International Acquisition and Exportability (IA&E) Elements March 2017 TLO: Explain international considerations in defense acquisition ELOs: Describe legal and regulatory mandates for developing international acquisition strategies Compare forms of international acquisition programs Describe Technology Security and Foreign Disclosure planning considerations Describe how international acquisition can contribute to weapons system affordability and interoperability Describe benefits of and methods for incorporating defense exportability features in initial designs Frank D. Kenlon Professor of International Acquisition (Intermittent) Defense Systems Management College – International Dept Frank.Kenlon@dau.mil, (410) 610-5040

International Acquisition & Exportability (IA&E) New term used in DoDI 5000.02 Defense Exportability Integration Sales & Transfers Technology Security & Foreign Disclosure International Cooperative Programs International Contracting

International Acquisition/ Security Cooperation Mechanisms Security Assistance International Armaments Cooperation Direct Commercial Sales (DCS) Building Partner Capacity (BPC) Requirement Foreign Customer Mutually Determined DoD Determined Relationship Buyer-Seller Partner Provider-Receiver Form of Agreement Foreign Military Sales (FMS) Letter of Offer and Acceptance (LOA) International Cooperative Program (ICP) Agreement Export License & Industry Contract(s) Psuedo-LOA Funding Equitably Shared DoD Program Management DoD Implementing Agency (IA) Joint DoD IA Contract Privity DoD IA & Industry Partner Nations & Industry Foreign Purchaser & US Industry Implemented by different organizations under various laws and procedures

Key Legislation Title 22 Legislation Arms Export Control Act (AECA) Foreign Military Sales (FMS) Direct Commercial Sales (DCS) Cooperative Programs Foreign Assistance Act (FAA) Grant Aid International Military Education and Training (IMET) Excess Defense Articles (EDA) Title 10 Legislation Building Partner Capacity (BPC) Cooperative RDT&E Acquisition and Cross Servicing Agreements (ACSAs)

Strategic Guidance National Security Strategy DoS/USAID Strategic Plan Strengthen alliances to defeat global terrorism Work with others to defuse regional conflicts Develop agenda for cooperative action with other centers of global power DoS/USAID Strategic Plan Counterterrorism Reduce/Eliminate WMD Promote conflict prevention & resolution Conduct security cooperation & security sector reform National Defense Strategy Shape the choices of key states Strengthen & expand alliances and partnerships Secure U.S. strategic access & retain freedom of actions National Military Strategy Support national efforts to address complex security challenges Deepen security relations with our allies and create opportunities for new partnerships Prepare for an increasingly dynamic and uncertain future Strategic Guidance for DoD Challenging global security environment Delicate balance between available resources and security needs Maintain broad/versatile capability portfolio

OSD Oversight Secretary of Defense Security Assistance –––––––––––––––––––––––– Deputy Secretary of Defense Under Secretary (Policy) Under Secretary (Acquisition, Technology and Logistics) Defense Security Cooperation Agency (DSCA) Defense Technology Security Administration (DTSA) Director International Cooperation (AT&L IC) Security Assistance Building Partner Capacity Technology Security International Armaments Cooperation

TSFD and Export Control Basics Fundamental Security Considerations Access Protection + Release Conditions Not transfer or use for other purposes without U.S. consent Provide substantially the same degree of protection as U.S. Type of USG/DoD Authorizations TSFD Export Foreign Visits

USG/DoD TSFD Authorizations Internal MILDEP processes Four primary DoD processes Eight specialized DoD processes All running independently under leadership of different offices Required for FMS and cooperative programs; prerequisites to Export License approval for DCS

USG/DoD TSFD Processes MILDEP Processes DoD Lead: Various MILDEP-specific various MILDEP Process Other DoD Processes Org.-specific various Few documented processes Interagency process LO/CLO AT&L Primary AT SAP SAPCO Specialized DSC AT&L + Policy Intel USD(I) Data Links/WF DoD CIO PNT/GPS COMSEC NSA & DoD CIO GEOINT NGA MTCR Policy NDP EW None No single process NVD/INS DTSA

