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  • Question

    Do FMS dollars have an outlay profile, or do Then Year (TY) expenditures equal TY obligations for the purpose of cost estimating and budgeting?


    Answer

    In our experience, each DoD Component has the lattitude to establish its own policies and practices in the area of FMS cost estimating for FMS contracts.  The Navy's Financial Management guidance document, https://www.secnav.navy.mil/fmc/Documents/FINAL-FMPM.pdf, appears to be silent on this specific point.  However, Navy International Programs Office or NAVCOMPT may have knowledgeable people in this specific policy area so it would be worth the effort to try to contact them to see if they have any recommendations.

    From an overall DoD perspective, the typical approach used in FMS IGCEs for FMS systems acquisition Letters of Offer and Acceptance (LOAs) would be to employ the principle that Then Year (TY) expenditures equal TY obligations for the purpose of cost estimating and budgeting since FMS is both 'colorless' and does not expire.  As a result, there is no distinction between obligation and expenditure as there would be for U.S. DoD authorized and appropriated funds.  The entire value of FMS Customer funding is essentially 'obligated' upon signature of the the FMS LOA and payment is made based on the DoD FMS contract(s)' provisions and funding expenditure requirements.

    That said, we would recommend you contact the Navy Program Management Office to determine if any specific FMS customer payment plans/schedules/requirements have been established in the specific FMS LOA that provides authority for the FMS contract(s) related to your IGCE efforts.

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