[Congressional Record Volume 143, Number 99 (Monday, July 14, 1997)]
[Senate]
[Pages S7415-S7420]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             DEPARTMENT OF DEFENSE APPROPRIATIONS ACT, 1998

  The Senate continued with the consideration of the bill.
  Mr. McCAIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arizona is recognized.
  Mr. McCAIN. Mr. President, once again, I find myself in the 
unpleasant position of speaking before my colleagues about unacceptable 
levels of unnecessary spending in the defense appropriations bill. I 
fully understand the pressure facing the chairman and ranking member of 
the committee, but I would be remiss in my responsibilities were I not 
to go on record for those items in the bill of truly questionable merit 
that appear to represent the usual practice of inserting programs 
primarily for parochial reasons.
  The total value of these programs is about $5 billion, about twice as 
much as the Congress increased the President's overall defense budget 
request and, incidentally, about the same amount of wasteful spending 
added in the defense authorization bill. This amount does not include 
the $300 million transferred from the Defense Department to the 
Transportation Department for Coast Guard activities, a perennial 
provision in defense appropriations bills.
  Let me review some examples of items included in the bill and report 
that are, in my view, wasteful, unnecessary and designed simply to 
serve personal interests.
  The bill not only funds an oceanographic research ship not requested 
by the Defense Department, it throws in an extra $19.5 million for 
oceanographic and meteorological research. Are we to honestly believe 
the $209 million in the budget request for that function is inadequate 
for the next fiscal year? Of course, the over $200 million for C-130J 
aircraft--once again not requested and certainly not needed, as 
emphasized by the Air Force Chief of Staff--represents a particularly 
egregious waste of taxpayer money.
  I wonder, Mr. President, if some day, some year we will stop buying 
C-130 aircraft. Many years ago, the Air Force said they didn't need any 
more C-130 aircraft. It is time--well, I say it every year. It gets a 
little ridiculous.
  An especially troublesome expense, neither budgeted for nor estimated 
in any accompanying documentation provided by the Appropriations 
Committee, is the amount associated with the various ``Buy America'' 
provisions included in the bill. Such expenses include restricting to 
U.S. manufacturers procurement of shipboard anchor and mooring chain, 
carbon, alloy and armor steel plate, and ball and roller bearings. 
Consequently, there is an automatic and generally substantial unknown 
cost tied to this bill that will only become known as contracts are 
signed with American manufacturers despite the availability of less 
expensive products from our trading partners.
  Lest anyone feel that I am unsympathetic to American manufacturers, I 
need only point out the protectionist measures our European allies and 
customers are considering in retaliation for the ``Buy America'' 
statutes included in the appropriations bills that are routinely passed 
by Congress. Britain, a major purchaser of American platforms and 
systems, is understandably tired of the one-way street we pursue in 
defense acquisitions. I am fully cognizant of the need to protect 
certain vital industries for national security reasons, but the items 
protected in this and other bills hardly qualify.
  The costly and unnecessary practice of earmarking appropriations 
continues: $35 million for the Kaho'olawe Island Conveyance, 
Remediation and Environmental Restoration Fund; $250,000 for a pilot 
project to ``facilitate the transfer of commercial cruise ship 
shipbuilding technology and expertise to U.S. yards,'' provided the 
Jones Act restrictions are rigorously applied to the Hawaiian Islands; 
$5.4 million for establishment of a small business development center, 
which is to focus on agricultural programs in Pacific islands; $2.7 
million to investigate new technologies in such areas as hyperspectral 
fluorescence imaging, work to be conducted at the Akamai project at 
Tripler Army Medical Center in Hawaii, with another $10 million 
earmarked that the Department will be expected to spend for these 
programs; $2.7 million of the oceanographic spending to which I 
referred earlier at the Naval Surface Warfare Center in south Florida; 
$6.9 million for upgrading air traffic control simulators at Keesler 
Air Force Base in Mississippi; and $8 million for continued activities 
at the Pacific Disaster Center.

  Mr. President, that barely scratches the surface of what is in this 
bill: $3 million is earmarked for the Caribbean radiation early warning 
system, which is to be spent at the Center for Monitoring Research, 
which brings me to the issue of Congress' tendency to create new 
centers for the study of every conceivable subject, research virtually 
all of which is already performed elsewhere. The defense authorization 
bill passed last week included $5 million to establish a center for the 
study of the Chinese military. I can go to my office or the library and 
find numerous examples of competent studies on the Chinese military 
already available, whether from the Rand Corp., the American Enterprise 
Institute, or various studies published by scholars at various 
universities. The authorization bill also establishes a Center for 
Hemispheric Defense Studies for no apparent reason.
  The practice of earmarking funds for centers knows no bounds. S. 1005 
includes $7 million for the Center of Excellence for Research in Ocean 
Sciences, just in case there was any risk of funds being spent for a 
center of mediocrity for research in ocean sciences; $4 million for the 
Southern Observatory for Astronomical Research; $4 million for the 
Center of Advanced Microstructure Devices; and on and on it goes. I do 
not doubt for one second that the sponsors of these programs can come 
before the Senate and offer an articulate and thoughtful defense of 
their pet projects. I do doubt very seriously whether any of these 
items properly belongs in the defense appropriations bill, especially 
during a period when vital accounts are regularly taxed to pay for 
ongoing and unforeseen contingencies, like Bosnia and Iraq.
  Any time military equipment is prepared for shipment to and from 
deployment, it is inspected for damage and, in the case of equipment 
being returned to its home base, for foreign substances like dust that 
could contain bacteria alien to our country. Do we really need to 
earmark another $1 million to expand that research specifically for 
brown tree snakes, which, to the best of my knowledge, are located only 
in Guam? Yes, it is true that we base a large number of forces on that 
island. It is also true that the brown snake is a dangerous snake. I 
simply find it hard to believe that we need to spend any defense 
dollars on an issue for which plenty of information already exists and 
is readily available.

