Services Excluded from U.S. Procurement Commitments


The United States offers broad coverage of services procured by federal and state entities under the WTO Government Procurement Agreement (GPA) and free trade agreements (FTAs). It covers all services purchased by its covered entities, with the exception of four categories of services, as well as several narrower exclusions.

Transportation Services: The U.S. excludes the procurement of all transportation services, including launching services, as a consequence of laws that impose domestic content requirements similar to those that apply to goods. The focus of the requirements is on the use of U.S.-flag air carriers and vessels.

With respect to air travel and transport, the Fly America Act (International Air Transportation Fair Competitive Practices Act of 1974, Section 5) requires federal employees, consultants, contractors, grantees and others to use U.S.-flag air carriers for U.S. government-financed international air travel and transportation, if available. For details, see Federal Acquisition Regulation (FAR) Subpart 47.4.

Similar restrictions apply to ocean transportation. Several laws prescribe the use of U.S.-flag vessels:

  • Cargo Preference Act of 1904 requires the Department of Defense to use only U.S.-flag vessels for ocean transportation, unless they are not available at fair and reasonable rates.
  • Merchant Marine Act of 1936 (also known as the Jones Act) declares U.S. policy to be to foster the development and encourage the maintenance of its merchant marine.
  • Cargo Preference Act of 1954 directs civilian government agencies that are acquiring supplies that may require ocean transportation to ensure that at least 50% of the gross tonnage of those supplies is transported on privately owned U.S.-flag commercial vessels, to the extent that such vessels are available at fair and reasonable rates. This provision may be waived in an emergency.

FAR Subpart 47.5 elaborates on these restrictions.

In explaining cargo preferences, the Maritime Administration in the U.S. Department of Transportation points to the vital role of a privately owned and operated U.S.-flag merchant marine in providing sealift capability during wartime or other national emergencies and skilled personnel in national emergencies and in helping protect U.S. ocean commerce from foreign control.

The domestic preferences for transportation services cannot be applied consistent with U.S. obligations under the GPA and FTAs. They require the U.S. to treat services of its trading partners in the same manner as it treats its own domestic services in procurement covered by the agreements. Since the U.S. does not waive these discriminatory measures under the Trade Agreements Act of 1979, it must exclude the affected services from its procurement commitments.

Public utilities services: The second major category of excluded services is public services, including telecommunications and ADP-related telecommunications services. The procurement of all public services is excluded, with one exception. That exception is enhanced (i.e., value-added) telecommunications services, which are open to foreign suppliers under the agreements. FAR Part 41 provides rules on the federal government’s procurement of public utilities.

Research and development (R&D) services: A third category of excluded services is R&D services. The United States, like other GPA and FTA parties, excludes the procurement of R&D services from its procurement commitments.

Services related to the operation and management of Federally Funded Research and Development Centers (FFRDC): Related to its exclusion of R&D services is the U.S. exception of services related to FFRDCs. These entities undertake, support or manage basic or applied R&D for the federal government. They are used to meet a special long-term R&D need, which cannot be met as effectively by existing in-house or contractor resources. In addition, these R&D centers have access, beyond that common in a normal contractual relationship, to government and supplier data, employees and facilities. FAR Subpart 35.017 sets out the policy and rules for FFRDCs.

Each FFDRC is sponsored under a broad charter by a federal government agency, which includes the Department of Defense, the Department of Energy and the National Aeronautics and Space Administration (NASA). The National Science Foundation maintains a master list of FFDRCs. They include such entities as the Jet Propulsion Laboratory, administered by the California Institute for Technology and sponsored by NASA, and the National Defense Research Institute, administered by the RAND Corporation and sponsored by the Department of Defense.

In addition to these four categories, the U.S. does not cover procurement of any service in support of military forces located overseas.

State services: Under the GPA and FTAs, the U.S. also excludes the procurement of certain services for states. Printing services are excluded for all state entities. In addition, two states (Mississippi and Tennessee) do not cover any services under the agreements.

Construction services: With regard to construction services, the United States opens the procurement of all services by federal and state entities, except dredging. However, six states (Arkansas, Hawaii, Kansas, Kentucky, Oklahoma and Tennessee) exclude construction services from their commitments.

Jean Heilman Grier

December 1, 2014

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