PERU July 2009

The Sales Process State Defense MILDEPs President Congress Foreign Purchaser Needs Supplies and Services C214 PD&R SAM-I, 5/1/2009

FMS Terminology What’s a FMS Case? A government to government agreement to transfer defense articles & services is a: Letter of Offer & Acceptance =LOA = FMS Case =Case “BN-D-YCY” =Case YCY

International Sales Process FMS Case lifecycle phases (DISAM Text Page 5-2) Preliminary, Definition and Request Offer and Acceptance (SAMM C-5) Case Development Implementation, Execution, and Closure (SAMM C-6) Case Execution

Security Assistance Policy Documents Security Assistance Management Manual (SAMM) DoD 5105.38-M DSCA Policy Memoranda Financial Management Regulation 7000.14-R, Vol. 15, Security Assistance Policy and Procedures Reconciliation and Closure Manual DoD 5105.65-M (RCM) MILDEP Specific Policy Manuals

= Customer Decisions Needs Where Cost What Kind When How Many FMS Non-U.S. Sources Where Cost What Kind U.S. Munitions List When U.S. Commercial Export Needs How Many = Arms Export Control Act FMS Letter Of Request (LOR) Minister of Defense Bandaria

Letter of Request Checklist Identification Information Purpose: P&A- Price & Availability LOA-Letter of Offer & Acceptance Lease Purchaser Pre-negotiations Transparency Acceptance Time Frame International Solicitation Major Item Considerations Standard Model Quantity Unique Configuration Delivery Timeframe Transportation Warranties Sole Source Support Considerations Operations Concept Maintenance Concept Supply Concept Initial Spares Support Equipment Facilities Follow on Support Publications Services FMS Case Reviews Training DOD/Contractor Services Site Survey Financial Considerations Funding Source Payment Schedule/Initial deposit Financial Waivers Special Considerations Memorandum of Understanding (MOU) Offsets Commercial Negotiations Special Reports Interoperability Total Package Approach   Purchaser Who and what organization in Bandaria is submitting the LOR (Army, Navy, Air Force, etc.) Purpose: Does Bandaria want P&A or LOA? Explain the 3 basic differences. Model: What specific version of the system do they want? Model designator or series. Quantity: How many do they want? Configuration: Do they want a special Bandarian configuration or do they want the standard U.S. version? The benefits of the standard version include: cheaper, easier to support, upgrade and mods, shorter lead time Sole Source: Do they want sole source? Justification must be included in the LOR. Have they conducted their own competition?) Delivery: What is the requested delivery timetable for all quantities? Acceptance Timeframe: Will the country be able to accept in 60 days or will more time be needed? Initial Spares: How many years of spares support will be requested? Usually 1-3 years are provided.  Operational Concept: Under what conditions will the weapon system be deployed? High or low altitude. Dessert or tropical. 1 base or 3 bases. All impact spares and support equip.  Maintenance Concept: Organizational, Intermediate, Depot (contractor, internal, third country, FMS). Impacts initials spares  Supply Concept: Commercial, third country, internal, FMS? This impacts initial spares and follow on support cases rqmts.  Transportation: Do they have a freight forwarder? Options: DTS internal, commercial, third country. Is staging/aggregation in U.S. or overseas required? Classified? Transportation plan required? Do they want insurance to cover shipment?  Contract Services/Organic Services: What does the customer want?Technical assistance, engineering, maintenance, supply, operators, A WSLO?  Training: What Kind? Operational, language, support to include maintenance. Options: commercial, internal, FMS, third country  Waivers: We need to know what waivers to the std /SAMM/AECA rules are required by the customer up front..  Warranties: Is a performance warranty required? (could increase cost)  MOU Is there an associated MOU/MOA? MOU’s may contain cost waiver information, tech transfer, mutual logistics support, and RSI considerations which may impact the LOA.  Commercial Negotiations: Have they previously purchased a similar item commercially? Are they currently engaged in serious negotiation with U.S. industry? Does national policy require price comparisons?  Foreign Competition: Is there serious foreign competition? This may be a SAO input. Transparency: Has the customer requested a detail line item break out with respect to cost? Will they request to observe contract negotiations? (SAO should not suggest these options)  Offsets: Define Define quicly a offsett. Will the customer request an offset from the manufacturer(s)? This information is needed for notification to Congress and possible financial impact considerations in the LOA  Site Survey: Has there been a site survey or is one being requested? Discuss the importance of a site survy . Read the text C-8 structure for a survey. Define a site survey- survey for specific piece of equipment as opposed to a Defense Rqmts survey.. Who does the survey, how is it paid for, when should it be done. Bottom line-can get all required info. via a site survey LOR Writing Guide