  Mr. President, I have touched on the tip of the iceberg. There is 
plenty more I could point to were time available. I only look forward 
to the day when my trips to the floor to highlight wasteful and 
unnecessary spending are no longer necessary.
  Mr. President, I ask unanimous consent that a list of objectionable 
add-ons in the Department of Defense appropriations bill be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

  Objectionable Add-ons in the Fiscal Year 1998 Department of Defense 
                          Appropriations Bill

                       Procurement (in millions)

Army: C-XX........................................................$23.0
Navy:
  SSN-21 Seawolf..................................................153.4
  NSSN..........................................................2,599.8
  Special Project Aircraft..........................................7.0
  Oceanographic Ships (TAG-65).....................................73.0
  LCAC Landing Craft...............................................17.3
  Environmental Support Equipment for Oceanography..................6.0
  T-45 Training Aircraft Earmarked for NAS Meridian................10.0
  Port Security Unit Equipment.....................................13.5
Air Force:
  C-17 (MYP)......................................................418.5
  WC-130 Aircraft.................................................177.0
  Small CVX (C-37)..................................................6.0
  Supply Assets Tracking System.....................................5.0
Defense-Wide: Automatic Document Conversion System.................20.0

[[Page S7416]]

Reserves and National Guard:                                      653.0
  Including the following aircraft:
    C-9 Replacement aircraft.....................................(40.0)
    WC-130 Spares/Support Equipment..............................(29.7)
    C-130J.......................................................(95.8)
    EC-130.......................................................(70.5)
    KC-135 Re-Engining...........................................(52.0)

                 Research and Development (in millions)

Army:
  Projectile detection and Cuing...................................$2.5
  Shortstop Electronic Protection system............................3.0
  Solid-State Laser Dyes............................................4.0
  Combat Vehicle and Automotive Technology:
    National Automotive Center......................................4.0
    High-Output Diesel Engine Testing...............................1.0
    HMMWV Engine rebuild Program....................................4.0
    Alterntive Vehicle Propulsion System............................5.0
  Environmental Quality Technology:
    Radford Environmental Development Program.......................6.0
    Plasma Energy Pyrolysis System..................................8.7
    Environmental Compliance Projects (WETO)........................8.8
    Pacific Island Ecosystems.......................................4.0
    Establish Small Business Center.................................5.4
    Bioremediation Science Center--for fragile Pacific Island Isolated 
      Ecosystems....................................................4.0
    Resource Recovery Technology Center.............................4.0
  Cold Regions Research Lab.........................................1.0
  Center for Geosciences Atmospheric Research......................10.0
  Medical Advanced Technology:
    Intravenous Membrane Oxygenator technology......................1.0
    MRE Nutrition Research..........................................3.6
    Mustard Gas Research............................................1.0
    Breast Cancer Research........................................175.0
    Prostate Diagnostic Imaging.....................................5.0
  Electronics and Electronic Devices:
    Rechargeable Coin Cells.........................................0.5
    AA Zinc Air Battery.............................................1.3
    Rechargeable Battery System.....................................0.6
    Reusable Alkaline Manganese Zinc................................1.0
  Virtual Retinal Display...........................................2.0
  Low Emissions Natural Gas Boiler Demo.............................2.0
  Cold Regions Research Lab Repair..................................1.3
  Management Headquarters--Akamai Project..........................26.5
    Including:
      Hyperspectral Florecence Imaging............................(2.7)
      Theater Medical Infrastructure.............................(10.0)
  Aerostat Development.............................................10.0
  Instrumental factory for Gears Program............................4.0
  Electronic Circuit Board Development Center.......................4.0
  University and Industry Research Centers..........................7.3
  Army Data Analysis Center.........................................5.0
  Battle Integration Center........................................22.0
  DoD High Energy Laser Test Facility..............................15.0
Navy:
  Natural Gas Cooling Systems.......................................2.5
  PMRF Sensors......................................................5.0
  LASH Hyperspectral...............................................12.0
  Computer Technology:
    Second Source Carbon Fibers.....................................2.0
    Photomagnetic Material Research................................0.35
    Plasma Quench Technology........................................3.0
    Advanced Material Intelligent Center............................2.5
  Defense Research Sciences:
    Marine Mammal Research Program..................................0.5
  Oceanographic and Atmospheric Technology:
    Natl. Oceanographic Partnership Program........................16.0
    NCSW Test Facility.............................................2.75
  Asbestos Thermochemical Conversion Pilot Plant--Puget Sound Naval 
    Shipyard........................................................2.0
  Freeze-Dried Blood Research.......................................2.5
  Photomagnetic Materials Research.................................0.35
  Environmental Quality and Logistics Adv. Tech.:
    Permanent Fuel Cell............................................1.75
    Visualization of Technical Info. Project........................2.0
    Smart Base.....................................................6.25
  Industrial Preparedness:
    Mantech........................................................50.0
    Center for Integrated Manufacturing Studies.....................4.0
  Exploratory Development:
    Oceanographic and Atmospheric Technology......................18.75
  Industrial Preparedness..........................................54.0
Air Force:
  HAARP.............................................................5.0
  Inorganic/Organic Optical Limiters................................1.0
  Armstrong Lab Exploratory Development.............................3.0
  Phillips Lab Explatory Development................................0.9
Defense-Wide:
  U.S.-Japan Management Training--University Research Initiatives..10.0
  Pacific Disaster Center...........................................8.0
  Scorpius Support Technologies....................................10.0
  Joint Theater Missile Defense:
    Advanced Research Center........................................7.0
    Kauai Test Facility.............................................5.0
    Pacific Missile Range Facility upgrades........................33.4
  Center of Excellence for Rsh. In Ocean Sciences...................7.0
  Materials and Electronics Technology:
    Life Support Trauma and Transport...............................4.0
    3-D Electronics.................................................5.0
    Cryogenic Electronics...........................................6.0
  Electric Vehicles................................................15.0
  Climate Fuel Cell Program.........................................5.0
  Southern Observatory for Astronomical Research....................4.0
  HAARP.............................................................3.0
  Advanced Electronics Technologies:
    Lithographic and Alternative Semiconductor Processing Techniques 
      Ctr..........................................................23.0
    Point Source X-Ray Lithography..................................3.0
    Defense Techlink Rural Tech. Transfer...........................1.0
    Center for Advanced Microstructures Devices.....................4.0
  Defense Research Initiatives.....................................14.0
  Agile Port Demonstration.........................................10.0
  Electric Vehicles................................................15.0
  High Performance Computing Modernization Prgm....................25.0

