Industry gets reprieve in '03 defense bill. (Government Policy Notes).

After receiving strong opposition from the defense industry and the Pentagon, provisions that would have expanded the statutory definition of "core logistics capabilities" have been stricken from both the House and Senate versions of the Fiscal Year 2003 National Defense Authorization Act.

Under current law, "core-logistics capabilities" are defined as those maintenance and repair activities that must be performed at public depots by public employees. A provision in the two bills would have expanded the definition to include acquisition logistics, supply management, systems engineering, and modification management--activities currently performed in large part by industry.

In assessing the potential impact of the revised definition on industry, the National Defense Industrial Association conducted a survey of its membership. Based on data provided, under the proposed definition, approximately 50,000 private sector jobs would have been moved to the public depots. As part of its advocacy efforts, NDIA shared this data with congressional and Pentagon officials. Additionally, NDIA President Lawrence P. Farrell, Jr., spoke out against the provisions in two high-profile interviews with Washington-based news media.

Congressional leaders agreed to strike the provisions after extensive consultation with the military services and the office of the secretary of defense. The breakthrough came when the Defense Department pledged to maintain the additional capabilities with an appropriate mix of government personnel, contractor personnel and public-private partnerships.

A second issue was largely a repeat of last year's so-called "Abercrombie Amendment." Both houses considered amendments to the 2003 bill that would have increased the number of public-private competitions that the department must perform, while restricting industry's opportunity to win such competitions. The amendments also would have required that the same number of jobs be subjected to competition in the private and public sectors. The Senate amendment was defeated 50-49. A similar amendment was offered but withdrawn when the House Armed Services Committee drafted the bill.

NDIA opposed the amendments in letters to all members of both the House and Senate Armed Services Committees, citing increased costs, reduced flexibility for Defense Department managers and exacerbation of the federal government's personnel crisis. The Office of Management and Budget also denounced the amendments, as did the Pentagon, in letters to the two armed services committees from the secretary of defense and assistant secretary of defense for legislative affairs.

New Export Tax Regime

Shortly before breaking for the congressional August recess, House Ways and Means Committee Chairman Bill Thomas (R-CA) introduced H.R. 5095, the American Competitive and Corporate Accountability Act of 2002. The bill, which would repeal the Extrarerritorial Income (ETI) Exclusion Act of 2000, was introduced, among other reasons, to bring the United States into compliance with current World Trade Organization (WTO) rules.

In January, a WTO appellate panel issued a report prohibiting the United Stares from allowing U.S. exporters to exempt a portion of their foreign-sales earnings from their taxes. The finding marks the fourth time in the past two and one-half years that the WTO has ruled against the United States on this issue, and there is no further opportunity for Washington to appeal this latest ruling. At press time, the WTO was meeting to determine the level of retaliatory trade sanctions that the European Union can impose against U.S. exports.

NDIA recommended, in one of its top issues for 2002, that the ETI Exclusion Act not be repealed. Repealing ETI without replacing it with comparable benefits, we argued, would severely disadvantage U.S. exporters, making them less competitive in the international marketplace with a potential for loss of jobs. Consequently, NDIA will track the developments of this legislation and continue to oppose its passage.

Prominent Speakers

NDIA's Legislative Information Division has stepped up its efforts to schedule appearances by influential members of Congress and high-ranking Pentagon officials. Since January, speakers at LID meetings have included:

* Sen. John Warner, R-Va., ranking Republican on the Senate Armed Services Committee.

* Rep. Curt Weldon, R-Pa., chairman of the House Armed Service's Military Procurement Subcommittee.

* Rep. Jim Moran, D-Va., member of the House Defense Appropriations Subcommittee.

* Reps. Mike Honda, D-Calif., and Joe Wilson, R-S.C.--both freshmen.

Future speakers include Rep. Norm Dicks, D-Wash., who also serves on the House Defense Appropriations Subcommittee. Pentagon speakers have included:

* Buzz Hefti, principal deputy assistant secretary of defense for legislative affairs.

* Larry Lanzillotta, principal deputy undersecretary of defense and comptroller.

* Lisa Bronson, deputy undersecretary of defense for technology security policy.

Navy-Industry International Dialogue

In late June, NDIA's International Division, in cooperation with the Navy International Programs Office, continued its sponsorship of the Navy-Industry International Dialogue. This session examined the Coast Guard's Deepwater Program, with representatives from the Coast Guard, the Navy, the contractors and the Commerce Department. The program highlighted the international opportunities for Deepwater programs.

Speakers included the Coast Guard Vice Commandant, Vice Adm. Thomas Barrett, and the program executive officer for Deepwater, Rear Adm. Patrick Stillman. The dialogue was the third time in recent months that NDIA divisions have hosted Coast Guard-related events, reflecting increasing interest in this important component of Homeland Security.

NDIA Government policy

Steve Thompson

Vice President Government Policy

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Ruth W. Franklin

Director, Procurement

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Jennifer Burnside

Director, International

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Ben Stone

Government Policy Analyst

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Jim Linden

Staff Assistant Government Policy

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