Buy American creates hurdles for Pentagon’s business plans

The Hill ^ | 29 Nov 2006 | Roxana Tiron

[FLOutdoorsman]

Over the years, Congress has fought to protect U.S. technology through Buy American and other trade laws, but some of the measures could backfire now that the Pentagon is trying to attract new, innovative businesses that haven’t traditionally worked with the military.

The Pentagon, which is always searching for new technology to maintain its competitive advantage in the world, is looking beyond the usual defense giants for fresh ideas.

“To enhance competition and innovation, it would be beneficial for the Department [of Defense] to bring in new firms,” said William Greenwalt, deputy undersecretary of defense for industrial policy at the Pentagon. “The problem with that is that many of these firms choose not to do business with the Defense Department, or if they have some business, it is a very minor portion of their total sales.”

One of Greenwalt’s top priorities is bringing in non-traditional contractors, as well as identifying the barriers to bringing them in.

The Pentagon is trying to attract a large swath of companies with a range of expertise from telecommunications and information technology to robotics and biotechnology.

But some commercial companies are developing concerns about doing business with the Pentagon, Greenwalt said in an interview.

If these companies sell their products to the U.S. military, they run the risk of the U.S. government imposing export controls on them, which diminishes their ability to make a profit on the global market.

“That could be a real problem for us and one that we may need to look for congressional help,” said Greenwalt, who was recently a top aide on the Senate Armed Services Committee.

“We can’t get in the situation where the most innovative companies in America won’t do business with the Department of Defense for fear of somehow tainting their products,” he added.

As a result, the military may not have access to the best technology in the United States even though “everyone else in the world does,” Greenwalt said.

“Right now it is still in the anecdotal phase, so I am still looking to see if this is a greater trend,” he noted.

Tight export control laws are not the only potential deterrent for commercial companies. The so-called Berry Amendment and its specialty-metals clause and other Buy American laws could also prove troublesome.

Enacted in 1941, the Berry Amendment mandates that certain materials used in defense procurement contracts be made in the United States. In 1973, Congress adopted a key provision, called the specialty-metals clause, requiring that the titanium and various steel and metal alloys defense contractors use be U.S.-made.

The clause is intended to ensure an adequate domestic industrial base and avoid dependence on foreign suppliers in an emergency, the U.S. specialty-metals industry says.

But this year the specialty-metals clause became a sticking point in negotiations over the 2007 defense authorization bill after several large- and medium-size Pentagon contractors disclosed that they did not comply with the provision because some of their suppliers have used foreign-produced specialty metals.

As a result, the Aerospace Industries Association, with backing from the Pentagon and the White House, lobbied for an exemption from the Berry Amendment for commercial items, among other issues. One of the arguments was that companies could no longer keep track of every nut and bolt from their suppliers.

But the defense industry and the Pentagon faced intense opposition from the specialty-metals industry and its allies in the House. The resulting legislation exempts electronic components containing small amounts of foreign specialty metals from the Berry Amendment. It also provides a four-year “get well” period for defense contractors who did not comply with the law.

Implementing the revised Berry Amendment and figuring out ways to keep the door open to new, innovative companies is going to be “extremely difficult,” Greenwalt added.

The Pentagon is still reviewing the implementation of the new legislation. Depending on any challenges, “the Department may have to determine whether it seeks any additional relief,” he said. “There is some relief” in the legislation passed this year, he added.

Companies that don’t do much business with the Pentagon are not going to track the specialty-metals content of their products. Therefore, should the military want to buy their technology, it would be almost impossible to do so without a lengthy and potentially costly waiver process.

“Is it going to be worth it to these commercial guys to go through that kind of bureaucracy to sell us their product, especially when we may only be 1 percent of their sales?” Greenwalt asked.

A source close to the specialty-metals industry argued that the new legislation allows for waivers to be granted “up and down the chain” of contractors, including subcontractors, a move that should speed up the process. Before, only the prime contractors could apply for a waiver.

But the Pentagon could be caught in a vicious cycle, having to protect those industries, such as the steel and titanium sectors, even though the Pentagon is not their main buyer and does not drive their market. At the same time, the Berry Amendment is important in periods of commercial downtime for the specialty-metals industry. Without it, the industry argues it could go out of business — a scenario that would, in turn, deprive the U.S. government of maintaining strong defense resources in times of emergency.

Attracting new companies willing to do business with the Pentagon is a long-term goal that will need congressional help, according to Greenwalt.

“I truly believe that Congress would like the Department to access the best technology and innovation for the war fighter,” he said.

[Mase]

Who'd have thought that the Buy America legislation could impede innovation and possibly deny the best products possible to our troops?

[FLOutdoorsman]

It's more than that. I think the idea was not to be depending on foreign products that they could be used against us. ie not supply important electronic products for us.

I think it's only like 55% or some absurd low percentage of the products have to be made in America.

[samadams2000]

Our troops can use these////

http://www.smith-wesson.com/webapp/wcs/stores/servlet/CustomContentDisplay?langId=-1&storeId=10001&catalogId=10001&content=11001

http://finance.yahoo.com/q/bc?s=SWHC&t=2y&l=on&z=m&q=l&c=

[Mase]

I truly believe that Congress would like the Department to access the best technology and innovation for the war fighter,” he said.

I want this too. What happens if the best technology is from a foreign company? Limiting the profit motive, outside of what constitutes legitimate national security, always inhibits innovation. Providing our military with what they need to remain the best fighting force in the world depends heavily on the success of our economy.

Politicians don't always act in a manner that ensures a healthy economy filled with innovation.

[Mase]

Heck, I'd like on of those for myself.

