SPEAKERS BUDGET PREPARATION BUSINESS MEASURES CONTRACTING EXPORT CONTROLS PRICING Information Technology INTERAGENCY RELATIONSHIPS New FMS Environment Panel Policy Development and Implementation Training CONFERENCE CONCLUSION ACTIONS
As General Michael Davison, Director, Defense Security Cooperation Agency, opened the Second Annual Security Cooperation Conference in Crystal City on 10 July, he presented the theme "Perspective Is Everything" as an appropriate motto for the security cooperation community which finds itself confronted by a myriad of changes resulting from this new era of a global strategy accompanied by rapid changes in technology and new missions.
(See General Davison's complete remarks) With perspective defined as viewing "relevant data in a meaningful way," Diane Halvorsen, head of DSCA's Reinvention Team, Mary Buehler also of the reinvention team, and Vanessa Murray, Director of DSCA's Legislative and Public Affairs office, presented a symposium designed to illustrate the variety of perspectives held by the participants in developing and implementing security cooperation policy. Instead of a total reliance on plenary sessions as was done last year, the primary proceedings of the conference resulted from ten panel sessions on different topics conducted over the two days, with a plenary resume of the issues presented in each.
Former Ambassador Edward L. Peck, the opening day speaker, seized on the conference theme on perspective to deliver a primer on the verities and vagaries of international relations. He delivered a powerful, insightful, thought-provoking and humorous lesson, using his "Peck's Postulates" to explain the four basic points that make every aspect of foreign affairs easily understandable.
First, there are NO absolutes; perception is everything. It is not what we say or even what we do that matters. The only thing that matters is how the other party(ies) PERCEIVE what we're doing - because that is what controls how they react. Differing perceptions do not make one side wrong and the other right, but they do dictate what does or does not happen.
Second, there are only two things you can always depend upon sovereign nations doing.
Third, every international problem can be put into one of just three categories, if grouped solely on the basis of who decides what to do about them.
(1) Unilateral Issues, in which one country can make the decision all by itself. For example, the U.S. decides to break relations with Cuba.
(2) Multilateral Issues, in which there is more than one participant and all must agree before a decision can be reached, e.g. the U.S. and Cuba decide to reestablish relations
(3) Non-Lateral Issues, in which an outside party may have a great deal of interest, but is not directly involved in the decisions, e.g. the U.S. and the Arab-Israeli Issue.
Fourth, there is only one internationally recognized, universal explanation for every nation's foreign policies: "That's different". This explains why, for example, the U.S. can involve itself militarily in protecting the Kurds in Iraq, but only express mild concern over the harsher circumstances facing the Kurds in neighboring Turkey.
Deputy Secretary of Defense Rudy de Leon opened the second day of the symposium with four principles to guide our security cooperation efforts. First, there should be no doubt about the importance of security cooperation programs like foreign military sales (FMS). Recent events in NATO, in the Republic of Korea, and in the United Arab Emirates show that security assistance can directly support our ability to shape the world and secure our interests. Second there should be a commitment to change. This should not be just one flash of activity but a commitment to the long haul to change mindsets, not just business plans. The third guiding principle is to remember the customer. By successfully filling the expectations of our FMS purchasers, we create the kind of partnerships that are necessary for our military coalitions. The last principle is to remember the war fighter. We must remind ourselves that all of our efforts in security cooperation are to build bridges to other country's militaries so that it will make it less likely that ours will have to be deployed.
(See Secretary de Leon's complete speech)
As the speaker for the Monday evening dinner, Stephen French, the Minister (Defence Materiel) at the British Embassy in Washington, offered the perspective of the United Kingdom but hoped that people would be able to draw wider parallels. In some instances, he addressed U K solutions. Mr. French recognized that size, political system, and constitution in the U.S. are different, and it was therefore neither appropriate nor indeed possible to implement some of these examples in the U.S. system, but perhaps they would strike chords and develop thoughts among other allies.
The perspective of the United Kingdom is the perspective of an ally, not just the formality of treaty obligations, but a deep and multi-facetted relationship, sustained by many different interactions every day. At heart, the U.S. and the UK share a deep-rooted community of interest. This is very important as we are striving for the same goal, and French believed this to be true of all in the room. Sometimes this gets overlooked, and we concentrate on the differences and problems. Although these are important, we must remember that this is generally at the margin. But as a much smaller nation, the UK cannot do everything that the U.S. does. Mr. French pointed out that Security Cooperation means, among other things, mutual benefits and interoperability. This means more than buying American! He mentioned ways in which the United Kingdom can contribute to interoperability through available technology, different processes such as new ways of contracting and partnering with industry; and other capabilities and operational techniques learned through different national experiences. As an ally, they gladly offer these things to the U.S. The following points defined the British viewpoint of FMS reinvention:
(1) demonstrable delivery of concrete security benefits and; meeting defined requirements;
(2) compliance with national parameters;
(3) value for money, an overarching priority that if not clearly being met, then we should not be pursuing FMS;
(4) a sophisticated customer.
In procurement terms, the UK fully understands that there will be differences in national contracting practices, but has expectations of certainties in timing of delivery and payments and assuredness of stewardship of our taxpayers' funds. The UK is increasing emphasis on levels of personal accountability. Both public and Parliament are more often asking the question "who is responsible?" National responsibilities cannot be abrogated by saying 'the U.S. system does not allow us to respond' to this question. We need transparency, visibility and assurance in the system.
Mr. French pointed out that the UK also has political oversight from a higher authority known as Parliament. In terms of a legal background, defense procurement and operations in the United Kingdom do not have a substantial legislative framework. This means they can be more flexible, provided formal cases for change are put to officials. However, where there are legislative hurdles, and they have to be strictly adhered to.
Mr. French summarized that there is a need to set out and hold to responsibilities on both sides. This has been done between U.S. and United Kingdom in the Declaration of Principles signed by Secretary Cohen for the U.S. DoD, and by the UK's Defense Secretary, Mr. Hoon, for the United Kingdom Government earlier this year.
The UK has a clear statement of where they wish to go, that is, to achieve a relationship that recognizes in practice what they believe by heart to be the case: that the U.S. and United Kingdom trust each other implicitly as allies. The Declaration of Principles seeks to achieve this by reducing or removing unnecessary bureaucracy in our relationship such as visit restrictions, export restrictions, and import restrictions. In short, the vision is of two nations working as closely together as feasible, with the minimum of barriers to progress. The UK recognizes and accepts that, even after the Declaration of Principles, there will still be hurdles to be overcome, but it is much better to define the hurdles, so we know where progress has to be made, and the consequences of not overcoming them.
Panel Members:
Mr. Richard Alpaugh, Deputy to the Commanding General, U.S. Army Security
Assistance Center (USASAC)
Mr. Jim McQuality, Comptroller, DSCA
Capt Greg Jackson, International Negotiations, Strategic Plans and Policy Directorate,
JCS/J-5
Mr. Joe Bowab, State Department
Mr. Jim Nix, Program Analyst, International Affairs Division, Office of Management and Budget
Mr. Marshall Billingslea, Senate Foreign Relations Committee
Ms. Vanessa Murray, Director, Legislative and Public Affairs, DSCA
Moderator:
Capt Tom Keithly, Director, Security Assistance Operations, NAVIPO
Purpose: To educate audience members on the processes involved in developing the FMS administrative budget, as well as the Foreign Military Financing (FMF) and International Military and Education (IMET) budgets, and to discuss the roles of each organization involved in preparing those budgets.
The basic issue addressed by this panel concerns the question of dividing the administrative surcharge pie. There are initiatives that would revitalize the FMS administrative budgetary process by providing a framework linking program objectives, resource allocations, and costs. Mr. McQuality explained that DSCA is implementing a new
performance based budget (PPB) system for the FMS administrative fund. This budget would borrow elements of the planning, programming and budgeting system (PPBS) by relating budget resources to performance objectives in six areas: pre-LOA, LOA development, case execution, case closure, other security cooperation, and organizational support. The proposal is to implement some elements of PPB in FY01 with full implementation to occur in FY02.
