Defense Budget

U.S. Air Force photo by SSgt Trevor T. McBride

Offshore Procurement Waivers – Time for a New Normal

Published Jan. 9, 2021 • Read time: 5m

U.S. Air Force photo by SSgt Trevor T. McBride

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With the 116^th Congress closing out its books, members and staff are already looking forward to working on top legislative priorities after the New Year. This agenda will include the annual fiscal year appropriations process and the National Defense Authorization Act for FY2022 – both of which offer a vast multitude of topics, concerns, and programs to examine and address. In addition to everything else, Congress will begin to legislate spending on foreign security assistance, such as foreign military financing – commonly known as FMF – for several countries, including Egypt, Jordan, Colombia and Tunisia. While FMF is an important foreign policy tool to support our partners in key regions around the globe, it is U.S. taxpayer dollars that are spent on FMF, to the tune of several billion a year.

In looking at foreign security assistance, one specific issue that will be important to examine, especially during pandemic-induced national economic strain, is the Offshore Procurement Waiver. These waivers are allowed for precise purposes and are granted to foreign companies that perform work on U.S. government contracts that support wider U.S. policy goals. The general public is not likely as aware of their existence as they are other higher visibility or hot-button issues – but for a host of reasons, they should be.

The basic reason for the existence of Offshore Procurement Waivers is that in some highly specialized cases when objectives that are important to the U.S. cannot be performed by U.S. companies, a waiver can be granted to a foreign company to do the work. That said, obtaining a waiver is not easy. The U.S. government has established an extensive set of regulatory criteria – all of which absolutely must be satisfied to qualify. The list of eight conditions, which is covered in the Defense Security Cooperation Agency’s Security Assistance Management Manual – colloquially referred to by practitioners as “the green book” – is considerable.[i]

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Found under section C9 7.2.7.3, these eight provisions concern vital things like having “no negative impact on the U.S. industrial mobilization base (e.g., dissolution of a company doing U.S. defense business) or on an area of U.S. labor surplus (e.g., increased unemployment) if the proposed procurement were from foreign sources” – or – “The defense article or service must be obtained from foreign sources in order to meet the requirement,” meaning no U.S. company exists that can perform that work. Given the vastness of America’s economic and industrial base, workforce talent and expertise, and technological capability, it’s difficult to believe there aren’t U.S. companies that can perform most of this work.

With that in mind, and especially during these unusual economic times, the country and case managers charged with the administration and management of these contracts need to review and be ready to identify each of these waivers. They may need to be prepared to do the work of pulling some of the waived work that is currently foreign-sourced back to the U.S. workforce where it is desperately needed. Also, there may be a pressing need for Congress to take a closer look at Offshore Procurement Waivers, the history of their use, awardee evaluation processes and grants. Beyond oversight, however, Congress may also want to consider tightening the requirements for waiver grants as our “new normal” is most likely to become status quo in the foreseeable future.

Such actions would not be without merit for several reasons. As recently as late 2017, DSCA deemed it necessary to write and disseminate a letter to numerous agencies and departments that clarified the official regulations and guidelines[ii] – so there may already have been either ambiguity or misinterpretation regarding how these waivers are to be used, their purpose, and the restrictions on their use. This should concern Congress, simply from a transparency and accountability perspective, and establishing clarity for the new Congress – at the very least – would be value-add in their always-present mission to put their constituents’ well-being and economic health at the forefront of political and legislative agendas.

Additionally, given that the U.S. economy continues to struggle from the effects of COVID-19, working at the national level ensures that we can do everything possible to support U.S. companies, small businesses, and American workers not only "good business," but a moral imperative. In these unique and challenging times, larger American interests may supersede convenient arrangements or even pragmatic bureaucratic solutions – especially when U.S. taxpayers are footing the bill.

Looking ahead to the coming year, the 117^th Congress would be well within its role and responsibilities to take a deeper look at the Offshore Procurement Waiver process and ensure principled but vigorous oversight of a new administration with a new agenda. With a fresh start in 2021, the desire for the new Congress to ensure that the administration and agencies are adhering tightly to codified guidelines written with the U.S. taxpayer in mind should be at a high thrust setting.

Times, policies, and national priorities change – and it is for all of these reasons that Offshore Procurement Waivers must receive additional oversight, diligence in application, and possibly legislative modification in process and procedure to ensure American interests hold the primacy U.S. workers and taxpayers deserve.

Dr. Richard McCool is a retired USAF F-16 combat pilot with 14 years of experience as an aerospace industry executive and consultant.