Defense Contracting: Progress Made in Implementing Defense Base Act Requirements, but Complete Information on Costs Is Lacking

The Defense Base Act (DBA) requires U.S. government contractors and subcontractors to buy workers' compensation insurance for employees working overseas, and the cost of this insurance is then passed on to the government. The Department of Labor oversees the claims process and ensures contractors are aware of DBA insurance requirements. Given the large number of contractor personnel working in Iraq, concerns have been raised over the cost of workers' compensation insurance provided under DBA. Since the Iraq conflict began in March 2003, federal agencies have issued contracts for Iraq reconstruction and to support deployed forces. The Department of Defense (DOD) recently reported it alone has 163,591 contractor personnel working in Iraq. Based on GAO's 2005 report on DBA insurance, Congress directed DOD to address challenges identified. This testimony is based on the 2005 report and GAO's analysis of recent agency efforts. As requested, it provides an update on (1) DOD's efforts to reduce DBA insurance rates; (2) DOD's ability to calculate its total DBA insurance costs; and (3) the progress toward addressing prior DBA implementation challenges. In preparation for this testimony, GAO reviewed related reports to identify agency efforts to address prior findings and interviewed officials from DOD, State, Labor, and USAID. GAO discussed this testimony with agency officials.