Industry gets handle on TAA compliance costs

The adage, "A good offense is the best defense," applies in federal contracting when the government IT channel goes up against Trade Agreements Act prohibitions.

IT manufacturers, distributors and resellers should have in place contract compliance systems and collectively inform government policymakers and agencies about the costs of TAA compliance, according to a panel of industry and legal executives who discussed the issue at an executive breakfast today in McLean, Va.

The event was co-sponsored by immixGroup Inc., a management consulting firm for IT companies that want to do business with the federal government, and the Information Technology Association of America.

The Trade Agreements Act lets the president delegate authority to the U.S. trade representative to waive the Buy American Act, which sets preferences for buying U.S.-made domestic articles, materials and supplies when purchased for public use in the United States. The country's trade representative uses the purchasing power of the federal government as leverage in free trade negotiations with other non-trade agreement signatory countries, such as China, Malaysia and Taiwan.

The TAA also prohibits the United States from purchasing certain products and services supplied by countries that have not signed a government procurement agreement with the United States or the World Trade Organization.

To ensure compliance with the TAA, vendors should establish systems that maintain current manufacturer certifications as well as part-number-level data, said Steve Charles, co-founder and executive vice president of immixGroup Inc., who moderated the panel discussion. They also should provide dollar figures to show congressional policymakers the higher production costs of TAA compliance, costs of legal liability and the non-availability of certain items, he added.

Dell Inc, for example, has put processes in place to ensure it complies with the TAA. During the last seven years, the global direct-sale computer vendor has had a compliance checklist for its computer manufacturers to follow, said Linda Rodden, the company's director of federal contracts and proposals. Dell is then flagged every time the production point changes, she said.

Dell also separates various marketing segments by having internal numbers for various manufacturing companies so that it can key into them and exclude their products from sale to the federal sector, she said. This avoids TAA violations.

A complicated issue for Ingram Micro Inc. of Santa Ana, Calif., occurs when a vendor with five manufacturing plants cannot predict which one will ship the orders the company placed, said Bob Laclede, the company's vice president and general manager of government and education division. When the shipments reach the company's distribution centers, employees must determined where they came from and whether they are TAA-compliant, and then segregate them within the warehouse, he said.

"But what all that does is add cost to the supply chain," Laclede said, adding that one laptop vendor recently told him that it costs $70 more to build a TAA-compliant laptop.

The issue has gained visibility over the last year after office supplier firm Safina Office Products Inc. blew the whistle on competitors OfficeMax Inc., Office Depot Inc. and Staples Inc. for delivering non-TAA compliant items. They collectively paid settlements of more than $30 million to the government.

As a result, the General Services Administration's Office of the Inspector General stepped up its efforts to find violations of the TAA across all industries. Some members of the government IT community believe that GSA will target their sector next.

Rep. Tom Davis (R-Va.) has supported TAA waivers for the IT industry, but most members of Congress oppose such waivers.