[Federal Register Volume 76, Number 203 (Thursday, October 20, 2011)]
[Notices]
[Pages 65186-65187]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27218]
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DEPARTMENT OF DEFENSE
Request for Public Comments on How the Department of Defense Can
Improve the Way It Procures Defense Items and Defense Services in
Support of Foreign Military Sales (FMS) Programs
AGENCY: Department of Defense (DoD).
ACTION: Request for public comments.
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SUMMARY: Defense Federal Acquisition Regulation Supplement (DFARS)
subpart 225.73--Acquisition for Foreign Military Sales (FMS) implements
22 U.S.C. 2762 of the Arms Export Control Act (AECA) that authorizes
DoD to enter into contracts for resale to foreign countries or
international organizations. In a recent report signed by the Secretary
of Defense titled ``Security Cooperation Reform Phase 1'', a
requirement directs the Office of the Under Secretary of Defense for
Acquisition, Technology and Logistics (OUSD(AT&L)) to seek information
from industry on how to improve the FMS process. The report is
available at http://www.acq.osd.mil/dpap/cpic/ic/docs/Signed_SCRTF_Report_Phase_1_-July%202011.pdf.
[[Page 65187]]
DATES: Submission of Comments: Submit written comments to the address
shown below on or before December 2, 2011. Comments received will be
considered by DoD in the formation of a recommendation to the Secretary
of Defense if a revision to the regulation or policy is necessary and
appropriate.
ADDRESSES: Submit comments to: Director, Defense Procurement and
Acquisition Policy, 3060 Defense Pentagon, Washington, DC 20301-3060,
or e-mail to [email protected].
FOR FURTHER INFORMATION CONTACT: Mr. Jeff Grover, telephone 703-697-
9352.
SUPPLEMENTARY INFORMATION: The Foreign Military Sales (FMS) Program is
authorized under the Arms Export Control Act (AECA). The FMS program is
an important instrument of U.S foreign policy. It allows the United
States to provide defense articles and defense services to friendly
countries and international organizations in order to deter and defend
against aggression, facilitate a common defense, address security
issues of mutual strategic concern, and to strengthen the security of
the United States. The sales agreement between the United States and a
foreign country or international organization is executed via a Letter
of Offer and Acceptance (LOA). Security Assistance Management Manual,
DoD 5105.38-M, found at http://www.dsca.osd.mil/samm/, provides
guidance for the administration and implementation of Security
Assistance and related activities. The articles and services acquired
via FMS sales are procured through the Department of Defense
Acquisition System. In the LOA, the Department of Defense (DoD)
promises that when procuring for the purchaser, DoD will, in general,
employ the same contract clauses, the same contract administration, and
the same quality and audit inspection procedures as would be used in
DoD procurements. Pricing for FMS contracts typically use the same
principles used in pricing of other defense contracts. However, the
application of the pricing principles in Federal Acquisition Regulation
(FAR) parts 15 and 31 to an FMS contract may result in prices that
differ from other defense contract prices for the same item. Direct
costs associated with meeting a foreign customer's additional or unique
requirements are allowable under such contracts. Indirect burden rates
applicable to such direct costs are permitted at the same rates
applicable to acquisitions of like items purchased by DoD for its own
use. If the foreign government has conducted a competition resulting in
adequate price competition as identified in FAR part 15, the
contracting officer shall not require the submission of cost or pricing
data. The contracting officer should consult with the foreign
government through security assistance personnel to determine if
adequate price competition has occurred. In accordance with the
Presidential policy statement of April 16, 1990, DoD does not
encourage, enter into, or commit U.S. firms to FMS offset arrangements.
The decision whether to engage in offsets, and the responsibility for
negotiating and implementing offset arrangements, resides with the
companies involved. Relating to offset costs, a U.S. defense contractor
may recover all costs incurred for offset agreements with a foreign
government or international organization if the LOA is financed wholly
with customer cash or repayable Foreign Military Financing (FMF)
credits. The U.S. Government assumes no obligation to satisfy or
administer the offset requirement or to bear any of the associated
costs. Typically, costs not authorized under FAR part 31 are not
allowable in pricing FMS contracts. On November 22, 2002, the Defense
Federal Acquisition Regulation Supplement (DFARS) was amended to
increase FMS customer participation and acquisition transparency in DoD
contracts awarded on behalf of FMS customers. DFARS subpart 225.73
provides authorization for FMS customers to participate in
specifications development, delivery schedule planning, identification
of warranties and other contractual requirements unique to the
customer, as well as the review of pricing needed to make price-
performance tradeoffs. This DFARS change encourages customer
participation in both the acquisition process and industry discussions.
Customers also are allowed to participate in the contract negotiation
process within the limitations of DFARS subpart 225.73, to the degree
authorized by the contracting officer (CO). This section specifically
protects against unauthorized release of proprietary data and improper
influence on the contracting process.
Mary Overstreet,
Editor, Defense Acquisition Regulations System.
[FR Doc. 2011-27218 Filed 10-19-11; 8:45 am]
BILLING CODE 5001-06-P