                    Military Personnel (in millions)

Air Force: Additional B-52 Force Structure.........................$4.5
Reserve and National Guard:
  C-130 Force Structure (Air Force Reserve).........................1.4
  C-130 Force Structure (Air National Guard)........................4.0

                Operations and Maintenance (in millions)

Army:
  Roock Island arsenal Bridge......................................$5.0
  North Star Borough Landfill.......................................5.0
  Saddle Road--Pohakuloa, Hawaii Training Area......................3.0
Navy:
  Naval Meteorology and Oceanography Command.......................19.5
  Pacific Missile Range Facility...................................15.0
  Fallon Naval Air Station..........................................3.2
Air Force:
  Civil Air Patrol..................................................4.4
  Spacetrack--Maui, Hawaii..........................................1.4
  Manufacturing Assistance Technology Program.......................2.0
  B-52 Attrition Reserve Aircraft..................................42.4
Defense-Wide:
  Legacy...........................................................10.0
  Repairs to Federally-Funded Schools..............................10.0
  Exercise Northern Edge (PACCOM)...................................5.0
  Partnership for Peace............................................44.2
  Civil-Military Programs (Challenge)..............................32.0
National Guard:
  C-130 Force Structure............................................13.0
  C-130 Operations..................................................6.0

                    Other DOD Approps. (in millions)

Defense Health Program:
  Hepatitis A Vaccine.............................................$25.0
  Military Health Service System Info. Mgmt........................10.0
  Uniformed Service Univ.-Health Sciences..........................13.0
  Pacific Island Health Care Program................................5.0
  Brown Tree Snakes.................................................1.0
  Cancer Control Program--Charleston Navy Hospital..................9.0
  Army Research Institute...........................................5.4
  Military Nursing Research.........................................5.0
  Disaster Management Training--Tripler Army Medical Center.........5.0
  Health Care Cooperation between Military and Civilians--Holloman Air 
    Force Base......................................................7.0
  Diagnostic Ctr. of Excellence for Breast Cancer & Prostrate Cancer--
    Ft. Drum........................................................4.0

                     Related Agencies (in millions)

Kaho'olawe Island Conveyance, Remediation, and Environmental 
  Restoration Trust Fund..........................................$35.0

                    General Provisions (in millions)

Shipbuilding Industrial Base Enhancement..........................$0.25

  Mr. McCAIN. Mr. President, finally, I want to again thank the Senator 
from Alaska and the Senator from Hawaii for, as always, doing an 
outstanding and dedicated job in preparation of this very difficult and 
largest appropriations bill that we consider. We have had debate and 
discussion over my objections for many years. I am sure that will 
continue. But that debate and discussion has not been characterized by 
a lack of respect on my part for the outstanding job that both the 
Senator from Alaska and the Senator from Hawaii do.
  I yield the floor.
  Mr. STEVENS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Alaska.
  Mr. STEVENS. Mr. President, I await, sometimes with trepidation, the 
annual report of my good friend from Arizona. I know of no one who 
spends more time, other than Senator Inouye and I do, than the Senator 
from Arizona.
  His comments are to the point. We do disagree on some of the issues. 
But I

