In the Joint Explanatory Statement accompanying the fiscal year 2014  Consolidated Appropriations Act, Congress mandated that we examine  the potential benefits and problems of amending Section 112 to apply the  preference to all of the countries within the CENTCOM area of  responsibility, which includes countries bordering the Arabian Sea and  Arabian Gulf, as shown in figure 2. The DOD contracting agencies responsible for implementing the U.S.  contractor preference include the U.S. Army Corps of Engineers, which  manages DOD’s construction in the Middle East and the Kwajalein Atoll,  and the Naval Facilities Engineering Command, which manages DOD’s  construction on U.S. territories in the Pacific. Contractor Preference to Contracts in Countries Different from Those Required by Section 112 Due to an Outdated Regulation but Took Action to Correct DFARS

We found that DOD did not apply the U.S. contractor preference in  accordance with the current Section 112 from October 2010 through May  2014. The U.S. Contractor Preference Potentially Affected 2 of 35 Military Construction Contracts Awarded in the Arabian Gulf Countries and in the Pacific

Based on our analysis, there were 35 contracts awarded from October  2010 and May 2014 that were subject to the U.S. contractor preference in  accordance with DFARS. DOD and State Officials Identified Potential Benefits and Problems with Expanding Section 112 to Include All of the Countries in the CENTCOM Area of Responsibility

		Officials Identified Some Potential Benefits to Expanding the U.S. Contractors May Have More Familiarity with U.S. Officials Identified Some Potential Problems with Expanding the U.S. These officials said a  policy that provides a preference to U.S. contractors could be in conflict  with these existing U.S. policy goals. Agency Comments

DOD and State Department reviewed a draft of this report but did not  provide any comments. Appendix I: Scope and Methodology

To examine the extent to which the Department of Defense (DOD) has  awarded military construction contracts in accordance with Section 112  since fiscal year 2011, we reviewed Section 112 and DOD’s implementing  guidance, the Defense Federal Acquisition Regulation Supplement  (DFARS), to identify and develop criteria for assessing the department’s  actions. Using the Federal Procurement Data System–Next Generation  and in coordination with DOD officials, we identified the DOD military  construction contracts that were awarded from October 2010 through May  2014 that were valued over $1 million and either were awarded in  countries bordering the Arabian Sea, as mandated by Section 112, or  were awarded in countries bordering the Arabian Gulf, as implemented by  DOD in DFARS. For the 29 contracts that were subject to the preference in accordance  with DFARS, we then obtained and analyzed contract documentation for  those awards to determine (1) whether DOD included the preference  language, (2) whether the 20 percent preference was applied to the  proposed offers of competing non-U.S. firms, (3) whether the preference  affected the award.the preference in accordance with DFARS, we found a military  construction–operations and maintenance contract that the Army Corps of  Engineers had incorrectly applied the preference to; however, we did not  include this contract in our analysis since this type of contract was not  covered by either Section 112 or the DFARS provision—and was thus  outside of the scope of our engagement. To identify the potential benefits and problems of  expanding the preference, we interviewed officials from DOD, State, and   and asked  a private-sector association with knowledge about this issue,them about the effect of the preference on those guiding principles.
Why GAO Did This Study

Since the 1980s, Congress has mandated a preference for U.S. contractors for military construction contracts in certain overseas countries. In the Joint Explanatory Statement of the Consolidated Appropriations Act for Fiscal Year 2014, Congress mandated that GAO examine the potential benefits and problems of expanding this preference to the countries that make up the CENTCOM area of responsibility.
This report (1) examines the extent to which DOD has awarded military construction projects in accordance with the U.S. contractor preference and (2) describes DOD and State Department officials' views on the potential benefits and problems with expanding the U.S. contractor preference to include all countries within CENTCOM.
To examine the extent to which DOD awarded contracts in accordance with the U.S. contractor preference, GAO analyzed information concerning the contracts awarded from October 2010 to May 2014 subject to the preference to determine whether DOD applied the preference and whether the preference affected the contract award. To identify the potential benefits and problems with expanding the preference, GAO interviewed officials with knowledge of this issue.

What GAO Found

GAO found that the Department of Defense (DOD) did not apply the U.S. contractor preference in accordance with the current statute from October 2010 through May 2014. The fiscal year 2014 Consolidated Appropriations Act directs that military construction contracts valued over $1 million and located in countries bordering the Arabian Sea, U.S. territories in the Pacific, and the Kwajalein Atoll, be awarded to a U.S. contractor unless their price is 20 percent higher than the price from a competing non-U.S. contractor with an equally responsive and responsible bid. However, DOD incorrectly applied the preference to countries bordering the Arabian Gulf, which is geographically distinct from the Arabian Sea (see figure). DOD officials were unaware the statute changed the preference from “Arabian Gulf” to “Arabian Sea” in 2002 and therefore had not updated DOD's acquisition guidance. DOD's application, however, included the geographic area in which the majority of military construction in the Arabian Sea and Arabian Gulf locations took place from October 2010 through May 2014. GAO also found that due to other factors that are also considered, such as a contractor's experience, the preference potentially only affected 2 of the 35 award decisions for military construction contracts since fiscal year 2011. DOD updated its guidance during GAO's review, but it could become outdated, again, if a congressional bill becomes effective, as the bill would change the locations subject to the preference in fiscal year 2015.
GAO also found that DOD and State Department officials identified potential benefits and problems with expanding the statute to include all of the countries within the U.S. Central Command area of responsibility. For example, according to the officials, one potential benefit of contracting with U.S. firms would be greater familiarity with U.S. contracting and construction procedures. However, these officials also told GAO the 20 countries in the CENTCOM area vary widely in their local capacities, economies, and strategic concerns. Therefore, an expansion may run counter to specific U.S. policy goals in certain locations.

What GAO Recommends

GAO is not making recommendations in this report. DOD and State Department reviewed the draft of the report but did not provide any comments.