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  • Question

    If the FMS customer is aware that an LRU had a previous life in the Army fleet, but is operational, can the ARmy FMS team sale/loan that equipment?


    Answer

    Based on DoD Security Cooperation Policy in the Security Assistance Management Manual (SAMM) and DoD Financial Management Regulations (FMR), Volume 15, Chapter 7 it's acceptable to sell used DoD equipment that is still in serviceable condition.  While this is not a routine situation in DoD Foreign Military Sales (FMS) -- most of the equipment DoD sells (or leases) via FMS is new rather than used -- it's really not all that unusual either.

    Based on your question, the most likely challenge you'll face is "how do I establish a price for the older version LRUs."  There are three basic pricing approaches that the DoD FMS community uses:

    ALT 1) The DoD FMR Vol 15, Chap 7 para 070301 guidelines on FMS sales from DoD stock states that "defense articles not intended to be replaced at the time a sales agreement is entered into [will be priced at] not less than the actual value."  What this means in a practical sense is that your organization will need to develop an "actual value" for each used LRU that takes into account its initial procurement value minus depreciation due to age/use by the Army..

    ALT 2) Another alternative is to declare the older LRUs as "Excess Defense Articles (EDA)" and price them at "reduced or no cost" based on SAMM Chapter 11, para C.11.3.

    ALT 3) The Army could also decide to establishing a price for lease or loan of the LRUs based on SAMM Chapter 11, para C.11.6 and C.11.7.

    In my experience, most DoD Component Security Assistance (FMS) Implementing Agencies prefer ALT 1 to ALT 2 or ALT 3 since ALT 1 is typically easier to implement.  However since your organization is part of the Department of the Army, you should consult the US Army Security Assistance Command (USASAC) through your local Army acquisition chain of command to obtain specific advice on how your organization should price the used LRUs for FMS sale, EDA transfer, or lease/loan..

     

     

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