International Armaments Cooperation Agreements Their Nature, the Processes, and Procedures

1. International Armaments Cooperation Agreements Their Nature, the Processes, and Procedures Advanced International Management Workshop (ACQ 340)

2. International Armaments Cooperation (IAC) Agreements Outline • Key Reasons for IAC • What is an International Cooperative Program (ICP)? • What Are International Agreements (IAs)? • Where Do Ideas for ICPs Come From? • What is the Business Process for the Development and Approval of IAs? • What Are the Keys to Successful Negotiations?

3. Key Reasons for IAC

4. Access Influence Build Relationships Capable Partners Interoperability National Security Objectives

5. National Defense Imperative “…Secretary Mattis spoke today by telephone with NATO Secretary General Jens Stoltenberg to…discuss the key role NATO plays in transatlantic security. The secretary, who previously served as NATO’s Supreme Allied Commander for Transformation, wanted to place the call on his first full day in office to reinforce the importance he places on the alliance.The two leaders discussed the importance of our shared values, and the secretary emphasized that when looking for allies to help defend these values, the United States always starts with Europe. SECDEF James Mattis January 23, 2017

6. Strategic Guidance • National Security Strategy • Advance the nation’s interests, universal values, and a rules based international order through American leadership • Promote peace, security, and opportunity through stronger cooperation • Strengthen and grow global alliances and partnerships, forge diverse coalitions, and lead the UN and other Multilateral organizations • DoS/USAID Strategic Plan • Prevent & respond to crises and conflict and provide humanitarian assistance • Overcome global security challenges through diplomatic engagement and development cooperation • Combat climate change & global health challenges • Defense Strategic Guidance • Challenging global security environment • Rebalance to Asia-Pacific • Delicate balance between available resources and security needs • Maintain broad/versatile capability portfolio • National Military Strategy • Strategic environment driven by globalization, diffusion of technology, and demographic shifts • Both state actors and violent extremist organizations propose threats • Need for U.S. military to remain globally engaged; preserve alliances and expand partnerships • 2014 QDR • Protect the homeland • Build security globally • Project power/win decisively • Innovation and reform • Rebalance to Asia-Pacific; focus on Middle East

7. DoD Policy “PMs shall pursue international armaments cooperation to the maximum extent feasible, consistent with sound business practice and with the overall political, economic, technological, and national security goals of the United States.” DoD Directive 5000.01, The Defense Acquisition System, Enclosure 1 Para E1.1.1.

8. Acquisition Strategy “Program Management[PM] is responsible for integrating international acquisition and exportability [IA&E] considerations into the program’s Acquisition Strategy at each major milestone or decision point. [PM] 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 consider U.S. export control laws, regulations, and DoD policy for international transfers when formulating and implementing the acquisition strategy … Where appropriate, [PMs] will pursue cooperative opportunities and international involvement throughout the acquisition life cycle to enhance international cooperation and improve interoperability ...” (emphasis added) DoDI 5000.02 (Enclosure 2, paragraph 7.a.)

9. DoD Policy The DoD Components shall work with users to define requirements that facilitate, in preferred order: (1) the procurement/modification of commercially available products, services, and technologies, from domestic or international sources, or the development of dual-use technologies; • the additional production/ modification of previously-developed U.S. and/or Allied military systems or equipment; • -------------------------------------------------------------------------------------------- (3) a cooperative development program with one or more Allied nations; (4) a new joint Component or Government Agency development program; or (5) a new DoD Component-unique development program. DoD Directive 5000.01, The Defense Acquisition System, Enclosure 1 Para E1.1.18.