The JCS' role in foreign military sales is essentially in policy development, not in execution. In discussing the foreign operations budget, JCS represents the regional
war fighting CINCs with respect to the FMF and IMET budgets. JCS tries to influence non-DoD budgets through OMB and State. The idea is to tie FMF and IMET to a long-range plan, the three-year period in the theater engagement plan. It is necessary to link the budget request to the CINC's objectives such as impact on access, coalition building, interoperability, equipment modernization, and regional stability. Thus, the CINC attempts to obtain what is necessary to build a credible force to accomplish missions without U.S. forces being involved.
The Department of State is responsible for the international affairs, or the 150 account, budget. While this is relatively small in contrast the DOD budget, it is big for the State Department, being in the $22-25 billion dollar range. Of this, three to four billion dollars is military assistance. This latter figure is what the military is interested in. In the past, the Annual Integrated Assessment of Security Assistance (AIASA) was used to identify military programs requirements, but this has fallen by the wayside. The new process, which has been in effect for the last couple of years, takes the mission program planning guidance from State and tries to coordinate it with the regional CINC's theater engagement plan to give a military perspective to support a war fighting strategy. The state bureau performance plan combines inputs of the country teams and integrates them into the regional bureau plan. This is then briefed to the Secretary of State on the total needed to support a regional foreign policy. Applicable executive branches are invited to participate in the deliberations. The amount of money requested by the country teams has gone to OMB, within Department of State support of the submission. However countries do not usually get the full amount requested. In order for this to happen, a better job must be done of justifying programs to get greater Congressional support. Better planning would be beneficial.
From the OMB perspective, program justification is key. Competition exists even within the 150 account budget. The entire 150 account is a dangerous budget environment. From the Senate's point of view, security assistance could be a valuable tool of foreign policy, but it is not being taken advantage of the to the extent possible. Threats to countries are increasing, and some of these might be met by security assistance. There are many countries that want a relationship with the United States but cannot afford to pay for it. Today, about 98 percent of FMF is distributed to only three countries.
The Senate wants an annual preparation of a security assistance strategy to accompany the foreign aid bill. This would be a multiyear plan instead of today's piecemeal presentation. Today, the impression is that security assistance is used as a political handout to whoever is in the limelight when money is being passed out. Although security assistance is an integral part of foreign policy, there are no benchmarks against which programs can be measured, and no program objectives by country to say how the money requested would support this strategy. The Foreign Relations Committee wants this justification in terms of a comprehensive five-year plan with supportable objectives. If the State Department could come up with a programmatic approach, this would bolster congressional support.
Conclusions:
First, those involved in putting together these various budgets must plan better and provide input tailored to the needs of the recipient. While this applies to all funding, particular scrutiny is given to appropriated funds used in the carrying out US Foreign Policy. The principal challenge here is to ensure that expectations are properly communicated between all participants early in the process.
Second, DSCA, in concert with the Military Departments, must transition to a PPBS-like system. DSCA must lead all FMS claimants in the development of some type of a Performance-Based Budget over the next year and push for implementation in FY 2002. The principal challenge here is for DSCA to provide the leadership (and resolve) needed to ensure this important initiative happens as well as to provide adequate additional resources to the MILDEPS and to ensure that this change is properly implemented.
Panel Members:
Mr. Robert Keltz, Deputy Director, DSCA
LTC David M. Robinson, Analyst, OSD(P)/PA&E
Mr. Stephen Hyland, Defense Acquisition Attache, Australia
Mr. Craig White, Public Services Manager, KPMG Consulting
Moderator:
Mr. Clifford Crivello, USASAC
Purpose: To discuss business measures relating to Security Cooperation and why they're important. The agenda for this panel was formed to allow for presentations and questions answering; why have Business Metrics; how are the derived; and how are they applied to day-to-day business. The session was broken into two parts; the first hour was dedicated to an overview on Metrics, presented by Mr. White from KPMG. During the second hour, each panel member gave a short presentation and answered questions from the audience.
The panel on business measures started with a tutorial given by Craig White of KPMG. He explained that the purpose of business measurement is to motivate and measure desired behavior in an organization. Although typically only a few measures are needed, there is a tendency today to collect far too many, since with today's technology you can easily manipulate many measures. First he identified the qualities of world-class measurement system and then identified the attributes of a good business measure. He looked at types of measurements such as raw data indicators, external output measures, and internal process measures. He looked at measuring targets, goals, and standards that must be attainable. The tutorial ended with a presentation of the Balanced Scorecard concept, in which performance is measured in four quadrants: financial, customer, internal processes, and organizational learning.
David Robinson, OSD(Policy)/Program Analysis & Evaluation, discussed the performance contract between defense agencies and the Defense Management Council, which consists of the Deputy Secretary of Defense and the Under Secretaries. In terms of metrics, the required performance contracts are looking at cost, quality, customer satisfaction, benchmarking, and reinvention. These contracts are not done in a vacuum. JCS, the DoD staff and agency staffs are all involved in creating the contract or performance plan. These contracts are all tied to the Government Performance and Results Act. Consequently, they are tied to individual agency strategic plans and directly into the various business areas.
Bob Keltz, Deputy Director of DSCA, noted that business measurement was necessary for effective stewardship of the funds and processes of DSCA's five core competencies:
Since these are all separate business areas, they should have separate sets of metrics. In foreign military sales, DSCA has identified four metrics (letter of offer and acceptance preparation, processing supply discrepancy requests, case closure, and shipped with delivery not reported) and are exploring whether others should exist. Mr. Keltz agreed that the word reinvention should not be used to develop metrics, since this somehow implies a time finite procedure, but rather they should emphasize continuous process improvement. In those instances where U.S. foreign policy interest are served, success is growing the United States' market share whether by giving support for foreign military sales, direct commercial sales, or some hybrid mechanism. The issue is not one of which method is better, but whether the United States is a reliable, cost-effective supplier of defense items.
Steve Hyland from Australia noted that cost, adherence to schedule, and case closure were the biggest metrics that his government, as an FMS customer, pay attention to. Mr. Hyland's presentation was in the form of a story about attempting to purchase a car, and because of the system, that purchase takes over 4 years, during which the price doubles (story based on an actual FMS case). His presentation exposed the SA community's need for metrics to improve responsiveness to the customer and improve its processes. In a commercial project, the buyer has insight into and influence over these areas. In foreign military sales, this is not the case, and there is no recourse available to the buyer against the producer for failing to comply with cost, schedule and case closure requirements. Consequently the FMS customer would prefer more insight into the FMS process. By and large, FMS is going well. There are over 600 open cases, but the difficult cases are symptoms of deeper problems. Normally they would not make such a big deal of LOA processing times, since direct commercial sales would be about the same. It would take approximately three months to issue their request for proposal, and then another six-nine months to evaluate it. The real concern is having insight into the program to see if alternatives could be explored when something goes wrong. The higher up in the hierarchy that you go, the problems become more meaningful. Thus, bad experiences are all the more striking.
The common theme evident throughout the workshop was that quality metrics and objectives can help organizations preclude the " faction mentality." Such performance measures are tools organizations can use to teach people how to work together to achieve common goals; in our case deliver on time, within cost and close cases in a timely manner. Reference was made to DSCA's strategic plan and the importance of objective setting. The process of objective setting in the form of a Strategic Plan has merit because well-defined objectives help to unify the thinking of all concerned, are necessary prerequisites for operating on a planned approach rather than on a crisis-to-crisis basis, and allow for comparison of performance against objectives.
Panelists:
Andrew Burt, Canadian Embassy
Valerie Brown, Defense Contract Management Agency
Mike Mutty, OUSD/AT&L, Defense Procurement, Foreign Contracting
Dominique Myers, F-16 Contracting Officer
Dirk Robinson, F-18 Contracting Officer
Moderator: Mr. Keith Webster, Director, Program Support Directorate
Purpose: To address DoD's policy on obtaining cost and pricing data when foreign governments conduct a competition to select a major weapon system; the role of the contracting officer in case development; providing improved pricing visibility to FMS customers; a customer's perspective regarding FMS vice DCS; the role that the Defense Contract Management Agency plays in administering DoD contracts that include FMS requirements; lessons learned regarding FMS purchases of both F-16 and F-18 aircraft; customer participation in contracting and offsets.
