In 2017, Congress authorized the U.S. Department of Defense (DOD) to bypass open competition in awarding contracts for goods and services to firms in any country in Africa that “has signed a long‐term agreement with the United States related to the basing or operational needs of the United States Armed Forces.”1 While this represents, to our knowledge, the most broadly scoped preferential procurement policy in U.S. history, it was not the first. Over the past 20 years, government procurement has become an increasingly popular tool for obtaining basing rights and military access, fighting insurgencies, and shoring up weak states and fragile economies. The U.S. government—mostly the DOD—spends billions every year purchasing goods and services from foreign countries.
Over $1 billion a year in overseas defense spending is what we call “strategic,” meaning that it is designed to both support global military operations and target specific firms in pursuit of particular foreign policy objectives. This strategic spending typically takes the form of contracts that are awarded with limited competition through a congressional statute or an international agreement between the United States and a recipient country. The 2017 preferential procurement policy for Africa illustrates limited‐competition procurement: “(1) competition is limited to products or services from the host nation; (2) a preference is provided for products or services from the host nation; or (3) a preference is provided for products or services from a covered African country, other than the host nation.”2
Since 2000, Congress has authorized preferential defense procurement policies on four different occasions: once to support the counterinsurgency efforts in Iraq and Afghanistan (2008) and three other times to secure access in Central Asia (2010), Djibouti (2015), and all of Africa (2017).3 The argument underlying these policies is that defense procurement for the goods and services that support a deployed military presence—from coffee deliveries to construction materials—creates jobs and opportunities for local firms, promoting market growth. In theory, this growth yields a host of positive effects, such as winning hearts and minds in counterinsurgency campaigns, rebuilding states through economic development, and increasing incentives for communities to host a U.S. military presence. Moreover, by contracting directly with foreign firms, the United States hopes to procure goods and services for military operations while avoiding entanglement with foreign governments, limiting the risk of human rights abuses, and ensuring that host communities, not regimes, reap economic benefits.
We have found no evidence to support these claims. Moreover, Washington has made little effort to collect data on the economic or political effects of such policies, making it difficult to evaluate whether they work as expected. This is troubling, because procurement spending carries serious risks of unintended and unwanted consequences. First, it is far from certain that strategic spending will always yield economic growth. The amount of money needed to achieve tangible effects can skew local markets and exacerbate economic dependencies, resulting in a host of negative social effects. Second, when engaging in this strategic spending the United States struggles to control who ultimately gets its business and how commercial firms fulfill contracts. The limited transparency of these exchanges has sometimes resulted in the DOD inadvertently funding the enemy. In some cases, attempts to source locally have led to contracting “fratricide,” in which multiple U.S. agencies inadvertently compete for the same goods and services, spiking prices and creating local shortages.4 Both occurred repeatedly in Iraq and Afghanistan. Third, using spending to influence recipients can draw the United States into bidding wars with competitors such as China, whose control over state industries and unscrupulous global economic policies allow it to manipulate firms’ hiring and purchasing practices.
This paper presents data on overall trends in U.S. defense spending by country, region, and year between 2000 and 2015. It then discusses the major foreign policy objectives that the United States uses spending to pursue, comparing spending to other inducements such as foreign aid and arms sales. The paper also outlines the potential risks of using preferential procurement as a foreign policy tool. It concludes with policy recommendations for how Washington can exercise greater caution in its use of overseas procurement spending.