Government Procurement: United States Reported Opening More Opportunities to Foreign Firms Than Other Countries, but Better Data Are Needed
Published: 2017-02-09T00:00:00

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:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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.)
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.
section_title: What GAO Recommends
paragraphs: 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.

section_title: Letter
paragraphs: Globally, government procurement—the purchase of goods or services  on behalf of a government—constitutes a significant potential market for  international trade, with an estimated annual size of $4.4 trillion.  However, some procurement markets may be closed to foreign  competition because of national laws, regulations, and executive policy  directives, according to officials from the Office of the United States Trade  Representative (USTR). Over the past four decades, the United States  has played a key role in developing trade agreements—the World Trade  Organization’s (WTO) Agreement on Government Procurement (GPA)  as well as numerous U.S. free trade agreements (FTA)—that open  government procurement to international competition, ensure that the  procurement process is conducted transparently and without bias, and  provide foreign suppliers with the same rights as domestic ones. In  addition, the GPA and the North American Free Trade Agreement  (NAFTA) require that parties to these agreements submit annual  statistical notifications of government procurements covered by these  provisions (covered government procurement). These data are important  for providing transparency about the extent to which GPA and NAFTA  parties have opened government procurement covered by the  agreements to foreign suppliers and for demonstrating the agreements’  financial benefits.
In response to your request for information on U.S. participation in  international procurement agreements, we reviewed statistical reporting  by the United States and trading partners in selected international  procurement agreements. Specifically, in this report, we  1.  broadly compare covered government procurement reported by the  United States and other parties to the GPA and U.S. FTAs;  2.  assess the usefulness of GPA and U.S. FTA parties’ statistical  reporting for more detailed comparisons of—and transparency  regarding—their covered government procurement; and  3.  examine the extent to which U.S. agencies’ approach to reporting  statistical data on covered government procurement to the WTO  ensures timeliness, accuracy, and comparability.
To address our first objective and aspects of our second and third  objectives, we estimated total government expenditures and total  government procurement covered by the GPA and U.S. FTAs for the  United States and the other 57 countries that are parties to these  agreements. We used macroeconomic data for 2008 through 2012 from  the United Nations’ (UN) National Accounts Official Country Data system  and the International Monetary Fund’s Financial Statistics and World  Economic Outlook to make these estimates. In addition, we analyzed  data on covered government procurement reported to the WTO for the  same period by the United States and other selected parties to the  GPA—the European Union (EU), Japan, Canada, South Korea, and  Norway, which represent, after the United States, the next five largest  GPA procurement markets. Together these parties represent over 90  percent of GPA countries’ total government procurement.
To analyze GPA-covered government procurement by level of  government and by other covered entities, we used the latest available  data for the United States, which were reported to the WTO in September  2016 for fiscal year 2010, and compared them with other selected parties’  statistical submissions for 2010. (We first analyzed all available data for  2008 through 2013 and determined that data for 2010 provided a  reasonable basis for noting general patterns and making broad  comparisons between the latest U.S. data reported and data reported by  other parties.) We used information from the Federal Procurement Data  System–Next Generation (FPDS-NG) as part of our assessment of U.S.  federal covered government procurement. Because over 70 percent of  procurement reported by the five selected GPA parties other than the  United States was from the EU, we focused our analysis of other parties’  data on the EU data after determining that they were sufficiently reliable  for comparing U.S. and EU covered government procurement in orders of  magnitude. Although we conducted consistency checks across time  periods, we were not able to otherwise assess the comprehensiveness  and accuracy of the data that other parties reported to the WTO under the  GPA; alternative data sources were not available for these parties. In  addressing our second and third objectives, we considered the effects of  a number of data limitations that we identified on precise measurement  and analysis of differences in the parties’ covered government  procurement under trade agreements as well as on analysis of covered  government procurement over time. We determined that although these  limitations affected our ability to perform certain detailed analyses, such  as disaggregation of covered government procurement by type and trend  analysis over a period of time, they were not an impediment to using the  data for broad comparisons of orders of magnitude of covered  government procurement.
To address all three objectives, we interviewed U.S. agency officials in  Washington, D.C., from the Office of Management and Budget (OMB),  the General Services Administration (GSA), USTR, and the Department  of Commerce (Commerce). In addition, we discussed the availability of  U.S. states’ data with state officials, reviewed public documents, and  contacted state audit organizations to assure ourselves there were no  significant deficiencies that would affect the data we used. Moreover, we  interviewed WTO and EU, Japanese, Canadian, and other officials in  Geneva, Switzerland, and reviewed related documents issued by their  offices as well as relevant studies.
We conducted this performance audit from August 2015 to February 2017  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. (See app. I for more  information on our scope and methodology.)
subsections: section_title: Background
paragraphs: U.S. international trade agreements that cover U.S. government  procurement include the GPA and bilateral and regional FTAs. Two  versions of the GPA currently coexist: the prior GPA, which was signed  on April 15, 1994 (in this report, “the 1994 GPA”), and a revision of the  agreement, which entered into force on April 6, 2014 (in this report, “the  2014 GPA”). According to the WTO, the 2014 GPA reflects refinements  to the 1994 GPA, including updates to the agreement’s text and  expansion of market access commitments. The 2014 GPA has 19 parties  (including the EU) covering 47 WTO member countries (including the 28  EU member countries). Another 29 WTO members are observers; of  these, 9 are in the process of acceding to the agreement. In addition to  the GPA, the United States has 14 FTAs with 20 countries, 4 of which  (Canada, Israel, Singapore, and South Korea) are also parties to the  GPA. Almost all of the FTAs include provisions covering government  procurement.
subsections: section_title: GPA Framework for Government Procurement
paragraphs: The GPA aims to mutually open government procurement markets for  goods, services, and construction services among its parties, according to  the WTO. Under the GPA, foreign suppliers are able to compete  alongside U.S. suppliers for U.S. government contracts covered by the  agreement, and U.S. suppliers are able to compete for covered foreign  government contracts in accordance with the framework established by  the GPA. Under this framework, parties to the GPA are obligated to follow  the processes for carrying out government procurement listed below:
Parties to the agreement must treat other parties’ goods, services,  and suppliers no less favorably than those of domestic sources or any  other party and may not discriminate against locally based suppliers  on the basis of foreign affiliation or ownership.
The agreement prohibits the use of offsets in covered government  procurement—that is, any condition or undertaking that encourages  local development by means of local content or investment  requirements, countertrade, or similar requirement.
The agreement generally requires that the covered government  procurement be conducted in a transparent, fair, and  nondiscriminatory manner.
The agreement specifies three methods of procurement that may be  specified in a contract, provided that the procuring entity meets the  conditions set out in the agreement:  1.  open tendering, in which all interested suppliers may submit a  2.  selective tendering, in which only qualified suppliers are invited to  submit a tender; and  3.  limited tendering, in which the procuring entity may contact a  particular supplier (or more than one supplier) of choice.
According to USTR, to implement U.S. obligations under the international  agreements that cover government procurement, the United States  waives preferential purchasing requirements—such as the requirement to  purchase U.S.-made products—that would otherwise be inconsistent with   the agreements. For example, USTR has waived the Buy American Act  and other preferential provisions for eligible products in acquisitions  covered by various trade agreements.
section_title: Covered Government Procurement
paragraphs: Under the agreements we reviewed, each party’s covered government  procurement is defined in part through coverage schedules in annexes to  the agreement. These annexes identify the procuring entities covered by  the agreements at the central and subcentral government levels as well  as, in some agreements, procuring entities at an additional level (in this  report, “other government entities”). These annexes further identify the  goods and services and construction services whose procurement by the  specified entities is covered by the agreement.
In addition, each agreement delineates threshold values for coverage of  government procurement. Below these thresholds, procurement activities  are not covered by the agreement, and foreign access in accordance with  the procedure in the agreement is not guaranteed. In the GPA, these  threshold values are expressed as special drawing rights (SDR) in  coverage schedules delineating covered entities. The United States  converts the threshold values set in the GPA to official dollar amounts,  which USTR reviews, and may revise, every 2 years and publishes in the  Federal Register. For calendar years 2016 and 2017, the United States  converted the GPA threshold values to $191,000 for procurement of  goods and services and to $7.4 million for procurement of construction  services for covered central government entities. These amounts help  define the opportunities available to U.S. and foreign firms seeking to  compete for government procurement contracts in the countries that are  parties to the agreements.
Moreover, parties to these agreements identify, by general category or  entity, exclusions or exceptions to the coverage schedules. According to  USTR officials, all international parties to the agreements we reviewed  have certain procurements not open to foreign suppliers, including those  not open for social, economic, or national security reasons. For example,  the United States specifies exclusions that include set-asides for small  businesses and for women-owned and veteran-owned businesses.
section_title: U.S. Agencies Involved in Oversight of U.S. Government Procurement Commitments
paragraphs: According to USTR officials, OMB, USTR, Commerce, and GSA  participate in overseeing the U.S. commitments related to government  procurement under the trade agreements in a number of ways, including  the following:
OMB’s Office of Federal Procurement Policy sets the overall direction  for federal procurement policies and regulations, which are driven by  federal laws.
USTR negotiates the agreements and submits data to the WTO.
Commerce’s International Trade Administration monitors compliance  with the agreements, supports USTR’s activities, and provides  services to promote U.S. exports.
