International Acquisition and Exportability (IA&E)

Elements

December 2014

Frank D. KenlonProfessor of International Acquisition (Intermittent)

Defense Systems Management College – International Dept Frank.Kenlon@dau.mil, (410) 610-5040

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International Acquisition & Exportability (IA&E)

Defense Exportability Integration

Sales & Transfers

Technology Security & Foreign Disclosure

InternationalCooperative

Programs

New term used in interim DoDI 5000.02

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International Acquisition/ Security Cooperation Mechanisms

Mechanism Security

AssistanceInternational Armaments Cooperation

Direct Commercial Sales (DCS)

Building Partner Capacity (BPC)

Requirement Foreign Customer Mutually Determined

Foreign Customer DoD Determined

Relationship Buyer-Seller Partner Buyer-Seller Provider-Receiver

Form of Agreement

Foreign Military Sales (FMS) Letter of Offer and Acceptance (LOA)

International Cooperative Program (ICP) Agreement

Export License & Industry Contract(s)

Psuedo-LOA

Funding Foreign Customer Equitably Shared Foreign Customer DoD

Program Management

DoD Implementing Agency (IA)

Joint Foreign Customer DoD IA

Contract Privity DoD IA & Industry Partner Nations & Industry

Foreign Purchaser & US Industry

DoD IA & Industry

Implemented by different organizations under various laws and procedures

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Key Legislation

Title 22 Legislation• Arms Export Control Act (AECA)

− Foreign Military Sales (FMS)− Direct Commercial Sales (DCS)− Cooperative Programs

• Foreign Assistance Act (FAA)− Grant Aid− International Military Education and Training (IMET)− Excess Defense Articles (EDA)

Title 10 Legislation− Building Partner Capacity (BPC)− Cooperative RDT&E− Acquisition and Cross Servicing Agreements (ACSAs)

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National Security Strategy• Strengthen alliances to defeat global terrorism• Work with others to defuse regional conflicts• Develop agenda for cooperative action with

other centers of global power

National Defense Strategy• Shape the choices of key states• Strengthen & expand alliances

and partnerships• Secure U.S. strategic access &

retain freedom of actions

DoS/USAID Strategic Plan• Counterterrorism• Reduce/Eliminate WMD• Promote conflict prevention &

resolution• Conduct security cooperation

& security sector reform

National Military Strategy• Support national efforts to address

complex security challenges• Deepen security relations with our

allies and create opportunities for new partnerships

• Prepare for an increasingly dynamic and uncertain future

Strategic Guidance

Strategic Guidance for DoD• Challenging global security

environment• Delicate balance between

available resources and security needs

• Maintain broad/versatile capability portfolio

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OSD Oversight

Secretary of Defense––––––––––––––––––––––––Deputy Secretary of Defense

Secretary of Defense––––––––––––––––––––––––Deputy Secretary of Defense

Under Secretary(Acquisition, Technology

and Logistics)

Under Secretary(Acquisition, Technology

and Logistics)

Under Secretary(Policy)

Under Secretary(Policy)

Defense Security Cooperation Agency

(DSCA)

Defense Security Cooperation Agency

(DSCA)

Director International Cooperation (AT&L IC)Director International

Cooperation (AT&L IC)Defense Technology

Security Administration (DTSA)

Defense Technology Security Administration

(DTSA)

Security AssistanceBuilding Partner Capacity

Technology Security

International Armaments Cooperation

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TSFD and Export Control Basics

Fundamental Security Considerations

Release Conditions

Type of USG/DoD Authorizations

TSFD Foreign VisitsExport

• Not transfer or use for other purposes without U.S. consent• Provide substantially the same degree of protection as U.S.

Access Protection+

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USG/DoD TSFD Authorizations

• Internal MILDEP processes• Four primary DoD processes• Eight specialized DoD processes

• All running independently under leadership of different offices

• Required for FMS and cooperative programs; prerequisites to Export License approval for DCS

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USG/DoD TSFD ProcessesMILDEP Processes

DoD Lead: Various

MILDEP-specific various

MILDEP Process

Other DoD Processes

DoD Lead: Various

Org.-specific various

Few documented processes

Interagency process

LO/CLO AT&L Primary

AT AT&L Primary

SAP SAPCO Specialized

DSC AT&L + Policy Specialized

Intel USD(I) Specialized

Data Links/WF DoD CIO Specialized

PNT/GPS DoD CIO Specialized

COMSEC NSA & DoD CIO Primary

GEOINT NGA Specialized

MTCR Policy Specialized

NDP Policy Primary

EW None No single process

NVD/INS DTSA Specialized

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TSFD Oversight

• Arms Transfer and Technology Release (ATTR) Senior Steering Group (SSG) established in DoDD 5111.21:– Overarching DoD authority to ensure clear senior-level

direction– Serves as appeals board and mediation body – USD(P) & USD(AT&L) co-chairs with interagency

participation

• TSFD Office (TSFDO) also established in DoDD 5111.21:– ATTR SSG Executive Secretariat and assesses/recommends

changes to policies– Develops/implements procedures and checklists,

coordinates documentation and policy, conducts outreach

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Defense Exportability “Headwaters”