[rbg81]

Like its civilian counterparts, the Defense Industry is just itching to outsource jobs. If they were allowed they would not hesitate to ship critical production, engineering and R&D to China and the Third World. National security be damned--all these guys really care about is making a buck.

[mr_hammer]

"Who'd have thought that the Buy America legislation could impede innovation and possibly deny the best products possible to our troops?"

Yes or No, do you believe that the US is capable of designing and manufacturing the best military hardware bar none?

[Mase]

Yes or No, do you believe that the US is capable of designing and manufacturing the best military hardware bar none?

Capable? Sure. But if there's a better technology available from a manufacturer in Japan, Sweden or Switzerland, I want the military to have access to it without any restraints. I also want our domestic industry to be able to sell to whom they choose as long as it doesn't constitute a legitimate threat to national security.

[mr_hammer]

"But if there's a better technology available from a manufacturer in Japan, Sweden or Switzerland, I want the military to have access to it"

By what you have just stated you believe the US is incapable of making the best equipment bar none. If we made the best there would be no reason to purchase from another country, correct? That is why I asked for a simple yes or no answer.

Now, if we cannot design and manufacture the best equipment in the world that is where the debate must take place.

[Mase]

By what you have just stated you believe the US is incapable of making the best equipment bar none. If we made the best there would be no reason to purchase from another country, correct? That is why I asked for a simple yes or no answer.

Your logic escapes me. You asked if we were capable. I said we were. I also think we're capable of making the best cars in the world although I haven't owned an American made car since the lemon I bought in the early 90's.

Capability and availability are two separate things. Do you want the American military to be able to supply our fighting forces with the best technology and equipment available? If so, why would you place limitations on where they can purchase that technology and equipment? Does competition help or hinder innovation?

[Paul Ross]

Who'd have thought that the Buy America legislation could impede innovation and possibly deny the best products possible to our troops?

Only an IDIOT.

I.e., such as Jack Spencer of the Heritage Foundation...who admits he has a scant plurality of support inside the organization! Yet he baldly acts as if they have complete control.

Anyways...since we aren't even living up to the existing 50% domestic-content legal requirement...rather obviously this is a phony argument by the phony free traders...who refuse to Enforce the Rules of Trade. Which should be a slam-dunk for real, honest conservatives.

Because No One is Above the Law!

No ifs. No buts.

Note: This position being touted is also an interesting reversal of field by the free traders...a contradiction really... because they always contend our manufacturing and R&D and innovation is doing just fine!!!!

[Paul Ross]

One of the arguments was that companies could no longer keep track of every nut and bolt from their suppliers.

A non-argument for our highly "advanced"...and very healthy... manufacturering industry, surely.

Computers developing amnesia lately...or is it the phoney free trade weasels running them?

[Paul Ross]

That is why I asked for a simple yes or no answer.

Which is the correct way to deal with the La-La-land crew. But don't hold your breath. Their dogma is far more important to them than reality.

Now, if we cannot design and manufacture the best equipment in the world that is where the debate must take place.

Correct. It should prove interesting to see if he will completely duck this, or try and squirm on the hook...

[Paul Ross]

I want the military to have access to it without any restraints.

You can't have your fairy-land trade utopia...and a unique American advantage in technology. The whole globalization creed is to "flatten out the concentrations" and "spread them uniformly" across the Globe. Hence, the END of American supremacy. That is what is being preached by your apostles...whether you will admit it or not.

I also want our domestic industry to be able to sell to whom they choose as long as it doesn't constitute a legitimate threat to national security.

Legitimate according to who? You??!?

Political appointees in the State, Treasury and Commerce Departments whose only objective is to keep papering over the devastating truths with disinformation etc. and get through their terms without the inevitable SHTF?

The proverbial Foxes Guarding the Hen House!

This is why the Defense Dept. needs to be restored to control of the U.S. Bureau of Industry and Security. And given real teeth again.

'Nuff said.

[Paul Ross]

Like its civilian counterparts, the Defense Industry is just itching to outsource jobs. If they were allowed they would not hesitate to ship critical production, engineering and R&D to China and the Third World. National security be damned.

Bump!

And if we make exceptions for small contractors...the majors would be well-positioned to demand the same exceptions too.

The proverbial "camel-nose-in-the-tent" has already really happened with the reducing of the 75% requirement that Reagan believed in...to the 50% domestic content requirement of Bill Clinton....

[mr_hammer]

"Do you want the American military to be able to supply our fighting forces with the best technology and equipment available?"

Yes, I most defiently want them to have the best.

Again, I ask you. Is US capable of designing & manufacturing the best military equipment? If it is, there is no reason to go overseas for said purchases is there?

Let's cut to the chase. The US government is incapable of paying for said weapons systems made in the USA and suport the soon to be socialist state we are headed for.

Right now it has nothing to do with quality or delivery (those are givens) or even the best whatever given piece of equipment is. It is about being the lowest world wide bidder. Plain and simple and to hell with being self sufficient.

I say no, we cannot afford to build state of the art weapons systems state side and also funnel a lot more dollars into keeping granny in perscription drugs further jeapodizing our long term security. That is the truth.

[streetpreacher]

Are those rifles for sale to the general public?

[1rudeboy]

This domestic-content requirement has its costs and benefits. If EADS/Airbus wins that Air Force refueler-contract, then it will locate a plant in the U.S. to build it (Alabama, I think).

[streetpreacher]

Capable? Sure. But if there's a better cheaper technology available from a manufacturer in Japan, Sweden or Switzerland India, China or Pakistan, I want the military to have access to it...

Now you're being a realist.