TNAG-2404-FCO40-3491-Hong-Kong-defence-and-public-order-1992 — Page 42

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THE WHITE HOUSE

offics of the Press Secretary

(Newport Beach, California)

June 19, 1992

FACT SHEET ON DEFENSE_PROCUREMENT REFORMS

As part of his continuing regulatory reform initiative, the President today announced an important change in federal defense procurement policy that will ease the transition by American businesses and workers to the post-Cold War era. When fully implemented, tha nev policy will enable American firms to compete more effectively for billions of dollars additional business, and will preserve tens of thousands of American jobs.

The end of the Cold War and the accompanying down-sizing of the U.S. military have created dislocations in the American economy. To excel in this new enyironment, and to avoid significant layoffs, many defense-oriented companies have tried to redirect their efforts toward commercial products for example, by commercializing military technologies.

One obstacle to a successful transition is the Defense Department's "recoupment of non-recurring costs" rule. This rule was originally adopted in the early 1960s as a way of sharing weapon development costs with U.S. allies. It requires contractors to pay fees to the Government on non-Government sales of products and technologies developed under Government contracts -- as well as commercial spinoffs of those technologies. In today's environment, the rule operates like a sales tax imposed only on U.S. companies: it hurts American workers by making it more difficult for their employers to compete for business, both in the U.S. and abroad.

This burdan on American workers and businesses is no longer justified in light of the historic political changes during the past three years. Accordingly, the President today announced a new policy that will result in the elimination of all recoupment fees as expeditiously as possible.

1. The Policy. The new policy developed by the Department of Defense and CMB's office of Federal Procurement Policy, in consultation with the Council on Competitiveness, the President's Export Council, and the Department of State -- will be implemented as follows:

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By administrative action, the Department of Defense will immediately abolish recoupment fees on all products other than "major defense equipment"" (MDE) exported for military uses.

This action will eliminate recoupment fees on all non- military products, including spinoffs and derivatives of military products. Recoupment would no longer be required if, for example, a company decided to use aircraft cockpit display technology in making dashboard displays for automobila.

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