[Congressional Record Volume 147, Number 37 (Tuesday, March 20, 2001)]
[Senate]
[Pages S2593-S2594]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. FITZGERALD (for himself and Mrs. Clinton):
  S. 581. A bill to amend title 10, United States Code, to authorize 
Army arsenals to undertake to fulfill orders or contracts for articles 
or services in advance of the receipt of payment under certain 
circumstances; to the Committee on Armed Services.
  Mr. FITZGERALD. Mr. President, I rise today to introduce S. 581, a 
bill that will help United States Army arsenals remain competitive and 
productive in the 21st century. The Army arsenals have long been an 
important military resource. They have not only served as a cost-
effective supplier of high-quality military equipment, they have also 
proven to be an invaluable supplier of last resort, providing mission-
critical parts when private contractors have lacked the capacity to 
meet emergency needs or have breached their contracts with the 
government. This bill will help ensure that these important facilities 
do not fall into disuse during the periods between national emergencies 
and heightened military needs.
  Rock Island Arsenal, in my home state of Illinois, was acquired by 
the United States in 1804. Located on an island in the Mississippi 
River, the area was converted to its current function, and named Rock 
Island Arsenal, in 1862. Since then, Rock Island Arsenal has built 
weapons and military equipment for all of our nation's wars, developing 
a specialty in the manufacture of howitzers.
  Today, Rock Island Arsenal is the Department of Defense's only 
general-purpose metal-manufacturing facility, performing forging, sheet 
metal, and welding and heat-treating operations that cover the entire 
range of technologically feasible processes. Rock Island Arsenal also 
contains a machine shop that is capable of such specialized operations 
as gear cutting, die sinking, and tool making; a paint shop certified 
to apply Chemical Agent Resistant Coatings to items as large as tanks; 
and a plating shop that can apply chrome, nickel, cadmium, and copper, 
and can galvanize, parkerize, anodize, and apply oxide finishes.
  These capabilities have proven essential to the functioning of the 
United States military. In recent years, Rock Island Arsenal has been 
called on to produce M16 gun bolts when a private contractor defaulted 
on a contract. It has also produced mission-critical pins and shims for 
Apache helicopters when outside suppliers have proven unresponsive to 
the Army's needs.
  S. 581 will help guarantee that United States arsenals will be there 
again when the military needs them in an emergency, by helping to 
ensure that arsenals have an adequate workload in normal times. During 
the 1990s, the Department of Defense shifted away from direct funding 
of arsenals to the Working Capital Fund, ``W.C.F.'', system,

[[Page S2594]]

under which private companies compete with the arsenals for government 
service and production contracts. This system has improved the 
efficiency of the military by promoting cost transparency and 
discouraging the overconsumption of arsenal goods and services.
  Unfortunately, implementation of the W.C.F. system has also produced 
some unintended consequences. As arsenals have been placed in 
competition with private firms, they have remained tied down by 
government rules that place the arsenals at a competitive 
disadvantage--and that hamper their efforts to secure a full workload. 
One of these rules is the requirement that arsenals be paid in advance 
for all services and products that they provide. Private firms are not 
required to operate under such conditions, they routinely receive 
payment only once they have delivered on their contract. As a result, a 
military department seeking goods or services, or a private contractor 
seeking help in supplying the government--is discouraged from 
contracting with an arsenal. Even when an arsenal can provide higher 
quality or at lower cost, the requirement of up-front payment may prove 
burdensome enough to convince purchasers to meet their needs elsewhere.

  The legislation that I introduce today will place United States Army 
arsenals on a more equal footing with their private competitors. It 
will limit the advance-payment requirement to only those circumstances 
where payment is less than certain, and will otherwise allow arsenals 
to accept payment after performance. Specifically, arsenals will be 
allowed to accept later payment when the United States purchases 
directly from an arsenal, when an arsenal supplies a contractor serving 
the United States, or when payment for foreign military purchases is 
guaranteed by the United States. In these cases, an advance-payment 
requirement is unnecessary--it serves only to put the arsenals at a 
competitive disadvantage. Application of the requirement in these 
circumstances should be ended.
  S. 581 will help ensure that Army arsenals will be able to secure an 
adequate workload in periods between supply emergencies. This bill will 
also serve taxpayers' money by encouraging efficient use of reserve 
resources, which must be maintained regardless of whether or not they 
are fully in use. Therefore, in the interest of encouraging optimal 
utilization of an invaluable national resource, and to help integrate 
the Army arsenals into the private-competition system of the Working 
Capital Fund, I today introduce s. 581.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 581

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. PERFORMANCE OF ORDERS FOR ARTICLES OR SERVICES BY 
                   ARMY ARSENALS BEFORE RECEIPT OF PAYMENT.

       (a) Authority.--(1) Chapter 433 of title 10, United States 
     Code, is amended by inserting after section 4541 the 
     following new section:

     ``Sec. 4541a. Army arsenals: performance before receipt of 
       payment

       ``(a) Authority.--Regulations under section 2208(h) of this 
     title shall authorize the Army arsenals to undertake, with 
     working-capital funds, to fulfill orders or contracts of 
     customers referred to in subsection (b) for articles or 
     services in advance of the receipt of payment for the 
     articles or services.
       ``(b) Transactions to Which Applicable.--The authority 
     provided in subsection (a) applies with respect to an order 
     or contract for articles or services that is placed or 
     entered into, respectively, with an arsenal by a customer 
     that--
       ``(1) is--
       ``(A) a department or agency of the United States;
       ``(B) a person using the articles or services in 
     fulfillment of a contract of a department or agency of the 
     United States; or
       ``(C) a person supplying the articles or services to a 
     foreign government under sections 22, 23, and 24 of the Arms 
     Export Control Act (22 U.S.C. 2762, 2763, 2764); and
       ``(2) is eligible under any other provision of law to 
     obtain the articles or services from the arsenal.''.
       (2) The table of sections at the beginning of such chapter 
     is amended by inserting after the item relating to section 
     4541 the following new item:

``4541a. Army arsenals: performance before receipt of payment.''.
       (b) Regulations.--The Secretary of Defense shall prescribe 
     the regulations to carry out section 4541a of title 10, 
     United States Code (as added by subsection (a)), not later 
     than 60 days after the date of the enactment of this Act.
                                 ______