Companies: Wave bye to 'Buy American'

Contractors claim provision would strain Pentagon's freedom to buy commercial goods

"A single flat-panel display [production] facility costs a billion dollars ... Defense procurement is supposed to be geared toward moving away from sole-source factories producing nothing but something for the government customer. [With this], you'd end up with $50,000 laptops." ?  Joe Tasker, senior vice president for government affairs at the Information Technology Industry Association

Henrik G. de Gyor

Government IT contractors are pressing Congress to drop "Buy American" provisions in the defense budget bill that would severely limit the Defense Department's ability to purchase products and systems that contain foreign-made software and components.

Provisions in the House Defense Authorization Act for fiscal 2004 call for the department to increase the domestic content of the products it buys from 50 percent to 65 percent.

Because so many IT components are made overseas, the proposed made-in-America requirements would make it virtually impossible for the Pentagon to acquire commercial IT products, said Joe Tasker, senior vice president for government affairs at the Information Technology Industry Association in Arlington, Va.

"Desktops, laptops, telecom, cell phones -- they are not made in America with 50 percent American content," Tasker said.

The fate of the requirement is uncertain, as House and Senate conferees and the Bush administration try to work out compromise language.

Rep. Duncan Hunter, chairman of the House Armed Services Committee, inserted the Buy American provisions into the House bill. The provisions would:

  • Require the Defense Department to buy only products made in the United States, and American-made content would have to account for 65 percent of the cost of those products, up from 50 percent;

  • Require contractors and bidders to identify the countries of origin of all essential components of systems worth $25,000 or more sold to the Defense Department for national security purposes.

Hunter, R-Calif., proposed the legislation because he is concerned that the United States is losing its capability to produce critical components at home.

"The United States should not rely on foreign sources for key components of our military systems," Hunter said in an Aug. 8 column in the San Diego Union-Tribune. "The argument that the best military technology is found overseas is bogus. The research and development budget of the U.S. military is greater than the rest of the world combined."

Industry executives oppose Hunter's provisions and are lobbying for a compromise.

In a Sept. 29 letter to Sen. John Warner, R-Va., chairman of the Senate Armed Services Committee, seven industry groups wrote that the provisions "will force many current suppliers out of the defense marketplace due to increased costs and limitations on the use of foreign components and manufacturing technologies ... effectively deny[ing] the U.S. military access to cutting-edge technology, thus dulling the warfighting edge."

Warner appears ready to support industry's cause. Bill Greenwalt, a professional staff member on the Senate committee, said Warner is concerned that the House provisions represent a fundamental shift in U.S. policy.

"The senator believes it is important to tap the global supply chain. It allows interoperability with our allies and ensures we gain the best technology," Greenwalt said.

Warner wrote to Hunter Oct. 1 that "the issue of 'Buy America[n]' is so important that it should be carefully reviewed by the administration, perhaps by a presidential commission, and most certainly by hearings in both the Senate and House by the several committees having jurisdiction, before proposals such as the pending one become law."

Several versions of compromise language have surfaced, according to congressional staff members and industry lobbyists. But at press time, the most prominent compromise -- language that was drafted in September -- had been rejected, according to industry lobbyists.

That compromise, negotiated by Hunter and Deputy Defense Secretary Paul Wolfowitz, eliminated the requirement that contractors report the country of origin of all essential system components, defined as components costing more than $25,000.

The Defense Department had objected to the reporting requirements because they were "extremely onerous and expensive, and could not be met from existing data sources," according to a department summary of the changes officials requested.

Industry executives supported removal of the reporting requirement, but they are unhappy that the compromise would require the Defense Department to analyze systems' foreign-made content using existing information.

"The philosophy of the compromise is that the use of offshore components is excessive, and we cannot rely on our allies. That's why industry generally is opposed to the compromise," Tasker said.

Now, industry lobbyists are guessing at the outcome.

"We are trying to understand what the state of play is," said Jon Etherton, vice president of legislative affairs at the Aerospace Industries Association in Arlington, Va.

Industry executives said total removal of the new requirements is essential to ensure that the Defense Department can buy the best IT components at the best prices, and to preserve relationships with U.S. allies. They said those relationships would be strained, and joint projects such as the Joint Strike Fighter would be jeopardized, if the Defense Department cannot buy technology made by its allies.

And if the requirements were made law, it's uncertain how the Defense Department would buy IT, Tasker said.

"A single flat-panel display [production] facility costs a billion dollars," he said, referring to the popular computer screens, which are not made in the United States. "Defense procurement is supposed to be geared toward moving away from sole-source factories producing nothing but something for the government customer. [With this], you'd end up with $50,000 laptops."

Staff Writer Gail Repsher Emery can be reached at

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