[Congressional Record (Bound Edition), Volume 146 (2000), Part 8]
[Senate]
[Pages 10655-10656]
[From the U.S. Government Publishing Office, www.gpo.gov]



                   UNITED STATES NONMILITARY ARSENALS

  Mr. FITZGERALD. Mr. President, thank you very much.
  I take this opportunity to thank my colleagues on the Armed Services 
Committee, Chairman Warner, and also the ranking member, Senator Levin, 
for the amendment I offered, that they have accepted, I am told. My 
amendment addresses the situation with our Nation's military arsenals.
  We have the Rock Island arsenal in Rock Island, IL. It lies on an 
island in the Mississippi River between the border of Illinois and 
Iowa. The Rock Island Arsenal dates back to just about the time of the 
Civil War. It has been producing outstanding equipment, with 
outstanding personnel, to our Nation's military for well over 100 
years.
  A few years ago, the military changed its procurement rules to 
require our Nation's arsenals, when they were bidding on a contract, to 
provide military hardware to our Army or Defense Department. It 
requires them to submit bids that not only include their marginal cost 
for producing the product but, in fact, requires them to add into their 
bid the entire overhead.
  This new policy which the Defense Department established a few years 
ago has actually been harming taxpayers. Why, someone might ask, has 
that been harming taxpayers? What has been happening, as our Nation's 
arsenals--and there are three in this country; in addition to one in 
Illinois,

[[Page 10656]]

there is one in New York and also one in Arkansas--go to bid on 
projects to provide supplies to the military, and they have to not only 
state their cost of building those supplies, they also have to add in 
the cost of their overhead. That means in analyzing those bids, the 
military is always going to prefer the bid of the private contractor.
  In fact, our arsenals have been losing business from the U.S. 
Government. This has been harming taxpayers. The reason it has been 
harming the taxpayers is because once we pay the private contractor to 
build the weapon or perform on the contract, we are still paying to 
keep the arsenals open. So the taxpayers wind up paying twice for the 
project.
  For example, a few years ago the military requested a new Light Towed 
Howitzer. They wound up giving the bid to a British defense firm. The 
Rock Island Arsenal lost out on the bid. The Government paid the 
British defense firm to start on the contract, but meanwhile, the 
Government and the taxpayers are still paying to keep the arsenals 
open.
  My amendment is designed to correct this flaw which is wasting 
taxpayers' money. From now on, under this amendment, when domestic 
organic arsenals in this country bid on a military project, they will 
be able to state their incremental cost for building the product, if it 
is a Howitzer or other weapon for the military. This way, it will be 
more fair to the arsenals. They will be able to bid their actual cost 
and the playing field won't be tilted in favor of the private 
contractors.
  Actually, the Department of Defense convened a defense working 
capital fund task force a couple of years ago that noted that the 
taxpayers were being billed twice for these military contractors; that 
it didn't make any sense. In fact, that issue paper which came out on 
February 25, 1999, and was issued by the defense working capital fund 
task force, concluded that

       [T]he Department of Defense will ultimately pay twice for 
     maintaining the essential organic capabilities as well as 
     contracting out for the goods or services.

  It went on to say that these rules cause an artificial, a fictitious 
bookkeeping entry that overprices the arsenal services and not only 
encourages behavior that is not optimal for the military as a whole, 
but also leads to an increasing disparity between military and private 
suppliers that ``results in an increasing abandonment of arsenal 
services.''
  Mr. President, I compliment the members of the Armed Services 
Committee and Chairman Warner and also the ranking member for accepting 
my amendment. We should be able to help our Nation's arsenals and 
particularly the Rock Island Arsenal in Rock Island, IL, as well as 
save the taxpayers of this Nation some of their hard-earned money.
  The PRESIDING OFFICER. The Senator from Nebraska.

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