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May 14, 2004

Move to curb Navy foreign ship leases

Congresswoman Jo Ann Davis (R-VA) gained overwhelming bipartisan support for an amendment to the Department of Defense Authorization Bill limiting leases of foreign-built ships to not more than one year. Her amendment was adopted May 12 by the Armed Services Committee.

"Congresswoman Jo Ann Davis stood up for the industry and the security of our Nation with this important amendment," said Cynthia Brown, president of the American Shipbuilding Association. "The Department of Defense (DOD) practice has been to evade the Budget Enforcement Act and U.S. acquisition laws by purchasing, via long-term leases of 59 months in duration, foreign-built ships to the detriment of America's defense industrial base."

Congress enacted the Budget Enforcement Act in 1990 to curtail leasing of capital assets such as ships because of budget analyses demonstrating that leasing is more expensive to the taxpayer than a direct acquisition. DOD, however, has been leasing foreign-built ships for 59 months, or one month shy of five years, and then leasing the same ship for another 59 months to meet military unique long-term mission requirements.

By using a lease contract one month shy of five years, DOD is not required to request funding authorization for the entire cost of the lease in the first year as required by Office of Management and Budget regulations accompanying the Budget Enforcement Act, notes the American Shipbuilding Association.

U.S. law also requires that ships purchased for all branches of the Armed Forces be built in the United States. This law is being circumvented because a lease acquisition is not technically interpreted as a "purchase."

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