10. Operational To increase military effectiveness through interoperability and partnership with allies and coalition partners Economic To reduce weapons acquisition costs by sharing costs and economies of scale, or avoiding duplication of development efforts with our allies and friends Technical To access the best technology worldwide, and help minimize the capabilities gap with allies and coalition partners Political To strengthen alliances and relationships with other friendly countries Industrial To bolster domestic and allied defense industrial bases Objectives of Armaments Cooperation International Cooperation in Acquisition, Technology and Logistics Handbook, May 2012

11. Building Blocks of IAC International Cooperation in Acquisition, Technology and Logistics Handbook, May 2012

12. What Is An International Cooperative Program (ICP)?

13. International Cooperative Program An international cooperative program [conducted through International Armaments Cooperation (IAC)] is any acquisition program or technology project that includes participation by the U.S. and one or more foreign nations, through an international agreement, during any phase of a system’s life cycle. DoDI 5000.02, Operation of the Defense Acquisition System, Enclosure 2, para 7. b. (1)

14. By Law, US Government Personnel Cannot Give Away Taxpayer Assets Without Receiving Something in Return Security Cooperation Activity Requires a Return in the Form of Q-P-Q Security Assistance Based on Money for Something (e.g., a Missile, Tank, or Aircraft) Armaments Cooperation Based on Something for Something (e.g., Technology for Use of a Test Range) Equitability in the Business Case Explains the Rationale for the Shared Benefits Shared Benefits on a Quid-Pro-Quo (Q-P-Q) Basis

15. Vehicles for International ActivityComparison

16. Defense Sales Vs. Cooperative Acquisition DEFENSE SALESIAC (Buyer-Seller) (Partnership) Rigidly Structured Flexible Bilateral Arrangement Bilateral or Multilateral Foreign Gov’t is Customer Foreign Gov’t is Partner Foreign Gov’t Requirement Joint Requirement Foreign Gov’t End User Both Gov’ts Are End Users Foreign Gov’t Funds Both Gov’ts Fund US Sets Terms (LOA) Terms are Negotiable US Controls Implementation Both Participate in Oversight Foreign Gov’t Pays for Services Cost of Services are Shared USD(P) Oversees (Title 22) USD(AT&L) Oversees (Title 10)

17. What Are International Agreements (IAs)?

18. The Nature of an IA • Each IA is unique • Not a Treaty, but much more than an international handshake • An Executive Department Agreement that may have a Congressional reporting requirement • Legally binding for the US • Only politically, morally binding for some partners • Enforceable if terms violated? • Reciprocal

19. International Agreement Definition Any agreement concluded with one or more foreign governments (including their agencies, instrumentalities, or political subdivisions) or with an international organization, that: (1) Is signed or agreedto by personnel of any DoD Component, or by representatives of the DoS or any other Department or Agency of the U.S. Government; (2) Signifies the intention of its parties to be bound in international law; (3) Is denominated as an international agreement or as a memorandum of understanding, memorandum of agreement, memorandum of arrangements, exchange of notes, exchange of letters, technical arrangement, protocol, note verbal, aide memoire, agreed minute, contract, arrangement, statement of intent, letter of intent, statement of understanding, or any other name connoting a similar legal consequence. DoDD 5530.3, International Agreements

20. Congress has enacted several laws authorizing agreements with foreign nations for the purpose of enhancing mutual defense. Each such law contains specific objectives, powers and requirements 10 U.S.C. § 2358 (General R&D) 10 U.S.C. § 2350a (Cooperative R&D with NATO, allied and friendly foreign countries) 22 U.S.C. § 2767 (Arms Export Control Act, Section 27) 22 U.S.C. § 2796d (Arms Export Control Act, Section 65) Primary Legal Authorities for IAC

21. Types of IAC Agreements • Information/Data and Personnel Exchange (IEP and DPEP) Agreements • AECA Section 65 Loan Agreements (But Not Leases) • Test and Evaluation Program (TEP) Cooperation Agreements • Cooperative Research, Development, and Acquisition (RD&A) Agreements • Program/Project Specific Agreements (Memorandum of Understanding (MOU) or Memorandum of Agreement (MOA)) • Research, Development, Test, and Evaluation (RDT&E) Agreements or Technology Research and Development Project (TRDP) Agreements • Allow for Project Agreements/Arrangements (PAs) on specific subjects • Cooperative Production Agreements • Reciprocal Defense Procurement (RDP) MOUs • Coproduction Agreements (via License or FMS)

