Defense Department Foreign Source Procurement

In response to a congressional request, GAO provided information on restrictions on foreign-source procurement in Department of Defense (DOD) contract awards since fiscal year (FY) 1978, including information on Army Corps of Engineers contracts within the United States. Specifically, GAO determined: (1) the value and composition of DOD foreign-source procurement; (2) the supply and service categories which showed the largest increases during FY's 1979-1982; (3) the extent to which foreign-source procurement was exempt from Buy American Act restrictions; and (4) which countries have the largest dollar volume of DOD contract awards and the composition of these awards.

Foreign suppliers' share of DOD prime-contract procurement has increased an average of 2.6 percent for FY's 1979-82 over the 1975-77 period. Construction and service awards accounted for this increase. Contracts for construction in Saudi Arabia represented a majority of the increase in construction. During the 1979-82 period, the largest increase in foreign-source awards occurred in the supplies and equipment categories. Most of this increase was in the oils and fuels categories and reflected the sharp increase in petroleum prices over the period reviewed. DOD appropriations restrict the procurement of food, clothing, textiles, specialty metals, and shipbuilding. However, these restrictions do not apply when items are not available or are for procurement outside the United States in support of combat operations or in emergencies. The Buy American Act requires agencies to procure domestic materials when they are intended for use within the United States and are available. However, these provisions do not apply to purchases of goods and services that will be used or consumed outside the United States or if the cost of the domestic product is determined to be unreasonable. GAO found that most foreign-source awards were exempt from Buy American Act restrictions and that foreign procurement was negligible in domestic Corps of Engineers projects. GAO was unable to provide meaningful data on subcontract level foreign-source procurement, because the subcontract level procurement reporting system is not fully operational.