Acquisition Policy Lesson #3004 21 August 2018

Sourcing Security Cooperation Requirements United States Government Stock Procurement Type Agreement FMS = LOA BPC = Pseudo LOA FMS Logistics & Acquisition Processes SC Purchaser FMS = Partner BPC = USG DoD Depot Defense Contractor

Line Item Information Source Code P = Procurement S = Stock X = Mixture

Special Defense Acquisition Fund Revolving fund used to finance procurement in anticipation of future transfers DSCA, in consultation with DoS, selects articles/services for SDAF purchase SAMM provides a “SDAF Procurement Proposal Form” Proposals must be reviewed by SAF/IA, DASA DEC, NIPO DSCA must approve the sale of all SDAF assets SDAF assets are sold to support urgent requirements that cannot be met using the normal FMS process A stand-alone case or separate case line is used to purchase from SDAF inventory SAMM C11.9

FMS Buyer/Seller Relationships United States Government 1 2 LOA CONTRACT International Purchaser Defense Contractor Non-Contractual Relationship

BPC Buyer/Seller Relationships United States Government 1 2 Pseudo-LOA CONTRACT United States Government Defense Contractor

Acquisition Policy (1) Acquisition for FMS purchasers must be in accordance with DoD regulations and other applicable USG procedures This affords the foreign purchaser the same benefits and protection that apply to DoD procurement and is one of the principal reasons why foreign governments and international organizations prefer to procure through FMS channels. SAMM C6.3.1

Acquisition Policy (2) SAMM C6.3.1: Federal Acquisition Regulation (FAR) provisions applicable to the DoD also apply to FMS procurements DFARS Subpart 201.104: The FAR and Defense Federal Acquisition Regulation Supplement (DFARS) also apply to purchases and contracts by DoD contracting activities made in support of FMS DFARS Subpart 225.7300: Titled “Acquisitions for Foreign Military Sales” contains the few but important differences when procuring for FMS versus DoD requirements

DoD Acquisition Relationships System/ Program Offices System/ Program Managers Inventory Control Points Item Managers

DoD Procurement Overview United States Government System Manager Authorizations & Appropriations Purchase Contracting Officer Item Manager Request Procurement Contract Defense Contractor

FMS Procurement Overview United States Government System Manager Directive Purchase Case Manager Contracting Officer Item Manager Request MILSTRIP Procurement Contract LOA Foreign Government Defense Contractor

Contract Administration Procuring Contracting Officer (PCO) Conducts source selection, contract negotiation, and contract award. Works at implementing agency Administrative Contracting Officer (ACO) Performs contract administration and quality assurance Works for Defense Contract Mgmt Agency (DCMA) Auditors support both PCOs and ACOs Works for Defense Contract Audit Agency (DCAA)

Contract Administration PCO ACO Contractor

Contract Administration United States Government LOA Directive System Manager Purchase Case Manager MILDEP PCO Item Manager Request MILSTRIP Requisition Negotiate & Award LOA Foreign Government DCAA – Audit DCMA - ACO Defense Contractor

Noncompetitive Method Procurement Methods Competitive Method Default procurement method Noncompetitive Method Exception Use must be justified & approved Historically referred to as “Sole Source” Officially “Other than Full & Open Competition” FAR, DFARS, SAMM FAR Part 6 – Competition Requirements

FMS Sole Source Request Official written direction to use other than full and open competition should be submitted in the Letter of Request Applicable to both cash and non-repayable FMF funded LOAs NOT applicable for Building Partner Capacity (BPC) programs More BPC discussion later SAMM C6.3.4

FMS Sole Source Approvals Implementing agencies evaluate requests for approval or disapproval Encouraged to defer to purchaser’s request Consult with IA legal counsel on questions of legality or ethics Disapproved requests coordinated with DSCA Approved requests documented in LOA Sole Source note SAMM C6.3.4.3

Sole Source LOA Note The purchaser has requested in a letter dated [insert date] that [insert name of specific firm or other private source] be designated as [insert "prime contractor" or "subcontractor"] for line/items(s) [insert line item numbers] of this Letter of Offer and Acceptance. This note is confirmation that a specific source designation has been requested in writing by the purchaser and that the Department of Defense has accepted the request. SAMM Appendix 6

Exceptions for Noncompetitive Procurement Single Responsible Source Unusual & Compelling Urgency Maintain Industrial Capability International Agreement Required By Law National Security Public Interest FAR Part 6.302

Building Partnership Capacity (BPC) Noncompetitive Procurement BPC programs are funded with USG appropriated funds BPC pseudo-LOAs are not USG to foreign government sales FAR “international agreement” exception is NOT available for use with BPC programs BPC requesting authority must justify BPC noncompetitive procurement based on one of other FAR exceptions SAMM C6.3.4.1.2 & C15.T4

Customer In Contract Process FMS customers should be encouraged to participate with USG acquisition personnel in discussions with industry concerning: Technical Specifications Delivery Schedules Special Warranty Provisions Price/Performance Tradeoffs Other Requirements Unique to FMS Customer DFARS 225.7304(b) & Greenbook Attachments 9-1/2

