Today's Article
Should U.S.
contractors be
allowed to flaunt
'Buy American'
clause?
contractors be
allowed to flaunt
'Buy American'
clause?
The American Spark
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Cargo-scanning Subcontractor Spurns 'Buy American' Clause
By Cliff Montgomery
Last 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 scanner; but Chemonics
required the equipment to have been around at least two years.
"We were pissed," Peter Kant, vice president of government affairs for Rapiscan, told Government 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 States; in fact
Smiths Detection would have made the security equipment for the Chemonics subcontract in Tennessee, he added.
Miller would like USAID to enforce a minimum U.S.-content requirement for any equipment used to fulfill its contracts. With
the Chemonics contract, the only 'sourcing' 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.
By Cliff Montgomery
Last 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 scanner; but Chemonics
required the equipment to have been around at least two years.
"We were pissed," Peter Kant, vice president of government affairs for Rapiscan, told Government 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 States; in fact
Smiths Detection would have made the security equipment for the Chemonics subcontract in Tennessee, he added.
Miller would like USAID to enforce a minimum U.S.-content requirement for any equipment used to fulfill its contracts. With
the Chemonics contract, the only 'sourcing' 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.