Detailed procedures for FMS programs including writing LOAs and managing cases are found in
Chapter 5
and
Chapter 6.
The following broad policies apply and should be noted early in the FMS process. See Chapter 9 for detailed financial policy information. Broad financial policies that should be noted early in the FMS process are available at
Section C9.3.
C4.3.1.
International Weapons Competitions.
Foreign nations often compete weapon system procurements. The foreign Government’s defense or economic ministry solicits bids or proposals from defense industries in the international market. Depending on the nation’s acquisition process, the solicitation may be a formal request for information, a tender or proposal, an invitation to bid, or a similar document that states the review criteria for proposal submissions. Given the size of the U.S. industrial base, the U.S. response may consist of more than one offering. In the international competition, the foreign nation evaluates proposals submitted by both the U.S. and non-U.S. competitors against the solicitation criteria.
C4.3.1.1.
Foreign Solicitation.
In an international competition, the foreign nation releases its solicitation in the international market. When submitted through appropriate channels
(see Section C5.1.3.)
the solicitation is an LOR and initiates USG processes (e.g., NDP-1, technology transfer, and other reviews) to determine whether it is in the U.S. best interest to participate in the competition. The U.S. response in an international competition may include FMS, Direct Commercial Sale (DCS), international cooperative agreement, or a combination of these programs. See
Section C5.2.
for more information on LOR responses. Most foreign solicitations are released to international defense industries rather than to Governments; however, the FMS process should not be excluded from the response solely on the basis of how the foreign solicitation was released or conditioned.
C4.3.1.2.
Lead Agency for Advocacy.
DSCA is the DoD focal point for policy regarding U.S. participation in international competitions. The Department of Commerce (DoC) is the lead USG agency for policy regarding advocacy of U.S. offerings to foreign governments. The Military Departments (MILDEPs) and defense contractor team develop the proposal, which is presented by the appropriate MILDEP as the representative of the U.S. government. Table C4.T4. identifies the lead agency and advocacy for the USG responses.
Table C4.T4. Lead Agency and Advocacy in International Competitions
| Number of U.S. Responses |
Number of Services Involved |
Lead DoD Agency |
USG Advocacy |
|
One
|
One
|
MILDEP responsible for the weapon system or technology offered
|
The one U.S. system offered is articulated as the formal U.S. position.
|
|
More than one
|
One
|
MILDEP responsible for the weapon systems or technologies offered
|
USG personnel may not favor the merits of one U.S. proposal over another. U.S. advocacy must be generic - the U.S. proposals are combat proven, interoperable with many nations, technologically superior, worldwide supportable, etc. This neutral stance extends to USG presence in meetings with foreign officials. If USG personnel are present for one U.S. contractor presentation, every effort must be made to be present for all briefings on other U.S. offerings. Only when one U.S. MILDEP and/or contractor team remains in the competition can the United States advocate one U.S. offering. This occurs if all other MILDEP and/or contractor teams self-eliminate or the foreign nation formally states these proposals are no longer under consideration.
|
|
More than one
|
DSCA
|
C4.3.1.3.
Responsibilities of the DoD Lead Managing the USG Response.
The DoD lead facilitates the USG’s deliberative processes in order to develop the policy decisions that affect the proposals as early as possible. The DoD lead obtains the views of the key USG stakeholders: DoS, DoC, Office of the Under Secretary of Defense for Policy (OUSD(P)), Office of the Under Secretary of Defense (Acquisition, Technology, and Logistics (AT&L)), Defense Technology Security Administration, DSCA, and the MILDEPs. The DoD lead ensures MILDEP and/or contractor teams submit proposals that are consistent with internal U.S. decisions, are as responsive as possible to the requirements of the foreign solicitation, and meet the solicitation’s schedule. In cases of multiple U.S offerings, the DoD lead must facilitate all U.S. proposals impartially so that there is no perception that one offering is preferred over another and there is no biased interpretation of policy. The DoD lead must bring together all competing MILDEP and/or contractor teams to highlight issues, perform joint problem solving, establish plans and agreements, ensure that the U.S. entrants are being held to the same standards, address cross-cutting issues, and coordinate responses with the foreign purchaser.