22. Information Exchange Program (IEP)Agreements and Annexes • Exchange of Scientific and Technical information • Program funding categories: Basic Research, Applied Research and Advanced Technology Development • No transfer of US production or manufacturing information, materials or equipment, price and availability information, or money • Reciprocal, equitable exchanges of information • Partners authorized to use information transferred for informational and evaluation purposes • Only funds involved are for travel/administration • Information Exchange Annex (IEA) and Data Exchange Annex (DEA) are the same DoDI 2015.4, Defense Research, Development, Test and Evaluation (RDT&E) Information Exchange Program (IEP)

23. Loans (Stand Alone Agreement or within an IA) Sometimes referred to as Equipment and Material Transfer (E&MT) NATO Nations and Major non-NATO allies (not Friendly Foreign Countries (FFC)) Materials, Supplies and Equipment May be Expended Without Reimbursement Test Results Provided Without Charge Loans 22 U.S.C. Section 2796d

24. Only IAs to enable Reciprocal Use of Test Facilities (RUTF) Carried out under RUTF PAs Allows for payment of direct costs and appropriate indirect costs Streamlined staffing directly to DOT&E for signature Facilitates Cooperative Test and Evaluation (T&E) Projects Carried out under CT&E PAs Based on standard equitability principles Implemented through Bilateral IAs Currently with Australia, Canada, Denmark, Finland, France, German, the Netherlands, Norway, and the United Kingdom (and soon Korea, Italy, Israel, and Sweden) Multilateral TEP (MTEP) signed April 2015 among Australia, Canada, New Zealand, United Kingdom and the United States Test and Evaluation Program (TEP) Agreements 10 U.S.C., Section 2350 l

25. Cooperative RD&A Agreements • Program MOUs/MOAs • Covers several phases of a cooperative development (e.g. TMRR, EMD, Production, and equivalent categories in the partner’s system) • Phase MOUs/MOAs • Usually for one phase of a development • Preferred by the US because of the PPBE System • Framework (or Master or Umbrella) MOUs/MOAs (initiate nothing) • Research, Development, Test, and Evaluation (RDT&E) Agreements, Technology Research and Development Project (TRDP) Agreements (with PAs) • Master Information Exchange Agreements (with Annexes)

26. Objectives of Umbrella Agreement Scope of the Umbrella Agreement(6.1, 6.2, 6.3, 6.4) Management of Umbrella Agreement Intellectual Property Provisions Security Provisions Loan of Materials Third Party Sales and Transfers Liabilities and Claims Participation of Additional Nations Customs Duties Dispute Settlement Amendment of Umbrella Duration of Umbrella Termination of Umbrella Objectives of Particular Project Scope of Particular Project Project Management of Particular Project; Contributing Participants Cost Sharing of Particular Project Work Sharing for Particular Project Contractual Arrangements for Particular Project; Acquisition Strategy Duration of Particular Project Termination of Particular Project Framework/Master/Umbrella MOUs Covered in Umbrella MOU Covered in PA Program Dependent Program Independent

27. Active RDT&E and TRDP Agreements

28. Active RDT&E and TRDP Agreements

29. Broad bilateral umbrella MOUs that seek to reduce trade barriers Establish reciprocal principles and procedures that enhance access to each country’s defense market by removing discriminatory barriers Waives application of “buy national” restrictions (e.g., Buy American Act) for each other to the extent possible (DFARS 225.872-1) Sometimes cover special interest topics Quality Assurance Services, Contract Audit Services, Logistics Support, Security of Supply Usually in separate MOU annexes but separate reciprocal QA MOUs have been entered into with countries without RDP MOUs RDP MOUs are in place with 26 countries http://www.acq.osd.mil/dpap/cpic/ic/reciprocal_procurement_memoranda_of_understanding.html Reciprocal DefenseProcurement (RDP) MOUs

30. Reciprocal Defense Procurement MOUSwith 26 Countries Australia Austria Belgium Canada Czech Republic Denmark Egypt Estonia Finland France Germany Greece Israel Italy Japan Luxembourg Netherlands Norway Poland Portugal Slovenia Spain Sweden Switzerland Turkey United Kingdom