GSA provides technical support to USTR in preparing the data for  statistical notifications required by the GPA.
section_title: The United States Has Reported a Larger Amount of Covered Government Procurement Than Other GPA and U.S. FTA Parties
paragraphs: While recent and complete data on covered government procurement are  not available, we estimated, using data available for 2008 through 2012,  that GPA and U.S. FTA parties’ annual average government procurement  covered by these agreements totaled about $1.6 trillion—approximately  one-third of their average total annual government procurement in those  years. Overall, the amount of GPA-covered government procurement that  the United States reported for 2010—the most recent year for which U.S.  data are available—was more than double the combined amount reported  by the five GPA parties with the next largest procurement markets (in this  report, “the next five largest GPA parties”). At the central government  (federal) level, U.S. covered government procurement reported for 2010  was also higher than the combined total reported by the next five largest  GPA parties.
subsections: section_title: About a Third of All Estimated Government Procurement by GPA and U.S. FTA Parties Is Covered by the Agreements
paragraphs: Using available macroeconomic data, we estimated that average annual  covered government procurement reported by the United States and the  57 other countries that are parties to the GPA and U.S. FTAs totaled  about $1.6 trillion per year from 2008 through 2012—about one-third of  the average annual $4.4 trillion total government procurement that we  estimated for these countries for this period. This amount estimated for  covered government procurement  comprises covered government procurement of goods and services  by specified government entities at the central and subcentral levels,  above certain predetermined thresholds, and not excluded by the  agreements;  is largely a measure of the opportunities available to domestic and  foreign firms seeking to openly compete for government procurement  contracts in the countries that are parties to the agreements; and  includes procurements conducted through limited tendering  procedures.
In a larger context, covered government procurement under the GPA and  U.S. FTAs represents less than one-tenth of the 58 countries’ estimated  $18.7 trillion in average annual government expenditures. Figure 1 shows  our estimates of GPA and U.S. FTA parties’ average annual government  procurement covered by the agreements, relative to their estimated  government expenditures and total government procurement, in 2008  through 2012.
section_title: Available 2010 Data Show Covered Procurement Reported by the United States Was Twice the Combined Amount Reported by the Next Five Largest GPA Parties
paragraphs: Data available from the WTO for 2010 show that the United States  reported more than twice as much GPA-covered government  procurement as the next five largest GPA parties combined, although  total U.S. government procurement is less than the combined total for the  other five parties. In its statistical notification for 2010—the most recent  U.S. submission to the WTO to meet the 1994 GPA statistical  requirements, providing the most complete data for all selected  countries—the United States reported covered government procurement  totaling about $837 billion. In contrast, the combined covered government  procurement reported by the next five largest GPA parties—the EU,  Japan, South Korea, Norway, and Canada—for 2010 was about $381  billion. Using macroeconomic statistics, we estimated that total  government procurement by the United States and the next five largest  GPA parties in 2010 was about $1.7 trillion versus $2.4 trillion,  respectively. (See fig. 2.)
According to the available data, the EU’s reported covered government  procurement ranked second to the United States’ in 2010, at about $331  billion. For the same year, Japan reported about $25 billion in covered  government procurement; South Korea reported about $18 billion;  Norway reported about $5 billion; and Canada reported about $2 billion,  although the data available for Canada represent only central government  procurement. Table 1 shows these GPA parties’ reported covered  government procurement by central governments, subcentral  governments, and utilities and other government entities as well as our  estimates of the value of each party’s total government procurement. The  U.S. and EU total government procurement markets are comparable in  size, with estimated annual procurement of about $1.7 trillion and $1.6  trillion, respectively, in 2010; however, the United States reported more  than twice as much covered government procurement as the EU—$837  billion versus $331 billion, respectively. (Elsewhere in this report we  discuss limitations in the data that affected our ability to perform certain  analyses and precluded more precise comparisons.)
We found that the United States and the other five largest GPA parties  reported for 2010 that an average of about 27 percent of all covered  government procurement was at the central government level and 67  percent was at the subcentral level; however, there is large variation  among the parties’ reported procurement. For the United States, the EU,  and Norway, subcentral government procurement constitutes over half of  the covered government procurement reported by each party. For South  Korea, procurement by utilities and other government entities constitutes  close to 75 percent of reported covered government procurement. For  Japan, central government procurement constitutes over half of reported  covered government procurement. Overall, covered government  procurement by government entities such as utilities represents about 6  percent of the combined covered government procurement reported by  the United States and the next five largest GPA parties; however, some  GPA parties, such as Canada and Japan, do not report procurement by  these entities.
section_title: The United States Has Reported Opening More Central Government Procurement to Foreign Suppliers Than Have Other GPA Parties
paragraphs: We calculated the percentages of covered central government  procurement relative to total central government procurement for GPA  parties, based on data reported to the WTO. Total central (federal)  government procurement includes above-threshold and below-threshold  procurement by covered entities reported to the WTO as well as  procurement excluded from GPA coverage but reported to the WTO.  Our analysis of detailed data on central government procurement, which  were available only for the United States, Japan, and South Korea, shows  that the United States reported opening its central (i.e., federal)  government procurement market to foreign competitors to a greater  extent than Japan and South Korea. The $198 billion in U.S. covered  federal procurement reported for 2010 (see table 1) represents about 80  percent of the $247 billion in total reported U.S. federal procurement that  year. In contrast, Japan’s and South Korea’s reported covered central  government procurement for 2010 constituted about 30 percent and 13  percent, respectively, of their reported total central government  procurement. (See fig. 3.)
These amounts of covered central government procurement are the value  of contracts largely open to all domestic and foreign competitors.  However, covered government procurement also includes procurement  made under limited tendering provisions. According to USTR officials,  limited tendering is considered to be covered procurement under the  GPA. GPA parties are to report the use of these provisions. (See app. II  for more information about limited tendering.)
The EU reported covered central government procurement of about $111  billion for 2010. However, we were unable to estimate the percentage of  the EU’s total central government procurement that this amount  represented because, unlike the United States, Japan, and South Korea,  the EU does not separately report below-threshold procurement by  covered entities. For 2010, the EU reported a macroeconomic estimate of  about $676 billion in total central government procurement that does not  distinguish procurement not covered by the GPA, including below- threshold amounts. According to EU officials, these data are not available  because the EU does not require member states to report data on below- threshold procurement in the EU procurement database. According to  the EU notification to the WTO, below-threshold procurement can be  estimated by deducting above-threshold procurement from the reported  total central government procurement; using this calculation, we  estimated that the EU’s covered central government procurement  represented 16 percent of its total central government procurement in  2010. We did not estimate this percentage for Canada and Norway,  because Canada does not report below-threshold central government  procurement or procurement excluded from the agreement and Norway  does not disaggregate limited tendering or exclusions by level of  government.
section_title: Several Factors Could Explain Large Differences in GPA Parties’ Covered Procurement as Share of Total Procurement
paragraphs: There are several possible explanations for the large differences between  the United States and the next five largest GPA parties’ covered  government procurement relative to their total government procurement.  For example, because parties negotiate coverage, the percentage value  depends on (1) the value of actual individual procurements vis-à-vis the  set threshold levels, (2) the list of covered entities and covered types of  government procurement in parties’ GPA commitments, and (3)  exclusions from coverage. Many EU member states, as well as Japan and South Korea, have actual government expenditures smaller than the  United States’ and are therefore likely to have more smaller-value  individual procurement contracts that fall below the GPA threshold levels.  There is also variance in parties’ commitments in terms of covered  entities. For example, Canada, the EU, Japan, Norway, and South Korea  use a positive list approach for designating covered services—that is,  listing only the services covered by the GPA—while the United States  uses a negative list approach—that is, listing only services by a covered  entity meeting the procurement threshold that are not covered by the  agreement. According to Commerce officials, a negative list approach  provides more liberal coverage than a positive list approach because it is  not an exhaustive list and allows for coverage of new services. Moreover,  our analysis of EU-reported data found that over 80 percent of EU total  government procurement is not covered by the EU commitments.  Procurements can fall outside EU commitments if they are below  threshold or for other reasons, such as when they are specifically  excluded. For example, EU procurement for hotel and accommodation  services, water, defense equipment, and fuels for the production of  energy are excluded from the agreement.
section_title: Deficiencies in Statistical Reporting of Government Procurement Limit Detailed Comparisons and Transparency
paragraphs: Government procurement statistics reported by the GPA and U.S. FTA  parties that we reviewed have deficiencies and inconsistencies that limit  detailed comparisons of, and transparency regarding, the parties’ covered  procurement. These statistics provide transparency—one of the GPA’s  main goals, according to the WTO—about parties’ implementation of the  GPA as well as the agreement’s benefits. However, our review of data  that the United States and next five largest GPA parties submitted to the  WTO for 2008 through 2013 found that a number of parties did not submit  the reports annually, the submitted reports did not include all required  data, and each party’s reports included inconsistencies that limit the  data’s comparability. Further, a lack of common understanding on  definitions of key terms has led to inconsistent reporting practices among  the GPA parties, and a GPA statistical working group has made little  progress in addressing such challenges. Of the U.S. FTAs we reviewed,  only NAFTA requires its parties to report annual statistics on government  procurement; however, the last data exchange between the three NAFTA  parties took place in 2005. As a result, information about the extent to  which U.S. FTA partner governments open procurement to U.S. suppliers  is not available. The UN’s Principles Governing International Statistical  Activities states that high-quality international statistics are a fundamental  element of global information systems and that sources and methods  should be chosen to ensure timeliness and other aspects of quality.  Moreover, related good practices encourage countries to continually  improve the quality and transparency of their statistics and systematically  establish common concepts, classifications, standards, and methods.
subsections: section_title: Statistical Reporting Requirements in 1994 and 2014 GPA Differ in Some Respects
paragraphs: Under the 1994 GPA, which entered into force in 1996, countries are  required to provide detailed statistics on their procurement, though the  requirements will change with submissions of 2014 procurement data  under the 2014 GPA. Under the 1994 GPA, each party is to collect and  provide to the committee, on an annual basis, the following statistics for  central government entities’ procurement:  the estimated value of contracts awarded, both above and below the  threshold values, on a global basis and broken down by entity;  the number and total value of contracts awarded above the threshold  values, broken down by entity and by category of products and  services according to uniform classification systems;  the number and total value of contracts awarded through limited  tendering, broken down by entity and by categories of products and  services; and  the number and total value of contracts awarded under exceptions to  the GPA, broken down by entities.
