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i 

20–791 2017

[H.A.S.C. No. 114–123] 

ASSESSING THE DEPARTMENT 

OF DEFENSE’S EXECUTION OF 

RESPONSIBILITIES IN THE U.S 

FOREIGN MILITARY SALES PROGRAM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

AND INVESTIGATIONS 

OF THE

COMMITTEE ON ARMED SERVICES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

MAY 17, 2016 
(II) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

VICKY HARTZLER, Missouri, Chairwoman 

JEFF MILLER, Florida 

K. MICHAEL CONAWAY, Texas 

JOSEPH J. HECK, Nevada 

AUSTIN SCOTT, Georgia 

MARTHA MCSALLY, Arizona 

JACKIE SPEIER, California 

JIM COOPER, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., Georgia 

GWEN GRAHAM, Florida 

HEATH BOPE, Professional Staff Member 

KATY QUINN, Professional Staff Member 

MIKE GANCIO, Clerk 
(III) 

C O N T E N T S 

Page 

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS 

Hartzler, Hon. Vicky, a Representative from Missouri, Chairwoman, Subcommittee on Oversight and Investigations ...................................................... 1 

Speier, Hon. Jackie, a Representative from California, Ranking Member, Subcommittee on Oversight and Investigations ...................................................... 2 

WITNESSES 

Grady, Claire, Director, Defense Procurement and Acquisition Policy, Under 

Secretary of Defense for Acquisition, Technology and Logistics ...................... 5 

McCormick, Beth, Director, Defense Technology Security Administration, Office Of the Secretary of Defense .......................................................................... 7 

Rixey, VADM Joseph, USN, Director, Defense Security Cooperation Agency, 

Department of Defense ........................................................................................ 4 

APPENDIX 

PREPARED STATEMENTS: 

Grady, Claire .................................................................................................... 43 

Hartzler, Hon. Vicky ........................................................................................ 31 

McCormick, Beth .............................................................................................. 61 

Rixey, VADM Joseph ........................................................................................ 33 

DOCUMENTS SUBMITTED FOR THE RECORD: 

Letters of Offers and Acceptance graph and chart ........................................ 67 

WITNESS RESPONSES TO QUESTIONS ASKED DURING THE HEARING: 

Ms. Bordallo ...................................................................................................... 71 

Mrs. Hartzler .................................................................................................... 71 

Ms. Speier ......................................................................................................... 71 

QUESTIONS SUBMITTED BY MEMBERS POST HEARING: 

Ms. Speier ......................................................................................................... 75 

(1) 

ASSESSING THE DEPARTMENT OF DEFENSE’S EXECUTION OF RESPONSIBILITIES IN THE U.S. FOREIGN 

MILITARY SALES PROGRAM 

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, Washington, DC, Tuesday, May 17, 2016. 

The subcommittee met, pursuant to call, at 10:00 a.m., in room 

2212, Rayburn House Office Building, Hon. Vicky Hartzler (chairwoman of the subcommittee) presiding. 

OPENING STATEMENT OF HON. VICKY HARTZLER, A REPRESENTATIVE FROM MISSOURI, CHAIRWOMAN, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS 

Mrs. HARTZLER. Welcome and good morning. Before we begin, I 

would like to note that members of the full committee plan on attending today who may not be part of this committee. And so, 

therefore, I ask unanimous consent that these committee members 

be permitted to participate in this hearing, with the understanding 

that all sitting subcommittee members will be recognized for questions prior to those assigned to the subcommittee. 

Without objection, so ordered. 

This is the subcommittee’s third event to review and assess the 

Department of Defense’s [DOD’s] role in the U.S. Foreign Military 

Sales program. As I noted at our hearing last week with representatives of the defense industry, foreign military sales, or FMS, is 

one component of the partnership-building tools the United States 

utilizes. It is a vital instrument of U.S. national security policy and 

is watched closely by our allies, partner nations, and adversaries 

alike. 

This subcommittee understands that FMS is a complex program. 

It is executed by many Federal agencies and policy stakeholders. 

All are dedicated professionals who strive to further U.S. national 

security. They recognize that building critical relationships and 

military capacities of our foreign partners and allies strengthens 

American security. It also aids our vital defense industrial base 

and in many ways eases the task of equipping our forces with the 

best equipment. 

But as with many large and multifaceted programs, FMS also 

comes with an inherent set of bureaucratic challenges. Some observers think the process is needlessly delayed and hinders the 

ability to deliver military capabilities to our partners engaged in 

many of the same conflicts or confronting the same threats we are. 

In recent weeks, our subcommittee has learned, through various 

avenues, about lengthy policy reviews that occur regarding some 
2 

FMS cases. For example, it is my understanding that FMS cases 

for fighter aircraft that began well over 2 years ago have been delayed due to opaque and bureaucratic deliberations at the National 

Security Council. This is very unfortunate. And I wholeheartedly 

agree with Chairman Thornberry’s recent assessment that the NSC 

has become an organization making military operational decisions, 

building misinformation campaigns, and absorbing most national 

security functions from within the White House. 

I also strongly support the amendments filed by both Chairman 

Thornberry and Representative Jackie Walorski during floor consideration of the fiscal year 2017 NDAA [National Defense Authorization Act] this week, and I am glad that they were made in order 

so that we can vote to implement overdue accountability and congressional oversight to the processes and deliberations of the NSC. 

We have also heard of delays stemming from the need to ensure 

technology embedded in U.S. products is properly protected. It is 

important to note that as we seek to streamline this process, the 

foundational basis of the FMS program is to support and preserve 

the national security interests of the United States. 

Concerns have also been expressed about initial requirements or 

final design configurations which have been poorly developed. We 

have heard that the Defense Department does not always efficiently collaborate with industry in appropriately determining and 

developing end-item configurations based on the defined requirements. We have been told the Department also sometimes insists 

on undesirable contractual vehicles and upfront financial requirements that may dissuade allies from coming to the U.S. for their 

military equipment and support service needs. I also am concerned 

about the size and alignment of the Department’s acquisition workforce and how the workforce is trained in prioritizing of FMS cases. 

The goal of our FMS oversight activities has been to gain a better understanding of the strengths, weaknesses, opportunities, and 

challenges associated with DOD’s role in the FMS program, how 

this committee can help streamline the process without sacrificing 

technology, security, and support the dedicated and hardworking 

people of our defense industrial base. 

It is essential that the program is executed effectively and efficiently, and results in timelier acquisition and delivery of military 

capability where and when it is needed, both for the security of the 

United States and our reputation as an international partner. 

But before I introduce the witnesses, I turn to the Oversight and 

Investigations Subcommittee ranking member for any opening remarks she wishes to make. 

[The prepared statement of Mrs. Hartzler can be found in the 

Appendix on page 31.] 

STATEMENT OF HON. JACKIE SPEIER, A REPRESENTATIVE 

FROM CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS 

Ms. SPEIER. Madam Chair, thank you. And thank you to our witnesses who are here today. 

Last week, the subcommittee heard industry’s perspective on the 

process for U.S. foreign military sales. We heard suggestions for 
3 

improving the process, but we also heard about delays, including 

assertions that delays led to lost sales. 

I think it is important for us to dig deeper. How many sales have 

actually been lost? Let’s get specific. Is the process slow because 

foreign countries are unwilling to sign agreements with the United 

States not to share technology with other countries who are not our 

allies? Last week’s industry witnesses were unable to provide specific examples where foreign governments have walked away from 

an FMS sale because the process was too slow. 

The quality, prestige, and servicing agreements involved in purchasing U.S. weapons systems cannot be matched by foreign competitors. So I want to get a better sense of how much of an issue 

this really is. 

At the last hearing, industry also complained that the technology 

transfer review was slowing down the process. But I want to reiterate that we need reassurance that these weapons do not fall into 

the wrong hands. Obtaining these assurances is a necessary part 

of the process. 

Despite these potential challenges, based on current sales this 

year, foreign military sales are robust. Let me repeat: they are robust. A recent Defense Security Cooperation Agency announcement 

indicated about $29 billion in FMS sales through the end of April, 

which is on track with last year, so the demand is still clearly 

there. 

Regardless, there are always improvements that can be made, 

and I look forward to hearing about several ongoing initiatives 

across the DOD to make the process more efficient. I also look forward to better understanding about benefits and potential pitfalls 

of the program. 

Foreign military sales support the U.S. defense manufacturing 

base and strengthen our international partnerships. Through FMS, 

our interoperability with other international partners increases as 

does their capability to respond to shared global security challenges. 