TSFD Oversight Arms Transfer and Technology Release (ATTR) Senior Steering Group (SSG) established in DoDD 5111.21: Overarching DoD authority to ensure clear senior-level direction Serves as appeals board and mediation body USD(P) & USD(AT&L) co-chairs with interagency participation TSFD Office (TSFDO) also established in DoDD 5111.21: ATTR SSG Executive Secretariat and assesses/recommends changes to policies Develops/implements procedures and checklists, coordinates documentation and policy, conducts outreach

Defense Exportability “Headwaters” Joint Staff, CoCOMs & Services Mil-to-Mil engagement with Allies & Friends JCIDS Guidance Non-Materiel Solutions DOTMLPF-P Procurement or Modification What does DoD want to sell Or Transfer In the Future? Additional Production Or Modification Materiel Solutions Cooperative Development Program New DoD Joint Program New DoD Component Program

Defense Exportability Dilemma Provide required capabilities quickly to allies and friends Protect the “crown jewels” of U.S. defense technology How can the USG/DOD best balance these two competing demands? Where does the money come from needed accomplish these goals?

How Many Configurations? Few Simpler design and test Simpler production and logistics Easier upgrades More affordable Many Greater customer choice Treats countries differently Tailored logistics and upgrades More expensive DoD and partner/customer nations must compromise to achieve optimal outcomes for all (easy to say, hard to do)

Defense Exportability Features (DEF) Pilot Program FY11 NDAA directed SECDEF to “carry out a pilot program to develop and incorporate technology protection features in a designated system during the R&D phase of such system.” Program Scope/Status Identify MDAPs for which there is significant anticipated export demand and whose technical aspects are amenable to DEF Pilot program to provide funding to evaluate exportability and facilitate planning for, design, and incorporation of exportability features during RDT&E AT&L selects candidate programs from MILDEP nominations FY12 NDAA change Industry to share at least half the cost of developing and implementing program protection features FY14 NDAA extended pilot program through October 2020 Defense Exportability is Part of BBP 2.0

Defense Exportability Activities IOC A C B LRIP Technology Maturation & Risk Reduction. Production & Deployment DRFPRD Materiel Solution Analysis CDD-V CDD ICD Draft Operations & Support Materiel Development Decision FRP Sustainment Disposal FOC Engineering & Manufacturing Development CDR CPD PDR Exportability Assessment Projected sales Technology complexity Exportability Feasibility Studies Conducted with program contractor Included in TMRR contract Funded by program or DEF PE Industry provides 50% Exportable Designs Funded by program, cooperative program or customer, or industry (or combination) May be multiple configurations Exportable Version Production Funded by customer Exportable Version Depot & Spares Activities Require MDA Approval

Backup Charts

Security Cooperation is a DoD Term (Joint Pub 1-02) All DoD interactions with foreign defense establishments to build defense relationships that promote specific US security interests, develop allied and friendly military capabilities for self-defense and multinational operations, and provide US forces with peacetime and contingency access to a host nation. Security Cooperation is a DoD Term (Joint Pub 1-02)

Security Cooperation Elements Elements that involve defense acquisition Combined Exercises Equipment Sales & Financing Defense Contacts & Familiarization Int’l Armaments Cooperation Support to Operations Humanitarian Efforts & Civic Assistance Training & Education

Benefits Economies of Scale Maintain hot production base DCS FMS ICP Economies of Scale Production Operations & Support Maintain hot production base Share sustaining engineering costs Share production line shutdown costs Share RDT&E costs Share production non-recurring costs

Security Assistance Programs Security Assistance is a State Department Program Program Administration Responsibilities Department of Defense Foreign Military Sales (FMS) Foreign Military Financing Program (FMFP) Int’l Military Education & Training (IMET) Foreign Military Construction Services (FMCS) Leases Drawdowns Excess Defense Articles (EDA) Department of State Peacekeeping Operations Int’l Narcotics Control & Law Enforcement Nonproliferation, Antiterrorism, Demining, and Related (NADR) Direct Commercial Sales (DCS) US Agency for Int’l Development Economic Support Fund (ESF)

Foreign Military Sales (FMS) LOR From Stock Requisition Letter of Request LOA Contract Letter of Offer and Acceptance Foreign Government U.S. Government Services, Sale of U.S. defense equipment/services by U.S. Government Buyer-seller relationship Foreign Funds (or U.S. grants/loans) with administrative surcharge Conducted under State Department Title 22 authority Information, or New Production

