1. Background & personal introduction
Background & personal introduction. Explain two part DISAM & DAU presentation. DISAM will provide big picture concept. DAU will provide more technical contracting detail.

2. Purpose
Highlight how contracting for FMS contributes to U.S. national security and foreign policy strategies
Discuss the contracting officer’s role in enabling the FMS process to be successful
Challenge you to view contracting for FMS as more than just another business transaction
Done - I would delete the period from the first bullet
Identify desired outcome of this short presentation.
2012 DoD Procurement Conference and Training Symposium

3. FMS Contracting Terminology Organizational Roles & Responsibilities
Magnitude of FMS
FMS Process Background
Contracting Officer Role in FMS
Offer, Execution, Closure
FMS Customer Participation
Pseudo FMS / Building Partnership Capacity
Outline of major presentation topics.
2012 DoD Procurement Conference and Training Symposium

4. Security Cooperation
DoD term* for all interactions with foreign defense establishments to:
Build defense relationships that promote specific US security interests
Develop allied & friendly military capabilities for self-defense and multinational operations
Provide US forces with peacetime and contingency access to a host nation.
Foreign Military Sales (FMS) is a tool for implementing security cooperation national security strategies
Outline current terminology and identify how terms relate to FMS. Direction of this logic is to reinforce that FMS is not just buying stuff, rather it contributes towards an overall set of USG activities aimed at enhancing US national security and foreign policy. This definition highlights the DoD side.
*Joint Pub 1-02
2012 DoD Procurement Conference and Training Symposium

5. Security Assistance
State Department term* for a group of programs through which the US provides:
Defense articles
Military training
Other defense services
Goal: To promote national policies and objectives
Foreign Military Sales (FMS) is a tool for implementing security assistance foreign policy
This definition highlights the State Dept side.
*Joint Pub 1-02
2012 DoD Procurement Conference and Training Symposium

6. Security Cooperation Foreign Policy National Security DoS DoD
Foreign Military Sales
- Customer Funded
- DoS Funded (Grant)
- DoD Appropriations
Visual reinforcement of context for FMS (both traditional and pseudo). Start to build the linkage that SC is a broad set of activities with FMS being a component of SC. Also, introduce that there is more than just a single type of FMS. More on the FMS types later.
2012 DoD Procurement Conference and Training Symposium

7. Defense Security Cooperation Agency
OSD policy level agency with leadership, management, and oversight responsibility for DoD Security Cooperation (SC)programs
USG interagency advocate for SC initiatives and programs
Issues the Security Assistance Management Manual (SAMM) as SC (FMS) policy
Having already exposed audience to the terms SC & SA. Now, introduce them to DSCA and identify the macro roles/responsibility of DSCA. Intro the SAMM as it will be referenced on upcoming slides. Also, identify DISAM (which I as a speaker represent) as the educational/training component of DSCA.
Operates a DoD schoolhouse
DISAM—Defense Institute of Security Assistance Management
2012 DoD Procurement Conference and Training Symposium

8. Military Departments and other Agencies
DoD Relationships
Secretary of Defense
––––––––––––––––––––––––
Deputy Secretary of Defense
Military Departments and other Agencies
Under SECDEF
(Acquisition, Technology, & Logistics)
Under SECDEF
(Policy)
Defense Security Cooperation Agency (DSCA)
Director of International Cooperation
Provide a visual OSD level view. Help audience relate to what they already know (i.e. the AT&L) hierarchy to the SC hierarchy. Reinforce policy level/oversight role of DSCA relative to actual FMS execution via the existing MILDEP infrastructure.
Defense Institute of Security Assistance Management ( DISAM )
Defense Acquisition University (DAU)
2012 DoD Procurement Conference and Training Symposium