Mike Mutty, a specialist in foreign contracting policy, emphasized the need to get contracting officers involved in case development very early in the process. He explained that it is a common practice in Europe for customers to get unlimited data rights for black boxes, a requirement that can cause misunderstandings when dealing with U.S. contractors. He discussed several of the FMS reinvention initiatives relating to providing more information, including cost and pricing data, to the foreign customer during the contracting process. We need to develop realistic expectations up-front with what we can/cannot do during case development. Customers want unlimited data rights-US law precludes providing unlimited data rights. If everyone knows these conditions from the beginning, we can come up with realistic rules of engagement and eliminate surprises during the execution phase of the program. Regarding requirement for industry's submission of cost and pricing data, a July 99 Defense Procurement policy memo stated that competitions should determine the cost paid; therefore, the USG would not require the cost data normally required for single source contracts. Pricing transparency in contracting is a tough issue with many competing interests. Countries need to have better idea so the can justify potential purchases to their Parliaments. Industry has to submit to the U.S. Contracting Officer incredibly detailed information and does not want unauthorized disclosure of this data. The Defense Policy Advisory Committee on Trade (DPACT) met last January and this issue was part of the agenda. Dr. Hamre, then DepSecDef, and Dr.Gansler, USD(AT&L), directed that a working group be formed to work out the issues. This working group has met three times with the Foreign Procurement Group, Industry, Contracting Officers, policy personnel, and FMS community, and is on the right path toward resolving the issue in a manner that will accommodate everyone's interests as much as possible.
Dirk Robinson pointed out that the U.S. must address the varying needs of countries during the case development process. Countries want different degrees of participation in negotiations. For example, his office has worked with Australian representatives in a "limited observer" status. Industry is sensitive to cost versus pricing data. His office is asking contractors to provide certified price-based proposals.
Valerie Brown, who very recently assumed her position at DCMA, reviewed the Defense Logistics Agency's (DLA) role in supporting FMS. The Defense Contract Management Command (DCMC) was created in 1990 under DLA in order to present a single face to the defense industry, to develop uniform policies, to upgrade the performance of the contract administration services workforce, and to reduce costs of operation. In March 2000, the new Defense Contracting Management Agency was formed from DCMC. DCMA administers 325,000 contracts valued at $852 billion at 900 separate locations worldwide. DCMA's goal is to deliver great customer service. DCMA provides contract administration services (CAS) for contracts supporting foreign military sales, direct commercial sales, and foreign military financing (FMF) cases. CAS are financed through a 1.5 percent surcharge on all articles and services procured on contract. CAS provided through these kinds of contracts represent about 13 percent of the overall DCMA budget. Contractors selling defense articles through direct commercial sales contracts may request and pay for CAS from DCMA. The agency also provides audit services for FMF-funded commercial purchases, and has recently established an international and federal business office.
Andrew Burt of the Canadian Embassy provided a customer's perspective. From his viewpoint, "not all that much," has changed in the way FMS has been conducted over the past twenty years. He explained that customers must look at the business case aspects of each proposed sale. Because the new realities of the global economy put the U.S. in competition with other providers, the proposed LOA must provide "irrefutable evidence of value for money." Most of the arms sales from the U.S. to Canada are conducted as direct commercial sales. Canada views FMS as a "premium service" that must be justified and defended to the politicians as the best approach. Canada wants greater disclosure and greater participation on behalf of customer countries, and greater acceptance of customer involvement from U.S. industry. Andrew Burt concluded his remarks with a request for a FMS system that is "better, faster, and cheaper."
Dominique Myers, chief of the foreign contracting directorate for the F-16 program office, opened her remarks by stating that F-16s are flying in 22 countries. She described a situation where the customer country held the competition to choose a contractor, but the F-16 contracting team in support of this FMS contract had to be increased from 17 to 25 contracting specialists because the customer and contractor did not provide enough detail up front to the government. The resulting configuration changes have created an overwhelming workload. In cases like this where the customer conducts the source selection and passes on the results to the U.S. government, more rigor must be required in the process. Issues of scope are involved, because the necessary level of detail is not being provided, and U.S. contracting officers don't have the data and tools they need to manage the contracts properly. Ms. Myers emphasized that no one size fits all for FMS reform initiatives, and that all contracts should not be fixed price. She also suggested that in the case of offsets, a Memorandum of Understanding should be established between the contractor and customer country in order to describe the specific requirements of the offset arrangement.
During open discussion, the problem was raised of having to wait until all contract lines are reconciled before an FMS case can be closed. Mike Mutty explained that an announcement went into the Federal Register with a proposed rule stating that line items may be closed on an individual basis. This would enable FMS cases to be closed faster. A memorandum to this effect was signed out by Mr. Dave Oliver and may be found on the OUSD website.
A suggestion from industry was for the FMS customer to sit down with the government and work out the details of what he wants to negotiate with the contractor, then provides the USG with a letter that absolves the USG and allows the FMS customer to negotiate only that portion directly with the contractor. The USG would be in an observer status. The sale could be termed a "foreign sale" rather than "FMS". The customer could be given the option and make the decision which way he wants to go. The customer viewpoint on this was that the customer wants to use the good experience the US contracting office has, and wants to participate in USG buys so he can get good buys. The customer does not know as much about what is going on with the contracts as the Contracting Officer. Looking for something in-between----have a "team" that would allow the customer to participate, and all participate in the decisions so know exactly what is going on.
From the customer perspective, the customer receives more detailed information in a direct commercial sale than he receives in an FMS sale.
A question was raised of whether or not the customer would be allowed to see the terms and conditions of the US contract. Answer: Normally, the contract would have to be redacted to take pricing out, but the conditions should be provided to the country. If not, the option is to obtain a copy via the FOIA process.
Under current conditions, Contracting Officers have a difficult time fulfilling their duties of determining whether or not offset costs are fair and reasonable, and find themselves in the middle of an arrangement that is supposed to be between the foreign purchaser and the U.S. contractor(s). Per industry, offset costs can be provided as a snapshot in time, but are moving targets and hard to pin down.
USG contract management services to support direct commercial sales may be obtained by setting up an FMS case that provides these services at an hourly rate. This may be done using either blanket order or defined contract requirements.
What was agreed to:
Panel Members:
Ms. Pam Frazier, Deputy Assistant Secretary, Bureau of Political Military Affairs, Department of State
Ms. Susan Ludlow-MacMurray, Director, International Security Policy, Office of the Under Secretary of Defense for Policy
Col Kevin O'Conner, Chief, Weapons Division, DSCA
Mr. John Isbell, Program Manager for International Defense Trade, Department of Commerce
Mr. Joel Johnson, Vice President (International), Aerospace Industries Association
Moderator:
Mr. Ed Ross, Director, Middle East/Asia/North Africa Directorate
Purpose: To review the current changes to the export control processes, including improvements to the USG licensing process, and respond to various queries.
Ms. Frazier led off with a presentation on the Joint State-DoD "Defense Trade Security Initiative
(DTSI)" HOTLINK #5. This initiative involves several changes to the International Traffic in Arms Regulation (ITAR), principally in the area of streamlined licensing reform. This includes:
(1) creating new license authorizations,
(2) expanding the scope of existing licensing practices,
(3) enhancing ITAR exemptions (from getting a license), and
(4) improving transfers relative to government-to-government programs.
More specifically, the DTSI involves 17 proposals dealing with such matters as a single comprehensive license issued at the beginning of a project, increased use of multiple destination licenses, expedited license review for NATO transfers, and enhanced computer connectivity between the DoD and the State Department to permit more timely exchange of data on license applications. Ms. Frazier mentioned that the State Department was increasing its licensing staff by more than 50 percent.
With respect to the "Defense Trade Security Initiative", Ms. Ludlow-MacMurray noted that DoD has to also
get its house in order and to decrease any licensing backlog within the Defense Department. The Initiative has many positive features, such as focusing better control over those exports that need more attention, expediting the processing of those programs that the U.S. government wants to forward, and even utilizing other nations' control systems where in place. Building upon Ms. Ludlow-MacMurray's observations, Colonel O'Connor commented that there was, indeed, heightened awareness of the need for greater export license process discipline. The OUSD(P)/PS-sponsored international programs security management courses will continue to focus additional attention on process-related matters.
