C9.4.1.
Government-Furnished Engineering Services.
The purchaser may request U.S. Government (USG)-furnished engineering services, or costs may be incurred, when providing these services as part of production. These services are offered on FMS cases and are reported and/or billed the same as other services. Estimated costs to provide engineering services are included in the estimated unit cost of the purchased item. Such costs also include the pro-rata share of government-furnished testing and evaluation services. If requested, a break-out of USG cost is provided to the purchaser. USG-furnished engineering services are charged directly to an FMS case as follows.
C9.4.1.1.
Performance of the service is necessary for production, configuration control, or reliability of the procured item. The charge is based on the proportionate share of work years needed for the FMS items. The charge is pro-rated based on the ratio of items produced for FMS purchasers to the total items produced in the same time frame.
C9.4.1.2.
The services are recurring in nature and are related to a current production run in which the FMS materiel is produced. Nonrecurring costs (NC) are recoverable via policies and procedures included in
DoD Directive 2140.2
and
DoD 7000.14-R, Volume 15, Chapter 7.
C9.4.1.3.
The services are allocable to a specific purchaser or purchaser’s program rather than performed to benefit the program in general. Some engineering work years may be required for general FMS administration. When the costs of such work years cannot be allocated to FMS case lines, they may be paid using FMS Administrative Surcharge funds (FMS Admin).
C9.4.2.
Manpower in Support of FMS Programs.
C9.4.2.1.
Case-Related Manpower Functions and Funding Sources.
Table C9.T2. describes case-related manpower functions and indicates which activities should be included as line items on the case (direct charges) and which activities are covered under the FMS Administrative Surcharge (indirect charges).
C9.4.2.2.
Standard Level of Service (SLS).
SLS activities are case-related activities covered by the FMS Administrative Surcharge. SLS activities/functions listed in Table C9.T2. under the “FMS Admin” column represent indirect charges funded by the FMS Administrative Surcharge and should not be included and/or priced as direct charges on the LOA. Requests to deviate from the funding sources shown on this table or requests for clarification regarding this table must be coordinated with the DSCA (Business Operations Directorate, Financial Policy and Internal Operations Division).
C9.4.2.3.
Program Management Services.
The IA may determine that USG program management services, beyond those indirect activities covered under the “Standard Level of Service,” are necessary for successful program implementation and execution.
C9.4.2.3.1.
Cases “Accepted” After August 1, 2006.
For LOAs or case line items “accepted” after August 1, 2006, any program management services will be included on well-defined, services line items on the case. The tailored line item description note for each of these line items must include details describing exactly what services will be provided and the length of time they will be performed.
C9.4.2.3.2.
Cases “Accepted” Prior to August 1, 2006.
For cases “accepted” prior to August 1, 2006, program management services were included on Program Management Lines (PMLs) on the cases. Table C9.T3. identifies the types of sales where PMLs may have been used. PMLs were identified on LOA documents using Generic Code R6B. Generic Code L8A was used on older cases to identify Case Management Lines. While R6B and L8A may no longer be added to cases, PMLs and Case Management Lines that were “accepted” prior to August 1, 2006 may be used until closure of those cases as long as the activities are within the scope of the line as written as of August 1, 2006. Adjustments may be made to these existing PMLs via LOA Modifications or LOA Amendments as long as these adjustments are within the current scope of the PML; no adjustments will be made to increase the scope of these line items. Any additional scope required may be added as new line items in accordance with
Section C9.4.2.3.1.
The FMS Administrative Surcharge is not applied to PMLs. The following must be included on all LOAs, Amendments, or Modifications that include PMLs: “Subtotal Cost of Ordered Articles and Services and PML total value.” The total of these two values is the block (8) value of the document.