One issue where we are failing to maximize the benefits from 

this program is in recouping the hundreds of billions of dollars of 

taxpayer money that has gone to research and development for 

these weapons systems. Historically, we used to recoup a portion 

of these investments when we sold weapons to foreign governments. However, due to a policy change, DOD now waives all research and development fees. As a result, we are leaving nearly 

$800 million, and I suggest even more, of taxpayer money on the 

table each and every year and allowing industry and foreign governments to benefit at the American taxpayer’s expense. Given the 

high demand for these sales, we need to do a better job of getting 

a return on our investment. 

In our oversight role of the DOD and its part in the FMS process, 

the subcommittee continues to learn more about whether the FMS 

process is suitably efficient, effective, and timely. Yet I will reiterate what I said last week: We must not forget that FMS is an 

instrument of U.S. foreign policy. As we sell weapons systems and 

services to foreign countries, we must ensure they are used appropriately, responsibly, and are in our best interests. Although that 

may delay the process, it is a policy we must always keep in mind. 
4 

With that, I yield back, Madam Chair. 

Mrs. HARTZLER. Sure. Thank you, Ms. Speier. 

So I am pleased to recognize our witnesses today, and I want to 

thank them for taking time to be with us. We have today Vice Admiral Joseph Rixey, director of the Defense Security Cooperation 

Agency [DSCA] for the Department of Defense. Thank you for coming back. We have Ms. Claire Grady, director of Defense Procurement and Acquisition Policy from the Office of the Under Secretary 

of Defense for Acquisition, Technology and Logistics. And Ms. Beth 

McCormick, director of the Defense Technology Security Administration [DTSA], also from the Office of the Under Secretary of Defense for Acquisition, Technology and Logistics. 

Thank you all for being with us here today. And so now we will 

begin with your opening statements. 

So, Vice Admiral Rixey, we will begin with you. 

STATEMENT OF VADM JOSEPH RIXEY, USN, DIRECTOR, DEFENSE SECURITY COOPERATION AGENCY, DEPARTMENT OF 

DEFENSE 

Admiral RIXEY. Thank you, Chairwoman Hartzler, Ranking 

Member Speier, and members of the subcommittee. I am pleased 

to be here today to share with you my thoughts on the overall 

health and well-being of the foreign military sales process and the 

Department of Defense’s role in the program from my vantage 

point as the director of the Defense Security Cooperation Agency. 

FMS is a longstanding foreign policy and national security program that supports partner and regional security, enhances military-to-military cooperation, enables interoperability, and develops 

and maintains international relationships. The system is performing very well, and the United States remains the provider of choice 

for our international partners with over 1,700 new FMS cases implemented in fiscal year 2015 worth more than $47 billion. 

FMS is operated under the title 22 authority in which direction 

and guidance is delegated to DOD from both the President and 

from the Department of State. DOD manages the FMS life cycle, 

overseen by DSCA; conducts technology transfer reviews overseen 

by the Defense Technology Security Administration; and manages 

the defense acquisition and logistics systems which are overseen by 

DOD Acquisition, Technology and Logistics, and the military departments. 

The FMS process is executed through a system designed to fulfill 

requirements of the Arms Export Control Act, ensuring three fundamental and critical validations occur before a capability can be 

offered: that the sale is of mutual benefit to the partner nation and 

the U.S. government, that the technology will be protected, and 

that the transfer is consistent with U.S. conventional arms transfer 

policies. 

Criticism of the alleged slow approval timelines is largely associated with a few high profile cases, and this criticism is actually 

misplaced. These delays are the natural outcomes of the required 

validations rather than a negative reflection of the performance of 

the FMS system itself. 

The FMS system is burdened, but it is not broken, and we have 

made important strides, not only within the Department of De-
5 

fense, but across the interagency in mapping out and beginning to 

develop and implement important initiatives that target areas for 

improvement to keep the FMS system responsive to our partner 

needs and agile to support national security objectives. 

We have identified approximately 40 interagency initiatives to 

better enable the United States to remain the provider of choice for 

our foreign partners, providing them with the full spectrum of required capability to receive, maintain, and sustain the products 

they receive through the FMS program. 

Initiatives range from professionalizing of the Security Cooperation workforce, providing ways in which we can better understand 

and help define partner requirements earlier, and surely we are 

properly resourced for FMS contracting manpower and establishing 

ways we can more effectively respond to the requirements, such as 

our ability to buy ahead of need with the Special Defense Acquisition Fund. 

And that is a broad overview. My written statement has greater 

detail that I am happy to discuss in response to your questions. 

Distinguished committee members, I want to thank you again for 

the opportunity to sit before you today, and I look forward to your 

questions. 

[The prepared statement of Admiral Rixey can be found in the 

Appendix on page 33.] 

Mrs. HARTZLER. Thank you. 

Ms. Grady. 

STATEMENT OF CLAIRE GRADY, DIRECTOR, DEFENSE PROCUREMENT AND ACQUISITION POLICY, UNDER SECRETARY 

OF DEFENSE FOR ACQUISITION, TECHNOLOGY AND LOGISTICS 

Ms. GRADY. Thank you. 

Good morning, Chairman Hartzler, Ranking Member Speier, and 

distinguished members of the subcommittee and committee. Thank 

you for the opportunity to appear before you to discuss the role the 

defense acquisition community plays in supporting foreign military 

sales. 

In acquiring goods and services on behalf of FMS customers, we 

employ the same rigorous policies and procedures that we use to 

meet our own requirements. When an FMS customer seeks to acquire major weapons systems, whenever possible, the same acquisition program management office that oversees the DOD acquisition 

and sustainment of that system is also responsible for delivering 

the FMS requirements. In this way, the Department and the FMS 

customers enjoy the benefits of synergy, not only from the perspective of staffing, but also in realizing efficiencies in achieving economies of scale, which results in lowered negotiated prices from industry. 

To increase the efficiency and effectiveness of the overall acquisition system, the Under Secretary of Defense for Acquisition, Technology and Logistics, Frank Kendall, has advanced a series of continuous improvement initiatives we refer to as Better Buying 

Power. One of the central elements of Better Buying Power is our 

focus on the people who comprise our acquisition workforce and ensure we provide the training and tools to enable them to secure the 
6 

best possible value for our warfighters, the American taxpayer, and 

our FMS customers. 

The Department has invested significant resources, with the support of Congress, to ensure that our acquisition workforce is properly sized, with the right skills, experience, and training to execute 

the responsibilities entrusted to us. Last year, DOD’s talented contracting officers obligated over $274 billion on contract actions, of 

which about $26 billion were for foreign military sales. 

DOD training and certification programs for the defense acquisition workforce are considered to be the gold standard within the 

Federal Government. The professionalism and capability of our acquisition workforce is a significant contributing factor in our international partners’ choice to acquire goods and services through the 

U.S. FMS program. 

Another pillar of Better Buying Power is to incentivize productivity and innovation in industry and the government. A key tenet 

of that is the need to employ appropriate contract types and to 

properly align incentives. There is no one preferred contract type. 

The contract type that is employed should reflect the balance of 

risk between the government and the contractor and provide the 

contractor with the greatest incentive to achieve the outcomes necessary to make the program successful. If the Department were 

precluded from using the appropriate type contract in any particular environment, it would effectively constrain our ability to deliver best value to the FMS customer and eliminate opportunities 

to achieve efficiencies by combining U.S. and FMS requirements on 

the same contract. 

As detailed in the tables I included in my written statement, the 

Department’s contracting officers employ a variety of contract types 

that will best support the FMS customer’s needs, with the predominant contract type being firm fixed price. 

Recognizing the importance of being responsive to customers’ 

needs, we are continuing to work with Vice Admiral Rixey, DSCA, 

and the implementing agencies to shorten the times involved in the 

portion of the process that the acquisition community can influence. For example, as is the case with U.S. requirements, sole 

source foreign military sales contracts for military items require 

the contractor to submit certified cost or pricing data in accordance 

with the Truth in Negotiations Act. We are exploring opportunities 

to reduce procurement lead time and realize efficiencies by extrapolating from prior cost history to price future requirements and reduce the administrative costs for contractors to submit and certify 

proposals for FMS requirements. 

