The Road To Job Creation Begins With Government Procurement Practices

President Obama has spoken eloquently and often about his determination to create jobs in America, and to curtail the practice of sole-source procurement at the Pentagon. But it would appear that the Department of Defense hasn’t been listening.

Our company, Infrastructure Defense Technologies, LLC (“IDT”), is a manufacturer of protective barriers for the U.S. Military. We have seen firsthand the manner in which the Defense establishment is destroying the National Defense Industrial Base by doling out sole-source contracts to foreign companies amid the trials of war and economic depression. Following is the story of our company, and a recommendation to the White House on how to fix the continued practice of outsourcing the Pentagon at the cost of American jobs and manufacturing on the home front.

Protective barriers are a mainstay of the military supply chain, and are deployed at every American base throughout Iraq and Afghanistan. For the last seven years, the Defense Logistics Agency (“DLA” - the support agency of the Department of Defense charged with supplying protective barrier equipment) has purchased over $1 billion worth of these products from a foreign company, on a sole-source contract. What’s worse, our government has paid for these purchases in foreign currency, at an unfavorable exchange rate to U.S. Taxpayers.

In 2008, the DLA was ordered by Pentagon brass to find alternatives to the foreign barrier products for the purposes of breaking the sole-source monopoly, finding better protection for our deployed troops and increasing the longevity of service in the field (the foreign product was reported in a U.S. Air Force Memorandum as “failing in as little as six months to one year”).

The DLA responded to the Pentagon order by conducting a competitive solicitation for barriers, which required that protective characteristics and technical capabilities would be the most important criteria of evaluation. The winner of the competitive process would be awarded a four year contract worth $400 million.

IDT’s barrier product was judged by the Defense Logistics Agency to offer the best protective benefits to the U.S. Military. Our Technical Proposal was rated best among all offerors, and our price was determined to be “fair and reasonable”. Yet, despite these facts, the DLA rewarded the same foreign company it had been sole-sourcing for the previous seven years, thus continuing their monopoly status in the military supply chain.

IDT promptly filed a formal bid protest with the Government Accountability Office (“GAO”), and asserted that the foreign company was ineligible for award because they failed to meet the requirements of the DLA’s solicitation. The DLA responded to our protest by petitioning the GAO to dismiss our protest in order that they may take “Corrective Action”….presumably to correct the mistakes they made in awarding an ineligible foreign vendor with $400 million in U.S. Taxpayer treasure.

Well, the DLA took corrective action alright. They allowed the foreign company to fix their ineligible offer, then rewarded them yet again.

IDT is based in the President’s home State of Illinois. Our town of Belvidere (and the greater Rockford area), has an unenviable unemployment rate of 22% (and rising). A successful award of this contract would have created 250 new, high-paying jobs in our plant, and an estimated one thousand additional jobs in our supply chain, since 100% of our product content is American made.

So, in the midst of war and economic recession, the DLA has chosen to stick it to our soldiers, taxpayers, workers and industrial base in one fell swoop. They have also disregarded two of President Obama’s key initiatives: The creation of jobs, and the end of sole-source monopolies on defense expenditures.

Nicely done, DLA.

There is no shortage of stories about contracting problems at the Department of Defense, where many of their largest suppliers are foreign entities. The recent KC-X tanker battle between American based Boeing and European Aeronautic Defense and Space represents a case-in-point. But how do we solve this issue of the Defense Department’s coddling of foreign companies at the expense of American jobs and industrial security? The answer is surprisingly simple, and it’s called the Buy American Act.

The Buy American Act sounds like a great provision, but like most things political, its meaning has been diluted over time. The Act was signed into law by President Franklin D. Roosevelt in 1933, and required the United States Government to prefer U.S .made products in its purchases. Fast forward to 2010, where countries allied with the United States by treaty or trade agreement are permitted to compete for U.S. Government procurements on an equal footing with American businesses.

The practice of allowing foreign entities to bid for American contracts as equals with American companies cannot be justified in the face of empirical evidence which illustrates its absurdity. While supporters of unrestricted free trade are quick to point out that international agreements are reciprocal, two examples nullify their argument. First, the U.S. Government purchases far more than any other nation on Earth, which makes justification of reciprocity on equal terms impossible on the grounds of parity. Second is America’s trade deficit, which is killing our competitiveness, harming our currency and weakening the overall economy.

Consider for a moment the benefits of true preference for American-made goods in the government procurement system. Contracts to U.S. businesses will create jobs, which will in turn create new taxpayers and reduce unemployment rolls. Domestic procurement will stimulate capital expenditures on durable goods such as machinery and equipment, thus stimulating downstream productivity. U.S. businesses pay income taxes on their profits, whereas foreign entities use our money to pay taxes in their own countries. Finally, present-day prosperity breeds future ingenuity through research, development and expertise (formerly referred to as American know-how).

Based upon the foregoing, a 25% price consideration should be given to any American company which offers a product or service to the U.S. Government in the presence of foreign competition. And unlike most measures in Washington, this highly effective strategy could be implemented in short order due to its simplicity and popularity with the American People.

At Infrastructure Defense Technologies, our mission is to protect America’s deployed troops and create jobs at home. Maybe the Pentagon should consider these values. And as for the President? Well Sir, these are among the commitments of your campaign and the duties of your office.

By: Ken Carlton

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Ken Carlton is the Executive Vice President of Infrastructure Defense Technologies, an Illinois based manufacturer and marketer of physical security equipment. He is responsible for the overall management of the company, including Finance, Operations and Administration. He has been with IDT since its founding in 2005. From 1990 to 2005, Mr. Carlton was the General Manager at Corrugated Metals, Incorporated, an IDT affiliated company which manufactures metal building products.