II 110th CONGRESS 2d Session S. 3203 IN THE SENATE OF THE UNITED STATES June 26, 2008 Mr. Roberts (for himself and Mr. Brownback) introduced the following bill; which was read twice and referred to the Committee on Armed Services A BILL To prohibit the use of funds by the Department of Defense on the KC–X tanker contract, and for other purposes related to that contract.

1.

Short title; table of contents

(a)

Short title

This Act may be cited as the KC–Tanker Recompete Act. (b)

Table of contents

The table of contents for this Act is as follows: Sec. 1. Short title; table of contents. Sec. 2. KC–X Tanker contract. Sec. 3. Independent cost estimate. Sec. 4. Requirement to offset illegal subsidization to foreign persons participating in KC–135 replacement competition. Sec. 5. Ensuring fair competition. Sec. 6. National security considerations. Sec. 7. Industrial base considerations. Sec. 8. Loss of employee tax revenue. Sec. 9. Loss of corporate tax revenue. Sec. 10. Regulatory burden. Sec. 11. Foreign Corrupt Practices Act. Sec. 12. Covered contractor definition. Sec. 13. Report.

2.

KC–X Tanker contract

(a)

Prohibition

No funds may be used by the Department of Defense on the KC–X tanker contract. In this subsection, the term KC–X tanker contract means the contract awarded by the Department of the Air Force on February 29, 2008, for the next generation air-refueling tanker aircraft. (b)

Replacement

If the Department of the Air Force chooses not to exercise its authority to award a new contract for the KC–X tanker to the bidder whose protest of the February 29, 2008, award was sustained by the Government Accountability Office on June 18, 2008, the Secretary of Defense, using competitive procedures, shall award a contract for a replacement for the KC–135 tanker. Such funds as may be necessary are authorized to conduct the competition for such contract.

3.

Independent cost estimate

As part of the acquisition process for the award of a contract for a replacement for the KC–135 tanker, as required by section 2(b), the Secretary of Defense and the source selection authority shall ensure that an independent cost estimate is completed. The cost estimate shall include an estimate of— (1)all costs borne by the suppliers; (2)all costs borne by foreign governments; (3)all costs borne by domestic suppliers (if the proposal involves any domestic suppliers); and (4)all costs covered by cost accounting standards under the Federal Acquisition Regulation.

4.

Requirement to offset illegal subsidization to foreign persons participating in KC–135 replacement competition

(a)

Requirement

As part of the acquisition process for the award of a contract for a replacement of the KC–135 tanker, as required by section 2(b), the Secretary of Defense shall, in conducting the cost or price evaluation of any proposal submitted by a subsidized person, increase the cost or price of the proposal by the amount of illegal subsidization. (b)

Illegal subsidization

For purposes of subsection (a), the amount of illegal subsidization with respect to a proposal submitted by a subsidized person is the amount of the illegal subsidy referred to in subsection (c), as determined jointly by the Secretary of Commerce and the United States Trade Representative after receipt of a request from the Secretary of Defense for such a determination. (c)

Subsidized persons

With respect to any proposal submitted to the Department of Defense for a contract for a replacement of the KC–135 tanker, a subsidized person is any of the following: (1)

Foreign person

A foreign person to which the government of a foreign country that is a member of the World Trade Organization has provided a subsidy for the tanker if— (A)the United States has requested consultations with that foreign country under the Agreement on Subsidies and Countervailing Measures on the basis that the subsidy is an illegal subsidy under that Agreement; and (B)the World Trade Organization has ruled that the subsidy provided by the foreign country is an illegal subsidy under the Agreement on Subsidies and Countervailing Measures. (2)

Joint Ventures

Any joint venture, cooperative organization, partnership, or contracting team of which a foreign person described in paragraph (1) is a member. (3)

Subcontracts

Any person proposing to use a foreign person described in paragraph (1) or an entity described in paragraph (2) as a subcontractor in performing the contract for which the proposal is submitted. (d)

Definitions

In this section: (1)The term Agreement on Subsidies and Countervailing Measures means the agreement described in section 101(d)(12) of the Uruguay Round Agreements Act (19 U.S.C. 3501(d)(12)). (2)The term illegal subsidy means a prohibited subsidy or an actionable subsidy under the Agreement on Subsidies and Countervailing Measures. (3)The term foreign person means— (A)an individual who is not a United States person or an alien lawfully admitted for permanent residence into the United States; or (B)a corporation, partnership, or other nongovernmental entity which is not a United States person. (4)The term United States person means— (A)a natural person who is a citizen of the United States or who owes permanent allegiance to the United States; and (B)a corporation or other legal entity which is organized under the laws of the United States, any State or territory thereof, or the District of Columbia, if natural persons described in subparagraph (A) own, directly or indirectly, more than 50 percent of the outstanding capital stock or other beneficial interest in such legal entity. (5)The term cost or price evaluation means an evaluation conducted by a source selection authority pursuant to subpart 15.305(a)(1) of the Federal Acquisition Regulation.

5.

Ensuring fair competition

As part of the acquisition process for the award of a contract for a replacement for the KC–135 tanker, as required by section 2(b), the Secretary of Defense and the source selection authority shall ensure that any covered contractor, foreign or domestic, for the contract, as part of the cost criteria, is evaluated both on the cost borne by the supplier and any cost borne by a foreign government that is not borne by a government (local, State, or Federal) in the United States. The costs considered in the evaluation shall be consistent with the costs estimated in the independent cost estimate completed pursuant to section 3.

6.

