I

105TH CONGRESS

1ST SESSION H. R. 925

To prohibit the Department of Defense from allowing defense contractors

to recoup merger-related restructuring costs from the taxpayers.

IN THE HOUSE OF REPRESENTATIVES

MARCH 5, 1997

Mr. SMITH of New Jersey (for himself, Mr. SANDERS, Mr. DEFAZIO, Mr.

KLUG, Mr. DICKEY, Mr. NEUMANN, Mr. ACKERMAN, Mr. BARRETT of

Nebraska, Mr. LIPINSKI, Mr. FRANKS of New Jersey, Mrs. MALONEY of

New York, Mr. CHABOT, Mrs. KENNELLY of Connecticut, Mr. WATTS of

Oklahoma, Mr. STARK, Mr. HOEKSTRA, Ms. JACKSON-LEE of Texas, Mr.

LOBIONDO, Mr. EVANS, Ms. NORTON, Mr. FRANK of Massachusetts, Ms.

STABENOW, Mr. LEWIS of Georgia, Mrs. CARSON, and Mr.

BLUMENAUER) introduced the following bill; which was referred to the

Committee on National Security

A BILL

To prohibit the Department of Defense from allowing defense

contractors to recoup merger-related restructuring costs

from the taxpayers.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Payoffs-for-Layoffs

5 Corporate Welfare Elimination Act of 1997’’.
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1 SEC. 2. PROHIBITION ON PAYMENTS UNDER DEFENSE CON2 TRACTS FOR RESTRUCTURING COSTS OF A

3 DEFENSE CONTRACTOR MERGER OR ACQUI4 SITION.

5 (a) PROHIBITION.—No funds appropriated or other6 wise made available to the Department of Defense may

7 be obligated or expended under section 2324 of title 10,

8 United States Code, for payment of any restructuring cost

9 associated with a merger or acquisition that is incurred

10 by a contractor under contract with the Department of

11 Defense.

12 (b) APPLICABILITY.—(1) The prohibition in sub13 section (a) applies with respect to any merger or acquisi14 tion occurring on or after the date of the enactment of

15 this Act.

16 (2) In the case of a merger or acquisition that oc17 curred before the date of the enactment of this Act, funds

18 appropriated or otherwise made available to the Depart19 ment of Defense may be used to process or pay a claim

20 for restructuring costs associated with the merger or ac21 quisition only if the relevant contract or advance agree22 ment specifies that payment for such costs may be made

23 under the contract or agreement using funds appropriated

24 or otherwise made available to the Department of Defense.

25 (c) CONFORMING REPEAL.—Subsection (a) of section

26 818 of the National Defense Authorization Act for Fiscal
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1 Year 1995 (Public Law 103–337; 10 U.S.C. 2324 note)

2 is repealed.

3 (d) REPORTS BY SECRETARY OF DEFENSE.—Sub4 section (e) of such section is amended—

5 (1) in the matter preceding paragraph (1), by

6 striking out ‘‘and 1997’’ and inserting in lieu there7 of ‘‘1997, 1998, 1999, and 2000’’; and

8 (2) by adding at the end of paragraph (3) the

9 following:

10 ‘‘(F) An analysis of the dollar amount of

11 any windfalls achieved by the combining defense

12 contractors which results from the reduction of

13 overhead on fixed-price type contracts from the

14 Department of Defense that existed before the

15 business combination.

16 ‘‘(G) A list of each major weapons system

17 purchased by the Department of Defense since

18 July 21, 1993, for which actual prices have ac19 tually been reduced that are attributable to the

20 contractors’ restructuring efforts.

21 ‘‘(H) The total number of pending restruc22 turing proposals submitted to the Department

23 of Defense as of the date of the report and the

24 total dollar amount of the requests for restruc25 turing costs contained in those proposals.’’.
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1 (e) COMPTROLLER GENERAL REPORT.—Subsection

2 (g)(3) of such section is amended by adding at the end

3 the following: ‘‘The report shall include an estimate and

4 detailed description of the net effect on the Federal budget

5 of reimbursing defense contractors for their merger-relat6 ed restructuring costs, including the following:

7 ‘‘(A) The payment by the Department of De8 fense of restructuring costs resulting from business

9 combinations of defense contractors.

10 ‘‘(B) The reduction of Federal tax revenues

11 from unemployment resulting from business com12 binations of defense contractors who have been reim13 bursed for their merger-related restructuring costs.

14 ‘‘(C) The increase in Federal expenditures in

15 other Federal adjustment programs from unemploy16 ment resulting from business combinations of de17 fense contractors who have been reimbursed for

18 their merger-related restructuring costs, including

19 food stamps, housing and energy assistance, and any

20 other programs the Comptroller General determines

21 that unemployed persons are likely to use at a rate

22 higher than employed persons.
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1 ‘‘(D) The increase in Federal grants of cash

2 and in-kind assistance to States and local commu3 nities that have experienced significant layoffs or fa4 cility relocation (or both) resulting from the business

5 combination, that are attributable to losses in the

6 State and local tax base and increased the use of

7 State and local government services similar to those

8 described in subparagraph (C).

9 ‘‘(E) The effect of reduced competition result10 ing from business combinations on the prices the

11 Department of Defense pays for military equipment

12 and services.’’.

13 (f) DEFINITIONS.—Such section is further amended

14 by adding at the end the following new subsection:

15 ‘‘(h) DEFINITIONS.—For purposes of this section:

16 ‘‘(1) The term ‘windfall’ means the savings, ei17 ther actually realized or anticipated, by the combin18 ing defense contractors as a result of reducing over19 head through merger-related restructuring which are

20 foregone by the Government because certain defense

21 contracts are fixed-price type contracts that existed

22 before the business combination and cannot be ad23 justed to reflect the contractor’s reduced overhead.

24 ‘‘(2) The term ‘significant layoffs’ means a situ25 ation in which the number of layoffs exceed 500 full-
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1 time equivalent employees or in which one of the

2 combining defense contractors previously represented

3 the fifth largest employer or greater in the relevant

4 State or local community.’’.

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