A Comparison: Direct Commercial Sales & Foreign Military Sales Lesson #3003 5 January 2017

A Comparison: Direct Commercial Sales & Foreign Military Sales

World Defense Market Tornado F-18 F-7/MiG-21 MiG-29 F-16 Gripen JAS-39 Eurofighter Mirage Tornado F-15 F-16 F-18 MiG-29 F-7/MiG-21

Foreign Purchaser’s Option DoD View DoD is generally neutral whether a foreign country purchases through FMS or DCS DCS? Security Assistance Management Manual FMS? Foreign Partner

FMS DCS What is the Best Choice? Implied Relationship Management Financial Time Follow-On Support Non-Standard Offsets FMS DCS

Foreign Military Sales Buyer/Seller Relationships United States Government CONTRACT LOA Foreign Government United States Contractor

Direct Commercial Sale Buyer/Seller Relationships United States Government L I C E N S Foreign Government United States Contractor CONTRACT

DSCA/State Department can require “FMS-Only’’ sales FMS-Only Designation DSCA/State Department can require “FMS-Only’’ sales Evaluation Criteria Pol-Mil relationship with purchaser New or complex system or service Security of sensitive technologies Feasibility of FMS-DCS hybrid

Concurrent Negotiations Military services may not engage in FMS/DCS comparison studies When FMS is in conflict with DCS: FMS data may be withdrawn if DCS activities are later initiated No FMS data until ongoing DCS activities have ceased Can be done in certain circumstances Countries national policy requirement DSCA must grant an exception

FMS or DCS Most defense articles and services can be provided through either FMS or DCS Is one method the best for all procurements?

FMS DCS What is the Best Choice? Implied Relationship Management Financial Time Follow-On Support Non-Standard Offsets FMS DCS

FMS/DCS Implied Relationship Time Customer preference for working with DoD or defense contractor? Political considerations in country Time Many factors to consider One is not always quicker than the other Each avenue needs to be analyzed

Program management by DoD – “Leave the driving to us” Management - FMS Program management by DoD – “Leave the driving to us” Experienced personnel familiar with the equipment FMS charges for this management service Administrative surcharge Non-recurring costs Quality Assurance Contract administration services (CAS)

Foreign purchaser must assume this responsibility Management - DCS Foreign purchaser must assume this responsibility Contract negotiation Contract administration Technical knowledge Legal review There will be a cost for this--will it exceed FMS charges? Will there be additional benefits that outweigh additional costs?

USG consolidates requirements USG pays on-time Financial Issues - FMS Difficult to compare LOA estimated price Total Package Approach (TPA) USG consolidates requirements USG pays on-time

Financial Issues - DCS DCS: fixed price? Without having to adhere to DoD procedures, contract prices might be lower Lower quantity may cause higher prices Use commercial banking procedures--less money tied up than in Trust Fund Prompt billing

FMS/DCS Follow-on Support (FOS) Non-standard Support Offsets Can use FMS FOS with DCS major weapon systems sale and vice versa DCS: Heavily dependent on end item and contractor Non-standard Support FMS or DCS FMS: provides unique non-standard support programs Offsets Always between customer and contractor

Range of Customer Involvement Traditional FMS Sole Source FMS FMS with Offsets Combination FMS / DCS DCS with FMFP DCS with USG contract admin Traditional DCS

FMS DCS What is the Best Choice? Implied Relationship Management Financial Time Follow-On Support Non-Standard Offsets FMS DCS

FMS or DCS: Which is better? LOA DCS Contract It All Depends...

A Comparison: Direct Commercial Sales & Foreign Military Sales Lesson #3003 5 January 2017