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B-101404,B-188338 1 (1977-03-23)

handle is hein.gao/gaobadtgp0001 and id is 1 raw text is: 845 COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON, D.C. 20548 j'-101404 T11e Honorable The Secretary of Defense Dear k,1r. Secretaryt The recent increase in the use of coproduction. industrial participation, and offset arrangements with friendly foreign nations as an instrument of Department of Defense procurement, as well as the prevent substantial level of direct DOD pur- chases (by prime and subcontracts) from foreiqn industry raise several important questions that we feel warrant your iinmediate attention. These procurements are m.ade under the Armed Services Pro- curement Act, which requires your Department to include in all negotiated defense contracte (and, by operation of *flow-down provisions, in all subcontracts) a clause granting the Comp- troller General and his representatives access to the books and records of the Vontractors and subcontractors. (10 U,S.C. $2313(b) (1970)) Application of this requirement to contracts with foreign Industry has until -recently created no major difficulties, Lately, however, the audit responsibilities of GAO have been increasingly challenged by foreign industry and by the governments involved in these new cooperative pro- curement arrangements, These challenges must be met at the highest levels within our respective orqan izations :f the U.D. is to develop a coherent epproach and enduring solution that will permit your .Department to achieve Its objectives and us to discharge our responsibilities to the Congress to assure that negotiated contracts utilising appropriated funds are .priced fairly-and reasonably. During late 1975'and early 1976, GACI representatives worked closely with ,Air Force officials to develop an audit agreement relating to non-U.S., subcon.tracts under the F'-6 program. The algreement that resulted constituted a balanced arranqement under which some--but not all--of DD's and kAo's audit responsibilities were- delegated to the national audit aqencies of the.governments involved. This arrangement recoa- nised the interests of the participating governments, the sensitivities of foreign industry, DODIs audit role as an adjunct to its function as contractual manager of the program, and GAC's responsibility regarding the large anount of U.S. fundv involved.

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