[[Page S7417]]

want the Senate to know once again we are grateful to him for the 
amount of time he puts into the bill. He has led, through his comments 
from year to year, changes that we have tried to make in subsequent 
bills to reflect his guidance. We again will examine this bill as we go 
to conference to make sure that we have done the best we can to accept 
his advice and counsel. But I deeply, truly am grateful to him for the 
time he takes on the bill.
  Mr. McCAIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. McCAIN. I thank the Senator from Alaska for his consideration of 
my remarks and the context in which they are intended. I appreciate the 
degree of cooperation he and the Senator from Hawaii have accorded me 
and my staff in the examination of the pending amendments. I am 
grateful for that.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from Iowa.
  Mr. HARKIN. Mr. President, parliamentary inquiry. What is the floor 
situation right now? Is the bill open for amendments?
  The PRESIDING OFFICER. A first-degree amendment is currently pending 
to the bill.
  Mr. STEVENS. Mr. President, I ask unanimous consent that my amendment 
be put aside so we can consider the amendment of the Senator from Iowa.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                           Amendment No. 848

     (Purpose: To prohibit the use of taxpayer funds to underwrite 
         restructuring costs associated with a business merger)

  Mr. HARKIN. Mr. President, I have an amendment which I send to the 
desk and ask for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The bill clerk read as follows:

       The Senator from Iowa [Mr. Harkin] proposes an amendment 
     numbered 848.

  Mr. HARKIN. Mr. President, I ask unanimous consent that further 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the end of title VIII, add the following:
       Sec.   . None of the funds available to the Department of 
     Defense under this Act may be obligated or expended to pay a 
     contractor under a contract with the Department of Defense 
     for any costs incurred by the contractor when it is made 
     known to the Federal official having authority to obligate or 
     expend such funds that such costs are restructuring costs 
     associated with a business combination that were incurred on 
     or after July 15, 1997.

  The PRESIDING OFFICER. The Senator from Iowa is recognized.
  Mr. HARKIN. Mr. President, I will take just a few minutes here to 
describe my amendment and what it does. I appreciate the chairman's 
willingness to set aside his amendment to take up this one.
  Mr. President, this is an amendment similar to one that I offered a 
year ago to get the Government out of the business of paying defense 
contractors for exercising their own best business judgment in merging 
together to form larger corporations, because that is what we are doing 
right now. Even though defense contractors want to merge--it is in 
their own best business interest to do so--taxpayers are coming in and 
subsidizing it.
  This is new. We have never done this before. Prior to July 1993, the 
Department of Defense had a longstanding practice of not permitting 
defense contractors to charge restructuring costs to flexibly priced 
contracts that were transferred from one contractor to another as a 
result of a business combination.
  That was the longstanding policy of DOD. The rationale for this 
practice was that DOD should not have to pay increased costs merely 
because one contractor is combining with another contractor. That 
statement comes right out of a recent GAO report.
  But in July 1993, DOD changed its longstanding practice and uniformly 
began permitting defense contractors to charge restructuring costs to 
the taxpayers of this country.
  How did this come about? Did it come about because Congress passed a 
law permitting it? No. Was there ever any debate on the Senate floor 
about it? None whatsoever. Was there ever one hearing held on it? No, 
there was not one hearing held on it.
  What happened was that in 1993, then Undersecretary of Defense, Mr. 
John Deutch by name, was Undersecretary for Procurement. He decided, 
single-handedly, to change the longstanding policy and made this 
change.
  We raised the point at the time, I and others, that this was a change 
in the Federal Acquisition Regulations, [FAR]. To get a change like 
this in FAR, there was a process and procedure that one had to go 
through. It had to be published in the Federal Register. There had to 
be hearings on it. Congress had to act on it. None of that took place.
  When we raised the point that regulations were not followed in 
changing the FAR, Mr. Deutch testified that in fact this was not a 
change in FAR, this was simply an explanation of existing law, that 
indeed the Department of Defense or any Federal agency had the 
authority to pay for the costs of mergers and acquisitions. So to get 
out from underneath violating the law, which I believe is what Mr. 
Deutch did at that time in terms of not going through the normal 
process, he then said, well, this really was not a change in FAR, it 
was simply an explanation of what was existing law.
  That raised all kinds of questions, as I pointed out last year in the 
debate.
  If this had been existing law for all these years, then it does not 
just affect the Department of Defense. It affects every agency of 
Government. That means that if hospitals merge, if they have Government 
contracts, can now come in and say, we want help for our mergers and 
acquisitions.
  This could go back years and years. People could come back from 20 
years ago and say, Oh, well, we didn't know that that was existing law, 
so now we need to be reimbursed for the mergers we made in the past.
  So we are hung up on the twin horns of this sort of dilemma. On the 
one hand, if it was indeed a change in FAR, then Mr. Deutch and the 
Department of Defense did not go through proper procedures to 
accomplish that. If, on the other hand, it was not a change in FAR, 
then we have opened a Pandora's box for providing for taxpayer funding 
for any merger or combination for any company that has any Government 
contract.
  But I want to point out this is the Department of Defense, DOD, 
funding bill. And, you know, some of my colleagues argue that we are 
tight for money in this bill. We tried last week to transfer some money 
out of DOD to pay for veterans. We were told we did not have enough 
money in DOD for that. Now we have a subsidy the likes of which we have 
never seen in this country. I call it the ``money for nothing'' subsidy 
because that is exactly what the taxpayers are getting.

