DEFENSE 

SUPPLIERS

Factors Affecting U.S. 

Titanium Aircraft 

Component 

Manufacturers' Market 

Share of DOD 

Business

Report to Congressional Committees

July 2013

GAO-13-539

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-13-539, a report to 

congressional committees

July 2013

DEFENSE SUPPLIERS

Factors Affecting U.S. Titanium Aircraft Component 

Manufacturers’ Market Share of DOD Business

Why GAO Did This Study

Titanium is used in airframe 

components and jet engines, in part 

because it provides greater strength at 

lower weight than other metals. It is 

produced in a number of shapes, 

including bars, billets, and sheets. By 

law, U.S. manufacturers are generally 

required to use U.S. produced titanium 

for DOD aircraft components, unless 

an exception applies. One exception 

allows companies in 23 “qualifying 

countries” to use foreign produced 

titanium when manufacturing aircraft 

components for DOD. There is concern 

that U.S. manufacturers are losing 

market share to qualifying country 

manufacturers that are able to use 

foreign produced titanium.

The House Armed Services Committee 

report accompanying the National 

Defense Authorization Act for Fiscal 

Year 2013 mandated that GAO assess 

the ability of U.S. aircraft component 

manufacturers to compete for DOD 

contracts. In this report, GAO 

assessed (1) available data on titanium 

prices, (2) available data on U.S. and 

foreign manufacturers’ market share of 

DOD aircraft component contracts, and

(3) the factors that affect the ability of 

U.S. aircraft component manufacturers 

to compete for DOD contracts. GAO 

reviewed Census foreign trade data, 

the best proxy for titanium prices; 

federal procurement data; and relevant 

industry studies; and interviewed a 

broad range of government and 

industry officials.

What GAO Recommends

GAO is not making recommendations

in this report. Agencies and third 

parties reviewed GAO’s draft report 

and technical comments received were 

incorporated as appropriate.

What GAO Found

Census data show that U.S. and foreign produced titanium prices varied from 

2003 through 2012 depending on the product. For example, in 2012, the export 

price (the proxy for the U.S. price) for titanium bar—used to make engine 

blades—was higher than the import price (the proxy for the foreign price), while 

the export price for titanium sheet—used to make wing components—was less 

than the import price. Industry officials noted that these differences may be due 

to varying operating costs and titanium production capabilities in different 

countries and to titanium producers’ negotiated agreements with prime 

contractors or aircraft component manufacturers. 

U.S. aircraft component manufacturers receive the majority of Department of 

Defense (DOD) business, whether through direct purchases by the department 

or through purchases made by its prime contractors. Based on obligation of 

procurement money, 98 percent of DOD’s purchases of aircraft components went 

to U.S. manufacturers from fiscal years 2008 to 2012 (shown in the figure below). 

The remainder went to foreign manufacturers, primarily from qualifying countries. 

DOD prime contractors reported that over the past 10 years they have bought 70 

to 100 percent of DOD titanium aircraft components from U.S. manufacturers.

DOD Aircraft Component Obligations to U.S. and Foreign Manufacturers, Fiscal Years 2008-

2012

Industry officials identified management of titanium sourcing and industry 

consolidation, rather than titanium price, as factors affecting competition between

aircraft component manufacturers for DOD business. Prime contractors generally 

manage titanium sourcing decisions for their DOD component manufacturers 

through long term agreements and an approval process that often directs 

competing manufacturers to the same titanium source, thereby potentially 

reducing pricing advantages available to aircraft component manufacturers in 

qualifying countries. Many officials from aircraft component manufacturers also 

identified industry consolidation of the titanium producers and component 

manufacturers as a factor that could affect their access to titanium for DOD 

contracts, although they have not yet seen any adverse impacts.

View GAO-13-539. For more information, 

contact Belva M. Martin at (202) 512-4841 or 

martinb@gao.gov. 
Page i GAO-13-539 Titanium Procurement 

Letter 1 

Background 3

U.S. and Foreign Titanium Price Differences Varied By Product 

Type 9

U.S. Manufacturers Have the Majority of DOD’s Aircraft 

Component Business 12

Factors Other Than Titanium Price Affect the Ability of U.S. 

