GOVERNMENT CONTRACTING INSIGHTS CONTRACTING
Pentagon Targets Foreign Military Sales Reforms
The Defense Department announced June 13 that the secretary of defense approved recommendations for strengthening the foreign military sales program and instructed FMS-implementing agencies to move forward with these recommendations.
It remains to be seen how the department’s agencies will implement the recommendations, and there is a possibility that legislative action will impact FMS reform and supplement or supersede these recommendations.
Last year, the Pentagon formed a tiger team to evaluate the FMS program and consider potential improvements. As part of that process, the team solicited industry input in the form of a November report compiled by the Aerospace Industries Association, the Professional Services Council and the National Defense Industrial Association and a follow-on set of seven industry recommendations released in February of this year.
In June, the tiger team released — and the department adopted — its own set of six recommendations that largely mirror the broad goals — if not the specific action items — set forth in the industry recommendations.
First, the tiger team recommended improving the Pentagon’s understanding of ally and partner requirements. A key action item identified was a creation of a defense security cooperation service “on par with the Defense Attaché Service.”
A defense attaché office is led by a U.S. military officer and serves as the primary military advisor to a U.S. ambassador. Defense attaché offices are located within U.S. embassies and consulates, providing an in-country presence to liaise with allied defense ministries regarding their security needs. Defense attachés historically have been the security cooperation officer for the given country. It is unclear precisely how the tiger team envisions the new service would interact with the existing defense attachés.
The second tiger team recommendation is to enable efficient reviews and reduce barriers to export control approvals for key technologies. The tiger team did not identify any specific actions here, but the industry report flagged the need for a more centralized approach to export management, including considering aligning the end use monitoring programs across various departments.
Next, the tiger team recommended providing allies with priority capabilities, including by developing methodologies for facilitating non-programs of record. The industry report observed that FMS currently strongly favors programs of record, which are programs for which Congress has — or intends to — appropriate funding. The industry report recommended several actions with an eye toward clarifying how industry can navigate approvals for FMS cases for products outside of programs of record, such as creating an interagency inventory of available product options and creating a formal acquisition pathway for non-programs of record.
Fourth, the tiger team called for accelerating acquisition and contracting support by establishing contract award standards/metrics and developing process maps to monitor FMS cases. Industry identified the same underlying issue in its report, noting that, “Time has the most impact on U.S. competitiveness, sales, production schedules and defense partnership objectives.”
The most in-depth tiger team recommendation is to expand defense industrial base capacity. To achieve this, the Defense Department will undertake a comprehensive study on how to incentivize investment in production capability, including surge capacity for high-demand articles and services. Other action items include use of multi-year contracts — rather than standard one-year base contracts with additional one-year option periods — and enhanced use of the Special Defense Acquisition Fund.
Finally, the tiger team recommended taking steps to ensure broad U.S. government support, including from the State Department and Congress. To implement all these recommendations, the Defense Department announced it would establish an FMS Continuous Process Improvement Board.
In summary, the tiger team’s recommendations largely track the industry recommendations, although industry made more explicit recommendations on topics such as creative contracting processes and export financing arrangements.
For example, industry made specific recommendations around strategic alignment, including establishing an interagency working group to track major arms transfers to the National Security Strategy and National Defense Strategy. Industry also recommended changes to expedite the contracting process, such as allowing contractors to be directly involved in the letter of offer and acceptance process for sole-source requests from foreign partners.
It is possible that the tiger team adopted some of the specific action items suggested by industry, but the Pentagon chose not to publish a full copy of its recommendations, electing only to summarize them in a press release. For the moment, industry remains in the dark regarding the precise actions recommended by the tiger team and what actions the department may focus on moving forward.
Despite some overly enthusiastic media reporting to the contrary, the Pentagon’s adoption of the tiger team findings does not guarantee that any of these recommendations will become reality. The secretary of defense instructed the components to move forward with implementation, but the agencies will retain discretion on how to best move forward, and certain aspects of the tiger team recommendations may be restructured or deferred.
As mentioned at the outset, the tiger team recommendations and the Defense Department’s move toward implementation may be impacted or even superseded by legislative action. There are several legislative proposals for FMS reforms circulating around Capitol Hill, and the next National Defense Authorization Act appears primed to provide additional direction to the Pentagon on the future of the program. ND
Nooree Lee is a special counsel in the Washington, D.C. office of Covington and Burling LLP.
Topics: Defense Department