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DoD International Acquisition Transactions 101

Every once in a while it’s a good idea to get back to basics, so this month’s blog will focus on several primary transaction mechanisms used to conduct DoD international acquisition business. We’ll…

DoD International Acquisition Transactions 101


  1. Home
  2. Blogs
  3. DoD International Acquisition Transactions 101
Frank Kenlon (Prof of Int'l Acq, DAU/DSMC-Int'l)
Every once in a while it’s a good idea to get back to basics, so this month’s blog will focus on several primary transaction mechanisms used to conduct DoD international acquisition business. We’ll start with the most well-known, but also address some of the more obscure mechanisms, since each one is designed for use in various types of international acquisition situations. At Defense Acquisition University (DAU), we often use the analogy of a “toolbox” to illustrate how these various mechanisms can be used -- by beginners, journeymen, and artisans -- to achieve desired international acquisition outcomes with allied and friendly nations in support of our national security and defense goals and objectives.

DoD International Acquisition “Tools”

Foreign Military Sales (FMS)

Basics: This U.S. government-to-foreign government sales mechanism was formally established by Congress in the Foreign Military Sales Act and Arms Export Control Act in 1960s and 70s. A buyer-seller arrangement, it is by far the largest mechanism in terms of the volume and value of transactions processed per year. FMS arrangements are established bilaterally with eligible allied/friendly nations and international organizations through Letters of Offer and Acceptance (LOAs) or Leases. Sales can be made from U.S. stock, but most FMS LOAs involve contracting by a DoD Component – acting as the acquisition agent on behalf of the foreign nation or international organization – to acquire the desired defense articles, services, and/or technical information from private sector entities. FMS transactions can range in value from small (under $1M) to large (billions of $) depending on the nature of the defense articles and services being sold. FMS system acquisition transactions -- which involve numerous LOAs and LOA amendments – often have a period of performance lasting 10 – 25 years involving hundreds of DoD contracting actions.

Fun Facts: Did you know that the Defense Security Cooperation Agency (DSCA) recently authorized the establishment of “Agent” and “Lead Nation” FMS LOAs to enhance NATO and multinational coalition FMS responsiveness? Were you aware that DoD Program Managers (PMs) often employ International Business Planning principles to combine domestic program and FMS procurement requirements for the same production and/or logistics support items in annual contracting buys to achieve economic order quantity savings and improve schedule flexibility for the U.S. and FMS customers?

International Cooperative Programs (ICPs)

Basics: DoD was initially empowered by Congress to enter into cooperative acquisition partnerships with allied/friendly nations and international organizations beginning with NATO SeaSparrow in the 1960s. For a number of reasons, Congress decided to provide DoD with additional ICP authorities in both Title 10 and Title 22 during the 70s, 80s, and 90s. As a result, current DoD ICP legal authorities cover the entire acquisition spectrum from cooperative Science and Technology (S&T) and RDT&E projects and programs, system and equipment production and logistics support cooperative procurement, and post-production upgrades and logistics support investments. ICPs are international acquisition partnerships rather than sales transactions. FMS LOAs are not used. Instead, DoD Components establish ICP international agreements with foreign partner nations approved by the Office of SecDef/Acquisition & Sustainment (A&S). ICPs involve mutual contributions by partner nations of S&T and/or program management expertise, funding, and technology, and all partners share program risks and benefits on an equitable basis. ICPs may be either bilateral or multilateral, and can be structured as equal, proportional, or “senior – junior” partnerships based on the results of international agreement negotiations. While the number of new ICPs established each year on a DoD-wide basis is relatively small, DoD is currently implementing hundreds of signed ICPs. They can range in value from under $1M to hundreds of billions of $. System production, support and upgrade ICP international agreements’ period of performance often range from 20-40 years, involving thousands of contracting agency actions on behalf of DoD and the partner nations.

