Military Sales to Israel and Egypt: DOD Needs Stronger Controls Over U.S.-Financed Procurements
NSIAD-93-184
Published: Jul 07, 1993. Publicly Released: Aug 10, 1993.
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Highlights
Pursuant to a congressional request, GAO reviewed the Foreign Military Financing (FMF) programs for Israel and Egypt, focusing on: (1) why Israel and Egypt often purchase U.S.-funded goods and services directly from contractors rather than from the U.S. government; (2) potential program weaknesses; and (3) each countries' procurement procedures.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Other | 1. To improve oversight of subcontractors, DSAA should require FMF recipient countries and contractors to report all subcontractors required or directed by the country. Also, DSAA should arrange for DCMC to perform a pre-award survey of subcontractor capability, if unknown. |
Current guidelines require the contractor to submit a list of all subcontractors on a proposed contract. It is the prime contractor's responsibility to manage and ensure compliance of subcontractors. Pre-award surveys are now required on all purchase orders of $100,000 or more unless the vendor is already a U.S. supplier.
|
| Other | 2. To ensure greater use of the FMS procurement channel, DSAA should direct U.S. military buying organizations to perform price comparisons on high-value commercial contracts and where the buyer requests a sole-source procurement. Where price and availability are comparable to FMS, DSAA should require that the country buy through the FMS channel. |
New guidelines issued in January 1995 require the country to buy FMS unless DOD determines that the FMS system cannot satisfy the requirement. Price comparisons will be conducted on all sole-source contracts over $500,000. Proof of competition, to include offer prices, will be required on all competitive buys. If the lowest offer is not selected, the country will be required to justify its choice.
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| Other | 3. To verify that milestones are achieved and services are preformed in-country, DSAA should direct DCMC to conduct quality assurance checks on purchases over a certain dollar threshold. Also, DSAA should require that the foreign country pay the costs for these DCMC services. |
Under new guidelines that took the effect on January 1, 1995, foreign countries are now required to purchase contract administration services from DCMC on all contracts over $500,000. DCMC quality assurance inspections are done at the discretion of the country unless DOD determines otherwise. DCMC services are paid for by the country in accordance with AECA.
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| Other | 4. To verify contractor compliance with the certification, DSAA should require contractors, and their subcontractors, to maintain their books and records in a manner that permits the U.S. government to verify contractor compliance. |
Commercial contractors doing business with DOD must comply with cost accounting standards. By contract, subcontractors are required to meet the same standards. DCAA monitors compliance with procedures.
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Contract oversightDepartment of Defense contractorsForeign governmentsForeign military salesForeign military sales policiesFraudMilitary officersProcurement practicesQuestionable foreign paymentsRisk management