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Inspector General Audit of the FMS Program Underway

Last month, the Department of Defense Inspector General announced that it was undertaking an audit of the Foreign Military Sales (FMS) Agreement Development Process. The audit will assess how the Defense Security Cooperation Agency (DSCA), Military Departments, and other organizations coordinate foreign government requirements for defense articles and services and whether DoD maximizes the results of the FMS agreement development process.

The audit is in response to a congressional reporting requirement included in the House Report to the National Defense Authorization Act for Fiscal Year 2019. The House Report noted Congressional concern that the FMS process is “slow, cumbersome, and overly complicated,” and that the acquisition decisions supporting the FMS process are “stovepiped,” leading to an FMS program that is “not coordinated holistically across [DoD] to prioritize resources and effort in support of U.S. national security objectives and the defense industrial base.” Consequently, Congress directed DoD to conduct this audit of the FMS program and submit a final report to Congress. The tone and language of the House Report indicates that Congress is seeking to streamline the process for all stakeholders, including the U.S. military, foreign partners, and industry. The House Report specifically calls out precision guided munitions as a focal point for additional foreign military sales that may mitigate risk to the U.S. industrial base.

Congress’ focus on the efficient and effective use of the FMS program comes at a time when FMS sales continue to grow at a remarkable rate. The DSCA’s annual report for FY 2018 showed foreign military sales of $55.66 billion. This amount is a 33 percent increase over FY 2017. Rather than relying on the one-year increase, DSCA points to the three-year rolling average of $43.7 billion in sales to demonstrate the significant and continued increase in arms sales over the past three years. With numerous major sales announced thus far in FY 2019, including sales of precision guided munitions that Congress has focused on, it appears likely that foreign military sales will remain quite robust moving forward.

The audit also comes on the heels of a recent GAO report on “DOD’s Approach to Developing Price and Availability Estimates for Foreign Customers.” GAO found that from FY 2014 – 2018, DoD received 3,038 requests for FMS price and availability from 93 countries. Given the volume and complexity of the requests received, DoD at times took well over 45 days to respond, the time period suggested by DoD guidance. Out of a sample of five requests, DoD took on average 199 days to respond, with the longest taking 320 days. GAO noted that “[l]engthy response times could result in customers missing opportunities to consider potential requests in upcoming budget cycles.” While GAO was careful to acknowledge that many factors beyond DoD’s control impacted these response times, this GAO report may add to concerns on the Hill regarding the efficiency of the FMS process.

It remains to be seen what changes DoD and/or Congress may seek to make concerning the FMS program. The FMS program largely escaped the scrutiny of the Section 809 Panel Report, but this audit may shed light on FMS-specific process improvements that may be possible. We will continue to monitor developments related to this audit and potential changes to the

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