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 AIA UPDATE: March 2007, Volume 11, No. 6
User Fees in FAA Financing Proposal Raises Concerns FAA's multi-year reauthorization proposal, featuring a new, user-fee-based funding plan, has encountered strident criticism from lawmakers and aeronautics stakeholders. Some members of Congress and some administration officials, including the Transportation Department's inspector general, maintain that the new financing proposal is inadequate to both maintain the current system and modernize it in coming years. The proposal addresses the FAA trust fund that pays for most of the agency's budget, requested at $14.1 billion for fiscal 2008. The trust fund is set to expire Sept. 30 unless Congress passes a reauthorization bill and President Bush signs it by then. Under the administration plan, current revenue sources would remain in effect until fiscal 2009 when the new funding scheme would succeed them. In 2005, two-thirds of trust fund revenues came from a 7.5 percent excise tax on airline tickets and 18 percent from international arrival and departure taxes. Other sources include a cargo waybill tax and fuel taxes. In their place the bill would install user fees to raise 53 percent of FAA's total budget. Higher fuel taxes and reduced international passenger taxes would provide 28 percent. The general fund would support the remaining 19 percent, according to the FAA scheme. To finance the next-generation air traffic control system intended to support doubled or tripled air operations by 2025, the reauthorization bill would permit FAA to issue up to $5 billion in bonds, beginning in 2013, to cover capital costs. At recent House and Senate hearings some lawmakers expressed concern and skepticism over user fees and borrowing authority in the proposal. While FAA maintains that user fee revenue is necessary for funding next-generation improvements, House Aviation Subcommittee Chairman Jerry Costello (D-Ill.) said the proposed financing plan would be $900 million under what the current system would provide between fiscal 2009 and 2012. The Transportation Department's inspector general says FAA's plan can't support transformation to a new management system and would barely sustain the existing system. AIA believes adequate, stable funding is the most critical issue because FAA will need to support the current system while developing and implementing a new one. Other concerns include application of user fees to safety oversight and the composition and responsibilities of a proposed Air Transportation System Advisory Board. AIA Source: susan.mertes@aia-aerospace.org AIA and Partners Launch Export Control Modernization Initiative AIA and seven other national business associations have formed the Coalition for Security and Competitiveness, an initiative to modernize the U.S. export control system. In addition to AIA, coalition members are the U.S. Chamber of Commerce, the National Association of Manufacturers, the Electronic Industries Alliance, the Association for Manufacturing Technology, the Coalition for Employment through Exports, the Information Technology Industry Council, and the National Foreign Trade Council. The coalition is promoting steps to make more efficient, predictable, and transparent the processes for obtaining export authorizations for defense and dual-use technologies. While initially seeking the attention of the administration on short-term improvements, the coalition also is laying the groundwork for development of a modern export control system that best meets future security and economic interests of the United States. Go to securityandcompetitiveness.org to learn more about the coalition. AEROSPACE FOCUS  WASHINGTON PIPELINE: Administration's Budget Request Needs Boost By John W. Douglass, AIA President and Chief Executive Officer President Bush's budget request for fiscal 2008, released in early February, was a decidedly mixed bag for those of us in the aerospace industry. It included positive details for defense, such as robust funding for some important long-term programs. But it did not address certain pressing financial needs for space exploration and aeronautics research and development. The good news is there is time for improvement. Several factors make this budget proposal a little different from the recent past. Foremost is the change in control of Congress from the administration's Republican allies to its Democratic opponents. While the requests are always a framework for Congress to begin its budgeting process, the party switch suggests the possibility of more deviation from the president's request than in recent years. In addition, it is President Bush's second-to-last year in office and several sitting members of Congress are already campaigning to take over for him in 2009. All these factors suggest the requested budget might not be the blueprint that tradition dictates. We should give credit to the administration for the request's responsible approach to the defense budget, reflecting a strong commitment to force structure and important long-term programs like the F-35, F-22, and CV-22. It requests funding for war efforts in Iraq and Afghanistan and increases non-war funding for the Defense Department. The level of funding for DoD would put our nation in a good position to continue the war on terror, defend against conventional threats, and promote cooperation with allies and friends. An important detail will be the manner in which these funds are spent. We need