Another area where we are looking to improve is in the final 

pricing of undefinitized contract actions [UCAs]. The preferred 

practice is to finalize the terms and conditions and negotiate the 

price prior to award of a contract. However, due to urgent needs 

of FMS customers, it is often necessary to authorize the contractor 

to begin work prior to reaching final agreement on price and other 

terms. Although the statute exempts undefinitized contract actions 

awarded for FMS customers from restrictions and procedures 

otherwise required for UCAs, by policy, the Department has mandated that these management procedures be employed whenever 

practicable. And if it is not possible to improve those—if it is not 
7 

possible to apply those management techniques, they’re required to 

notify their acquisition chain of command as well as my office. 

We also have instituted internal reporting procedures to provide 

management and attention and visibility on our use of UCAs and 

provide semiannual reports to the Congress. In these reports, we 

identified a number of UCAs that have remained undefinitized for 

extended periods of time. Definitizing UCAs in a timely manner is 

important to both the government and industry and requires the 

mutual cooperation of both to achieve. We are committed to doing 

better in that area. 

Responsive to your hearing invitation letter, I have included in 

my written statement information about DOD’s technology security 

and foreign disclosure process and the Defense Exportability Features Pilot Program. For acquisition, these initiatives are led by my 

colleague in the Office of the Under Secretary for Acquisition, Technology and Logistics, the director of International Cooperation. 

I thank you for the opportunity to address the acquisition perspective of this important element of the Security Cooperation program, and I look forward to your questions. 

[The prepared statement of Ms. Grady can be found in the Appendix on page 43.] 

Mrs. HARTZLER. Thank you, Ms. Grady. 

Ms. McCormick. 

STATEMENT OF BETH McCORMICK, DIRECTOR, DEFENSE 

TECHNOLOGY SECURITY ADMINISTRATION, OFFICE OF THE 

SECRETARY OF DEFENSE 

Ms. MCCORMICK. Thank you, Chairman Hartzler, Ranking Member Speier, and members of the subcommittee. I appreciate the opportunity to discuss the Department of Defense ongoing technology, 

security, and foreign disclosure process improvements. 

As part of the Office of the Under Secretary of Defense for Policy, 

my agency, the Defense Technology Security Administration, collaborates with our sister agency, the Defense Technology Cooperation Agency, to build the capacities and capabilities of international 

allies and partners through the transfer of defense articles. Whether through the foreign military sales or direct commercial sales, 

providing the right equipment to match the security requirements 

of partners is a must. 

My agency also partners with several organizations in the Office 

of the Under Secretary of Defense for Acquisition, Technology and 

Logistics. The Arms Transfer and Technology Release Senior Steering Group, which I co-chair with Keith Webster, Director of International Cooperation, in the Office of the Acquisition, Technology 

and Logistics, brings together all of the key DOD stakeholders and 

process owners, breaking down longstanding stovepipes and focusing attention on the considerable factors so we can get capability 

to our global partners effectively and efficiently. 

We recognize that in some complex export transactions, if we 

wait for a formal letter of request from the international partner, 

we will be behind the power curve in the technology security and 

foreign disclosure review process. As a result, for select high-demand or sensitive systems, we seek to develop anticipatory policies 

addressing several of the technology security and foreign disclosure 
8 

reviews in advance of a request or export license authored submission. Also, we are able to avoid false impressions when the answer 

will be ‘‘no’’ and, in some cases, address challenges early enough in 

order to get to a quick ‘‘yes’’ decision. 

Partnership between the U.S. Government and U.S. defense industry is also imperative, and I would note that last week this committee had several presentations by those key industry associations. Last October, I had the privilege of co-hosting a U.S. DODindustry partnership forum with Keith Webster. As co-chairs of the 

Arms Transfer and Technology Release Senior Steering Group, we 

thought it was high time to have a dialogue about ways industry 

and government can work together to facilitate defense exports. 

While we developed the initial concept for the event, the forum became a reality only through collaboration with the Aerospace Industries Association and the National Defense Industrial Association. 

This was a great opportunity to foster communication between 

the Department of Defense and our industry partners on how we 

can work together to ensure our industry remains competitive 

internationally. Industry is counting on increased exports of defense technology to new and emerging markets. We had industry 

and DOD panels addressing a variety of defense export-related topics, with a healthy exchange of perspectives. We took stock of the 

many reforms undertaken, including the administration’s Export 

Control Reform Initiative, improvement to the foreign military 

sales process, DOD participation in many international trade 

shows, and thinking about exportability capabilities to partners 

and allies from the start. 

Again, thank you for the opportunity to share our technology security and foreign disclosure-related process improvements with 

you today. I look forward to additional questions from the committee. Thank you. 

[The prepared statement of Ms. McCormick can be found in the 

Appendix on page 61.] 

Mrs. HARTZLER. Thank you, Ms. McCormick. 

General Rixey, I would like to start asking questions of you. You 

said in your testimony that your written statement will provide 

more information on the different initiatives, over 40 initiatives, 

that you shared with us two hearings ago, the list here of all these 

initiatives. 

Admiral RIXEY. Yes. 

Mrs. HARTZLER. And I was very much looking forward to you 

coming and sharing details about some of these—— 

Admiral RIXEY. Sure. 

Mrs. HARTZLER [continuing]. But in your written—in your oral 

testimony, you just mentioned a couple of them and you said to 

look at the written testimony. We did not receive this till 8:30 last 

night. I was at that time reading Ms. Grady and Ms. McCormick’s 

testimony, which didn’t arrive 48 hours, either, before. 

Do you realize there is a requirement that the testimony be here 

48 hours before, and how come you didn’t meet that deadline? 

Admiral RIXEY. Yes, ma’am, I do realize. And I apologize. I wanted to make sure that my chop went through the interagency prop-
9 

erly. And I admit that it was my fault and I should have had it 

to you sooner. 

Mrs. HARTZLER. So there is no way that I have had a chance to 

read this and nobody else on this committee has, so can you outline 

some of the things in the written testimony, some of the initiatives 

that you are doing to help speed up the process? 

Admiral RIXEY. Yes, ma’am. 

Mrs. HARTZLER. Thank you. 

Admiral RIXEY. I will talk about three or four specifically that I 

think are critically important. The first is we are working very 

closely with the services to ensure that we have adequate manpower to execute our programs. As I have shown earlier, it is a system of systems that has many artisans involved with ensuring that 

we get a good requirement from our customer, that we are able to 

process the case in a timely manner, that we are able to do the 

technology review, we can do the foreign policy review, and then, 

finally, to ensure that we have enough artisans to get the acquisition process moving forward. 

We want to ensure that the services realize that it is in a critical 

mission area and that they support staffing of these key positions, 

as well as we are working with the services and the comptrollers 

to find a way to fund these personnel with nonappropriated funds 

to ensure that we can meet the demands of a very robust FMS system. So that is the very first initiative, is to ensure that we have 

adequate manpower to execute these programs. 

Mrs. HARTZLER. Can I stop you just a second? 

Now, in Ms. Grady’s testimony, you say you have oversight of 

over 30,000. 

Ms. GRADY. I am sorry. To clarify, the 30,000 that I have—— 

Mrs. HARTZLER. You want to—— 

Ms. GRADY. Good point. Thank you. Sorry. 

The 30,000 that I highlighted I have personal oversight of is the 

contracting professionals. The acquisition workforce writ large is 

just over 150,000, about 153,000 to 156,000. 

Mrs. HARTZLER. So how many of those, Admiral Rixey, are you 

speaking of that you are making sure you have adequate manpower of? 

Admiral RIXEY. Well, we fund—overall, the whole system, I fund 

about 10,000. And I would—I would say roughly about 7,000 of the 

majority of those are in the acquisition community. So—— 

Mrs. HARTZLER. Do you feel like you need to hire more to meet 

the needs? 

Admiral RIXEY. I do believe that we will, if the demand continues. And there are three items that our international partners 

tend to purchase. If they purchase an item that is from our program of record or something that we are already developing, I can 

leverage, for the most part, the program offices that exist for those 

types of equipment. For example, the F–18 Hornet. I would go to 

the F–18 program office and say—and they actually have a contingent that do international sales, and we can facilitate that. 

Sometimes our international partners want to buy an item from 

us, but they want to add capability that is unique to their country. 

Well, then I have to go to the same program office and ask them 

for engineers and technicians to help me understand how we are 
10 

going to integrate these capabilities in, and that is usually supported very well. 

Where we run into some difficulties is when a country asks us 

for nonprogram of record-type procurements, for example, a patrol 

boat that is not in our inventory. Then I have to go find—there is 

no program office. We have to establish a program office. And that 

sometimes is a challenge finding those artisans, because we are always running up against manpower constraints or caps in manpower. 

