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International Acquisition Management
FMS Systems Acquisition “Step 1” – Documenting what the Customer Wants
Written by: Frank Kenlon (Prof of Int'l Acq, DAU/DSMC-Int'l)
March 15, 2019
One of the challenges that DoD acquisition professionals encounter on a daily basis is the inherent difficulty involved in translating visions and desired outcomes into formal documentation that eventually leads to a program contract award. The Big “A” DoD acquisition process uses three key documents to get the ball rolling:
Joint Capabilities Integration and Development System (JCIDS)
– which documents DoD operational capability needs in Initial Capability Documents, (ICDs) and Capability Development Documents (CDDs), etc.
Acquisition Strategy (or equivalent)
– which documents a program’s Milestone Decision Authority-approved acquisition approach consistent with DoD 5000 series policy and practice
Planning, Programming, Budget, and Execution System (PPBES)
– which documents funding requirements in a Program Objective Memorandum and the President’s Budget submission to Congress.
My recent blogs on accelerating Foreign Military Sales (FMS), however, have emphasized that the
FMS Systems Acquisition Process
uses a totally different approach. FMS acquisitions are typically triggered by an FMS Customer nation through a “
” informal expression of interest that
Defines What the Customer Wants
. The next step in the process occurs when the Customer submits a formal Letter of Request (LOR) through USG Security Cooperation channels to acquire a U.S.-origin military system via FMS. This blog will explore how Step 1 works and how it could be improved.
Documenting what the FMS Customer Wants
When I took college-level economics in the 1970s, most economists based their analyses on what they referred to as the “rational actor paradigm” where individuals and organizations always make prudent and logical decision that lead to optimal outcomes. Like many things, the state of the art in economics has evolved since then. Today most economists base their analyses on a behavioral economics paradigm that also considers the psychology of human behavior to explain economic decision making. I believe that many of the studies and critiques of the FMS Systems Acquisition process over the years have been based on a “rational actor” rather than “human behavior” perspective. Not the best approach …
Taking into account how economists’ thinking has evolved, do you think that most of the FMS systems acquisition LORs that DoD receives are based on:
A) Objectively determined, highly accurate, and comprehensive descriptions of the system the FMS Customer wants?
B) Subjective, fuzzy, and incomplete descriptions of the system that the FMS Customer says it wants?
Well, I suspect many of you chose B) – and you’d probably be correct most of the time -- but as we love to say here at DAU, the best answer is probably “it depends.” Here’s why.
(from my blog on FMS Step 0)
“If Step 0 [Defining What the Customer Wants] of the FMS process isn’t functioning effectively there will always be a large number of FMS Systems acquisition transactions experiencing significant issues from Step 1 onward.”
Not a revelation but certainly a truism. Intensive Step 0 engagement with a prospective FMS Customer normally results in an initial draft LOR that’s much closer to the A) answer above than an LOR from that Customer that just shows up in the mail.
-- DoD Acquisition and Security Cooperation workforce members should take a look at the Step 0 best practice guidance contained in Section 2 of the
FMS Systems Acquisition Best Practices Job Support Tool (JST)
when conducting pre-LOR engagement activities with prospective FMS Customers.
Receipt and Analysis of LORs
An LOR that has been formally submitted by a prospective FMS Customer is routed within the DoD Security Cooperation community based on State Department and Defense Security Cooperation Agency (DSCA) policy and practice. Within DoD, DSCA typically routes FMS systems acquisition LORs they receive to the cognizant DoD Component for action.
At a big picture, level, the overall objective of DoD’s LOR analysis is to determine whether or not the LOR is
or not. If the LOR is not actionable, then it should be returned to the Customer for revision and resubmission (if this is what the Customer decides to do).
I have always felt that an FMS LOR analysis is loosely analogous to the process that DoD Component acquisition organizations use to evaluate whether prospective contractors are
to a contract solicitation or not. However, in the FMS Systems Acquisition process there are no objective standards available for use in DoD LOR evaluation since there neither JCIDS nor Acquisition documents -- e.g., Milestone Decision Authority-approved Acquisition Strategy, Acquisition Program Baseline, etc. -- available for use as objective measures of responsiveness.
What criteria should be used to objectively evaluate LORs? Let’s start with a few macro-level LOR analysis areas that are typically assessed by DSCA and the DoD Components:
Step 0 Engagement
Did it occur?
If so, how effective was it?
