Government Procurement:

United States Reported Opening More Opportunities to Foreign Firms Than Other Countries, but Better Data Are Needed

GAO-17-168: Published: Feb 9, 2017. Publicly Released: Mar 13, 2017.

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Contact:

Kimberly M. Gianopoulos
(202) 512-8612
gianopoulosk@gao.gov

 

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The United States participates with 57 other countries in trade agreements that allow foreign firms to compete for government business. We found that the United States reported opening a greater percentage of its government procurement to foreign competition than the next five largest trade agreement partners combined.

However, statistics reported for these trade agreements—including coverage data from the United States—aren't always timely, accurate, or comparable. We recommended some strategies to improve statistical reporting by the United States and its U.S. trading partners.

Government Procurement Opened to Foreign Competition under the WTO GPA as Reported by the United States and Next Five Largest GPA Parties, 2010

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Additional Materials:

Contact:

Kimberly M. Gianopoulos
(202) 512-8612
gianopoulosk@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

What GAO Found

Under the World Trade Organization (WTO) Agreement on Government Procurement (GPA), the United States has reported opening more procurement covered by the agreement to foreign firms than have other parties to the agreement. For example, U.S. data for 2010—the most recent available—show that the United States reported $837 billion in GPA-covered procurement. This amount is about twice as large as the approximately $381 billion reported by the next five largest GPA parties—the European Union, Japan, South Korea, Norway, and Canada—combined, even though total U.S. procurement is less than that of the other five parties combined. (See figure.)

Government Procurement Opened to Foreign Competition under the WTO GPA as Reported by the United States and Next Five Largest GPA Parties, 2010

Government Procurement Opened to Foreign Competition under the WTO GPA as Reported by the United States and Next Five Largest GPA Parties, 2010

Deficiencies in the statistical reporting of government procurement by GPA and U.S. free trade agreement (FTA) parties, including the United States, limit detailed comparisons as well as transparency—one of the GPA's stated goals. For example, the GPA parties' reports that GAO reviewed were not always submitted on time and often lacked certain required data. Also, a lack of common understanding of key terms' definitions led to inconsistencies in GPA parties' reporting. Moreover, while parties to the North American Free Trade Agreement (NAFTA) are required to exchange government procurement data annually, NAFTA's parties have not done so since 2005; other U.S. FTAs GAO reviewed do not require reporting of government procurement data. As a result, policymakers and others have limited information with which to monitor the agreements or assess their financial benefits.

The U.S. approach to statistical reporting of GPA-covered government procurement to the WTO does not ensure the data's timeliness, accuracy, and comparability. For instance, while a recent revision of the methodology for calculating covered U.S. federal procurement improves accuracy, it creates a 6-year reporting delay. In contrast, the GPA requires the reporting of annual procurement statistics within 2 years. In addition, U.S. agencies have not developed a methodology for reporting states' covered government procurement, as the GPA requires. Instead, the United States reports total state-level procurement, which GAO estimated may exceed covered procurement by about 10 percent. Further, the expertise needed to report government procurement data to the WTO is fragmented among the four agencies involved, leading to inconsistencies, errors, and deficiencies. Federal standards for internal control call for U.S. agencies to issue relevant, accurate, and reliable information within a time frame that enables entities to carry out their responsibilities.

Why GAO Did This Study

Globally, government procurement, estimated at $4.4 trillion annually, constitutes a significant market for international business. However, according to officials from the Office of the U.S. Trade Representative (USTR), which is responsible for reporting to the WTO, government procurement markets are often closed to foreign competition. GAO was asked to review U.S. participation in international procurement agreements, which seek to ensure fair and open competition on a reciprocal basis. This report (1) broadly compares GPA-covered government procurement reported to the WTO by the United States and other parties; (2) assesses the usefulness of statistical reporting of government procurement data by GPA and U.S. FTA parties for more detailed comparisons; and (3) examines the extent to which the U.S. approach to reporting such data ensures timeliness, accuracy, and comparability. GAO analyzed WTO and U.S. documents and data pertaining to the GPA and U.S. FTAs and interviewed officials in Washington, D.C., and Geneva, Switzerland.

What GAO Recommends

GAO is making six recommendations to USTR to improve statistical reporting of government procurement under the GPA and U.S. FTAs, including working with GPA parties to enhance their reporting, resuming the required data exchange with NAFTA parties, improving U.S. federal and state procurement data reported to the WTO, and ensuring that U.S. statistical notifications to the WTO are well documented and reviewed for accuracy. USTR did not provide official comments.

