By: Margaret M. Cassidy & Andrew Swick
Non-U.S. defense contractors even if partners, allies or friendly to the U.S. looking to sell directly to the Department of Defense (DoD) or to a prime or higher tier sub, often get lost in the foggy procurement laws and regulations that dictate when DoD can purchase non-U.S. items.
Austrian suppliers know this fog well and analyze how these requirements apply to them create a roadmap for how other U.S. partners, allies and friends can frame their approach to selling into the U.S. defense industrial base.
When an Austrian supplier hears from a U.S. defense contractor or even a DoD procurement official that its products are suddenly “no longer eligible” for U.S. defense contracts, alarm bells ring, and rightly so. But in this case the alarm is bigger than the fire. The truth is more complicated, but addressable: Austria remains a recognized partner for U.S. defense procurement, but the rules that govern how Austrian goods are treated are procedural and, frankly, easy to misread. That confusion is costing time, bids, and trust, but can be cleared up once the requirements are understood.
Two different rules, two different answers
The U.S. government runs two overlapping legal constructs related to country of origin or where the product is produced that matter to any company selling to the Department of Defense (DoD):
- the Buy American Act (BAA), and
- the Trade Agreements Act (TAA).
Both acts are included to some degree in the Federal Acquisition Regulations (FAR) and the Defense Federal Acquisition Regulations (DFARS). They sound similar, but they do different jobs.
Under the TAA, Austria is eligible to sell to DoD. It is a signatory to the World Trade Organization’s Government Procurement Agreement, so Austrian‑made end products are TAA‑eligible for U.S. government procurements above the TAA dollar threshold (currently about $193,000). The DoD implements that rule through the DFARS Trade Agreements clause, DFARS 252.225-7021. In short: Austian companies, with Austrian origin items, or any company with Austrian origin items may sell those Austrian origin items to DoD under the Trade Agreements Act and the related DFARS.
The BAA, however, is more complicated for foreign manufacturers because it is designed to give U.S products preference over the products of other countries. DFARS treats “qualifying countries”, that is countries eligible to sell to the U.S. government under the BAA, differently depending on whether the country has a blanket public‑interest exemption or requires case‑by‑case treatment. Austria is a qualifying country, but it sits in the latter bucket: DFARS 225.872‑1(b). That means an Austrian product can be treated like a U.S. product for award purposes only if the Contracting Officer (CO) prepares an individual public‑interest determination under DFARS 225.872‑4. If the CO does not make that finding, the Austrian offer is treated as non‑exempt and may be disadvantaged by the BAA evaluation factor. Generally, the BAA evaluation factor requires that DoD apply a price “penalty” to the offer of a foreign nation – meaning any price offered by a non-U.S. supplier is increased by a certain percentage when being considered against U.S. origin items.
So is Austria “in” or “out”?
Both. Austria is “in” as a qualifying and TAA‑designated country. But Austria is not in the small group of countries that enjoy a blanket waiver from BAA restrictions. That procedural distinction causes the confusion. The DFARS definitions and clause text (for example, DFARS 225.003 and DFARS 252.225‑7001) list Austria as a qualifying country, while another DFARS 225.872‑1 makes clear that Austria requires a purchase‑by‑purchase CO finding.
Why the confusion matters
Austrian suppliers and U.S. primes alike can lose business because of this procedural wrinkle. If a CO overlooks the requirements for making individual determinations defined in DFARS 225.872‑4 and treats an Austrian offer not eligible for exemption to the BAA, that offer may be penalized in the evaluation and lose to a domestic competitor, even when the Austrian product would have been acceptable had the CO followed the required steps. These DFARS requirements are procedural so, if a CO fails to follow these steps, it opens the door for a company offering an Austrian item to protest the award. The confusion is not just legal hair‑splitting; it’s real money and real delay for contractors who may be eligible for the award.
Complicating matters further is the 1991 Reciprocal Defense Procurement Memorandum of Understanding (RDP MOU) between the United States and Austria. That MOU, amended in 1996 and including an automatic five‑year renewal clause, sits on the DoD website and looks like a firm commitment. The MOU’s existence reinforces the idea that Austria is a trusted partner. But an MOU is not a blanket regulatory waiver; DFARS still governs how the BAA is applied in practice. The Government Accountability Office’s recent review of reciprocal procurement agreements also notes the automatic‑renewal language for Austria. The U.S. even published a Federal Register notice in December 2022 seeking industry input about negotiating a new RDP with Austria, but there’s no public record that the 1991 MOU was terminated or replaced.