Aircraft Component Manufacturers to Compete for DOD 

Business 15

Agency and Third-Party Comments 17

Appendix I Scope and Methodology 19

Appendix II GAO Contact and Staff Acknowledgments 21

Table

Table 1: Qualifying Countries 4

Figures

Figure 1: Application of DOD Specialty Metals Clause and 

Qualifying Country Exception 5

Figure 2: DOD Titanium Production and Aircraft Component 

Manufacturing Processes 7

Figure 3: Titanium Ingot Export and Import Prices, 2003-2012 10

Figure 4: Titanium Import and Export Prices for Mill Shapes, 2005-

2012 11

Figure 5: DOD Aircraft Component Obligations to U.S. and Foreign 

Manufacturers, Fiscal Years 2008-2012 13

Figure 6: DOD Aircraft Component Awards to U.S. and Foreign 

Manufacturers, Fiscal Years 2008-2012 14

Contents 
Page ii GAO-13-539 Titanium Procurement 

Abbreviations 

ATI Allegheny Technologies Incorporated

DFARS Department of Defense Federal Acquisition 

Regulation Supplement

DOD Department of Defense

FPDS-NG Federal Procurement Data System-Next Generation

RTI RTI International Metals Incorporated

TIMET Titanium Metals Corporation

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

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Page 1 GAO-13-539 Titanium Procurement 

441 G St. N.W.

Washington, DC 20548

July 1, 2013

Congressional Committees

Specialty metals, such as titanium and titanium alloys, are essential in the 

manufacture of critical Department of Defense (DOD) aircraft 

components, in part because they are lightweight, strong, and corrosion 

resistant. Since the early 1970s, DOD and its contractors have generally 

been required to acquire titanium produced in the United States for the 

production of aircraft components unless an exception applies. One such 

exception, known as the qualifying country exception, waives the 

requirement for procuring specialty metals produced in the United States 

if the acquisition relates to international agreements with other countries.1

The House Armed Services Committee report, accompanying the 

National Defense Authorization Act for Fiscal Year 2013, mandated that 

GAO assess the ability of U.S. aircraft component manufacturers to 

compete with manufacturers in qualifying countries that can obtain foreign 

produced specialty metals including titanium for DOD contracts.

This qualifying country exception permits titanium aircraft component 

manufacturers in 23 “qualifying countries” to acquire titanium produced 

outside the United States, including titanium produced in non-qualifying 

countries, for use in DOD procurements.

2

 

1

10 U.S.C. § 2533b(d) waives the requirement to procure specialty metals from domestic 

sources if the acquisition relates to certain agreements with foreign governments. 

Implementing this provision, Department of Defense Federal Acquisition Regulation 

Supplement (DFARS) provides that aircraft or aircraft components containing specialty 

metals, including titanium and titanium alloys, that are not melted or produced in the 

United States may be acquired if the aircraft or components are manufactured in or 

contain titanium melted or produced in certain “qualifying” countries. Under DFARS, 

qualifying countries are those which have a reciprocal defense procurement memorandum 

of understanding or international agreement with the U.S. in which both countries agree to 

remove barriers to purchases of supplies produced in the other country and the 

memorandum or agreement complies, where applicable, to the Arms Export Control Act, 

22 U.S.C. § 2776, and 10 U.S.C. § 2457, relating to standardization of equipment with 

North Atlantic Treaty Organization members. DFARS §§ 225.7003-3(b)(4); 225.7003-1(c); 

225.003(10). For the purposes of this report, we refer to this as the qualifying country 

exception.

In this 

report, we assessed (1) available data on U.S. and foreign produced 

titanium prices, (2) available data on U.S. and qualifying country 

2

H.R. Rep. No. 112-479, at 191 (2012).

 
 

Page 2 GAO-13-539 Titanium Procurement 

manufacturers’ market share of DOD aircraft component contracts, and 

(3) factors that affect the ability of U.S. aircraft component manufacturers 

to compete for DOD contracts.