Table C9.T2. Case-Related Manpower Functions and Funding Source Manpower Matrix
Table C9.T3. Historical Rules for Use of Program Management Lines (PMLs)
| NOTE: FMS cases “accepted” prior to August 1, 2006 may have included PMLs. This table provides historical information for the rules that governed the use of PMLs on those cases. No new PMLs may be included on cases (or new case lines) “accepted” on or after August 1, 2006. Program management costs may be included on cases after August 1, 2006, if justified. Inclusion of these costs should follow the same general guidelines on this table. |
| What Types of Sales MAY Include Program Management Lines? |
System sales of aircraft, ships, shipboard equipment, missiles, combat vehicles, radars, or communications electronics which include the major end item and necessary logistical and training support
Modifications that improve the operational capability of systems already in purchaser inventories
Non-standard equipment, systems, or services
Sales that include program acceleration
Coproduction programs
|
| What Types of Sales MAY NOT Include Program Management Lines? |
Sales from stock other than weapon systems
Follow-on support, including publications, maps, and charts
Entirely for services
Individual major end item sales
Modifications other than those that improve the operational capability of systems
Routine non-Major Defense Equipment (MDE) sales
|
C9.4.2.4.
Manpower Reporting Requirement.
When forwarded to DSCA for countersignature, the LOA Manpower and Travel Data Sheet (MTDS) must accompany any LOA that contains case-funded manpower. An MTDS is also required for Amendments that change the scope (increase or decrease) of lines involving manpower, as well as for Modifications that increase the value of lines involving manpower. Figure C9.F2. is the MTDS format for manpower pricing. The MTDS may be provided to purchasers upon request. The following services are exempt from the MTDS requirement:
The MTDS for Amendments must reflect the total personnel, travel, and support costs for lines that include manpower, not just the differences between the previous and revised amount; this applies to all lines being revised, whether an increase or decrease in scope. The MTDS for Modifications must reflect the total personnel, travel, and support costs for lines that include manpower, not just the differences between the previous and revised amount; this applies only to lines being revised due to price increases.
Figure C9.F2. LOA Manpower and Travel Data Sheet (MTDS)
C9.4.2.5.
Manpower Funding Sources.
Manpower for FMS case-related programs is funded from one of two sources: the FMS Administrative Surcharge or FMS case lines. See
Table C9.T2.
for a description of case manpower functions and how each function should be funded. Requests to deviate from these funding sources must be coordinated with the DSCA (Business Operations Directorate, Financial Policy and Internal Operations Division).
C9.4.2.6.
Program Management Services - Tracking Costs.
An auditable methodology must be used to document work each individual performs on a program management services line (for cases “accepted” on or after August 1, 2006) or a Program Management Line (for cases “accepted” prior to August 1, 2006). Personnel charges must be identifiable by position number, employee identification number, or other traceable means.
C9.4.3.
Training.
DoD 7000.14-R, Volume 15, Chapter 7,
provides detailed guidance for the pricing of training on FMS cases and under the International Military Education and Training (IMET) funded program. The following paragraphs provide additional policy applicable to the various tuition rates (Rates A – E). See
Chapter 10
of this Manual for information on Travel and Living Allowance (TLA) charges for the IMET funded program.
C9.4.3.1.
Change in Status if IMET-Recipient Country.
C9.4.3.1.1.
Under
AECA, section 21(a)(1)(C) (22 U.S.C. 2761(a)(1)(C)),
countries purchasing education and training via an FMS case and using national funds are to be charged the incremental rate (Rate C) if they are concurrently in receipt of IMET funds (receiving IMET funds in the same fiscal year as the case). If a country is not concurrently in receipt of IMET, it is not eligible for incremental pricing of education and training paid on LOAs accepted/signed after the end of the fiscal year of its IMET funding allocation.
C9.4.3.1.2.
The rate to be charged for education and training is established at the time of sale, not at the time that the education and training begins or periods to which it may extend. The rate, whether incremental or full, will continue to apply to all education and training provided under the LOA, or Amendments to it, until the total value of the training line has been obligated. Note: Incremental pricing and full pricing rates may not be mixed on the same training line.
C9.4.3.1.2.1.
If a country is concurrently receiving IMET funding at the time an LOA is accepted/signed, then the LOA should be priced using the incremental rate (Rate C) for education and training, as referenced in
DoD 7000.14.-R, Volume 15, Chapter 7, paragraph 0710.
C9.4.3.1.2.2.
If a country is not in receipt of IMET funding at the time of LOA acceptance/signature, then the full rate (Rate A) for education and training is to be charged.
C9.4.3.1.2.3.
