International Procurement

This report examines how various North Atlantic Treaty Organization (NATO) countries are implementing their reciprocal defense procurement memorandums of understanding with the United States. GAO (1) compares how the United States and the allies view the memorandums of understanding and implement certain aspects of the agreements; (2) examines whether memorandums of understanding provide opportunities for U.S. firms to compete freely and fairly in allied defense markets; (3) reviews the extent to which allied governments' tariff practices affect contractor selections; (4) examines allied contract-award grievance procedures; and (5) addresses Defense Department monitoring of the memorandums of understanding.

GAO found that: (1) MOU obligate signatories to evaluate bids without considering national laws and regulations regarding tariff costs and seek to eliminate buy-national laws and tariffs relating to defense procurements; (2) the DOD method of meeting MOU obligations by waiving the Buy American Act has permitted European firms to compete with U.S. firms for costly defense contracts; (3) although DOD estimated that it had opened at least 44 percent of its procurement market to foreign competition in fiscal year 1990, European governments stated that the United States has limited their access to the U.S. defense market; (4) allied officials stated that they seek to maximize competitive opportunities, but reserve the right to limit competition or direct contracts to national or other European sources; (5) U.S. industry officials stated that such factors as lessening U.S. technology transfer controls, understanding foreign defense procurement practices, and maintaining a substantial in-country presence are required to successfully compete for defense-related contracts in Europe; (6) although DOD added procurement procedure annexes to existing MOU to promote equal treatment for U.S. contractors and promote more openness and accountability in European defense procurement, DOD has not followed up on other recent MOU-related initiatives; (7) although European countries pay tariffs on U.S. defense imports, most concerned parties believe that tariffs are an insignificant factor in contract selections; and (8) U.S. contractors rarely appeal European contract awards, since many countries' grievance procedures were cumbersome and contractors fear losing future contract opportunities.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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