Asked & Answered: George Ash on the defense industry in Michigan

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By Steve Thorpe
Legal News

Once the “Arsenal of Democracy,” Detroit’s defense-related production has diminished over the years. George W. Ash is a partner at Foley & Lardner LLP and a member of the Automotive Industry Team as well as the Privacy, Security & Information Management Practice.

He is the chair of the firm’s Government Procurement Practice, which was recognized by Chambers USA (2011, 2012 and 2013) as one of the top practices in the nation. A retired United States Air Force (USAF) lieutenant colonel, Ash spent 20 years of active duty as a judge advocate and an associate professor of law at the USAF Academy.

He also served as an advisor to the strategic arms reductions talks in Geneva with the former USSR.

Ash recently spoke with Steve Thorpe with the Legal News.
 
Thorpe: What are some of the Michigan-based companies still doing defense work?

Ash: Michigan businesses are heavily involved in government procurement, and it plays a significant role in our economic wellbeing.

In reviewing my database, over the past 29 months 723 different Michigan businesses were awarded major federal government prime contracts, with the vast majority awarded by defense agencies.

The number of awards per entity ranged from one to 80. The total value of these awards is over $24 billion.

This doesn’t include awards under multiple award contracts such as the General Services Administration or the Federal Supply Schedule contracts, options, additional purchase orders, contract changes, awards under the micro-purchase level ($2,500) or purchases using government credit cards.

Concommittally, it doesn’t include subcontract awards from prime contracts originally awarded to out-of-state prime contractors. The value of these subcontract awards is likely as large as the Michigan prime contract awards.

Most people think defense procurement means weapon systems, and while it includes such items, it also includes sedans, office supplies, clothing, fuel, energy, construction, janitorial services — and the list goes on.

The government buys virtually everything! They are the largest purchaser of goods and services in the world, and Department of Defense (DoD) makes more purchases than any other federal agency.

Thorpe: The state’s Strategic Air Command bases went away quite a while ago. But Selfridge Air National Guard Base continues. Tell us about your involvement in keeping that facility open.

Ash: Actually, my first assignment as a newly minted judge advocate in 1976 was to Wurtsmith Air Force Base, a Strategic Air Command base near Oscoda, Michigan.

In 1995, much to everyone’s surprise, Selfridge was placed on the proposed base closure list. Technically, it was the Army Garrison at Selfridge that was closing, but it was that Army unit which largely paid for Selfridge base support, with its on-base housing used by TACOM military personnel.

The Army claimed by closing the Army Garrison they could save $10 million per year with no adverse impact. I was hired by the Selfridge Air National Guard Base Community Council.

In working with the community, I was successful in showing the Army proposal shifted costs from one service to another, providing no real cost savings, and that their model included a number of false assumptions.

Also, there was little assessment of Selfridge’s military value, which was the key factor in a Defense Base Closure and Realignment (BRAC) decision. Because of our input, the BRAC commission voted to remove Selfridge from the closure list. After that, the Michigan delegation, led by Candice Miller, Carl Levin and Deborah Stabenow, collaborated to further raise the military value of Selfridge and also enhance its importance as a homeland security asset.

The next BRAC was in 2005, and I was hired by Macomb County to assist in keeping both Selfridge and TACOM off the closure list. Working with the community once again, we were so successful that TACOM actually increased in size as a result.

Thorpe: Tell us about your work with TACOM. What do they do?

Ash: TACOM, which is located in Warren, is an Army installation formally known as the U.S. Army TACOM Life Cycle Management Command. While most think of it as a “buying center” for tanks and heavy equipment, it is actually more than that — its mission includes research, development and sustainment efforts to provide the nation’s warfighter with the best possible material and equipment — virtually everything used by today’s soldier.

It also includes the U.S. Army Tank Automotive Research, Development and Engineering Center (TARDEC) with over two dozen special laboratories specializing in testing and research related to ground transportation systems — ideally located in the automotive capital of the world.

