TO: ACQUISITION REFORM WORKING GROUP (ARWG):
Linda Bauer Darr, CEO, American Council of Engineering Companies (ACEC) Steve Sandherr, CEO, Associated General Contractors of America (AGC) Todd Thibodeaux, CEO, Computing Technology Industry Association (CompTIA) Jason Oxman, CEO, Information Technology Industry Council (ITI) General Hawk Carlisle, USAF (Ret), CEO, National Defense Industrial Association (NDIA) Thomas J. Donohue, CEO, United States Chamber of Commerce (U.S. Chamber)
FROM: George Williams, CEO, AMERICAN SHIPBUILDING SUPPLIERS ASSOCIATION
RE: ARWG Letter dated September 24, 2020 to the Senate and House Armed Services Committees sharing“…suggestions and proposals for the defense authorization legislation for FY2021.”
DATE: November 13, 2020
The American Shipbuilding Suppliers Association (ASSA) advocates for the United States shipbuilding supplier community. We address industry-wide issues directly to Congress, the Navy and the U.S. Coast Guard. Our end objective is to ensure that our domestic shipbuilding companies remain robust, strategic assets to the United States defense programs.
We were concerned to read in the referenced letter the blanket statement from the ARWG regarding House Sec. 825 Enhanced domestic content requirement for major defense acquisition programs. Your letter, reference page 9, identifies your concerns as follows: “Given the complex nature of the global supply chain, particularly in the areas of information and communications technologies (ICT), the feasibility of this provision is questionable and cause for concern among industry partners of the Department.”
By law, US Navy ships are required to be built in US shipyards (10 USC §7309). The national security justification for this is clear. However, there is no such requirement for critical Hull, Mechanical & Electrical (HM&E) components—propulsion systems, machinery control systems, shafts, bearings, ships service power generation and many others—to be manufactured in the U.S.
ASSA’s position is that Congressional direction is needed for components for all Navy Surface Ships and Unmanned Vessels to be required to be designed, engineered, manufactured and assembled in the U.S. Continued foreign encroachment on American Manufacturers is a matter of economics and national security.
ASSA understands the complexity of the defense global supply chain and wishes to directly engage with the ARWG signatories of the subject letter. The ASSA objective is to define common ground with ARWG enabling a joint communication to Congressional Armed Services Committees which supports Buy American shipbuilding as noted in the 2021 defense authorization legislation.
ASSA POSITION BACKGROUND:
Currently, acquisition decisions are relegated to shipyard primes or their foreign-owned partners, and there is no requirement for sourcing these components within the U.S. Shipbuilding Supplier Industrial Base. This situation is decimating the American Shipbuilding Suppliers industry so much so that one day, the U.S. will be totally dependent upon foreign countries to defend our Nation.
The draft FY 2021 Defense Appropriations Act under the guidance of Chairman Pete Visclosky (D-IN) included a requirement that all preliminary requirements development, performance specification development, and related efforts for a host of new Navy ship classes now seeking R&D funding must include specifications that “all hull, mechanical, and electrical components are manufactured in the United States.” Representative Norcross’ Amendment includes a time table, incrementally raising the domestic percentages on an annual basis. Some lawmakers are saying they support the increase in jobs the Buy American Legislation would generate but worry that the Representative Norcross’ proposed timeline is too aggressive. ASSA believes that Congress has not been aggressive enough to save American jobs and manufacturers.
Some opponents say, “let’s study the issue.” ASSA believes that the only study required is of the loss of jobs, tax revenue and lost manufacturing operations due to foreign procurements and encroachment. Other opponents cite international agreements that rely on offsets as an issue. These are smaller issues to face than what our Nation is facing when we do not pass legislation that requires the Navy and shipyards to Buy American.
We constantly hear that “Buy American” will be more costly. ASSA believes that any extra costs can be largely or completely offset by the direct benefit to the U.S. Treasury derived from buying from domestic manufacturers. U. S. manufacturers pay U.S. corporate income tax and employ American workers, who pay American taxes. American manufacturers use American made components and sub-assemblies from American sub-suppliers, all paying income tax. This takes people off the unemployment rolls, makes them productive, makes them gain experience in their trades and teaches them skills. Buying components from foreign sources provides no benefit to the U.S. Economy or to the U.S. Industrial Base. Our experience in dealing with COVID-19 shed light on why America should not rely on a global supply chain when the most reliable supply chain is here in the United States. The manufacturing companies that make up this shipbuilding supplier base are very specialized in responding to the unique requirements of our warships; their facilities are capital-intensive; they require a highly skilled workforce; they are familiar with stringent Navy requirements for operations in demanding environments, e.g. cyber security, shock, vibration, EMI, acoustic, etc.; their highly engineered products generally do not lend themselves to commercial markets; they provide critical business to 3rd and 4th tier suppliers within the shipbuilding supplier base; and the loss of opportunity to U.S. suppliers would increase the cost on other Navy platforms. Most importantly, maintaining a robust domestic manufacturing capability allows for a surge capability by ensuring rapidly scalable capacity when called upon to support major military operations—a theme frequently emphasized by DoD and Navy leaders. These capabilities are a critical National asset and once lost, it is unlikely or extremely costly to replicate them as was the case in the DDG-51 restart.
In the absence of clear direction from the Navy on domestic sourcing of critical components, Congress should consider providing such direction through a statutory requirement that key critical components must be designed, engineered, manufactured and assembled in the U.S. The Administration has been espousing these theories since the September 2018 report was released on “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States. It’s time to make “Buy American”, America’s priority. Our members would welcome the opportunity to meet with members of ARWG to discuss how we can collaborate to support American jobs and the manufacturing industry. I would like to request that a working point of contact be assigned to work with our staff liaison to identify next steps for the working group and members of ASSA. Tish Haas Williams can be reached at 228-216-9048 or by email at email@example.com.