Make U.S. Military Contracts Patriotic
The American Army, Navy, Air Force, and Marines should purchase equipment, clothing, and services from U.S.-based companies only. Pro or con?
Pro: Save U.S. Jobs
The U.S. Air Force sparked controversy with its February decision to award a $35 billion contract, one of the Pentagon’s largest, to French company European Aeronautic Defence & Space (commonly known as EADS) and American partner Northrop-Grumman (NOC). The move raised the issue of whether the military should be allowed to accept bids from foreign companies for defense contracts.
Soon after, several Congressional representatives expressed their concern over the decision, and with good reason. Awarding military contracts to foreign companies could bring disastrous results if it turns into a trend.
Awarding military contracts to U.S.-based companies provides a major economic boost by keeping jobs in the country. This is especially important, given the high rate of unemployment and underemployment in the U.S. manufacturing sector. According to Senator Patty Murray (D-Wash.), not giving the contract to competing American company Boeing (BA) could cost as many as 44,000 U.S. jobs. While Senator Jeff Sessions (R-Ala.) defends the EADS contract, saying it would still provide new jobs throughout the U.S., the contract would mean a net loss of U.S. jobs.
Also, Boeing has prior experience working with the military, which should have been taken into account. Furthermore, an Air Force evaluation determined that the Boeing jets had a higher survivability rate than the comparable model from EADS (EAD.PA). Wouldn’t it have made sense for the Air Force to make its decision in favor of the U.S. company, given this knowledge?
Notably, the $35 billion contract was reopened for bidding on July 10, as Defense Secretary Robert Gates said the selection process was biased against Boeing. Whether Boeing or another company emerges as the victor this time remains to be seen. However, it is in our best interest that Gates and other leaders are paying attention to these concerns voiced by both senators and the American people.
Con: Competition Has Its Benefits
Arguments for giving military contracts solely to U.S.-based companies revolve mostly around dependency on other countries, security concerns, and the loss of American jobs. There’s no question that those are important factors, but mandating all U.S. military contracts be bestowed exclusively on U.S companies reeks of protectionism. This could result in harmful repercussions from abroad, costing even more U.S. jobs and weakening our international alliances.
In February, the U.S. Air Force gave a $35 billion contract for the building of midair refueling tankers to the European partners of Northrop Grumman and the European Aeronautic Defense & Space Co. (the parent of Boeing’s rival, Airbus, known as EADS). In early July, however, after a protest from Boeing, the Government Accountability Office said that the Air Force’s decision-making process had been flawed, and the Pentagon announced it will reopen the bidding. This gives Boeing another chance to secure the contract, and would mean the possible creation of up to 40,000 U.S. jobs.
Yet, according to information provided by the Air Force, the bid by EADS-Northrop would provide superior planes at a lower cost. In weighing its decision, the Air Force says it considered mission capability, risk, past performance, cost, and the integrated assessment of the tankers that each company would be able to provide, and Boeing was unable to best EADS-Northrop in even one category.
Regardless of whether the Air Force—as Boeing asserts—incorrectly appraised the advantages of the Boeing bid, the root of this issue goes to free-trade policies and safety. Military contracts should not be solely about U.S. jobs. They should be about what’s best for our country and our armed forces. Maintaining good relations with our neighbors abroad as well as ensuring the safety of military supplies and equipment takes precedence. In this case, investing in America may mean investing abroad.
Opinions and conclusions expressed in the BusinessWeek Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.