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A story now about how the Pentagon does business. Even with deep budget cuts there are still lucrative defense contracts being signed. And when it comes to some materials, like fabric, the U.S. military is required by law to buy only products made here in the U.S. There's a multi-million dollar issue for the makers of some extraordinarily tough, rubber-coated watercraft.

NPR's Jackie Northam reports on the fierce competition over inflatable boats.

(SOUNDBITE OF BOAT MOTOR)

JACKIE NORTHAM, BYLINE: This video, on a U.S. military website, shows Marines training at a naval base in Kuwait. The Zodiac, a rugged inflatable boat, bounces over the high waves, levels out, and smoothly maneuvers through the water. For roughly two decades, Zodiac has been the military's choice for inflatable rubber rafts. These are not the recreational rafts you take out to the lake on a Sunday, especially the high-end model, the F470, says Lionel Boudeau, the head of Zodiac's North America operations.

LIONEL BOUDEAU: It is used for a large variety of missions, like assault landings, infiltration and ex-filtration. It can be deployed from the shore or deployed from the air by an aircraft, an helicopter, by a submarine. It is used by Special Forces and regular army.

NORTHAM: Boudeau says Zodiac supplies the bulk of the U.S. military's inflatable rafts. But that monopoly has made it more difficult for other inflatable raft companies to compete, says Elizabeth Wing, the vice president of the Northern California company, Wing Inflatables.

ELIZABETH WING: Once a contract gets locked in, you know, after it's been awarded, it's a number of years until, you know, a contract for the same or similar item comes up again.

NORTHAM: Wing says her company's inflatables should be given a chance to compete with Zodiac. When a new contract with the Army came up about three years ago, Wing tried to open up the field. She began digging into something called the Berry Amendment. It's a statute that restricts the Pentagon from purchasing certain supplies that are not made with American materials, such as fibers and textiles, or by American workers.

It was a direct challenge to Zodiac, which is a French company, and its boats were largely made of materials produced overseas. Wing firmly believes the Berry Amendment should be applied to the rubber rafts.

WING: Because our inflatables are primarily fabric, it just happens to be a coated fabric.

NORTHAM: Wing says the contracts are worth a lot - she says 20 to $30 million each, so she continued to press the Pentagon to re-examine the Berry Amendment. She says finally, the Army Material Command issued a ruling. If the Defense Department wants to buy the inflatable rafts, they have to be made in America with American materials.

David Berteau is a vice president at the Center for Strategic and International Studies. He says he was surprised by the decision.

DAVID BERTEAU: Because, ultimately, it's very easy for the bureaucracy to say the easiest thing for me to do is do tomorrow what I was doing yesterday And in this case, it took the vendor to come in and say you guys need to pay attention and ask these questions over again and come up with new answers.

NORTHAM: The Pentagon's decision had a huge impact on Zodiac.

(SOUNDBITE OF MACHINERY)

BOUDEAU: Here we go.

NORTHAM: What is this?

BOUDEAU: So this is the workshop where we build the F470 for the DOD.

NORTHAM: Zodiac's CEO, Boudeau, looks out at a factory floor where inflatable rubber rafts are in every stage of production, from flat pieces of rubberized fabric to a fully formed boat. Most of the construction is manual. Just one employee uses a small machine to prepare a boat for gluing.

(SOUNDBITE OF MACHINERY)

NORTHAM: When the Pentagon decision came down, Zodiac quickly transformed a sales office in Stevensville, Maryland into a factory. Its experts came in from all over the world to train newly hired local staff. Boudeau says the boats are now compliant with the Berry Amendment.

BOUDEAU: So these boats are built by U.S. citizens, using U.S.-sourced textile material. Fabric, webbing, ropes, everything comes from the U.S. and is very compliant.

NORTHAM: Boudeau says it was a challenge to quickly ramp up production in the U.S. but it was worth it for financial reasons and to maintain a long history with the U.S. military. He says that relationship helps Zodiac sell products worldwide.

Elizabeth Wing says now the playing field is level.

WING: For us, that was really the name of the game was to ensure that our competitor didn't have an unfair advantage under the law.

NORTHAM: There are two contracts for the Army and the Navy coming up. Wing, Zodiac, and several other inflatable boat companies are vying for those contracts.

Jackie Northam, NPR News.

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