Tuesday, August 6, 2013

US Security Cooperation through FMF & FMS

U.S. Security Cooperation (SC)

The United States policy of Security Cooperation is based upon cooperation between the U.S. and other sovereign nations in order to meet common regional stability goals and enable friends and allies to improve their defense capabilities and needs. It consists of a group of programs authorized by the U.S. Foreign Assistance Act of 1961 (FAA), the Arms Export Control Act (AECA), and related statutes, under which the Department of Defense (DoD) or commercial contractor(s) provide defense articles and services in support of U.S. national policies and objectives. Each year the Administration submits requests to Congress for the Security Assistance budget. Congress reviews the request and appropriates funds under the Foreign Operations Appropriations Act (FOAA) for various international assistance programs, including Foreign Military Financing (FMF) and International Military Education and Training (IMET). The State Department’s Bureau of Political-Military Affairs sets policy for the FMF program, while the Defense Security Cooperation Agency (DSCA), within the DoD, manages it on a day-to-day basis. Security Assistance Organizations (SAOs) operating from U.S. embassies overseas play a key role in managing FMF within recipient countries.

Foreign Military Financing (FMF)

FMF is the U.S. Government program of grants and loans for financing the acquisition of U.S. military articles, services, and training. FMF helps promote U.S. national security interests by strengthening coalitions, cementing cooperative bilateral military relationships and enhancing interoperability with U.S. forces. Because FMF monies are used to purchase U.S. military equipment and training, FMF also contributes to a strong U.S. defense industrial base. FMF purchases are made through the Foreign Military Sales (FMS) program, which manages government-to-government sales. On a much less frequent basis, FMF also funds purchases made through the Direct Commercial Sales (DCS) program, which oversees sales between foreign governments and private U.S. companies. (For more information on DCS, please see the relevant DMG blog).

Foreign Military Sales (FMS) 

FMS is managed and operated by DoD on a no-profit and no-loss basis. As part of the DoD, the Defense Security Cooperation Agency (DSCA) coordinates the transfer of defense material, training and services to allies, as well as promotes military-to-military contacts. Foreign Military Sales division is the core activity of DSCA and annual sales range between US$30 and US$40 billion. Countries and international organizations participating in the program pay for defense articles and services at prices that recoup the actual costs incurred by the U.S. Th is normally includes a fee (currently 3.8% of what the defense articles and/or services cost) to cover the cost of administering the program. Procurement activity is conducted by DoD acquisition staff compliant to FAR and DFARS. Due to U.S. interest in encouraging standardization and interoperability among U.S. and SC countries, FMS normally involves the transfer of those items which have been fielded with U.S. forces. While available through FMS, nonstandard articles or services are normally acquired commercially under DCS.

Procedure Followed

Generally, when a foreign country requires U.S. defense articles or services a Letter of Request (LOR) will be submitted through diplomatic channels to the appropriate DoD Military Department or Defense Agency and copied to the Department of State (DoS) Bureau of Politico-Military Affairs and the DSCA. If the request is approved, the DoD will respond either with Price and Availability (P&A) information or a Letter of Offer and Acceptance (LOA). The LOA is a formal offer which, when accepted, forms the basis for the U.S. to provide the material and services offered.(For more information on LOA and P&A, please see the relevant DMG blog).

Preparing to do Business

There are significant opportunities present for U.S. and international suppliers of defense material and services to participate in and benefit from FMF and FMS. However, it is necessary to understand the requirement specification and acquisition process, as well as ensure that your offering will be compliant to regulations and eligible for consideration. If you find yourself needing help with the above, please reach out to us.

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