Defense Department plans to invest $5 billion in new projects on Guam

Guam senator seeks congressional backing in chasing tax-delinquent military contractors

By Pacific Island Times News Staff

The Department of Defense's expansion on Guam is projected to entail more than $5 billion worth of new construction projects on island in the next three to five years, the governor's office announced today.

Lou Leon Guerrero

“These investments are more than buildings and budgets. They are a reflection of the growing responsibilities we carry and the national recognition of Guam’s continued readiness to serve and protect," Gov. Lou Leon Guerrero said following the latest round of Civil-Military Coordinating Council meeting at the Joint Region Marianas today.

According to a press release from Adelup, new projects include the acceleration of the Missile Defense Agency’s Guam defense system, significant facility upgrades across military installations, and projects designed to enhance resilience, capacity and readiness.

“As we navigate this historic level of military investment, it’s more important than ever that we align these developments with the needs of our people," the governor said. "Guam must not only be the tip of the spear—we must also be the center of planning, protection and progress."

Leon Guerrero and Adm. Brett Meitus, JRM commander, led the council meeting that brought together top military commanders, federal representatives and local officials.

The governor said the government of Guam and the DoD are coordinating to manage military investments on and off base, focusing on road improvements, bio-safety lab, and infrastructure critical to underground hardening.

"We’re also working to merge our defense of Guam plan to better align local and federal efforts, and we’re actively seeking to decrease the time it takes to certify H-2B workers," she added. "This may require legislation to ensure a permanent solution that allows H-2B workers to support both civilian and military projects on Guam.”

While the DOD is investing billions of dollars in military projects on Guam, Vice Speaker V. Anthony Ada said the much-ballyhooed revenue generated for the island has not been fully realized due to tax avoidance.

Ada is seeking congressional assistance in plugging tax leakages on Guam by compelling federal contractors performing projects on island to comply with local laws.

Anthony Ada

The Office of Public Accountability reported in 2023 that several federal contractors undertaking millions of dollars worth of military projects on Guam are either not locally licensed to operate businesses or not filing their taxes, resulting in approximately $22 million in tax leakages.

Besides the shadow business operations and tax evasion, the OPA also detected underreporting of sales and unverified tax exemptions claimed by certain contractors.

“Without any information regarding the actual contract payments and list of contractors/sub-contractors with qualified/allowable exemptions, neither (the Department of Revenue and Taxation) nor OPA can accurately determine the reportable gross receipts and (business privilege tax) due from military construction contracts,” the OPA said in a report released in March 2024.

Without the contractors’ filing records, the OPA was unable to accurately ascertain the impact of potentially uncollected revenues on the government of Guam's revenues.

“During a recent economic services meeting, I raised this concern with DRT, as non-Guam firms secured around $846 million in federal contracts in Guam, and with local law requiring only prime contractors to pay the (business privilege tax) and not local subcontractors, we need to enhance compliance efforts to avoid losing millions each year,” Ada said.

The Office of the Inspector General first blew the whistle on unrealized revenues from federal contracts in 2014, assessing $414 million in taxes owed to the government of Guam as of the audit year.

Last week, the Government Accountability Office reported that the Department of Defense's investments in Guam have reached $3.9 billion as of this year.

While the GAO attributed Guam's economic growth to the DOD's spending, the amount of potential tax revenue left uncollected was unknown.

Ada wrote to congressional leaders, seeking their support in including language in the FY 2026 National Defense Authorization Act to incorporate compliance measures for federal contractors, mandating them to register with the DRT and provide documentary evidence of such registration as a condition for receiving final or progress payments under any applicable contract.

The vice speaker also requested the inclusion of language to direct the Secretary of Defense to develop and adopt a Guam-specific clause under the Defense Federal Acquisition Regulation Supplement, ensuring compliance by federal contractors conducting business in Guam as a long-term regulatory approach. 

“We believe that these simple steps should allow for a better communication on the collection aspect for DRT to ensure that these contractors are indeed paying their share of tax obligations,” Ada said, addressing the letter to Sen. Roger Wicker, chairman of the Senate Armed Services Committee, and Wicker’s House counterpart, Rep. Mike Rogers.

“With ongoing discussions on reducing the BPT, we also need to safeguard that entities winning these large contracts are indeed paying their fair share of local taxes as every other business entity in Guam,” Ada said.

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