The statistical reporting requirements on procurement by subcentral  government and by utilities and other government entities are generally  similar to the requirements for procurement by central government  entities. However, under the 1994 GPA, parties are not required to report  the value of contracts awarded by subcentral government and other  entities below the threshold values or the number of contracts awarded.  In addition, under the 1994 GPA, each party is required to provide  statistics on the country of origin of products and services purchased by  its entities to the extent that such information is available.
The 2014 GPA’s statistical reporting requirements differ in some respects  from the 1994 GPA’s. For example:
The 2014 GPA requires countries to provide their annual statistical  notifications within 2 years of the end of the reporting period, whereas  the 1994 GPA does not specify a reporting deadline.
While the 1994 GPA requires parties to report the estimated value of  below-threshold contracts awarded for central government  procurement and procurement excluded from the agreement, the  2014 GPA does not require these data. As a result, policymakers will  not have available data to calculate GPA parties’ total central  government procurement in 2014 and subsequent years, unless  parties voluntarily report such data. Further, it will not be possible to  determine the extent of covered government procurement as a  percentage of total central government procurement.
Whereas the 1994 GPA requires data on the country of origin of  purchased goods and services, the 2014 GPA does not require such  data. As a result, policymakers will not be able to use government  procurement data that GPA parties submit to the WTO for 2014 and  subsequent years to assess the degree to which procuring entities  award contracts to foreign sources.
The 2014 GPA allows a party, instead of submitting data in its  notification to the WTO, to notify the WTO of the website address  where the party publishes its statistics, with any instructions  necessary to access and use such statistics, as long as the statistics  are published in a manner that is consistent with the GPA statistical  reporting requirements. As a result, the format of data that parties  report to meet their GPA annual statistical reporting requirements may  vary from the format of data they reported for previous years.
section_title: Deficiencies in GPA Parties’ Reporting Limit Transparency and Comparisons of Parties’ Procurement
paragraphs: Although the data the United States and next five largest GPA parties  reported for 2010 enable broad comparisons, deficiencies in their  reporting prevent more detailed comparisons of their covered  procurement. A lack of timely, complete, and consistent statistical  reporting by the parties limits transparency, one of the GPA’s main goals  stated by the WTO. As a result, trade officials are limited in their ability to  identify anomalies in, and monitor, other parties’ compliance with their  GPA commitments. These reporting deficiencies also reduce  policymakers’ ability to obtain an accurate understanding of the relative  benefits of the GPA—that is, the extent to which they and other parties  have opened procurement to one another’s suppliers.
We identified the following deficiencies in the GPA statistical notifications  we reviewed.
Incomplete reporting. Parties have not provided data for all entities  covered by the agreement, as required. For example, although  Canada submitted annual notifications with central government  procurement data for 2008 through 2013, the notifications did not  include data on procurement by subcentral governments or by other  government entities. According to Canadian officials we spoke with,  only 10 to 15 percent of Canada’s government procurement occurs at  the central government level. These officials said that Canada is  working to devise a methodology to report on subcentral government  procurement. Similarly, Japan’s annual notifications have not included  procurement by entities such as utilities and state-owned enterprises  that are covered by the GPA. Moreover, Norway reports total limited  tendering for all levels of government and other covered entities rather  than disaggregating these data by level of government. In addition,  while the GPA requires parties to provide data on the value and  number of covered contracts, EU member countries report only the  contracts’ value.
Lack of timely reporting. A number of parties have not provided their  annual statistical notifications for 2008 through 2013 to the WTO in a  timely manner. For example, the United States submitted its most  recent notification, for fiscal year 2010, in September 2016 and has  not submitted notifications for fiscal years 2011 through 2013. South  Korea has not submitted notifications for any year except 2010, and  Japan has not submitted a notification for 2012 although it did so for  other years through 2013.
Inconsistencies in reporting. Our review of the statistical  notifications submitted by the United States and next five largest GPA  parties found a number of inconsistencies. For example, Canada  switched its reporting from fiscal to calendar year in 2010, making it  more difficult to compare Canada’s data over time. Japan  denominates central government procurement in SDR and subcentral  government procurement in yen, but its statistical notifications do not  provide a conversion rate. Norway reports three estimates of covered  government procurement, which are disaggregated by different  characteristics, but none of the estimated totals match the others. The  United States provided data on federal procurement for 2008, 2009,  and 2010, but the U.S. data on overall and covered federal  procurement in 2008 and 2009 are inconsistent because of a change  in the reporting methodology that began with the 2009 notification.
Figure 4 shows the deficiencies and other issues that we identified in the  United States and next five largest GPA parties’ statistical reporting.
section_title: Common Understanding of Definitions of Key Terms Is Lacking among GPA Parties
paragraphs: We found several areas where there was a lack of common  understanding about the definition of key terms for reporting procurement  data required by the GPA. This led to inconsistency in the reporting  practices of the GPA parties we reviewed, which affects the usefulness of  the reported data for detailed comparisons of the parties’ covered  government procurement, diminishing transparency.
Government procurement. According to WTO officials, there is no  official definition of government procurement; as a result, GPA parties  lack a clear, common understanding or practice for computing its  value. Our review of statistical data submitted by the United States  and the next five largest GPA parties for 2010 found that they  generally measured procurement by the total value of contracts  awarded or by actual expenditures on goods and services in a given  time frame. However, we found that the reported contract values  represented different measures of procurement at different points in  time, which resulted in inconsistent reporting. For example, Canada  and Japan report data on government procurement based on the full  value of awarded contracts, the EU reports data on government  procurement based on total contract values at the time of award,  Norway reports the agreed full value of contracts when they are  signed, and the United States reports the total dollars obligated  against GPA-covered contracts in the year they are signed and any  subsequent obligations on those contracts during the following 5  years. In addition, while the GPA outlines the scope of covered  government procurement, our analysis found that GPA parties  interpreted standard statistical terms differently, leading to  inconsistencies in their reporting. For example, the degree to which  the GPA parties’ notifications include data on procurement by state- owned enterprises is unclear. As a result, the parties’ notifications  may provide different measures of covered government procurement.
Below-threshold central government procurement. While the 1994  GPA requires that parties report the estimated value of below- threshold contracts awarded at the central government level, GPA  parties interpreted this requirement differently, leading to  inconsistencies in their reporting. We found that GPA parties  reported different types of data for below-threshold central  government procurement—some parties reported data for all central  government entities, while other parties reported data only for entities  covered by the GPA. For example, the EU does not report the value  of contracts below the GPA thresholds. Instead, according to the EU  notification, these values can be estimated by deducting the reported  above-threshold procurement from the estimated total government  procurement of goods and services, which also includes procurement  below GPA thresholds and other noncovered government  procurement. In contrast, the United States reports below-threshold  central government procurement only for GPA-covered entities. As a  result, estimates of GPA parties’ below-threshold central government  procurement are not comparable.
Uniform classification system. There is no single classification  system for reporting procurement by economic sector, which has led  to the use of different systems to categorize reported procurement by  GPA parties. For example, the United States uses the U.S. product  and service codes to classify federal government contracts in product  groups, categorizing reported procurement as either goods and  services or construction services. The EU uses its common  procurement vocabulary to classify EU contracts, categorizing  reported procurement as supplies, services, works, or  “miscellaneous.” Canada codes reported procurement by its goods  and services identification numbers and groups it into goods, services,  and construction, but plans to replace the current classification with  the UN standard products and services codes in 2017. Without  consistent categorization, it is difficult to compare parties’ covered  government procurement by product group.
