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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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: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    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 U.S. Trade Representative

  2. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    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 U.S. Trade Representative

  3. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    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 U.S. Trade Representative

  4. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    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 U.S. Trade Representative

  5. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    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 U.S. Trade Representative

  6. Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    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 U.S. Trade Representative

 

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