The following identifies the initiative and can be further defined in the attached briefings. These include:
· Major program authorization
· Major project authorization
· Global project authorization
· Technical data authorization
· Expanded scope of existing licensing practice
· Overseas warehousing & distribution agreements
· Special embassy licensing program
· Interagency electronic licensing
· Improved ITAR exemptions
· Exemption for maintenance & maintenance training
· Exemption for DoD bid process
· Enhance DoD ITAR exemption
· Streamline COMSAT components licensing
· ITAR Exemption for FMS defense services
· Advanced re-transfer consent for USG
· Periodic review of the US Munitions List
The Export Controls discussion then turned to foreign military sales (FMS) vis-a-vis direct commercial sales. According to Colonel O'Connor of the DSCA Weapons Division, sometimes it is not possible to have a completely commercial sale; rather the situation may call for a hybrid of both FMS and commercial sale processes. Colonel O'Connor then briefly addressed the international competition issue, a matter of significant interest to the DSCA Weapons Division which, in turn, tries to advance a level playing field among U.S. defense equipment manufacturers that are competitively vying for the same defense export sale. He noted that the government advocacy issue (i.e., support of a U.S. manufacturer in competition with a foreign manufacturer) is no longer so clear cut. Rather, as a result of the globalization of defense industry, major U.S. subcontractors on foreign contract offerings are now seeking a voice similar to that of U.S. prime contractors. International customers, too, have their own constituencies in terms of demands for third-party transfers of U.S. systems as well as technology, offset, and co-production requirements.
Mr. John Isbell indicated that the Department of Commerce did many of its reforms in the early 1990s. The results were substantial: Commerce saw its licensing requests drop from 100,000 to about 9,000. Mr. Johnson then sized up the U.S. Government licensing initiatives as constituting great progress, but there are still many issues to be resolved. For instance, if exemptions become country-specific, then program licenses may become more desirable. The increased State-DoD effort to shorten license turnaround time in terms of established time limits is noble, but this may cause too many license provisos, thereby creating another set of problems. With respect to the periodic review of the U. S. Munitions List for currency, the review should not only be vertical (e.g., fighter aircraft category) in nature but also involve a horizontal scrub of the associated items under a particular category. Mr. Johnson noted that industry must do a better job of getting certain information incorporated into FMS contracts and in establishing a paper trail on program licenses in order to respond to potential State Department inquiries at a later date.
The panel identified initiatives realizing some improvements. Backlogs have been reduced from highs of 660 licenses pending down to single digit backlog. Processing times have been reduced from as high as 45 days or higher down to approximately 16 days over the last six months. Further, the panel advised that although there have been significant improvements, we continue to face challenges as the initiatives are implemented. The organizations within the USG including State & DoD, as well as our allies and US industry must continue to focus on each other equities and work together as a team to ensure continued success - - no small challenge. Questions focused on further clarification of the initiatives and the potential benefits to the customer and the USG.
The Security Cooperation community needs to address the following:
· Track status of changes to International Traffic in Arms Regulations (ITAR) in order to implement DTSI
· Publish change to Security Assistance Manual to implement ITAR change to exempt Technical Assistance Agreements for defense services contracted by the USG on behalf of the foreign customer via FMS cases; determine if change to the Defense Federal Acquisition Regulation is required
· Continue to brief/reinforce DTSI to NATO allies, Australia and Japan
· Develop separate DTSI package germane to defense trading partners other than NATO partners, Australia and Japan
· Brief/reinforce this package to this group
· Work with industry to develop concrete examples for each initiative in order to demonstrate the practicality of each
· As ombudsman, develop new guidance regarding competitions and advocacy to cover the role of US subcontractors on foreign offerings which are competing with US offerings
Panelists: Ms. Kay O'Brien, formerly of the Office of the Secretary of Defense Comptroller's Office
Ms. Virginia Caudill, Director, Management Studies, Defense Institute for Security Assistance Management (DISAM)
Mr. Don Ebert, Division Chief, Tactical Missile Systems, U.S. Army's Aviation and Missile Command (AMCOM)
Ms. Noel Lacey, Pricing Analyst, Defense Logistics Agency
Mr. Pat Sullivan, Contracting, Aerospace Industries Association
Mr. Michael Newman, Procurement Director, British Embassy
Mr. Mike Patterson, Country Director, DSCA
Moderator: Ms. Jeanne Farmer, Director, Europe, Russia, Americas, & Sub-Saharan Africa Directorate (ERASA), DSCA
Purpose: To discuss what comprises LOA prices, the status of Firm Fixed Price (FFP) and Not-to-Exceed (NTE) pricing, and the Defense Working Capital Fund; to discuss cost versus pricing data, and what is appropriate to provide, and when.
Jeanne Farmer of DSCA hosted the panel on the controversial subject of pricing. Kay O'Brien, formerly of the OSD comptroller, came out of recent retirement to participate in this panel. She noted that the rules are set by the Office of the Secretary of Defense Comptroller in line with the Arms Export Control Act. We do not have much latitude to change them. In general, pricing has been stable and has not changed much since 1977. Most of the problems being encountered are in the areas of billing and delivery performance. Improvement is needed in the calculation of the amount of the initial deposit, the use of letters of credit, and the proposal to use actual charges rather than cost pools for surcharges.
Kay O'Brien, recently retired from OSD Comptroller, provided a briefing on the elements of FMS prices.
Virginia Caudill of DISAM noted that total package approach pricing takes time to develop a comprehensive program. We do the customer a disservice by not presenting life cycle costs when we present alternatives. Although the U.S. suffers the criticism of frequently raising prices, in many cases the customer's desired changes actually cause the delays and subsequent price increases. There is a lack of visibility to the customers in the application of surcharges, and as currently structured, the billing statement is inadequate in explaining them and is difficult to fix when there are errors. Most customers recognize the need for surcharges, but they cannot tell what they are getting for them. We still need to develop solutions for pricing of several areas of concern, including services, software, publications, and training delivered via distance learning mechanisms.
Pat Sullivan of Aerospace Industries Association, provided the industry perspective on pricing transparency. Industry's concerns center on protecting proprietary rights of the manufacturers. He emphasized that, as far as industry is concerned, cost is proprietary information which industry is reluctant to share with the purchaser. Providing pricing data, however, is more palatable and thus more feasible. Transparency depends on various things: customer trust, seriousness of the inquiry, a good definition of requirements, the time allowed to respond, and the costs associated with the effort. Not-to-exceed or firm fixed price quotations are very difficult to prepare because of the risk and the cost. This requires a lengthy process to develop the letter of request. Consequently this approach should be the exception, not the rule.
Noel Lacey of the Defense Logistics Agency gave a brief explanation of the components of the defense working capital fund and how these affect FMS
pricing.
Representing the Javelin program office of the Army's Aviation and Missile Command, Don Ebert gave examples of how the Army gives transparency in the letter of offer with regard to prices. By tracking the additive costs on the LOA, line by line,
AMCOM can share these data with the customer.
Mike Newman of the British Embassy pointed out that from the customer's perspective, there were three main issues in desiring transparency in pricing. The first is to make informed decisions about the weapon systems to buy and then throughout the program, to minimize surprises that may occur as prices change. Foreign governments need to justify the program to their superiors, both political and within the Ministry of Defense. By participating in the pricing and debates, the customer is assured that the prices are reasonable.
Mike Patterson of DSCA offered the results of a DSCA study on firm fixed price and not-to-exceed LOAs. Since 1950, an examination of closed cases shows that the prices have been overestimated by about twelve percent. This alone confirms complaints of many customers about having excessive funds tied up in the trust fund. Firm fixed price for stock items is feasible and should be used when appropriate. Pursuing bottom-line firm fixed price LOAs would require legislative change. This avenue will be employed only if the interest level in doing so increases dramatically. Because of the large amount of work involved in the preparation of a not-to-exceed LOA, this preparation should be funded separately on an upfront LOA when the purchase is from a single known source and should be done on an exception basis. In international competitions, the USG will support not-to-exceed LOAs without requiring a support case to fund the upfront workload. Again, this should be done on an exception basis.
One main point emphasized is that in a September 13, 1999, memo DSCA specifically authorized "detailed pricing information may be provided with the LOA if desired by the customer. Available reports identifying these costs may also be provided as requested. It should be noted that these price breakouts should only include U.S. government pricing data. Pricing information is available from DSAMS through either report 65 or 69."
Major Themes Identified During the Workshop:
· Pricing transparency is important to all parties in a sale.
· Transparency and early involvement of the FMS customer and the government contracting office in major sale allows the FMS customer to make an informed decision and to justify the sale to officials back at home. It also helps the U.S. Government and industry better estimate and meet the foreign customer needs.
