House Chairman: DOD Not 'Buying American'

Ears may have been burning at the Pentagon following a talk by Rep. Donald Manzullo (R-Ill.) about purchasing practices at the Department of Defense (DOD).

Manzullo, chairman of the House Small Business Committee and a self-professed strong advocate for small manufacturers, castigated the Pentagon for not taking into account the effects of its purchasing practices on U.S. small business.

"This is not a very pleasant subject to talk about"—namely, supporting and maintaining America's defense industrial base—because "[I'm] constantly fighting with the Pentagon" on this subject, said Manzullo, speaking at the Heritage Foundation, a conservative think tank in Washington.

While insisting repeatedly that "I'm a free-trader," Manzullo argued strenuously for the need to swing the weight of the federal government, and DOD in particular, behind U.S. defense-related manufacturing.

"This is not about protectionism," but about trying to arrest continued erosion of the U.S. domestic industrial base, Manzullo said.

Even as DOD "has become more reliant on the private sector" for its hardware, it has become dependent increasingly on single-source suppliers, Manzullo said, citing findings in a Bush administration report.

The American "defense industrial base has become vulnerable," partly because DOD has been shopping abroad for products, Manzullo said, again citing the administration report. DOD procurement officials are failing to look at the impact of their purchasing decisions on the domestic defense industrial base, he said.

"What is the Pentagon doing about it? Why isn't the Pentagon concerned... [about] trying to secure their industrial base?" he asked.

"If the U.S. manufacturing base continues to shrink at its present rate," he said, citing another report, "manufacturing innovation will shift to other global centers." With that shift, he said, the United States will lose its edge in manufacturing innovation, and the American standard of living will decline.

Manzullo also cited the question raised by former Secretary of State Henry Kissinger as to whether the United States can remain a great power if it becomes a purely service-driven economy.

Manufacturing is a key component of America's industrial strength because it drives R&D, he said. If the manufacturing goes abroad, taking R&D with it, engineering capabilities in this country "would become second-rate," he said.

At what point can the United States become too reliant on foreign suppliers for the "core component" of DOD purchasing? Manzullo asked. The Pentagon doesn't want to ask that question, he said, because it doesn't want to hear the answer.

In fact, he said, the U.S. manufacturing base is being undercut by foreign competition in a host of areas involving components that are important to defense-related products, he said. Manzullo then relayed a litany of such components, including printed circuit boards, photomasking, metal casting, molds, batteries, alloys, and materials development for applications such as superconducting.

The shrinking of the domestic manufacturing base is hurting U.S. defense capabilities, Manzullo said. The United States is "down to a single-source supplier" for small-caliber ammunition, for example.

He pointed to a recent flu vaccine shortage that spotlighted American reliance on a foreign source for the vaccine, adding that "if you think bioterrorism is a threat to this country," you can't let the remedies for it "slip offshore."

Manzullo then weighed in against foreign defense companies whose governmental subsidies give them an unfair advantage over American firms.

Pointing to the Anglo-Italian helicopter company, AgustaWestland Inc., he noted that 32 percent of that company is owned by the Italian government. "This is a socialist corporation: the largest shareholder is the government," he said.

Is it fair, Manzullo asked, for American firms, which have to get by without subsidies, to have to compete against such government-backed firms?

Yet the Bush administration still awards contracts to these foreign "socialist" companies, Manzullo charged.

He brought up the recently announced decision by the Navy to award its contract for Marine One, the new presidential helicopter, to the team of Lockheed Martin Corp. and AgustaWestland. Losing out on that bid was Sikorsky Aircraft Corp., which had stressed its intention of building a 100-percent American-made helicopter.

"Is someone saying we should get rid of our industrial base" in order to ingratiate ourselves to friends abroad? Manzullo asked.

"It is wrong to pit a free market company against a socialist company and then use the term `best value'" to describe the decision to go with the latter company's product; but that's what the Pentagon does, according to Manzullo.

He moved on to the F-35 Joint Strike Fighter (JSF), being built jointly by Lockheed Martin, Northrop Grumman Corp., and BAE Systems, and financed by the United States and a consortium of other countries.

For a particular JSF component that required milling, he said, Northrop Grumman turned to a company from Spain, not one of the countries in the consortium, instead of a manufacturer in Manzullo's congressional district.

Challenged to justify the move, Northrop Grumman told Manzullo that the company in his district "didn't meet the specifications" for the job.

