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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
A Comparison:

Direct

Commercial

Sales

Foreign

Military

Sales

&

fms or dcs which is better

DCS

Contract

FMS

LOA

It All

Depends...

FMS or DCSWhich is better?
sales comparison billions
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

acquisition preference samm c4 5 8
Acquisition PreferenceSAMM C4.5.8

DoD prefers that countries friendly to the US fill defense requirements with US origin items.

acquisition policy samm c4 5 8
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.

fms only designation samm c4 5 9

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
fms only designation

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
dcs preference designation samm c4 5 10

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
what about both fms dcs

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
can usg support dcs samm c11 8

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
concurrent negotiations samm c4 5 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

???

loa withdrawal samm c4 5 11 1
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

can fmfp fund dcs samm c9 7 4 1 1
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

fmfp guidelines for dcs samm c9 7 4
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
slide15

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)

fms or dcs
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
relationships fms
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

relationships fms1
Relationships - FMS

United States Government

LOA

CONTRACT

Foreign

Government

Defense

Contractor

relationships dcs
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

relationships dcs1
Relationships - DCS

United States Government

L

I

C

E

N

S

E

Foreign

Government

Defense

Contractor

CONTRACT

management fms
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
management dcs
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?
financial issues fms
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
financial dcs
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
range of customer involvement
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
what s the best choice
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

fms or dcs which is better1

DCS

Contract

FMS

LOA

It All

Depends...

FMS or DCSWhich is better?