Foreign Military Sales Trends

The Scale of FMS FMS and Service Procurement: 5 Year Average Average annual procurement budget over last 5 years (FY09-13): #1. $41.6 Billion USAF #2. $39.7 Billion FMS #3 $37.5 Billion U.S. Navy #4 $32.4 Billion U.S. Army #5 $8.4 Billion USMC   If we remove the FY12 Saudi Arabia F-15 sale and recalculate: #1. $41.6 Billion USAF #2 $37.5 Billion U.S. Navy #3 $33.7 Billion FMS #4 $32.4 Billion U.S. Army #5 $8.4 Billion USMC USMC USMC Cleared for Public Release

International Armaments Cooperation (IAC) Cooperative research, development, and acquisition projects and programs Enabling Programs Personnel exchange (ESEP & APEP) RDT&E Information Exchange Program (IEP) International Cooperative R&D (ICR&D) program Coalition Warfare Program (CWP) Foreign Comparative Testing Program (FCT) International Cooperative Programs (ICPs)

International Cooperative Program Agreement Work U.S. and/or Foreign Government Activity Foreign Government(s) U.S. Government U.S. and/or Foreign Industry Contract Service, Acquisition or technology project in any Defense Acquisition Management System phase Partnering relationship Jointly managed Costs, benefits, risks shared equitably Information, or New Production

Interim DoDI 5000.02 (Enclosure 2, paragraph 10) Acquisition Strategy “Program management is responsible for integrating international acquisition and exportability considerations into the program’s Acquisition Strategy at each major milestone or decision point. Program management will consider the potential demand and likelihood of cooperative development or production, Direct Commercial Sales, or Foreign Military Sales early in the acquisition planning process; and, where appropriate, program managers will pursue cooperative opportunities and international involvement throughout the acquisition life cycle to enhance international cooperation and improve interoperability in accordance with DoD Instruction 2010.06.” Interim DoDI 5000.02 (Enclosure 2, paragraph 10)

Allied Interoperability Equipment procured for U.S. forces employed in NATO, other allied, and coalition operations must be standardized or at least interoperable with equipment of allies and coalition partners DoD complies with U.S.-ratified International Standardization Agreements to maximum extent feasible, subject to systems engineering tradeoffs Program Managers to pursue opportunities throughout the acquisition life cycle that enhance international cooperation and improve interoperability DoDI 2010.06, Materiel Interoperability and Standardization with Allies and Coalition Partners

Direct Commercial Sales (DCS) Sale of defense articles, services, or training made or provided by U.S. defense industry to a foreign entity Not administered by DoD and do not involve a government-to-government agreement Foreign entity contracts directly with U.S. company USG control procedure is accomplished through licensing

Direct Commercial Sales (DCS) $ Contract Export License Application Signed Export License Foreign Entity U.S. Company Foreign entity purchases U.S. defense equipment/services from U.S. company U.S. Government control through licensing Department of State for military items Department of Commerce for civil & dual use items U.S. Government

Program Managers should monitor program contractors’ marketing efforts FMS vs DCS DoD is generally neutral whether a foreign country purchases through FMS or DCS Certain items can be designated FMS only; based on complexity, sensitivity, interoperability, relationships Most major system DCS programs will have an FMS companion effort for FMS-only items (i.e. a hybrid program) Program Managers should monitor program contractors’ marketing efforts

Building Partner Capacity (BPC) Title 10, DoD Security Cooperation programs executed through the FMS infrastructure Differences from traditional FMS USG Requesting Authority identifies requirement Funded by the USG “Pseudo”-LOAs are not signed by country Title transfers in country Variety of programs conducted under multiple legal authorities List of programs and BPC policies are contained in Chapter 15 of the SAMM

Building Partner Capacity (BPC) Stock Requisition MOR Pseudo LOA Memorandum of Request Letter of Offer and Acceptance Contract Requesting Authority Implementing Agency Provision of U.S. defense equipment/services by U.S. Government Specific programs authorized in annual NDAAs Conducted under Title 10 authority with DoD funding Foreign Government