“Buy American” requirements are weakened in defense spending bills

"Buy American" provisions may not be as strong as they were in previous years once House and Senate defense spending bills are reconciled into one budgetary request.

Congress is about to pass an annual bill that dictates spending levels for the Department of Defense. This year’s legislation contains a couple of key items that should be of interest to small and medium-sized manufacturers.

As has been the case in the recent past in other legislative venues, “Buy American” provisions, in this case with regard to defense procurements, were quietly at issue. Both the House and Senate spending bills, which were in a conference committee for melding in mid-November, contained sections easing “Buy American” provisions for multiple defense department procurement items. Sen. Tammy Baldwin, D-Wis., had offered an amendment, with bipartisan support, on the Senate floor that would have kicked out the section weakening “Buy American” provisions. Senate Republican leaders, taking their lead from Sen. John McCain, R-Ariz., chairman of the Armed Services Committee, declined to allow that amendment to come up for a vote.

“Section 863 would enact a harmful sunset provision on current requirements, eliminating them at the end of fiscal year 2018 and consequently opening taxpayer-funded defense contracts to unfairly subsidized foreign competition, placing American jobs at risk, including in Wisconsin’s skilled shipbuilding industry,” Baldwin said. Her unsuccessful amendment was supported by the Alliance for American Manufacturing.

Both the House and Senate bills also contain a provision requiring the Defense Department to establish a pilot program for small and medium-sized manufacturers aimed at strengthening the defense industrial base. This may be partially in response to President Trump’s July executive order on assessing and strengthening the manufacturing and defense industrial base and supply chain resiliency.

The pilot program would consist of:

1. The use of contracts, grants, or other transaction authorities to support manufacturing and production capabilities of small and medium-sized manufacturers.
2. Purchases of quantities of goods or equipment for testing and qualification purposes.
3. Purchase commitments to create incentives for industry to develop manufacturing and production capabilities of interest to national security, including cost sharing with funding from nongovernmental sources.
4. Issuing loans directly to small and medium-sized enterprises to support manufacturing and production capabilities.

The National Defense Industrial Association issued a statement that said, “While NDIA did not specifically propose this pilot program, we support its intent and inclusion in the final version of the national defense authorization bill. Moving forward, we encourage appropriators and the department to sufficiently resource this effort.”

Manufacturers Associations Oppose Coal Subsidies

Manufacturers are pushing back hard against a proposal from U.S. Energy Sec. Rick Perry that would increase electricity costs for factories dependent on utilities that use coal.

Perry ordered the Federal Energy Regulatory Commission to issue a proposed rule allowing regional transmission organizations, which set electric rates in various regions of the country, to allow electric utilities that keep 90-day supplies of coal on hand to increase their rates to consumers. Perry is concerned that the retirement of coal-dependent utilities, which has been going on for years and is likely to hasten, would put parts of the country in jeopardy in the event of disasters or extreme cold temperatures because those utilities couldn’t immediately switch to natural gas in an emergency.

But the Industrial Energy Consumers of America (IECA), American Foundry Society, and dozens of other national and local trade groups representing many manufacturing sectors argued Perry’s plan would be a “bailout” of coal.

“We do not support subsidies for energy because it distorts markets and tilts the playing field between the various energy sources,” Paul Cicio, IECA president, said.