Presentation on theme: "Berry Amendment Dave Riley Deputy District Counsel, DCMAW"— Presentation transcript:
1 Berry Amendment Dave Riley Deputy District Counsel, DCMAW Presented By:Dave RileyDeputy District Counsel, DCMAW
2 Berry Amendment Outline BackgroundGeneral Application and ExceptionsDoD ImplementationAreas of ConcernDisclaimer: The views I express are purely my own. OSD leadership may not share my opinion. Policy in this area is currently being considered at the OSD level.
3 It’s odd that chopped liver might be covered; silver bullets aren’t. Berry Amendment: It’s not intuitive!It’s odd that chopped liver might be covered; silver bullets aren’t.
4 Berry Amendment Background Earliest version – 1940 Naval Appropriations Act.1941: Restriction was included in the General Appropriation Act. Thereafter, the annual Defense Appropriation Acts contained the Berry Amendment restrictions.1992: Becomes a note to 10 U.S.C. § 2241.2002: Codified at 10 U.S.C. 2533a (FY02 Defense Authorization Act).Purpose: The legislative history of the Berry Amendment indicates that the purpose of the amendment was and is to maintain and support the defense industrial base for those items it covers.
5 Who was E.Y. Berry?Ellis Yarnal Berry (R) served as South Dakota's Western District Congressman from
6 Why is it called the Berry Amendment? Though the restriction existed prior to 1952 it was during floor debates that Congressmen E.Y. Berry introduced his amendment to DoD’s Buy American restrictions.Prior to this amendment “Berry” only covered food and clothing.The Berry Amendment to the DoD Buy American Restrictions expanded the coverage to include “clothing, cotton or wool (whether in the form of fabric or yarn or contained in fabric, materials, or manufactured articles).”
7 Berry Amendment (Basics) Restricts the use of DoD funds to pay for certain itemsThat are not grown, reprocessed, reused, or produced in the U.S.To protect the related industrial base in the U.S.Puts no direct requirements on ContractorOnly via contract terms does Berry apply to primes/subs
8 Berry Amendment (Coverage) Food, Clothing, Tents/Tarpaulins/CoversCotton and Other Natural Fiber ProductsWoven Silk or Woven Silk BlendsSpun Silk Yarn for Cartridge ClothSynthetic Fabric or Coated Synthetic FabricCanvas ProductsWool (including in manufactured articles)Individual Equipment manufactured from or containing such fibers, yarns, fabrics, or materialsSpecialty Metals, including stainless steel flatware, unless the metals were melted in manufacturing facilities located within the United StatesHand or Measuring Tools
9 Specialty MetalsApplication was added to Berry Amendment coverage in 1972Consider the timing of this addition – Vietnam War
10 Acquisition Exceptions DFARS & 10 USC 2533aAt/below Simplified Acquisition ThresholdIn support of Combat OperationsFood, specialty metals, hand/measuring tools –In support of Contingency OperationsUnder other than competitive procedures approved on the basis of unusual and compelling urgency USC § 2304(c)(2)Specialty metals and chemical warfare protective clothing when acquisition furthers an agreement with a foreign government (Qualifying Country sources)
11 Acquisition Exceptions, Continued Domestic Non-Availability Determination (DNAD) at Secretariat levelSatisfactory quality and sufficient quantity of the protected articles or items, or of specialty metals (including stainless steel flatware), cannot be acquired as and when needed at U.S. market prices.The U.S. Market Price exception is rarely utilized.Requestor must first consider alternatives that would Not require a DNAD. Exception may be considered only if requesting activity first confirms such alternatives are unacceptable.
12 Acquisition Exceptions, Continued Waste and byproducts of cotton or wool fiber for use in the production of propellants and explosives.Acquisitions of foods manufactured or processed in the United States, regardless of where the foods (and any component if applicable) were grown or produced.Under FY 2003 and subsequent DoD Appropriations Acts, this exception does not apply to fish, shellfish, or seafood manufactured or processed in the United States or contained in foods manufactured or processed in the United States.
13 More BERRY AMENDMENT Exceptions Outside the United StatesIn support of combat operationsProcurements of food, Specialty metals (including stainless steel flatware), or hand or measuring tools in support of contingency operations.
