Berry Amendment Background NDIA Sarasota, FL February 21, 2006 Terry L. Albertson

2 Berry Amendment – Specialty Metals 10 U.S.C. § 2533a codified longstanding appropriation act restriction dating to 1972 DoD may not use appropriated funds to purchase non-domestic specialty metals –Exception for metal melted in a qualifying country or contained in article manufactured in qualifying country under the Trade Agreements Act; –Flows down to subcontractor for aircraft, missiles & space, ships, tanks, ammo or weapons –Expressly applicable to commercial items –The Anti-Buy American Act Purchases below $100,000 exempt

3 The Statute (a) Requirement. - Except as provided in subsections (c) through (h), funds appropriated or otherwise available to the Department of Defense may not be used for the procurement of an item described in subsection (b) if the item is not grown, reprocessed, reused, or produced in the United States. (b) Covered Items. - An item referred to in subsection (a) is any of the following: (1) an article or item of * * (D) [fabric] (whether in the form of fiber or yarn or contained in fabrics, materials, or manufactured articles); or * * * * (2) Specialty metals, including stainless steel flatware. (3) Hand or measuring tools. (c) Availability Exception. - Subsection (a) does not apply to the extent that the Secretary of Defense or the Secretary of the military department concerned determines that satisfactory quality and sufficient quantity of any such article or item described in subsection (b)(1) or specialty metals (including stainless steel flatware) grown, reprocessed, reused, or produced in the United States cannot be procured as and when needed at United States market prices.

4 Legislative Intent Congress did not intend the statute to apply to de minimis quantities of metal: [I]t would be a virtual impossibility for a company participating in a defense contract to try to ascertain for itself, let alone for the myriad of suppliers of small component metal parts, that there was no small amount of metal used which would come within the definition of specialty metals. I would hope that the Department of Defense in the administration of this provision, while seeking to carry out the broad intent of protecting the special metal industry, would have sufficient flexibility and discretion under this provision so that they would not be required to go to ridiculous extremes which would result in an almost impossible administrative burden placed upon Government contractors, and the addition of needless expenses to the Government in carrying out its procurement practices. 118 Cong. Rec. S17967 (Oct. 13, 1972) (statement of Sen. Javits).

5 Laird Determination It is apparent, from the legislative history of this provision, that it was not intended that this Department achieve or attempt to achieve the impossible in its implementation. Rather, it is clear that its purpose is to afford reasonable protection to the specialty metals industry to help preserve our domestic production capacity to satisfy mobilization requirements, without forcing a massive disruption of our existing procurement methods and programs. An accommodation is therefore needed to give maximum effect to this new requirement without losing sight of other Congressional objectives that the Department of Defense function in an efficient and economical manner in meeting its mission. Melvin Laird. Nov 1972 Precedent for Exercise of Secretarial Discretion

6 The Regulation DFARS Restrictions. The following restrictions implement 10 U.S.C. 2533a. Except as provided in subsection , do not acquire — (a) Any of the following items, either as end products or components, unless the items have been grown, reprocessed, reused, or produced in the United States: * * * * (b) Specialty metals, including stainless steel flatware, unless the metals were melted in steel manufacturing facilities located within the United States.

7 The Basic Clause DFARS Preference for domestic specialty metals. * * (b) Any specialty metals incorporated in articles delivered under this contract shall be melted in the United States or its outlying areas. (c) This clause does not apply to specialty metals — (1) Melted in a qualifying country or incorporated in an article manufactured in a qualifying country; or (2) Purchased by a subcontractor at any tier.

8 Alternate 1 Clause For contracts for aircraft, missile and space systems, ships, tank-automotive, weapons, and Ammunition: (c) This clause does not apply to specialty metals melted in a qualifying country or incorporated in an article manufactured in a qualifying country. (d) The Contractor shall insert the substance of this clause, including this paragraph (d), in all subcontracts for items containing specialty metals.

9 Berry Amendment Compliance Much ado about almost nothing –Fasteners, springs, wire mesh –Stainless steel v. titanium Widespread compliance failures –Congressional attention –$6+ million FCA settlement (Sept. 29, 2004) –GAO report re commercial aircraft –Numerous voluntary disclosures

10 Berry Amendment: DCMA Guidance DCMA guidance issued September 2005 and reissued February 17, 2006 Acceptance of noncompliant product permitted if payment withheld –Withholding equals value of lowest level auditable part, plus burdens at all tiers –References to possible fraud, possible replacement, and quality largely deleted –No direction about prior deliveries

11 Berry Amendment: Pending Issues De minimis exception? –Program type used as test since 1972 –Small purchases – DOD only? –Needs to be updated Measure of damages –Metal or entire part –Burdens –Prior deliveries Replacement? False claims?