Should U.S.contractors beallowed to flaunt’Buy American’clause?
Cargo-scanning Subcontractor Spurns ‘Buy American’ ClauseBy Cliff MontgomeryLast year, Congress gave the U.S. Agency for International Development (USAID) $50 million to provide security scanning systems for checking commercial cargo leaving and entering the West Bank and the Gaza Strip. The principal contractor recently rejected two firms as potential subcontractors, leaving a partnership of Chinese and American companies that the losing firms say violates the spirit, if not the letter, of “Buy American” laws.USAID awarded the main contract to Chemonics International Inc., a global consultancy. In April, the company began taking proposals from subcontractors who could sell it mobile X-ray scanners.In June, one of those subcontractors, Rapiscan Systems–a Hawthorne, Calif.-based security systems company–received a letter from Chemonics stating that its proposal did not meet the company’s ‘minimum mandatory requirements’. Rapiscan had offered to provide one its newest products, the Eagle Mobile scannerGovernment Executive magazine. He added that Chemonics’ two-year requirement doesn’t make sense, because companies routinely offer their most recent models to contractors. Kant further argued that the decision violated the intent of various “Buy American” laws, and said he wants lawmakers to address the issue.A second American subcontractor, Smiths Detection, also was told it was rejected for Chemonics’ subcontract.While Chemonics would not discuss the details of the ongoing procurement with Government Executive, it appears that the Chinese company Nuctech, which paired up with Billerica, Mass.-based American Science & Engineering (AS&E), was given the subcontract instead. Executives at both Rapiscan and Smiths Detection said they have seen evidence that the AS&E/Nuctech team will manufacture its security equipment in China, an assertion AS&E would neither affirm nor deny. Kim Nilson, director of the project for Chemonics, told Government Executive that all potential subcontractors, including AS&E/Nuctech, ‘complied with sourcing requirements’.Both this reminds one of the first rule of political language: argue the law when you can’t argue the facts.While building the equipment in China appears to be technically legal, Rapiscan and Smiths Detection said it is unfair to force them to compete for federal dollars against a company in Communist China that can offer lower prices because of the country’s lower labor and regulatory costs.”Where I have a problem is in the rules…I have a problem with my taxpayer money going to a Chinese company,” Brook Miller, vice president for Smiths Detection, told Government Executive.Miller’s company is itself based in Britain, but it does a significant amount of its manufacturing in the United Statessourcing‘ requirement appears to have been that products will be shipped from the United States.Kant pointed out that having foreign companies provide America‘s security equipment may create vulnerabilities at home. If potentially hostile nations get hold of the security equipment being used by the United States and its allies, they may figure out how to disrupt the machines, he said. Partly for that reason, American companies are prohibited from selling such sensitive equipment to certain countries. Chinese companies face no such restrictions, however.Nilson replied she was aware that some of the subcontractors were unhappy with the results of Chemonics’ subcontracting process.”Unfortunately, that happens a lot,” she told Government Executive.When companies like Rapiscan and Smiths Detection lose procurements to top contractors managing federal dollars, they have little recourse.”We protested,” said Kant. “[Chemonics] said you can’t protest, it’s not a [Federal Acquisition Regulation] procurement.” Kant said he complained to USAID as well, but the agency declined to take any action, and has directed all questions about the subcontracting procurement to Chemonics.The Government Accountability Office (GAO), which handles protests from principal contractors over disputes with federal agencies, does not have jurisdiction over subcontracting disputes. Kant says he has sent numerous letters to appropriate members of the House and Senate in the hopes they will review the contract and–if Chemonics has indeed violated the intent of ‘Buy American’ laws–ask USAID to revoke the contract.”If you’re intending companies to buy U.S.A., and this is a loophole–you should look at it,” Kant said. “If USAID can go around the [Federal Acquisition Regulation] and buy from the Chinese,” he said, “then as a U.S. company, I will move all my stuff to Malaysia and make it low cost… But I don’t think that’s what [Congress] wants.”If the claims about Chemonics are true, one must realize the truth in Kant’s last sentiment; but it’s still interesting to note that corporate America only cries “foul” the moment they are the ones losing money to the ‘efficiency’ of globalization.