9. FMS Sales By Fiscal Year48 46 44 42 40
38.1 38
Total Sales in Billions
36.4 36
32.9 34 32 30
31.6 28 26
Dollars in billions 24 22
21.0 20
23.3 18
Quick look - Visual on historic scale and recent growth of FMS business. Purpose is to provide context and highlight this is big business with a high probability that the contracting audience is going to encounter FMS sometime in their career. Perhaps sooner rather than later. In other words, why should they be interested….it is most likely going to be their task to execute FMS via contract awards. 16
13.5 14
13.2
12.5
13.0 12 10 8
10.6 6
Source: DSCA: 1200 System, as of Jan 2012 4 2 01 02 03 04 05 06 07 08 09 10 11
2012 DoD Procurement Conference and Training Symposium

10. Magnitude of FMS
I still owe you the number of FMS cases. Want to confirm with Beth when she returns on Tuesday and then will provide.
Quick look - DSCA directed slide relating FMS to Fortune 500 rankings.
2012 DoD Procurement Conference and Training Symposium

11. Total Case Value (Billions)
Magnitude of FMS
Implementing Agency
Number of Open Cases
Total Case Value (Billions)
Army
4,809
135.3
Navy
3,963
74.2
Air Force
3,394
168.4
Other Agencies
766
7.0
Total
12,932
385.0
Done - Would it be worthwhile to insert that these are active cases/not new cases?
Quick look - Another view to give scale by quantity of LOAs and distribution across MILDEP.
As of 9 Mar 2012
2012 DoD Procurement Conference and Training Symposium

12. Global Competition Global Defense Market F/A-18 Gripen Rafale MiG-29
Quick look - This slide begins a logic trail that, at its end, will show that the DoD contracting process itself is an asset the USG leverages to achieve national security and foreign policy goals. I will use this slide to set the stage that the USG is competing in the global defense market with other nations & industrial enterprises to engage with allies and key partners via defense related activities.
Eurofighter
Global Competition
2012 DoD Procurement Conference and Training Symposium

13. DoD Preference
SAMM C4.5.8
DoD prefers that countries friendly to the US fill defense requirements with US origin items.
Foreign Policy
Military Relationships
Interoperability
Economies of Scale
Defense Industrial Base
Present SAMM policy that in the competitive global defense market, the DoD (and the USG) benefit when allies and key partners elect to procure US origin defense articles/services.
2012 DoD Procurement Conference and Training Symposium

14. FMS Benefits and Protection
SAMM C6.3.1
Acquisition for FMS will be in accordance with DoD regulations and 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.
Primary purpose of this slide is to emphasize that DoD’s contracting processes themselves are a value added consideration by our international partners.
SAMM policy states that DoD will buy for FMS essentially the same way we buy for DoD. The USG and DoD purchase via a well established/regulated processes, with built in checks and balances, that are intended to acquire quality items/services at fair prices.
The USG (for foreign policy and national security reasons) is willing to make its acquisition process available for use by other friendly nations/allies. FMS is the process that other nations/allies can use to gain access to the inherent benefits/protections built by the USG into its acquisition/contracting processes.
Although other nations often have DCS as an option, it is often the value that DoD’s acquisition processes (as executed by the contracting officer community) bring to the table that influence the countries toward selecting FMS (as opposed to DCS).
2012 DoD Procurement Conference and Training Symposium

15. United States Government
FMS Relationships
United States Government 1 2
LOA
CONTRACT
Visual depiction of FMS relationship (as compared and contrasted to the previous slide)
Foreign
Government
Defense
Contractor
2012 DoD Procurement Conference and Training Symposium

16. FMS Functional Relationships
System
Manager
FMS Case
Manager
Directive
MILDEP / Agency PCO
Purchase
Request
Orders
Item
Manager
Negotiate
& Award
DCAA
Audit
Services
FMS LOA
Demonstrate the multi-disciplinary inter-relationships for FMS. Discuss that FMS relies on the underlying DoD acquisition, logistics, contracting, contract administration and contract audit infrastructure to fulfill LOA reqmts/expectations.
DCMA
ACO Services
Defense
Contractor
Foreign
Government
2012 DoD Procurement Conference and Training Symposium