The way we fund our personnel right now is through reimbursable accounts, which at this point count against their caps. We are 

working with the comptrollers to figure out how to pay direct site 

and establish these types of program offices and this type of support without counting against the service’s manpower. And that is 

one of the initiatives that we are working on, is to be able to both 

expand and contract with sales. 

Mrs. HARTZLER. To have the flexibility. 

Admiral RIXEY. Have the flexibility, yes, ma’am. 

Mrs. HARTZLER. So how many people are you planning on hiring 

in the next 6 months to help meet—— 

Admiral RIXEY. In the next 6 months? 

Mrs. HARTZLER. Uh-huh. 

Admiral RIXEY. I think we have a lot of work to do in determining—understanding anticipated demand, and I still have to go 

through the mechanisms of how to hire. So not many in the next 

6 months. I will be able to project, over the life of these cases, what 

we think we are going to need in terms of as contracts start to become required for case execution. In the 6 months, I don’t have 

enough time right now to change the policies. 

Mrs. HARTZLER. Okay. So the adequate workforce is one of the 

things that you are trying to get ahold of and—— 

Admiral RIXEY. Yes. 

Mrs. HARTZLER [continuing]. Figure out manning. 

Admiral RIXEY. Yes. 

Mrs. HARTZLER. Why don’t you go ahead and give another example? Then we will go to the questions of other—— 

Admiral RIXEY. So the next one, I think, is probably the most important and it is within our control, is we need to certify and train 

our Security Cooperation workforce almost in the same manner 

that we did a couple decades back with the acquisition community. 

Right now Security Cooperation, I would say, is basically an ad 

hoc operation. We do train our folks, we send them to school at 

Wright-Patterson called DISAM [Defense Institute of Security Assistance Management]. I would say that that would probably be 

like a level one certification. We need to expand upon that. We 

need to make sure that the 800-plus Security Cooperation officers 

that I am responsible for in the embassies down in these particular 

countries are fully trained. And in some of these countries, we may 

need a level of certification above an entry level certification. 

So we need to professionalize the Security Cooperation workforce, 

from the Security Cooperation and also within the services, and we 

also need to reach out to the acquisition community—which I think 

you will explain—Claire will explain how we are training our acquisition professionals to be savvy in acquisition for foreign part-
11 

ners. And so this is what I think we need to embark on and is very 

important. 

Mrs. HARTZLER. I was going to go, but since you mentioned Ms. 

Grady, there is something in her testimony—which I very much enjoyed your testimony. It was getting right at the heart of the 

changes that you are making to try to address and expedite FMSes. 

So I very much appreciate that. 

But you mentioned that there is now an international acquisition 

billeting that you are doing to train people in this specific area. 

Can you expound on that and tell how many people, how many billets you have that deals just with foreign military sales? 

Ms. GRADY. Absolutely. And, first of all, as part of our standard 

acquisition training, we apply the same processes to foreign military sales as we do to U.S. So one of the important elements of that 

training is addressing foreign military sales early in all of our acquisition training so that when our program managers are embarking on a new program, they are considering the full spectrum of potential requirements, including partner or allied sales in the future 

when they are standing up programs. 

So we want people to have, acquisition professionals to have 

awareness of the full scope of the acquisition responsibilities they 

have, including the foreign military sales. 

In addition to what is included as part of the standard certification training for functional communities, we also have subspecialties in international acquisition where we have identified positions that are predominantly or have a need to have greater 

knowledge of the international acquisition. We—that as a subspecialty emerged in 2007 exclusively for program managers. It 

wasn’t until 2014 that we looked and said, it is much broader than 

just the program manager who needs awareness associated with 

that. 

We have put through about 7,500 students in training, and we 

have recently put a lot of emphasis on two foundational courses, 

Acquisition 120 and Acquisition 130. Acquisition 120 deals predominantly with the Security Cooperation enterprise and what the 

acquisition role is in that. Acquisition 130 focuses on technical 

rights and disclosure of technology. And we have had about 6,000 

people take those courses just since they have stood up in 2014. 

So it has been an area of emphasis. And when we look at our 

acquisition workforce and our planning for the future, we look not 

just for the U.S. requirements, but the total capabilities that we 

need to deliver and make sure that we are working with the service acquisition executives to forecast their workforce needs for the 

full body of work we are going to ask them to perform. 

Mrs. HARTZLER. It sounds like it certainly makes a lot of sense 

to me that you would train people and give them the specialty 

background that they need to deal with that. 

Okay. Ranking Member Speier. 

Ms. SPEIER. Thank you, Madam Chair. And thank you again to 

the witnesses for your testimony. 

Vice Admiral Rixey, when you refer to non-program-of-record 

cases, you are talking about designer products, are you not, for specific countries? 

Admiral RIXEY. Yes, ma’am. They will be unique. 
12 

Ms. SPEIER. So, I mean, I think it is really important for us to 

appreciate that when a country comes to us and says, ‘‘We don’t 

want something off the shelf. We want you to build us something 

special,’’ that is a designer product, that is a one of a kind. And, 

frankly, they should pay for that and they should pay, in my view, 

the R&D [research and development] for that as well, because we 

are building them something unique. 

Now, let’s get to the crux of this. How many cases do you have 

in any given year—— 

Admiral RIXEY. Well, in fiscal year 2015—— 

Ms. SPEIER [continuing]. In sales? 

Admiral RIXEY [continuing]. We had 1,774. 

Ms. SPEIER. Okay. 1,774 sales that actually went through the 

process? 

Admiral RIXEY. That were implemented. Cases that were implemented. 

Ms. SPEIER. And how many of those were for weapons? 

Admiral RIXEY. I would say roughly—we broke that out, and the 

rough order of magnitude is about 75 percent goes to end items and 

25 percent to things like training and services. 

Ms. SPEIER. So 75 percent of all of those were for weapons systems? 

Admiral RIXEY. Yes. 

Ms. SPEIER. If you were to chart that year to year, how would 

that compare? 

Admiral RIXEY. I will have to take that for the record, but if I 

were to guess, that would be consistent, but—— 

[The information referred to can be found in the Appendix on 

page 71.] 

Ms. SPEIER. Do you expect sales to increase? 

Admiral RIXEY. I expect sales to be steady this year to match 

what we did in 2016—or 2015. 

Ms. SPEIER. Okay. There has been a lot of talk in this committee 

about lost sales. And the witnesses that testified last week, I specifically asked them, give me some examples, and they were hard 

pressed to do it. 

Could you tell us, how many sales have we lost because of the 

slowness of the process? 

Admiral RIXEY. I cannot. I would have to take that back for the 

record as well. There has been—industry has told me that they 

have lost sales, but I don’t have any proof, and so I will have to 

go back and do more research on that. 

I know that the fact that we do get delayed in certain items, the 

international partners do convey to me that they will look elsewhere for products. But I will have to take that question back for 

the record to get you an exact answer. 

[The information referred to can be found in the Appendix on 

page 71.] 

Ms. SPEIER. But when all is said and done, if they want an F– 

16, they are probably not going to go somewhere else to get it. 

Admiral RIXEY. Well, they can. They can go to the French, they 

can go for a Mirage, they can go to Saab, and occasionally they do, 

but that is not the—they don’t tell me the reason. It could be for 

their competitive advantage within their country, and so—they can 
13 

go to other places. There are other opportunities to buy generation 

4, generation 4.5 fighters from other countries. 

Ms. SPEIER. But if they are allies of ours, do we—is that a bad 

thing? 

Admiral RIXEY. Not necessarily. If it is a NATO-compliant solution and it is interoperable, it is a capability. And, again, the business of DSCA is to provide capability. And if they find that 

through, like I said, a NATO-compliant solution, that is a capability. 

What we strive for in foreign military sales is building our partnership capacity and interoperability. That is what we—that is 

what our mission statement is for. And the reason we encourage 

foreign military sales is that we are involved with the contracting, 

we can design the contract itself and the specifications, and to ensure maximum interoperability. That is an extension of our warfighting capability if they are interoperable. And—— 

Ms. SPEIER. So where does the slowness start to be seen? Where 

is the logjam? 

Admiral RIXEY. Ma’am, we have actually tried to look at that in 

terms of—I built a Gantt chart that shows from, again, when the 

customer makes a requirement down through all the different 

lanes that have to—we have to go through, where we have to discuss a mutual benefit, is it a technology transfer issue, is it a foreign policy concern, and is it available in our acquisition community? 

