The Senate Appropriations Committee’s defense spending bill addresses several aspects of how and with whom the Defense Department conducts business, including a measure addressing the topic of corporate inversion that several congressmen and senators have looked at recently.

Defense subcommittee chairman Dick Durbin (D-Ill.) said during the July 17 committee markup of the spending bill that “more and more corporations are using a strategy called inversion to move their headquarters overseas only on paper to ease their tax burden in the United States so they pay fewer dollars to the federal government. We have current laws that say inverted corporations cannot compete for contacts in the Department of Defense; unfortunately, some nine different companies that have inverted have found loopholes in the law and have over $100 million in contracts awarded to them after they decided to leave the United States. That’s unacceptable. We tightened the language here.”

Sen. Dick Durbin (D-Ill.), chairman of the Senate Appropriations defense subcommittee
Sen. Dick Durbin (D-Ill.), chairman of the Senate Appropriations defense subcommittee

Full committee ranking member Sen. Richard Shelby (R-Ala.) said he believed the measure amounted to tax reform disguised as a spending bill, but Durbin said he stands by the measure.

The spending bill’s accompanying report directs the Government Accountability Office to follow up on a 2009 report discussing unearned fees in defense contracts. “In 2006, the Government Accountability Office [GAO] reviewed 50 programs and determined that between April 2006 and October 2010, the Department of Defense could save in excess of $450 [million] by not offering contractors a second opportunity to win unearned fees, and save more than $68 [million] by using more clearly defined determination criteria.”

A 2009 report highlighted some instances of savings DoD achieved by following the report’s recommendations and made additional recommendations to update contracting guidance. In the spending bill, “the Committee directs the GAO to review the original 50 programs to determine the actual amount of unearned award/incentive fees that were saved. The Committee further directs the GAO to assess additional policy changes that could be implemented to guarantee that contractors are only awarded performance bonuses they have earned.”

Durbin spoke several times during the week about the bill’s high emphasis on competition in military acquisition. Among others, the bill sets up more competition in the Evolved Expendable Launch Vehicle (EELV) program by providing $125 million to accelerate a competitively awarded launch mission. “Competitions shall be open to all certified providers of [EELV]-class systems,” the bill reads, and “competitions shall consider bids from two or more certified providers.”

Durbin told reporters after the subcommittee markup on July 15 that “our goal here is to have a competition and see what happens to the cost of the program. Competition generally reduces cost, and let’s see if it happens here.”