17. Letter of Offer and Acceptance (LOA)
Done - A thought…if you keep these couple of slides in, perhaps when you get to the pseudo area, you could show a sample page that has the Funds, Purpose, Availability note that provides the specific information of expiring/ canceling funds?????
Quick look - Visual of what a LOA is. Do NOT intend to review format / structure. Simply establish that FMS is a USG commitment to a foreign partner to deliver stated items/services. The LOA is the USG “contract” with the foreign partner.
CONSIDERING POSSIBLY DELETING.
2012 DoD Procurement Conference and Training Symposium

18. Letter of Offer and Acceptance (LOA)
Quick look - One step further to visually introduce the LOA. Here just want to relate the LOA line structure to the allocation of funds/responsibilities to various supporting activities within the DoD/MILDEP acquisition/logistics infrastructure. Also, contracting officers can relate to Contract Line Items (CLINS) and this same type indenture is present in the LOA.
CONSIDERING POSSIBLY DELETING.
2012 DoD Procurement Conference and Training Symposium

19. FMS Acquisition Policy
FAR / DFARS Authority
Cost / Pricing Data
Incentive Clauses
Sole Source Requests
Purchaser Involvement
Contract Data Requests
Contingent Fees
Warranties
Offsets
Done - Perhaps put “Purchaser Involvement” in a different color????
Quick look - Purpose is to expose contracting audience to the DSCA level SC policy. Specifically, highlight the section of SC policy that relates to acquisition. This slide and the next 5 slides are intended to emphasize that the content of the LOA must be synchronized / harmonized with the content of the procurement contract. The LOA establishes the reqmt and provides the funding. In terms that the audience would understand, the LOA is the reqmts document, the authorization, and the appropriation (fund source).
The procurement contract, which will most generally occur later, implements the LOA. This is why the contracting community needs to support the case mgmt community in LOA preparation. DoD should not commit to something in the LOA that is not executable via our contracting policy/procedures.
2012 DoD Procurement Conference and Training Symposium

20. DFARS FMS Policy Acquisitions for FMS Subpart 225.7300 7300 - Scope
General
Guidance
Pricing
Customer Involvement
Limitation of Liability
Offsets
7307 – Contract Clauses
Done - Perhaps put “Customer Involvement” in a different color????
Quick look - Purpose is to introduce the section of the DFARS that contains special FMS direction. Do NOT intend to drill into the details just make an introduction. Dave Lewis of DAU can provide more specific detail.
2012 DoD Procurement Conference and Training Symposium

21. Subpart 225.7302 – Guidance (PGI)
Contracting Officer will assist the MILDEP responsible for preparing the LOA by—
(1) Working with prospective contractors to—
- (i) Identify, in advance of the LOA, any unusual provisions or deviations;
- (ii) Advise the contractor if the MILDEP expands, modifies, or does not accept any requirements proposed by the contractor;
- (iii) Identify any logistics support necessary to perform the contract; and
- (iv) For noncompetitive acquisitions over $10,000, ask the prospective contractor for information on price, delivery, and other relevant factors; and
Emphasize that this imperative, “will”, requires the CO to be involved early in the process to ensure no false impressions are made and that strategy for harmonization of requirements to contractual document should begin at this time.
2012 DoD Procurement Conference and Training Symposium

22. Subpart 225.7302 – Guidance (PGI)
(2) Working with the MILDEP responsible for preparing the LOA to—
- (i) Assist, as necessary, in preparation of the LOA;
- (ii) Identify and explain all unusual contractual requirements or requests for deviations; and
- (iii) Assist in preparing the price and availability data.
LOA
Contract
Again, early involvement with the implementing agency
FMS
Case
Manager
PCO
2012 DoD Procurement Conference and Training Symposium

23. Contracting Officer in LOA Offer
Realistically set customer expectations
Total Cost
Delivery Schedule
Expenditure Profile
Identify any unique issues to be addressed with customer
Review and advise on customer generated sole source requests
Establish extent of customer participation
Initial Deposit
15 Jun 2012
15 Sep 2012
15 Dec 2012
15 Mar 2012
$1,100,000
600,000
800,000
700,000
900,000
1,700,000
2,500,000
3,200,000
4,100,000
Estimated Payment Schedule
Payment Date
Quarterly
Cumulative
Done - I would lower case “Set Customer Expectations.” Also, suggest changing “an” to “any” in the second bullet
Key contracting roles in LOA offer development. Intend to highlight the cash flow (payment schedule) issues particularly given the recent F-16 program cash flow issues. Also, intro a key point of the overall presentation which is discussion of customer participation in the contract process.
2012 DoD Procurement Conference and Training Symposium