We are seeing holdups throughout various places, whether it is 

foreign policy review or going from once we have approval to contract award. It is everywhere. And it is a complex system of systems. I would like to think that the front end of it, where we have 

that deliberate conversation, goes at a pace that is required to 

make sure that we have a deliberative conversation. 

Ms. SPEIER. Well, in a private conversation that I had with you 

yesterday, you seemed to indicate to me that the delays start to 

occur in the foreign policy area when the purchaser is unwilling to 

sign the agreements relative to retaining the technology and not 

sharing it with third parties that are not our friends. 

Admiral RIXEY. I would argue that of the 1,774 cases that we 

had go through the system, the ones that gain a lot of attention 

are those very few high profile cases that are hung up in policy review. And for the most part, most of what we have goes through 

the system relatively quickly. 

Some of these major defense articles that get these headlines, the 

few happen to have huge production lines and have huge workforces depend on the sales of these end items. But when I look at 

the system as a whole writ large, I think fundamentally we get 

through the system quickly. 

I am worried and concerned about, with $47 billion of sales this 

year and matching next year, the sheer number of contracts going 

through our acquisition community could cause the major delay. 

And I think if you ask industry where they focus, their concerns 

are, is getting to contractor award once we have had approval, and 

we are working very hard on these things. And I think Claire will 

talk about some of the initiatives that are in place. 
14 

The foreign policy issue that I see really are on high profile cases 

and really not that many when you look at the 1,774 cases that we 

push through. So—and why are they hung up? Well, things tend 

to get hung up when some of the countries don’t sign security 

agreements with us. So when we come to technology transfer and 

technology review, we pause on whether or not we are going to provide that capability from a technology transfer perspective. 

Ms. SPEIER. Okay. On the issues of research and development, 

historically we were reimbursed for the research and development 

that we have provided for all these complicated weapons systems. 

You had indicated to me that if we were to receive the R&D licensing fee, so to speak, we would be talking about, I think the figure 

you said was over $800 billion a year. 

Admiral RIXEY. Yes. 

Ms. SPEIER. So when did we stop receiving those funds? What 

year was it? 

Admiral RIXEY. I don’t know the exact date. I understand it was 

in the 1990s. I know that just—I—when it comes to waiving nonrecurring—or nonrecurring costs, I execute that in accordance with 

the Arms Export Control Act. That authority has been delegated 

from the President down to the Secretary of Defense and down to 

me. 

Ms. SPEIER. Well, at one point, as I understand it, there was an 

amendment to just get rid of the R&D—— 

Admiral RIXEY. Yes. 

Ms. SPEIER [continuing]. Reimbursement, and Congress said, no, 

that what we will give you instead is a waiver. 

Admiral RIXEY. Is a waiver. 

Ms. SPEIER. But as I understand it from you, you have waived 

every single request. 

Admiral RIXEY. Almost every single. There has been one or two 

exceptions, but for the most part, yes. And the criteria that we use 

is—so in the last 31⁄2 years, we waived for not—for NATO standards. So a NATO country, Australia, New Zealand, and a few others, we waived; 38 percent of the waives associated with that. 

The other two reasons that we are authorized to waive is there 

is a likely loss of a sale, or if there is economies of scale to be 

gained by selling, for example, more jets on a line, incorporating it 

into our contract, our unit costs come significantly down, then we 

won’t—— 

Ms. SPEIER. But, Vice Admiral, those three potential reasons to 

do it basically cover the waterfront, right? 

Admiral RIXEY. Yes, they do. 

Ms. SPEIER. You can basically make that argument for everything, and that is what you’ve done. 

Admiral RIXEY. Yes, ma’am. 

Ms. SPEIER. So we have received, the taxpayers have received 

zero, basically zero back for all the R&D that we invest in these 

various weapons systems. 

Now, the F–35, as I understand it, can only be purchased 

through FMS. Is that correct? 

Admiral RIXEY. That is not correct. We have—we have FMS customers as well. 

Ms. SPEIER. No. 
15 

Admiral RIXEY. Of the F–35. 

Ms. SPEIER. From direct military sales? I thought—— 

Admiral RIXEY. Oh. Oh, only through FMS. I am sorry. I was 

confused whether it is a cooperative program, and we have FMS 

customers. You are absolutely correct. 

Ms. SPEIER. So in that kind of situation, they are not buying it 

from anyone else. 

Admiral RIXEY. Yes, ma’am. 

Ms. SPEIER. They want that particular weapon. And why 

wouldn’t we recoup the R&D that we have invested in that particular weapons system? 

Admiral RIXEY. Well, again, I apply the logic of likely loss of—— 

Ms. SPEIER. Well, but you are not going to lose it because they 

are not going to get it through direct military sales, and they specifically want that airplane and not someone else’s airplane. 

Admiral RIXEY. Not in all cases. They can—they have alternatives. There are other generation 4, 4.5 fighters that they can go 

to if they find it too costly. And so, again, I apply the waiver criteria that has been provided. 

Ms. SPEIER. Okay. I am just going to say for the record, Madam 

Chair, we are talking about taxpayer money. And historically the 

R&D was recouped. It has morphed into a situation where it is 

waived unilaterally and ubiquitously, and the result is the taxpayer is just fronting this R&D money without any benefit. And we 

wouldn’t expect that from a license that a university was providing 

to a pharmaceutical company. They get recoupment. And I think 

the Federal taxpayer should get recoupment as well. 

With that, I yield back. 

Mrs. HARTZLER. Thank you. 

Representative Scott. 

Mr. SCOTT. Thank you, Madam Chair. 

Admiral, you mentioned patrol boats. And just as an example, a 

country like Australia, if they wanted to buy a patrol boat from a 

U.S. company, would they have to go through the foreign military 

sales? 

Admiral RIXEY. No, sir. They could go direct commercial. 

Mr. SCOTT. Because they are a NATO ally? 

Admiral RIXEY. I think when we look at the technology, we 

would do an evaluation based on technology. But a patrol craft, if 

it didn’t have any sensitive technologies that were of concern for 

our technology release, they could go direct commercial sale. 

Mr. SCOTT. Okay. So it is really—it is not the vessel; it is the 

weapons systems and the technology that is on the vessel where 

foreign military sales comes in? 

Admiral RIXEY. There are two reasons. If we designated—and 

Ms. McCormick can talk about it. If it is designated as FMS only, 

then it has to go through the FMS system. There are some countries that don’t have mature enough procurement officials to buy 

anything, and they come to us to purchase it for them. 

Mr. SCOTT. Okay. Well, that answers one question. There are 

smaller countries who don’t have the ability to do this, to negotiate 

the contracts for themselves is one of the reasons they would come 

through foreign military sales. 

Admiral RIXEY. Yes, sir. 
16 

Mr. SCOTT. But a country like Australia, who is a friend, if they 

want to buy a patrol craft, they can just negotiate directly with 

U.S. manufacturers. And if there are any questions about the technology or the weapons systems that might be on that patrol craft, 

then they would get either a waiver from foreign military sales 

or—— 

Admiral RIXEY. Well, we would—what we would do is we would 

call it a hybrid. They could buy 95 percent of it via direct commercial sale and then maybe, for example, if it is a system that is so 

classified for even Australia, we would deem that FMS, and that 

piece would be—just that piece would be FMS and then it would 

be provided to the vendor. 

Mr. SCOTT. Okay. So of the thousands of contracts that you have, 

if you broke them down by the dollar volume, is it 10 percent of 

the contracts that would make up 90 percent of the dollar volume? 

Do we have a—— 

Admiral RIXEY. Oh. 

Mr. SCOTT. Are there several supersized contracts that make up 

the vast majority of the volume—— 

Admiral RIXEY. There are some supersized cases that make up 

the majority of the volume. And I can—if you want to in a closed 

session, I could walk you through the specific countries and those 

contracts themselves. 

Mr. SCOTT. Well, certainly, to me, if we can simplify the process, 

I think that would be better for everybody. It would be better for 

the three of you and it would be better for the industry that is trying to sell the weapons and it would be better for the consumer as 

well. And so some of the stuff that is not sensitive, getting it out 

of the backlog sooner rather than later, I think probably helps 

everybody. 

But for all of you, and I hope you will be specific with this, if 

there are any Federal acquisition regulations or statutory policy requirements that could be altered or eliminated, what would make 

DOD’s force of the FMS program more efficient or effective? And 

just pick one thing, if you would. What is the one thing you would 

do you if could—if you had control that would make the system better? 