If a country is no longer in receipt of IMET yet has an LOA/Amendment that has been accepted/signed using incremental pricing and there is a requirement to increase the dollar value of a training line for an adjustment, e.g., a student’s training on that line exceeded the programmed training time by one week to which additional costs were incurred, the incremental pricing applicable to the line when the case was accepted/ signed is the appropriate pricing to charge to the line. If, on the other hand, there is a requirement to increase the dollar value of training on the original LOA/Amendment for other than an adjustment, e.g., adding another course or adding additional students (change in scope), a new line will need to be established that prices the new requirement at the full cost (Rate A).
C9.4.3.1.2.4.
If an LOA/Amendment has been accepted/signed using full pricing (Rate A) and a country subsequently begins to receive IMET funding during any fiscal year in which training is still to be performed under the case, then that case may be amended to delete any unobligated funds from the full-priced education and training line and a new line added on the LOA which may then be priced at the incremental rate (Rate C) for future education and training requirements. There will be no retroactive/backward adjustments for training already started or scheduled (student in the “training track”). Students that began education and training with the full rate cannot retroactively receive the incremental rate when the case is amended. Only those students starting education and training on or after the Amendment is accepted/signed are eligible to receive the incremental rate
C9.4.3.2.
Civilian Unfunded Retirement.
Civilian Unfunded Retirement is a factor applied to civilian pay costs that is recouped from FMS billings. The Office of the Under Secretary of Defense (Comptroller) (OUSD(C)) publishes annually the acceleration factor(s) applicable to civilian unfunded retirement. These factors may be found at
http://comptroller.defense.gov/rates/;
select Tab D of the applicable year. The acceleration percentage factor is applied to the combined base pay and leave and holiday pay to determine the cost. Civilian unfunded retirement is applicable to full cost tuition rates and not applied to incremental tuition rates.
C9.4.3.3.
Military Fringe Benefits.
Military personnel services are priced using the applicable DoD Military Personnel Composite Rate plus an acceleration factor that covers medical health care costs of active duty personnel and their dependents. In addition rates include a per capita normal cost for Medicare-Eligible Retiree Health Care (MERHC) accruals. These factors are published annually by OUSD(C) at
http://comptroller.defense.gov/rates/;
select Tab K of the applicable year. Military fringe benefits consist of quarters (family housing), subsistence, medical (hospital), and other personnel support (e.g., commissary and exchanges). The costs are applicable to both direct and indirect military salaries and are computed by applying the acceleration factors for officer and enlisted personnel. These costs are included for all military personnel allocated to the training course. Tuition rates D and E exclude both direct and indirect military salaries; therefore, military fringe benefits are excluded as well. Military fringe benefits costs, used as part of base operating support (BOS) costs and allocated to training courses, are used as indirect costs in the tuition rates. The costs must not be duplicated in the tuition rates by also being included as direct and indirect costs under Pay and Fringe Benefits.
C9.4.3.4.
Maintenance and Repair of Facilities.
These costs are part of the normal base operating costs. When training facilities are used for SA courses, the costs are included as indirect costs in the tuition rates.
C9.4.3.5.
Attrition Charges for FMS Training.
Attrition charges are included in tuition Rate A for flying and/or non-flying training courses whenever the training or educational course includes the use of training equipment or operational equipment used as training aids. For all other FMS tuition rates (e.g., Rates B, C, and D, the liability statement, as provided in
DoD 7000.14.-R, Volume 15, Chapter 7,
is applied. Attrition charges are recorded directly into the attrition account. DSCA must approve use of these funds. When equipment is damaged beyond repair due to FMS student error, a report of the loss and request for funding to cover procurement of the replacement items is submitted for DSCA (Business Operations Directorate) approval. After DSCA approval is obtained, the MILDEP forwards a request (with a copy of the DSCA approval) to DFAS Indianapolis to process the payment from the attrition account to the appropriate recipient(s).
C9.4.4.
Asset Use, Tooling Rental, or Facility Rental.
C9.4.4.1.
Charges for Use of USG-Owned Facilities.
Fair pricing legislation removed the requirement to apply asset use, tooling rental, or facilities rental charges on FMS cases using USG property. Commercial sales of defense articles to any foreign country or international organization include charges for use of USG-owned facilities, plants, and production or research equipment in connection with the production of the defense articles. Collections of these costs are deposited into the Miscellaneous Receipts Account 3041.
C9.4.4.2.
Rental Charges for Use of DoD Assets.