24. FMS Sole Source
SAMM C6.3.4
Customer request must be based on objective needs
Faster delivery for urgent requirement
Specific nonstandard source
History with vendor
Standardization
Customer source selection
Advise customer of contractors that:
Poor past performance
No prior experience at task
Ineligible for contracts
Represent high risks
2012 DoD Procurement Conference and Training Symposium

25. FMS Sole Source FAR 6.3 Other Than Full & Open Competition
Single Responsible Source
Unusual & Compelling Urgency
Maintain Industrial Capability
International Agreement
Required By Law
National Security
Public Interest
LOA
2012 DoD Procurement Conference and Training Symposium

26. LOA & Contract Relationship
SAMM C6.3.5
Discussions with the foreign purchaser must be undertaken during the development of the LOA … to assure that the contracting community has all the data required to award a contract consistent with contracting regulations and the foreign country desires.
Emphasize importance of establishing clear understandings and expectations during the LOA development process. This requires the involvement of the contracting community. If done well, the LOA should be capable of simultaneously achieving the outcomes of meeting customer expectations and being executable within FAR/DFARS reqmts.
Harmonize
LOA
2012 DoD Procurement Conference and Training Symposium

27. Subpart – Pricing
Use same principles as in pricing other defense contracts
Recognize the reasonable & allocable cost of doing business with an international customer, even though costs might not be recognized in the same amounts in DoD only contracts
Selling expenses
Product support and post delivery service expense
Offset costs
Other: IR&D/B&P, etc.
Principles found at FAR 15.4 and DFARS 215.4
2012 DoD Procurement Conference and Training Symposium

28. Contracting Officer in LOA Execution
SAMM C The Case Manager and contracting officer work together to make sure the contract and the LOA are consistent.
SAMM C Payment schedules updates are necessary to reflect revisions to delivery schedules, pricing updates, contract award dates, and contractor payment milestones.
Emphasize that the fact that the LOA serves as a commitment by the USG with a partner. Although the LOA prices, delivery schedule, payment schedule are estimates, it still serves to set customer expectations. As LOA execution occurs, if reality starts to deviate from what was planned and stated in the LOA, DoD should re-engage with the customer. Early communication of bad news is better than late communication of bad news. Again the LOA should be in sync with the contract(s) and visa versa.
Harmonize
LOA
2012 DoD Procurement Conference and Training Symposium

29. Subpart 225.7301 – Guidance (PGI)
Separately identify FMS requirements in solicitations
Contract CLIN / SubCLIN Structure and ACRNS
Ensure LOA terms / country unique requirements are incorporated into contract
Comply with Defense Transportation Regulation, Part II requirements for packaging, labeling and documentation
Appendix E: Security Cooperation Shipments (34 pages)
Transportation plan required for classified; arms, ammo & explosives; hazardous
Require a DD 250 to accompany shipment
In addition to WAWF
Info needed for transportation and customs clearance
Principles found at FAR 15.4 and DFARS 215.4
2012 DoD Procurement Conference and Training Symposium

30. Colors of “FMS” Funds Customer Cash Customer Source No Year Limits
DFARS “Cost of International Business” Applies
Dept of State
Foreign Military Financing
No Year Limits
Excluded in DFARS Cost of
International
Business
Dept of Defense
Appropriated to DoD
Year Limits
Normal DoD Cost Allowability Rules
Pseudo-cases
The three colors of FMS and the rules. Next two slides expand on BPC.
Main point ….. Not all FMS is the same. Contracting officers need to know the funding source of each FMS reqmt in order to apply the correct contracting set of rules.
2012 DoD Procurement Conference and Training Symposium

