Administration divisions on procurement provision may slow Defense bill

With the fiscal 2004 defense authorization conference expected to make some headway this week, the administration remains divided on controversial provisions in the House version of the bill, congressional and industry sources say.

Although Deputy Defense Secretary Paul Wolfowitz has worked ardently with House Armed Services Chairman Duncan Hunter, R-Calif., to draft and revise a compromise proposal that dilutes the House legislation and quells concerns raised by several Cabinet-level agencies, the State Department reportedly continues to oppose the effort.

The State Department is calling on Hunter to delete one section of the bill that would require the Pentagon to purchase from domestic sources certain military systems components identified by the Defense secretary as essential to the functioning of key U.S. weapons systems.

However, the language includes authority that allows the secretary to waive this restriction if the technology is not available in sufficient quantity, satisfactory quality or at a reasonable cost in the United States-or if the waiver is determined to be in the interest of national defense.

The Pentagon would be required to submit an annual report to the Armed Services committees, disclosing the number of waivers used to circumvent the domestic source restrictions.

In addition, the restrictions would not apply to countries participating in international agreements, such as memoranda of understanding or other bilateral accords with the United States, if such agreements were made before the enactment of the proposed legislation.

Agreements made after the effective date would be subject to the Pentagon's determination that the MOU or other arrangement was in the public interest. The Defense secretary would be required to consider the place of performance for any contract work in his determination. In addition, the secretary would have 24 months to prepare a plan to implement the legislation, if enacted, and another 12 months to put the plan into effect.

Two other provisions in Hunter's language were deleted in an earlier iteration of the Hunter-Wolfowitz compromise. One would have amended the "Buy American Act" requiring that U.S. weapons systems have at least 65 percent U.S. content-an increase over the current 50 percent mandate.

But even with the omission of these sections and the call to eliminate yet another, the State Department is said to remain concerned that the overall language will isolate the United States from its trade partners and minimize America's ability to develop cooperative technological innovations that will win future battles and save lives in combat, congressional and industry sources say.

In addition, compromise language addressing trade concerns raised by the U.S. Trade Representative remains an obstacle.

Although the compromise includes a provision allowing the Defense Department to waive any restrictions that might conflict with World Trade Organization obligations, USTR reportedly remains unclear on language that specifically limits the use of foreign-produced machine tools by American suppliers.

Defense trade is generally exempt from WTO rules, but the language in the compromise may be seen as giving an unfair advantage to U.S. machine tool manufacturers, because their equipment is often used for both commercial and defense production.

Joel Johnson, vice president of international affairs of the Aerospace Industries Association, said difficulties in interpreting language in the Hunter-Wolfowitz compromise is likely because it is being negotiated by people who are experts neither in the field of acquisition policy nor in international trade law.

"Because you have people negotiating who don't know procurement or trade, you've got language that is very hard to interpret at the moment," Johnson said, adding that a good scrubbing of the proposal by House and Senate legislative counsel might be needed before it could be seriously considered.

The chairmen and ranking members of the Armed Services Committees in both chambers are slated tentatively to meet Tuesday to discuss the path forward on the fiscal 2004 defense authorization conference, congressional aides said.