To address our objectives, we analyzed U.S. Census Foreign Trade 

statistics data to determine U.S. export and import values of titanium 

metals from calendar years 2003 to 2012, which we determined were the 

best available proxy as no publicly available U.S. and foreign titanium 

price data are available. For the purposes of this report, Census export 

data serve as a proxy for U.S. produced titanium prices, while import data 

serve as a proxy for foreign produced prices. We compared these data to 

other industry information on prices, obtained concurrence from 

knowledgeable government officials that these data were the best 

available proxy, and determined that these data were sufficiently reliable 

for our purposes. We identified U.S. and qualifying country 

manufacturers’ market share of DOD aircraft component contracts from 

fiscal years 2008, the year that DOD started collecting these data, 

through 2012 by analyzing data from the Federal Procurement Data 

System-Next Generation (FPDS-NG) using the relevant aircraft claimant 

codes, some of which may not include titanium, because FPDS-NG does 

not specifically identify components by their titanium content. We 

excluded contracts for services and items that were not identified as 

manufactured end products. We also excluded indefinite delivery 

contracts but included contract orders issued from those contracts. We 

compared the FPDS-NG data to data from DOD reports on supplies 

manufactured outside the United States that use the same source data 

and determined the data were sufficiently reliable for our purposes. To 

determine the market share for aircraft component subcontracts awarded 

by DOD prime contractors, we collected information from selected DOD 

program offices, aircraft and engine manufacturers, and manufacturers of 

titanium aircraft components—such as engine blades and rotating discs—

for DOD products. We also reviewed relevant studies on the titanium and 

aircraft component industries. We supplemented our work with interviews 

with a broad range of officials from government agencies, the four major 

U.S. and foreign titanium producers, five of the six major DOD aircraft and 

engine prime contractors, as well as nine titanium aircraft component 

manufacturers primarily identified by prime contractors. Additional 

information about our scope and methodology can be found in appendix I.

We conducted this performance audit from September 2012 to July 2013 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 
 

Page 3 GAO-13-539 Titanium Procurement 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.

In 1941, Congress enacted the Berry Amendment, a domestic source 

restriction, which required that certain items procured for defense 

purposes be grown or produced in the United States.3 Specialty metals, 

including titanium and titanium alloys,4 were added to the Berry 

Amendment in the early 1970s, generally requiring DOD and its 

contractors to procure specialty metals produced or melted in the United 

States unless an exception applied allowing specialty metals from foreign 

countries.5 In 1978, the “qualifying country exception” was added to the 

specialty metals domestic source restriction, which waived the 

requirement for procuring specialty metals produced in the United States 

when the purchase relates to agreements the United States has with 

foreign governments, known as “qualifying countries.”6

 

3

This domestic source restriction, which became known as the Berry Amendment, initially 

was enacted as part of the Fifth Supplemental National Defense Appropriation Act, 1941, 

Pub. L. No. 77-29, 55 Stat. 123, 125 (1941). Subsequently, it was included in various 

defense appropriation acts and was codified in the National Defense Authorization Act for 

Fiscal Year 2002 at 10 U.S.C. § 2533a, Pub. L. No. 107-107 § 832 (2001).

Under this 

exception, aircraft component manufacturers in 23 “qualifying countries” 

currently are exempt from the specialty metals domestic source restriction 

and are permitted to use non-domestic produced titanium to manufacture 

4

Titanium alloys are metals mixtures that contain 50 percent or more titanium and one or 

more metallic elements, such as aluminum, or non-metallic, alloying elements. DFARS §§ 

225.7003-1(c); 252.225-7008; 252.225-7009.

5

The specialty metals provision of the Berry Amendment was enacted in the Department 

of Defense Appropriation Act, 1973, Pub. L. No. 92-570, § 724 (1972). Although the 

statute did not specifically define “specialty metals,” DOD defined the term consistent with 

the pertinent report of the House Committee on Appropriations to include four categories 

of metals, including titanium and titanium alloys. DOD Secretary of Defense 

Memorandum, “Section 724 of the Department of Defense Appropriation Act, 1973” (Nov. 

20, 1972). In 2006, the specialty metals provision was codified at 10 U.S.C. § 2533b. John 

Warner National Defense Authorization Act for Fiscal Year 2007, Pub. L. No. 109-364, § 

842 (2006).

6

Department of Defense Appropriation Act, 1978, Pub. L. No. 95-111, § 823 (1977).

Background 

Specialty Metals Domestic 

Source Restriction and 

Qualifying Country 

Exception 
 

Page 4 GAO-13-539 Titanium Procurement 

DOD aircraft components.7 Under the current version, the specialty 

metals domestic source restriction does not apply to aircraft or aircraft 

components manufactured in a qualifying country or aircraft or aircraft 

components containing specialty metals produced or melted in a 

qualifying country.8

Table 1: Qualifying Countries

Table 1 lists the 23 qualifying countries.

Australia France Poland

Austria Germany Portugal

Belgium Greece Spain

Canada Israel Sweden

Czech Republic Italy Switzerland

Denmark Luxembourg Turkey

Egypt Netherlands United Kingdom 

of Great Britain 

and Northern Ireland.

Finland Norway

Source: GAO presentation of Defense Federal Acquisition Regulation Supplement (DFARS) § 225.003(10).

Under the qualifying country exception, manufacturers in the listed 

countries have greater flexibility when procuring specialty metals for DOD 

procurements than U.S. manufacturers. Specifically, they can procure 

specialty metals from any source—including non-qualifying countries—

while a component manufacturer in the United States must procure 

specialty metals from a source in the United States or a qualifying 

country, as shown in figure 1.

 

7

DFARS §§ 225.7003-3(b)(4); 225.7003-2(a); 225.003(10).