Commercial sales of defense articles produced in Government-owned facilities or with Government-owned industrial plants and production or research equipment for which a rental charge is assessed in accordance with the
Federal Acquisition Regulation (FAR) Part 52.245-9
and the
Defense Federal Acquisition Regulation Supplement (DFARS) Part 245.4
must include the rental charge in the sales price. The rental charge in commercial contracts may be waived on a case-by-case basis. See
Section C9.6.4.
C9.4.4.3.
Use of U.S. Industrial Plant Equipment or Production and Research Property for Foreign Countries or International Organizations.
Non-Government use of industrial plant equipment or production and research property requires prior written approval of the contracting officer or Departmental level approval, depending upon the percentage of usage, in accordance with provisions in the
DFARS Part 245.405
and
Part 245.407.
Such approval may be granted only if use does not interfere with U.S. requirements, and the work is in support of FMS or a direct commercial sale approved under the AECA. The rental charges in commercial contracts can be waived on a case-by-case basis. See
Section C9.6.4.
C9.4.5.
Nonrecurring Cost (NC) Recoupment Charges.
Title 32 Code of Federal Regulations (CFR) Part 165,
DoD 7000.14.-R, Volume 15, Chapter 7,
and
DoD Directive 2140.2
provide detailed guidance on establishing NC charges and pricing these costs on LOA documents. These costs do not apply to cases that are fully financed with non-repayable Foreign Military Financing (FMF) or non-repayable Military Assistance Program (MAP) funds. See
Section C9.6.3.
on NC waiver requirements and processes. For questions regarding the NC charges contact DSCA (Strategy Directorate). See
Appendix 6
for LOA notes relating to NC charges.
C9.4.5.1.
NC Approval Process.
The DoD Components submit requests to establish an NC to the DSCA (Programs Directorate) using the formats and pricing methodology in
DoD 7000.14.-R, Volume 15, Chapter 7.
Detailed worksheets accompanying NC recoupment charge establishment requests will be marked “For Official Use Only (FOUO)” unless circumstances require formal classification. DSCA (Programs Directorate) staffs the package within DSCA, Under Secretary of Defense for Acquisition, Technology and Logistics (USD(AT&L)), and Under Secretary of Defense (Comptroller) (USD(C)). After coordination, the Director, DSCA approves or disapproves the NC charge and the Defense Security Assistance Management System (DSAMS) NC table is updated.
C9.4.5.2.
Estimated NC Charges.
There may be instances when an NC charge is being developed at the same time that an LOA is being prepared to sell the item in question. If there is not enough time to complete the NC approval process, an estimated amount for NC should be included in the unit price of the item on the LOA. The LOA should also include a note informing the purchaser that NC charges on the applicable line are estimates only and advising that a modification shall be done to adjust the price once the approved NC value is known. See
Appendix 6
for exact note wording.
C9.4.5.3.
Determining NC Charges When Documentation is Not Available.
In cases when historical documentation cannot be found, the MILDEP will calculate the pro rata NC at 5 percent of the last known DoD acquisition cost. The MILDEP is required to submit the proposed NC calculation and the basis for concluding that the SME item would have met the MDE threshold to DSCA (Strategy Directorate). Refer to
DSCA Policy Memo 12-09, dated February 14, 2012.
C9.4.5.4.
Reporting.
NC collections are reported on the DSCA(Q)1112 report prescribed in
DoD 7000.14.-R, Volume 15, Chapter 7.
The report is submitted quarterly by each of the DoD Components, to the DSCA (Business Operations Directorate, Financial Policy and Internal Operations Division Operations Directorate) within 45 days of the end of each quarter.
C9.4.6.
Royalties.
As a general rule, the FMS purchasers are treated similar to other Federal Agencies when assessing royalties to a purchase.
C9.4.6.1.
Royalties for use of intellectual property that is not subject to contractor proprietary rights restrictions normally are not allowed to be collected on FMS cases. If the USG is required to pay a royalty to a contractor for intellectual property that is subject to contractor proprietary rights restrictions, then it is a legitimate charge to the FMS case and should be included in the end item price. In any situation where a royalty is being considered for collection against an FMS procurement, and the same royalty would not be collected against a U.S. Federal Agency procurement, the IA should contact the DSCA (Business Operations and Strategy Directorates) for guidance.