Admiral RIXEY. Well, I would support DASD [Deputy Assistant 

Secretary of Defense for] Security Cooperation’s initiative consolidating some of these title 10 authorities down to be a little bit 

more flexible than they are. And so we do also run title 10 authorities through the FMS system, and they come with some restrictions, like time, region, and there is about 20 authorities. So anything we can do to streamline those title 10 authorities, I think, 

would be—would help alleviate a lot of the strain on our contracting commands because of the restrictions associated with 

them, and that is to support that initiative. 

Ms. GRADY. From an acquisition and procurement perspective, 

we largely follow the identical regulations for both foreign military 

sales and U.S. sales. There is maybe less than five pages of unique 

requirements associated with foreign military sales in our procurement and acquisition regulations. 

Most recently, though, last year in the National Defense Authorization Act, we got specific guidance—or authority from the Hill 
17 

relative to treatment of offset costs, and that has been one of the 

areas that has historically slowed us down significantly from foreign military sales. We are in the process of implementing that 

from a regulation perspective, and that should expedite the contracting process. 

It is one of the unique aspects of a foreign military sale that 

would not have been—that is not applicable to U.S., which because 

it is foreign, it is different and, therefore, it takes some time—or 

added time to the process. The treatment of indirect offset costs 

that we got the authorization for last year will help us in terms of 

speeding up our timeline. 

Mr. SCOTT. All right. I am down to 10 seconds, so hurry. Please. 

Ms. MCCORMICK. Congressman, I don’t really have any specifics, 

because I think the role in my process is one that has to be a fairly 

deliberate one, and so it takes some time to make the decisions 

that we need to make. But I would echo Admiral Rixey’s comments 

that some of the authorities that we have under title 10 should be 

looked at and streamlined. 

Mr. SCOTT. Thank you. 

Mrs. HARTZLER. Thank you. 

Ms. Graham. 

Ms. GRAHAM. Thank you, Madam Chairwoman. And thank you 

all for being here today. 

Admiral, following up on Congressman Scott’s question, so there 

are FMS contracts and there are commercial contracts. Do we keep 

track of those that are getting FMS contracts, what they are doing 

commercially as well? 

Admiral RIXEY. Yes. And that is the State Department program. 

So we handle FMS; and then the license requirements, they go 

through State. And State manages and tracks the direct commercial sales. 

Ms. GRAHAM. Is there somewhere where you can go where you 

can see what foreign governments have in terms of commercial contracts as well? 

Admiral RIXEY. Well, I would defer that to State, but we track, 

obviously, the FMS cases that come through DSCA. 

Ms. GRAHAM. So they do have a tracking system where they keep 

track of that? 

Admiral RIXEY. Yeah, definitely. 

Ms. MCCORMICK. Maybe I could—maybe I could—— 

Ms. GRAHAM. Okay. 

Ms. MCCORMICK [continuing]. Handle the question, since I get— 

my agency actually is in a situation that we get the licenses referred to us by the Department of State. 

So in this particular case, under the title 22 authorities of the 

State Department, the Directorate of Defense Trade Controls actually receives license authorizations from our industry directly to 

sell basically some of the same products through the direct commercial sale process. And the State Department Bureau of Political-Military Affairs also oversees the foreign military sales process. 

So all of defense trade is under their authorities and under the 

title 22. 
18 

So—but my agency actually gets to review those direct commercial sale licenses. So we provide that technology security input into 

the Department of State on those matters as well. 

Ms. GRAHAM. And how is a decision made if—I am assuming we 

have countries that have both commercial and FMS contracts. How 

is the decision made whether it is required FMS or whether it can 

be done commercially? 

Ms. MCCORMICK. I will go ahead and take that one again. 

The decision basically is really a choice by the recipient country, 

unless we have made a decision between the Department of Defense and the Department of State that a particular item must go 

through the foreign military sales process. And that decision is normally made, what we were just answering Congressman Scott’s 

question, it is normally because that technology is so sensitive that 

we want to put in place the various agreements between ourselves 

and the other government for the protection of that technology. 

Otherwise, it is really driven by the international partner, the 

international customer’s decision. 

Ms. SPEIER. Will the gentlelady yield? 

Ms. GRAHAM. Absolutely. 

Ms. SPEIER. Isn’t it also, the difference is with direct military 

sales, you don’t have the support provided in terms of maintenance? Isn’t that the distinction between the two? 

Admiral RIXEY. It is not that it’s not provided. It is that we 

aren’t ensuring that it is provided. So if the partner nation is, like, 

Australia, who wants to go direct commercial sale, they are strong 

enough and capable enough that they are going to build in a logistic support plan and they have the absorption capability. So that 

is dependent upon the nation that is procuring. 

So going direct commercial sale doesn’t mean they are not going 

to get the logistic support or the—or will they be able to absorb it. 

When they go foreign military sales, we ensure full-spectrum capability, so we will deliver the end product, 2 years of initial support, we will encourage them to have a follow-on technical support 

case so that it is being supported properly, and we ensure that they 

can absorb it through our conversations with the COCOMs [combatant commands] and our country teams. 

So the difference between a foreign military sale and a direct 

commercial sale is we feel it is necessary, again, as the mission of 

Defense Security Cooperation, to deliver full-spectrum capability. 

And so we have to have very candid conversations, deliberate conversations, which also slow down the process, to assure that they 

get the product, they have the support, and they can absorb it. 

DCS [direct commercial sale] is between the country and the contractor. We have no idea about the configuration, we have no idea 

about supportability. The times that we recommend DCS is when 

the technology is mature and the procuring officials are mature. 

Any time you deviate from that, they are setting themselves up for 

a nonsupportable system. 

Ms. SPEIER. I thank the gentlelady for yielding. 

Ms. GRAHAM. Of course. Thank you. 

In the two processes, is there—if a country—is there an advantage in terms of timing or challenges that the countries face to 

choose one over the other, other than what Congresswoman Speier 
19 

just pointed out, that one has more of a support system attached 

to it than the other? 

Admiral RIXEY. Well, I will tell you what I am told is the advantage of going direct commercial sales. First of all, they can go direct 

to the international—or they can go direct to the vendor. In their 

minds, they think they are saving on the 3.5 percent administrative fee that we charge them to manage these cases. However, they 

are still going to go through the technology review. They are not 

going to skip that. There is this thought out there that they won’t 

have to go through the technology review process. They do. But in 

terms of going direct to the vendor, they can negotiate their fee, 

they can negotiate the contract. 

An FMS case, when they come to us, we go through our entire 

processes to get there. And I think they are necessary processes. 

Because sometimes some of these countries that don’t have mature 

contracting offices get themselves into bad contracting vehicles or— 

and so we are providing a service and we are charging for a service. We also make sure, in our terms and conditions of a foreign 

military sale, that they can’t do third-party transfers and that they 

are subject to our end-use monitoring processes. 

So they think that when they go direct, they are skipping this. 

They are not. And they are also putting themselves at risk of dealing with our industry. 

Now, again, when they have very mature contracting offices, that 

is not a problem. 

Ms. GRAHAM. We sell F–35s to international—— 

Admiral RIXEY. Correct. 

Ms. GRAHAM [continuing]. Obviously. Would that be considered 

something—that goes through FMS every time? 

Admiral RIXEY. That does. 

Ms. GRAHAM. Okay. 

Admiral RIXEY. And I would highly recommend a major end 

item, especially that is involved with still completing its phases of 

development, to go foreign military sales. It is a huge risk if they 

do otherwise. 

Ms. GRAHAM. Okay. Thank you. 

I yield back, Madam Chairwoman. 

Mrs. HARTZLER. Thank you. 

Madam Bordallo. 

Ms. BORDALLO. Thank you, Madam Chairman. 

Admiral Rixey, I think many of us see the FMS process as integral to our Asia-Pacific rebalance strategy in terms of reassuring 

allies and partners, as well as building capacity in that region. 

Now, in recent years, we have made progress with regard to South 

Korea, and I am hopeful that efforts will continue to streamline 

sales to our partners in the South China Sea. 

You touched very briefly on this in your testimony, but to what 

extent is DSCA, in coordination with the Department of State, 

working to prioritize FMS, particularly related to maritime capabilities for countries in the Asia-Pacific region? 

Admiral RIXEY. Well, yes, ma’am. We work very closely with our 

combatant commanders, with OSD Policy, and with State to ensure 

that we understand our priorities writ large. I think once you understand that FMS, I told you, is a burdened process. We have to 
20 

have some mechanism for prioritizing this finite workforce. We actually reorganized at DSCA along regional lines, and so I now have 

an integrated regional team lead at DSCA that has a relationship 

with the combatant command and the specific SCO [Security Cooperation Officer] that does foreign—does security cooperation, has 

a relationship with OSD Policy to ensure that we are, in fact, executing those priorities. And those folks in the Pacific are very much 

tied in to these initiatives that you are talking about. 