· We need to understand the differences between "price" data and "cost" data. The "price" to the FMS customer is different from the "cost" to the manufacturer. The latter includes proprietary data that can not be released to the customer.
· DSCA provided the authority last year for government program offices to provide price details to the FMS customer. We now need to work with everyone to help clarify what is proprietary data as there are very different interpretations of this by program offices and contractors.
· Firm Fixed Price and Not to Exceed pricing must be the exception, not the rule.
Future Actions: We are going in the right direction. Actions that we should continue to pursue include:
· Improving the billing process,
· Giving the customer more visibility on pricing as a standard practice, rather than the exception, and
· Improving cash flow requirements.
· DSCA needs to provide a recommended format for providing pricing details to the FMS program offices.
· The Comptroller also recommending moving to actual costs rather than cost pools for such items as case administration, contract administration and services, and transportation.
Bottom line:
We're closer together than we realize on meeting transparency needs. We just need to spread the word and continue down the path together, keeping in mind that all customers are not the same.
Panelists:
Mark Scher, Chief Information Officer, DSCA
Kent Wiggins, Deputy Chief Information Officer & DSAMS Program Manager, DSCA
Dave Carey, Director of International Studies, DISAM
Jean Wilson, Chief, Security Assistance Systems Integration, Defense Finance and Accounting Service (DFAS-Denver)
Ron Larson, Director, Policy Automation, Office of the Secretary of Defense (OSD)
Moderator: Mr. Ed Ross, Director, Middle East, Asia, North African (MEAN), DSCA
Purpose: To educate the audience on the different information technology programs that influence or are used by the Security Cooperation community, what those programs do, and where DoD is headed in terms of future IT.
Mark Sher, DSCA's chief information officer, introduced the panel with a description of the on-going initiatives surrounding the use of information technology in the security cooperation arena. He began with an overview of the role of information technology in Security Cooperation, indicating how it underwrites virtually all aspects of the business and consumes over 20% of the FMS Admin budget. He then presented a chart showing the key information systems, several of which the other panel members discussed in more detail. He ended with two primary information technology challenges facing the SC community, which involve investing wisely and information assurance.
Kent Wiggins broadly discussed the Defense Security Assistance Management System (DSAMS), starting with
the basic problem of a variety of independently managed systems used in the MILDEPs that accomplish the same basic functions. The goal of DSAMS is to integrate these systems into a new DoD standard system that marries up the good parts of the existing systems with new technology, and thus avoiding the costs of having to maintain multiple systems. How this effort is being approached was discussed, which includes breaking the development down into manageable modules, using a structured software development approach, and using a team of government and contractor personnel. Of special interest was the ability to create customized reports, which Mr. Wiggins indicated was possible using additional software. He ended by saying that although the project has already achieved some success-and many joint projects never get this far-challenges do exist, one of the hardest being the difficulty in getting the MILDEPs, DSCA and the other agencies to change the way they do business.
Dave Carey discussed some of the automation initiatives of primary interest to the Security Assistance Officer (SAO) community. Due to the unique conditions of being located in remote places with varying conditions throughout the world, a straightforward means was needed to give the SAOs the information they need to effectively perform their mission. The Security Assistance Network (SAN) was created as a result, which provides e-mail capability, a data transfer capability for foreign military training and SAO budget information, libraries of various information, and access to various FMS databases. He ended by indicating access to the SAN is being expanded to the international customer in the form of the I-SAN and introduced the procedures by which foreign purchasers could get access to this new International Security Assistance Network. By using this system, a country can work as a team with the security assistance organization in managing the country's training program.
Jean Wilson discussed DFAS' Security Assistance system strategy, starting with
a list of functions that DFAS will perform for Security Assistance, such as core accounting (funds control, general ledger, financial reporting), entitlements (vendor/contract pay), and disbursing. She presented a matrix showing the crosswalk strategy between the legacy systems (e.g., CISIL, CMCS, MISIL, SAMIS) and the migratory or target systems (e.g., DJAS, STARS, GAFS, DSAMS). She ended with a vision for the end-state data flow, which would essentially have all DFAS data resident in the DFAS Corporate Database (DCD), which other systems (like DSAMS) would use.
Ron Larson discussed some of the initiatives underway within OSD, one of which is the
Security Policy Automation Network (SPAN). The systems supported by SPAN are FORDTIS (which will be TPS in the future), National Disclosure Policy System, Decision Support System, Foreign Visits, and Foreign Disclosure System. He also discussed a Congressionally mandated initiative to modernize the exports area. The U.S. Export Systems (USXPORTS) is the embodiment of this initiative, and Mr. Larson described its concept of operations.From the Office of the Undersecretary of Defense for Policy, Ronnie Larson spoke about a new effort to build a more comprehensive system which could be used in processing foreign disclosure requests. In order to complete this integrated system, personnel would be drawn from the Departments of State, Commerce, and Defense. This system would also be used in tracking foreign visitors to the U.S.
Panelists:
Mr. Bill Denk, Director Defense Programs Division, Commerce Dept
Ms. Pam Frazier, Principle Deputy Assistant Secretary for Security Operations, Bureau of Political Military Affairs, State Dept
Ms. Karma Job, Country Director, DSCA
Mr. Mike MacMurray, Senior Foreign Affairs Specialist, Special Operations Low Intensity Conflict
Mr. Michael Ritchie, Director, Humanitarian Assistance and Demining Programs, DSCA
Moderator: Mr. Keith Webster, Director, Program Support Directorate (PSD), DSCA
Purpose: To address how organizations associated with Security Cooperation interact, the effect on implementing agencies, and the effect on the foreign purchaser.
Pam Frazier of the Department of State opened with a discussion of the State Department's role chairing the National Disclosure Policy Committee. When approving the disclosure of technology, the U.S. government is, in essence, willing to authorize a marketing license. There are concerns that the disclosure technology gives the signal that the U.S. government would likely approve the actual transfer itself. State, however, looks at other issues such as regional concerns and conventional arms transfers in making its decision. Each year about 2,100 cases go to Congress under the reporting framework of Section 36(b), Arms Export Control Act. About two percent represent any kind of problem. Why is the reporting threshold as low as $14 million? Ms. Frazier explained that this was the price of an A-4 squadron in the early 1980s. Still, Congress wants to lower the threshold, not to raise it. With the co-mingling of research and development and foreign military sales, as well as hybrids of direct commercial and foreign military sales, these transfers are going to receive greater scrutiny. As DoD gets more creative, Congress wants more information. Also, there are frequent delays in getting to Congress due to the number of instances when Congress is not in session.
Karma Job of DSCA noted that there are large numbers of checks and balances to make sure that the transfers are in the best interests of the United States. An effort is made resolve any differences, and she pointed out that the key to interagency efficiency is often personal relationships.
Mike MacMurray of the office of the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict talked about the need to build bilateral relationships with all the agencies with which he deals. He noted that it is necessary to know the agency's culture, because the different services, even different parts of State, approach things differently. Individual differences are often greater than agency differences.
Michael Ritchie, DSCA's Director of Humanitarian Assistance and Demining noted differences in his operations depending on whether it was concerned with disaster relief, humanitarian assistance, or demining. Humanitarian Demining programs are strictly controlled in an Inter-agency process by way of the IWG that meets quarterly to add and remove countries from the program. This is the most formal of all interagency processes. The Humanitarian Assistance projects are nominated on an annual basis based on Policy guidance. This list of projects is staffed among all interested agencies during the second quarter before program approval is sent out to the Regional CINCs in the fourth quarter. Disaster Relief is a real-time emergency and is coordinated among the interagency without formality and with all due haste.
Bill Denk of the Commerce Department spoke at length about the departmental role in reviewing defense memoranda of understanding including reciprocal agreements, foreign procurement, production, services, and research and development. In all cases, the impact on the U.S. industrial base is issue that needs to be addressed. Mr. Denk thinks that there is a growing imbalance in the use of MOUs because we are giving away more than we are getting. With the possibility of excess defense articles displacing new sales in the market, the Department of Commerce is now involved in the dialogue and has been added to the review process for transfers of EDA. They do not want everyone in the field telling countries that they can have EDA without thinking about the impact on new sales or on the industrial base. The Department of Commerce does promote defense sales, and they work closely with State Department to ensure that licenses are in place before advocating that a sale proceed. Within defense trade policy, Commerce is not just concerned about export control policy but with reciprocal MOUs. Commerce has also started to see the Section 36(b) reports on offsets, and they are concerned about what kind of multipliers are being offered to settle offset requirements.
