Statement of Administration Policy: H.R. 3039 - Defense Production Act Amendments of 1991

(House Rules) and SENT to House 10/1/91
(Carper (D) Delaware and five others)

The Administration opposes H.R. 3039 and urges the House to enact a simple extension of the existing authorities of the Defense Production Act of 1950 (DPA) until September 30, 1994, in lieu of H.R. 3039.

Specifically, the Administration opposes the following provisions of H.R. 3039:

—   Section 111, which would include the Secretary of Commerce and the Administrator of the Small Business Administration in determining which contractor may receive loans, loan guarantees, and purchase agreements for defense contracts. The Secretary of Defense can best determine which contractors should receive such assistance.

—   Section 122, which would establish a cap of $400 million for the Defense Production Act Fund. The $400 million cap is excessive; a $250 million cap has long been recognized as sufficient.

—   Section 123, which would statutorily establish a policy concerning "offset" arrangements in military exports. (U.S. exporters may enter into reciprocal agreements to purchase certain goods and services from or provide other services for the country purchasing U.S. military goods and services, thereby "offsetting" the cost of the original export.) The section would also mandate specific diplomatic initiatives to reduce the effects of offsets. These requirements would inadvisably restrict Federal policy and interfere with the President's exercise of his constitutional authority to conduct foreign affairs.

—   Section 124, which would require (1) U.S. industry to report immediately offset agreements with foreign entities and (2) the Secretary of Commerce, rather than the President, to prepare an annual offset report for Congress. Section 124 would also require the Secretary to disclose alternative findings or recommendations, made within the government, on offsets. The real-time reporting by U.S. industry would be burdensome and unnecessary. A statutory requirement to disclose internal Executive branch findings and recommendations would infringe upon the President's constitutional authority to maintain the confidentiality of Executive branch deliberations.

—   Section 126, which would require the utilization of certain materials in existing and future weapon systems. This requirement may require the redesign of, or lowered specifications for, existing or future weapon systems to accommodate these materials. This would raise the costs and lower the performance of the weapon systems or make weapon systems procurement and support more vulnerable to particular suppliers.

—   Section 134, which would require the establishment and maintenance of a defense industrial base information system. Such an information system would be an enormous undertaking and impose a considerable reporting burden on the government and the companies involved.

—   Section 163, which would require a report on the review of the foreign acquisition of U.S. companies involved in critical technologies that would be burdensome and of questionable value.

—   Sections 201 and 202, which would require the Department of Defense to consider providing full reimbursement of defense contractors' independent research and development/bid and proposal costs. Such reimbursement would unnecessarily increase Defense Department contract costs by up to $1 billion annually by 1996.

—   Section 211, which would amend the Code of Federal Regulations to specify the circumstances under which a contractor may be suspended or debarred. Such an amendment would duplicate existing procedures and would result in a misplaced emphasis on violations rather than contractor responsibilities.