Defense contractors, lawmaker tussle over procurement provision

In rare case of public discord between defense contractors and a Republican chairman of the House Armed Services committee, several defense-related trade associations are waging a high-energy battle against a "Buy American" provision spearheaded by Armed Services chairman Duncan Hunter, R-Calif.

The provision-which the House has already approved in its fiscal year 2004 defense authorization bill-would require that "critical" components of most military systems be acquired from domestic sources. It would also raise the required "domestic content" in a system's labor and materials to 65 percent, from the current 50 percent. And it would require that major defense-acquisition programs use only machine tools made in the U.S.

Several associations-led by the National Defense Industrial Association, the Aerospace Industry Association and the Information Technology Association of America-argue that the measure, if approved, would wreak havoc in defense contracting.

The associations argue that the act will convince fewer vendors to sell to the Pentagon, as new paperwork expenses-for all potential vendors, not just the winning bidders-and decreased competition combine to raise the price of procurement. Moreover, the critics argue, a number of crucial products-from memory chips to flat video screens-are almost universally made overseas today. If companies attempted to move those operations home, then the cost of retrofitting and establishing separate manufacturing lines for defense and non-defense products would be prohibitive. And some major ongoing programs-such as the multi-branch, $200 billion Joint Strike Fighter-might be placed into jeopardy because they include too many international features.

The NDIA has sent out a legislative alert to its 1,100 corporate members, urging a grassroots effort to derail the provision, said Pete Steffes, NDIA's vice president for government policy. The NDIA has also sent letters blasting the measure to Defense Secretary Donald Rumsfeld; House Speaker Dennis Hastert, R-Ill.; Senate Majority Leader Bill Frist, R-Tenn.; House Majority Whip Tom DeLay, R-Texas; Senate Armed Services Committee chairman John Warner, R-Va.; Senate Armed Services ranking member Carl Levin, D-Mich.; Hunter; House Armed Services ranking member Ike Skelton, D-Mo.; and Office of Management and Budget acting director Augustine T. Smythe.

"As the measure came out of the House, a lot of members saw the title and thought it sounded like mom and apple pie," Steffes said. "But we think it will have a significant impact on America's industrial base. Several provisions are aimed at doing the right thing, but it will be very costly for companies to comply, especially small businesses, because they don't have the overhead to spread around the extra costs of recordkeeping."

Earlier, ITAA president Harris Miller expressed his group's opposition. "Our military deserves to have the highest quality tools to fight wars and terrorism," he said.

Jon Etherton, vice president of legislative affairs at AIA, said that his group has been holding a weekly meeting with its own members and with allies in other associations to "coordinate our efforts." AIA has asked its member companies to assess the potential impact of the measure so that the association can provide Congress with specific figures on how much the provision would impact their operations.

The measure will addressed in a House-Senate conference that is expected to begin after the July 4 recess. "It's an issue of great importance, and the congressman does plan on addressing it in conference," said Hunter's press secretary, Michael Harrison. "Our dependency on foreign countries for our military resources doesn't serve our national security interests." Harrison added that discussions about the provision are "ongoing" at the staff level, "and when we're back from recess, we may have something more formal."

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