C4.3.2.
Total Package Approach (TPA).
A TPA ensures that FMS purchasers can obtain support articles and services, to include construction of necessary support facilities, required to introduce and sustain equipment. The complete sustainability package must be offered to the purchaser when preparing Price and Availability (P&A) data or LOAs. In addition to the system itself, other items to consider in a total package include: training, technical assistance, initial support, ammunition, follow-on support, etc.
C4.3.3.
False Impressions.
Problems can occur when foreign purchasers expect to obtain certain articles and services from the USG but conditions prevent these sales. National Disclosure Policy specifically requires avoidance of creating false impressions. USG personnel must consider releasability, disclosure, sanctions, and all required coordination before indicating to a potential purchaser that a sale from the USG is possible.
See Section C3.2.2.
C4.3.4.
Neutrality.
DoD prefers that countries friendly to the United States fill defense requirements with U.S. origin items. Unless an item has been designated as “FMS Only,” DoD is generally neutral as to whether a country purchases U.S.-origin defense articles or services commercially or through FMS channels. In some instances, such as for certain Government Furnished Equipment (GFE) and Government Furnished Materiel (GFM),
AECA, section 38(a)(3), (22 U.S.C. 2778))
controls apply and items are sold only via FMS.
C4.3.5.
FMS-Only Determinations.
The AECA gives the President discretion to designate which military end-items must be sold through FMS channels exclusively. This discretion is delegated to the Secretary of State. Generally, as a matter of policy, this discretion is exercised upon the recommendation of DoD.
C4.3.5.1.
The DoS approves or disapproves all sales and is responsible for the continuous supervision and general direction of all sales. Each MILDEP or DoD Component develops the recommendation for FMS-Only designation considering the criteria in
Section C4.3.5.2.
and
Section C4.3.5.3.
The MILDEP or DoD Component forwards FMS-Only systems designations recommendation with rationale to DSCA (Programs Directorate, Weapons Division) and DTSA. DTSA enforces DoD FMS-Only designations through the export licensing process. Questions regarding FMS-Only designations should be directed to the MILDEP or DoD Component. Requests for further assistance with FMS-Only designations may be directed to DSCA (Programs Directorate, Weapons Division) for reconciliation or referral to the appropriate DoD element for resolution in accordance with NDP-1 or
DoD Instruction 2040.02.
C4.3.5.2.
Four general criteria are used to determine whether a sale should be required to proceed through the FMS process: Legislative/Presidential restrictions; DoD/MILDEP policy, directive or regulatory requirement, e.g., the National Disclosure Policy; government-to-government agreement requirements; and interoperability/safety requirements for U.S. Forces.
C4.3.5.3.
These criteria, particularly DoD/MILDEP policy, can be further understood by considering four possible elements:
C4.3.5.3.1.
U.S. Political-Military Relationship with the End-User.
The geopolitical situation and security relationships are taken into account when considering the appropriateness of recommending FMS-Only. The inherent strengths of FMS or DCS licensing methods are also considered in selecting the method that best suits the interests of U.S. and the foreign purchaser within the context of existing world security circumstances.
C4.3.5.3.2.
Sale of a New or Complex System or Service.
DoD may recommend FMS-Only:
C4.3.5.3.2.1.
To maximize the purchaser’s ability to assimilate the technologies and manage its acquisition/logistics.
C4.3.5.3.2.2.
For enhanced interoperability and cooperation between U.S. and purchaser’s military forces.
C4.3.5.3.2.3.
For end-items or services that require complex systems integration with other combat systems.
C4.3.5.3.2.4.
For end-items or services that require access to sensitive U.S. government databases, libraries, or software-source code.
C4.3.5.3.2.5.
For end-items or services that require EUM or on-site accountability.
C4.3.5.3.3.
Diversion and Exploitation of Defense Systems Technologies.
Security of sensitive technologies requires greater scrutiny in the transfer process. Defense systems and munitions that are not particularly complex or sensitive but still require enhanced control to prevent proliferation to rogue states or terrorist organizations represent another area where FMS may be more appropriate than DCS.
C4.3.5.3.4.
Feasibility of Separating Weapon System Components into FMS/DCS Elements.
