CQ TODAY
April 25, 2008 – 6:45 p.m.
Lawmakers Line Up for Tanker Battle

Lawmakers who oppose the Air Force’s decision to award a major tanker-airplane contract to a team of companies that includes the European jetmaker Airbus are gearing up for a major fight on Capitol Hill.

The so-called Buy American forces, who wanted the Air Force to award the $35 billion contract to the Chicago-based Boeing Co., have a two-pronged strategy.

First, those lawmakers are readying measures that would prevent the Air Force from following through on the contract, which was awarded to a team led by Northrop Grumman Corp. and the U.S. arm of the European Aeronautic Defense and Space company (EADS).

Second, they propose to permanently change Pentagon contracting rules that they believe favor foreign firms over U.S. companies.

Some of the measures are expected to come up in the House as soon as the next two weeks, when the war spending and defense authorization bills are written. Boeing’s allies say they are considering all avenues of opportunity.

“If it moves, we’ll shake it,” said Sen. Pat Roberts, R-Kan.

The Buy American movement could be helped by a slowing economy, growing concern about the outsourcing of jobs abroad and the pressures of an election year, analysts said. In the House, particularly, the odds are good for passage of legislation related to the tanker deal.

But in the Senate — where free-trade sentiment is stronger and where powerful senators back the Northrop Grumman contract — there is less inclination to back such provisions. Moreover, President Bush has threatened to veto the bills.

Still, the prospect that such efforts might gain traction this year has some foreign governments concerned about access to Pentagon contracts, their armed forces’ ability to operate closely with the U.S. military and relations in general.

Likewise, the Pentagon and top U.S. contractors are concerned stricter domestic­-source legislation would make it harder to buy high-quality foreign-made components or entire weapons systems — and potentially lead to reprisals overseas against U.S. firms.

“If we allow Boeing to successfully lobby for a politically driven outcome, what are we going to say when something similar happens to a U.S. company in some parliament somewhere else in the world?” asked Todd Malan of the Organization for International Investment, which represents foreign companies in the United States.

The coming battle, which is expected to include big-money lobbying, is taking shape along geographic lines.

On one side are lawmakers from Washington state and Kansas, where the Boeing tanker would be built.

On the other are lawmakers from Ala­bama, where the Northrop Grumman/EADS tanker would be assembled. By value, the Northrop plane would be 42 percent foreign-built, compared with 15 percent for the Boeing tanker, the firms said.

Many lawmakers are waiting for the Government Accountability Office to rule on Boeing’s official protest of the award before aligning themselves with either camp.

The GAO, which is the official arbiter of federal contracting protests, has until June to issue its nonbinding recommendations.

Seeking to Undo the Deal

In the meantime, the deal’s opponents are plotting their legislative strategy.

Rep. Todd Tiahrt, R-Kan., an Appropriations Defense Subcommittee member whose state is home to the headquarters for Boeing’s defense industries, has written an amendment that would require a new tanker competition.

The plan, which could be attached to the coming war spending bill and possibly other defense bills, would also bar the Pentagon from buying anything from a foreign company that has been accused before the World Trade Organization of receiving illegal subsidies.

Tiahrt’s proposal also would require the Pentagon, in weighing bids, to consider factors that would favor U.S. companies competing against foreign firms.

For example, under Tiahrt’s plan, the Pentagon would have to weigh, in comparing bids, a foreign company’s receipt of government money to cover health care costs that U.S. companies have to pay themselves, he said.

Furthermore, he wants to require the Pentagon to weigh the impact of using foreign suppliers on U.S. national security, jobs, tax revenues and industrial capacity.

His proposal would also require that the Pentagon consider the impact of any rules or laws that are waived for foreign companies, including the 1933 Buy America Act (PL 72-428), which requires that all U.S. government purchases contain at least 50 percent U.S.-made parts or labor.

There are exceptions to the Buy America Act, the most significant being the Pentagon’s authority to waive the law for companies in the 21 countries with which the United States has certain trade agreements. But Tiahrt and other members have talked openly of limiting or eliminating that exception.

Tiahrt insisted he supports free trade and brushes aside concerns that his proposal could trigger a trade war.

“All I think we should have is a level playing field,” Tiahrt said.

House Panel Sympathetic to Changes

Meanwhile, Duncan Hunter, R-Calif., ranking member of the House Armed Services Committee and one of Congress’ most ardent Buy American proponents, has his own plan.

Like Tiahrt, Hunter is considering recommending a ban on Pentagon contracts for companies alleged to receive illegal subsidies.

He is also advocating language that would reopen the tanker competition under new rules clarifying the Air Force’s requirement for an extremely large tanker.

If the Air Force had been clear about that before, Hunter said, Boeing would have bid its 777 aircraft, not its smaller 767, and would have won.

Hunter also may seek language that would ban contracts for companies from countries that do not spend at least 2 percent of their GDP on defense.

“American taxpayers, who pay an average $1,000 a piece for the defense of the free world, should, as a matter of equity, be allowed to make the systems that they pay for,” Hunter said, adding that he planned to try to attach his proposal to the fiscal 2009 defense authorization bill, scheduled to be marked up starting the week of May 5.

Ike Skelton, D-Mo., chairman of the House Armed Services Committee, has not spoken publicly on the tanker award. But he has expressed concerns in the past about maintaining a healthy U.S. defense industry. And many others on the committee are sympathetic to Hunter’s perspective.

In the Senate, free trade is more popular, but the economic downturn and outrage over Boeing potentially losing the tanker contract could be compelling for some lawmakers.

For now, key members of the Senate Armed Services Committee say the panel is unlikely to consider tanker-related provisions in its version of the defense policy bill this year. And the Senate Appropriations Committee has no plans to take up the tanker issue, either in the supplemental war spending bill or before the GAO issues its recommendations, according to Daniel K. Inouye, D-Hawaii, and Ted Stevens, R-Alaska, the chairman and ranking member, respectively, of the panel’s Defense Subcommittee.

But Stevens has said he may consider legislation that could give Boeing some of the tanker work when the panel writes the fiscal 2009 Defense appropriations bill.

Boeing has other allies on the Appropriations Committee, including Patty Murray, D-Wash., and Sam Brownback, R-Kan.

But Northrop Grumman can depend on several committee heavyweights too, among them ranking Republican Thad Cochran of Mississippi and Richard C. Shelby, R-Ala.

Source: CQ Today
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