8

DFARS § 225.7003-3(b)(4). DFARS provides that the exception may apply to an end 

item or component under a prime contract or a subcontract at any tier. DFARS § 

225.7003-3(b).
 

Page 5 GAO-13-539 Titanium Procurement 

Figure 1: Application of DOD Specialty Metals Clause and Qualifying Country 

Exception

In addition, there are other exceptions to the specialty metals domestic 

source restriction that allow DOD to procure items containing specialty 

metals, including titanium in aircraft or aircraft components, from 

manufacturers in qualifying and non-qualifying countries. For example, 

one such exception, known as the domestic non-availability exception, 

waives the specialty metals domestic source restriction when DOD makes 

a determination that specialty metals, including titanium in aircraft or 
 

Page 6 GAO-13-539 Titanium Procurement 

aircraft components, are not available in the United States in the required 

form and at a reasonable price.9 Other exceptions waive the specialty 

metals domestic source restriction for purchases outside the United 

States in support of combat operations or purchases in support of 

contingency operations.10

The commercial aerospace industry is the largest consumer of titanium 

metals in the world. DOD estimates that the aerospace industry accounts 

for 60 to 75 percent of the U.S. market, with military and DOD business 

accounting for up to 15 percent of the aerospace industry.11

 

9

Specifically, DFARS § 225.7003-3(b)(5) waives the specialty metals domestic source 

restriction when DOD makes a determination that the specialty metal melted or produced 

in the U.S. cannot be acquired as and when needed at a fair and reasonable price in a 

satisfactory quality, a sufficient quantity, and the required form.

Titanium 

metals are important metals in the aircraft industry, in part because they 

are lightweight, strong, and corrosion resistant, making them common for 

use in structural airframe and jet engine components. In an airframe, 

titanium may be used in bulkheads, tail sections, landing gears, wing 

supports, and fasteners. In engines, titanium may be used in blades, 

rotating discs, rings, and casings. To manufacture a titanium aircraft 

component, there are multiple steps in the supply chain, from titanium 

production through the manufacturing of the finished component. Figure 2 

provides an overview of the DOD titanium production and aircraft 

component manufacturing processes.

10DFARS §§ 225.7003-3(a)(2) and (3).

11Department of Defense, Office of the Under Secretary of Defense Acquisition, 

Technology & Logistics Manufacturing and Industrial Base Policy, Titanium Supply for 

Defense Uses, (September 2011). The other percentage is used in medical and other 

devices.

Titanium and Aircraft 

Component Industry
 

Page 7 GAO-13-539 Titanium Procurement 

Figure 2: DOD Titanium Production and Aircraft Component Manufacturing Processes

a

According to DOD, if titanium sponge is shipped to the United States for final smelting into ingots or 

finished stock, it is not subject to the specialty metals domestic source restriction at that stage of the 

process. The same is true for other unprocessed forms of titanium such as non-melt derived titanium 

powder or titanium alloy powder. Defense Federal Acquisition Regulation Supplement (DFARS) § 

225.7003-2 and §§ 252.225.7008 and 252.225-7009. 
 

Page 8 GAO-13-539 Titanium Procurement 

There are a limited number of titanium producers in the world, and market 

shares are concentrated in a small number of large producers. Currently, 

there are four major worldwide producers of high-quality titanium for 

aerospace: one in Russia (Verkhnaya Salda Metallurgical Production 

Association) and three in the United States. These three major U.S. 

titanium metal producers—Allegheny Technologies Incorporated (ATI); 

RTI International Metals, Inc. (RTI); and Titanium Metals Corporation 

(TIMET)—account for 94 percent of the U.S. production capacity.12

For tactical aircraft and engines, DOD generally contracts with six prime 

contractors—Boeing, Lockheed Martin, Northrop Grumman, General 

Electric, Pratt & Whitney, and Rolls-Royce—the latter three for engines. 

These prime contractors generally rely on aircraft component 

subcontractors to produce titanium aircraft components. Prime 

contractors or aircraft component manufacturers generally purchase 

titanium from one of the four major titanium producers. As described 

above, when selling components to DOD, the specialty metals domestic 

source restriction limits the U.S. prime contractors’ and aircraft 

component manufacturers’ purchase of titanium to one of the U.S. or 

other qualifying country sources. Qualifying country aircraft component 

manufacturers that sell to DOD have the flexibility to source titanium from 

any producer, including a non-qualifying country source.

Due in 

part to the limits of worldwide production capacity, titanium products 

require a long lead time to produce, and manufacturers may order 

titanium metal years before it is expected to be delivered in a finished 

product to the customer.