At times, purchasers may desire all or a portion of a sale to be DCS. It is possible to separate the FMS-Only aspects of a purchase from the portion that can be sold DCS.
C4.3.6.
Direct Commercial Sales (DCS) Preference.
Companies may prefer that a sale be made commercially rather than using FMS procedures. When a company receives a request for proposal from a country and prefers DCS, the company may request that DSCA (Strategy Directorate) issue a DCS preference for that particular sale. The company’s request must include a copy of the purchaser’s solicitation for a price quotation. Approved DCS preferences should be held within SCOs and at the item manager level to allow proper screening of LORs. The process outlined in this section is a best efforts commitment by DoD. Failure on the part of the DoD Component to comply with these procedures will not invalidate any resultant FMS transaction. Before approving DCS preference for a specific transaction, the following are considered.
C4.3.6.1.
Article or Service Exclusions.
Items provided on blanket order lines and those required in conjunction with a system sale do not normally qualify for DCS preference.
C4.3.6.2.
Specific Sale Exclusions.
Articles or services that may otherwise qualify for DCS preference may be required to be sold through FMS procedures to certain countries and for sales financed with Military Assistance Program (MAP) or, in most cases, with FMF funds. The Director, DSCA, may also recommend to the DoS that it mandate FMS for a specific sale.
C4.3.6.3.
P&A or LOA Requests.
DCS preferences are valid for one year. If during this time period, the IA receives a request from the purchaser for the same item, it should notify the purchaser of the DCS preference, using the following text:
Figure C4.F1. IA Notification to the Purchaser of DCS Preference
C4.3.6.4.
The IA must determine whether commercial activity has ceased, determine whether guidance in
paragraph C4.5.11.
applies, or seek further guidance from DSCA (Strategy Directorate).
C4.3.7.
Concurrent FMS and Commercial Negotiations.
Purchasers should avoid concurrent FMS and commercial requests. If the purchaser’s national policy or specific circumstances require that both FMS and commercial data be obtained, the purchaser should submit a request for exception to DSCA (Strategy Directorate). IAs may not engage in FMS-commercial comparison studies unless the Director, DSCA, grants an exception for a specific circumstance.
C4.3.7.1.
FMS Data Obtained First.
If the purchaser obtains FMS data and later determines it should request a commercial price quote, the purchaser should cancel the LOR prior to requesting commercial data. If an LOA has been offered and the purchaser then solicits formal bids from private industry for the same item, the IA should query the purchaser as to its intentions and indicate that the LOA may be withdrawn.
C4.3.7.2.
Commercial Data Obtained First.
If the purchaser requests FMS data after soliciting bids from contractors, the purchaser must supply information to the IA showing that commercial acquisition efforts have ceased before any FMS data is provided.
C4.3.8.
Travel in Support of Security Cooperation Programs.
U.S. military and DoD civilian employees who travel to and from a foreign country on SC business, regardless of whether the travel is financed by FMS administrative or case funds, must use the same commercial air carrier, class of service, and routing that the transportation officer requires of other DoD travelers. Waivers from the normal travel procedures will be granted to SC travelers on the same basis and in the same manner as provided for DoD personnel traveling on regular defense business. See
Joint Federal Travel Regulations (JFTR), Volume 1, Uniformed Service Members;
and
Joint Travel Regulations (JTR), Volume 2, DoD Civilian Personnel.
C4.3.9.
Use of Federal Acquisition Regulation (FAR) and DoD FAR Supplement (DFARS).
When procuring for a foreign Government, DoD will apply the same contract clauses and contract administration as it would use in procuring for itself, except where deviations are authorized in the DFARS. If a sole source procurement requested by a foreign Government appears to be motivated by objectives in conflict with this requirement or with any U.S. legislation, the MILDEP’s proposed sole source denial memorandum must be forwarded to DSCA (Operations and Strategy Directorates, and the Office of General Counsel) for coordination.
C4.3.10.
Diversion of Materiel.
DoD policy requires a determination that the sale of a defense item will not degrade U.S. defense efforts by taking needed equipment from U.S. stocks (withdrawals) or disrupting deliveries of critical items from production for U.S. Forces (diversions), unless the sale of the item is in the overall U.S. national interest.
