In my previous blog on this topic, we explored the differences between FMS and ICP international acquisition transactions, emphasizing that they are most definitely not the same.

I am writing this second blog to discuss their similarities because:

• even though FMS and ICP transaction mechanisms – FMS Letters of Offer and Acceptance (LOAs) and ICP International Agreements – are fundamentally different legal mechanisms established between the U.S. and other sovereign nations;
• in certain situations, FMS and ICP transactions can be used to establish Government-to-Government (G2G) international acquisition efforts with allied/friendly nations that appear to be -- and in some cases are -- substantively the same with respect to delivery of coalition warfighting capabilities to U.S. and allied/friendly nation operational forces. 

Confused?  If not, you probably should be … so I encourage you to read on. However, before we tackle the intricacies of FMS versus ICP similarities, you’ll need a basic understanding of how DoD international acquisition transactions work.  Here’s the conceptual approach that DoD experts in this area use. 

DoD International Acquisition & Exportability (IA&E) 

About 15 years ago, DoD created an IA&E framework – shown in the image below -- to help the workforce think about how to plan, establish, and implement various types of international transactions with our allies and friends.   We’ll use this framework to begin our journey from confusion to clarity.

These six areas are all interrelated, hence the ‘puzzle piece’ graphic.  In discussions with DoD acquisition and security cooperation personnel about actual projects and programs, however, IA&E experts often group them together as follows:

• Planning and Analysis: Deciding what DoD should do in a certain international acquisition situation with another nation, group of nations, or international organizations.
• Transaction Mechanisms: FMS, ICP, International Contracting, Direct Commercial Sales (DCS), Building Partner Capacity (BPC), Acquisition & Cross Servicing Agreements (ACSAs), etc. 
• TSFD & Exportability Policy Decisions: Deciding on what defense and dual-use articles and services should be cooperatively developed, sold, transferred, or procured from foreign sources and implementing exportability measures pertinent to these transactions.

When formulating a new international acquisition program of any type, your DoD organization should begin its IA&E analysis by evaluating its strategy and policy aspects as shown on the left-hand side of the graphic below. 

If the proposed DoD international acquisition effort will establish a new or precedent-setting international transaction, foreign policy and national security stakeholders in the U.S. and the foreign nation (or set of nations) should be consulted to confirm that the proposed transaction is in the nations’ collective best interest.  Once this is accomplished, DoD organizations should follow the rest of the recommended “flow path” elements from left to right. Experience has shown that using this set of IA&E flow path business ‘rules’ leads to the best possible acquisition outcomes for the U.S. and its coalition partners.

Heading Check 

You may be wondering at this point, “why is Professor Kenlon talking about DoD’s IA&E framework and transaction flow path when this blog is supposed to explain the similarities between FMS and ICPs?” 

Here's why.  I've observed during my DoD acquisition career that too many DoD organizations start in the middle of this diagram, where the yellow diamond with the "?" is located rather than at the beginning.  Then they choose one of the U.S. Government (USG) international acquisition mechanisms listed in the boxes in the middle (for example, ICP or FMS) for reasons either unknown or unclear.  After that, they start trying to put one of these international transaction types in place.  This is the DoD international acquisition version of the Abeline Paradox played out with one (or more) of our allies and friends.  Unless the organization is just lucky, they will go down a suboptimal path that often leads to:

1. no international acquisition transaction at all; or
2. a transaction that -- to some greater or lesser degree -- does not address the needs of U.S. warfighters, allied/friendly nation warfighters, or both.

In this case, it’s better to be good than lucky so I encourage you to read on.

A Better Approach 

Keeping the IA&E transaction flow path above in mind, DoD organizations evaluating a proposed international acquisition effort should form a Program Assessment Team (PAT) to ask themselves – and later on, USG and DoD stakeholders -- the following questions:

1. Is the proposed effort in the USG’s/DoD’s foreign policy and national security interest? 
2. Would it be advantageous to the USG/DoD to transfer defense article(s) or service(s) associated with the effort to the allied/friendly nation(s) involved?
3. Would allied and friendly nations be interested in the proposed effort?
4. Should U.S. Government (USG) TSFD and Export Control (EC) policy authorize proposed transfers associated with the proposed effort?

Depending on the nature of the proposed effort, if the PAT’s answers to these first four questions – after consultation with key internal and external USG/DoD stakeholders -- is “Yes” then (and only then) should the PT move to the penultimate question: 

1. What would be the best DoD international acquisition transaction mechanism to use to accomplish the desired effort's outcome? 

