D irect C ommercial S ales D irect C ommercial S ales F oreign M ilitary S ales F oreign M ilitary S ales & & A Comparison: July 2015 SCM-OC/SCM-OC-X

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

Foreign Purchaser’s Option Foreign Purchaser DCS? FMS? Security Assistance Management Manual DoD View DoD is generally neutral whether a foreign country purchases through FMS or DCS.

Implied Relationship ManagementFinancialTime Follow-On Support Non-StandardOffsets FMSDCS What’s the Best Choice?

Foreign Military Sales Buyer/Seller Relationships United States Government ForeignGovernmentForeignGovernment United States Contractor Contractor LOA CONTRACT

Direct Commercial Sale Buyer/Seller Relationships United States Government ForeignGovernmentForeignGovernment United States Contractor Contractor LICENSELICENSE LICENSELICENSE CONTRACT

FMS-Only Designation  DSCA/State Department can require “FMS-Only’’ sales  Evaluation Criteria  Pol-Mil relationship with purchaser  New or complex system or service  Security of sensitive technologies  Feasibility of FMS-DCS hybrid

Concurrent Negotiations  Military services may not engage in FMS/DCS comparison studies  When FMS is in conflict with DCS:  FMS data may be withdrawn if DCS activities are later initiated  No FMS data until ongoing DCS activities have ceased  Can be done in certain circumstances  Countries national policy requirement  DSCA must grant an exception

FMS or DCS  Most defense articles and services can be provided through either FMS or DCS  Is one method the best for all procurements?

Implied Relationship ManagementFinancialTime Follow-On Support Non-StandardOffsets FMSDCS What’s the Best Choice?

FMS/DCS  Implied Relationship  Customer preference for working with DoD or defense contractor?  Political considerations in country  Time  Many factors to consider  One is not always quicker than the other  Each avenue needs to be analyzed

Management - FMS  Program management by DoD – “Leave the driving to us”  Experienced personnel familiar with the equipment  FMS charges for this management service  Administrative surcharge  Non-recurring costs  Quality Assurance  Contract administration services (CAS)

Management - DCS  Foreign purchaser must assume this responsibility  Contract negotiation  Contract administration  Technical knowledge  Legal review  There will be a cost for this--will it exceed FMS charges?  Will there be additional benefits that outweigh additional costs?

Financial Issues - FMS Financial Issues - FMS  Difficult to compare  LOA estimated price  Total Package Approach (TPA)  USG consolidates requirements  USG pays on-time

Financial Issues - DCS Financial Issues - DCS  DCS: fixed price?  Without having to adhere to DoD procedures, contract prices might be lower  Lower quantity may cause higher prices  Use commercial banking procedures--less money tied up than in Trust Fund  Prompt billing

FMS/DCS  Follow-on Support (FOS)  Can use FMS FOS with DCS major weapon systems sale and vice versa  DCS: Heavily dependent on end item and contractor  Non-standard Support  FMS or DCS  FMS: provides unique non-standard support programs  Offsets  FMS or DCS  Always between customer and contractor

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

Implied Relationship ManagementFinancialTime Follow-On Support Non-StandardOffsets FMSDCS What’s the Best Choice?

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