  Let us look at the mergers and acquisitions that we have had.
  Just last week Lockheed Martin announced it would purchase Northrop 
Grumman for an estimated $11.6 billion. Well, besides a nice stock 
boost for Northrop Grumman, which closed up 21.12 cents on the stock 
market when the merger was announced, these merging companies are also 
eligible to receive millions of dollars from the American taxpayers 
just for doing what is in their own best business interest. So that is 
why I am offering this amendment, a commonsense amendment to prevent 
these large and profitable companies from receiving taxpayer subsidies 
simply for merging.
  I am not saying they cannot merge. I am simply saying that the 
taxpayer should not fund it.
  For the life of me, I cannot see the wisdom in paying these 
profitable companies for merging when they are doing it in their own 
best business interest, when they are making a lot of money on the 
stock market, and we are paying them with money that we just do not 
have. I thought we were trying to balance the budget.
  Again, this is not money for any goods that we are going to receive 
at all. I just think that if these companies want to merge, fine--I 
know the Department of Defense has been urging them to merge for 
savings to the taxpayers, possible savings to the taxpayers. I do not 
know whether that is true or not. There may be some savings, but I do 
not think that has all been documented in terms of real savings. But 
even if there are savings to the taxpayers, the fact is, these 
companies are making a lot of money by

[[Page S7418]]

merging. These companies would not merge if it was not in their best 
business interests to do so. There is no one at the Defense Department 
holding a hammer over their heads saying, Lockheed, you must merge with 
Northrop Grumman. There is no one holding a hammer over the head of 
Boeing saying, You must merge with McDonnell Douglas. They are doing it 
because it is increasing their profits, increasing their bottom line 
for their stockholders. Otherwise they would never do it.
  These mergers, aside from making more money for the companies, are in 
fact decreasing the amount of competition that we have out there now 
for Government procurements. But now they say that, well, these mergers 
are going to save us money.
  Let me read a couple of passages from a recent DOD inspector general 
report, dated June 28, 1996. On page 9-- let me read it in its full 
context:

       Contractors' [meaning defense contractors] are submitting 
     cost proposals for activities called concentration, 
     transition, economic planning, and other terms that do not 
     immediately suggest restructuring and make the cost issues 
     difficult for the Government to review, administer, and 
     resolve.

  On page 10 of the same IG's report--this is still the DOD inspector 
general's report--they said that:

       One contractor's restructuring proposal projected savings 
     over 10 years. But the contractor's projections are highly 
     speculative since the volume of Government business is not 
     guaranteed. The same contractor also proposed savings based 
     on ``synergies in the work force''--

  How about that one?

     a term that is not defined in the existing procurement 
     regulations, and is difficult at best to substantiate and 
     evaluate.

  Not my words, this is the DOD inspector general's words.
  On page 16 the same IG report:

       Amortization based on the projection of extended savings 
     can almost make a marginal acquisition appear attractive by 
     spreading costs over a long period, and comparing them to the 
     projected savings to determine savings. In all cases, amorti- 
     zation periods were selected for arbitrary reasons. . . .

  According to a GAO study of one business combination, they said:

       The net cost reduction certified by DOD represents less 
     than 15 percent of the savings projected to the DOD 2 years 
     earlier when they sought support for the proposed 
     partnership.

  So DOD said, here is the proposed savings. GAO did the study of it 
and said the cost reduction was less than 15 percent of the proposed 
savings.
  So, I believe, Mr. President, this practice is clearly an abuse of 
taxpayers' money. We never passed it in the Congress. I believe that if 
this had ever come up for a vote in the Senate to say that we are now 
going to pay for mergers and acquisitions for these companies who are 
going to make these huge profits, I do not think it ever would have 
passed.
  If these companies are merging for business reasons, why do they need 
a handout from the taxpayers? If they are not being ordered to do so by 
the Government--and they certainly are not; encouraged, yes, not 
ordered to do so--but if they are good, the mergers will happen anyway, 
and the taxpayers will receive any savings without paying anything out.
  I know that is the point that is going to be made. We know that we 
can see some savings being made by these mergers. Fine. That is a great 
savings for the taxpayer if that is happening. But there is no reason 
we should have to pay for these mergers, because the companies are 
making much higher profits, much more money than they were before.

