Thursday, May 22, 2008

Congressional Eyes Now on the GAO and Appropriators

The 2009 House Defense Authorization Bill (H.R.5658)and the fight to get tanker related language inserted into it is pretty much a done deal. The bill is now being discussed on the house floor and should be voted on tonight. The fight will be taken up again when the bill goes to conference with the Senate. The Senate Bill (S. 3001) does not have the following provisions:

Review of Illegal Subsidies
If the World Trade Organization (WTO) rules that an illegal subsidy was given to any large commercial aircraft manufacturer, the Committee requires the Air Force to review the potential impact of that subsidy on the recent source selection process for the KC-45 aerial refueling tanker program. If the Air Force determines that the subsidy did impact the competition, then it must find a way to remove the impact from the competition to ensure the fairness of the process.

Prohibition on Illegal Subsidies in Defense Contract Awards
The bill prohibits any future DOD contract from being awarded to a company that benefits from illegal subsidies.

Industrial Base Consideration
DOD is requires to consider the potential impact on the domestic industrial base during all future competitions for major program contracts.

Consideration of Employee Benefits
DOD must ensure that no foreign company receives a competitive advantage if its employee benefits costs are borne by the government.

Also, the House bill reduced the authorization for the KC-45 Tanker to $831.8 million, a cut of about $62 million. This was done because, according to Air Force officials, advanced procurement funding is not required during FY09 program. The Senate authorized the full $893,419 requested; all under RTD&E.

Congressional Quarterly reports that the White House has already lodged veto threats against provisions in the bills ranging from a timetable for withdrawal of U.S. troops from Iraq to an attempt to nullify President Bush’s executive order directing agencies to ignore “earmarks,” or lawmakers’ projects, unless they are spelled out in bill texts. So even after Senate-House conference, the 2009 Defense Authorization Act may have a long way to go before being signed into law.

On Wednesday night the House Rules Committee voted not to allow Rep. Duncan Hunter's amendment that would have barred the military from going to full production of the tanker until the U.S. Air Force certified that no more than 15 percent of the aircraft was foreign-made and that final assembly would take place in the United States. This was the only language that could have had an effect on the tanker contract regardless of GAO or WTO rulings.

A number of other tanker related amendments were either ruled agaist or pulled due to overwhelming resistance from the wait-for-the-GAO report faction. Our members have stated that this wait-and-see group is larger than the pro-Boeing faction and the pro-EADS faction put together. We believed this would end up being the case when we posted much the same back in March.

Given the history of tanker controversy in Congress only the true believers like ourselves are willing to fully weigh in now. Most in Congress will need some sort of positive ruling from either the GAO or the WTO before committing.

The real action should come later in the House Appropriations Subcommittee on Defense (HAC-D) which will do its mark-up after the GAO ruling. Also, the Subcommittee membership is heavily pro-Boeing.

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