What Austrian suppliers should consider
- Assume TAA eligibility. Include the TAA certification (DFARS 252.225‑7021) when bids exceed the TAA threshold.
- Attach a short “public‑interest packet” to any offer to assist the CO in quickly evaluating the offer as allowed for in DFARS 225.872‑4. Useful content to include: country of origin documentation; a concise explanation of technical uniqueness or mission relevance; evidence that acceptable U.S. sources are unavailable; and any delivery or readiness urgency.
- Price for both outcomes. Model bids assuming the CO grants the exemption and also assuming the CO treats the offer as non‑exempt meaning that the offer may be evaluated with a 50% price penalty, increasing its evaluated price under DFAS 225.105.
- Keep the Austria MOU in procurement files and ready to be included in bids: https://www.acq.osd.mil/asda/dpc/cp/ic/docs/rdp-mous/mou-austria.pdf.
- Prepare a 1–2-page public‑interest packet to accompany any Austrian‑origin offer.
- At the appropriate time in the procurement process, during the Q&A for example, ask whether the CO will prepare a DFARS 225.872‑4 determination and what evidence is required.
- Monitor DFARS/PGI updates in case Austria’s status changes.
What U.S. contracting officers and primes should do
COs need to understand and follow the DFARS and PGI (Procedures, Guidance, and Information) procedures to the letter when an Austrian offer is low or otherwise eligible for award. Document the determination and findings. For primes, insist that your subcontractors provide clear origin documentation and the public‑interest packet to inform the CO’s decision and avoid downstream protests.
Final Note
The situation is largely settled legally: Austria qualifies and is TAA‑eligible, and the 1991 MOU remains relevant. The wrinkle is procedural: DoD has not given Austria a blanket BAA exemption, so each Austrian offer needs a CO’s purchase‑by‑purchase finding to avoid BAA evaluation penalties. For Austrians worried that a bureaucratic quirk will shut them out of the U.S. market, the message is simple: Austria end-items are welcome here. But welcome letters don’t win contracts—clear paperwork, smart pricing, and a little procedural literacy do.
Specific Questions
Q: Is the 1991 Reciprocal Defense Procurement (RDP) MOU still in effect?
Yes. The 1991 MOU (with its 1996 amendment) contains an automatic five‑year renewal clause; DoD lists Austria among RDP MOUs. Austria RDP MOU (DoD): https://www.acq.osd.mil/asda/dpc/cp/ic/docs/rdp-mous/mou-austria.pdf
Q: Was the MOU “ratified” by the U.S. and did it need renewal between 2021–2023?
The RDP MOU is an executive‑branch international procurement arrangement; it is not a treaty requiring Senate ratification. The MOU’s amendment provides automatic five‑year renewals unless terminated, so there is no separate Senate “ratification” step to track. The U.S. published a Federal Register notice in Dec. 2022 seeking industry input about negotiating a new RDP with Austria but there is no public record showing the MOU was terminated or that a new agreement replaced the 1991 text. Federal Register notice re: potential new RDP with Austria (Dec 2022): https://www.federalregister.gov/documents/2022/12/09/2022-26712/negotiation-of-a-reciprocal-defense-procurement-agreement-with-the-ministry-of-defense-of-austria. And the GAO still considers it in place as of 2024. GAO report on RDP MOUs (Dec 2024): https://www.gao.gov/assets/gao-25-106936.pdf
Q: Why does Austria appear removed from some DFARS lists but still present in clause text?
DFARS treats qualifying countries in two ways. Austria is listed in DFARS 225.872‑1(b) (purchase‑by‑purchase public‑interest exceptions) rather than in 225.872‑1(a) (countries with a blanket public‑interest determination). At the same time, DFARS definitions and clauses such as DFARS 225.003 and DFARS 252.225‑7001 continue to identify Austria as a “qualifying country.” That apparent inconsistency is intentional: Austria qualifies, but DoD has not given Austria a blanket waiver from BAA restrictions; each acquisition must be handled individually. See DFARS 225.872‑1 / 225.872‑4 / 225.003 / 252.225‑7001 / 252.225‑7021: https://www.acquisition.gov/dfars