For more information, contact Kimberly M. Gianopoulos at (202) 512-8612 or gianopoulosk@gao.gov.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In February 2017 we reported that government procurement statistics submitted by parties to the Agreement on Government Procurement (GPA) and U.S. free trade agreements (FTA) have deficiencies and inconsistencies. For example, we found that reporting by GPA Parties were not always on time and often lacked certain required data. Also, a lack of common understanding of key terms' definitions led to inconsistencies in GPA parties' reporting. We recommended that to improve the quality and transparency of statistical reporting of international government procurement by GPA and U.S. FTA parties to fulfill their commitments under these agreements, the U.S. Trade Representative (USTR) should prepare and submit a proposal to the World Trade Organization (WTO) GPA working group on statistical reporting established by the Committee on Government Procurement that aims to improve the quality of statistical reporting by WTO parties to address the weaknesses we identified. On April 27, 2017, as Chair of this working group, USTR tabled a proposal to improve statistical reporting that identified outstanding issues preventing GPA parties from improving the quality of statistical reporting. This proposal was agreed to by other members of the statistical working group and they too have made submissions based on this proposal. This proposal identifies deficiencies in reporting that we highlighted in our report. With this effort USTR implemented our recommendation. According to USTR, the proposal calls for parties to make recommendations on four issues: 1) whether the GPA Parties should adopt a common method for collection of statistics; 2) whether the GPA Parties are able to standardize the classification in the statistical data reported to the GPA Committee; 3) means for facilitating the collection of country of origin of goods and services covered by the agreement; and 4) other technical issues in government procurement data reporting raised by any GPA Party.

    Recommendation: To improve the quality and transparency of statistical reporting of international government procurement by GPA and U.S. FTA parties to fulfill their commitments under these agreements, the U.S. Trade Representative should prepare and submit a proposal to the WTO GPA working group on statistical reporting established by the Committee on Government Procurement that aims to improve the quality of statistical reporting by WTO parties to address the weaknesses we identified.

    Agency Affected: Executive Office of the President: Office of the United States Trade Representative

  2. Status: Closed - Implemented

    Comments: In February 2017, we reported that although North American Free Trade Agreement (NAFTA) requires its parties (the United States, Canada, and Mexico) to exchange annual statistics on government procurement, they have not exchanged this information since 2005. As a result, the parties have been unable to compare their covered government procurement with that of the other parties, reducing transparency and hindering their ability to monitor activity under the agreement. We recommended that the U.S. Trade Representative (USTR) resume the annual exchange of statistical data on covered government procurement with the other NAFTA parties as NAFTA requires. In May 2017 USTR officials responded to our recommendation and acknowledged their support for resuming the annual exchange of statistical data with Canada and Mexico and stated that they would ensure that the exchange of procurement statistics was considered as part of the ongoing reevaluation of NAFTA. Subsequently, NAFTA was renegotiated and replaced by the United States-Mexico-Canada Agreement (USMCA), which entered into force on July 1, 2020. Under USMCA, the parties have agreed to prepare an annual statistical report on its covered procurement, and make the reports publicly available on an official website within two years of the end of the reporting period. Under NAFTA, parties were only required to exchange statistics among themselves, with no public reporting requirement. As a result of the new agreement, procurement data will again be exchanged between the parties and it will be transparent to policymakers and the public.

    Recommendation: To improve the quality and transparency of statistical reporting of international government procurement by GPA and U.S. FTA parties to fulfill their commitments under these agreements, the U.S. Trade Representative should resume the annual exchange of statistical data on covered government procurement with the other NAFTA parties as NAFTA requires.

    Agency Affected: Executive Office of the President: Office of the United States Trade Representative

  3. Status: Open

    Comments: In February 2017 we reported that the United States had revised its approach to statistical reporting to the World Trade Organization (WTO) about covered federal government procurement from an "award values" methodology to an actual "cumulative obligations" approach in October 2015. The "cumulative obligations" methodology resulted in a more accurate measure of covered federal procurement, but it introduced a 6-year delay in reporting. We found this reporting delay inconsistent with the 2014 WTO Agreement on Government Procurement (GPA) requirement of reporting within 2 years of the end of the reporting period. We recommended that the U.S. Trade Representative (USTR) should, with appropriate experts in Commerce, Office of Management and Budget, and General Services Administration, improve the U.S. methodology for providing covered federal government procurement statistics to the WTO to ensure both accurate and more timely reporting, consistent with GPA requirements--for example, by providing preliminary estimates and updated values of covered federal procurement or by using an alternative methodology that bases measures of covered government procurement on actual annual obligations, if USTR determines that such an approach is consistent with WTO obligations. Following the issuance of our report, in December 2017 USTR reported that they had worked with other agencies to improve their methods. While they decided to continue to report statistics using the "cumulative obligations" methodology they decided to also report "partially reported" (preliminary) statistics to improve the timeliness of U.S. reporting. This preliminary data was to be based on the same data used in the "cumulative obligations" methodology but can be submitted within two years of the end of the reporting period and therefore comply with GPA statistical reporting obligations. USTR submitted preliminary statistics for FY 2015 on November 15, 2017; for FY 2016 on October 31, 2018; and for FY 2017 on October 29, 2019. USTR will later update these statistics to reflect the "final" total value in 2021. GAO will continue to monitor this recommendation until that time.