Typical Analytical Results
: The first question is purely objective, so if the answer is “No”, then it’s likely the LOR is flawed and some type of ‘after the fact’ Step 0 effort will need to be conducted to ensure the LOR is actionable. If Step 0 engagement occurred, DoD Component International Program Office (IPO) FMS subject matter experts (SMEs) subjectively evaluate the effectiveness of the Step 0 engagement on a ‘Pass-Fail’ basis using their historical knowledge and experience of similar LORs submitted for similar FMS systems acquisitions.
FMS Customer History
Have we received FMS systems acquisition LORs from this Customer recently?
If so, what happened?
Typical Analytical Results
: Once again, the first question is purely objective, so if the answer is “No”, then the LOR evaluators must rely on the quality of the Step 0 engagement (if it occurred) to judge whether the LOR is actionable. If the answer to the first question is “Yes” then the DoD Component IPO SMEs can use the Step 0 results to subjectively compare the LOR against their historical knowledge and experience regarding similar LORs from that Customer, and how subsequent FMS Letter of Offer and Acceptance (LOA) development and implementation for that Customer worked out for everyone involved.
FMS Program Type
What type of FMS systems acquisition does the Customer want to pursue?
DoD Program of Record (POR)
Non-Program of Record (NPOR) Type A – Variant of DoD POR
NPOR Type B – Former DoD POR
NPOR Type C – Commercially developed system unrelated to any DoD POR
Typical Analytical Results
: LORs for DoD PORs are normally routed to the DoD Component IPO, which usually involves the DoD Program Management Office (PMO) in the LOR evaluation. If LOR asks for a POR version system with few (if any) Customer-desired modifications, then LOR evaluation is pro forma unless additional Technology Security and Foreign Disclosure (TSFD) approvals are required (see next criterion for potential impact). If the LOR asks for a NPOR, Type A, these are also normally routed to the DoD IPO/PMO for evaluation. If an LOR asks for an NPOR Type B or Type C, DSCA has to decide what to do. Fortunately, the Conventional Arms Transfer (CAT) Policy Implementation Plan team responsible for this topic is making progress in this area, but their initial findings and recommendations are still under review.
Technology Security and Foreign Disclosure (TSFD) and Defense Exportability
Has the U.S. system requested in the LOR been approved for sale or transfer?
Does an exportable version configuration of the system requested in the LOR currently exist?
Typical Analytical Results
: With respect to the first question, while this seems like a simple “Yes-No” question, in reality it isn’t. The U.S. Government/DoD TSFD decision making system is very complex. Check out the
DAU Defense Exportability Integration JST
(over 10 pages long) if you’re curious as to why this is so. For most FMS systems acquisition LORs, some additional USG/DoD TSFD decision making activity (minor or major) is required. However, if the LOR requests a U.S. system configuration that the USG/DoD TSFD community considers “not releasable,” then by definition the LOR is
Similar to the first question, the second also seems like a simple “Yes-No” but it isn’t either. Unless the U.S. POR has already developed an exportable configuration that “exactly matches” the Customer’s LOR, USG/DoD TSFD decision making precedents must be reviewed to determine what additional TSFD decisions are required (if any). Once this is accomplished, then the DoD IPO/PMO must assess the scope, cost, and schedule impact involved in developing an exportable version for the Customer to see if its feasible.
The results of DoD IPO/PMO TSFD impact assessment – which may be “Yes”, “No” or “Shades of Gray” (hopefully not 50!) – are then discussed with the FMS Customer. Sometimes USG/DoD TSFD decisions materially change an exportable version’s capabilities. If this happens, the DoD Component has to ask the FMS Customer if they want to proceed with the systems acquisition program minus some of the capabilities they asked for in the LOR. Based on personal experience, TSFD impact discussions like these can be quite awkward for both sides. No wonder the International Acquisition and Security Cooperation communities consider this the hardest criterion to evaluate, discuss, and (hopefully) resolve!
Political-Military & Operational Considerations
Are there any special Pol/Mil considerations that could influence potential FMS sale to the Customer?
Typical Analytical Results
: While most FMS systems acquisition LORs are not affected by these considerations, some of the most high profile LORs are – and the impact could be positive or negative. Positive examples include Customer senior leader or U.S. regional Combatant Commander Pol/Mil interventions to “give this LOR the highest priority” in order to move forward quickly with FMS LOA development. Negative examples include regime changes, human rights violations, or high level Pol/Mil foreign policy or national security disagreements at the Administration or Congressional level. As a result, like the Monopoly board game, some LORs affected by Pol/Mil considerations zoom right to “Go” while others end up in “Jail” for several turns.