National security considerations

As part of the acquisition process for the award of a contract for a replacement for the KC–135 tanker, as required by section 2(b), it is the responsibility of the Department of Defense to take into consideration the national security impacts, the industrial base impacts, and the economic impact to the United States of awarding contracts for critical capabilities to foreign entities.

7.

Industrial base considerations

As part of the acquisition process for the award of a contract for a replacement for the KC–135 tanker, as required by section 2(b), it is the responsibility of the Department of Defense to take into consideration the industrial base impacts and the economic impact to the United States of awarding contracts involving critical jobs to foreign entities.

8.

Loss of employee tax revenue

As part of the acquisition process for the award of a contract for a replacement for the KC–135 tanker, as required by section 2(b), it is the responsibility of the Department of Defense to take into consideration the impact of lost personal income tax revenues to the United States, as a result of awarding defense contracts to foreign entities.

9.

Loss of corporate tax revenue

As part of the acquisition process for the award of a contract for a replacement for the KC–135 tanker, as required by section 2(b), it is the responsibility of the Department of Defense to take into consideration the impact of lost corporate tax revenues to the United States, as a result of awarding defense contracts to foreign entities.

10.

Regulatory burden

As part of the acquisition process for the award of a contract for a replacement for the KC–135 tanker, as required by section 2(b), it is the responsibility of the Department of Defense to take into consideration the impact of all regulations waived or that are not applicable with respect to foreign entities. These regulations include cost accounting standards, Buy America provisions, specialty metal provisions, the Foreign Corrupt Practices Acts, and compliance with the International Traffic in Arms Regulation.

11.

Foreign Corrupt Practices Act

(a)

Condition for prospective award of contract

(1)

In general

As part of the acquisition process for the award of a contract for a replacement for the KC–135 tanker, as required by section 2(b), the Secretary of Defense and the source selection authority shall require that any contractor or subcontractor described in paragraph (2) that is not already covered by the Foreign Corrupt Practices Act shall be required, as a condition of the contract, to comply with the requirements of such Act. (2)

Contractor and subcontractors described

A contractor or subcontractor described in this paragraph is any of the following: (A)A prospective defense contractor that is part of an internationally controlled group of entities. (B)A prospective subcontractor that is part of an internationally controlled group of entities, provided that the subcontractor is at the second tier or higher and is to be used by the prospective defense contractor (as described in subparagraph (A)) to perform the contract. (b)

Compliance Program

(1)

In general

With respect to compliance with the Foreign Corrupt Practices Act, the Secretary of Defense shall require that all contractors and subcontractors described in subsection (a)(2) have a compliance program and certify in writing that they have completed an audit of that compliance program. (2)

Debarment

(A)

In general

Any contractor described in subsection (a)(2) that engages in conduct that violates the requirements of the Foreign Corrupt Practices Act or any similar applicable laws in foreign countries shall be debarred from contracting with the Department of Defense. (B)

Period of debarment

The period of debarment under subparagraph (A) shall be at least 3 years. (c)

National Security Waiver Authority

(1)

In general

The Secretary of Defense may waive the applicability of subsections (a) and (b) in specific instances if the Secretary determines that the waiver is necessary in the national security interests of the United States. (2)

Non-delegation

The Secretary of Defense may not delegate the waiver authority under paragraph (1). (3)

Notification

Upon issuing a waiver under paragraph (1), the Secretary of Defense shall notify the appropriate Congressional committees in writing not later than 30 days after issuing such waiver. (d)

Definitions

In this section: (1)

Foreign Corrupt Practices Act

The term Foreign Corrupt Practices Act means— (A)section 30A of the Securities Exchange Act of 1934 (15 U.S.C. 78dd–1); and (B)sections 104 and 104A of the Foreign Corrupt Practices Act of 1977 (15 U.S.C. 78dd–2). (2)

Internationally controlled group of entities

The term internationally controlled group of entities means a controlled group of entities the common parent of which is a company organized under the laws of a foreign government and to which the Foreign Corrupt Practices Act does not, by its jurisdictional terms, apply. (3)

Appropriate congressional committees

In this subsection, the term appropriate congressional committees means— (A)the Committee on Armed Services, the Committee on Appropriations, and the Permanent Select Committee on Intelligence of the House of Representatives; and (B)the Committee on Armed Services, the Committee on Appropriations, and the Select Committee on Intelligence of the Senate.

12.

Covered contractor definition

In this Act, the term covered contractor, with respect to a prime contract of the Department of Defense, means any of the following: (1)

Contractor and subsidiaries and affiliates

(A)Any prospective contractor making an offer for the contract. (B)The contractor awarded the contract. (C)Any subsidiary or affiliate of the contractor awarded the contract. (2)

Subcontractors and subsidiaries and affiliates

(A)Any subcontractor of a contractor described in paragraph (1)(B) that is at the second tier or higher and is to be used by the contractor in the performance of the contract. (B)Any subsidiary or affiliate of any such subcontractor.

13.

Report

(a)

Report requirement

The Secretary of Defense shall submit to the congressional defense committees a report on compliance by the Department of Defense with the provisions of this Act during the acquisition process for the award of a contract for a replacement for the KC–135 tanker, as required by section 2(b). (b)

Deadline

The report shall be submitted no later than the date of award of such contract. (c)

Congressional defense committees

In this section, the term congressional defense committees means— (1)the Committee on Armed Services and the Committee on Appropriations of the Senate; and (2)the Committee on Armed Services and the Committee on Appropriations of the House of Representatives.