But Lockheed Martin used that company, Manzullo said, recalling that he asked Northrop Grumman representatives, "Why are you rewarding the Spaniards and doing destruction to an American company?"

Manzullo said that he asked a DOD contracting officer "if, indeed, the Pentagon is monitoring the industrial base," and was told, once again, that "best value" is the Pentagon's criterion for choosing contractors.

But the only way the Pentagon judges the health of a company, he said, is "how well their stock is doing on the exchange," a practice that looks only at the big defense contractors and misses the many smaller would-be contractors or subcontractors that are not listed on the stock exchange.

Deriding such "Wall Street metrics," he asked "how can you measure the health" of small companies by such a means?

Yet it is those small companies that do the innovating that drives the nation's economy forward, the congressman said.

Programs under the purview of Manzullo's Small Business Committee include the Small Business Innovative Research (SBIR) program, which funnels federal research and development (R&D) dollars to small businesses.

Congress reauthorized the SBIR program in 2000 for another eight years. Manzullo's committee monitors SBIR, especially watching to ensure that the program's R&D funds are reaching what the committee terms "small manufacturers critical to the defense industrial base."

"An innovation always starts with something small," and then grows into something big, he said. If the innovation starts oversees, he said, "it's gonna stay over there."

To those who say that Buy American legislation has addressed these sorts of issues, Manzullo charged that such legislation "has become so diluted" as to be ineffective.

"DOD put out regulations that `all' or `substantially all' [made in America] means 51 percent."

It's possible to be in compliance with the Buy American Act, he said, even "with zero American parts" in a product, Manzullo said.

It may not be pleasant but I do agree we need to talk about it. Manzullo has some interesting thoughts on the subject.

I am kind of tired now but once I am recharged I am sure I will have some type of opinion on the subject.

Congress writes acquisition law. All acquisitions are done in accordance with laws written by congress. If this yahoo wants the DoD to only consider US firms, then re-write the law, otherwise the DoD has its hands tied on the subject.

I would like to see a US-only approach but the DoD simply can't do that. Open competitive bids are the norm, sole source (SBA or 8A) are exceptions, and the norm allows for non-US bidders.

This Yahoo, as you call him, has an extremely valid point. It's extremely important to maintain our ability to produce those products that support our military. Do you think for a minute that if we are at war with a country that supplies needed products for our weapons systems, and they are a single source supplier, we will get the parts. This is a very dangerous road to go down.

3 posted on 03/10/2005 5:27:52 AM PST by jumperbones (The dreams of a man in his old age, are the deeds of a man in his prime.)

Sorry, my last post was meant for you. Do you think this is a valid point?

4 posted on 03/10/2005 5:30:52 AM PST by jumperbones (The dreams of a man in his old age, are the deeds of a man in his prime.)

Getting the most bang for the taxpayer's buck means choosing the lowest bidder. That said, we are seeing situations where critical components are being produced exclusively by foreign firms, e.g., companies in the PRC controlled by the PLA! We are also seeing high attrition in the second and third tier of subcontractors domestically. The defense industrial base is in trouble. Congress needs to address this.

FMC. . .the post was meant for me.

No problem, Jump. He has valid points but the issue isn't with the DoD, it is with congress. The DoD has to follow acquisition law and those in the DoD that do not would go to jail.

I agree. America first. No question. Now. . .let's change the law rather than point fingers at the DoD.

One of the great "benefits" of globalization is that we no longer produce in this country everything we need to support a modern military, especially electronics. Check the country of origin of most consumer electronics - same is true of military components.

If I had paid better attention I would have noticed it was meant for another. Been up almost all night working on the following thread, ah, how bout checking it out?

Thank you for the thougtful and prompt explanation.

KENI THOMAS - Flags of Our Fathers - A Soldiers Story (awesome patriot and singer)

There are only three ways to create wealth.

Manufacturing

Farming

Mining

Once we give up any one of these we will become a poorer nation.

"For a particular JSF component that required milling, he said, Northrop Grumman turned to a company from Spain, not one of the countries in the consortium, instead of a manufacturer in Manzullo's congressional district."

Anyone want to bet that the manufacturer who lost the contract went whining to the guy he sends campaign donations to?

11 posted on 03/10/2005 6:36:25 AM PST by hchutch (A pro-artificial turf, pro-designated hitter baseball fan.)

12 posted on 03/10/2005 6:39:16 AM PST by Dust in the Wind (Lead, Follow or get out of the way!)

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