SITREP

A recent Defense News article detailed a change in U.S. policy on defense material procurement. Taiwan companies will now be allowed to bid directly for U.S. Department of Defense (DoD) contracts because of an amendment to the U.S. Defense Federal Acquisition Regulation Supplement (DFARS). This also means that Japan, Hong Kong, Singapore, and South Korean companies can bid directly to U.S. DoD as well. All have signed onto the World Trade Organization’s Government Procurement Agreement and are thus eligible in the U.S. market.

I have several problems with this – while not being a protectionist by nature and I believe firmly in free markets and less government interference – the fact is that the defense groups in all of these countries require the involvement of indigenous companies even when there are solid overseas sources. Should an American company want to bid on weapon systems in these countries, they have to partner with local groups. Again, while I have spent a lot of time in all of these countries and have good friends in many of the defense manufacturing and historical firearms communities, I don’t believe that this new situation is a good one for the U.S.

All of these non-U.S. companies have relationships with existing U.S. companies such as ATK, General Dynamics, and even the smaller groups here. They have a path to selling to the U.S. government that includes programs that increase U.S. employment and support contract groups. Joint ventures are possible that increase U.S. jobs along with lowering costs. These U.S. companies have a lot of experience in the U.S. system of procurement as well as intuitive understanding of the needs of the end users, and definitely serve a purpose.

At this point in the world wide recession that many of us think has become a depression, we do not need to be using our tax-payer supplied government funds to prop up other countries’ economies. They do not prop up our economy unless there is a self-serving interest such as buying our bonds. Very few are opening the borders for U.S. manufacturers if they have an indigenous manufacturing base for the products themselves. It’s just economic common sense to keep your own people working. If you can enhance this in-country capability by partnering with outsiders, that’s wonderful.

However, allowing countries that have much lower pricing due to their significantly lower labor costs full access to our multi-hundred billion dollar defense purchasing has the potential to hammer on many of our (the U.S.’) already weakened companies. Just as a jobs issue this makes no sense. I would possibly be supportive of making the U.S. DoD market more accessible as long as it included U.S. companies, and had a reciprocal effect for U.S. companies to bid directly into all of these countries as well. Even this might have a damaging effect on U.S. companies.

There is also the issue of U.S. technology going into these other countries and possibly making it into unfriendly hands. Our TDPs would have to go over with contracts and there is already so much industrial espionage that is successful at present. It is massively damaging to our national security. Some think this will amount to a freebie handout of our defense technology to the Chinese manufacturers.

The other more chilling effect is on our own indigenous design groups. The 1986 ban on further manufacture of machine guns meant that the small designers who have traditionally brought us the “great leaps forward” – people like John Browning, Hiram Maxim, Eugene Stoner, et al, had contemporaries in the modern day – Syd McQueen, Max Atchisson, and many others. After 1986 they no longer had a civilian market to sell into, which supported their R&D shops. While there are designers working out there, it’s virtually impossible to support yourself while doing such. The impediments to being a designer are immense now and tearing down the infrastructure of the U.S. defense industry is going to further damage our innovation. There are very few of us who can put together the manufacturing engine and market to allow freeform R&D unless we’re U.S. DoD contractors.

Many of us are hoping that this will be reviewed and stops put in place to both reduce the damaging effect of this “Open Market” to our DoD needs, and open a more friendly path for U.S. manufacturers into these countries as well. -Dan