31. Cooperative Production Conducted under an IA; features division of labor and final assembly/integration of the product FMS Coproduction Uses FMS procedures and commercial licenses to transfer to a foreign nation ability to produce US origin defense articles LOAs, munitions export licenses, FMS Coproduction IA Licensed Coproduction US companies to foreign governments or companies Munitions export licenses through State Department Coproduction Agreements

32. Where Do Ideas for ICPs Come From?

33. NATO NATO Organizations NATO Support Organization (NSPO) Member Nations of NATO Currently 28 nations Major Non-NATO Allies Friendly Foreign Countries Nations and Organizations

34. Multilateral Forums and Activities NATO Panels, Sub-Panels, Capability Groups, Project Groups, Organizations NATO Conference of National Armaments Directors (CNAD) and Five-Power National Armaments Director (NAD) Meetings The Technical Cooperation Program (TTCP) – AU/CA/GB/NZ/US Bilateral Forums and Activities US-Japan Systems and Technology Forum (S&TF) US-Republic of Korea Defense Technological and Industrial Cooperation Committee (DTICC) AUSMIN Defense Acquisition Committee (ADAC) Singapore-US Defense Cooperation Committee (DCC) US-Canadian Armaments Cooperation Management Committee (ACMC) Other OSD and Military Department Bilateral Forums Technology Working Groups Meetings

35. Information and Personnel Exchange Programs International Testing Programs DoD or Military Department Industry Partner Nation Promises by Your Boss Other Sources

36. Defense Acquisition System (DAS) Model 1: Hardware Intensive Program Initial Operational Capability (IOC) Full-Rate Production (FRP)Decision Full Operational Capability (FOC) Capability Development Document (CDD) Validation User Needs Development Request for Proposals (RFP) Release Decision A C B Materiel Development Decision Low-Rate Initial Production (LRIP) OT&E Sustainment Disposal Materiel Solution Analysis Technology Maturation & RiskReduction Engineering & Manufacturing Development Production and Deployment Operations & Support = Decision Point = Milestone Decision Technology Opportunities & Resources • A hardware intensive development program such as a major weapons platform. This is the “classic” model that has existed in some form in all previous editions of DoDI 5000.02. It is the starting point for most military weapon systems; however, these products almost always contain software development resulting in some form of Hybrid Model A.

37. A C B DAS – IAC Activity Alignment International Cooperation in AT&L Implemented by International Agreement AcqStrat (Initial) AcqStrat (Update) Exploratory Discussions and International Forums Cooperative R&D and International Testing Studies and Exchanges Cooperative Production and Coproduction Cooperative Logistics Cooperative Opportunities discussion required at each MS per Section 2350a, 10 U.S.C.Cooperative Opportunities discussion results are incorporated into the Acquisition Strategy

38. DAS – IAC & Foreign Military Sales (FMS) International Armaments Cooperation (IAC) International Agreements (IAs) Foreign Military Sales USD(AT&L) Oversight LOAs USD (Policy) Oversight

39. What Is the Business Process for the Development and Approval of IAs?

40. Commitment of the Potential Partners Capability Requirements Harmonization (JCIDS) Acquisition Strategy Harmonization Performance trades Cost estimating Schedule realism Equitability Equal, Benefiting Assets, Unbalanced Benefits Tech Security & Foreign Disclosure (TSFD) and Export Control Key Planning Considerations

41. Developing the Business Case PotentialProgram ViableProgram ProposedProgram Conduct Technical Discussions with Potential Partners Prepare Summary Statement of Intent (SSOI) Contact your MILDEP IPO or Equivalent (sooner the better) (Required document developed based on AT&L(IC) template) • Technical discussions help define • Program objectives and scope • Responsibilities of the participants • Resource contributions • Collect other information needed for the SSOI U.S. Only Document SSOI/supporting docs are submitted by DoD Component to AT&L/IC per DAG

