Defense Production Act:

Foreign Involvement and Materials Qualification in the Title III Program

NSIAD-94-74: Published: Mar 14, 1994. Publicly Released: Apr 12, 1994.

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Pursuant to a congressional request, GAO reviewed title III of the Defense Production Act, focusing on the: (1) extent and nature of foreign involvement in the title III program, Department of Defense (DOD) oversight of such involvement, and its impact on effectiveness; and (2) adequacy of DOD efforts to qualify materials for defense weapon systems.

GAO found that: (1) four of the six title III projects have some foreign involvement; (2) the impact of foreign involvement on the title III program is difficult to assess since most projects are incomplete, and none of the materials produced are actually being used in a weapon system; (3) most of the title III contracts are not classified, which results in reduced requirements for DOD review, oversight, and approval of foreign involvement in these projects; (4) weapon system qualification is difficult due to defense downsizing, budget cuts, and the reduced military threat; and (5) five of the six projects have met the title III material qualification standards, but none of the materials has completed design-allowable testing.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In March 1994, the Office of the Assistant Secretary of Defense for Economic Security forwarded a memorandum to the Title III Program Office emphasizing the need to implement the recommendations. Also, DOD completed a review of Defense Production Act authorities. Two working group meetings were held in 1994 to monitor implementation on an individual project basis. The Title III office has been using the recommended procedures since mid-1994, based on interim written guidance. In 1996, DOD issued revised DOD Directive 4400.1 and provided a Title III Operating Guide incorporating the recommendations, for use by the Title III Program Executive Agent in the Air Force. It covers the monitoring of supply and demand of materials on a continuing basis, and of technology and market factors within industries associated with active and planned projects, so that changes can be reacted to in a timely fashion.

    Recommendation: Although there are indications that the title III program has become more flexible in adjusting to changing market conditions, the Secretary of Defense should take steps to ensure that the Principal Deputy Assistant Secretary of Defense for Dual Use Technology Policy and International Programs follows through on the strategies identified in the DOD fiscal year (FY) 1992 report on the program. In particular, this should include using more flexible contract terms and monitoring supply and demand of materials on a continuing basis so that market changes can be reacted to in a timely fashion.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: On March 25, 1994, the Office of the Assistant Secretary of Defense for Economic Security forwarded a memorandum to the Title III Program office emphasizing the need to implement the GAO-recommended actions. Two Title III Working Group meetings were held in April and May 1994, to monitor implementation on a project-by-project basis. The DOD contact stated that the Title III office has been using the GAO recommended procedures since mid-1994, based on "interim" written guidance. On March 18, 1996, DOD issued DOD Directive 4400.1, "The Defense Production Act Programs," and in April 1996, DOD provided a DOD Operating Guide incorporating the GAO recommendations. In addition, the Federal Acquisition Regulation, Subpart 34.1, now requires the use of appropriated funds to pay for qualification testing of Title III materials.

    Recommendation: The Secretary of Defense should take steps to ensure that the Principal Deputy Assistant Secretary of Defense for Dual Use Technology Policy and International Programs follows through on the strategies identified in the DOD FY 1992 report on the program. In particular, this should include considering funding for design-allowable testing efforts on other projects, as was the case for the discontinuous reinforced aluminum (DRA) project, and actively supporting contractor efforts to qualify title III materials and involving as many potential customers as possible in evaluating such materials by continuing its recent efforts to qualify materials for projects besides DRA.

    Agency Affected: Department of Defense

 

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