Based on experience and observation, DSCA and the DoD Component IPOs usually employ these criteria – in consultation with potential U.S. industry sources (whenever possible) -- when they analyze incoming FMS systems acquisition LORs for DoD. Whether it’s written down or not, SMEs normally assess all five (5) criteria using a “Green-Yellow-Red” scorecard to determine whether or not the FMS Customer’s system acquisition LOR is actionable. If it is, they move forward with Price & Availability (P&A) or LOA development. If it isn’t, they normally engage in discussions with the Customer to better understand (and hopefully resolve) Yellow and Red light issues or concerns. Only rarely are LORs returned with a formal “No – we can’t meet your needs.” The exception to this general rule concerns LORs for NPOR systems, which are often returned with the following response -- “our DoD Component has no responsibility for this system.”
Is the Status Quo Acceptable?
Based on the Pareto Principle (80/20 rule), my opinion is that DSCA and the DoD Components do a pretty good job at evaluating most of the FMS Customer system acquisition LORs they receive, and respond to them in a timely manner. However, many other people don’t feel this way. Moreover, at present there isn’t any objective data available to help make such judgments on an enterprise-wide basis.
Fortunately, it’s much easier to obtain the status of a specific LOR that’s being analyzed by DSCA and/or a DoD Component. Once senior leaders ask the “right” questions, and the DoD Component IPO marshals and engages the “right” IPO and PMO-level resources, a high quality “Green-Yellow-Red” answer is normally provided. That said, I believe the level of DoD Component performance in analyzing incoming LORs varies substantially based on the policies, practices, and SME talent employed by their IPO, PEOs, and PMOs. As a result, all DoD Components could benefit from greater sharing and broader use of LOR analysis best practices at these levels.
The question remains, however, is the status quo acceptable or not? The
CAT Policy Implementation Plan
makes it clear that the answer is “No,” and that is why it has established Lines of Effort and specific tasks to pursue several USG/DoD enterprise level improvements in the FMS area. Focusing solely on Step 0 and Step 1 of the FMS Process, I believe the USG/DoD status quo approach is deficient in two key areas:
: There is no DoD enterprise-wide information technology (IT) system that uses a variegated approach to provide each level of the DoD chain of command -- from the SecDef to the acquisition PM (about 5 levels) -- with the dynamic situational awareness they need regarding the receipt and analysis of FMS systems acquisition LORs from world-wide Customers at any given time.
: The fact that such a DoD IT system doesn’t exist means that – at any given time – it’s very difficult for the DoD chain of command to ascertain:
Which received LORs being analyzed have been designated as “Top Priority” (i.e., the top 10%) because they are critically important from a top-level DoD foreign policy and national security perspective.
How these Top Priority LORs are progressing, and whether there any serious issues or delays that require attention and resources to resolve these problems.
How many LORs are actually in the middle of the bell curve (i.e., the 80%), and how are they progressing (are most of them actionable?).
How many LORs at actually at the bottom of the bell curve (i.e., the bottom 10%), why are they there, and how are they progressing (e.g., are most of them not actionable?).
As noted above, there are several USG CAT Policy teams working on ways to move from status quo FMS performance to improved outcomes. Regarding Step 1 of the FMS Systems Acquisition process, I would offer the following suggestions for their consideration:
: In addition to local acquisition organization policy and practice, DoD Component IPOs and PMOs should systematically employ Section 3 of the
FMS Systems Acquisition Job Support Tool
to conduct an objective, rigorous evaluation of all incoming systems acquisition LORs to ensure they are actionable.
Operational Art Level
: If they are not doing so already, DoD Component Acquisition Executives (CAEs) and their IPOs should use the five (5) criteria above to develop a “Green-Yellow-Red Scorecard” of all incoming LORs under their cognizance. This approach would ensure that only actionable LORs proceed to Step 3, draft P&A or LOA development. LORs that aren’t actionable should be returned to DSCA and the prospective Customer for revision and re-submission.
: USD(P), USD(A&S), DSCA, and the CAEs should develop an enterprise-wide DoD IT system that enables all levels of command – from DoD’s senior leaders to individual PMOs – to maintain situational awareness of all incoming FMS systems acquisition LORs, establish priorities (based on the 80/20 principle), and oversee enterprise-wide performance of LOR receipt and analysis activities against mutually agreed standards.
I hope this exploration of how Step 1 of the FMS Systems Acquisition process could be improved fits within the bigger picture context of ongoing DoD Acquisition and Security Cooperation community efforts to accelerate FMS. Senior leaders throughout the Department are encouraging both communities to work together to achieve the Administration’s CAT Policy objectives in furtherance of our nation’s strategic goals. We have a unique opportunity formulate and implement policy and procedural changes that will lead to a quantum leap in FMS performance benefiting the U.S. and our allies and friends. Let’s make the most of it.
Until next time, Prof K
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