Fun Facts: Did you know that the Office of SecDef/A&S/International Cooperation is responsible for reviewing, coordinating, and approving all DoD ICP international agreements under a DoDI 5000.02-based process described the Defense Acquisition Guidebook, Chapter 1, International Acquisition and Exportability (IA&E) Supplement? Were you aware that DoD PMs – or their equivalents in S&T, Test & Evaluation, Warfare Center, and Logistics Support organizations – are encouraged by Title 10 and DoD 5000 series policy guidance to identify and pursue mutually beneficial international cooperative opportunities with allied/friendly nation and international organization counterparts through exploratory discussions described in the DAU ICP Job Support Tool (JST)?

Direct Commercial Sales (DCS)

Basics: U.S statutes pertaining to this U.S. industry-to-foreign government/industry sales mechanism were codified in the Arms Export Control Act (primarily for defense articles and services) and Export Administration Act (primarily for dual use items and technology) in the 1970s, and further updated in the Export Control Reform Act of 2018. U.S companies must seek and obtain U.S. Government (USG) export control approvals from the State Department (International Traffic in Arms Regulations) or Commerce Department (Export Administration Regulations) prior to establishing contracts with foreign government or private sector entities for efforts. DCS contractual arrangements, which may occur throughout the acquisition life-cycle, are normally bilateral, but could involve multiple government and/or foreign private sector entities. Similar to FMS and ICPs, DCS transactions can range in value from small (under $1M) to large (billions of $) depending on the nature of the defense articles and services being developed, sold, supported, or upgraded. Unlike FMS and ICPs, however, “pure” DCS relies solely on industry contracts as the transaction mechanism without any USG involvement other than export control approvals. No DoD contracts are awarded.

Fun Facts: Did you know that while most DCS arrangements are implemented through “stand alone” industry contracts, in some situations the USG and DoD mandate the use of “hybrid” arrangements that involve DCS/FMS or DCS/ICP efforts to implement the overall program? Were you aware that DoD Component International Program Offices (IPOs) PMs, Integrated Product Team (IPT) members, and Foreign Disclosure Officers (FDOs) are routinely asked by the Defense Technology Security Administration (DTSA) to provide programmatic and technical expertise in the formulation of DoD positions provided to State and Commerce on proposed DCS transactions? (See the DAU Defense Exportability Integration (DEI) JST for details.)


Basics: Hybrid programs -- which combine various international acquisition transaction mechanisms in a single program -- have become more prevalent in recent years since they are often the only way foreign nations are able to acquire complex, highly capable systems from the U.S. Here’s a brief description of three typical forms of hybrid program combinations that are often used:

  • DCS/FMS: In most circumstances, the DCS contract is the “lead” transaction for integration and delivery with one or more FMS LOAs providing specific defense articles or services that are either only available from DoD or are specified as “FMS-only” by DSCA or USG/DoD Technology Security and Foreign Disclosure (TSFD) authorities.
  • DCS/ICP: Some ICPs develop a significant system industry production and logistics support capability in the U.S. and foreign partner nations. In such situations, the USG and partner nation(s)’ export control authorities may authorize U.S. and foreign industry to sell the ICP-developed defense articles and services via DCS contracts to Third Party nations, subject to provisos that require DoD and foreign partner involvement in specific aspects of the DCS transaction (similar to DCS/FMS hybrid arrangements).
  • FMS/ICP/DCS: ICPs that develop a system production and logistics support capability occasionally specify in the international agreement that USG FMS will be used as the transaction mechanism for “Third Party Sales” to other nations that want to acquire the ICP-developed system. Once appropriate consultations and/or approvals from ICP partner nations are obtained, Third Party nations are able to establish an FMS LOA with the USG to purchase the system, logistics support, and/or upgrades. In some cases, DCS transactions may also be used to provide follow-on support or upgrades to Third Party nations, subject to USG TSFD and export approvals.

It should come as no surprise that formulating, establishing and implementing hybrid programs is challenging since – by their very nature – these programs are operating in two (and maybe even three) different USG/DoD legal and policy environments overseen by different USG and DoD process owners. As a result, hybrids typically require extensive coordination and cooperation by USG, DoD, and industry stakeholders – as well as a substantial amount of artisan-level IA&E expertise – to achieve program success.