    Recommendation: The U.S. Trade Representative should, with appropriate experts in Commerce, OMB, and GSA, improve the U.S. methodology for providing federal government procurement statistics to the WTO to ensure both accurate and more timely reporting, consistent with GPA requirements--for example, by providing preliminary estimates and updated values of covered federal procurement or by using an alternative methodology that bases measures of covered government procurement on actual annual obligations, if USTR determines that such an approach is consistent with WTO obligations.

    Agency Affected: Executive Office of the President: Office of the United States Trade Representative

  4. Status: Closed - Implemented

    Comments: In February 2017, we reported that U.S. agencies lack a methodology for reporting States' and other government entities GPA-covered procurement as required. We recommended that the U.S. Trade Representative (USTR), in consultation with appropriate experts in Commerce, Office of Management and Budget (OMB), and General Services Administration develop a methodology for reporting statistics on state governments' covered procurement to the WTO consistent with GPA requirements. USTR, in consultation with Commerce, assessed methods for preparing more accurate state-level statistics on GPA-covered procurement. USTR found only eight states of the 37 covered by the GPA currently make procurement statistics available in an on-line searchable format, but none of those states indicates the value of procurements covered by trade agreements. USTR revised the methodology used to estimate state-level procurement. The new methodology strips out state spending categories that are not considered government procurement for the purposes of U.S. international trade obligations. The new methodology continues to use the U.S. Census Bureau State Government Finances report and provides a more accurate estimate; however, this new methodology does not estimate the percentage of state procurement that is covered by the GPA. Census data does not take into account thresholds or entities that are excluded from coverage. As a result, improved U.S. reporting on sub-federal level procurement to the WTO, does not correct for the value of non-covered procurement and therefore still overstates its value, though to a lesser degree.

    Recommendation: The U.S. Trade Representative should, in consultation with appropriate experts in Commerce, OMB, and GSA, develop a methodology for reporting statistics on state governments' covered procurement to the WTO consistent with GPA requirements.

    Agency Affected: Executive Office of the President: Office of the United States Trade Representative

  5. Status: Closed - Implemented

    Comments: In February 2017 we reported that agencies involved in the decision to revise the U.S. methodology for reporting federal procurement to the World Trade Organization (WTO) were unable to provide documentation supporting their methodological decisions. We recommended that the U.S. Trade Representative (USTR), in consultation with appropriate experts in Commerce, Office of Management and Budget, and General Services Administration ensure that methodologies and data sources used to prepare Agreement on Government Procurement (GPA) statistical notifications are documented. On August 24, 2018, USTR officials provided GAO a document that they and Commerce developed, which describes their new methodologies for compiling federal and state-level statistical notifications. This document will be a reference for future reporting. Additionally, as part of the data documentation process, Commerce committed to maintain a time stamped version of the source data used annually in the preparation of both federal and state-level statistics on a government wide website (max.gov). USTR also provided a link to the reported data on their website at https://ustr.gov/issue-areas/government-procurement/us-government-procurement-statistics .

    Recommendation: The U.S. Trade Representative should, in consultation with appropriate experts in Commerce, OMB, and GSA, ensure that methodologies and data sources used to prepare GPA statistical notifications are documented.

    Agency Affected: Executive Office of the President: Office of the United States Trade Representative

  6. Status: Closed - Implemented

    Comments: In February 2017, we reported that no U.S. agency had taken responsibility for ensuring the accuracy, timeliness, or comparability of the procurement data submitted to the World Trade Organization (WTO). This resulted in an incomplete understanding among the agencies of the U.S. methodology for reporting procurement statistics to the WTO, a number of technical deficiencies, a lack of documentation, and some errors in U.S. statistical reporting to the WTO. We recommended that the Office of the United States Trade Representative (USTR), in consultation with appropriate experts in the Department of Commerce (Commerce), Office of Management and Budget, and General Services Administration, ensure that calculations using U.S. procurement statistics and other data are reviewed for accuracy before reporting them to the WTO. According to USTR officials, following the issuance of our report, they in consultation with Commerce, took actions in response to our recommendation. In August 2018, USTR officials informed GAO that they and Commerce had developed a document detailing their new process to review U.S. data submissions to the WTO for accuracy. According to USTR, each set of data is to be pulled independently by two Commerce staff using an established methodology and then it will be compared by them for consistency and accuracy. There are additional reviews and clearances of formatted procurement statistics by USTR before they are submitted to the WTO or posted online. USTR reported U.S. procurement statistics in November 2017, under the new process. As a result, a process has been established with defined roles and responsibilities for ensuring the quality of U.S. statistical submissions.

    Recommendation: The U.S. Trade Representative should, in consultation with appropriate experts in Commerce, OMB, and GSA, ensure that calculations using U.S. procurement statistics and other data are reviewed for accuracy before reporting them to the WTO.

    Agency Affected: Executive Office of the President: Office of the United States Trade Representative

 

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