Shoring up the defense industrial base

By Dr. Paul Freedenberg Vice President-Government Relations AMT—The Association For Manufacturing Technology

By Dr. Paul Freedenberg
Vice President-Government Relations
AMT—The Association For Manufacturing Technology

It is likely that few in the manufacturing community realize that the Chairman of the House Armed Services Committee, Duncan Hunter (R, Calif.), inserted a provision into the Fiscal Year 2004 Defense Authorization Act that provides an incentive to U.S. defense contractors to use U.S.-built machine tools in defense contracts.

The machine tool provision authored by Chairman Hunter directs the Secretary of Defense to "establish an incentive program. . .to purchase capital assets manufactured in the United States [and]. . .provide consideration in source selection in any request for proposals for a major defense acquisition program for offerors with eligible capital assets." This means the Defense Department is charged with creating an incentive program, probably involving bonus points, to reward contractors that agree to use U.S. machine tools in the defense projects for which they are bidding.

The logical question would be to ask why Rep. Hunter inserted such a provision in legislation dealing with defense issues. Hunter's answer is that he is concerned that the U.S. may soon be entirely dependent on foreign sources of machine tools for the manufacture of key weapons systems. There are no machine tool examples from the recent U.S.-Iraq war, and Rep. Hunter does not have a single machine tool plant in his Congressional District. Yet he not only inserted this provision in the bill that his committee produced, he held out for its adoption when the Administration, the Senate Armed Services Committee, and the defense-contracting community pressured him to remove it as the price for passage of the final legislation. Why was he so committed to this provision?

There was an incident in which a Swiss company, opposed to U.S. policy in Iraq, withheld a switch necessary to the functioning of a U.S.-made precision-guided munition. A U.S. vendor replaced the product within a couple of weeks, but the incident raised concerns as to the security of our defense industrial base. Being familiar with the critical role machine tools play in any defense mobilization or effort to produce surge capacity to deal with a defense emergency, Rep. Hunter decided that one good way to preserve the independent capacity of the U.S. to deal with such military emergencies would be to use the defense budget and Defense Dept. procurement to strengthen our machine tool base. This is what his new provision of law does. Last year, by AMT estimates, less than $500 million worth of machine tools were purchased for use in defense-related work in the U.S. (and perhaps as many as half were foreignmade). In a $10 trillion economy, that amount is miniscule. But Chairman Hunter feels that it is critical to maintain an independent machine tool capacity for both defense and political purposes. He foresees future foreign-policy crises in which the U.S. policy could be leveraged by nations disagreeing with our policy and withholding key components or equipment. Rep. Hunter believes that, in a small way, his new provision might also help to reverse recent trends toward offshore defense purchasing. He is part of a growing number who are concerned about the decline of our nation's manufacturing capabilities. His colleagues view the decline from the perspective of U.S. industrial competitiveness. Hunter also sees national security implications in the recent trends.

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