Fun Facts: Here’s a bit of a trick question … should U.S. industry or DoD be responsible for overall program management oversight and integration responsibility for a DCS/FMS hybrid program? Answer: it depends on how the foreign nation and DoD agree to structure the hybrid and how it’s actual implementation plays out. The variables involved are often very complex, so we employ a fictional case study and DAU’s FMS Systems Acquisition JST in our ACQ 380 International Acquisition Management course to explore the critical thinking challenges involved in establishing and implementing a DCS/FMS hybrid program.

Building Partner Capacity (BPC) Programs

Basics: Congress provided DoD with various BPC program authorities after 9/11 to help equip coalition nations that could not afford to equip themselves. BPC is commonly referred to as “pseudo-FMS” but in reality it’s a totally different international acquisition mechanism. The USG Security Cooperation community – which includes the NSC and several State and DoD stakeholder organizations -- decides which coalition partners should be equipped using BPC resources. Specific requirements for individual BPC programs are established by DoD -- normally a Combatant Commander (CoCOM) -- and they are funded with Title 10 appropriations or Title 22 money authorized by Congress and allocated by DoD. BPC transactions involving acquisition are established using pseudo-FMS cases which assign a DoD Component Implementing Agency the responsibility for conducting the BPC acquisition effort, then delivering the defense articles or services the CoCOM wants the coalition partner to have. Title 10 funding appropriated by Congress for various BPC acquisition programs around the world exceeded $5B in Fiscal Year 2016.

Fun Facts: Did you know that DSCA has a Directorate for BPC that includes an Equipping Division responsible for DOD BPC programs including: the 1206 Global Train and Equip Program, Combating Terrorism Fellowship Program (CTFP), Global Security Contingency Fund (GSCF), Special Defense Acquisition Fund (SDAF), Global Peace Operations Initiative, and the sale or grant of Excess Defense Articles (EDA)? You can learn more about the details of how BPC program transactions are formulated, established, and implemented in the Security Assistance Management Manual (SAMM), Chapter 15.

Acquisition and Cross-Servicing Agreements (ACSAs)

Basics: Congress enacted the initial Title 10 ACSA legislation during the Cold War to empower DoD Combatant Commanders to acquire and provide logistics support items and services to NATO and Pacific Rim allies during exercises, peacetime, and wartime operations. After 9/11, DoD obtained authority from Congress to enter into ACSAs with a broad range of allied or friendly nation participating in coalition exercises and operations with the U.S. Specific ACSA transactions are conducted through individual Implementing Arrangements which establish purchase or barter arrangements between the U.S. and the ACSA partner nation under the Master ACSA. For example, a DoD Combatant Commander could establish an Implementing Arrangement to provide 1000 rounds of “in-stock” U.S. artillery ammunition stored in-theater to an ACSA partner nation that needs it in exchange for local fuel supplies that the ally provides the U.S. The CoCom and the allied nation keep track of the value of all of the ACSA Implementing Arrangements established over time under the Master ACSA to ensure the overall set of exchanges are fair and equitable.

Fun Facts: Did you know that Office of SecDef/A&S and the Joint Staff are responsible for oversight and management of global ACSA activities? You can learn more about the details of how ACSAs are established and implemented by visiting the DAU International Community of Practice (ICOP) website to view a Joint Staff presentation on ACSAs.

Using the DoD International Acquisition “Toolbox”

In practice, using the correct international acquisition mechanism for a given situation is not always as easy as it seems. What might appear to be a rather simple buyer-seller transaction could be achieved several different ways – FMS, DCS, BPC program, or even an ACSA Implementing Arrangement – depending on the circumstances. The type of ICP international agreements used to establish S&T Project Arrangements with allied and friendly nations are markedly different than large scale Production, Sustainment, and Follow-On Development (PSFD) Memoranda of Understanding (MOUs). The DoD Acquisition and Security Cooperation communities use a combination of online and resident course at DAU and the new Defense Security Cooperation University (DSCU), on-the-job training and human resources management within the DoD Components, and community-wide mentoring across the DoD enterprise to turn beginners into journeymen and (eventually) experts. If you are interested in learning more about the DoD international acquisition Toolbox -- and how these Tools are employed by the DoD acquisition workforce to achieve U.S. national security and defense goals – visit DAU’s website and view our DoD International Acquisition Transactions Overview presentation.

Until next time, Prof K