  So, therefore, we should not have to pay for them. Lawrence Korb, 
former Under Secretary of Defense, pointed out that defense contracting 
is still a profitable business. Over the past year, Lockheed Martin 
stock increased 48 percent in value, Northrop Grumman stock is up 50 
percent, and McDonnell Douglas went up a whopping 80 percent last year. 
That is fine. That is good. But then why do we have to come in and give 
taxpayers' money to them to merge?
  You do not have to take it from me but from a very conservative think 
tank, the Cato Institute, which said, ``The costs associated by mergers 
should not be absorbed by Federal taxpayers. This is an egregious 
example of unwarranted corporate welfare in our budget.''
  Taxpayers for Common Sense said, ``It is time for the Pentagon to 
drop this ridiculous money-for-nothing policy.''
  The Project on Government Oversight said, ``The new policy is 
unneeded, establishes inappropriate government intervention in the 
economy, promotes layoffs of high-wage jobs, pays for excessive CEO 
salaries, and is likely to cost the government billions of dollars.''
  Mr. President, it is time for the Pentagon to drop this ridiculous 
money-for-nothing policy. This policy is unneeded, it allows 
inappropriate Government intervention in the economy, and is likely to 
cost more because it will limit competition.
  Mr. President, the GAO recently pointed out that in the last round of 
mergers and acquisitions they found the following: One, GAO was unable 
to account for savings for the Federal Government due to DOD's 
subsidies for mergers; second, the GAO reported that the mergers have 
led to the layoff of 15,000 workers, with an additional 4,000 expected. 
GAO also offered no evidence that the subsidy had resulted in any 
savings that would not have been achieved without Federal payments.
  There is another effect that we have not factored in here: 15,000 
hard-working blue-color Americans lost their jobs, most of them good 
union people, making pretty good wages--15,000 of them out of work. I 
suppose they belong to unions like the machinists and a lot of other 
good unions, making good money. Fifteen thousand laid off because of 
these mergers and acquisitions. How many went on food stamps? How many 
drew unemployment compensation? That is another cost to the taxpayers 
that was not picked up by these merger and acquisition costs or 
factored into the studies.
  Mr. John Deutch, in 1993, made a big mistake. We should not compound 
that mistake. Already, we have paid out $179 million to pay for mergers 
and acquisitions. There is pending right now on the books about $817 
million that we can see. That is not counting the upcoming Boeing-
McDonnell Douglas merger. How many more hundreds of millions of dollars 
will that add?
  My amendment, Mr. President, says simply that all of those that we 
have--and I want to make sure the managers of the bill understand 
this--all of those with which we have contractual arrangements, 
obviously have to be paid. What my amendment says is that those that 
have not been contractually made, we will not pay for these mergers or 
acquisitions. So if we have made the contracts, I guess we have to live 
up to it. But my amendment says none in the future.
  It is time to stop this ridiculous policy of paying highly profitable 
companies to do what is in their own best interests and which they 
would do anyway even if there were no Government subsidy.
  I yield the floor.
  Mr. STEVENS. Mr. President, I have discussed this matter with the 
distinguished Senator. I want to specifically call his attention to two 
sections that are in our bill that were in the bill the year before and 
the year before. One says:

       None of the funds available to the Department of Defense 
     under this Act shall be obligated or expended to pay a 
     contractor under a contract with the Department of Defense 
     for costs of any amount paid by the contractor to an employee 
     when--
       (1) such costs are for a bonus or otherwise in excess of 
     the normal salary paid by the contractor to the employee; and
       (2) such bonus as part of restructuring costs associated 
     with business combination.

  Second, we have a provision in this bill on page 91 section 8090. 
``None of the funds available to the Department of Defense under this 
Act may be obligated or expended to reimburse a defense contractor for 
restructuring costs associated with business combination of the defense 
contractor that occurs after the date of enactment''--and it was in 
last year's bill, also; so it covers all of the mergers and 
consolidations that the Senator has mentioned--``unless:

       (1) the auditable savings for the Department of Defense 
     resulting from restructuring will exceed the costs allowed by 
     a factor of at least two to one, or
       (2) the savings for the Department of Defense resulting 
     from restructuring will exceed the costs allowed and the 
     Secretary of Defense determines that the business combination 
     will result in the preservation of a critical capability that 
     might otherwise be lost to the Department, and

[[Page S7419]]

       (3) the report required by section 818(e) of Public Law 
     103-337 be submitted to Congress in 1996 is submitted.