Country of origin. According to the 1994 GPA, parties are to apply  the same rules of origin to products or services supplied for covered  government procurements as they apply in the normal course of  trade. In addition, parties are to provide statistics on the country of  origin for products and services purchased by its entities, to the extent  that such information is available. Japan reports suppliers’  nationality, using it as the basis for determining country of origin for its imported goods and services, but a supplier’s nationality may differ  from the origin of the product or service. The EU, Canada, South  Korea, and the United States do not report this information, although  the United States collects it in its Trade Agreements Report (TAR),  which USTR uses to generate the WTO notifications at the federal  level. Until 2008, in its TAR reporting, the United States defined  country of origin for goods as the place where the product was  manufactured, which, according to OMB officials, aligns with data on  place of manufacture, as defined in the FAR, for purposes of U.S.  government contracting. However, since 2009, U.S. statistical data— the source of U.S. procurement information reported to the WTO— have defined country of origin for goods as the place of performance  of the contract and have defined country of origin for services as the  country of the supplier (vendor). Without consistent reporting of  suppliers’ country of origin, it is difficult to estimate the extent to which  GPA parties award covered government procurement contracts to  foreign suppliers.
section_title: GPA Statistical Work Group Has Made Little Progress in Addressing Factors That Affect Reporting of Required Procurement Data
paragraphs: In March 2012, GPA parties convened a working group—the Committee  on Government Procurement’s Work Programme on the Collection and  Reporting of Statistical Data—to review the collection and reporting of  procurement statistics. According to WTO officials, GPA parties  recognized that they faced challenges in collecting data related to  government procurement to meet the GPA reporting requirements and  that different methodologies were used to collect these data, including  data for central government entities and subcentral government entities.  WTO officials noted that the work group was created because GPA  parties could not agree on how to address statistical reporting challenges  in the 2014 GPA and is part of parties’ GPA obligations.
In forming the working group, the United States and other GPA parties  agreed to submit relevant information and review the submissions in  order to make recommendations on whether the parties should adopt a  common method for collecting statistics, standardize the classifications of  statistical data, facilitate the collection of country of origin of goods and  services data, and address other technical issues in government  procurement data reporting raised by any party. According to a WTO  document, the working group was also to consider the “potential  harmonization” of parties’ statistical data to provide transparency  regarding procurement covered under the GPA and consider how these  data may be used for further analyses to facilitate greater understanding  of the agreement’s economic importance. The WTO document states  that statistical data illustrating the extent to which the parties procure  goods and services covered by the agreement from other GPA parties  could be an important tool in encouraging other WTO members to accede  to the agreement.
As of December 2016, nine parties had provided submissions to the  working group. According to USTR, the parties’ submissions show  variance in the methods used to measure government procurement  above and below agreement thresholds as well as variance in data  sources, classifications, and availability of country-of-origin statistics.  According to WTO officials, the working group is still taking stock of this  information. As a result, it has made limited progress in addressing its  goals.
section_title: Lack of Procurement Data from U.S. FTA Parties Reduces Transparency
paragraphs: Although 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  are 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. NAFTA requires the reporting of  annual data on the estimated value of government procurement contracts  awarded, both above and below threshold values. According to a USTR  official, NAFTA parties are not required to publish any statistical data but  are required to exchange such data among themselves. According to  USTR officials, NAFTA data have not been exchanged since 2005  because NAFTA partners have been focused on negotiations for the  Trans-Pacific Partnership. U.S. statistical data related to NAFTA can be  accessed electronically via the FPDS-NG through the TAR, but the most  recent complete report is for fiscal year 2010. Moreover, Commerce  officials noted that all three NAFTA members have had difficulty in  providing accurate statistics.
Other U.S. FTAs that we reviewed do not require reporting of such data,  and information about the extent to which FTA partner governments open  procurement to U.S. suppliers is not readily available. Although other U.S.  FTAs contain provisions concerning government procurement, NAFTA is  the only U.S. FTA with a statistical reporting requirement among the FTAs  we reviewed. According to Commerce officials, procurement statistics can  be used to convince prospective members to join a bilateral or multilateral  procurement agreement by empirically demonstrating the financial  benefits other member states have achieved. While some FTA partner  countries—that is, Canada, Israel, South Korea, and Singapore—are  parties to the GPA, most other U.S. FTA partners are not parties to the  GPA or NAFTA and therefore are not required to provide any statistics on  their government procurement, according to USTR officials. As a result,  data that could be used to make detailed comparisons of, and provide  transparency regarding, FTA parties’ covered government procurement  and to demonstrate the agreements’ economic benefits are not available.
section_title: U.S. Agencies’ Approach to Reporting GPA- Covered Procurement Does Not Ensure Timeliness, Accuracy, and Comparability
paragraphs: U.S. agencies’ approach to statistical reporting of covered government  procurement to the WTO does not ensure the timeliness, accuracy, or  comparability of the reported data. The methodology that agencies used  to report covered federal (central government) procurement until 2009  produced timely data but overstated the value of procurement  opportunities. An interagency revision of the methodology improved these  data’s accuracy, but it has significant disadvantages. For example, the  revised methodology introduces a 6-year delay in reporting to the WTO,  whereas the 2014 GPA requires reporting within 2 years of the end of the  reporting period. Also, the interagency decision to revise the methodology  was based on a misinterpretation of reported federal procurement data,  and the agencies involved in the decision were unable to provide  documentation supporting the decision. Further, U.S. statistical  notifications submitted to the WTO, as well as the TAR on which the  reports are based, contain inconsistencies and errors. In addition, USTR  lacks a methodology for reporting states’ and other government entities’  GPA-covered procurement, as the GPA requires, and instead reports  estimated total government procurement, which exceeds covered  procurement. Finally, no U.S. agency has taken responsibility for ensuring  the accuracy, timeliness, or comparability of the procurement data  submitted to the WTO. Federal standards for internal control call for U.S.  agencies to issue relevant, accurate, and reliable information, recording  and communicating it within a time frame that enables entities to carry out  their responsibilities. Without timely, accurate, and comparable data on  GPA-covered U.S. procurement, U.S. agencies and Congress, as well as  other GPA parties, lack information necessary for assessing the  economic benefits of participating in the agreement.
subsections: section_title: Revised U.S. Methodology for Reporting Federal Procurement Increases Accuracy but Has Significant Disadvantages
paragraphs: The U.S. methodology used from 1996 through 2008 to report federal  procurement to the WTO produced timely data but inflated procurement  values. In 2009, U.S. agencies began a revision of this methodology,  resulting in a more accurate measure of federal procurement based on  actual cumulative obligations rather than award values. Applying the  revised methodology caused the reported value of covered U.S. federal  contracts to drop by more than 75 percent from fiscal year 2008 to fiscal  year 2009. However, the revised methodology introduces a 6-year delay  in reporting to the WTO, whereas the 2014 GPA requires reporting within  2 years of the end of the reporting period. Also, the revised methodology  provides data on the value of U.S. federal procurement obligations that  are only broadly comparable to the value of central government  procurement that some other GPA parties report.
subsections: section_title: Original “Award Value” Methodology Produced Timely Statistics but Inflated Federal Procurement Values
paragraphs: Although the 1996-2008 methodology for reporting U.S. federal  procurement provided timely annual data on award values, it overstated  procurement opportunities. This methodology, which calculated the total  potential value of GPA-covered federal government contracts at the time  of award, provided a simple and direct measure of covered federal  procurement, since the method used to determine the number of covered  contracts and determine the contracts comprising the aggregate contract  values is based on information reported in in FPDS-NG. The methodology  also provided timely annual data based on the bidding opportunities for  prospective domestic and foreign suppliers in that year. (After a contract  is awarded, contract changes may occur, and additional funds may be  obligated to the contract, which would change the contract value.) In  addition, the methodology provided data that were consistent with  information posted on the official U.S. government website of federal  procurement opportunities for GPA purposes.
However, the original methodology overstated the value of U.S. central  government procurement, primarily because of the way data is reported in  FPDS-NG and by aggregating multiple-year, multiple-award federal  contracts, which resulted in the counting of some award values more than  once. Multiple-award contracts result from a single solicitation and are  awarded to multiple suppliers. The government then selects among the  multiple suppliers to issue individual orders for supplies, services, or both  as needed. Federal contracts, including, multiple-award contracts, can  include options that the government may, or may not, exercise; contracts  with options are often referred to as multiple-year contracts and,  according to OMB staff, generally include a base year with four 1-year  option periods. In FPDS-NG, data on each supplier’s multiple-year,  multiple-award contract reflects the base and all option value, since each  supplier could receive up to the full value of the contract if all options are  exercised.
For example, a contract for which FPDS-NG shows an award value of  $10 billion, comprising a base value of $5 billion and a $5 billion option,  might result in only $5 billion in obligations if the option is not exercised.  In addition, the contract’s $10 billion award value might be entered in  FPDS-NG for each supplier that is awarded a multiple-award contract,  since each supplier could receive up to the full value of the contract, and  could be entered for each year of the contract’s duration. The original  methodology reported a multiple-year contract’s potential award value— that is, the contract value including all possible options that could be  exercised against the contract—and aggregated across multiple-award  contracts, even though the options may not be exercised on each  supplier’s contract. Commerce officials explained that contract options  allow for additional purchases under the same contract at the discretion of  the U.S. government entity. For example, Commerce officials told us that  because multiple-year, multiple-award contracts are intended to be used  as needed, contracting officials may set a high total award value for a  group of contracts to allow the contracts to be used repeatedly and to  ensure that there are sufficient funds to pay any awardee for each  contract option.