JCIDSGuidance

Non-Materiel Solutions

Materiel Solutions

DOTMLPF-P

Procurement or Modification

Additional ProductionOr Modification

CooperativeDevelopment Program

New DoD JointProgram

New DoD Component Program

WhatdoesDoD want

to sellOr

TransferIn

the Future?

Joint Staff, CoCOMs & Services Mil-to-Mil

engagementwith Allies & Friends

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Defense Exportability Dilemma

How can the USG/DOD best balance these two competing demands?

Where does the money come from needed accomplish these goals?

Provide required capabilities

quickly to allies and friends

Protect the “crown jewels” of U.S. defense

technology

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How Many Configurations?

Few• Simpler design and test• Simpler production and

logistics• Easier upgrades• More affordable

Many• Greater customer choice• Treats countries differently• Tailored logistics and

upgrades• More expensive

DoD and partner/customer nations must compromise to achieve optimal outcomes for all (easy to say, hard to do)

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Defense Exportability Features(DEF) Pilot Program

• FY11 NDAA directed SECDEF to “carry out a pilot program to develop and incorporate technology protection features in a designated system during the R&D phase of such system.”

• Program Scope/Status– Identify MDAPs for which there is significant anticipated export demand and whose

technical aspects are amenable to DEF– Pilot program to provide funding to evaluate exportability and facilitate planning for,

design, and incorporation of exportability features during RDT&E– AT&L selects candidate programs from MILDEP nominations

• FY12 NDAA change– Industry to share at least half the cost of developing and implementing program

protection features

• FY14 NDAA extended pilot program through October 2020

Defense Exportability is Part of BBP 2.0

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Defense Exportability Activities

IOCA CB

LRIPTechnology Maturation &

Risk Reduction.

Production & Deployment

DRFPRD

MaterielSolutionAnalysis

CDD-V

CDDICD Draft

CDD

Operations & SupportMateriel

DevelopmentDecision

FRP

Decision

Sustainment

DisposalFOC

Engineering & Manufacturing Development

CDRCPDPDR

Exportability Assessment

• Projected sales

• Technology complexity

Exportability Feasibility Studies

• Conducted with program contractor

• Included in TMRR contract

• Funded by program or DEF PE

• Industry provides 50%

Exportable Designs

• Funded by program, cooperative program or customer, or industry (or combination)

• May be multiple configurations

Exportable Version Production

• Funded by customer• May be multiple

configurations

Exportable Version Depot &

Spares • Funded by

customer

Activities Require MDA Approval

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Backup Charts

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Security Cooperation

All DoD interactions with foreign defense

establishments to build defense relationships

that promote specific US security interests,

develop allied and friendly military capabilities for self-

defense and multinational operations, and provide US

forces with peacetime and contingency access to a host

nation.

Security Cooperation is a DoD Term (Joint Pub 1-02)

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Security Cooperation Elements

CombinedExercises

Equipment Sales

& FinancingDefense

Contacts &Familiarization

Int’l Armaments Cooperation

Support to Operations

HumanitarianEfforts & Civic

Assistance

Int’lTraining & Education

Elements that involve defense acquisition

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Benefits

DCSFMS

ICP

• Economies of Scale− Production− Operations & Support

• Maintain hot production base• Share sustaining engineering costs• Share production line shutdown costs• Share RDT&E costs• Share production non-recurring costs

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Security Assistance Programs

Program Administration Responsibilities

Department of Defense• Foreign Military Sales (FMS)• Foreign Military Financing Program (FMFP)• Int’l Military Education & Training (IMET)• Foreign Military Construction Services

(FMCS)• Leases• Drawdowns• Excess Defense Articles (EDA)

Department of State• Peacekeeping Operations• Int’l Narcotics Control & Law Enforcement• Nonproliferation, Antiterrorism, Demining,

and Related (NADR) • Direct Commercial Sales (DCS)

US Agency for Int’l Development• Economic Support Fund (ESF)

Security Assistance is a State Department Program

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Foreign Military Sales (FMS)

Requisition

ContractU.S.

