Government Procurement: United States Reported Opening More Opportunities to Foreign Firms Than Other Countries, but Better Data Are Needed
Fast Facts
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
Highlights
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
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.
Recommendations
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.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Office of the U.S. Trade Representative | 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. | 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.
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| Office of the U.S. Trade Representative | 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. | 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...
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| Office of the U.S. Trade Representative | 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. | In February 2017 we reported that the U.S. 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...
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| Office of the U.S. Trade Representative | 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. | 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...
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| Office of the U.S. Trade Representative | 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. | 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...
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| Office of the U.S. Trade Representative | 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. | 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,...
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