14 Application and Exceptions DFARS (c) - Acquisitions of items listed in FAR (a), unless the items are hand or measuring tools.FAR – Nonavailable ArticlesHowever, when an item is listed at FAR conduct market research to determine if the item is available in the domestic marketplace (including alternatives.)Examples: Cashew Nuts, Castor oil, altar linen, quinine, cobra venom
15 Application and Exceptions The following Qualifying Countries are treated equally with “domestic” sources for specialty metal and other restrictions (see DFARS ):AustraliaBelgiumCanadaDenmarkEgyptFederal Republic of GermanyFranceGreeceIsraelItalyLuxembourgNetherlandsNorwayPortugalSpainSwedenSwitzerlandTurkeyUnited Kingdom of Great Britain and Northern Ireland
16 Buy American Act (BAA)Passed during the Great Depression to both save and create jobs for American workers.The Berry Amendment limits competition.The BAA merely gives a preference to U.S. manufactured goods by adding a price evaluation factor to foreign end products.Legislation – Great Depression relief vice Industrial Base preservation.Primary intent – Jobs vice Strategic DefenseOriginally designed to make sure food/uniforms came from U.S. sources
17 Why do we need the Berry Amendment? Examples (from American Manufacturing Trade Action Coalition):Vietnam War – Sony withheld cameras used to guide tactical missilesIn 1983, the socialists in the Japanese Diet blocked the sale of ceramic packaging used in U.S. cruise missilesJDAM bomb production was stopped during Iraq war because a Swiss industrialist refused to ship critical part - disagreed w/Administration policyHellfire Missile production was stopped during West Coast dock strike because critical parts sourced in Japan were awaiting off-loading
18 Recent Berry IssuesArmy black berets from China, Romania and Sri LankaRussian titanium fraud case of late 90s – spawned the withhold methodologySpecialty Metal issues arising primarily at major subs* Providing non-conforming goods is a fraud indicator; investigative referrals have been made in some instances
19 Biggest Concern – Specialty Metal Has arisen most often at sub level in programs where flow-down required:Aircraft; missile and space systems; ships, tank-auto; weapons; ammo (Laird Memo – DFARs )See also DFARS (subcontracts for commercial items)It’s still the Prime’s problem
20 Main Problems Prime didn’t flow down clause to subs Prime contract used confusing or inappropriate language – duty to inquire?Prime contract omitted required language – Christian Doctrine?(GAO reports 60% of contracts have “problems”)Prime not taking ownership (overseeing) sub compliance – getting a cert is not enoughGeneral lack of understanding of the requirement
21 DCMA Fire-proofing Guidance What we were trying to achieve:Help PCOs to make appropriate determinations – many “problem” contractsTry to foster consistency – we had received complaints about disparate treatment (especially on withhold calculations)Try to be pragmatic while complying with the letter of the law – avoid ADA violationsGet all ACOs working off the same sheet of music
22 DCMA Interim GuidanceSupplants the fire-proofing memo as the primary Berry guidance documentFire-proofing memo still good background infoMain issues addressed by guidance:Authority to accept with a withholdCalculation of withholdConditional acceptance languageAccounting for withholdsWAWF test of invoicing process has been successful
23 What ACOs Expect From PCOs Tell us if a Berry Amendment exception applies to this acquisition.Tell us if you intend to obtain a DNAD (Secretarial Exception).Tell us if you want to reject the item.If the answers to 1-3 are all no, tell us if we are authorized to conditionally accept the non-conforming part with a withhold calculated per the DCMA Interim Guidance.Execute contract mods, as appropriate.
24 What DCMA Will DoWork with DCAA, PCO and Primes to determine appropriate withhold amountsProcess Conditional Acceptance (modified DD250) incorporating withhold after PCO approvalPerform normal quality function w/r/t tendered product including release of product from subs where source inspection is authorized
25 Controversial Areas Amount of withhold: Contract end item, major sub-assembly, lowest level auditable part, or metal only?What about FAR (replace at no cost)?Burdened amount from all subs and withheld at prime level – impact of different accounting systemsLowest Level Auditable Part Plus BurdenThis calculation is auditable, does not rely on an estimate, includes all costs associated with the non-compliant part, and is in synch with replace option.We create an ADA violation if we pay for items containing non-domestic metals.Our withhold approach is based on DoJs position in actual fraud case.
26 Related Issues What about FMS? Statute restricts use of funds “appropriated or otherwise available to DoD”Industry position – FMS funds not “otherwise available” to DODDCMA defers to PCO on funds availability issuesGAO opinions, case-law on false claims act, long-standing positions of Defense Security Assistance Agency and DoJ are at odds with industry positionFMF is distinct from FMS as to funding.The part is still contractually non-compliant.
27 Definition Issues What constitutes an ALT 1 major program? DPAS rating is instructive but not necessarily determinative.Not all contracts are rated – or rated correctly.DPAS system is a Dept of Commerce reg.Safe approach:If contract rated DPAS A1-A6 – ALT 1 likely applies.If you think something has been ordered for an ALT 1 program but it isn’t rated DPAS A1-A6, ask PCO for a definitive determination.
28 More Definition Issues Why isn’t the US considered a qualifying country? Won’t this drive business off-shore?This issue was considered by DAR Council.Making US a qualifying country would “gut” the statutory intent.DAR Council considered and rejected requirement for metal in article from qualifying country to also be smelted in a qualifying country.The qualifying countries list results from various trade agreements.
29 Fiscal IssuesThe amount of withhold is so small it costs more to work the fix than is being saved.That may be so but fiscal law does not recognize a de minimis rule.Contractors can make a business decision to set the withhold amount at a higher component level if obtaining auditable data for lowest level non-compliant part is difficult, not cost-effective, or impossible.
30 Payment IssuesWAWF does not allow for withholds on conditional acceptances?I am not a WAWF/MOCAS expert.Fixed Price Ks - Identify via an attached schedule the withhold amount by line item and a revised unit price. Attach to receiving report (DD250). Voucher and DD250 need to match.Flexibly Priced Ks – back withhold amount out of voucher consistent with billing instructionsAny payment delays are due to contractual noncompliance, not “the system.”
31 Payment Process 1. The DD250 is created in WAWF. Conditional Acceptance language (will likely need to be attached to the acceptance document given space constraints in the “Comments” Field ); a schedule (authorized by the ACO/PCO) identifying the amounts to be withheld at the line item level must also be attached in order for DFAS to pay the invoice.1. The DD250 is created in WAWF.2. Once created, the WAWF menu will show a new Tab called “Misc. Info.”3. Click on “Misc. Info” tab and there will be an “Add Attachment” button.4. Click on the “Add Attachment” button and you will see the familiar Windows-type “Select File to Attach/Browse” Button.
32 My View Looking Up My opinion only: OSD is engaged and they know we are looking for policyOSD knows how DCMA has recommended conducting business in the interimIndustry (AIA and others) has engaged OSD at the AT&L level and aboveSerious people on both sides of the legislative debate over Berry restrictions will be heard from