Pentagon Ordered to Buy American for Green Technology

One of the provisions contained in the Defense Authorization Bill for this fiscal year passed at the end of Congress’ lame duck session is one that extends the Buy American requirements for the Defense Department to solar panels. The rule makes the Pentagon only consider U.S. sources for this piece of “green technology” in their contracting efforts.

The Federal government procurement laws and regulations put a whole host of restrictions on contracts issued by the Pentagon for hardware, services and support. These include the Berry Amendment and Buy American Act. These are used to support U.S. industries by granting them privileged status and providing them a ready market.

The Berry Amendment for example requires prime contractors and their subcontractors to purchase or use food, clothing, tents, cotton, woven silk and other fibers or articles made out of them only from U.S. suppliers.

The Buy American Act has been in existence since the Thirties and requires preferences for American produced or manufactured goods.

While the U.S. Government should be supporting domestic sources at the same time it can force cost or schedule implications to a program. Especially with the change in the world’s economy over the last fifty years there may not be a domestic manufacturer or source for a product. The laws are waived in this case but that causes a potential schedule change or cost growth to a program. The domestic source may also be more expensive driving up the total cost of the procurement.

These kind of social engineering attempts within defense and government contracts are worthy but like the rules pertaining to small businesses or minority owned they may have a cost or efficiency affect. They are also vehicles that may be abused through companies selling non-U.S. material as U.S. made or taking advantage of the efforts to reward certain types of businesses. There have been many cases over time of companies pretending to meet certain criteria that they don’t thus gaining an advantage in sole source or direct contract awards.

The rule about using U.S. solar cells may have the same affect. The industry like so many others is turning to China and a great deal of the world’s production capacity is in that country. U.S. companies have been reducing their footprint and this may make it hard for the Pentagon to find a source capable of delivering the product on time or at the necessary cost.

This illustrates the issue where Congress wants to get the most for their defense dollars but at the same time by favoring a supplier may be forcing the Defense Department to buy something that they could get at a better price or in a more timely fashion.

Photo from sjsharktank’s flickr photostream.

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Procurement Fraud in Japan

As long as governments have been buying things there has been fraud related to this process. Sometimes it involves greedy suppliers who deliver low quality products or substitute one thing for another in an attempt to maximize their profits. Sometimes government employees take bribes to favor one contractor over another. Most major governments have laws and regulations established to prevent this or punish those who participate. Even though there are several cases a year in the U.S. and across the world of procurement crime and corruption.

In Japan they have just had a major shake-up of the Japanese Air Self-Defense Force (ASDF) as they found rigging and bribery related to office supply contracts at a major depot.

In this case it involved multiple violations of ethics and procurement rules. Officials were diverting money from other requirements including aircraft maintenance and communications and base support services to buy unneeded office equipment. As well as that misuse of funds the contracting officials were favoring companies that hired their retired colleagues. This led to bid rigging for the contracts.

As fall out from the case the ASDF Chief of Staff was replaced as were forty-nine other officers. The investigation also led to a reorganization of the ASDF procurement force. The contractors did not get off lightly either with five companies paying millions in penalties. On top of that the retired ASDF staff were forced to resign and could not work for the contractors for ten years.

Because governments spend so much money especially on defense item fraud is tempting to both sides. The most egregious case in modern U.S. history was the twenty-one year old Miami Beach arms dealer who received a $300 million contract from the Pentagon to supply ammunition to the Afghanistan military. Because they used Russian weapons there was no U.S. domestic manufacturer. The company tried to use old Chinese made ammo from Albania. This violated several different laws and no real work was done on the contract and it was suspended.

These cases will continue as long as defense spending and contracting does. Human are human and many are tempted to try and make money themselves off of the deals.

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