The nation's defense contractors will have to wait twice as long in some cases to get paid by the government as part of the latest effort by Congress to hold down spending in the coming year.
The new policy, adopted by House and Senate conferees last week as part of a $268 billion defense appropriations bill, would effectively shift about $1.25 billion of anticipated defense procurement costs from fiscal 2000 to 2001.
Negotiators also agreed to declare about $7.2 billion of the Defense Department's routine operation and maintenance activities--everything from fixing leaky roofs to upgrading roads--an "emergency" and hence not counted against 2000 spending.
Republican leaders are struggling to pass all 13 spending bills for the new fiscal year without technically breaching tough restrictions on how much they may spend or dipping into budget surpluses generated by the Social Security trust fund. To do that, they are engaging in what critics say are accounting "gimmicks" to seemingly minimize total spending for the fiscal year that began Oct. 1.
So far, for accounting purposes GOP lawmakers have shifted about $22 billion of new spending for labor, health, human services, education and housing into fiscal 2001 while declaring nearly an equal amount of "emergencies" that won't be counted against this year's spending limits.
Other measures are under consideration as well. One would postpone the expenditure of $2.2 billion by taking advantage of the fact that the military's final payday for fiscal 2000 falls on the last Saturday in September and could be rolled into the next week.
A senior Senate appropriations aide stressed yesterday that there was nothing included in the defense appropriations conference report (the final version of the spending bill) last week changing the pay dates for any federal employee. "I've heard of no plan under any scenario or discussion that people would receive pay later than the day they should receive it," the aide said.
However, House Democratic aides insisted that such a proposal was discussed as a possibility by Sen. Ted Stevens (R-Alaska) during the conference and they insisted it was still a live prospect. "There are lots of gimmicks out there," said a House Democratic aide.
With roughly $50 billion set aside for Defense Department procurements for all the services, any proposal for slowing down the government's payment could have a huge ripple effect, creating hardships for some companies that depend on timely payments.
Under the Prompt Payment Act, the Pentagon is required to pay contractors within a specified period. For example, the Defense Department is required to make "progress payments" in no less than five days after receiving a valid billing. But under the new provision, the Pentagon can wait for up to 12 days to make those payments, and they would have additional time to make the final payments.
Defense contractors seemed unware of the provision. Spokespersons for Bethesda-based Lockheed Martin Corp., the country's largest defense company, and General Dynamics Corp. of Falls Church said yesterday that they had not heard of the congressional changes in procurement payments.
Some industry sources speculated smaller contractors would be hurt more by the changes, in that they are more dependent on Pentagon business and could be at the mercy of larger contractors who might try to delay their own payments to their suppliers.
In another provision upsetting Pentagon officials, lawmakers moved last week to restrain the use of new multi-year procurement contracts. While military authorities had argued that such deals could yield substantial savings and greater program stability, there was strong opposition among House members, who said uncertainties about future defense spending levels made long-term commitments too risky.
They worried that if contracts were initiated and then subsequently terminated for lack of funds, there would be severe penalties and program disruption.
In their committee report last summer, House appropriators chastised the Army in particular for pursuing multi-year production contracts on two projects--a new antitank targeting system and a new line of medium-weight trucks, which has been plagued by technical and safety problems.
The defense conference report awaits final approval by the full House and Senate and is likely to win President Clinton's signature. It would provide $4.5 billion more for the fiscal year than Clinton requested, and $17.3 billion more than last year's levels.
Staff writers Bradley Graham and Tim Smart contributed to this report.