The Defense Security Cooperation Agency (DSCA) is projecting that total sales beyond fiscal year 2013 could be as much as $30 billion or as little as $5 billion due to declining global military budgets and competition for products and services.
DSCA Director Navy Vice Adm. Joseph Rixey presented a briefing slide Thursday showing total sales, which include Foreign Military Sales (FMS) and United States capacity building programs like the Section 1206 train and equip program, totaled between roughly $30 billion to $40 billion between fiscal years 2008 and 2011, including over $31 billion in sales as of Oct. 31. According to Rixey’s slide, total sales spiked to about $70 billion in FY ’12, which he attributed to F-15 sales to Saudi Arabia.
Rixey attributed the projected decline in total sales to strained defense budgets worldwide and competition as European countries and other nations have foreign goods and services that are “quite capable.” Rixey said if the Defense Department wants to avoid the downtick in total sales DSCA is predicting, it needs to embrace flexibility like hybrid approaches.
An example Rixey gave of a hybrid approach was the sale of Boeing’s [BA] P-8A Poseidon maritime patrol aircraft to India, called the P-8I. Rixey said the aircraft was procured via Direct Commercial Sales (DCS) from Boeing, but to complete the execution of the sale, DoD needed to bring in “five FMS cases” to support. Rixey said getting the cases signed and through both the governments of India and the United States in a timely manner to support the contract with Boeing and the deliverables associated with it was “a lot of work.”
DSCA did not respond to requests for comment by press time Thursday.
“Being part of this new norm, we’re going to rise to the occasion to support because we need to if we’re going to compete for market share,” Rixey said at the Center for Strategic and International Studies (CSIS) think tank in downtown Washington.
The P-8I is a variant for India of the long-range, anti-submarine warfare, anti-surface warfare, intelligence, surveillance and reconnaissance aircraft Boeing is developing for the Navy. Boeing said the Indian navy was the first international customer for the P-8 with a contract signed on Jan. 1, 2009 to deliver eight aircraft.
Boeing said it would deliver the first P-8I within 48 months of contract signing and the remaining seven by 2015. Boeing delivered the first P-8I in May 2013 (Defense Daily; June 27, 2013). Boeing said in a statement it delivered its fifth P-8I to India on Sept. 9. Company spokesman Charles Ramey said Thursday Boeing plans for one more delivery this year and the final two in 2015. Ramey said there are options for four additional planes, which the company hopes to have on contract next year.
In essence, the major difference between FMS and DCS are how much procurement involvement an international customer desires to assume and how much it wants to delegate to DoD. As a very broad generalization, the traditional FMS process can be characterized as an international purchaser employing DoD to conduct a defense procurement on its behalf and entrusting the Pentagon to make decisions and act on its behalf.
A few major differences between FMS and DCS are that Foreign Military Sales are government-to-government transactions, more stringent and slower to develop than DCS. Some weapon systems like man-portable air defense missiles (MANPADS), certain cryptographic equipment, precise positioning service and airborne early warning and control systems (AWACS) are only available via FMS.
In DCS, the foreign customer directly interfaces with the contractor on all elements of the contract without DoD being an intermediary. Under traditional DCS, the U.S. government essentially has no direct involvement in the procurement process except for the export license.