'Buy American' push alarms IT contractors

Congress is considering approving "buy American" provisions for federal procurements that could have negative effects on federal IT contractors, Olga Grkavac, vice president of the Information Technology Association of America, told Washington Technology.

The protectionism trend has been evident for many months, but has strengthened with the overturning of the Dubai Ports deal, she said. Dubai Ports, owned by the United Arab Emirates, would have overseen port security in six major U.S. ports. Under pressure from Congress, the deal was scuttled, and Dubai Ports said it would sell off its U.S. businesses to an American buyer.

"We are concerned about a fortress mentality," Grkavac said. "The Dubai Ports deal has exacerbated it."

Legislation introduced by Rep. Duncan Hunter (R-Calif.), chairman of the House Armed Services Committee, would require substantial U.S. citizenship representation among the boards and executives of companies that receive contracts for U.S. critical infrastructure protection for national security.

The CEO, chairman and majority of the board of directors must be U.S. citizens, according to the bill. In addition, a majority of the voting shares of the corporation must be owned by U.S. citizens, and half of the members of the board must be approved by the secretary of defense, in consultation with the secretary of homeland security.

The restrictions potentially might affect U.S. subsidiaries involved in U.S. federal contracts related to homeland security. Companies active in that market include Ericsson Inc., whose parent firm is in Stockholm, Sweden, and BAE Systems North America Inc., whose parent company is in the United Kingdom.

The ITAA views the restrictions as onerous and extremely difficult to enforce, but there is worry that the protectionism trend may rush them toward approval.

"Mr. Hunter has used the Dubai ports deal to push his legislation," said Trey Hodgkins, director of defense programs for the ITAA. "People should understand it's just not realistic to do things like dictate the citizenship of shareholders or people on boards."

Even though ITAA's membership is American-based, many have global operations and suppliers. The association is concerned about the buy-American trend because it could drive up costs, drive down competition and provoke protectionism elsewhere that could shut out American suppliers.