According to Commerce officials, they sought to improve the accuracy of  WTO notifications based on the award-value methodology. These officials  said they recognized that the data anomalies in FPDS-NG related to  multiple-year, multiple-award federal contracts materially skewed the  overall statistics and, as a result, cumulatively misrepresented the total  value of U.S. federal procurement for 2008. Because FPDS-NG records  hundreds of thousands of contracts across many agencies, Commerce  did not identify all multiple-year, multiple-award federal contracts. Instead,  Commerce identified three Department of Defense entities that frequently  used this type of contract and two blanket purchasing agreements  reported by the Department of Interior Bureau of Land Management and  deleted these contracts from the FPDS-NG TAR data they used to draft  U.S. notification. However, this approach resulted in inconsistent  treatment of multiple-award contracts with other agencies and also  needlessly excluded all other contracts.
Using the TAR, we searched FPDS-NG for, and identified, all GPA- covered multiple-year, multiple-award federal contracts awarded in fiscal  year 2009. Our analysis shows that these contracts—which were the  main cause of the original methodology’s inflated estimates of covered  federal procurement—accounted for 12 percent of all covered federal  contracts awarded in fiscal year 2009 (3,637 of 30,243 contracts). We  found that these contracts represented 95 percent of the total dollar value  of all awards ($18.666 trillion of $19.625 trillion), based on the old  methodology and the way these contracts are reported in the FPDS-NG  system.
section_title: Revised “Cumulative Obligations” Methodology Produces More Accurate Data but Delays Reporting
paragraphs: In 2009, USTR officials informed EU officials that OMB, in consultation  with USTR and Commerce, was planning to change the U.S.  methodology for preparing U.S. statistical reports as part of an OMB effort  to improve the quality of federal procurement data, and that U.S. statistics  reported to the GPA in the future would measure federal procurement  based on actual cumulative obligations against awarded contracts over a  5-year period, which is consistent with what OMB considers the standard  life of such contracts. In October 2015, USTR notified the WTO that the  United States had revised its methodology for preparing GPA statistical  reports on federal procurement. To more precisely reflect the value of the  federal procurement market at the time of each report, the revised  methodology would reflect total amounts obligated under GPA-covered  contracts over a 6-year period–that is, the year the contract was awarded  plus 5 years after the award. As a result, the United States did not report  procurement data to the WTO for 5 years, despite the 1994 GPA  requirement to report annual statistics. In December 2015, the United  States submitted its statistical notification of U.S. federal procurement in  fiscal year 2009, based on the revised methodology.
Our analysis shows that compared with the original methodology, the  revised methodology has both advantages and disadvantages. The  revised methodology provides a more accurate estimate of federal  procurement value than the original methodology, as it uses data for  actual obligations for procurement contracts rather than potential award  values and avoids the inflated values resulting from the aggregation of  multiple-year, multiple-award federal contracts. Because of the change in  methodology, the estimated value of covered central government  contracts in the United States decreased by more than 70 percent from  fiscal year 2008 to fiscal year 2009, dropping from about $712 billion in  fiscal year 2008 to $204 billion in fiscal year 2009.
However, the revised methodology’s use of cumulative obligations data  leads to a more than 6-year lag in reporting annual data to the WTO. If  this methodology is used to report data for fiscal year 2014 and  subsequent years, the resulting delay would appear to be inconsistent  with the 2014 GPA’s requirement that parties provide their statistical  notifications within 2 years of the end of the reporting period. The delay  would also reduce the transparency of U.S. covered government  procurement for U.S. policymakers and GPA parties. In addition, it is  inconsistent with federal standards for internal control that call for U.S.  agencies to issue relevant, accurate, and reliable information and to  record and communicate the information within a time frame that enables  entities to carry out their responsibilities. Finally, in measuring actual  obligations for procurement contracts rather than the value at the time of  award, the new methodology is inconsistent with the methodology used  by other large GPA members, such as the EU and Norway, which report  contract values at the time of award rather than actual obligations (or  expenditures). As a result, the revised methodology makes comparisons  of the United States’ and other GPA parties’ central government  procurement less consistent. In addition, the United States continues to  report the number of covered contracts to the WTO based on their award  value, which leads to an inconsistency between the reported numbers  and values of reported U.S. government procurement contracts. The  contracts comprising the reported value of covered (above-threshold)  procurement are determined at a later time under the new methodology  and can result in a different set of contracts. Table 2 shows advantages  and disadvantages of the original and revised methodologies.
Our analysis also found that, despite using 6 years of data, the revised  methodology does not produce final obligated contract values, because it  does not capture obligations that can occur after the 6-year period.  Since the 2014 GPA requires parties to provide their annual statistical  notifications within 2 years of the end of the reporting period, we analyzed  the distribution of cumulative obligations. As table 3 shows, a preliminary  estimate of 3 years of cumulative obligations for contracts awarded in  fiscal year 2009, consistent with the 2014 GPA’s requirement to report  annual statistics within 2 years of the end of the reporting period—that is,  obligations in fiscal years 2009 through 2011—covered about 67 percent  of cumulative obligations through July 2016. Updating this estimate with  obligations made for these contracts in fiscal year 2012 would raise the  amount covered to about 78 percent. Using the revised U.S. methodology  to analyze 6 years of cumulative obligations against the 2009 awards— that is, obligations in fiscal years 2009 through 2014—we found that the  amount USTR reported to the WTO in December 2015 equaled about 96  percent of total obligations for these contracts over the 6-year period. In  other words, using 6 years of cumulative obligations, in accordance with  the revised methodology, produced about 30 percent higher procurement  value than using 2 years of obligations consistent with the 2014 GPA  requirement to report within 2 years of the end of the reporting period.  However, the revised methodology did not account for 100 percent of the  contracts’ value after 6 years. The methodology assumes that cumulative  obligations against awarded contracts over a 6-year period—a year  longer than a contract’s typical duration, according to OMB—will capture  the full value of those contracts. Our analysis of federal contracts  awarded in fiscal year 2009 shows that the U.S. estimate of covered  government procurement based on the revised methodology is $200  billion for fiscal years 2009 through 2014. However, cumulative  obligations for these contracts from fiscal year 2009 through July 2016  amounted to $209 billion—about $9 billion more than the amount  obligated for these contracts by the end of the revised methodology’s 6- year period.
Further, in compiling the fiscal year 2009 U.S. statistical notification  submitted to the WTO in December 2015, USTR did not use the revised  methodology as it was described to the WTO in August 2011. Whereas  that methodology was to use 6 years of obligations data (i.e., fiscal years  2009 through 2014), the fiscal year 2009 statistical notification used 6  years and 6 months of obligations data. While the notification reported  that $204 billion was obligated in fiscal years 2009 through 2014 for fiscal  year 2009 contracts, the reported data were extracted from FPDS-NG in  June 2015.
While analyzing the original and revised U.S. methodologies, we  identified an alternative methodology that uses annual obligations for  covered contracts as a measure of covered government procurement.  (See app. III.)
section_title: Agencies’ Decision to Change U.S. Methodology Showed Incomplete Understanding of Reported Procurement Data
paragraphs: The rationale on which U.S. agencies based their decision to change the  U.S. methodology for reporting covered federal procurement to the WTO  suggest that the agencies had an incomplete understanding of U.S.  procurement data reported to the WTO in response to the GPA  requirements. In 2011, OMB determined, in consultation with USTR   and Commerce, that U.S. statistical reports to the WTO on federal  procurement were misleading and that the methodology should be  revised. At the same time, USTR and Commerce were receiving  questions from other parties about the U.S. statistics, according to a  USTR document. According to OMB documents, the TAR, which is used  as a basis for the U.S. statistical reports to the WTO, overstated available  bidding opportunities as a result of the original U.S. methodology.  However, our review of agency documents and interviews with agency  officials found that this conclusion was based on a misinterpretation of the  reported data. The United States’ statistical notification for fiscal year  2008 stated that $700 billion worth of procurement was available to GPA  trading partners, while the Office of Federal Procurement Policy reported  obligations of only $527 billion. Agency documents show that this  identified gap of $173 billion was the basis for the decision to remove the  2008 TAR from the standard FPDS-NG statistical reports and to develop  the new methodology. However, the two amounts, which capture different  measures of federal procurement, are not comparable. The $700 billion  reported to the WTO was a measure of all contracts awarded in a  particular year—that is, all newly awarded contracts in fiscal year 2008,  which could be obligated any time over a 5-year period. In contrast, the  $527 billion reported by the Office of Federal Procurement Policy  reflected all obligations made within a 1-year period—that is, obligations  in fiscal year 2008 against any contract, regardless of the year of the  initial contract award.
section_title: Agencies Lacked Documentation to Support Revision of Methodology for Reporting Federal Procurement Data to the WTO
paragraphs: The agencies involved in the decision to revise the U.S. methodology for  reporting federal procurement to the WTO were unable to provide  documentation supporting the decision. Federal standards for internal  control call for U.S. agencies to carry out internal control activities to help  ensure that management’s directives, such as changing the U.S.  methodology, are carried out. These activities include the need for  appropriate review of data (and software) used in information processing  as well as properly recording and documenting significant events. We  requested, but could not obtain, documentation of the original  methodology, any comparison of the original and revised methodologies,  and any analysis of the revision’s effects on U.S. reported awarded  contract values. According to OMB staff, the agency reviewed data in the  TAR that Commerce shared with them via e-mail, but no documentation  of these reports was available from OMB, Commerce, GSA, or USTR. In  addition, we were unable to obtain copies of the TAR that were the basis  of statistical notifications submitted to the WTO. As a result, we had to  rely on interviews with current and former USTR, GSA, and Commerce  officials to reconstruct the original methodology from GSA computer  programs. OMB staff stated that staff turnover prevented them from  providing complete information about how and why the TAR was initially  developed and revised.
