July 1, 2010
Turkey: America's New Armorer?By Steve Boggs
I just downloaded three "notices of unsuccessful bid" to manufacture defense materiel. Two went to Turkey. Anybody ever heard of Devrezi Plastik Makina, Tarim Gida, or Faymer Makina Imalat Ihracat, Ltd.? No? Wish I could say the same!
I started my business in 1986, breaking the most important rule by being grossly undercapitalized. Given that it was to be a viable manufacturing operation, this was a bit tricky. I cajoled my brother into loaning me $2,000 and cried to my momma for some help (she scraped together $4,000).
With a wife and two kids, this constituted living expenses for three months. Before the credit card companies figured out what was going on, I had about ten of them adding up to around $30,000 in credit. With these I paid back mom and bro.
Here we are, close to our 25th year in business, with six employees (not counting me and my wife) -- three machinists, two welders/fabricators, and one painter/packager/shipper. (Three of us are veterans, including my son, who did two tours in Iraq.) It's amazing what you can do if you don't have a rich uncle. In all that time, no one has missed a paycheck (that is, if you don't count my wife or I).
We have accomplished what we have by making and selling military spare parts to U.S. government. The buyer (the Defense Logistics Agency -- DLA) makes awards based on Automated Best Value, which is 50% quality history and 50% delivery history. It's highly competitive, and we've found the only way to make decent money is to go after the more complicated stuff, usually requiring a tooling investment (i.e. castings, forgings, weldments). Once you get an order and make your investment, you have a reasonable chance of making some of that money back on future orders...unless, of course, you lose to companies in Turkey.
For the last ten or so years, we lose 15%-20% of the orders we bid to one of the hundreds of companies in Ankara, Turkey. How can that be? The best I can figure is that it's either because they are a NATO member or a GATT signatory country and therefore are eligible to bid. Why, then, don't I see other countries that fall in these categories getting orders (like the ones I bid, typically $500-$25,000)? Good question, for which I have no answer. When I sent a letter to my congressmen asking this question, I got a wonderful response from the Executive Director, DLA-Acquisition, Technical & Supply Directorate, with this great reply: "Turkey is classified as a 'qualifying country' under the Buy American Act." (I hope you weren't drinking coffee when you just read that. If so, take a moment and wipe down your screen.)
Did you like that? If so, you'll really like this next one. "It is DoD policy that the Buy American Act (BAA) restrictions are inconsistent with the public interest in the acquisition of qualifying country end products and do not apply."
There are five basic exemptions to the BAA. These are:
1) Lowest-priced domestic product is priced unreasonably (there once was the appearance that this could be the justifying argument, but the Turks have learned to not leave much money on the table quite a while ago);
2) Articles to be used outside the U.S.;
3) Not sufficiently produced in U.S. or not available in commercial quantities or of satisfactory quality (baloney -- if they want it, my brethren will make it);
4) Micro-purchase threshold of $2,500 (This is seldom the apparent reason. Besides, $2,500 is a welcome order for most companies like mine.); and
5) Inconsistent with the public interest. Bingo! That's the ticket! Keeping the Turks happy far outweighs having a viable domestic manufacturing base! Trump card and get out of jail free!
So much for getting a sympathetic ear from my government.
Now, I understand the need for bribes in that part of the world as well as the next guy. How smart is it, though, to build up the industrial base, specifically geared to armament, of a country that shows every indication of turning against you? How smart is it to do this when your own domestic industrial base is, by every indicator, declining? Is this really the price of keeping Incirlik AFB?
We can talk about the genius and beauty of free trade another time, but this just doesn't pass most people's smell test. I'm quite sure it's a two-way street, that I'm perfectly free to compete on equal footing over there. I'm also quite sure that their prices don't reflect their costs -- I don't care how little their workers are paid. I can easily prove their pricing is predatory. And didn't President Obama sign something called the American Recovery and Reinvestment Act?
About four years ago, I spent close to $1,000 sending out letters to my friendly American competitors asking them to get upset and to make some noise. What a waste of my time. Out of two hundred-plus letters sent, I got five or six replies. So I guess the lesson is that we get what we deserve.
Steve Boggs is the head of Boggs & Associates, Inc., Columbus, Ohio.