Defense Department Subcontract-Level Reporting System

Pursuant to a congressional request, GAO reviewed Department of Defense (DOD) attempts to obtain foreign-source procurement data at the subcontract level and its implementation of a subcontract-level reporting system.

GAO found that a quarterly reporting requirement has been established for certain DOD contractors, some of which have begun to provide information on their foreign subcontracts. GAO has doubts regarding whether the reporting system as planned and implemented will provide the information necessary to fully monitor arms agreements with friendly governments or identify foreign-source procurement at the subcontract level. The planned reporting system contains a number of definitional and procedural weaknesses which will affect the quality of information developed. By excluding prime contractors and first-tier subcontractors receiving major contracts for commercial items from reporting requirements, DOD discarded an area where foreign-source procurement is known to be significant. Another problem with the DOD reporting criteria is that no attempt is made to net out the value of domestic goods and services included in subcontracts with foreign vendors. Further, the reporting system does not attempt to capture any information on foreign-source procurement in subcontracts below the first tier having a place of performance within the United States. Establishing procedural controls to assure contractor compliance with the reporting requirement is another potential weakness. No effort was made to improve contractor compliance under the old subcontract-level reporting requirement, and there is little evidence to suggest that such an effort will be made under the new reporting system.