See Secton C6.4.6.
for information regarding diversions.
C4.3.11.
Insurance.
Purchasers must self-insure FMS shipments or obtain commercial insurance without any right of claim against the United States. This includes for returns. When requested by the purchaser, the IA may obtain insurance and include it as a separate LOA line item. For FMS cases already implemented, an Amendment can add authorized insurance coverage. Whenever an IA provides these services to a purchasing country or organization, it should obtain insurance from a U.S. insurance firm if possible. Providing insurance is an exceptional arrangement and the purchaser should be encouraged to make arrangements for insurance on subsequent cases.
C4.3.12.
Classification of Security Cooperation Information.
SC information shall be unclassified unless the DoS, the Under Secretary Of Defense (Policy) (USD(P)), the Assistant Secretary of Defense for International Security Policy (ASD(ISP)), or the Director, DSCA, directs classification in a particular situation, or unless the national security classification criteria of
Executive Order (E.O.) 12958,
DoDM 5200.01 Vol. 1.,
and corresponding MILDEP regulations warrant classification for national defense purposes.
C4.3.12.1.
Purchaser Requests to Classify Security Assistance/Security Cooperation Information.
Under exceptional circumstances and when approved by any of the organizational elements above in
Section C4.4.13.
and DSCA, SA/SC information may be classified at the request of the purchaser. See
Section 5.4.10.
for information the purchaser must provide when making such a request. FMS purchasers should be discouraged from requesting classification of FMS cases and related information. Under certain circumstances,
10 U.S.C. 130c
protects purchaser’s sensitive FMS information from public dissemination, although information so protected would not necessarily be classified. Congress has set a high standard for classification of FMS cases and, when congressional notification is required,
AECA, section 36(b)(1) (22 U.S.C. 2776)
requires a description of the damage to national security of the United States that could be expected to result from public disclosure of the information as justification.
C4.3.12.2.
Factors Determining Classification.
The primary factors considered by the DoS, USD(P), and the Director, DSCA, in requiring classification of FMS information are: whether the purchaser considers the information to be classified, the extent to which disclosure of the information would reveal the purchaser’s order of battle, taking into consideration the nature and quantity of defense articles sold and the degree to which the purchaser relies on the United States as a source of military supply; the extent to which disclosure of the information could be expected to stimulate demands by third countries upon the United States or upon other supplying nations for defense articles, thus encouraging global or regional instability or fostering an arms race; and to prevent unauthorized disclosure of the fact that a specific defense article is or may be sold to a particular foreign Government.
C4.3.12.3.
Levels of Classification.
All SC information that is classified is CONFIDENTIAL unless the DoS, USD(P), or the Director, DSCA, directs a higher level of classification, or unless the national security classification criteria of
E.O. 12958,
DoDM 5200.01 Vol. 1.,
and corresponding MILDEP regulations warrant a higher level of classification for national defense purposes.
C4.3.12.4.
Declassification.
All classified SC information shall be declassified when the originating agency so determines unless a longer period of classification is either directed in a particular situation by the DoS, USD(P), or the Director, DSCA, or is warranted by the national security classification criteria of
E.O. 12958,
DoDM 5200.01 Vol. 1.,
and corresponding MILDEP regulations for national defense purposes.
C4.3.13.
Department of Defense Support to Direct Commercial Sales.
U.S. industry may request defense articles and services from the DoD to support a DCS to a foreign country or international organization. Defense articles and/or services provided to U.S. industry must be accomplished pursuant to applicable statutory authority including
AECA, section 30 (22 U.S.C. 2770),
which authorizes the sale of defense articles or defense services to U.S. companies at not less than their estimated replacement cost (or actual cost in the case of services) for incorporation into end items to be sold by such company on a direct commercial basis to a friendly foreign country or international organization.
Section C11.5.
further clarifies authorized DoD support (articles or services) under this section. It is important that defense industry representatives identify early in the DCS planning process whether support from the DoD will be required. If DoD support is deemed necessary, meetings with DoD representatives should be arranged to discuss the level of support required and the method for funding the associated costs.
Page Updated 04-24-2012
