NDIA San Antonio March 12, 2007 What Used to Be the Berry Amendment Presented by Terry L. Albertson

2 Background Preference/requirement to use specialty metals melted in the United States or a qualifying country or incorporated in parts manufactured in a qualifying country on DoD contracts Phrased as limit on use of appropriated funds and arguably limited to the metal itself Originally justified as protection of defense industrial base Widely perceived as protectionist measure to protect a well-connected industry No exceptions except Domestic Non-Availability Determination (DNAD)

3 What Went Wrong When originally enacted, Mil Specs controlled virtually all DoD production Separate stocks of compliant products – no major compliance issues DoD encouraged use of commercial sources Commercial sources became global Much domestic production disappeared (especially stainless steel) Many opportunities for confusion Gradually recognized as a problem over several years, exploding to a real crisis in mid-2005

4 Initial Reaction Withholding to solve problem with improper use of appropriated funds –Not a permanent solution –Not a solution acceptable supporters in Congress No commercial item exemption permitted Repeal politically impossible Frosty reception for DNAD requests No authority to waive

5 Congressional Action Original statute repealed completely –No statutory requirements applicable to old contracts –Contractual requirements remain “One-time” waiver for products already in inventory New statute applicable to new contracts –Withholding abolished as a solution –Exemption for commercial electronic components –Limited to six categories of products –Applies to end items and components –Flow down required to subs at all tiers

6 Current Requirements Strict compliance required on new contracts at all tiers No longer a prohibition on use of funds, so withholding no longer solves the problem Contractors should identify problems before award and seek a DNAD One-time waivers definitely apply to inventory used on old contracts Waiver applicability to new contracts?

7 Subsequent Developments “Third tier” exemption for DoD purchases only Some guidance on waivers –Not entirely clear, but apparently to be reviewed contract-by contract –Progress on requests unclear Guidance on application of exemption for commercial electronic components issued Class DNAD for populated printed circuit card assemblies – and made retroactive Class DNAD for fasteners reported to be pending

8 Open Issues Resolution of prior withholdings Meaning of “one-time” waiver –One-time per what – contractor, contract, part? –Who is responsible for processing waiver requests – primes or manufacturers or both? –Applicable to new contracts? Commercial electronic components – at what level are “components” exempt? What happens if a judgment-proof supplier delivers noncompliant product on a new contract?