Defense bill strips Buy American revisions

Provisions to strengthen existing Buy American laws, contained in the House version of the Defense Authorization bill, failed to make it to the version signed by President Bush last week.

The provisions were championed by Defense Department officials and Rep. Duncan Hunter (R-Calif.), chairman of the House Armed Services Committee. Proponents said the proposed rules would boost U.S. manufacturing companies and make DOD less dependent on foreign countries for technology, weapon systems components and other acquisitions.

But some technology industry groups opposed the measure. Many products, especially items such as computers that are assembled from multiple components, would not qualify as U.S. made, critics suggested. And a proposal to require companies to report the sources of components in many systems would have been too burdensome for industry, they said.

One of those critics, Joe Tasker, senior vice president for government affairs and general counsel at the Information Technology Association of America, applauded the outcome of the conference process, which removed Buy American provisions from the bill, he said.

According to existing Buy American laws, agencies are supposed to assess a cost penalty on goods from foreign countries, unless those countries are covered in a trade agreement with the United States, he said. The proposed language would have required all defense procurements to follow the Buy American Act, not a trade agreement, he said.

"I understand the issue people want to discuss — American self-sufficiency," he said. "They want to discuss how much we do in America and how much we do overseas. I don't want to stop that discussion, and I think it's a good discussion to have. What we've done is we've made it possible to have that discussion without bringing procurement to a dead stop. That was the fear."

Chip Mather, senior vice president at Acquisition Solutions Inc., said that Buy American provisions in general are misguided.

"The very people you're trying to help, you actually make life more difficult for them," he said. "When you try to add Buy American to the Trade Agreements Act to the [North American Free Trade Agreement], it's bizarre. My experience is Buy American has hurt American companies."

The proposal continues to come up because its name invokes patriotic sentiments, he said.

"That's why it's so hard to vote against," he said. "Buy American Act, how can you vote against that? But it causes American companies a huge burden."

Attorney Louis Victorino, a partner at Sheppard, Mullin, Richter and Hampton LLP in Washington, D.C., said the stripped-down rules that appears in the bill's final version is "a fairly innocuous statute as it now stands."

He noted that the data collection requirements are gone. So is a proposal to increase from 50 percent to 65 percent the minimum percentage of American components a product must contain to be called American. Those two measures were the most controversial ones for American businesses, he said.

"They're doing some analysis, but only of data they already have," he said.

Victorino said the provisions would have had the effect of banishing the vendors that DOD officials want to attract. "DOD in particular, and government in general, has a history of trying to attract nontraditional vendors," he said. "This statute, had it passed, would have been anathema to that."

The bill could have been beneficial to the "rust industries," Victorino said, which are manufacturing firms that make traditional, low-tech products. But the needs and natures of those industries are different from high-tech companies, which often need to use components from overseas that are not available through U.S. sources, he said.

And government will not get the best technology if it doesn't come from private companies, he added. "Most of the cutting-edge technologies are no longer being financed by the Department of Defense."

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Hybrid approach

The final version of the Defense Authorization bill includes these changes to the Buy America provisions:

* Companies no longer have to determine if critical items included in certain military systems come from a domestic or foreign source.

* A proposal to require an item to contain 65 percent American components to qualify as an American product was dropped. The threshold remains 50 percent, as specified in existing laws.

Source: Defense Authorization bill