Most of my current involvement with TACOM focuses on representing clients that are doing business with TACOM, from obtaining a contract, performing a contract or post-performance questions or disputes.

Thorpe: Some say that the increasing complexity of procurement procedures is discouraging businesses from doing defense work. Agree?

Ash: Not necessarily. Certainly there are government-unique requirements and for sophisticated government-unique products (e.g., a combat vehicle or major weapon system), there will be complex requirements.

However, the government buys a wide variety of products, many of them meeting the Federal Acquisition Regulation definition of a commercial item that when applied properly, results in a “near commercial” contract or subcontract, even though the government is the ultimate customer.

What contractors can find discouraging is a cumbersome process that uses forms and acronyms that seem strange, and contracts that include socio-economic and compliance requirements over and above performing the contract’s objectives.

Successful contractors invest in the infrastructure to meet the government’s requirements (policies, procedures, training, etc.), while passing these costs onto the government, and have a strategy to pursue government work without letting it interfere with or affect the pricing or performance of their non-government work.

Thorpe: What has been the effect in Michigan of sequestration?

Ash: A recent article compared the DoD’s reaction to sequestration as resembling the “five stages of grief” — denial, anger, depression, bargaining and acceptance.

This time last year, most thought the 2011 Budget Control Act’s sequestration would never happen. Because sequestration called for an across-the-board cut in every program, when it first went into effect many hoped it would be rescinded. Then no one knew how to implement it.

As a result, for the first several months, procurements slowed dramatically. Initially, it seemed that the administration thought if it cut areas that affected the pubic (Transportation Security Administration inspection at airports, air traffic controllers, meat inspections, etc.), the public outcry would force Congress to change the law, but that didn’t work.

As we now move toward the “bargaining” phase of sequestration grief we are seeing some programs getting terminated, postponed, downsized or altered.

Unless Congress changes the law this fall, we will experience year two of the sequestration cuts (keep in mind it is a 10-year program to reduce debt).

Because the cuts are indiscriminate and are devoid of any strategy, it is impossible to effectively plan for the cuts.

As a result, cuts are implemented in accounts that are independent of strategy — in particular personnel and operations and maintenance.

I think there is general agreement that government spending — including in the DoD — can be reduced in a responsible way; but it starts with an overall strategy, not the wholesale cuts of sequestration.

So, sequestration has had an impact, but the largest immediate impact is probably on government employees getting furloughed. If year two goes in to effect, major programs will be prioritized, personnel (including troops) will be cut, and research and development postponed.

Thorpe: How does your practice involve the defense industry? What does the future hold?

Ash: I represent a wide variety of DoD contractors, from very large Top 100 corporate contractors to small, service disabled veteran owned businesses.

My clients provide a wide range of goods and services such as performing sophisticated research on cutting edge weapons and technology, providing military recruitment advertising, manufacturing weapon systems, building construction and performing as subcontractors providing a wide variety of goods and services at various tiers of performance.

Many of my clients sell commercial goods and services as a government prime or subcontractor. These contracts are performed in the U.S., overseas, or in combat zones. It is a very broad practice, which makes it interesting.

Predicting the future is always tricky — but especially so in government procurement, which is affected by politics and world events. For example, post 9/11, I had a client installing baggage screening equipment in 435 airports around the country on an emergency basis.

Similarly, roughly 10 years ago a client with little DoD experience in a single year performed subcontracts totaling $500 million on the assembly and integration of Mine Resistant Ambush Protected (MRAP) vehicles.

Certainly, the immediate trend is for reduced spending, leading to increased competition, greater demands by the government to obtain the intellectual property of contractors as a part of an acquisition so that future procurements can be competitively awarded, and overall greater compliance expectations by the government with harsher punitive action for violations.

However, as the administration considers options against Syria for using chemical weapons, all these expectations could change overnight. Remember Pearl Harbor? 9/11? World events can have an immediate impact on government procurement and things can change with little warning.
 

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