DOD Prime and Subcontract Awards Performed Outside the United States

Although DOD purchases the majority of its defense equipment and services from contractors performing in the United States, it does purchase some from firms performing outside the United States. While subject to annual fluctuations, the value of DOD’s prime contract awards performed outside the United States remained about 5.5 percent of total DOD procurement awards from fiscal year 1987 to 1997 (see fig. Prime contracts performed outside the United States tended to be concentrated in certain countries and products. According to DOD’s DD 2139 data, the value of annual foreign subcontract awards ranged from a high of almost $2 billion in fiscal year 1990 to a low of almost $1.1 billion in fiscal year 1997, averaging about $1.4 billion over this period. Weaknesses Exist in DOD’s Use, Collection, and Management of Foreign Subcontract Data

DOD’s Office of Foreign Contracting and DOD industrial base offices both collect and use foreign subcontract data, but they do not exchange their data with one another. In our review of selected subcontracts, we found instances in which foreign subcontracts were not reported to DOD in accordance with the reporting requirement, resulting in the underreporting of foreign subcontract values. Data Collection Does Not Capture Complete Foreign Subcontract Activity

DOD has no process or procedures to systematically ensure that contractors are complying with the foreign subcontract reporting requirement. DOD industrial base specialists collect similar information for periodic industrial base assessments but are unaware of the data the Office has collected. In addition, weaknesses in the Office’s data collection process significantly limit DOD’s ability to use consistent data on foreign subcontract-level procurements. Poor database management also undermines the credibility and usefulness of the Office’s foreign subcontract data. We also recommend that the Under Secretary of Defense for Acquisition and Technology direct the Director of the Office of Defense Procurement to develop and implement controls and procedures for periodically verifying compliance with the foreign subcontract reporting requirement and specify how to transmit the information to the Office of Foreign Contracting as a means of improving the completeness and consistency of its data and develop and implement procedures for entering data, verifying critical fields, documenting database programs, and querying the database to improve the Office’s database management practices.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) foreign procurement data, focusing on DOD's: (1) reported trends on contracts performed outside the United States; and (2) use of foreign subcontract information and the completeness and accuracy of how DOD collects and manages its data.

What GAO Found

GAO noted that: (1) for prime contracts, DOD purchases the majority of its defense equipment and services from contractors operating in the United States; (2) though subject to annual fluctuations, DOD's prime contract awards outside the United States remained about 5.5 percent of total DOD contract awards from fiscal year (FY) 1987 to 1997; (3) over this period, the value of DOD prime contracts performed both in and out of the United States declined; (4) prime contracts performed outside the United States tended to be concentrated in certain countries such as Germany, Italy, Japan, South Korea, and the United Kingdom and in certain sectors such as services, fuel, and construction; (5) at the subcontract level, the value of DOD's reported foreign subcontract awards ranged from almost $2 billion in FY 1990 to almost $1.1 billion in FY 1997, but this data has its limitations; (6) the Office of Foreign Contracting does not consider the data needs of industrial base specialists in its efforts to collect foreign subcontract data; (7) industrial base specialists are often unaware that data of this nature are available; (8) furthermore, weaknesses in the Office of Foreign Contracting's data collection and management processes undermine DOD's ability to use the foreign subcontract data for defense trade and industrial base decision-making; (9) the Office has no mechanism for ensuring that contractors provide required foreign subcontract information, which contributes to the underrepresentation of foreign subcontract activity; (10) GAO's review of selected subcontracts disclosed instances in which foreign subcontracts were not reported to the Office because contractors were unaware of the reporting requirement or misunderstood the criteria for reporting a foreign subcontract; and (11) the Office's poor database management also compromises the credibility and usefulness of its foreign subcontract data.