investment in defense research and development and steady funding on procurement to secure the long-term vitality of our industrial base, and we are taking this message to the administration and Congress. The troubling portions of the request both have to do with NASA. The budget for space exploration falls short, and the proposal for aeronautics research and development continues a recent history of outright cuts in funding. These proposals are troubling because they fail to keep the United States in the innovation forefront. While the budget request represents an increase for space exploration of about $1 billion, that's misleading because the increase is over flat exploration funding this fiscal year. It means the ramping up of funding associated with NASA's ambitious program to explore the moon, Mars, and beyond is behind schedule. In fact, the requested figure is more than $1 billion less than the funding level for next fiscal year contained in the projections within the 2005 NASA authorization bill. The news is worse for aeronautics research and development. The request, for the second year in a row, proposes nearly 20 percent less than the current funding level, which is less than half the peak investment in 1994. In the last several years Congress has stepped in and added money for R&D beyond the administration's request, a reflection of its importance to keeping America the worldwide aviation leader. While the request includes investment in FAA's budget for developing the vital NextGen air transportation system, more research and development funding must be added to the aeronautics budget. We are working with Congress as the budget process moves forward in an effort to make sure final funding levels are more in line with what is needed to allow our space exploration and aeronautics R&D efforts to succeed. Defense, space, and aeronautics need consistent support to ensure our industry remains a foundation for our economy. WASHINGTON WATCH: AIA Council and Congressional Staff Talk Space The winter meeting of the AIA Space Council featured a roundtable discussion with congressional staff members from the House and Senate Armed Services Committees and the Senate Commerce Committee. The event provided committee staff professionals who oversee national security and civil space exploration programs an opportunity to hear the views and concerns of industry representatives. Several issues surfaced during the discussion, including China's anti-satellite weapons test in January, the need for the government to generate realistic cost projections for military space systems, and the long-term viability of NASA's Vision for Space Exploration (VSE). Council members also briefed the staff representatives on a number of AIA initiatives underway to educate Congress on the enduring value of the nation's role as the premier international space power. AIA Source: patrick.mccartan@aia-aerospace.org WASHINGTON WATCH: AIA Lobbies Congress to Repeal Onerous Withholding Provision AIA has joined a broad industry coalition seeking congressional action to repeal language in the Tax Reconciliation Act of 2005 requiring federal, state, and local government contractors and grant recipients to withhold three percent from payments for products and services. Known as the Government Withholding Relief Coalition, the group has had dozens of meetings since January with congressional staff who work for members of the House Ways and Means Committee, the panel of jurisdiction over all federal tax matters. Business leaders from many sectors, including aerospace, oppose the tax-withholding provision, due to take effect in 2011, because it imposes unprecedented and costly government payment reporting requirements, posing a risk to revenue needed for normal company operations. Congress anticipated that the provision would allow the Internal Revenue Service to improve enforcement of federal tax laws against non-compliant contractors. Industry, however, contends that the provision penalizes the vast majority of law-abiding companies conducting business with the government. AIA Source: patrick.mccartan@aia-aerospace.org WASHINGTON WATCH: OPM Says Security Clearance Goal Has Been Reached The Office of Personnel Management (OPM) says that it has dropped below the congressionally ordered ceiling for completing security clearances in a timely manner. The Intelligence Reform and Terrorism Prevention Act of 2004 mandated that 80 percent of all applications for initial personnel security clearances were to be processed within an average of 120 days — up to 90 days for the investigative phase and not longer than 30 days for the adjudicative phase. In a February report to Congress, the Office of Management and Budget reported that OPM had concluded that "80 percent of the initial clearance investigations completed after October 1, 2006, averaged 101 days, while 80 percent of the adjudications averaged 17 days, for a combined average of 118 days." In a related report last September, the Government Accountability Office (GAO-06-1070 DOD Personnel Clearances) found that the investigation phase for initial top secret clearances adjudicated in January and February 2006 took an average of 286 days while the entire clearance process averaged 446 days. Last November members of AIA's Industrial Security Committee reported that their companies were experiencing an average of 359 days for initial secret security clearances and 457 total days for initial top secret clearances. Over the past year, AIA has