Government

LOA

From Stock

Foreign Government

New Production

Services,

or

Information,

• Sale of U.S. defense equipment/servicesby U.S. Government

• Buyer-seller relationship• Foreign Funds (or U.S. grants/loans) with

administrative surcharge• Conducted under State Department Title 22

authority

Letter of Offer and Acceptance

LOR

Letter of Request

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$13.26 $12.51 $13.00 $13.53 $10.58

$20.98 $23.29

$36.38 $38.09

$31.60 $32.10

$69.10

$27.81

$19.80

$7.19 $10.23

$7.09 $9.22

$7.23

$16.08 $17.19

$24.74 $27.83

$17.10

$26.00

$60.80

$16.32 $18.60

$-

$10

$20

$30

$40

$50

$60

$70

$80

FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Bil

lio

ns

Total Sales

FMS Sales (National Funds)

Foreign Military Sales Trends

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The Scale of FMS

FMS and Service Procurement: 5 Year Average• Average annual procurement budget over last 5 years (FY09-13):

#1. $41.6 Billion USAF#2. $39.7 Billion FMS#3 $37.5 Billion U.S. Navy#4 $32.4 Billion U.S. Army#5 $8.4 Billion USMC

• If we remove the FY12 Saudi Arabia F-15 sale and recalculate:#1. $41.6 Billion USAF#2 $37.5 Billion U.S. Navy#3 $33.7 Billion FMS #4 $32.4 Billion U.S. Army#5 $8.4 Billion USMC

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USMC

USMC

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International Armaments Cooperation (IAC)

• Cooperative research, development, and acquisition projects and programs

• Enabling Programs− Personnel exchange (ESEP & APEP)− RDT&E Information Exchange Program (IEP)− International Cooperative R&D (ICR&D) program− Coalition Warfare Program (CWP)− Foreign Comparative Testing Program (FCT)

• International Cooperative Programs (ICPs)

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Foreign Government(s)

U.S.Government

Contract

InternationalAgreement

U.S. and/or Foreign Government Activity

Work

New Production

Service,

or

Information,

• Acquisition or technology project in any Defense Acquisition Management System phase

• Partnering relationship• Jointly managed• Costs, benefits, risks shared equitably

U.S. and/or Foreign Industry

International Cooperative Program

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Acquisition Strategy

“Program management is responsible for integrating international acquisition and exportability considerations into the program’s Acquisition Strategy at each major milestone or decision point. Program management will consider the potential demand and likelihood of cooperative development or production, Direct Commercial Sales, or Foreign Military Sales early in the acquisition planning process; and, where appropriate, program managers will pursue cooperative opportunities and international involvement throughout the acquisition life cycle to enhance international cooperation and improve interoperability in accordance with DoD Instruction 2010.06.”

Interim DoDI 5000.02 (Enclosure 2, paragraph 10)

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Allied Interoperability

• DoD complies with U.S.-ratified International Standardization Agreements to maximum extent feasible, subject to systems engineering tradeoffs

• Program Managers to pursue opportunities throughout the acquisition life cycle that enhance international cooperation and improve interoperability

DoDI 2010.06, Materiel Interoperability and Standardization with Allies and Coalition Partners

• Equipment procured for U.S. forces employed in NATO, other allied, and coalition operations must be standardized or at least interoperable with equipment of allies and coalition partners

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Direct Commercial Sales (DCS)

• Sale of defense articles, services, or training made or provided by U.S. defense industry to a foreign entity

• Not administered by DoD and do not involve a government-to-government agreement

• Foreign entity contracts directly with U.S. company• USG control procedure is accomplished through

licensing

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Direct Commercial Sales (DCS)

U.S. Government

Contract

$Export License

ApplicationSigned Export License

U.S. CompanyForeign Entity

• Foreign entity purchases U.S. defense equipment/services from U.S. company

• U.S. Government control through licensing– Department of State for military items– Department of Commerce for civil & dual use

items

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FMS vs DCS

• DoD is generally neutral whether a foreign country purchases through FMS or DCS

• Certain items can be designated FMS only; based on complexity, sensitivity, interoperability, relationships

• Most major system DCS programs will have an FMS companion effort for FMS-only items (i.e. a hybrid program)

Program Managers should monitor program contractors’ marketing efforts

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Building Partner Capacity (BPC)

• Title 10, DoD Security Cooperation programs executed through the FMS infrastructure

• Differences from traditional FMS– USG Requesting Authority identifies requirement– Funded by the USG– “Pseudo”-LOAs are not signed by country– Title transfers in country

• Variety of programs conducted under multiple legal authorities

List of programs and BPC policies are contained in Chapter 15 of the SAMM

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Building Partner Capacity (BPC)

Requisition

Contract

Implementing Agency

Pseudo LOA

Foreign Government

• Provision of U.S. defense equipment/services by U.S. Government

• Specific programs authorized in annual NDAAs• Conducted under Title 10 authority with DoD funding

MOR

Memorandum of Request

Requesting Authority

Stock

Letter of Offer and Acceptance