Need LOR preparation help? DISAM’s LOR Writing Guide USASAC’S Commodity Specific Checklists (Int’l Customers tab) AFSAC On-line Implementing Agency (IA)- Country Program Director (CPD) USASAC-U.S. Army Security Assistance Center AFSAC-Air Force Security Assistance Center

LOR Applications LOR Submissions Selecting

LOR Applications LOR Submissions--Screen 1 Selecting The customer may submit a ‘New LOR’ or ‘View/Modify’ an existing LOR. For new LORs, the user must select the type of LOR required (Purpose of Request) and establish a ‘unique’ Country Reference Number. For existing LORs, the user may query by the Country Reference Number OR the AFSAC Reference Number. The user can view any existing LOR; however, only ‘open or pending’ LORs can be modified.

LOR Applications LOR Submissions--Screen 2 The user enters applicable LOR data on this screen, then clicks ‘Continue’ to proceed to the next screen. Edits will ensure user completes all required fields. Note that the user requested P&A data in this LOR Submission example. Multi-line phase allows the user to select one or more materiel/services. Selecting

Channels of Request Implementing Agency Prepare LOA Letter Of Request State DSCA Letter Of Request LOR Combatant Command U.S. Embassy Implementing Agency PROCEED Bandaria Prepare LOA Congress

International Traffic in Arms Regulations (ITAR) Provides registration / licensing requirements for the commercial export of defense articles, services, and related technical data. Includes the United States Munitions List (USML) Identifies “Significant Military Equipment” (SME) SME requires special considerations because of “Their capacity for substantial military utility or capability” SME also defined in §47(9), AECA Identified by an Asterisk (*) on the Munitions List [22 CFR 120-130]

Major Defense Equipment List Approved Charge $147,604 $326,461 $897,452 $1,045,566 $1,328,033 $144,279 $663,082 $607,149 $761.197 Effective Date 11 May 89 18 Jun 90 28 Nov 01 30 Dec 83 23 Feb 00 7 Aug 91 10 Aug 93 3 Jun 91 Helicopters AH-1S Cobra (with T-53-L-703 Engine) System without C-Nite AH-1W Super Cobra (with 2 T-700-GE-401 Engines)(N) AH-1Z (H1 Helicopter upgrade) with two T700-GE-410 Engines AH-64 Apache Helicopter System (with 2 T-700 Engines) (A) AH-64 (New) Apache Helicopter System with 2 T-700 Engines CH-47D Chinook (without T-55 Engines) (A) OH-58D Kiowa with one T-703 engine (with Mast Mtd Sights) (A) SH-2G (with 2T-700-GE-401 Engines) (N) UH-1Y (H-1 Helicopter Upgrade) with two T700-GE-401C Engines MDE List- SAMM Appendix-1 2

“Country Team Assessment” for SME/MDE LOR’s (SAMM C5.T1) U.S. Embassy/SCO Must Address: Reason nation desires articles/services Effect on recipient's force structure Reaction of neighboring nations Purchaser's ability to maintain, operate and support Economic impact and source of financing Human rights considerations Should USG approve purchase SME=Significant Military Equipment MDE=Major Defense Equipment

Defense Security Cooperation Agency Responsibilities Charter-Administer FMS Policy (SAMM) Congressional Input FMS Country Program & Financial Management FMS Administrative Budget Credit Program (FMFP) Training Program (IMET) FMS Trust Fund Mgt Waiver Authorities Memoranda of Understanding Security Cooperation Office Mgt. Computer System Development & Management Security Assistance Metrics Payment Schedules/Special Bills Case Closure Lean Six Sigma (LSS) Teams Security Cooperation Non-FMS Functions

Department of State Arms Transfer Points of Contact Under Secretary for Arms Control & International Security Bureau of Political-Military Affairs: Regional Security and Arms Transfers (RSAT) Director for Defense Trade Controls (DDTC)

Channels of Request Implementing Agency Prepare LOA Letter Of Request State DSCA Letter Of Request LOR Combatant Command U.S. Embassy Implementing Agency PROCEED Bandaria Prepare LOA Congress

Preliminary Definition & Request

Optional slides

Sources of Information U.S. site surveys and other assessments Internet News media, e.g., CNN Military-to-military Trade pubs, print, library and electronic Attendance at U.S. military schoolhouses U.S. Contractors Air trade shows Security Cooperation Officer Visits and observer missions Department of Defense