DoD International Program Efforts & Stuffed Bears

While shopping malls are not what they used to be, many of them still in business have a store or kiosk called Build-a-Bear Workshop . They typically sell/build stuffed bears to/for any customer at a price but, in certain circumstances, may provide bears to those in need gratis at the store owner's discretion. 

If DoD international acquisition efforts were stuffed bears that could either be bought or built, come in all shapes, sizes, and desired characteristics, and require care, maintenance, and upgrades to keep them functional … then DoD PTs would use the approach and questions recommended above to:

1. Decide whether or not a bear (or bear-related technology, support, or upgrades) should be made available to an allied or friendly nation (or sets of nations) at all.

(Note: Unlike Build-a-Bear Workshop, the USG/DoD are quite careful regarding which foreign nations they transfer bears (or bear-related articles and services) to as a result of the Arms Export Control Act and foreign/national security strategy & policy.).

2. Decide exactly what type of bear (or bear-related technology, support, or upgrades) should be made available to an eligible allied or friendly nation (or sets of nations).

(Note: Unlike Build-a-Bear Workshop, the USG/DoD must use the USG/DoD TSFD and EC processes to decide exactly what type bears (or bear-related articles and services) should be transferred for the same reasons as 1., above.) 

3. Decide what type of international business transaction should be used to provide specific types of bears (or bear-related articles or services) to different allied or friendly nations (or sets of nations) that are eligible to acquire them:
   1. Government-to-government (G2G) sale (FMS)
   2. G2G partnership (ICP)
   3. Direct Commercial Sale (C2G) (DCS)
   4. Gratis (e.g., Building Partner Capacity (BPC), Excess Defense Article (EDA), etc.)

(Note:  This blog will only focus on the differences between FMS and ICP transactions rather than the other options listed in 3.) 

Buy a Bear or Build a Bear?

PATs for proposed Program Efforts typically obtain assistance regarding the first two decisions above from their DoD Component International Programs Organization (IPO).  In the real world, these decisions can range from simple to complex.  To keep this blog from getting longer than it already is, we’ll assume in our ‘bear’ examples below that:

• The USG/DoD decision on bear transfer to one or more eligible nations is “Yes.”
• The initial USG/TSFD and EC decisions on the exactly what type of bear defense articles and services are authorized for transfer to one or more eligible nations via either FMS or ICP transaction is “adequately defined.”

The Simple Case

The PAT, in consultation with its IPO, would begin by focusing on the “Buy a Bear vs. Build a Bear” question for its proposed G2G international acquisition effort.  If only one foreign nation expressed interest, then the set of choices would appear to be straightforward:

(Note:  This table would be more complex if a proposed international acquisition effort was multilateral (three or more nations) rather than bilateral.)

Since I. and IV. in the table above result in consensus, the choice of mechanism seems clear; you would think that the PAT would be able to move forward with either an FMS or ICP transaction.  Alternatively, since II. and III. result in divergence on the choice of mechanism, it appears that the PAT would be unable to move forward at all.  Unfortunately, just like life, DoD international acquisition is not that simple because:

• FMS can be used legally and/or effectively by DoD for some types of bear transactions, but not for others; and, 
• ICP can be used legally and/or effectively by DoD for some types of bear transactions, but not others. 

The Complex Case

The graphic image below provides an overview of three basic DoD G2G international acquisition types – and associated DoD FMS and/or ICP mechanisms – that DoD organizations' PATs typically use to provide allied and friendly nations with defense capabilities throughout the acquisition lifecycle consistent with USG/DoD laws, regulations, and policies.

When we apply this real-world experience to our “Buy a Bear versus Build a Bear” approach, our revised table looks quite different.

(Note:  This table would be exponentially more complex if a proposed international acquisition effort was multilateral (three or more nations) rather than bilateral.)

ICP & FMS Transaction Complexity

S&T Projects

If you are a member of a DoD S&T organization or RDT&E organization PAT, choosing correct type of international acquisition for an S&T effort is pretty straightforward:

• All G2G S&T efforts are ICPs, none are FMS.
• Most G2G RDT&E efforts are ICPs, except for nations that have decided to ‘buy RDT&E’ from DoD via FMS to improve/enhance the U.S. system they are acquiring. 

RDT&E Projects

RD&TE efforts introduce more complexity than S&T efforts since both ICP and FMS transactions can be used depending on the circumstances associated with the proposed Program Effort.  ICP RDT&E efforts range from small scale R&D projects to large scale Engineering & Manufacturing Development programs such as NATO Alliance Ground Surveillance, Joint Strike Fighter, and Standard Missile 3 Block IIA. 

