Open Letter to the President
Dear President Trump,
It goes without saying that supporting US businesses and US manufacturing is important. Regardless of party lines, every legislator will tell you they are a hundred percent in support of promoting both principles. This letter will hopefully shine some light on an area of the federal government where the actions of government procurement officials do not support small businesses nor those that produce US products. It is my goal, on behalf of my family’s business and our employees, to ask for your support in taking action to review the procurement actions of the Defense Logistics Agency (DLA).
Just one week ago on July 25th, the DLA awarded a multi-line contract split up between three vendors. One of those vendors is a big business that historically supplies Mexican end products. One of the vendors is a small business that historically supplies Chinese end products. And the other business, ours, is a small business producing US-made end products.
As awarded, the estimated contract value is $777,551 with 58% going to the big business supplying Mexican products, 24% to the small business supplying Chinese products, and 18% to my family’s small business supplying domestic end products. This, in and of itself, is not necessarily a shame presuming the small business supplying domestic end products was considerably higher priced. Unfortunately, we were not.
In total the DLA saved only 4.7% on the contract value by not buying 100% from the small business producing in the US. Instead, the DLA awarded the contract strictly following a best-price criteria. In doing so, the government netted a $38,152 savings over buying everything from the small business producing domestic end products. Again, on a three-quarter of a million dollar contract the government chose to support Mexican and Chinese products to the tune of thirty-eight thousand dollars in savings.
What’s worse is that if you remove the two items procured via the small business sourcing the products from China, what you are left with is a small business producing domestic end products competing against a large business supplying Mexican products. By making the award to the large business the DLA will save only $15,832 per year on a total contract value of $589,565! That is a mere 2.6% savings!
Is a 2.6% savings more important than supporting a small business? Is that 2.6% savings more important than creating jobs in the USA? Needless to say, the answer to any reasonable American would be “no.”
Even if you review the savings anticipated by procuring two of the items from China, one of the items nets out an 11.8% savings whereas the other items net out a 5.4% savings. Again, are the cost savings justified enough not to buy US produced products?
In our experience over this past week, as we’ve worked to develop a moving forward strategy on how to bring this problem to light, informal surveys have been taken to see how much a typical tax paying American would be willing to pay as a premium if they knew the federal government would be supporting small businesses and/or US production. The results were that everyone we talked to felt 15% to 20% preference is reasonable.
The Industrial Hardware division of the DLA Troop Support branch clearly thinks otherwise. Maybe this is a case of “the DLA’s hands are tied and they can’t offer any sort of pricing preference in their solicitations” because the Federal Acquisition Regulations (FAR) prohibits such preferences. If so, then the FAR needs to be modified.
I believe, however, that the FAR does not prohibit and that the DLA did have the ability to offer some sort of pricing preferences should they have felt it prudent. Instead, the DLA chose to ignore any such preferences. They chose to spend tax payers’ dollars to support job growth in Mexico and China instead of here in the USA.
I won’t speak to the DLA as a whole. But I can speak to the specific branch that procures padlocks when I say that they do not, nor have they ever, supported small businesses nor businesses working to produce in the USA.
My family’s business is the only small business producing padlocks for the DLA in the USA, and we only started doing so in 2009. In 2009 we earned Lockheed Martin’s trust to be their primary sub-contractor to supply padlocks in support of the Fleet Automotive Support Initiative (FASI) program. We moved our manufacturing away from China and to the USA to start supplying a domestic end product.
To say it was hard work is an understatement. And now, eight years later, I challenge you to find a better supplier of any product to the DLA than Pacific Lock Company. In these seven years we have produced and delivered 5 million padlocks with not one return for quality problems! And, as a “direct-to-vendor delivery” (DVD) supplier, we have delivered directly from our factory to the warfighter on more than a hundred and four-thousand orders all with a one to three-day turn-around time!
Because of our exceptional performance, Lockheed Martin named us one of their small businesses of the year in 2014.
Again, I challenge you to find a better vendor to the US Government than Pacific Lock Company. And yet, the DLA chooses to deliberately make it very, very difficult for us to earn its business. Having a small business compete with a big business on a “level playing field” where no preference is given is hardly fair. Having a small business producing domestic products compete with another small business sourcing products from China, again with no preference given to the domestic manufacturer, is hardly a “level playing field.”
Our government should be taking reasonable steps to encourage small businesses and US production. Awarding $451,472 in yearly sales to a large business producing a Mexican product instead of to a small business producing a domestic product to exact a 2.6% cost savings is not reasonable.
Once again, my intent by writing this letter is to bring to light a culture of uncaring within this portion of the DLA. I have included the specifics to the procurement action on solicitation # SPE5EY-17-D-0550 below for your reference.
Gregory B. Waugh
President & CEO
661-294-3707, Ext. 102