Ms. BORDALLO. Very good. Now, from the DSCA perspective, 

what tools can Congress provide to enhance and facilitate internal 

as well as external processes with regards to the South China Sea 

FMS? Is there anything that—— 

Admiral RIXEY. I can’t think of anything on hand, but let me 

take that back for the record, I will get you a response. 

[The information referred to can be found in the Appendix on 

page 71.] 

Ms. BORDALLO. Okay. And though this hearing isn’t an evaluation of the Excess Defense Articles or Foreign Military Financing 

programs, they do fall under a similar purview. And I welcome any 

additional relevant comments that you may have. 

Admiral RIXEY. Yes, ma’am. Again, I will follow up, take that for 

the record, and provide that for you. 

[The information referred to can be found in the Appendix on 

page 71.] 

Ms. BORDALLO. Very good. 

Admiral RIXEY. But we are executing those programs as diligently as possible so—— 

Ms. BORDALLO. Well, I am pleased to hear that. 

Admiral RIXEY. Yes, ma’am. 

Ms. BORDALLO. And I yield back, Madam Chair. 

Mrs. HARTZLER. Thank you very much. 

Vice Admiral Rixey, I have had a chance to look just briefly at 

your testimony as others have been talking here. You say I will not 

address each of the initiatives that you outlined, but you do cover 

a few of them. I was wondering if you and your office could take 

each one of these and write a summary of what you are doing in 

each of these initiative areas for us. That would be very helpful. 

Admiral RIXEY. Yes, ma’am. We will forward you the—we actually have built PowerPoint quad charts that talk about those specifically, and I have them and I will provide those to you. 

[The information referred to can be found in the Appendix on 

page 71.] 

Mrs. HARTZLER. Great. Well, we appreciate your efforts there. 

Ms. Grady, last week at our hearing with the industry, they indicated and were talking about how when a project comes through, 

it is mixed together with a domestic sale project at the same time 

and sometimes might be put on the back burner until the domestic 

program goes through first. 

And I was just wondering, so how are acquisition programs 

prioritized within the DOD for interagency acquisition programs 

and FMS case acquisition programs? 

Ms. GRADY. Certainly. We look collectively at our total requirements, both U.S. and foreign allies, and coalition partners. And 

when I say ‘‘we,’’ that begins at the highest levels. We have war-
21 

fighter senior integration groups where you look at emerging needs 

from COCOMs and from the Joint Staff, working in conjunction 

with Acquisition, Technology and Logistics, Admiral Rixey’s staff in 

DSCA, DTSA, as well as all the implementing agencies to ensure 

we have visibility on the highest priority needs across the Department. 

Those obviously, particularly where you impact warfighter, are 

going to get the highest priority across the Department from an acquisition perspective. When you come to more routine recapitalization, that is balanced as part of a total workload of a particular implementing agency. And when we do forecast our requirements, we 

forecast both what we need for U.S. and what we need for FMS, 

and make sure that we track and—we track and get the management attention across the board, including looking at acquisition 

milestones to make sure we continue to progress. 

Wherever possible, we combine U.S. and foreign military requirements. That is where we find the greatest efficiencies so we can 

put everything on one contract. Budget cycles or needs don’t always 

align that way, in which case then we would enter into a separate 

procurement action associated with that. But, again, using the 

same program office to the greatest extent possible so you have the 

sustaining engineering benefits, as well as production efficiencies, 

as well as management of the vendor’s efforts. 

So we look at it as a collective workload management perspective. And in some cases, a U.S. requirement will be a higher priority; in some cases, an FMS requirement will be a higher priority. 

That is coming from the customers, and we make sure that is reflected in how we execute the workload. 

Mrs. HARTZLER. Great. Thank you. 

Ms. McCormick, so to put this question in context, industry expressed frustration to the subcommittee last week in their testimony that they would—kind of generalities—say, show up to DOD 

with, say, a certain rock and DOD would, in turn, tell them to 

bring us a different rock without providing much detail on why the 

first rock wasn’t sufficient. And it related to understanding technology, exportability, and configuration management of end items. 

So, therefore, what processes do you use to collaborate with the 

defense industry to provide predictability and policy guidance 

about which U.S. defense technologies are exportable and which 

are not? 

Ms. MCCORMICK. Well, thank you, Chairwoman. That is interesting that they say that because, actually, they bring me a lot of 

rocks and I help to shape the rocks that they bring us usually. I 

do it really through a couple of different ways. The first thing is, 

I have a very open-door policy with industry where I actually encourage industry to come in and talk to us, actually, even before 

they submit their export licenses. We also do deep-dive sessions. In 

fact, Admiral Rixey and I just did one a couple of weeks ago with 

one of the major defense companies where we spent over 3 hours 

talking about all of their international projects. 

In fact, I really encourage companies now, particularly as companies are increasing the amount or looking to increase their international sales and, particularly, doing sales in countries, perhaps, 

where we don’t have a lot of experience, don’t have a lot of track 
22 

record, to come in and really share with us, you know, their plans. 

And that gives us a great opportunity, I believe, to talk about sort 

of what is the art of the possible and to give them a clear sense 

of it. 

The final area, I think, that has been very helpful in this regard 

to clarify sort of what is in the art of the possible has been the significant changes that we have made as part of the administration’s 

Export Control Reform Initiative where we have gone through a 

comprehensive review of our export control regulations, both the 

Commerce Department’s and the Department of State. My agency 

has played a very key role in the technical review of those regulations in actually determining what type of technology we believe 

should stay in the jurisdiction of the Department of State. 

And we have moved a variety of items, many items, actually, 

over from the Department of State over to the Department of Commerce, including items, to be honest with you, that are military 

items. And now they are over in the Commerce’s jurisdiction and 

they are allowed to go to our friends and allies more easily, in fact, 

in a very—oftentimes, without any additional authorization by the 

United States Government. 

So I think those bright-line exercises we have done as part of export control where we have published those regulations and industry has had a chance to comment on them, I think through all of 

those vehicles they have a very good opportunity to know exactly 

where the sensitive technologies are and what type of technology 

they would be able to sell internationally. 

Mrs. HARTZLER. Okay, good. Do you believe that the Department 

is sufficiently staffed with the necessary skills to adequately perform end-use monitoring and enhanced end-use monitoring activities for those U.S. technologies that are exported to foreign customers? 

Ms. MCCORMICK. I will tell you what I am going to do, I am 

going to leave the staffing answer to Admiral Rixey, but I will give 

you my piece of the puzzle. So what my agency is very much involved in is working with Admiral Rixey, as well as the Department of State, to determine what types of technology, first off, as 

we have talked previously, need to go through that FMS process 

and which technology needs to have certain levels of either end-use 

monitoring or enhanced end-use monitoring. 

And so a lot of that is driven by that technology level. So I am— 

my staff and I are very involved in actually setting the determination of the frequency with which that end-use monitoring needs to 

be done. But in terms of the staffing level, I will leave that to Admiral Rixey since it is usually the workforce that he actually helps 

to fund that do that work. 

Mrs. HARTZLER. Okay. Thank you. 

Admiral RIXEY. Yes, ma’am. Well, first of all, staffing concerns 

with end-use monitoring is the same as staffing concerns with contracting and everything else. So as the foreign military sales increase, we will need to staff to meet that demand. I am responsible 

for the Golden Sentry program. That is for foreign military sale. 

The State is responsible for Blue Lantern. 

Under the Golden Sentry program, we have our staff that are in 

the embassies in each country, so we are working very closely with 
23 

the services to identify those needs. Also, how they are allocated, 

working with the Joint Staff and then how those folks are allocated. Again, we are going to have to look at staffing mechanisms 

that don’t count against manpower counts. And then I also have a 

team at DSCA that is responsible for assessing. We do assessment 

visits with each country to determine, are they managing their 

end-use monitoring programs carefully? 

With that assessment, we rate them, and if satisfactory, they can 

continue. We have rated some unsatisfactory when they are not 

meeting the requirements associated with that. And that is the 

team that I have that do those assessments and do those courtesy 

visits back at DSCA. We are staffed for that, but I will be concerned with the folks that we have in the embassies in terms of 

numbers if these sales continue to rise. 

Mrs. HARTZLER. Okay. Very good. 