In addition, although OMB and GSA provided us with documentation of  the TAR requirements that were approved by OMB, USTR, Commerce,  and GSA, we found no documentation of any steps to validate that the  requirements for applying the revised methodology were correct and  implemented successfully to produce the intended results. According to  OMB officials, OMB established the requirement for the new TAR after  consultation with USTR and trade agencies. The agencies concluded that  it was appropriate to determine the total value of obligations for a contract  5 years after it was awarded because they considered federal contracts to  generally include a base year and four 1-year option periods that the  federal government may or may not exercise. OMB officials said that the  Federal Acquisition Regulation (FAR) provides that the base and option  periods shall not exceed 5 years for services and the total of the basic  and option quantities shall not exceed requirements for 5 years in the  case of supplies, unless otherwise approved. OMB officials stated that the TAR was established using this reporting methodology. However,  according to an unpublished October 2015 communication to the WTO  GPA statistical working group, the U.S. methodology is based on the  amount spent during the base year and five 1-year option periods (i.e.,  the 6 years after the award date).
section_title: Trade Agreements Report and Statistical Notifications Contain Inconsistencies and Errors
paragraphs: We found several reporting inconsistencies and errors in the FPDS-NG  TAR and in U.S. GPA notifications submitted to the WTO.
USTR reviews the GPA thresholds, which are developed by  Commerce, and publishes them in the FAR every 2 years on a  calendar-year basis.However, the GSA-run program that generates  the TAR begins applying those thresholds every other fiscal year.  (See fig. 5.) As a result, the U.S. procurement statistics that USTR  reports to the WTO, based on the TAR, for contracts awarded in the  first quarter of each 2-fiscal-year period’s initial year reflect the new  biennial thresholds instead of the thresholds that U.S. procurement  officers used in determining the applicability of trade agreements for  those contracts. This discrepancy may affect the accuracy of data on  covered procurement reported to the WTO. When the new thresholds  are higher than the old ones, the reported data may exclude contracts  with values lower than the new thresholds; when the new thresholds  are lower, the data may include contracts that were not covered by  the GPA at the time they were signed.
The TAR, which is used as a basis for the WTO notifications, applies  a methodology to capture covered government procurements under  the GPA that does not reflect the process U.S. procurement officers  use to determine whether contracts are covered by the GPA.  Consequently, some contracts considered to be covered when  awarded may not be reported to the WTO. To determine whether a  contract is covered by the GPA, procurement officials calculate the  estimated acquisition value using a methodology set out in the  FAR. However, the new GSA-run statistical program used to  generate the TAR considers a contract to be covered by the GPA only  when cumulative obligations against that contract exceed the GPA  thresholds, which can happen at any time during the contract’s  duration. As a result, contracts that were determined to be covered by  trade agreements at the time of contract award but for which  cumulative obligations never exceed the GPA thresholds are not  included in the TAR and WTO notifications until a later and uncertain  point in time, if at all.
The fiscal year 2009 U.S. notification of state procurement reports  inaccurate data for Florida’s total government procurement. USTR  calculated that amount as $45 billion. However, using the U.S.  methodology for estimating total state procurement, we calculated that  Florida’s total government procurement in fiscal year 2009 was $37  billion.
section_title: U.S. Agencies Lack a Methodology for Reporting States’ and Other Government Entities’ GPA- Covered Procurement as Required
paragraphs: Although the GPA requires that parties provide annual statistics on  covered procurement by subcentral governments, USTR and Commerce  have not developed a methodology for using available state data to report  these data. Under the 1994 and 2014 GPA, notifications for states’ and  other government entities’ procurement are required to include statistics  on the value of contracts awarded by covered entities above the threshold  value. However, for fiscal years 2009 and 2010, the United States  reported total instead of covered government procurement for the 37  states that make up U.S. subcentral level commitments under the GPA.  As a result, the reported U.S. data are only broadly comparable with other  GPA parties’ data on covered subcentral government procurement.  Further, USTR’s reporting does not meet federal standards requiring  relevant, timely, and accurate reporting by U.S. agencies.
To estimate states’ total procurement, USTR uses the U.S. Census  Bureau’s state government financial data, which include below-threshold  procurement by noncovered entities. Also, these data do not account for  any restrictions that the federal government or a state government may  place on procurements for specific goods or services that are excluded  from U.S. GPA commitments. There is no central repository for statistics  on GPA-covered state procurement. An unpublished U.S. submission to  the GPA working group on the collection and reporting of statistical data  acknowledges that reported U.S. subcentral-level procurement data do  not distinguish between covered and noncovered government  procurement or reflect the amount or percentage of procurement   below or above the GPA threshold.
Although data on states’ GPA-covered procurement are not centrally  available, we estimated—using data that we obtained from 3 of the  largest states covered by U.S. GPA commitments—that the total state  government procurement reported to the WTO exceeds covered state  government procurement by about 10 percent. We calculated that in  2010, about 40 percent of estimated total government procurement by the  37 states covered by the GPA took place in California, New York, Texas,  and Pennsylvania. Three of these states—California, New York, and  Pennsylvania—collect electronic data on their contract awards and have  databases that contain information on the amount spent on state  procurement contracts (Texas does not). We calculated that contracts  representing over 90 percent of total government procurement in these 3  states were awarded in 2014 and 2015 by covered entities, had values  higher than the GPA thresholds, and therefore could be considered  covered government procurement.
For example, we estimated that on average contracts representing 99  percent of the value of New York’s goods and services contracts and 64  percent of the value of its construction services contracts were awarded  to covered entities and exceeded the U.S. GPA thresholds for 2014 and  2015. Goods and services contracts represent 92 percent of the value of  all state contracts in New York. Therefore, we estimated that 96 percent  of total government procurement by covered New York state entities was  above GPA thresholds and was therefore covered by the GPA. For  California, which is the largest state among the 37 covered states and  accounts for about 14 percent of their total government procurement, we  estimated that 92 percent of the value of goods, services, and  construction contracts awarded to covered entities fell above GPA  thresholds and therefore were covered by the GPA. For Pennsylvania, we  estimated that 95 percent of such contracts were covered by the GPA. In  estimating covered procurement for New York, California, and  Pennsylvania, we did not correct for procurements that are excluded by  the U.S. GPA commitments; therefore, our estimates may overstate these  states’ covered government procurement.
With regard to other government entities, including utilities, the United  States reported estimates of covered government procurement for 9 of  the 11 entities covered by the U.S.GPA commitments in 2009 and 2010.  These estimates are based on the entities’ financial statements. While the  methodology for these estimates varies on the basis of the data that the  statements provide, the general methodology adopted by the United  States calls for the estimate to include operating expenses other than  wages and salaries and newly acquired capital expenditures. Commerce  calculates the estimates using data on operations and maintenance  expenses; however, for certain entities, the available data aggregate  wages with other operating expenses. As a result, estimates based on  these data overstate these entities’ covered government procurement.  Conversely, covered government procurement reported for some entities,  such as the Port Authority of New York and New Jersey, includes capital  expenditures, while for other entities, such as the Port of Baltimore,  covered government procurement does not include these expenditures.  Since capital expenditures under the methodology adopted by the United  States should be included in the estimate of covered government  procurement, the data reported for entities that exclude capital  expenditures understate covered government procurement.
section_title: Gaps in Collaboration among U.S. Agencies Contributed to Reporting Deficiencies
paragraphs: We found that gaps in collaboration among the four agencies involved in  preparing, using, and submitting the required procurement data to the  WTO—USTR, OMB, Commerce, and GSA—contributed to deficiencies in  the reporting of these data. The preparation of GPA statistical  notifications requires expertise in procurement data, procurement policy  and regulations, and WTO agreements. However, none of the agencies  has all of the expertise needed to prepare and submit the U.S.  notifications, and statements made by agency officials to us indicated  gaps in their collaboration in leveraging each other’s expertise. For  example:
An official from USTR stated that he was the “consumer” of  procurement data received from OMB and GSA but that USTR  currently has no technical expertise in federal procurement data  collection.
OMB staff noted that USTR relies on OMB’s interpretation of  procurement data during trade negotiations. They also stated that  USTR is the report owner and the program officer for trade agreement  data and reporting, since it negotiates all trade agreements.
Officials from Commerce told us that they provide “technical  assistance” to USTR in developing and finalizing the trade agreement  and reviewing procurement data in the TAR but that they were not  responsible for U.S. notifications or for submitting those notifications  to the WTO.
Officials from GSA told us that GSA is the “technical executor” of data  requests received from agencies, including Commerce and USTR,  with regard to report design and provided technical assistance on  reporting requirements, but the GSA officials were not involved in any  policy decisions.
USTR, Commerce, and GSA officials stated that OMB’s Office of  Federal Procurement Policy is responsible for setting procurement  policy and therefore is responsible for the methodology used in U.S.  reporting of procurement data. However, an OMB Office of Federal  Procurement Policy official stated that although her office employed  procurement data specialists, the TAR was prepared according to  USTR specifications. OMB staff stated that they worked with USTR,  Commerce, and GSA to establish and finalize the reporting  requirements and methodology for the TAR to meet the GPA and  NAFTA reporting requirements.
