DSCA: Foreign Military Sales

By J.R. Wilson - September 19, 2014

Two Sentinel radar systems are loaded onto a Chilean C-130 at Edwards Air Force Base (AFB) as part of a Foreign Military Sales case for Chile. Chile intends to use the radars to modernize its armed forces by expanding its existing air defense architecture to counter threats posed by air attack. The pick-up was crucial to ensure Chile received the systems to conduct scheduled training. The FMS case was a priority case for U.S. Southern Command and is expected to enhance greater interoperability between Chile and the United States, and among other allies. Edwards AFB personnel worked closely with personnel from the U.S. Army Security Assistance Command and the Chilean air force to coordinate the flight and loading. U.S. Air Force photo by Kenji Thulowei

Foreign Military Sales (FMS) are a fundamental tool of U.S. foreign and national security policy intended to strengthen U.S. security and promote stronger relationships with allies and partners. To that end, the Arms Export Control Act (AECA) authorizes the president to sell defense articles and services from Department of Defense (DoD) stocks and to enter into contracts for procurement of defense articles and services on behalf of foreign countries and international organizations. These authorities have been delegated to the Director of the Defense Security Cooperation Agency. However, before the procurement activities can take place, the Secretary of State must first determine which countries are eligible for FMS and approve individual sales on a case-by-case basis. Under FMS, the U.S. government enters into bi-lateral government-to-government agreements with partner nations or international organizations to procure defense articles and services on their behalf. Currently, some 223 countries and international organizations use the FMS system to procure defense articles and services.

Partner nations may also procure U.S. defense articles that are in DoD stocks or that have been declared excess by the military departments through the DoD Excess Defense Articles program. However, many FMS cases are for new procurement, which incorporates partner requirements into ongoing DoD production and acquisition processes. Some advanced systems may be available only through FMS, but for the majority of defense articles and services, it is the partner nation’s decision to use FMS as a procurement option. FMS can increase demand for the producing contractor, which may lower the acquisition costs, through economies of scale, for both DoD and the partner nation. In addition, FMS can extend a production line scheduled for closure when DoD has decided not to acquire additional items beyond those already funded for the U.S. military. Some countries prefer the U.S. government to take on the contracting and acquisition processes on their behalf and appreciate the transparency and integrity integral to the program. FMS also offers partners the “Total Package Approach” whereby a weapon system is bundled with U.S. acquisition and supply processes for the support equipment, sustainment, and training needed for its operational use beyond initial delivery.

On March 27, 2014, Lockheed Martin delivered two C-130J Super Hercules aircraft to the Republic of Korea. The Republic of Korea Air Force (ROKAF) has been operating legacy C-130 aircraft for almost three decades, and is now the 14th country to fly the C-130J. Lockheed Martin photo

To begin the FMS process, a partner country must submit a formal request for defense articles and or services known as a “Letter of Request (LOR).” This written document is usually submitted to the DoD implementing agency. It must contain enough descriptive information to enable the U.S. government to provide a response in the form of a Letter of Offer and Acceptance (LOA). At a minimum, the LOR must identify:

requirements (item, quantity, delivery time)
the operational concept (mission, number of bases, hours)
requirements for maintenance, operations, and logistics training
required follow-on support (spares, repair, etc.)

Receipt of the LOR initiates an interagency review and approval process primarily between the Departments of Defense and State, with State retaining final approval authority. Certain sales also require prior Congressional notification. The AECA establishes various thresholds for these notifications:

■ A 15-day notification for NATO member countries, South Korea, Australia, Japan, Israel, and New Zealand reaching the following thresholds:

major defense equipment (MDE) of $25 million or more
any defense articles or services of $100 million or more
design and construction services of $300 million or more

■ A 30-day notification for non-NATO organizations and any other country or international organization reaching these thresholds:

MDE of $14 million or more
any defense articles and services of $50 million or more
design and construction services of $200 million or more

Once the Secretary of State has approved a sale and any required Congressional notifications have been completed, the DoD implementing agency is authorized to present the official government-to-government agreement known as the LOA to the foreign partner. Through the LOA the U.S. government agrees to provide the specified defense articles and services and the foreign partner agrees to fund the purchase and to abide by certain conditions for end-use, security, and retransfer among other standard terms and conditions. A complex FMS case may take years to complete and require long-term training and sustainment. It is through these processes that FMS helps to nurture relationships between the U.S. military and partner-nation militaries.

Between FY 06 and FY 13, FMS sales have ranged between approximately $16 billion and $30 billion per year, with the exception of FY 12, where FMS total $60 billion. That total was influenced by a one-of-a-kind sale of more than $29 billion of F-15s (including spare parts and services) to Saudi Arabia.

“Foreign Military Sales are zero loss/zero gain efforts for DoD, so if countries want to buy through us, we will make sure we have the resources to support the requirement.”

Since 9/11, the ever-changing global geopolitical environment – and, more recently, worldwide economic decline – has led to a renewed focus on making the most effective use of FMS. That includes ensuring transactions support the goals of the U.S. national security strategy for a partner nation or region.

Process improvement efforts include identifying existing defense articles and services early in the process and being able to track them in a central repository, along with initiatives to make the process more flexible, responsive, transparent, and cost-effective to meet customer expectations.

“U.S. budget cuts won’t have a significant impact on countries using their own funds to invest in FMS, but their own declining budgets will impact how much they invest in their defense infrastructure,” said Director for Strategic Planning and Integration at DSCA Kidd Manville. “Foreign Military Sales are zero loss/zero gain efforts for DoD, so if countries want to buy through us, we will make sure we have the resources to support the requirement.”

FMS also contribute to improved compatibility between U.S. and allied forces in a coalition battlespace; if a partner country cannot communicate, coordinate, or keep up with U.S. combat units in the field, neither benefits, and overall operations could be degraded. In addition to upgraded equipment to address compatibility, FMS cases also offer sustainment – long-term support for defense articles already sold – as well as contracts to find, remanufacture, or manufacture out-of-production parts.