Defense Spending:

Trends and Geographical Distribution of Prime Contract Awards and Compensation

NSIAD-98-195: Published: Aug 12, 1998. Publicly Released: Aug 12, 1998.

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Louis J. Rodrigues
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Pursuant to a congressional request, GAO reviewed: (1) the overall trends and geographical distribution of Department of Defense (DOD) spending between 1988 and 1997; and (2) defense spending in conjunction with each state's population and income tax contributions.

GAO noted that: (1) the award of DOD prime contracts in the United States declined from $164 billion to $107 billion from 1988-1997; (2) there were large declines in equipment and research prime contracts, while service prime contracts have become a more significant portion of total prime contracts; (3) meanwhile, DOD compensation decreased from $111 billion to $97 billion; (4) four states--California, Virginia, Texas, and Florida--accounted for $81 billion, or about 40 percent, of DOD prime contract awards and DOD compensation in 1997; (5) over the period 1988-1997, changes in the prime contract awards have occurred throughout the 50 states, and California has experienced the largest decrease; (6) states with the largest decreases had major reductions in prime contracts for equipment; (7) in some states, gains in prime contracts for services lessened the impact of significant decreases in equipment prime contracts; (8) defense dollars are generally associated with employment and other economic benefits to the states; therefore, Congress and other decisionmakers are also often interested in measuring defense spending against state population and income tax contributions; (9) large variances occur within these measures; and (10) for example, DOD prime contract awards and DOD compensation per dollar of personal tax contributions in 1996 ranged from $.78 per dollar in Hawaii to $.04 per dollar in several states.

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