31. Pseudo FMS Funds Management
Process
Quick look - A little humor to highlight that BPC / pseudo FMS is using the FMS process to do something that the process was NOT originally designed to do.
U.S. Appropriated Funds
2012 DoD Procurement Conference and Training Symposium

32. Building Partnership Capacity
Pseudo FMS = Building Partnership Capacity (BPC)
PGI – The FMS acquisition infrastructure is also used to execute cases funded with US appropriated funds under special authority to build partner capacity
Budget authority for BPC/pseudo cases is executed from the FMS Trust Fund
Lines of accounting look like no-year money (97 X 8242), BUT must be administered per the appropriation rules
PGI – For pseudo LOAs, ensure that the contract is consistent with the period of funds availability
New Graphic Inserted - It may not appear from it, but the graphic is one they had for foot stomp. If you have a better one, you may want to use it. The key here is that we want them to know there are different rules. Would this be a good place to insert the Funds, Purpose, Availability note, if desired?
A quick look at the key BPC rules.
2012 DoD Procurement Conference and Training Symposium

33. Pseudo - LOA
Done - A thought…if you keep these couple of slides in, perhaps when you get to the pseudo area, you could show a sample page that has the Funds, Purpose, Availability note that provides the specific information of expiring/ canceling funds?????
Quick look - Visual of what a LOA is. Do NOT intend to review format / structure. Simply establish that FMS is a USG commitment to a foreign partner to deliver stated items/services. The LOA is the USG “contract” with the foreign partner.
CONSIDERING POSSIBLY DELETING.
2012 DoD Procurement Conference and Training Symposium

34. Pseudo - LOA
Done- A thought…if you keep these couple of slides in, perhaps when you get to the pseudo area, you could show a sample page that has the Funds, Purpose, Availability note that provides the specific information of expiring/ canceling funds?????
Quick look - Visual of what a LOA is. Do NOT intend to review format / structure. Simply establish that FMS is a USG commitment to a foreign partner to deliver stated items/services. The LOA is the USG “contract” with the foreign partner.
CONSIDERING POSSIBLY DELETING.
2012 DoD Procurement Conference and Training Symposium

35. Contracting Officer in LOA Closure
Traditional FMS:
Preferred : Close contract – permits final FMS closure
Alternative: For open contracts, provide an assessment of each respective FMS customer’s remaining contractual liability
Permits interim case closure
Pseudo / BPC FMS:
Preferred : Close entire contract
Alternative: For open contracts, ensure CLINs supporting pseudo FMS are physically delivered and funds disbursed (i.e., no ULOs) prior to funds expiration
CLOSED=
Final Bill
FMS
Case
File
Closed
PAYMENTS
SERVICES
DELIVERY
Highlights of contracting officer roles to support FMS case closure.
2012 DoD Procurement Conference and Training Symposium

36. CO in LOA Closure Phase FMS Trust Fund D N A B R I $$$ Interim Closed
Accelerated
Case Closure
Procedures
ACCP D N A B R I
Case A
Case B
Case C
CCSA
CLOSED=
Final Bill
FMS
Case
File
Interim
Closed
$$$
Visual view of accelerated case closure. Purpose is to use this slide to highlight the importance of scrubbing ULOs on open contracts to release “surplus” funds back to the customer.
ULO
CCSA
= Case Closure
Suspense Account
Contract
Payments
2012 DoD Procurement Conference and Training Symposium

37. FMS Unique FMS Customer Participation Foreign Disclosure – NDP 1
Security Requirements
Transportation plans (heavy focus needed here because don’t have U.S. infrastructure in place when items are delivered in country. (Delivering to Djibouti instead of Ft Hood, TX).
Freight forwarders, Documentation, DD250’s, WAWF, Title transfer
Maintenance/Sustainment – Life Cycle maintenance building “Partnership Capacity”
Payment Instructions
CLIN / Sub-CLIN structure
2012 DoD Procurement Conference and Training Symposium