 

12Department of the Interior, U.S. Geological Survey, 2011 Minerals Yearbook: Titanium 

[Advance Release] (April 2013).
 

Page 9 GAO-13-539 Titanium Procurement 

Census data from calendar years 2003 to 2012 show variations in U.S. 

and foreign produced titanium prices for ingot, bar, billet, and sheet.13

Data for ingot—the titanium form used to produce mill shapes—show that 

U.S. export and import prices have varied over the last 10 years.14

 

13Harmonized system codes that identified products as bar, billet, and sheet in the Census 

data changed in 2004, according to Census officials. To maintain a consistent data set, we 

limited our analyses to calendar years 2005 through 2012 for these products. For ingot, a 

consistent data set was available for calendar years 2003 through 2012. The harmonized 

system codes used by Census for bar includes “bars, rods, profiles, and wire of titanium” 

and for sheet includes “blooms, sheet bars, and slabs of titanium.” For the purposes of this 

report, we refer to these commodity groupings as bar and sheet, respectively.

The 

import price was $3.93 less per kilogram than the export price in 2004, 

while the export price was $7.84 lower per kilogram than the import price 

in 2007. In 2011 and 2012, export and import prices converged, as seen 

in figure 3.

14The Census import data values represent the prices paid by U.S. customers to import 

foreign produced titanium metals, including applicable duty values. The Census export 

data values represent the selling price of titanium produced in the United States and 

purchased by customers outside the United States. We compared the Census import and 

export values to understand the relative price differences between foreign and U.S. 

produced titanium.

U.S. and Foreign 

Titanium Price 

Differences Varied 

By Product Type 
 

Page 10 GAO-13-539 Titanium Procurement 

Figure 3: Titanium Ingot Export and Import Prices, 2003-2012

Census data also show that import and export price differences for mill 

shapes—the titanium shapes made from ingot and used to manufacture 

aircraft components—have also varied over the past 8 years. Specifically, 

the import prices for billet—used to make rotating disk engine 

components—have, with the exception of 2011, remained less than 

export prices over the past 8 years; however, the price difference has 

been reduced from $17.82 per kilogram in 2005 to $2.77 per kilogram in 

2012. Price differences for sheet—used to make wing components—have 

also varied over the last 8 years, with the import price exceeding the 

export price from 2009 to 2012. The import price of bar—used to make 

engine blade components—has consistently remained significantly lower 

than the export price over the last 8 years. Figure 4 shows the historical 

import and export prices of titanium billet, sheet, and bar.
 

Page 11 GAO-13-539 Titanium Procurement 

Figure 4: Titanium Import and Export Prices for Mill Shapes, 2005-2012

Relevant reports and government and titanium industry officials we 

interviewed attribute overall price variations to changes in global demand 

and the supply capacity of titanium producers to meet demand. Industry 

officials also told us that price differences between the U.S. and foreign 

produced titanium products can be driven in part by differences in 
 

Page 12 GAO-13-539 Titanium Procurement 

operating costs and production capabilities between U.S. and foreign 

producers. In addition, officials told us that price differences between 

titanium products, such as bar and billet, can partly be due to the 

increased number of steps needed to produce one over the other.

While price differences between U.S. and foreign titanium can be large—

for example, in 2005, Census bar import price was $25.02 per kilogram 

and export price more than twice that at $50.37 per kilogram—officials 

from prime contractors and aircraft component manufacturers told us that 

price differences have not been large enough to have a significant impact 

on the cost of a DOD aircraft. For example, data in one DOD study show 

that a 50 percent increase in the price of titanium would result in about a 

1 percent increase in the cost of a DOD aircraft, because titanium cost is 

generally a small percentage of the overall aircraft cost. Furthermore, 

prices are typically negotiated through private agreements and can 

depend on the specific terms of the agreement between the customer and 

producer. In addition, industry officials noted that U.S. produced titanium 

has been competitively priced relative to foreign produced titanium. 

DOD can either directly contract for aircraft components or contract with 

prime contractors that in turn buy them from component manufacturers. 

DOD awarded the majority of aircraft component contracts to U.S. 

manufacturers from fiscal years 2008 through 2012. Specifically, FPDSNG data over the past 5 years show that DOD directly obligated a total of 

$209.6 billion for aircraft component contracts.15

 

15This total excludes contracts for services and items that were not identified as 

manufactured end products. We also excluded underlying indefinite delivery contracts 

which do not specify place of manufacture, but included subsequent contract orders which 

do specify place of manufacture.