With regard to the interagency process of LOA development and implementation, General Davison noted that we are revising the metrics on the LOA process. In order to start processing we need a complete letter of request from the purchaser. Today our policy of completing the LOA in 60 days is too optimistic, and consequently we have built up the countries' expectations. We simply cannot get through the interagency process in this time. Now we are thinking about 120 days, for LORs without revisions. We will probably establish a target percentage that can be done within 120 days. However, a 60 days is a pipe dream. General Davison also commented on the Section 36(b) Congressional reporting process. DOD makes every effort to deliver the packages to the State Department but then they must worry about the Congressional calendar. Moreover, the purchaser country has its own budget windows, and is often needed to spend money or to use a specific contract already in effect. An audience member commented that Congress is going to want more oversight. As he pointed out, however, there are some obstacles to this. For example, in one area of the State Department, a single person negotiates with both the authorization and appropriations committees of Congress. Consequently during the budget cycle, little else moves from this office. Ms. Frazier commented that it is a rare case when somewhat objects either to the program or to the amount of money. In many instances, members of authorization committees are traveling and cannot be consulted on the case. The State Department depends on the committee chairman, and it must be willing to make some trade-offs.
What was agreed to:
· State needs to remain committed to further reducing 36(b) cycle times.
· Collectively, it was agreed that the Security Cooperation community, from the SAO forward, must ensure that the interagency has as much information as humanly possible to support a customer's request. The LOR should be better than complete, the CINC justification should be strongly supportive and the services/DSCA need to be clear regarding the details.
· Finally, it is vital that all agencies have a healthy relationship with members of Congress and their staff. Doing so will help to ensure greater success overall.
Panelists:
Mr. Bob Keltz, Deputy Director, DSCA
Mr. Willard Mitchell, Deputy Under Secretary for International Affairs, Secretary of the Air Force/International Affairs (SAF/IA)
Mr. Gibson LeBoeuf, Deputy Director, Navy International Programs Office (NAVIPO)
Mr. Werner Kaelin, Swiss Defense Procurement Counselor, Swiss Embassy
Mr. Joel Johnson, Vice President International, Aerospace Industries Association (AIA)
Gibson LeBoeuf described how the DSCA strategic goals and the goals of his boss, the Assistant Secretary of the Navy for Research, Development, and Acquisition, are complementary and support four main initiatives: improving the business process, providing better support for the
war fighter, developing resource management methods that are cheaper and more effective, and making Navy International Program Office (NAVIPO) people smarter. For example, NAVIPO is applying the TEAM USA concept, a hybrid cooperative effort between the U.S., customer countries, and U.S. industry, to several programs, including the Predator and the Chilean frigate. NAVIPO is also developing a country program director's handbook and increasing training opportunities for its personnel. Other initiatives include the use of Navy acquisition interns and pay banding, whereby compensation is determined according to an individual's contribution to the mission within certain set limits.
Willard Mitchell explained how the nature of business with friends and allies is changing: there is no more "pure" FMS or direct commercial sale (DCS). The U.S. must provide support to licensing efforts and technology transfer reviews. Because the USAF is evolving into an expeditionary air force, we must build relationships around the world to support that force. Among other requirements, we must achieve access to airfields and interoperability with allied air forces. Our allied partners around the world want to acquire the combat capabilities demonstrated by the U.S., so we must streamline the FMS process so it is timely, transparent, and delivers the necessary capabilities.
Bob Keltz listed some key agenda items for DSCA over the next year. He affirmed that the FMS administrative fund is stronger now than it was before the fee was reduced from 3 percent to 2.5 percent, and promised that DSCA intends to stay the course with the 2.5 percent administrative fee. The DSCA goal is to sustain a steady state for the security cooperation workforce, absorbing the inflation in civilian and military pay, with no more job cuts in the foreseeable future. DSCA plans to devote more attention to offset issues, since Arms Export Control Act (AECA) Section 36(b) notifications to Congress require generic descriptions of offset agreements, and the first Congressional hold was placed on a 36(b) notification in July 2000 as a result of the offset information required. In addition, the issue of what exactly constitutes offset costs is currently part of a high-level policy debate in OSD. Other issues of concern to DSCA include end-use monitoring, transparency in contracting, the Defense Trade Security Initiative, and the likely delay in Section 36(b) notification processing as a result of the election year and change in Presidential administrations. Mr. Keltz concluded his remarks with the promise that DSCA will be spending a lot of time on customer outreach.
Werner Kaelin of the Swiss Embassy began his remarks by stating that he was very encouraged by the new Defense Trade Security Initiative (DTSI). He then listed some customer country expectations relating to the new FMS environment. Country program directors should act as advocates for their customer countries, providing assistance in writing Letters of Request and in defining case requirements. Country directors should provide customer satisfaction and total quality management. The U.S. should help facilitate co-production agreements and promote hybrid cases and not-to-exceed pricing. The U.S. should also recognize that foreign procurements help sustain the U.S. defense industrial base and ensure that field commands understand and implement FMS reinvention initiatives. U.S. representatives should review price and production schedules with the customer countries and promote customer country participation in case development. According to Mr. Kaelin, the DoD needs to change its attitude towards case closure, since customer funds are being withheld without interest payments. The case manager should establish a timeline for case closure and prepare for that event throughout the life of the case. The U.S. should understand that customer nations are committed to FMS reinvention.
Joel Johnson provided the industry viewpoint of security cooperation issues. He explained that today's market is a buyer's market; buyers are smarter, and the world arms market is relatively flat. The U.S. currently has about 40 percent of the world market, a share that could be greatly affected by events in Europe over the next decade. Furthermore, the U.S. has served FMS customers for at least 15 to 20 years, and those customers are knowledgeable. The FMS contracting effort ought to look like a commercial contracting effort as much as possible; i.e., price breakdowns need to be given. Other industry concerns include offsets and technology transfer issues, and dealing with the Defense Threat Reduction Agency (DTRA).
All of the panel members echoed the need for ongoing communication and that a total customer satisfaction-oriented concept of quality, together with reasonable costs, must be established as a primary business goal. Presentations and comments reflected individual or organizational points of view but it is clear to all that the only way that we will achieve our goals is by working together in shaping our new environment.
Panelists:
Ms. Beth Baker, Deputy Director, Program Support Directorate, Program Management Division (PSD/PMD)
Mr. Craig Hunter, Director, International Development & Security Assistance, Office of the Assistant Deputy Under Secretary of the Army for International Affairs (DUSA/IA)
Mr. Larry Baillie, Director, Case Development Division, Navy International Programs Office (NIPO-02C)
Mr. Patrick Fox, Chief, Management Branch, Policy Division, SAF/IAX
LTC Kevin Clark, Security Assistance and International Logistics Division, Headquarters Pacific Command (PACOM)
In discussing the problems of development and implementation of policy as part of FMS reinvention, Beth Baker of DSCA presented a clever and insightful parable based on the children's book about the "Little Engine That Could. As the policy train loaded with ideas started up the hill, there were lots of people in the back cars to contribute ideas; that is, to "help". In reality, there are too many people helping and this actually slowed the engine down and the policy train had trouble getting up the hill. People on the side of the track lines were encouraging, shouting recommendations and advice. Some advised the engine to get rid of some of the people in the back cars because they were causing delays and would prevent the engine from getting anywhere. Halfway up the hill, the tracks were re-engineering. The senior engineers decided to make changes and the engine no longer fit on the tracks. The policy train decided to continue anyway. So they changed some wheels, took some time, and reconsidered some of the people in the back. Meanwhile, a larger train came by with higher speed priorities and pushed the policy train off the tracks, but the train continued. The force of the blow actually advanced the little train. Finally the train made it to the top, but most of the folks in the back had either jumped off, or were dissatisfied with the train, because too many other things had changed. They either thought it was too little or too late, or not what had been initially proposed.