42. Typical ICP Initial Phase Efforts Form Team Confirm Value Proposition Engage Partner(s) Identify Potential Partners Conduct Exploratory (Tech) Discussions Assess Viability & Benefits • Harmonize operational requirements • Align program objectives and structure • Explore equitability • Validate TSFD boundaries • Build DoD Component and partner-equivalent organizational buy-in • Common requirements • Funding availability • Desired technology • Industrial capabilities • Common S&T interests • Similar development programs • Previous ICPs • Security Cooperation emphasis • Compatible operational requirements • Programmatic feasibility and risks • U.S./partner contributions and level of commitment • TSFD executability • Mutual benefits and program viability

43. Tech Discussion Best Practices Tech Discussions U.S. Notional Concept Shared Vision Viable Cooperative Project/Program Proposed U.S. Objectives • U.S. S&T/operational requirements • U.S. acquisition objectives and structure • U.S. equitability • U.S. TSFD boundaries • DoD Component organizational buy-in • Security Cooperation plans Power Point Only -- No Int’l Agreement Text! • Compatible S&T/ operational reqmt’s • Manageable level of feasibility and risk • Adequate U.S./partner contributions and level of commitment • TSFD executability • Mutual project/program and pol/mil benefits • Requirements? • Cooperation scope? • Financial and non-financial contributions? • TSFD or pol/mil roadblocks? • Organizational commitment? One or more Tech Discussion sessions needed for complex ICPs

44. Short Title Partner Nation(s) Proponent Date Description Fiscal Legal Authority Technology Transfer/ Disclosure Contracting IA Generator Deviations U.S. Industrial Base Impact Negotiator Counsel Summary Statement of Intent (SSOI) US Only Document Latest Template September 27, 2016

45. Streamlines OSD Portion of the Process In effect since the mid-1990s; mature and well understood; designed to reduce staffing time Significantly changes process described in DoDD 5530.3 Applies to All AT&L-Related IAs Uses Silence Procedures for Approvals Details in Chapter 1, Supplement 1, Section 6 in the Defense Acquisition Guidebook (DAG) published February 27, 2017 https://acc.dau.mil/dag The Streamlined IA Process

46. IA Process for MOUs/MOAs Streamlining I Negotiations RAD (Request for Authority to Develop) Memo RFA (Request for Final Approval) Memo • Summary Statement of Intent (SSOI) • Negotiated MOU • Revised SSOI • AECA Sec 27 Certification US Only Document Defense Acquisition Guidebook

47. …The term “negotiation”also includes provision of a draft agreement or other document, the acceptance of which would constitute agreement, as well as discussions concerning any U.S. or foreign government or international organization draft document whether or not entitled “agreement.” The term “negotiation” does not include preliminary or exploratory discussions or routine meetings where no draft documents are discussed, so long as such discussions or meetings are conducted with the understanding that the views communicated do not and shall not bind or commit any side, legally or otherwise. “Negotiation” Exploratory discussions should aim to develop the SSOI DoDD 5530.3, International Agreements

48. MOU ProcessRequest for Authority to Develop (RAD) Stage Can Be Iterative; Consultation Smart in Complex Program RAD Approved by Memo RAD Memo/ SSOI Initiated by MOU Sponsor Service Service Approval MOU Manager ODIR (IC) Coordinates RAD/SSOI Legal Comptroller Policy Others Approval Disapproval 21 Days Meet with Reviewers

49. MOU ProcessDevelopment and Negotiation Stage Development Stage Negotiation Stage Generation of MOU Informal Staffing Start Formal Negotiations Negotiate MOU Negotiated MOU RAD Approved by Memo US Only Document/System DOD IA Generator NATO Uses AC/313 Guidelines

50. DoD-sponsored, menu-driven, computer software system referred to as IA Gen Standard and alternative text for each type of IA Conforms to relevant U.S. regulations and policies Country specific - Chapeau/Non-Chapeau versions Contains instructions for IA development and negotiations Contains DoD policy references associated with each IA Section International Agreements Generator