Collecting Research and Development Costs on Commercial Military Sales

Gao ID: NSIAD-86-44 February 28, 1986

GAO reviewed the Department of Defense's (DOD) procedures for identifying, monitoring, and collecting nonrecurring research, development, and production costs applicable to commercial sales licensed for export by the Departments of State and Commerce.

GAO noted that prior internal audits and congressional reports have concluded that millions of dollars have been lost because effective procedures have not been established for the collection of nonrecurring research and development costs. GAO found that: (1) DOD is not aware of most commercial sales agreements between defense contractors and foreign entities; (2) DOD cannot ensure that recoupments are collected; (3) although commercial sales of defense-related articles between U.S. companies and foreign entities require U.S. export licenses, State grants most licenses without consulting DOD; and (4) although Commerce is responsible for identifying products that need export controls, the vast majority of applications for Commerce export licenses involve low-technology products, which do not involve significant military risks and, therefore, DOD does not review those. GAO also found that: (1) the military services were not aware of 44 State-issued licenses which carried recoupment charges; (2) 14 of the 52 Commerce-issued licenses warranted a recoupment charge; (3) the descriptions used on the licenses were not sufficient to determine what was being exported or the correct charge; (4) U.S. representatives did not always forward contractor payments to the appropriate military service in a timely manner; and (5) although there are procedural deficiencies in the collection of nonrecurring costs, DOD has collected most nonrecurring costs associated with commercial sales.

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.

Director: Joseph E. Kelley Team: General Accounting Office: National Security and International Affairs Division Phone: (202) 512-4128


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