Ms. Baker's tale summarized the many frustrations with rule changes, impacts from other programs and initiatives and competing priorities. Still, she is currently working on a variety of vexatious policy issues: a change to the SAMM to comply with the acquisition policies as to what offset costs are allowable; audits to comply with end-use monitoring; interpretations of LOAs as to whether they are "cradle to grave" or not, and considering whether this is possible and what the cost might be; assuring consistency in the use of program management lines on LOAs within the military departments; and LOA quality which is incorporated into Defense Security Assistance Management System (DSAMS) standardization.
Craig Hunter of DUSA/IA described the impacts of security assistance policy on the functional side of the Army. In generating security assistance policies, it is necessary to account for the constraints of internal Army policies and automated systems that are devoted to improving the
war fighting capability of the Army. The international business is more complex, however, since the laws effectively are the mechanisms driving policy. The interagency effort, including the Department of State and Congress, makes policy-making much more difficult. Since the services are at the bottom of the food chain and can only directly deal with the weapon systems, critics must take into account downhill slope from laws governing security cooperation to the Department of State to the military departments. DoD is not in charge of security assistance; it is only driven by DOS policies.
In policy-making, one size does not fit all. There must be a selective application of requirements. The implementation of policy in the international arena is subject to too many variables, thus there is a lack of latitude at the Army level. We are not arms merchants; we are an extension of foreign policy, that is, foreign policy implementers. This is not a business. International decisions take affairs out of our hands. Until a decision is made to sell, the government's foreign policy perspective is more important than the Army's more insular views.
Hunter noted several policy challenges facing the Army. First is the rise of direct commercial sales with respect to FMS. Today there are more direct sales than ever, with larger sales of first-line weapons systems. The question is how does the Army support these without using FMS administrative funds? How do you get reimbursement for your efforts now that we have agreed that a government partnership with industry is indispensable, regardless of the mechanism of the sale itself? Next is the challenge of industrial globalization. In the past, the rule has been not to offer government support to a U.S. competitor in a foreign sale. Today, however, with a variety of trans-Atlantic mergers and other industrial joint ventures, what is an American industry? What if a foreign product has more U.S. content than that sold by an American firm? Can we endorse U.S. content in a foreign product? What now should be the Army's position on advocacy? Similarly, Hunter pointed out the dilemma in disclosure and technology transfer when we impose our controls over American exporters of systems and technology from other countries. Finally, he noted that funding is necessary to implement policy changes.
In summary, Hunter's perspectives in policy mean that one policy does not work for everyone; policy must be a cooperative effort, with everyone participating even if they do not agree. Also, all parties should use more common sense and logically evaluate the new circumstances in which we are operating.
Representing the Navy International Program Office, Larry Baillie emphasized that Navy policy has a very formalized process using the Technology Transfer and Security Curriculum Review Board (TSARB) for which Navy IPO is the executive agent. Thus, issues are resolved at a high level before the program begins execution. At this level, the concerns are mostly weapon system policy. DoD policies are set by DSCA and Defense Finance and Accounting Service (DFAS) and must be adhered to. NAVIPO works with DSCA to provide inputs. Mr. Baillie also noted that in the past there were only two or three policy letters a year and it was easy to keep up and to teach people how to follow the policies. But times have changed. Today we are seeing one or two policy memos a month. Since the staff has been cut back, today policy resources are used in negotiating policies with DSCA, not teaching what the new policies are and how they are to be implemented.
Patrick Fox of SAF/IA commented that, in setting policy, the Air Force had to deal with many levels such as DSCA, OMB, State, and the military departments. While everyone is reinventing, proposed policies must still be integrated, but the many changes make this difficult to accomplish. The impacts of policy changes have to be reviewed in terms of function, process, personnel, and automated systems. Implementers put their own spin on issues, and it becomes difficult to discriminate between what are truly policies and what are procedures. Typically it is easy to change the processes and procedures which you own, but where the policies apply to procedures that you do not own, these are harder to deal with. Since the new policies drive new procedures and processes, there is the need to create more handbooks, web sites, and computer-based training, to insure that those implementing these procedures are well trained. With lots of policy initiatives at all levels, it appears to many that chaos reigns. However, policy is not being developed in a vacuum; it is usually coordinated among all the relevant parties.
Lieutenant Colonel Kevin Clarke, USA, from the U.S. Pacific Command commented on the Euro-centric focus of the symposium. Although the unified commanders do not make security assistance policy, the CINCs have an interest in and contribute to policy from their perspective. This view stresses an interest in relationships with other countries to cultivate access and influence and to develop coalition interests such as interoperability. By using security assistance tools, we can encourage how our allies equip, train, sustain, exercise and execute their missions. The unified commands use training to maximize the opportunities to develop relationships. Since the CINC cannot tell any country what to do, security assistance is used as a carrot to encourage behavior that improves our mutual security. The theater engagement plan is what the CINC wishes to see happen in a country, but the country itself has to agree. Where U.S. funding is involved, everyone else in the security assistance community also has to agree in order to make the plan a reality.
General Davison commented on the health of the FMS administrative funds and the difficulty with the annual Congressional cap on using the money that is collected on each case. DSCA is working with OMB to lift it so that more funds can be used in the support of security cooperation programs. DSCA is still trying to determine the right size of the workforce. Baselining is necessary and no growth is projected. There will be enough money to cover pay raises and inflation only. In order to justify our efforts, the cost of activities must become part of the budget process. This will permit us to quantify our requirements more accurately on program management lines. In any event, there will be more money for the services for case closure.
Major Themes Identified During the Workshop:
· The overall theme of the conference was "Perspective is Everything". This theme resonated throughout the Policy Panel's discussions and clearly is one of the cornerstones that permeate the entire policy community.
· From a policy perspective it is essential that we facilitate the engagement with our customers while remembering that Security Cooperation is a State Department Program and is an explicit extension of our foreign policy. As such, they are primarily based on foreign policy needs, not necessarily best business practices.
· Most of our policies relate to the Arms Export Control Act with the key word here being "control". Again, we are not a business and must always be cognizant of that fact when implementing foreign policy.
· The international arena is much different from the standard DoD mission where the focus is primarily on the war fighter. Accordingly, the consensus among panel members was that the interagency and interdepartmental roles make the program much more difficult to manage.
· One size policy does not fit all. As a result, we selectively apply policy to meet our foreign policy needs.
· We are experiencing a dramatic overhaul in the policy arena as a result of a changing world environment and our re-engineering efforts. To use an analogy presented during the panel----it is simply getting harder and harder for "The Little Engine That Could" to keep up with the changes and to reach the top of the mountain while holding onto historically proven policies.
· Significant policy issues we are working on include LOA processing, end use monitoring, offset transparency, LOA quality, and LOA Classification. We are also working to provide a better definition of appropriate Program Management costs. These and other policy changes are expected to be captured in the Security Assistance Management Manual (SAMM) rewrite anticipated to be completed sometime in the Fall of 2001.
Future Actions We Need to Address:
· Policy and funding for DoD's increased support of Direct Commercial Sales.
· Industrial Globalization: How do we support international competitions when a "US Company" has less US content than the "foreign company", who are we competing against?
· The need for a more level playing field with our foreign competitors in the area of tech transfer.
Panelists:
Ms. Rita Verry, Training Team, Program Management Division, DSCA
Lt Col Erich Eschenburg, Deputy Director, Policy Division, SAF/IAX
Ms. Elena Kim-Mitchell, Deputy Director, Office of Policy, Plans and Analysis,
State Dept
Mr. Larry Mortsolf, Deputy Director, DISAM
Ms. Terry Bates, Director, Policy Division, SAF/IAX
Moderator: Ms. Freda
Lodge, Contractor Support, Training Team, Program Management Division, DSCA
Purpose: To discuss how USG provides international training (International Military Education and Training {IMET}, FMS cases, etc.), any changes on the horizon, and their potential effects. Additionally, to discuss the current status of internal USG Security Cooperation training and initiatives for change (workforce analysis, career field establishment, etc.).
This panel was unique in that it covered two topics:
1.) Training of Internationals and
2.) Training of Our Own Workforce.
The first - training of internationals - is accomplished through Foreign
Military Sales (FMS), as well as Foreign Military Financing (FMF), and
International Military Education and Training (IMET).
The second - training of our own workforce - encompasses Human Resource
Management, which is recruitment and retention, career development, education
and training which supports those goals.
Each one of the above topics was addressed separately within this two hour
Panel, in order to provide continuity of the topical discussion.