This includes all 

contracts for aircraft components, some of which may not contain 

titanium. Of the $209.6 billion, DOD obligated $205.3 billion, or 98 

percent, of these purchases to U.S. manufacturers. Additionally, DOD 

obligated $2.7 billion, or 1.3 percent of the total obligations, to 

manufacturers in qualifying countries. While obligations to manufacturers 

in qualifying countries increased from $335 million in 2008 to $661 million 

in 2012, their market share of DOD obligations remained between 

approximately 1 to 2 percent each year. Through other authorities 

available to DOD, the department obligated $1 billion to manufacturers in 

U.S. Manufacturers 

Have the Majority of 

DOD’s Aircraft 

Component Business
 

Page 13 GAO-13-539 Titanium Procurement 

non-qualifying countries.16

Figure 5: DOD Aircraft Component Obligations to U.S. and Foreign Manufacturers, 

Fiscal Years 2008-2012

As shown in figure 5, U.S. manufacturers have 

consistently been awarded the majority of DOD aircraft component 

obligations each year from fiscal years 2008 through 2012.

Similar to obligations, FPDS-NG data also show that DOD awarded the 

majority of aircraft component contracts and contract orders to U.S. 

manufacturers from fiscal years 2008 through 2012. Specifically, DOD 

awarded 306,465 contracts and contract orders for aircraft components.17

 

16FPDS-NG did not identify the place of manufacture for an additional $559 million, or 0.3 

percent of all aircraft component obligations.

17This includes all aircraft component contracts and excludes contracts for services and 

items that were not identified as manufactured end products. We also excluded underlying 

indefinite delivery contracts that do not specify place of manufacture, but included 

subsequent contract orders that do specify place of manufacture.
 

Page 14 GAO-13-539 Titanium Procurement 

DOD awarded over 98 percent, or 302,031, of these contracts and 

contract orders to U.S. manufacturers. The remaining 1.4 percent 

consisted of awards to both qualifying and non-qualifying country 

manufacturers. While total awards increased from 2008 to 2012, awards 

to manufacturers in qualifying countries consistently decreased each year 

from 896 awards in 2008 to 748 awards in 2012. As shown in figure 6, 

U.S. manufacturers have consistently been awarded the majority of DOD 

aircraft component awards and contract orders each year from fiscal 

years 2008 through 2012.

Figure 6: DOD Aircraft Component Awards to U.S. and Foreign Manufacturers, 

Fiscal Years 2008-2012

In addition to DOD’s direct purchases of aircraft components, officials 

from aircraft and engine prime contractors told us that they purchase 

aircraft components from manufacturers for use in DOD programs. They 

generally noted that over the last 10 years they have sourced from 70 to 

100 percent of titanium components for DOD aircraft from U.S. 

manufacturers, depending on the DOD program and specific component. 

For example, officials from DOD and one prime contractor said that the 
 

Page 15 GAO-13-539 Titanium Procurement 

F-35 Lightning II program has increased the use of qualifying country 

suppliers, because it is an international program with eight partner 

countries participating in the program. Alternatively, company officials 

involved in the F-22 Raptor program told us that they sourced 100 

percent of components from U.S. manufacturers due to export 

restrictions. Officials from DOD prime contractors also reported there are 

a limited number of manufacturers outside the United States that have the 

capabilities necessary to supply titanium aircraft components for DOD.

Industry officials told us that prime contractors’ long term agreements, 

prime contractors’ approval of titanium producers, and industry 

consolidation—rather than titanium price—are major factors affecting the 

ability of U.S. aircraft component manufacturers to compete for DOD 

contracts. Prime contractors generally manage titanium sourcing 

decisions for their DOD component manufacturers through long term 

agreements for titanium that include pre-negotiated prices. Additionally, 

DOD prime contractors can also require their component manufacturers 

to purchase titanium from producers that they have approved. Prime 

contractors’ use of these methods to manage titanium sourcing may 

reduce potential pricing advantages from the titanium sourcing flexibilities 

that are available to manufacturers in qualifying countries. In addition, 

many officials from aircraft component manufacturers identified industry 

consolidation as a factor that could affect their ability to compete. 

However, they did not identify competition for DOD contracts from 

manufacturers in qualifying countries with potential pricing advantages 

from titanium sourcing flexibilities as a major factor.

According to industry officials, DOD aircraft and engine prime contractors 

leverage their buying power by arranging long term agreements with 

titanium producers to ensure titanium availability and pre-negotiated 

prices. These arrangements usually specify titanium product, price, 

quantity, and delivery schedule. In turn, prime contractors can then direct 

their titanium aircraft component manufacturers in the United States or in 

qualifying countries to purchase titanium under these agreements. For 

example, with rotating components which are strictly controlled, the prime 

contractors require component manufacturers to use the titanium from the 

agreement to ensure quality. As such, potential price differences between 

U.S. produced and foreign produced titanium would not impact the ability 

of U.S. component manufacturers to compete with manufacturers in 

qualifying countries if all manufacturers buy titanium from the same 

agreement. For example, the prime contractor for the F-35 Lightning II 

has negotiated a long term agreement with a U.S. titanium producer to 

supply titanium at a pre-negotiated price for the airframe of the F-35

Factors Other Than 

Titanium Price Affect 

the Ability of U.S. 