C9.4.6.2.
FMS cases implemented prior to January 1, 1998, contained charges (referred to as royalty fees) for the use of technical data packages (TDPs) used to manufacture or produce items for non-USG use. These charges were reflected on a separate line on the LOA. For those FMS cases, financial accounting processes and reporting continue until case closure. Cases implemented on or after January 1, 1998, do not include royalty fees for use of TDPs that are not subject to contractor proprietary rights restrictions.
C9.4.7.
Small Case Management Line (SCML).
From 1 August 2006 through 2 July 2012, DSCA implemented an effectiveness measure to reduce the volume of small dollar cases. It was recognized that a certain level of FMS Administrative support was required in the implementation/execution of these cases. Based on analysis of data, the amount determined appropriate to charge was $15,000. The Small Case Management Line (SCML). Subsequent review of the initiative indicates that the SCML has served its intended purpose - a reduction in the number of small dollar cases. DSCA rescinded the application of the SCML effective with cases implemented/ accepted on/after 3 July 2012. Should this trend not continue and the number of small dollar cases return to their previous level, DSCA reserves the right to reinstitute the application of the SCML. Implementation instructions applicable to the rescission are in paragraph C9.4.7.1. Instructions for the SCML are in paragraphs C9.4.7.2. through C9.4.7.5.
C9.4.7.1.
SCML Rescission Information.
C9.4.7.1.1.
Cases "Accepted" or "Implemented" prior to 3 July 2012.
All cases "accepted" or "implemented" prior to 3 July 2012 that contain a SCML will retain the SCML in effect at the time they were accepted/implemented unless the current or future case value changes to preclude its application.
C9.4.7.1.1.1.
Cases that decrease in dollar value below $400,000 will not be required to add the SCML.
C9.4.7.1.1.2.
Cases with an existing SCML where the value increases such that the SCML requirement is rescinded, but later on decrease in value below $400,000, will not require a SCML.
C9.4.7.1.2.
Cases currently in "Development", "Writing" or "Review" Status.
All cases which are still being developed by the Implementing Agency (not yet submitted to DSCA for countersignature or not yet "offered" if countersignature is not required) should not include a SCML if the Offer Expiration Date (OED) falls on or after 3 July 2012.
C9.4.7.1.3.
Cases Currently in "Offer" Status.
All cases currently in offered status where a SCML is required should be reviewed by the Implementing Agency to determine whether the SCML requirement is a new addition to the case. If it is a new addition, the SCML should be eliminated. If the case had the SCML prior to the implementation of this policy, the SCML should execute in accordance with original policy.
C9.4.7.2.
SCML General Information.
All cases "accepted" on or after August 1, 2006 must collect a minimum of $15,000 in FMS Administrative Surcharges. For cases "accepted" on or after August 1, 2006, if the case value is so small that the FMS Administrative Surcharge amount calculated is less than $15,000, a separate line item (an SCML) will be added to the case so that the FMS Administrative Surcharge and the SCML, combined, total $15,000. [Example: For a case where the calculated FMS Administrative Surcharge is $500, the SCML value would be $14,500.]
C9.4.7.2.1.
The value of the SCML line item will be adjusted as necessary to allow for changes in case value when the case is amended or modified. If a case "accepted" on or after August 1, 2006 does not have an SCML initially but is modified or amended later to decrease the case value such that the FMS Administrative Surcharge collection is anticipated to be reduced below $15,000, an SCML will be added to the case to make up the difference in value to reach $15,000 - even if all other lines are being reduced to $0.
C9.4.7.2.2.
Once an SCML has been added to a case, it cannot be deleted. It can be reduced to $0 if the calculated FMS Administrative Surcharge reaches $15,000, but the SCML line item will remain on the case.
C9.4.7.2.3.
When the FMS Administrative Surcharge is waived for a case, the SCML will be considered part of that waiver and will not be charged.
C9.4.7.2.4.
The FMS Administrative Surcharge is not assessed against the SCML
C9.4.7.2.5.
A minimum of $15,000 in administrative charges (combination of the FMS Administrative Surcharge and the SCML) will be retained by the USG when the case is closed unless an exception is granted by the DSCA (Business Operations Directorate, Financial Policy and Internal Operations Division). See
Section C6.8.4.2.
for additional information.