Alternatively, a good example of an FMS RDT&E effort is the Saudi F-15 SA FMS program where Saudi Arabia invested ~$30B in FMS cases to develop and procure an upgrade version of the U.S. F-15.  Qatar also subsequently purchased a similar version called the F-15QA.  Later on, the U.S. Air Force decided to leverage these nations’ FMS R&D investments in upgraded F-15s by creating a U.S. F-15EX program that will provide next-generation F-15s to U.S. warfighters.  Note the similarity of results, from a warfighter perspective, in these ICP and FMS examples.  

System-Level Projects & Programs

System-level efforts are the most complex when it comes to choosing to use either ICP or FMS transactions, as Table 2 above clearly shows. If you are a member of a Program Management Office (PMO) PAT for a 'mature' DoD system that has been in production for some time -- and is also providing logistics support and upgrades to U.S. and allied/friendly nation warfighters who operate it – it’s likely that you’ll be asked at some point to make choices between ICP and FMS options.  It's not an easy task.

When faced with this situation, PMOs should review prior or existing ICP or FMS efforts (if any), then consult their DoD Component IPO and other international acquisition experts (including DAU) to obtain insights and advice prior to making ICP versus FMS transaction decisions. 

Capabilities Delivered to Warfighters by ICP and FMS

When I was a GS-7 acquisition trainee in 1981, my retired Navy E-9 mentor encouraged me to always keep sailors in mind during our acquisition program’s efforts by reminding me that:

• When you talk to scientists who are studying new capabilities for our program, tomorrow is ten years from now.
• When you talk to technologists who are developing new capabilities for our program, tomorrow is four or five years from now.
• When you talk to program office personnel who are acquiring new program capabilities -- finding $, putting $ on contract, accepting delivery, shipping articles & providing services-- tomorrow is one to three years from now.
• When you talk to a fleet sailor, tomorrow is actually tomorrow; they can only use what they have on their ship or at their squadron to conduct their missions.

In my last blog, I emphasized the fundamental differences between FMS and ICP as legal mechanisms:

• FMS transactions deliver defense capabilities to nations that decide to buy them from the USG/DoD to support their own warfighters.
• ICP transactions deliver defense capabilities to nations that decide to join together with the USG/DoD as acquisition partners to develop and/or produce them to support both U.S. and partner nation warfighters.

In the real world, however, both ICP and FMS transactions have the ability to deliver a full spectrum of interoperable, interchangeable, supportable, and upgradable capabilities to both U.S. and allied/friendly nation warfighters depending on how they are structured and managed.

• FMS Transactions:  Due to the nature of FMS arrangements, providing full spectrum capabilities to all nations is harder to accomplish.  However, many DoD PMOs have been successful in using various ‘hub and spoke’ methodologies – with DoD as the hub and FMS buyers as the spokes -- to organize and rationalize individual FMS acquisition efforts with corresponding U.S. DoD acquisition efforts.  When PMOs do this, they are able to develop, produce, and support DoD program of record weapon systems and equipment that both the U.S. and FMS customer nations own and operate. Moreover, FMS defense articles and services developed and produced for one FMS customer can typically be provided to other eligible FMS customers.
• ICP Transactions -- Because of the nature of ICP arrangements, providing full spectrum capabilities to all nations is much easier to accomplish, particularly if the partner nations are willing to work together and compromise with each other.  System-level ICPs involve joint management by a bilateral or multilateral Cooperative Program Office overseen by a Steering Committee comprised of representatives from DoD and the partner nations.  ICP-developed and produced weapon systems can also be sold by DoD FMS to eligible allied and friendly nations after consultation with or consent from the other ICP partner nations.

A compelling example of this is the NATO SeaSparrow program. Originally begun in 1968, the NATO SeaSparrow Project Office has developed, produced and supported original, Block 1, and Block 2 missile configurations.  The Evolved SeaSparrow Missile (ESSM) Block 1 has been procured by 10 NATO SeaSparrow partner nations and three FMS customer nations. 

As a result of how ESSM Block 1 was developed and acquired by these nations over the years using a combination of ICP and FMS transactions, the warfighters in thirteen different navies around the globe have an interoperable, highly capable, logistically supportable, and upgradeable medium range surface ship air defense missile on their ships that they can use today, tomorrow, and into the future.

Summary

Both ICP and FMS transactions play a critically important role the national security of the U.S. and its allies/friends. Thousands of ICP and FMS transactions are currently being implemented by DoD acquisition and security cooperation workforce members.  Hundreds more are put in place every year.  I hope this blog, which provides a more nuanced view of the difference and similarities between them, convinces you that it's worth learning more about ICP and FMS to help your DoD organization's acquisition projects, programs, and activities deliver the coalition warfare capabilities U.S. and allied/friendly nation warfighters need to prevail in an uncertain and dangerous world. 

Until next time. Prof K