Customer In Contract Process Degree of participation in contract negotiations is at discretion of the contracting officer after consultation with contractor Potential limiting factors: Multiple FMS customers Unique US requirements Contractor proprietary data DFARS 225.7304(d)

Customer In Contract Process FMS customer cannot: Observe or participate in negotiations involving cost or pricing data Direct exclusion of specific firms in solicitation Interfere with contractor’s placement of subcontracts Provide direction on source selection decisions or contract terms Request rejection of certain bids or proposals Receive contractor proprietary data unless approved by contractor DFARS 225.7304 & SAMM C6.3.5.2

Types of Contracts New Policy: Firm Fixed-Price (FFP) is default FMS contract type unless: Country Preference: Country establishes, in writing, a preference for different contract type Specific Sale Preference: FMS customer requests in writing (i.e. LOR) a different contract type for a specific foreign military sale Consolidated U.S. and Partner Contract: U.S. determines a different contract type is in the best interests of the U.S. taxpayer FY17 NDAA, Section 830 & Director DPAP 28 Jun 2018 memo

Release of Contract Data No need for release All pertinent info and contractual obligations are identified in the LOA Release can be considered if: Contract is unclassified Only covers purchaser’s requirement Not to be released: Internal negotiation documents Contractor proprietary information apply SAMM C6.3.6.2

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

Defense Industry Offset Association (DIOA) Offset Definition Defense Industry Offset Association (DIOA) An economic mechanism whereby a foreign government purchasing a major defense system imposes a requirement on the selling contractor to compensate the outflow of national funds with industrial activity back into the procuring country The exact nature of the economic activity that makes up the offset program can vary significantly from country to country

FMS Offset Relationships United States Government 2 3 LOA CONTRACT 1 International Purchaser Defense Contractor Offset Relationship

Types of Offsets Direct = Compensation in goods related to defense system being sold Indirect = Compensation in goods unrelated to the defense system sold

Non-repayable FMF may NOT finance offsets Offset Costs - SAMM Contractors can recover all offset costs in FMS contracts when the LOA is financed wholly by: Purchaser cash Repayable credits Non-repayable FMF may NOT finance offsets Contractor must disclose the estimated offset costs included the contract price to the USG Offset costs are priced into the LOA line item cost SAMM C6.3.9

USG may not enter into or commit U.S. firms to any offset agreement USG Offset Policy (1) USG may not enter into or commit U.S. firms to any offset agreement Contractor responsible for: Offset content negotiations Offset performance/execution SAMM C6.3.9

IA must notify DSCA if LOA contains offset costs USG Offset Policy (2) IA must notify DSCA if LOA contains offset costs Within the Congressional Notification information USG personnel should not discuss offset details with Purchaser Redirect offset questions to contractor USG can confirm (but not breakout) inclusion of offset cost in LOA SAMM C6.3.9

LOA Standard T&C - 2.8 Any offset arrangement is strictly between the Purchaser and the U.S. defense contractor. The U.S. Government is not a party to any offset agreement that may be required by the Purchaser in relation to the sales made in this LOA. The USG assumes no obligation to administer or satisfy any offset requirements or bear any of the associated costs. Revised per DSCA Policy Memo 18-35, 24 Jul 2018

LOA Standard T&C - 2.8 (continued) Although offsets are not within the scope of the DoD contracts entered into to fulfill the requirements of this LOA, offset costs may be recovered through such contracts. Indirect offset costs may be deemed reasonable without further analysis If the Purchaser wishes to obtain information regarding offset costs, the Purchaser should request information directly from the U.S. defense contractor Revised per DSCA Policy Memo 18-35, 24 Jul 2018

International Armaments Cooperation The term IAC covers a multi-faceted area in which the U.S. cooperates with other countries and international organizations to research, develop, acquire and sustain military systems. SAMM C2.1.7.2.1

Defense Acquisition Management Framework The Defense Acquisition System (DoDD 5000.01) and Joint Capabilities Integration & Development System (JCIDS - CJCSI 3170.01I) Materiel Solution Analysis Technology Maturation & Risk Reduction Engineering & Manufacturing Development Production & Deployment Operations & Support Development Decision Low Rate Initial Production Full-Rate Production Decision Sustainment Disposal Full-Rate Production and Deployment A B C International Armaments Cooperation Programs USD Acquisition & Sustainment (A&S) International Agreements Defense Acquisition University (DAU) Foreign Military Sales USD (Policy) LOAs DISCS

IAC Building Blocks

International Armaments Cooperation IAC includes: Information Exchange Program (IEP) Engineer and Scientist Exchange Program (ESEP) Test and Evaluation Program (TEP) Foreign Comparative Testing Cooperative Research, Development and Acquisition Defense Trade Cooperative Logistics SAMM C2.1.7.2.1

Acquisition Policy Lesson #3004 21 August 2018