October 29, 2003

Curbs sought on DoD contracting with foreign civil air carriers

By Amy Svitak, CongressDaily

House Armed Services Chairman Duncan Hunter, R-Calif., has reportedly proposed new legislation to include in the fiscal 2004 defense authorization conference report that would limit the Defense Department's ability to contract with foreign civil air carriers during a crisis, according to congressional aides.

The proposal, which would amend laws that govern the Pentagon's Civil Reserve Air Fleet, or CRAF, falls beyond the committee's jurisdiction. But sources say Senate Armed Services and Senate Commerce committees staff are reviewing it.

Under current law, U.S. airlines contract with the Pentagon through the CRAF program in emergencies, when the need for airlift exceeds the capability of military aircraft. As of January 2003, 33 carriers and 927 aircraft were enrolled in the CRAF, contractually pledging aircraft to be ready for activation when needed.

To provide incentives for civil carriers to commit aircraft to the CRAF program, the government makes peacetime airlift business available to participating civilian airlines. The International Airlift Services contract is the largest of these. For fiscal 2003, the guaranteed portion of the contract is $394 million. The Pentagon estimates throughout fiscal 2003 it will award more than $224 million in additional business.

Although U.S. airlines hold most CRAF contracts, current statute allows for exceptions to this rule for contracting with foreign air carriers.

However, Hunter's new proposal would make it more difficult for the Defense Department to utilize foreign carriers in emergency situations. Specifically, the language would curb the Pentagon's ability to contract with a foreign carrier flying to and from points outside the United States. However, Hunter's provision would continue to allow some exceptions. It also would prohibit the use of foreign aircraft for overseas flights originating within the United States.

In addition, the proposal would swap the term "air carrier" in favor of "aircraft," a subtle change in legal terminology that would require the Pentagon to contract with any U.S. entity, such as a private firm with a corporate jet capable of flying to points overseas, possessing long-range aircraft.

Finally, while current law defines U.S. corporations eligible to participate in the CRAF program as those in which U.S. citizens own or control at least 75 percent of voting interest, Hunter's proposal would change the definition of such corporations to those in which U.S. citizens own or control at least 75 percent of company stock. This modification could remove limited liability corporations from CRAF eligibility.

It is unclear whether Hunter's Senate counterparts will support the proposal in conference. But Senate Armed

Services Chairman John Warner,R-Va., and Arizona Sen. John McCain, the number two Republican on the committee, oppose Hunter's "Buy American" proposals in the House version of the bill.

Those proposals would limit the amount of foreign content included in U.S. weapons systems. Hunter could not be reached for comment by presstime.