Moreover, no U.S. agency has taken responsibility for ensuring the  accuracy, timeliness, or comparability of the procurement data submitted  to the WTO or for recording related decisions and activities. 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. Our prior work has shown that in such  cases, agencies can improve their activities through enhanced  interagency collaboration—for example, by agreeing on roles and  responsibilities, including leadership; by leveraging resources, including  expertise; and by developing mechanisms for effective collection,  analysis, and use of data.
section_title: Conclusions
paragraphs: Government procurement constitutes a significant potential market for  international trade that the U.S. government has sought to open through  the GPA and FTAs. Reporting of government procurement statistics  required by trade agreements provides transparency about the extent to  which the parties have opened government procurements covered by  their commitments under the agreements to foreign competitors. This  transparency, in turn, allows policymakers to gain an understanding of the  agreements’ relative benefits and helps other countries judge the  potential benefits of undertaking similar agreements.
While the data that the United States and next five largest GPA parties  reported to the WTO for 2010 allow for broad comparisons of their  covered government procurement, we found that deficiencies in the data  prevent more detailed comparisons, limiting transparency. In some cases,  the parties’ statistical reporting in response to GPA requirements was not  timely, complete, or consistent. In other cases, a lack of common  understanding of the definitions of key terms as fundamental as  “government procurement” led to inconsistency in the parties’ reporting  practices. In forming the working group for the GPA statistical work  program, the United States and other GPA parties committed to submit  relevant information, make recommendations, and consider the “potential  harmonization” of parties’ statistical data in order to provide transparency  regarding procurement covered under the GPA and improve  understanding of the agreement’s economic importance. However, the  GPA working group charged with recommending actions to address  technical issues, such as those we identified, that impede transparency  regarding covered procurement has made little progress. Moreover,  recent data on procurement covered by U.S. FTAs are not available— NAFTA parties last exchanged such data in 2005, and the government  procurement chapters of the U.S. FTAs we reviewed do not require  statistical reporting of covered government procurement.
We found that the introduction of the revised methodology for reporting  covered federal procurement affected the timeliness, accuracy, and  comparability of U.S. reporting of procurement statistics to the WTO.  While the methodology enables more accurate reporting, its use of 6  years of cumulative obligations data does not appear to be compatible  with the 2-year timeframe allowed by the 2014 GPA. In addition, gaps in  collaboration among USTR and the other agencies involved in collecting  and reporting U.S. government procurement data contributed to other  deficiencies we identified, such as the absence of documentation of the  methodology’s revision and inaccuracy in the U.S. statistical notifications.  Finally, the lack of a methodology for reporting state-level covered  procurement consistent with GPA requirements has led USTR and  Commerce to report only total procurement, limiting the comparability of  the United States’ and other parties’ covered subcentral government  procurement.
section_title: Recommendations for Executive Action
paragraphs: 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, we recommend that the  U.S. Trade Representative take the following two actions:
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.
Resume the annual exchange of statistical data on covered  government procurement with the other NAFTA parties as NAFTA  requires.
We also recommend that the U.S. Trade Representative take the  following four actions in consultation 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.
Develop a methodology for reporting statistics on state governments’  covered procurement to the WTO consistent with GPA requirements.
Ensure that methodologies and data sources used to prepare GPA  statistical notifications are documented.
Ensure that calculations using U.S. procurement statistics and other  data are reviewed for accuracy before reporting them to the WTO.
section_title: Agency Comments
paragraphs: We provided a draft of this product to USTR, Commerce, OMB, and GSA  for comment. USTR, Commerce, and OMB officials did not comment on  our findings and recommendations but provided technical comments,  which we incorporated as appropriate. For example, in response to  Commerce officials’ comments, we clarified our description of their efforts  to address data anomalies created by multiple-year, multiple-award  federal contracts. GSA concurred with our findings and recommendations  and also provided technical comments that we incorporated as  appropriate.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan to no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees, the U.S. Trade Representative,  the Secretary of Commerce, the Director of the Office of Management  and Budget, the Administrator of the General Services Administration,  and other interested parties. In addition, the report is available at no  charge on the GAO website at http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-8612 or gianopoulosk@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 IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: For this report, we (1) broadly compared covered government  procurement reported by the United States and other parties to the World  Trade Organization’s (WTO) Agreement on Government Procurement  (GPA) and U.S. free trade agreements (FTA); (2) assessed the  usefulness of GPA and U.S. FTA parties’ statistical reporting for more  detailed comparisons of—and transparency regarding—their covered  government procurement; and (3) examined the extent to which U.S.  agencies’ approach to reporting statistical data on covered government  procurement to the WTO ensures timeliness, accuracy, and  comparability.
subsections: section_title: General Analysis of Procurement by the United States and Other GPA and U.S. FTA Parties
paragraphs: The following describes our general analysis of data on procurement by  the United States and other GPA and U.S. FTA parties. To estimate total  government expenditures and total government procurement for the  United States and the 57 other countries that are parties to the WTO GPA  and U.S. FTAs, we analyzed macroeconomic data from 2008 through  2012 from the United Nations’ (UN) National Accounts Official Country  Data database and the International Monetary Fund’s Financial Statistics  and World Economic Outlook. We used the 2008-2012 time period for  these estimates in order to base them on the most reliable, consistent,  and comparable sets of data available. Government procurement  includes a government’s current purchases of goods and services, such  as machinery and equipment; purchases of accounting or information  technology services; and investment expenditures. The amount of  covered government procurement is a subset of total government  procurement. We defined covered government procurement under the  GPA and U.S. FTAs as procurement by covered government entities at  the central and subcentral levels that falls above certain predetermined  thresholds and outside certain exclusions stipulated in the agreements.  This amount is largely a measure of the opportunities available to  domestic and foreign firms seeking to compete under open tendering  procedures for government procurement contracts in the countries that  are parties to the agreements. Covered government procurement also  includes procurement conducted through limited tendering that is covered  under the agreements but is not open to all interested suppliers. (GPA  parties report data on the use of limited tendering procedures; we  analyzed these data and present our findings in app. II.)
We compared data on government procurement reported by the United  States with data reported by five other selected parties to the GPA—the  European Union (EU), comprising 28 member countries; Japan; Canada;  South Korea; and Norway. We selected these parties because they  represent, after the United States, the next five largest GPA procurement  markets. The combined total government procurement reported by these  six parties (33 countries) accounts for 92 percent ($4.0 trillion of $4.4  trillion) of average annual total government procurement for the United  States and the other 57 countries that are parties to the WTO GPA and  U.S. FTAs from 2008 through 2012. For the remaining 25 countries in the  dataset, total government procurement during this period amounted to  about $370 billion; we assumed that all of their estimated procurement is  covered by the agreements.
In addition, we interviewed federal agency officials from the Office of  Management and Budget’s Office of Federal Procurement Policy, the  General Services Administration’s Integrated Award Environment  Business Operations Division, the Office of the U.S. Trade  Representative’s (USTR) Office of WTO and Multilateral Affairs, and the  Department of Commerce’s International Trade Administration in  Washington, D.C. We also discussed the availability of U.S. state  procurement data with state officials, reviewed state government  documents, and contacted state audit organizations to determine whether  the data we used had any significant deficiencies. We interviewed WTO  secretariat, EU governmen, Japanese government, Canadian  government, and other officials in Geneva, Switzerland, and reviewed  related documents issued by their offices. In addition, we interviewed a  former USTR procurement trade negotiator and reviewed relevant  studies, papers, and articles.
section_title: Detailed Analysis of Covered Procurement by U.S. Federal and State Governments and Other Government Entities and by Other Selected GPA Parties
paragraphs: The following describes our detailed analysis of covered government  procurement by the U.S. central (federal) government and subcentral  (state) governments and other entities and by the other selected GPA  parties.
subsections: section_title: U.S. Federal Government Procurement
paragraphs: To analyze covered government procurement by the U.S. federal  government, we used data that the United States reported to the WTO in  September 2016 covering procurements in fiscal year 2010—the most  recent data available—after determining that these data provided a  reasonable basis for noting general patterns and making broad  comparisons with other parties’ central government procurement. We  used data from annex 1 of the U.S. WTO statistical notifications for fiscal  years 2009 and 2010. We did not use data from before fiscal year 2009  because the 2009 revision of the U.S. methodology for estimating federal  procurement rendered earlier data incomparable with data produced with  the revised methodology.
