Stainless Steel Tube Trade Advancement Committee Urges Defense Contractors to Comply With Buy America and Other DFARS Policies

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(Washington, D.C.) (June 6, 2018) The Stainless Steel Tube Trade Advancement Committee (SSTTAC) strongly encourages Department of Defense (DOD) contractors to comply fully with their obligations under procurement policies codified in the Defense Federal Acquisition Regulation Supplement (DFARS), including applicable domestic procurement preference policies mandated by Federal laws, such as the Buy American Act, 41 U.S.C. Ch. 83, as well as the domestic source requirements for “specialty metals” melted or produced in the United States, codified at 10 U.S.C. 2533b. Further, the SSTTAC urges DOD to properly enforce these critical domestic sourcing requirements.

The SSTTAC is a coalition of United States producers of seamless stainless steel and nickel-based alloy pipe and tube.  SSTTAC members’ stainless steel is among the specialty metals that “are essential to the manufacture and performance capabilities of certain Department of Defense (DOD) weapon system parts, due to their unique properties, such as being highly magnetic, lightweight, corrosion resistant, or having high durability.”[1]  SSTTAC members’ seamless tubes are produced to meet the demanding applications where maximum corrosion resistance or mechanical integrity is required.  Seamless tubes are utilized in military aircraft, submarines, naval vessels, nuclear equipment and fuel elements, and in the manufacturing of chemicals such as nitric acid.  The SSTTAC strongly supports the domestic procurement preference and materials source restrictions codified in the DFARS and encourages DOD’s strict enforcement of these laws with constant oversight of its weapons system contractors.

Defense suppliers, such as SSTTAC’s members, depend on their commercial customers to ensure their viability to produce the high-quality products necessary for defense applications.  As these commercial markets are impacted by nonmarket forces – such as foreign state industrial policies and unfair trading practices of foreign suppliers – the DOD’s enforcement of the laws designed to ensure a ready and robust domestic industrial base is critically important.

The SSTTAC commends DOD for its recently-promulgated final rule to clarify the flow down requirements of the DFARS specialty metals requirement.  DOD’s objective in issuing that rule was to “more fully implement the requirements of 10 U.S.C. 2533b, which restricts the acquisition of specialty metals not melted in the United States, its outlying areas, or a qualifying country, in order to strengthen the United States industrial base.”  79 FR 61584.

DFARS requires contracting officers to evaluate whether the contractor’s purchasing system is capable of ensuring that all applicable contractor purchase orders and subcontracts contain all terms, conditions, DFARS clauses – including the flow down of the specialty metals restrictions – for contractors whose sales to the government are anticipated to exceed $25 million in a 12-month period.  DFARS 244.305-70 and clause 252.244-7001.  The SSTTAC urges contractors to prioritize such compliance and encourages the DOD to vigilantly ensure that the specialty metals flow down requirements are being satisfied.

Unfortunately, the U.S. Government Accountability Office (GAO) has determined that in recent years the DOD has played only a limited role in ensuring compliance with the specialty metals restrictions and, additionally, identified weaknesses in the DOD’s procedures for waiving the statutory source restrictions.  SSTTAC members encourage DOD’s strict adherence to this requirement and encourage more thorough periodic reviews rather than truncated determinations that no such review is required.

Additionally, SSTTAC members urge the DOD to ensure that contractors are properly disclosing instances of noncompliance consistent with DFARS PGI 225.7003-3(d) to disclose how and when the noncompliance was discovered, a complete description of all items or systems containing noncompliant specialty metals, the manufacturer and country of origin of the noncompliant material, and estimated cost and schedule estimates to replace the noncompliant parts if a national security waiver is not granted.  This PGI specifically requires the disclosure of whether the specialty metals DFARS clause was flowed down to subcontractors.

Within the last year alone, the President has issued multiple directives aimed at fortifying the defense industrial base (E.O. 13806), protecting domestic productive capacity of critical specialty steels, and improving – not weakening – the application of federal “Buy American Laws” (E.O. 13788).  The DOD should follow the President’s vision and improve its enforcement and oversight of these laws and DFARS regulations.

“The specialty metals domestic source restrictions have been established to ensure that the United States has a vigorous domestic metals supply chain capable of meeting defense needs.”[2]  The SSTTAC is committed to ensuring that domestic productive capacity for seamless stainless steel and nickel-based pipe and tube remains a healthy component of the nation’s defense industrial base, able to satisfy the demands of both its defense and commercial market customers.  To that end, the SSTTAC strongly encourages the DOD to strictly adhere to these Congressionally-mandated procurement preference and source restriction laws and the DFARS procurement regulations implementing them, and improve its oversight of its contractors’ and subcontractors’ compliance with them.

“As Chairman of the SSTTAC, I respectfully encourage DOD to aggressively enforce DFARs requirements in order to insure the ability of this critical segment of the US economy to serve the needs of our national defense,” said Tony Thurman, President, Salzgitter Mannesmann Stainless Tubes, Houston, Texas.

[1]  Specialty Metals, DOD Dissemination of National Security Waiver Information Could Enhance Awareness and Compliance with Restrictions, GAO -15-133, p. 1 (2014).

[2]  GAO-15-133, p. 1.