We were immediately struck by these comments during a “Made in America” ceremony to announce new rules to prod federal agencies to buy more U.S.-manufactured goods. After all, former president Donald Trump frequently boasted about his “Buy American” efforts. And yet here was a figure we had never heard of before — which suggested Trump’s administration had fallen down on the job.
Every number needs context. This one not only lacks it, but it cannot be verified.
When we first queried the White House for the data backing up this statement, we received a cryptic answer — that we should note change in the sum of contract obligations to contractors not in the United States from 2017 to 2019, using the federal procurement data system (FPDS) information on SAM.gov.
When we went to the website, we immediately thought “yikes.” The website is not particularly user-friendly and we couldn’t come up with anything useful. We shared the website with one of the best data crunchers at The Washington Post. He took a look and immediately wrote back “yikes.” We checked with several procurement experts. Many were puzzled about Biden’s figure and how it could be calculated.
A White House official explained that this was a number calculated during Biden’s 2020 campaign, but a recent check of the data, for contracts over $5 million between January 2017 and December 2019, concluded that the sum of foreign-sourced obligations increased 28 percent in that time frame, which is almost three years — and not fiscal years, but calendar years.
The official acknowledged that there are shortcomings in the data and that it was an imperfect measure. Under Biden’s executive order, officials hope to improve the collection and transparency of foreign-sourced contracts, the official said.
Indeed, the Congressional Research Service (CRS) in a 2018 report warned: “Decision makers should be cautious when using obligation data from FPDS to develop policy or otherwise draw conclusions. In some cases, the data itself may not be reliable. In some instances, a query for particular data may return differing results, depending on the parameters and timing. All data have imperfections and limitations. FPDS data can be used to identify broad trends and produce rough estimates, or to gather information about specific contracts.”
As we waited for a White House explanation, an independent analyst directed us to annual reports issued by the Defense Department on its use of foreign contracts, drawn from FPDS data. Given that the Pentagon accounts for more than 50 percent of federal contracts, it would seem to be a pretty good gauge for the rest of the government.
Two laws, known as the Berry Amendment and the Kissell Amendment, impose strict rules on what the Defense Department can purchase from overseas. For instance, the department can buy “only fish, shellfish, and seafood taken from the sea in U.S.- flagged vessels or caught in U.S. waters and processed in the United States or on a U.S.-flagged ship,” according to the CRS. Clothing, textiles and footwear are also greatly restricted — and it turns out, a big source for the department is Federal Prison Industries. That puts the U.S. government in competition with private companies, as the CRS noted: “Critics have voiced concern that prison industrial programs pose a threat to private enterprise and to the jobs of residents who are not incarcerated.”
During his remarks on the executive order, Biden noted that the Defense Department spent $3 billion “on foreign construction contracts, leaving American steel and iron out in the cold. It spent nearly $300 million in foreign engines and on vehicles instead of buying American vehicles and engines from American companies.”
Those numbers appear to come out of the Defense Department reports. The report for the 2018 fiscal year shows nearly $300 million spent on aircraft engines and vehicles, as well as nearly $3 billion on construction.
The countries that received the most contracts are more or less related to where the United States has forces overseas. In fiscal 2019, the top recipients were Japan ($1.5 billion), Germany ($1.4 billion), South Korea ($1.1 billion), the United Arab Emirates ($1 billion) and Afghanistan ($800 million). The Defense Department has reached bilateral supply arrangements with nine countries that provide priority delivery for Pentagon contracts or orders from companies in these countries (and vice versa).
The Defense Department also has reciprocal defense procurement agreements with 27 countries. A Government Accountability Office report on 2015 data found that the U.S. government awarded more, by contract value, to foreign-owned firms located abroad than to foreign-owned, U.S.-located firms, mainly because of Defense Department contracts.
When we checked the trend from 2017 to 2019, the Defense Department’s annual reports on foreign spending showed there was an increase in Pentagon spending with foreign contractors, but it was 13 percent, not 30 percent. But more important, the share of foreign contracts went down during that period, from 3.3 percent to 3.1 percent. That’s because overall defense spending had been going up, too — nearly a 15 percent increase in that same period.
