Exposing Corruption and Preventing Abuse of Power

House Votes to Stop Future Funding of Rosoboronexport

The House of Representatives voted to cut off future government deals with a Russian government-owned arms contractor that has provided more than $1 billion in arms to the Syrian government. The contractor, Rosoboronexport, has supplied weapons to a brutal Syrian regime led by Bashar Al-Assad and currently has a contract with the Department of Defense (DoD) worth nearly $1 billion to supply helicopters to Afghanistan.

Representative Jim Moran (D-Va.) offered an amendment to the FY 2013 defense appropriations bill (H.R. 5856) which directs that no funding may “be used to enter into a contract, memorandum of understanding, or cooperative agreement with, make a grant to, or provide a loan or loan guarantee to Rosoboronexport.” The amendment passed with a resounding 407-5 vote. POGO hopes the Senate passes a similar measure.

Last month, POGO documented our concerns with the Rosoboronexport contract, under which the U.S. Army originally procured 21 Mi-17 helicopters for $377 million and later exercised an option worth $550 million to procure an additional 12 helicopters. While Representative Moran’s amendment does not affect the remainder of the current contract, it bars all future Pentagon business dealings with Rosoboronexport.

In addition to the contractor’s business with Syria, POGO also pointed out how Rosoboronexport’s business activities—including its ties to Iran’s nuclear program, which earned the company U.S. sanctions in 2006—may violate the Federal Acquisition Regulation’s (FAR) provision requiring the government to only award contracts to responsible companies. Although sanctions were lifted in 2010, Rosoboronexport has sold billions of dollars worth of weapons to Syria, which the government may have used to attack innocent civilians.

Further, Rosoboronexport’s contract with the Army was a sole-source contract that didn’t go through a rigorous bidding process. POGO has long warned about the dangers of sole-source contracts. Such contracts do not necessarily get the best product for the best price, and in this case, POGO has reason to believe that there were cheaper, domestic alternatives.

POGO also has concerns about Rosoboronexport’s classification as a small, minority-owned business at the time its contract was awarded (its classification as a small business has since been changed). According to the American Small Business League (ASBL), about 40 percent of the value of Rosoboronexport’s Army contract counted toward the government’s small business contracting goal. Rosoboronexport is responsible for roughly 80 to 90 percent of Russia’s foreign arms sales, and, according to the ASBL, has 2,500 employees and annual revenue of $424 million (both of which exceed federal small business standards).

In March, a group of 17 senators sent a bipartisan letter to Secretary of Defense Leon Panetta urging him to cut off funding to Rosoboronexport. Senator John Cornyn (R-Texas) put additional pressure on Obama, blocking the appointment of the Army Assistant Secretary for Acquisition, Technology and Logistics and sending letters to high-ranking DoD officials.

The Obama Administration and the Senate need to officially act, but the House approval of Moran’s amendment is a good step in holding Rosoboronexport responsible.