Overseas Military Construction: Observations on U.S. Contractor Preference

GAO found that the Department of Defense (DOD) did not apply the U.S. contractor preference in accordance with the current statute from October 2010 through May 2014. The fiscal year 2014 Consolidated Appropriations Act directs that military construction contracts valued over $1 million and located in countries bordering the Arabian Sea, U.S. territories in the Pacific, and the Kwajalein Atoll, be awarded to a U.S. contractor unless their price is 20 percent higher than the price from a competing non-U.S. contractor with an equally responsive and responsible bid. However, DOD incorrectly applied the preference to countries bordering the Arabian Gulf, which is geographically distinct from the Arabian Sea (see figure). DOD officials were unaware the statute changed the preference from Arabian Gulf to Arabian Sea in 2002 and therefore had not updated DOD s acquisition guidance. DOD s application, however, included the geographic area in which the majority of military construction in the Arabian Sea and Arabian Gulf locations took place from October 2010 through May 2014. GAO also found that due to other factors that are also considered, such as a contractor s experience, the preference potentially only affected 2 of the 35 award decisions for military construction contracts since fiscal year 2011. DOD updated its guidance during GAO s review, but it could become outdated, again, if a congressional bill becomes effective, as the bill would change the locations subject to the preference in fiscal year 2015.