To assess the reasonableness of using the 2010 data for our reporting  purposes, we also analyzed U.S. data on federal procurement that were  not reported to the WTO but that allowed us to estimate likely covered  government procurement in more recent years. Specifically, we examined  data from the Federal Procurement Data System–Next Generation  (FPDS-NG) for fiscal years 2010 to 2014 and estimated the amount of  actual obligations in a given fiscal year regardless of the year of the  original contract award (see app. III for a discussion of this alternative to  the two methodologies used by the United States to report federal  covered government procurement). Our analysis found that there is little  variation in U.S. covered government procurement measured using actual  obligations as a share of total federal procurement from year to year. We  also found that the percentage of covered federal procurement as  reported by the United States in 2009 and 2010 was consistent with  FPDS-NG obligations data. As a result, we determined that using the  2010 data was reasonable.
section_title: U.S. States’ and Other Government Entities’ Covered Procurement
paragraphs: To analyze covered government procurement by U.S. state governments  and other entities, we used data from annexes 2 and 3, respectively, of  the U.S. WTO statistical notifications for fiscal years 2009 and 2010. We  found that the United States reported total instead of covered government  procurement for the 37 states that comprise U.S. subcentral-level  commitments under the GPA. We estimated covered procurement by the  U.S. states by collecting data for 2014 and 2015 from three of the states  that have the largest amounts of procurement—California, New York, and  Pennsylvania—and calculating the percentage of their total government  procurement that was covered by the trade agreements. We calculated  state covered government procurement as the cumulative dollar value of  contracts by covered entities that were higher than the thresholds set in  the GPA; we did not otherwise correct for other specific exclusions, if  applicable. We were unable to obtain any data from another of the largest  states, Texas, as it does not collect such data in a central database. We  determined that the degree of overstatement of states’ covered  government procurement was likely relatively minor and would therefore  not affect our analysis of differences in orders of magnitude in subcentral  government procurement by the United States and the five selected GPA  parties.
To analyze covered government procurement by utilities and other  government entities, we examined the U.S. methodology for reporting  procurement by the 11 entities covered by the GPA. We examined the  disaggregated data from the financial statements of 9 of the 11 entities;  data for the remaining 2 were not available. We identified the components  used to estimate covered government procurement and the relative  effects of the inclusion of certain elements that should have been  excluded from the estimate and of the exclusion of certain elements that  should have been included in the estimate. We determined that these  effects were likely small and would not affect our overall conclusions.
section_title: Other Selected GPA Parties’ Reported Procurement
paragraphs: We analyzed all available data reported to the WTO by the five selected  GPA parties for 2008 to 2013 as well as estimates of their total covered  government procurement during this period. We assessed the internal  consistency of their WTO notifications and determined that despite some  annual variations, the 2010 data provided a reasonable basis for  comparing these parties’ and the United States’ covered government  procurement. For example, we sequentially expanded the analysis to  include data from 2008 through 2009, 2008 through 2010, 2008 through  2011, and 2008 through 2012, and we excluded years to match the last  two U.S. submissions for 2009 and 2010. We found that procurement by  central and subcentral governments and other entities appeared to be  stable at levels and as shares of covered and total covered government  procurement for the various time periods.
Because EU member governments’ procurement in 2010 accounts for  more than 85 percent of procurement reported by the five selected GPA  parties other than the United States, we focused our analysis and  assessment of the selected parties’ data quality on EU data. We took the  following steps to assess the reliability of EU procurement data, from the  EU’s Tenders Electronic Database. We spoke with EU officials and  reviewed publicly available data and analysis of EU covered government  procurement. We performed a detailed comparison of data from two  sources—the 2011 EU WTO GPA notification and the 2012 EU Public  Procurement Indicators. We used several measures related to EU  general government procurement, such as above- and below-threshold  procurement from the Official Journal of the European Union and from  member states reporting, and GPA covered government procurement.  After EU officials clarified certain relevant differences in the data, we  found the results from the two sources to be largely consistent. Therefore,  we determined the data we used were sufficiently reliable to discuss  differences in the United States’ and EU’s reported covered government  procurement in terms of orders of magnitude.
section_title: Data Limitations
paragraphs: Because alternative data sources were not publicly available for GPA  parties other than the United States and the EU (i.e., for Canada, South  Korea, Norway, and Japan), we were able only to check for consistency  across time periods and were not able to otherwise assess the  comprehensiveness and accuracy of the procurement data reported to  the WTO by these parties. In addition, other than noting that the amounts  reported are relatively consistent, we were unable to determine the  reliability of the data reported by parties other than the EU or the extent to  which the reported data represent the actual amounts of covered  government procurement for each party. Because the fact that some GPA  parties reported far less covered government procurement than the  United States is relevant to our report, we present these data for the  purpose of a broad comparison with data on U.S. covered government  procurement. We also present a table of what these nations reported in  2010 to indicate what was and was not reported. We performed a similar  analysis of 2009 and had consistent results.
In our report, we discuss the effects of a number of other data limitations  on the precise measurement and analysis of differences in the parties’  covered government procurement under trade agreements as well as on  analysis of covered government procurement over time. These limitations  include the absence of U.S. statistical notifications to the WTO for years  after fiscal year 2010; the lack of timeliness, completeness, and  consistency in GPA parties’ reporting; the lack of common understanding  and practice among GPA parties regarding reporting of procurement data;  the 2009 change in the U.S. methodology for reporting federal  procurement; and the failure of U.S. notifications to distinguish covered  from noncovered government procurement for the states. We determined  that these limitations may affect our ability to perform certain analyses.  For example, we were unable to disaggregate covered government  procurement of goods, services, and construction work, owing to the lack  of a generally accepted uniform classification system among all GPA  parties. Moreover, the changes in reporting methodology by the United  States and gaps in reporting by a number of parties made trend analysis  over a period of time inappropriate. However, while these limitations  preclude precise comparisons, we nevertheless determined that data  were sufficiently reliable for broad comparisons in terms of orders of  magnitude between parties’ covered government procurement.
We conducted this performance audit from August 2015 to February 2017  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.
section_title: Appendix II: Limited Tendering
paragraphs: The World Trade Organization’s (WTO) Agreement on Government  Procurement (GPA) recognizes the importance of transparent measures  for government procurement. Our analysis of covered government  procurement focused on procurement conducted under open tendering  procedures. In certain situations, the GPA also permits procurement  through limited tendering—that is, by contacting a supplier or suppliers of  choice directly rather than using open tendering procedures. The GPA  permits limited tendering when, for instance, no tenders are submitted, no  tenders conform to essential requirements of the tender documentation,  no suppliers satisfy conditions for participation, or tenders submitted are  collusive. Limited tendering is a restrictive practice for making individual  procurement decisions, according to the Office of the U.S. Trade  Representative. According to the GPA, limited tendering may not be used  to avoid competition among suppliers or to discriminate against foreign  suppliers.
Procurement data that the United States and the next five largest GPA  parties reported to the WTO for 2010 show varying use of limited  tendering. The United States, Japan, and Norway reported the use of  limited tendering in at least 20 percent of central government contracts  covered by the GPA. The practice was less common in the European  Union and South Korea, which reported limited tendering in fewer than 10  percent of GPA-covered central government contracts. (See fig. 6.)
section_title: Appendix III: Alternative Method for Reporting U.S. Covered Federal Procurement to the WTO
paragraphs: During our analysis of the original and revised U.S. methodologies for  reporting U.S. covered federal central government procurement to the  World Trade Organization (WTO), we identified an alternative  methodology that could be used to measure the openness of U.S. central  government procurement under the Agreement on Government  Procurement (GPA).
We found that the original and revised methodologies each have  advantages and disadvantages.
The original methodology allowed for timely reporting by capturing the  value of awards in the given year, but it overstated procurement  opportunities by reporting the full value of multiple-year, multiple- award contracts multiple times for each award recipient. Because  some reported funds were never obligated, aggregating those  contracts at the time of award and reporting this aggregate value for a  particular year overstated the value of covered federal procurement  opportunities.
The revised methodology accurately captures the dollars obligated  against awards in a particular year, but it leads to a 6-year reporting  lag by tracking the funds actually obligated for multiple-year contracts.  It also results in underreporting, as obligations against those contracts  can continue after the methodology’s 6-year time frame.
Our analysis of the revised methodology showed that reporting  preliminary estimates of dollars obligated in a multiple-year contract’s first  3 years would meet the 2014 GPA requirement to report within 2 years of  the reporting period and would cover the majority of funds that could be  obligated against such an contract. However, this approach could result in  the underestimation of funds obligated against the contract, as more  funds could be obligated in subsequent years. Therefore, such a  preliminary estimate would need to be updated several times to reflect the  actual total value of the contracts awarded.
We identified an alternative methodology that would estimate GPA- covered federal procurement based on actual obligations for covered  contracts in any given year, regardless of the year the contracts were  awarded. This approach would ensure timely reporting since these data  are available on an annual basis without a time lag; moreover, these data  would be largely consistent with total federal expenditures reported in the  macroeconomic data used to estimate total federal procurement.  However, these data may not represent opportunities available to foreign  and domestic firms in the reported fiscal year, since obligations in any  given fiscal year include obligations on task orders against contracts  awarded in prior years.
Using this alternative approach, we found that, whereas total obligations  for GPA-covered contracts declined from $540 billion in fiscal year 2009  to $445 billion in fiscal year 2014, or by 18 percent, there was little yearly  variation in federal covered government procurement as a percentage of  total federal procurement. For example, in fiscal year 2009, covered  contracts represented 53 percent ($289 billion) of total obligations, while  in fiscal years 2010 through 2014, they represented 51 percent ($274  billion), 48 percent ($261 billion), 48 percent ($248 billion), 48 percent  ($221 billion), and 48 percent ($214 billion), respectively.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: Kimberly M. Gianopoulos, (202) 512-8612 or gianopoulosk@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Adam R. Cowles (Assistant  Director), Marisela Perez (Analyst-in-Charge), Gergana T. Danailova- Trainor, and Julia Kennon made major contributions to this report. Martin  de Alteriis, Gezahegne Bekele, Christopher Cronin, Neil Doherty, Bradley  Hunt, Reid Lowe, and Grace P. Lui provided technical assistance.