Our in house staff are putting together an oil distribution system that will consist of stainless steel piping and miscellaneous stainless steel parts that will result in a closed piping system. All of the supplies being sourced are commercial off the shelf items. All can be sourced from American manufacturers except for one item; forged stainless steel elbows. I am being told they are not manufactured in the US. The total contract cost for the supplies is just over $2M. The elbow portion is under $10K. Can I consider the elbows a component of the end product which will be the piping distribution system? Can we purchase a this one foreign item in a small business set aside?
Based on my reading of DoD's two-part test (See DFARS 225.101), I think you are in compliance with BAA despite having to purchase $10K worth of stainless steel elbows from a foreign manufacturer. $10,000 represents less than 1% of the $2M total cost that you estimated for materials and components for this project. The threshold used in the two-part test is 50%, so you should be fine. I would still check this out with your legal advisor because the rules in FAR Part 25/DFARS Part 225 can be quite complicated, so there could be other implications that go beyond my narrow reading of the FAR/DFARS.
DFARS 225.101 General.
(a) For DoD, the following two-part test determines whether a manufactured end product is a domestic end product:
(i) The end product is manufactured in the United States; and
(ii) The cost of its U.S. and qualifying country components exceeds 50 percent of the cost of all its components. This test is applied to end products only and not to individual components.
(c) Additional exceptions that allow the purchase of foreign end products are listed at 225.103.