C9.4.7.3.
SCML Scope.
C9.4.7.3.1.
The SCML requirement applies to all cases (both FMS and BPC) "accepted" on or after August 1, 2006 where the case is being financed with any type of funding (e.g., national funds) other than Foreign Military Financing (FMF); or the case is being financed using multiple sources of funding (one of which may be FMF); or the case is being financed wholly using FMF monies and the purchaser received more than $400,000 in FMF funds in the previous Fiscal Year.
C9.4.7.3.2.
The SCML requirement does not apply to cases where the purchaser is using FMF monies to wholly fund the case and received between $1 and $400,000 in FMF funds in the previous year. Any exceptions to this policy require the approval of the Director, DSCA.
C9.4.7.3.3.
The SCML requirement does not apply to Excess Defense Articles (EDA) cases that are written solely for the purpose of transferring the grant item. These cases will have $0 case value. If the EDA case includes support (e.g., transportation or refurbishment services), the SCML will apply.
C9.4.7.3.4.
The SCML requirement does not apply to any case established for Presidential Drawdowns using the "S9" country code.
C9.4.7.4.
SCML Case-Writing Requirements.
C9.4.7.4.1.
The Military Articles and Services List (MASL) line and generic code used for the SCML is: (R6C) SMALLCASESUPT SMALL CASE SUPPORT EXPENSES
C9.4.7.4.2.
A one (1) month availability for the SCML will be used on the LOA (block (5) SC/MOS/TA). This will ensure that the entire value of the SCML is included in the initial deposit. Source of supply code "S" must be used for this line. The Delivery Term Code (DTC) and Offer Release Code (ORC) for this line should both be left blank (which will print as a dash on the LOA document).
C9.4.7.4.3.
Primary Category Code (PCC) CE1 must be used when pricing this line in DSAMS. No Indirect Pricing Components (IPCs) should be used against this line. DSAMS line type must be entered as CE (case expense).
C9.4.7.4.4.
The SCML note must be included on all cases that include an SCML. See
Appendix 6
for specific note wording.
C9.4.7.5.
Case Closure Requirements for SCMLs.
C9.4.7.5.1.
Increases in Case Value.
Cases with expenditures that exceed the current case value require an Amendment or Modification to increase the case value before the case can be closed. See
Section C6.7.2.1.2.
These Amendments and Modifications must include an appropriate reduction to an existing SCML. If the net case value is increased above the amount needed to achieve $15,000 in calculated FMS Administrative Surcharge value, the SCML value will be reduced to $0. The SCML will not be deleted as it must remain on the case and in the DIFS system to provide an audit trail to the supporting data for previously billed amounts.
C9.4.7.5.2.
Reductions in Case Value - SCML Already On the Case.
Any case which is proposed to close at a value less than its current value will require an increase to an existing SCML. Increasing an SCML at closure DOES NOT require a case Modification or Amendment. Instead, the case manager must notify the DFAS accountant via e-mail of the required change in the SCML value. The "C1I" closure certificate update cannot be sent to DIFS until the SCML delivery and admin transfer for the increase are recorded in DIFS.
C9.4.7.5.3.
Reductions in Case Value - SCML Not On the Case.
There may be instances when a case that does not include an SCML (e.g., the calculated FMS Administrative Surcharge value was $15,000 or greater) is being reduced such that the new, lower case value now mandates that an SCML be included (e.g., the new calculated FMS Administrative Surcharge is less than $15,000). For cases that were accepted on or after August 1, 2006, an SCML must be added to cover the difference between the calculated FMS Administrative Surcharge and $15,000 before the case can be closed. A case Modification is required to add an SCML to the case. For cases that were accepted before August 1, 2006, the SCML will not apply regardless of the reduction in case value.
C9.4.7.5.4.
SCML Delivered Amount Adjustments.
When the delivered FMS Administrative Surcharges on non-SCML lines result in the need to adjust the SCML delivered amount upward and that adjustment would result in the delivered value exceeding the ordered value on the SCML line by less than $1.00 (usually as a result of rounding), DFAS-IN is authorized to process an FMS Administrative Surcharge flat charge to the first, viable non-SCML line item on the case for any amount under $1.00. In this circumstance, a modification to the case is not required.
Page Updated 07-10-2012
