INCREMENTALISM: ERODING THE IMPEDIMENTS TO A GLOBAL PUBLIC PROCUREMENT MARKET

Georgetown Journal of International Law, Spring 2007 by Yukins, Christopher R, Schooner, Steven L

The examples provided with the December 2006 class deviation indicate that "tiers" do not correspond to levels of prime- and subcontractors; thus, per the example provided by the Defense Department, a prime contractor may contract for and deliver to the government a "first-tier component." The examples suggest that first- and second-tier components are instead defined functionally, rather than by the level of contractor (or subcontractor) supplying the item. The Defense Department guidance states that a first-tier component (a rocket motor, in the example) is incorporated direcdy into an end product (the rocket) , and a second-tier component (a power supply for the rocket motor, in the example) is incorporated direcdy into a first-tier component. This "functional" approach makes a great deal of sense, for if the Defense Department had taken a "contractor-tier" approach-if, for example, materials from "third-tier" subcontractors automatically qualified as "third-tier" components (and thus fell outside the Berry Amendment ban)-prime contractors would simply fragment the supply chain into many more contractual layers in order to avoid Berry Amendment compliance costs.

On its face, this "functional" approach also seems simple to implement: it merely means identifying "end products" to be delivered under a contract, and then, like unpacking Russian matryoshka dolls, determining which "tier" of component may include noncompliant specialty metals. Under the Defense Department class deviation, only the first and second tiers of components will be relevant.

In fact, however, the Defense Department's "tiering" approach leaves a great deal of uncertainty. In a highly complex weapon system, it is often very difficult to determine at what "tier" a specific item falls. Is a "tier" an aircraft door or the aircraft's entire fuselage, for example? This uncertainty will generate substantial costs and inefficiencies as contractors and suppliers haggle over the metaphysics of "tiers" in order to allocate the risks and costs of Berry Amendment compliance.

At the same time, however, the uncertainty in interpretation will leave the Defense Department and its contractors significant flexibility in interpreting the Berry Amendment's specialty metals ban-flexibil- ity that ultimately may allow for narrow interpretations of the ban. The confusion over defining "tiers" of components also means that it will be difficult to punish noncompliance as fraud, a threat which normally cows contractors into strict compliance in the U.S. system. In the end, the Defense Department's decision to inject flexibility into Berry Amendment compliance reflects the internal fissures that undermine traditional domestic preferences: agencies and contractors, under pressure to draw on a global supply chain, are resisting politicaldemands to accommodate domestic industries.

B. Secondary, Non-Economic Objectives As Barriers: Assessing Accessibility Requirements in Information Technology

The next category of rules-based barriers is secondary objectives of a non-economic nature. As Arrowsmith describes them, "[s]econdary policies (or, in United States terminology, 'collateral' policies) are those that do not relate to the main object of the procurement . . . for example, a policy of placing government contracts with disadvantaged ethnic groups to promote racial equality."43 These "secondary" or "collateral" policies, which typically are used to identify favored contractors, or weigh in the decision to award a contract, can erect substantial barriers to entry to a procurement market. Intentionally or not, these collateral policies may discriminate in favor of domestic industry. Furthermore, when integrated into a complex procurement process, collateral policies almost invariably increase contracting officials' discretion, and thus diminish transparency and increase the threat of corruption.44