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A Comparison:

A Comparison:. D irect C ommercial S ales. F oreign M ilitary S ales. &. DCS Contract. FMS LOA. It All Depends. FMS or DCS Which is better?. Sales Comparison (Billions). FMS. DCS. DCS Source: http://www.pmddtc.state.gov/reports/655_intro.html.

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A Comparison:

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  1. A Comparison: Direct Commercial Sales Foreign Military Sales &

  2. DCS Contract FMS LOA It All Depends... FMS or DCSWhich is better?

  3. Sales Comparison(Billions) FMS DCS DCS Source: http://www.pmddtc.state.gov/reports/655_intro.html FMS Source: http://www.dsca.mil/programs/biz-ops/factsbook/default.htm

  4. Acquisition PreferenceSAMM C4.5.8 DoD prefers that countries friendly to the US fill defense requirements with US origin items.

  5. Acquisition Policy SAMM C4.5.8 DoD is generallyneutral whether a country purchases US origin defense articles through FMS or on a direct commercial basis.

  6. FMS- Only! FMS-Only DesignationSAMM C4.5.9 • USG can require “FMS-Only’’ sales • Evaluation Criteria • Presidential/Legislative restriction • Political/Military relationship with purchaser • Interoperability with US • Complex systems integration • Diversion of sensitive technology • Sensitive data access

  7. FMS- Only! FMS-Only Designation Historical examples • Man Portable Air Defense (MANPAD) missiles • Global Positioning System - Precise Positioning Service (GPS/PPS) • Airborne Early Warning & Control (AEW&C) Systems • Certain Cryptographic Items

  8. DCS Only! DCS Preference DesignationSAMM C4.5.10 • Companies may request DCS preference • Approved requests valid for 1 year • “Best effort” to comply • Implementing Agency (IA) may decline LORs • Exclusions: • Blanket order LOAs • Support items for system sale

  9. FMS DCS What about both FMS & DCS? • Hybrid Sale: System sale total package may be separated into a DCS portion and a FMS portion – SAMM C4.5.9.2.4 • Follow-on Support: Common support should be provided even though the end items were acquired commercially SAMM C4.3.3

  10. CTR CTR CTR USG Can USG support DCS?SAMM C11.8 • USG may sell to U.S. companies in support of DCS • Articles/services are: • Available only from the USG • Commercially unavailable to meet delivery schedule • Services may include transportation, installation, testing or certification. • FMS surcharges applied to selling price

  11. Concurrent NegotiationsSAMM C4.5.11 • Military services will NOT normally engage in FMS/DCS comparison studies • Can be done in certain circumstances • Countries national policy requirement • DSCA approves policy exception for special circumstances FMS DCS ???

  12. LOA WithdrawalSAMM C4.5.11.1 • LOA provided then country solicits DCS bids • Implementing Agency should ask country its procurement intentions • LOA may be withdrawn Zap! LOA

  13. Can FMFP Fund DCS?SAMM C9.7.4.1.1 Egypt Greece Israel Jordan Morocco Pakistan Portugal Tunisia Turkey Yemen http://www.dsca.mil/DSCA_memoranda/fmf_dcc_2005/Guidlines2005%203.pdf

  14. FMFP Guidelines for DCSSAMM C9.7.4 • Possible when approved by DSCA on contract-by-contract basis • Normally not for standard items • Contract over $100K • FMFP may not pay for “Offset Costs” or sales commissions • USG contractor oversight--strict contractor certifications • http://www.dsca.mil/DSCA_memoranda/fmf_dcc_2009/Contractor_Certificationv4.pdf

  15. I certify under penalty of perjury that the foregoing certifications are complete and accurate to the best of my knowledge based upon: (1) written representation made to me by identifiable individuals within this company and which representations will be maintained for six years after receipt of the final payment made by DFAS on this Purchase Agreement; or (2) that I have exercised personal due diligence to ascertain that all statements in this certification are true and correct. VICE PRESIDENT TREASURER, COMPTROLLER, HAVING SUPERVISORY OR OTHER SENIOR FISCAL RESPONSIBILITIES OVER THE MAKING OFFICIAL OF THIS PURCHASE AGREEMENT _______________________________ ______________________________ (Signature) (Signature)

  16. FMS or DCS • Most defense articles and services can be provided through either FMS or DCS • Is one method the best for all procurements? • Relationships • Management • Financial

  17. Relationships - FMS • Government-to-Government • LOA between U.S. Government and purchaser • Procurement contract between U.S. Government and contractor • Direction from U.S. Government • Disputes resolved by U.S. Government • Report to Congress if sale meets §36(b), AECA FMS

  18. Relationships - FMS United States Government LOA CONTRACT Foreign Government Defense Contractor

  19. Relationships - DCS • U.S. Government only involved in export license review • Procurement contract between U.S. industry & foreign government • Contractor directly interfaces with customer • No U.S. Government involvement • Disputes resolved by foreign government • Report to Congress if sale meets §36(c), AECA DCS

  20. Relationships - DCS United States Government L I C E N S E Foreign Government Defense Contractor CONTRACT

  21. http://www.pmddtc.state.gov/licenses.htm

  22. Management - FMS • DoD program mgmt – “Leave the driving to us” • Experienced personnel familiar with system • Ops, logistics, engineering, contracting, finance, etc • FMS charges for these mgmt services • Administrative surcharge • Contract administration services (CAS) • Non-recurring costs • Packing, crating, handling • Transportation • Small case management line • Defined Services Lines

  23. Management - DCS • Foreign purchaser must assume this responsibility • Requirements definition • Contract negotiation • Contract administration • Technical knowledge • Legal system • What are the internal management costs? Will they exceed FMS the charges? • Will there be additional benefits that outweigh additional costs?

  24. Financial Issues - FMS • LOA estimated prices – What will the actual cost be? • Will LOA payment schedule match actual execution performance profile? • When will the case be closed? • USG consolidates purchases for better prices • Prompt and reliable payments to contractor

  25. Financial - DCS • May represent more risk for seller • Freedom from FAR & DFARS may reduce cost • Less than economic quantity purchase • Commercial banking procedures • Prompt incremental and final billing • Prompt contract closure

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

  27. What’s the Best Choice? Price Time Congress Advocacy Quality Assurance Implied Relationship Non-Standard Major System Sale Follow-On Support End Use Monitoring Offsets FMS DCS

  28. DCS Contract FMS LOA It All Depends... FMS or DCSWhich is better?

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