  Now, what we have done in the past is we have said that if clearly 
there is a two-in-one savings resulting from the combination, the 
buildings can be paid associated with restructuring. If it is a 
situation where the savings and the costs are equal, then the 
Department can pay costs associated with restructuring where it finds 
that it is in the interests of the Department and the United States to 
have the consolidation because of its impact on our industrial base. 
That is the last part I want to mention to my friend.
  We have reduced procurement costs by over 60 percent now of the 
Department of Defense. In so doing, we faced the problem of what 
happens to the industrial base. Many people have come to us and talked 
to us about this, come to the committee and talked to us about it. You 
have to maintain the industrial base that is necessary to provide this 
Nation with the systems that will be required in our defense. We have 
seen it in shipbuilding, in submarine building, in aircraft building, 
in tanks; we have seen it across the spectrum of procurement.
  In order to do that, in some instances, there have been incentives to 
industry to consolidate in the past. In this time, however, in this go-
round, there have been no incentives paid, there has been the right of 
the Department to pay a portion of the restructuring costs when they 
meet these two tests. If the savings projected are twice as much as the 
costs, then the Department may pay the costs.
  I say to my friend, the problem of maintaining the industrial base is 
a very difficult one in a global economy. We are part of a global 
defense economy now, too. There are enormous entities in other nations 
that are competing with our people to provide new equipment, military 
equipment to nations throughout the world, that are able to purchase 
and maintain sophisticated new technology for their own defense.
  Senator Inouye and I have visited nations throughout the Pacific 
almost annually, and we have seen that. We have seen the desire for the 
acquisition of new high-performance aircraft for aircraft carriers, for 
submarines. We have seen that in terms of the purchase from the Soviet 
Union, some of the nations in the Persian Gulf.
  The point I am making is, if we are to be able to maintain the 
capability that we must have to compete, if necessary, once again, in 
restructuring our own industrial base and making it possible to expand 
any of these systems, we have to maintain the minimum amount of 
industrial base necessary to do that. These restructurings that have 
taken place, in my judgment, have enhanced the ability of the United 
States to maintain an industrial base, primarily the ones that my 
friend is talking about in the field of aviation and that have happened 
just recently. Had those mergers, those consolidations not taken place, 
we would have seen the problem of the industrial basics exacerbated by 
some of those companies failing when they were under obligation to the 
United States to complete existing contracts.

  These mergers and consolidations have enabled these companies to come 
together, and they will, in fact, fulfill existing contracts. There is 
still enough of a competitive structure within our Nation to assure 
competition for future contracts. I understand the Senator has a GAO 
report on this matter.
  I think it is premature, really, to assess the impact of the laws we 
passed. By the way, there are other provisions in the authorization 
bill for the years past, and also in this year. I do not have the 
knowledge of every one of the items he mentioned on a personal basis, 
but I have the belief that the Department has before it a series of 
provisions that prohibit the reimbursement for the bonuses to start 
with. They are not part of this at all. They cannot be paid. But beyond 
that, there are limited cases when restructuring costs may be paid by 
the Department, either when the savings are 2-to-1 over the costs or 
where the Secretary finds it is at least equal savings to the costs, 
that those costs are in the interests of the Government in maintaining 
the industrial capacity to provide for our own defense.
  I say to the Senator, I reluctantly have to again oppose his 
amendment and I will do so. I do not stand here to say that there have 
not been some excesses in American industry per se over the payment of 
bonuses and costs upon merger and consolidations, but I do think in 
terms of those that have taken place within the realm of industrial 
base and supplies to the Department of Defense we have acted in the 
past and we are maintaining again this year strict controls over what 
can be paid by the Department from taxpayers' funds as a result of 
costs resulting from such restructuring.
  Mr. HARKIN. I appreciate my chairman's comments on this. I know that 
the law was changed last year; Commerce put these provisions in there.
  Let me respond by saying that I think the GAO report points out that 
these are ephemeral, at best. It does say that you have to, if I could 
just have the chairman's attention, have the savings, the restructuring 
savings for DOD just has to be projected by at least 2-to-1.
  Then here is what the GAO said about estimating these savings. It 
said:

       Restructuring savings, on the other hand, are not recorded 
     in a contractor's accounting records. Therefore, neither the 
     amount nor the nature of the savings can be determined by 
     reviewing the accounting records. Consequently, savings have 
     to be estimated. For example, Northrop-Grumman's estimated 5-
     year savings from closing the Grumman corporate headquarters 
     of about $215 million, of which about $100 million represents 
     the labor and fringe costs that would be avoided over the 5-
     year period by laying off approximately 250 workers. These 
     savings are, therefore, an estimate of a cost avoidance over 
     the 5 years, the cost of the additional people that would 
     have been needed had the headquarters not been closed.
       The savings from restructuring activities we examined were 
     generally in the form of such future cost avoidances. The 
     initial estimate of restructuring savings is simple in 
     concept because it makes the critical assumption that 
     everything else, except for the restructuring, is the same 
     after a business combination as before. Because things are 
     never the same, it is difficult to precisely identify actual 
     savings several years after the initial estimate is prepared.