38. FMS Customer Participation
DFARS
At contracting officer discretion, customer can participate in discussions with industry on:
Technical Specifications
Delivery Schedules
Price/Performance Tradeoffs
Special Warranty Provisions
Other Requirements Unique to FMS Purchaser
No Change - Will emphasize in presentation - Not sure how you can make this sound more positive. We really want the contracting officer to allow purchaser participation in these discussions. Know it is at their discretion, but it shouldn’t be simply, “No.”
This slide reflects that DFARS does permit (at contracting officer discretion) FMS customers to be involved in certain contract actions.
2012 DoD Procurement Conference and Training Symposium

39. FMS Customer Participation
DSCA Policy Memo We have customers who are interested in actively participating in FMS acquisitions, but believe they are being summarily shut out of the process. I request that you encourage each of your acquisition communities to take up the spirit of DFARS and actively seek opportunities for customer participation in DoD acquisitions for FMS.
Purpose is to highlight the senior level DoD engagement on this issue of customer participation. Intend highlight the “relationship building” aspects of why contracting officers should seek to accommodate customer participation.
Jeffrey A. Wieringa
Vice Admiral, USN
DSCA Director
2012 DoD Procurement Conference and Training Symposium

40. FMS Customer Participation
OUSD AT&L DPAP Memo, 21 July 2011
The FMS program is… an instrument of US foreign policy… to deter and defend against aggression, facilitate common defense and strengthen the security of the US.
Many FMS customers have voiced interest in actively participating in FMS acquisitions. I ask that you seek opportunities to enhance FMS customer involvement in your acquisition programs in order to foster better understanding, strengthen alliances, provide transparency, and build customer confidence and teamwork.
Adjusted font - Maybe since the font is smaller on this page than the preceding one, you could bold it here so that it appears to have the same “emphasis” behind it.
Again, highlight (this time from the contracting chain of command) the senior level engagement on the issue of customer involvement. Leverage this to appeal to the audience understand the motivation behind these senior leader memos.
Rather than just on a business case assessment alone, request audience consider customer involvement in a positive light based on it serving as a tool/mechanism to achieve higher level strategic USG relationship building. Most likely (given a well prepared LOA is in-place), customer involvement will NOT make the contracting officer’s job faster, easier or even qualitatively better; HOWEVER; it will meet the customer’s desire and therefore contribute to relationship building.
Richard Ginman
Director - DPAP
2012 DoD Procurement Conference and Training Symposium

41. Conclusion
Contracting for FMS is more than just than just buying stuff
FMS leverages DoD’s acquisition infrastructure to:
Promote strategic relationships
Achieve national security (DoD) and foreign policy (DoS) objectives
Provide enabling capabilities to partners for the common defense
FMS value does not begin at physical delivery, it includes the procurement process itself
Contracting Officers are essential enablers to successful FMS program development, execution and closure
Done - I would delete the period after the first bullet and delete the word “to” after Achieve (second bullet, second sub-bullet)
Wrap-up. Reiterate main points that I hope will be the long term take-aways from this presentation.
2012 DoD Procurement Conference and Training Symposium

42. In other words…
It is not just the destination (i.e., physical delivery), but also the journey that matters.
Done - I would insert a comma after i.e.
Shorter version of the key point - It is not just about getting stuff delivered - on schedule, within cost. It is about partnering. The contracting process itself presents an opportunity to partner. International partners want to partner (customer participation) in the buying process. The authority vested in the contracting community places contracting officers as the key gatekeepers in either permitting or excluding this participation.
The contracting community’s actions are essential to a successful FMS program.
Request the audience view the bigger SC picture/goal and that they be motivated to use their contracting SME to achieve these goals.
2012 DoD Procurement Conference and Training Symposium

43. Points of Contact
Jeffrey Grafton, Defense Institute of Security Assistance Management (DISAM) (937) or Dave Lewis, Defense Acquisition University, Midwest Region, DAUMW-CI (937) or Michele Kennedy, Defense Security Cooperation Agency, DSCA DBO-FPA (703) or Jeff Grover, OSD-AT&L (DPAP/CPIC) (703) or
2012 DoD Procurement Conference and Training Symposium

44. THANK YOU!
QUESTIONS???
2012 DoD Procurement Conference and Training Symposium