The numbers are pretty small, too. The value of foreign contracts was $10.56 billion in 2017 and $11.99 billion in 2019.
In fact, the reports showed that the percentage of Defense Department spending on foreign contracts had been steadily decreasing. It was 7.7 percent in 2010, 3.6 percent in 2016 and 3.1 percent in 2019. So even though the raw numbers went up during the Trump administration, the share of foreign contracts continued on a downward trend.
A substantial portion of the foreign contracts don’t qualify for inclusion under the Buy American rules because the services were used overseas.
But in the Trump years, the percentage of foreign contracts that were given waivers to Buy American rules increased, from 12 percent ($1.3 billion) in 2016, Barack Obama’s last year, to 31 percent ($3.7 billion) in 2019. That’s a statistically significant change, even if the dollars are a relative pittance of the federal budget. Biden during his news conference said that his executive order would prevent “federal agencies from waiving Buy American requirements with impunity, as has been going on.”
From fiscal 2017 to 2020, overall U.S. government spending went up 20 percent. (Procurement spending by itself went up 21 percent, according to an analysis by the Pulse of GovCon, a firm which advises on government contracting.) So a supposed 28 percent gain in foreign contract value over three years must be viewed within that context.
More to the point, if military contracts are worth at least 50 percent of the government’s total — and the trend line suggests they went up about 13 percent in the same period — that would mean the value of foreign-sourced contracts for the rest of the federal government would have had to increase more than 40 percent to achieve an average of 28 percent. That is difficult to believe, though the laws are not as specific for agencies other than the Defense Department.
Update: After this fact check was published, at our request Pulse of GovCon ran the numbers for The Fact Checker in SAM.gov and came up with only an 11-percent increase in foreign-contract spending from fiscal year 2017 to fiscal year 2019 — and just an 8.4 percent increase if you include fiscal year 2020, when spending on such contracts declined. Overall, that’s an average annual growth rate of three percent over three years.
The Biden numbers were calendar year, over almost a three-year period, so they are not exactly comparable. But something seems off. Pulse of GovCon produced numbers for spending for every federal agency, and its calculations for DOD were within five to six percent of the numbers reported by DOD to Congress. That gave us confidence that firm’s numbers are on target. The firm’s calculations suggest that that in recent years between 60 and 65 percent of spending on foreign-company contracts are by DOD, meaning the annual reports are also a useful guide to foreign-contract spending.
In the Biden statistic, “it seems there might be mixing of the foreign entity data with the U.S. businesses doing government work overseas and the money given to foreign governments,” said Amber Hart, co-founder of the firm, who said the data she obtained “only reflect solely federal dollar obligations to foreign entity contractors — not countries or U.S. businesses overseas.” There are separate data on spending obligations for U.S. businesses doing work in foreign countries, which sometime require that U.S. business to subcontract with foreign entities based out of that specific country.
The Pinocchio Test
Now that Biden is president, he cannot continue to rely on campaign math. He has the resources of the federal government at his fingertips to provide solid facts.
The FPDS numbers are difficult to obtain and analyze, and the data is not considered to be especially useful for policymaking. The president should use statistics that are easily verifiable for reporters. When the talented team at Pulse of GovCon dug into the FPDS data for The Fact Checker, they found not 28 percent growth over three years, but 8.4 percent. Recall that overall government spending went up 20 percent in that period, so the percentage of spending on foreign contracts actually decreased under Trump. That would be the more relevant figure, not the raw dollars spent.
This analysis is confirmed by the annual reports issued by the Defense Department, which by itself accounts for more than half of federal contracts. These reports show that, within the nation’s biggest federal contractor, real progress has been made in reducing reliance on contracts with foreign companies — and that the percentage of foreign contracts, as part of overall spending, declined steadily under Trump. Moreover, the actual dollars spent are relatively small.
The percentage of Defense Department contracts receiving waivers, however, jumped under Trump. Such waivers are a key target of Biden’s executive order. If Biden had used those statistics, sourced to the department, he would have been on more solid ground to make his point.
But Biden’s jab at Trump about overall foreign-contract spending appears wildly off base. We had originally awarded this claim Three Pinocchios. But with further analysis in hand, we have rewritten the Pinocchio Test and upped the Pinocchio count to Four.
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