attended Security Clearance Reform Coalition meetings with various government agencies involved in the security clearance process and visited Boyers, Pa., where OPM processes its field investigations. Before improvements can be made to the system, all agencies involved need to understand the steps in the process from submission of an application by the facility security officer to the granting of the clearance. AIA believes that until the entire process is understood, quick fixes or elimination of steps could overload an already burdened system. AIA Source: kirsten.koepsel@aia-aerospace.org DoD "Clarifies" Specialty Metals Provisions for Aerospace Industry The Defense Department has answered many of industry's questions regarding the new specialty metals provisions contained in the fiscal 2007 Defense Authorization Act. In a December memo, DoD provided guidance regarding a one-time waiver authority that would allow acceptance of noncompliant specialty metals if the metals were incorporated into items that were produced, manufactured, or assembled in the United States before November 16, 2006. Detailed guidance on the one-time waiver process, however, hasn't been issued. Industry expects that a Domestic Non-Availability Determination (DNAD), a type of variance, will significantly decrease one-time waivers for fasteners and hardware. The DoD policy also defines the term de minimis, used in the new exception for commercially available electronic components, as meaning that the overall value of the specialty metal content in the component is not greater than 10 percent of the value of the lowest level electronic component containing the specialty metal. The memo also clarifies that the specialty metals restrictions do not apply to third-tier and below parts or assemblies when those items are acquired directly by the government and are not part of an end, first-tier, or second-tier item. Parts not incorporated into an end item in one of the six major programs, such as factory equipment and ground support equipment, are not components and, therefore, are no longer covered by the specialty metals restrictions. Most importantly, the memo explains that a DNAD can be issued if compliant specialty metal "of satisfactory quality and sufficient quantity and in the required form" cannot be procured "as and when needed" or at a price that is fair and reasonable. Thus far, DoD has approved one class DNAD for populated printed circuit card assemblies. That class is posted on the DCMA Web site. Additional class DNADs for FSC 53 fasteners and other class 53 hardware are in process. Once approved, DoD is expected to turn to one-time waivers and clearing withholds for conditional deliveries. For contracts awarded after November 15, 2006, according to the memo, DoD will no longer withhold payment while conditionally accepting noncompliant items. This means that items delivered to the government must contain compliant specialty metals or be covered by a DNAD. AIA Source: terry.marlow@aia-aerospace.org Product Support Conference in May Will Focus on Life Cycle Issues AIA's spring 2007 product support conference will take place May 7-9 at the Sheraton Sand Key Resort in Clearwater, Fla. The theme of the conference is "Achieving Life Cycle Sustainment through Performance Driven Outcomes." Topics will include the Defense Department's goal of cost-effective joint logistics support. Joint logistics depends on the integration of life cycle management (LCM) principles into all department, service, and agency activities. However, achieving LCM requires implementing performance-driven outcome (PDO) strategies across acquisition and sustainment programs and commitment to assessment of all life cycle enterprise decisions against standardized metrics for system reliability and availability. The combination of business practices and technical methods is of critical importance for many of the initiatives within PDO, such as access to technical data and intellectual property, diagnostic and predictive modeling, standards for reliability and availability within development phases, and the expectations of follow-on, performance-based logistics contracts. AIA Source: rusty.rentsch@aia-aerospace.org Wings of Liberty Award  China's Anti-satellite Space Test Shows Need for Vigilance A ground-based ballistic missile scored a direct hit on a defunct Chinese weather satellite in early January, proving China's capability of destroying space-based equipment. China's successful anti-satellite test provides a dramatic wake-up call for U.S. space security efforts. While there is no suggestion our satellites are under imminent threat, the Chinese demonstration reminds us that direct strikes against space-based assets are possible. What this means to the United States is that we not only need to invest in advanced satellite technologies but also in a safe, reliable, and nimble launch infrastructure able to respond quickly to future challenges. Some members of Congress, however, suggest that arms control treaties are the only answer to such threats. AIA's Space Council, working through its National Security Space Committee, intends to leverage the Chinese demonstration as an opportunity to educate members of Congress not only about our ever-increasing reliance on space-based assets but also on the vulnerabilities these assets face. China's demonstration of anti-satellite capabilities also gives the Space Council an opportunity to call attention to one of AIA's top issues for 2007 — the need for