Aircraft Component 

Manufacturers to 

Compete for DOD 

Business 
 

Page 16 GAO-13-539 Titanium Procurement 

Lightning II. Given this, industry and government officials told us that 

aircraft component manufacturers working for the prime contractor on the 

F-35 Lightning II airframe buy titanium from the U.S. producer at the 

prime contractor’s pre-negotiated price. 

Industry officials also told us that DOD aircraft and engine prime 

contractors often direct DOD aircraft component manufacturers to specific 

titanium producers that they have approved. These officials noted that as 

a part of the approval process prime contractors typically require titanium 

producers to undergo a certification process that can be costly and take 

over a year to ensure titanium quality. Prime contractors then direct their 

aircraft component manufacturers to use titanium only from an approved

producer regardless of whether the aircraft component manufacturer is 

located in the United States or a qualifying country. For example, officials 

from one prime contractor told us that their company has only approved 

U.S. titanium producers for DOD aircraft components and therefore they 

are certain all titanium for their components are sourced from the United 

States, even if the component manufacturer is located in a qualifying 

country. Additionally, officials told us that in some cases prime contractors 

require titanium to be produced by specific processes for DOD products. 

For example, one prime contractor told us that it requires its titanium to be 

produced by cold hearth melting for any components that rotate on its 

DOD aircraft. According to this prime contractor, currently only two U.S. 

titanium producers can meet this requirement. Consequently, aircraft 

component manufacturers in the United States and qualifying countries 

producing DOD rotating components for this prime contractor must use 

titanium from one of these U.S. producers to meet the prime contractor’s 

requirement.

Lastly, many of the officials from DOD titanium aircraft component 

manufacturers that we spoke with identified consolidation between the 

titanium production and aircraft component manufacturing industries as 

affecting their ability to compete more than competition from 

manufacturers in qualifying countries that may have titanium pricing 

advantages. According to these officials, before consolidation, companies 

generally performed one step in the processes of producing titanium, 

manufacturing titanium aircraft components, or assembling a final product 

for DOD. Thus, component manufacturers had relatively equal access to 

titanium producers. In recent years, two of the three major U.S. titanium 

producers have consolidated with aircraft component manufacturers. 

These consolidations enable one company to perform multiple steps such 

as producing titanium and manufacturing aircraft components. Officials 

from manufacturers that have not consolidated told us that they are 
 

Page 17 GAO-13-539 Titanium Procurement 

concerned about their access to titanium from producers that have 

consolidated with competing aircraft component manufacturers. However, 

they have not yet seen the impact of industry consolidation on their 

companies. Moreover, one official from a non-consolidated titanium 

aircraft component company told us that prime contractors’ sourcing 

decisions would most likely continue to guarantee access to titanium for 

his company.

We provided a draft of this report to DOD, Commerce, Interior, and Labor 

for their review and comment. Interior provided technical comments that 

we incorporated, as appropriate. DOD, Commerce, and Labor did not 

provide comments. To help ensure accuracy, we also provided pertinent 

sections of the draft to companies with which we spoke and received 

clarifying comments which we incorporated as appropriate. 

We are sending copies of this report to interested congressional 

committees, as well as the Secretaries of Defense, Commerce, and the 

Interior, and Acting Secretary of Labor. In addition, the report will be 

available at no charge on GAO’s website at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact 

me at (202) 512-4841 or martinb@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made key contributions to this report 

are listed in appendix II.

Belva M. Martin

Director

Acquisition and Sourcing Management

Agency and ThirdParty Comments 
 

Page 18 GAO-13-539 Titanium Procurement 

List of Committees

The Honorable Carl Levin

Chairman

The Honorable James M. Inhofe

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Dick Durbin

Chairman

The Honorable Thad Cochran

Ranking Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Howard P. “Buck” McKeon

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

The Honorable C.W. “Bill” Young

Chairman

The Honorable Pete Visclosky

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Appendix I: Scope and Methodology