Training of Our Own Workforce:
Training of our own workforce is primarily accomplished through the Defense
Institute for Security Assistance Management (DISAM), which provides academic
courses on management of Security Assistance (Cooperation) programs.
Additional training is accomplished within the Military Department headquarters
and field activities through on-the-job training (OJT), handbooks, and various
informal monthly training sessions. Some of this has been initiated in the past
year or two.
Larry Mortsolf summarized five professional development programs currently under
development at DISAM. First, a faculty team is conducting a review and analysis
of the security assistance workforce across all agencies and military services
at the request of DSCA. The purpose of this study is to suggest some remedies to
challenges caused by downsizing, lack of new hires, increased productivity
demands, and the aging workforce. Second, as LTG Davison announced during his
opening remarks at this conference, DSCA will recognize those individuals who
take a certain combination of security cooperation courses and have at least
three years of related job experience through the award of three certificates:
the defense security cooperation career professional certificate, the
international certificate, or the training manager certificate. This certificate
program is jointly supported by the Defense Security Cooperation Agency, the
Defense Institute of Security Assistance Management, and the National Defense
Industrial Association (NDIA). Third, members of the Defense acquisition
workforce who complete DISAM courses are eligible to earn continuous learning
points under the policy announced by Jacques S. Gansler, Under Secretary of
Defense (Acquisition, Technology, and Logistics) (USD(AT&L)), in December
1998. Dr. Gansler's policy, entitled Titled "Reform Through Learning:
USD(AT&L) Policy on Continuous Learning for the Defense Acquisition
Workforce," applies to employees who have completed Defense Acquisition
Workforce Improvement Act (DAWIA) certification requirements for the positions
they hold, as well as to employees who are presently working to achieve
certification. The "Reform Through Learning" policy requires all
Defense acquisition personnel to earn 80 "continuous learning" points
(representing 80 hours) every two years by participating in a number of
professional development activities. DISAM has reviewed the acquisition content
of each of its courses. For example, the review of the CONUS (SAM-C) Course
determined that it included 29 hours of acquisition-related instruction.
Accordingly, graduates of the CONUS course will earn 29 continuous learning
points towards their required 80-point total. However, not every DISAM course is
eligible for award of continuous learning points. See the table on the DISAM
homepage for a list of the eligible courses and points to be awarded upon course
completion ( http://www.disam.dsca.mil/professional_dev/ home.htm
). Fourth, the American Council on Education recently awarded two DISAM courses
three hours of undergraduate college credit in supply chain management: the
CONUS Course (SAM-C) and the Overseas Course (SAM-0). Finally, DISAM is
developing a number of specific courses and training modules to be offered in a
Distance Learning format, via the internet or CD-ROM. For details about any of
these professional development programs, see the DISAM home page at
http://www.disam.dsca.mil/.
Terry Bates described several SAF/IA initiatives that are outgrowths of the Air
Force Reinvention efforts. After an audit was performed of the civilian
positions in SAF/IA, the decision was made to reclassify them into the
GS-130/131 "International Affairs" job series. A contractor-supported
effort to prepare a career development plan for individuals in this job series
will be completed in fall 2000. SAF/IA's intention is to implement this change
for eligible personnel across the Air Force, and eventually for all of the
military services, under the auspices of DSCA.
The Secretary of the Air Force for International Affairs (SAF/IA) has already
made great strides in supplementing the DISAM training by developing their own
Handbooks which are placed on their websites. In addition, they are working on
workforce issues by creating a single civilian series, and are currently working
on a career development plan.
The Navy International Programs Office (Navy IPO) has initiated monthly Country
Program Director (CPD) training sessions.
These changes are already contributing to "process improvements". A
better trained, more stable workforce can think differently, respond better to
customers, adapt to new process changes, and sustain these changes.
Training of Internationals:
Training of internationals is part of our core mission. We train internationals
primarily through the Foreign Military Sales (FMS) process, and also using State
Department grant funds called International Military Education and Training
(IMET).
Training of internationals is about a $450 million, or 1/2 billion dollar
business:
$400 million through FMS (about 14,000 students annually)
$ 50 million through IMET (about 9,000 students annually) for a total of 20,000
students a year.
A. Training is part of the Total Package Approach to accompany equipment
sales.
A. Training is also accomplished for foreign policy and national security
objectives:
1. More professional military (interoperability, coalition warfare);
2. Peacekeeping, humanitarian affairs and demining;
3. Democracy building:
a. Improved civil-military relations;
b. Rule of Law and human rights (The Defense Institute of International Legal
Studies (DIILS) has just become a part of DSCA, the same as DISAM);
c. Defense resource management.
Rita Verry, who manages training policy issues for DSCA, explained that, as a
result of the Expanded International Military Education and Training (E-IMET)
summit held in February 1999, the Defense Institute of International Legal
Studies (DIILS) is now part of DSCA. Also, DSCA is leading the security
assistance distance learning working group and participating with the OSD
distance learning working group to develop distance learning programs for
international customers, with contract support.
Lieutenant Colonel Eschenburg explained the
USAF goal of conducting international training to meet the customer's
requirements and to support self-sufficiency. Lt Col Eschenburg emphasized
the need to train the right people, given limited quotas, and to maximize the
use of training resources, especially those related to flight training. Because
quotas are limited and the need for training is great, it may be appropriate to
use distance education to supplement, but not replace, traditional resident
education, in order to reach a wider audience.
Elena Kim-Mitchell noted that International Military Education and Training
(IMET) programs are funded from the State Department is international affairs
budget. Two priorities for the State Department role in IMET programs are to
promote military-to-military contacts and to promote the capabilities of U.S.
friends and allies. IMET is viewed as a strong mechanism for promoting
democracy. Although IMET is the smallest security assistance budget issue for
the State Department, it receives intense Congressional oversight and is subject
to a wide disparity of views, including possible conflicts with other foreign
policy goals.
The second annual Department of Defense/Department of State Foreign Training
Report is on the DSCA website as well as the State Department website. We
encourage everyone to take a look at it, especially to read the words on why we
train internationals.
Within the Training of Internationals, the panel identified during the two
sessions yesterday, these four goals (credit goes to SAF/IA who started this
list before the conference began):
1. Improve the Training Process.
a. Develop performance measurements (quality versus quantity; curriculum review);
b. Enhance communication (more dialogue/discussion with the SAO's in the countries);
c. Automation (partially in response to Congressional requirements, partially in response to improving customer satisfaction and reducing workload on our own workforce).
2. Maximize the Use of Training Resources.
There are limited quotas available for internationals in professional military education (PME) courses, such as Command and General Staff College. Other unique types of training (such as flight training) also have very scarce quotas for internationals. We need to ensure that proper management ensures no quotas are lost due to cancellations, and find ways to manage these limited resources to the maximum.
3. Address Customer Concerns and Make Changes.
DISAM has created the I-SAN, a network for internationals to view information; there is more training information on the websites, there are annual Training Program Management Reviews (TPMRs). But we need to dialogue more with the countries, and find ways to make the changes that they desire.
4. Reach Larger Audiences.
There are various distance learning initiatives on-going. These initiatives are not a substitute for CONUS experience, but rather a supplement - that is, to reach those internationals that would otherwise not have a chance to access U.S. training.
Some of these changes can be addressed just within the Security Assistance training community, but others such as automation, have to be addressed within the context of the larger Security Assistance community.
LTG Davison closed the conference by stressing the need to focus on actions that were agreed upon during the workgroups and the need to expand foreign government participation at the next conference. He briefly touched on Ambassador Peck's and Deputy Secretary DeLeon's speeches by remarking how the term "That's Different" makes you stop and think about your role in the world and your role in the Security Cooperation community which plays a vital part in achieving our national security and foreign policy objectives. We need to keep the infrastructure healthy and dynamic by committing to making positive changes and remembering to include the foreign governments in a more active role.
LTG Davison underscored that Information technology is an extremely important aspect of our business. IT is not free, but is one of our strongest tools for faster communication and for reaching out to each other on a global basis. Other tools include business measures that force us to collectively focus on problem areas and methods for improving them.
DSCA's strategic plan is a roadmap to the future that affects us all. The Reinvention Working Group (RWG) representing the military services, defense agencies, and OSD interests, will be carried forward. Everyone is responsible for improvements. Remember - details are important!