sustained U.S. investment in national security space programs. AIA Source: anne.ellis@aia-aerospace.org F-22 Raptor Team Wins 2006 Collier Trophy Lockheed Martin Corporation and the F-22 Raptor Team are winners of the 2006 Robert J. Collier Trophy. Created in 1911, the Collier Trophy is considered the most prestigious of all aviation awards and is granted each year "for the greatest achievement in aeronautics or astronautics in America." The trophy is permanently housed at the Smithsonian Institution's National Air and Space Museum. The Raptor team was selected for "designing, testing, and operating" the newly operational U.S. Air Force F-22 Raptor. In addition to Lockheed Martin, team members are The Boeing Company, Pratt & Whitney, Northrop Grumman Corporation, Raytheon Company, and BAE Systems. Another candidate for the 2006 award was the Commercial Aviation Safety Team (CAST), nominated by AIA. CAST was nominated for its outstanding achievement in dramatically improving the safety of commercial aviation and saving lives. The team is made up of industry and government safety experts and has worked collectively over the past 10 years to reduce the number of fatal accidents in commercial aviation by an astounding 73 percent. The trophy will be presented at a black-tie dinner June 8 in Washington, D.C. AIA Source: ranee.carr@aia-aerospace.org Space Council Advocacy on ORS Restores Funding An AIA campaign last fall to rally support for the Operationally Responsive Space (ORS) program resulted in the restoration of requested funding for the program and a substantial increase, according to industry reports. ORS is a program that recognizes that space systems and technologies are essential to the U.S. warfighter and are primarily responsible for conferring the "information dominance" on which the U.S. and allied troops currently rely. AIA's Space Council initiated a drive to rally support for ORS in reaction to reports that program funding was in jeopardy. A strong industry response made it clear to the Pentagon that ORS is seen as an innovative and cost-efficient complement to legacy space systems. Bolstered by support from key top-level defense officials, the program was put back on track. Building on this momentum, the Space Council is now taking steps to strengthen the advocacy base for ORS within the Air Force, other services, and the Pentagon's Joint Chiefs of Staff. AIA has started by expressing industry's recommendations on the best way to move ahead on the congressionally mandated ORS Program Office. Further discussions will include championing the rapid development of ORS systems and launchers, supporting a comprehensive program office charter, determining a strong acquisition strategy, and encouraging the ongoing maturation of ORS technologies. The Space Council will also promote the importance of sufficient funding to support procurement of an initial generation of ORS systems. AIA Source: anne.ellis@aia-aerospace.org Fiscal 2008 Defense Budget Request Has Positive Funding The administration's fiscal 2008 budget request for defense, released in early February, includes adequate funding levels, growing 8.6 percent over fiscal 2007 levels. Including $141.7 billion in supplemental funding for the war on terror, the fiscal 2008 DoD request is $623.1 billion, about $24 billion more than the previous year. The budget shows a strong commitment to investment in force structure and important long-term programs, such as the F-35 Lightning II Joint Strike Fighter, F-22A Raptor, and CV-22 Osprey. The base budget contains $101.7 billion for procurement and $75.1 billion for RDT&E. The fiscal 2008 supplemental provides another $32.9 billion for procurement and $2 billion for RDT&E, for a total request of $134.6 billion for procurement and $77.1 billion for RDT&E. This compares to $130.5 billion for procurement and $77.1 billion for R&D in last year's budget. The request represents an increase of more than 11 percent for non-war spending. "Sustained and predictable investment in these areas is critical to maintaining the long-term health and vitality of the aerospace industrial base and workforce," said AIA President John W. Douglass. "We cannot afford to mortgage our future national security to cover near-term costs." Although the fiscal 2008 defense budget request is robust and generally favorable for modernization, procurement accounts could be targets for members of Congress who want to increase spending on non-defense issues. With the focus on increasing military end strength, the need to sustain current operations, and the general mood about Iraq, it is unclear what Congress will do to balance an overall federal budget that funds defense yet addresses new domestic priorities. Given historical precedents, this is something AIA will be watching and working on closely. Douglass said the association is pleased with the president's continued commitment to robust foreign military financing in the current request. These funds are critical to the continued improvement of defense capabilities for our allies and will enhance military cooperation with them. AIA also supports the administration's proposal to make the U.S. Export-Import Bank self-funded, given its ability to cover its own costs. The bank has played a vital role for the aerospace industry by issuing loan repayment guarantees for foreign airlines in emerging markets to purchase U.S. aircraft. AIA Source: mark.esper@aia-aerospace.org |
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