Page 19 GAO-13-539 Titanium Procurement 

To evaluate available data on U.S. and foreign produced titanium prices, 

we reviewed multiple sources of titanium price data including American 

Metal Market and Global Insight. These sources do not distinguish 

titanium prices by the titanium producer or the place of production; 

therefore these data do not allow for a comparison of U.S. and foreign 

produced titanium prices. We determined that U.S. Census Foreign Trade 

Statistics titanium export and import values were the best available proxy 

for U.S. and foreign produced titanium prices. We identified four 

harmonized system commodity codes in the Census data that identify 

titanium products that can be used to produce titanium aircraft 

components: (1) ingots; (2) billets; (3) bars, rods, profiles, and wire; and 

(4) blooms, sheet bars, and slabs. For the purposes of this report, we 

refer to “bars, rods, profiles, and wire” as bar and “blooms, sheet bars, 

and slabs” as sheet. We used the Census values from calendar years 

2003 to 2012 for titanium ingot and from 2005 to 2012 for titanium billet, 

sheet, and bar. The harmonized system codes that identified products as 

bar, billet, and sheet in the Census data changed in 2004. To maintain a 

consistent data set, we limited our analyses to calendar years 2005 

through 2012 for these products. The export values represent the selling 

price of U.S. produced titanium metal. The import values represent the 

price a U.S. manufacturer would pay for titanium from a foreign titanium 

producer, and therefore includes duties paid in addition to the value of the 

titanium product. To verify the appropriateness of these data as proxies, 

we compared the Census values to other available industry price 

information, obtained concurrence from knowledgeable government 

officials that these data were the best available proxy, and determined 

that these data were sufficiently reliable for our purposes.

To identify qualifying country manufacturers’ market share of Department 

of Defense (DOD) aircraft component contracts, we analyzed available 

data from the Federal Procurement Data System-Next Generation 

(FPDS-NG) from fiscal years 2008, the year DOD started collecting data 

on the use of the qualifying country exception, through 2012. For the 

purposes of this report, we identified aircraft related contracts as those 

designated by DOD claimant codes, A1A Airframe and Spares, A1B 

Aircraft Engines and Spares, and A1C Other Aircraft Equipment, some of 

which may not include titanium, because FPDS-NG does not specifically 

identify components by their titanium content. These claimant codes 

include components such as complete aircraft, airframe assemblies, wing 

assemblies, landing gears, aircraft engine and parts, aircraft instruments 

and parts, electrical equipment, and other accessories and parts readily 

identifiable for aircraft use. We excluded contracts for services and items 

that were not identified as manufactured end products. We also excluded 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 20 GAO-13-539 Titanium Procurement 

indefinite delivery contracts, because they do not specify the place of 

origin in the contract. However, we included orders issued off of those 

contracts, because they do specify the place of origin in the orders. 

Countries listed in the Defense Federal Acquisition Regulation 

Supplement (DFARS) § 225.003(10) were considered qualifying countries 

for this analysis. Overall market shares are based on the place of origin 

and place of manufacture fields in FPDS-NG. We compared the FPDSNG data to DOD reports on supplies manufactured outside the United 

States and determined the data were sufficiently reliable for our purposes. 

To determine the market share for component subcontracts awarded by 

DOD prime contractors, we collected information from selected DOD 

program offices, aircraft and engine manufacturers, manufacturers of 

titanium aircraft components—such as engine blades and rotating discs—

for DOD products. We also reviewed relevant studies on the titanium and 

aircraft component industries.

To identify the factors that affect the ability of U.S. aircraft component 

manufacturers to compete for DOD contracts, we reviewed relevant 

industry studies and interviewed government and industry officials. We 

interviewed officials from DOD offices including Acquisition, Technology 

and Logistics; Manufacturing and Industrial Base Policy; Defense 

Logistics Agency; and the Defense Contract Management Agency 

Industrial Analysis Center as well as officials from Department of the 

Interior’s U.S. Geological Survey and the Department of Labor’s Bureau 

of Labor Statistics. We also interviewed a broad range of relevant industry 

officials from the four major U.S. and foreign titanium producers, five of 

the six major DOD aircraft and engine prime contractors, relevant industry 

associations, and nine titanium aircraft component manufacturers. These 

aircraft component manufacturers were identified by prime contractors.

We conducted this performance audit from September 2012 to July 2013 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: GAO Contact and Staff 

Acknowledgments

Page 21 GAO-13-539 Titanium Procurement 

Belva M. Martin, (202) 512-4841 or martinb@gao.gov

In addition to the contact named above, John Neumann, Acting Director; 

James Kim; Beth Reed Fritts; Tana Davis; Keo Vongvanith; Julia Kennon; 

Marie Ahearn; Roxanna Sun; Danielle Greene; Namita Bhatia Sabharwal; 

and Amy Abramowitz made key contributions to the report.

Appendix II: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(121092)
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