  Basically, what they are saying is, all of this money is fungible. I 
know the chairman says that we put a provision in there saying they 
can't use any of this money to pay bonuses. Fine. But they can go ahead 
and pay big bonuses and they can shift the cost over somewhere else, 
and we pay for closing an office and laying off 250 workers, which is a 
cost avoidance.
  So this money is all fungible. The GAO says there is no accounting 
principle that they can look to to determine that. So these are 
projected savings, not actual.
  I say to my friend from Alaska, the distinguished chairman, projected 
savings, well, I can tell you, any defense industry that is going to 
merge is going to show you that the savings to the taxpayers is much 
more than 2-to-1 over the amount of money we are going to give them for 
merging. That is an absolute because they are going to be able to show 
those kinds of savings. That is not the point. The point is, they are 
going to merge because it is in their best business interest to do so.
  Last week, Northrop-Grumman stock went up $21.12 a share. That is a 
lot of money. The stockholders or shareholders are happy about this. 
They have the money to go ahead and merge. This is in their best 
business interest to do so. If the taxpayers get savings out of it, 
fine, I am all for it. We should get savings out of it. But why should 
we pay them to do something that they are going to do anyway? Let us 
get the savings. Let it be 2-to-1. I hope it is 3-to-1, or 4-to-1, or 
5-to-1. But we don't have to give them this money to do it.
  So that is in response to what the chairman just said. Yes, they have 
to project that the savings will exceed the allowed costs--that is the 
money we give them--by a factor of 2-to-1. Believe me, they are going 
to show that without any problem whatsoever. But if they can't, there 
is another loophole because if the projected savings to DOD exceeded 
the costs allowed, the secretary can determine if the business 
combination will result in the preservation of a critical capability. 
So there is another loophole if, in fact, they can't meet that test. 
Believe me they will meet that test.
  My bottom line is still this: These defense contractors are merging 
because it is in their best business interest to do so. It is not in 
our best interest, I

[[Page S7420]]

don't think--not all the time--because I think we are destroying a lot 
of competition that was out there. But there is no reason for the 
taxpayers to subsidize it. That is what this amendment does. It simply 
stops it.
  I yield the floor.
  Mr. INOUYE. Mr. President, I believe the measure before us has 
addressed this problem. The problem in issue is rather painful. On one 
hand, it is our intention, and the intention of our Department of 
Defense, to maintain and retain an industrial base. How do we maintain 
an industrial base if there are too many companies involved in one 
scope of work, adding to the cost of defense? We have found that by 
encouraging restructuring, they can bring about a definite reduction in 
costs--a reduction in costs to the taxpayers, a reduction in costs to 
the Department.
  Mr. President, there is no question that when we do achieve cost 
reduction brought about by restructuring, men and women will find 
themselves without employment. And so we are faced with this 
predicament: Do we subsidize a company by paying large sums of money 
for services and products, knowing that it can be done less 
expensively, but since we don't want men and women to lose their jobs, 
we subsidize their company to maintain an overloaded work force?

  We have decided that it would be in our national interest, in the 
interest of the Defense Department, and in the interest of the 
taxpayers that we bring down the cost of Government. We do have other 
programs--not in the defense bill, but in other accounts--such as 
labor, health and human services, Medicare, Medicaid, welfare to help, 
to the extent possible, those who may have become victims of 
restructuring. But we have, Mr. President--the chairman and I--the 
responsibility of presenting to the Senate a measure that we are 
confident would bring about the best service, the best product, at the 
least cost.
  Mr. HARKIN. Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  Mr. STEVENS. Mr. President, I ask unanimous consent that there be no 
further debate on the Senator's amendment and that it not be subject to 
second-degree amendments.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. STEVENS. Mr. President, we are awaiting the arrival of another 
Senator.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. STEVENS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.


                      UNANIMOUS CONSENT AGREEMENT

  Mr. STEVENS. Mr. President, I ask unanimous consent that at 11 a.m. 
on Tuesday the Senate resume consideration of this bill, the DOD 
appropriations bill, and that the following be the only remaining 
amendments in order with relevant second-degree amendments in order:
  First, there is a managers' package that we will offer;
  There is a pending amendment, No. 846;
  We have the Hutchison amendment on war criminals;
  McCain amendment to strike section 8097;
  The McCain amendment; we will call it the ``Buy America'' amendment;
  The Dorgan amendment on flood relief;
  A second Dorgan amendment on re-engining authority;
  A Feinstein amendment on land transfer;
  A second amendment on NATO expansion cost cap;
  Graham amendment, which I believe is cosponsored by Senator Mack, on 
electronic combat testing;
  The Harkin amendment, which is the second pending amendment for which 
the yeas and nays were just ordered on, amendment 848;
  Senator Inouye may have a managers' amendment in addition to mine;
  The Robb Marc card amendment;
  And that, following the disposition of those amendments, S. 1005 then 
be read a third time, the Senate proceed to vote on the passage of the 
bill;
  That further, when the Senate receives the House companion measure, 
the Senate immediately proceed to its consideration.
  I further ask that all after the enacting clause be stricken, and the 
text of the Senate bill S. 1005 be inserted in lieu of the House-passed 
bill, the bill be read a third time, and passed.
  I further ask that the Senate insist on its amendment and request a 
conference with the House, and that the Chair be authorized to appoint 
conferees on the part of the Senate.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. STEVENS. Mr. President, it is my understanding that, other than 
those amendments that have now been qualified under this unanimous-
consent agreement, no further amendments will be in order.
  It will be our intention to try to move as quickly as possible once 
we are on the bill tomorrow morning at 11 o'clock to dispose of the 
amendments I have listed. And I would ask that all staff be notified 
that we shall seek time agreements on those amendments when they are 
called up.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. STEVENS. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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