Ms. Grady, in your testimony you talk a little bit about the different types of contracts, and that was also brought up last week 

with industry. And you make a case there for enabling the fixed 

price incentive to continue. And you say that you require a lot of 

customers of FMS to participate in this at times—let’s see. It says, 

‘‘Simply put, sufficient funding needs to be in place to ensure that 

the FMS customer pays the final bill, no more, no less.’’ And this 

is alluding to the 3.5 percent fee that is—— 

Ms. GRADY. Actually, ma’am, that was in reference to a point 

that industry had raised last week—— 

Mrs. HARTZLER. Right. 

Ms. GRADY [continuing]. About the length of time that we need 

to hold on to excess funds before we can close out the contract. So 

it was specifically to contract type, not to the fee that is payable 

for the FMS process. 

Mrs. HARTZLER. Yes. Right. We are talking about the same thing. 

Ms. GRADY. Okay. 

Mrs. HARTZLER. Let me get around to my question here. Because 

they did raise that concern that sometimes it could be 7 to 10 years 

that the money is held up by the country until the contract is completely filled. So I just wondered, has there been examples of a 

country not having enough money to pay their final bill, and when 

did that happen? 

Ms. GRADY. I am not aware of a specific example. We can go back 

and look associated with that. We monitor throughout the contract 

performance to ensure that there are adequate funds in the case 

to pay all of the costs associated with that. 

When we talk about cases versus contracts, cases are usually a 

compilation of support that we are providing to a particular country. And it is usually typically more than just one specific contract. 

So it is the broader package of support that we are delivering to 

that foreign government. 

So we monitor both the estimate up front of what we think it will 

cost to complete the contract and then we monitor contract performance throughout the entire life of the contract to ensure that 

we have adequate funds. 

In the event the funds are different than what we anticipated, 

we would either notify the customer that we are—through DSCA, 

that we have excess funds or notify them that we need to poten-
24 

tially amend the case to add additional funding associated with 

that. We track that throughout the process. That is part of the case 

management function, and we want to be as transparent and as 

timely as possible in terms of notifying them where we are relative 

to the expenditure of their money. 

Mrs. HARTZLER. Would you be supportive of allowing the country 

to choose which type of contract that they enter into? 

Ms. GRADY. So what is somewhat unique about the FMS process 

is the letter of offer and agreement is a contract between the country and DSCA. The contract that we are entering into itself is actually between the U.S. Government and U.S. industry. So while we 

are doing that on behalf of the FMS customer, they are not actually 

a party to the legal contract that we enter into. What we look at 

and we apply the same rigor and discipline associated with selection of contract type for our FMS customers as we do for our U.S. 

customers. 

In a mature production environment, it would be fairly typical to 

see a firm fixed price contract type. Where we have seen uses of 

fixed price incentive has been instances where when we look at 

what we negotiated versus what the actual costs incurred were and 

there was a significant variation. And when I say significant variation, we define that back in 2008 in our acquisition regulations as 

greater than 4 percent. 

So, basically, there is some factor that is driving uncertainty into 

the cost of performance that we didn’t account for when we negotiated with industry. Using a fixed price incentive contract allows 

for sharing between either the overrun or underrun associated with 

those excess or surplus funds to be shared between the customer, 

ultimately, the customer and industry. 

So our preference is to use firm fixed price, but only if we have 

cost certainty that allows us to fairly price those contracts. 

Mrs. HARTZLER. Got you. Thank you very much. 

I just have a couple more here for Ms. McCormick. Can you tell 

me anything about what internal benchmarks DTSA has in place 

to guide decision timelines, and how are DTSA and DSCA communicating decision timelines to our country’s partners to ensure that 

they are making the best decisions in their national security interests and not seeking goods/services from alternative sources, such 

as China or Russia? 

Ms. MCCORMICK. Thank you for that question. So the first one, 

as I alluded in my—I mentioned in my opening statement, and it 

is also in my written statement about the Arms Transfer and Technology Release Senior Steering Group that we use. I think this is 

a very good forum that we use really as a benchmark because that 

is a forum where we get the DOD stakeholders together and we 

identify priority release decisions that were working across the different processes. 

I also, every week, get together with my staff, and I am constantly looking at the timelines associated with our review of export licenses. Obviously, we do provide the technical input, particularly to the Department of State, on those direct commercial sale 

munitions licenses. And I certainly—we don’t have a statutory 

timeline in that case, but I try to move very quickly. I try to do 

that in sort of the 60-day timeframe. On the dual-use side with the 
25 

Commerce license, we actually have statutory requirements that 

we have to meet. Those licenses have to be reviewed in a 30-day 

period. 

And so I think through the last couple of years, the processes 

that we have used to really track this are really trying to, again, 

be anticipatory with these release decisions. And as I indicated in 

my testimony, to actually do that in release of—basically, before a 

country actually asks for that capability. 

Admiral Rixey and I also work very closely together where the 

whole issue of defense trade is a constant discussion point that we 

have with international partners. We both work for Under Secretary Christine Wormuth, the Under Secretary of Defense for Policy, and she has many bilateral dialogues with countries. And I can 

tell you that the defense trade portion, including foreign military 

sales, is always a key part of those dialogues. 

And so I think that keeps our feet to the fire where we are working very closely with those international partners and they realize 

that the capability—we want to provide that capability to them and 

we certainly want to do it in a timely manner and be a provider 

of choice. 

Mrs. HARTZLER. Very good. So given the constraints on the U.S. 

budgets and foreign military sales are increasingly important to ensuring that the U.S. defense companies are able to remain competitive and provide for a more robust industrial base. So how are 

DTSA and DSCA communicating with industry to ensure that they 

have visibility on expected timelines in order to plan and ensure 

that they meet critical FMS needs and what can we be doing better 

here? 

Admiral RIXEY. Well, ma’am, first of all, we have a very robust 

industry engagement. And I meet with them regularly, unilaterally—or bilaterally, sorry. And sometimes I meet with Ms. McCormick. She joins me, and we have discussions with our industry 

partners. 

I have an entire team called my weapons group that is really an 

ombudsman to our industry partners to have as much dialogue as 

they are willing to have on those particular cases. In addition to 

that, I sit with Mr. Kendall and when he meets with the significant 

primes of industry to discuss foreign military sales. So we have 

what I consider an extraordinarily robust industry engagement 

across all three fronts to make sure that we are managing their expectations. 

Mrs. HARTZLER. Great. All right. Looks like Ms. Speier had to 

leave, so I think we are done with the questions from our end. But 

I wanted to give each one of you an opportunity to make any closing statements or anything else you would like to share on this 

topic that you haven’t had a chance to cover yet. 

So Vice Admiral. 

Admiral RIXEY. Well, I would like to close by saying, first of all, 

thanks for this opportunity. I do want to emphasize that we are defending the foreign military sales system. We think it is—you 

know, the Arms Export Control Act and all it entails is critically 

important to ensure that it is, as a foreign policy too, we are doing 

it the right way. 
26 

An FMS case as opposed to direct commercial sale case really establishes a mil-to-mil relationship for 25 to 40 years. It is a very 

effective foreign policy tool, for building that relationship, for interoperability, for building out our capacity. And so, anyway, ma’am, 

thanks for the opportunity to speak today. 

Mrs. HARTZLER. You bet. Thank you. 

Ms. Grady. 

Ms. GRADY. Good morning. Thank you for the opportunity. And 

I think I have emphasized this repeatedly, but also I just wanted 

to make one more reiteration. One of the strengths of the acquisition system and our ability to support the foreign military sales 

agilely, when you have potentially large swings in customer requirements and don’t always have the ability to anticipate as well 

as we would like what those requirements are, keeping the processes as consistent as possible, and providing the full range of acquisition tools we have available are the best way we can support 

our foreign military sale customers. 

Mrs. HARTZLER. Great. 

Ms. GRADY. Thank you. 

Mrs. HARTZLER. Thank you. 

Ms. MCCORMICK. And I appreciated the opportunity to join this 

panel today. I was sort of a late add, I believe, last week, but I was 

very pleased to be asked because, obviously, it is very important. 

We do want to share advanced technology with international partners, but we also have to strike that balance to make sure that 

that technology is going to be used in the manner in which it 

should be used and for which we have authorized it. So I hope you 

have gotten the impression this morning, we have a great collaboration within the Department of Defense to work these issues, and 

we also have a very strong partnership with industry as well. So 

thank you. 

Mrs. HARTZLER. You bet. Well, thank you for all that you are 

doing for our country. This is a very important process, not only 

for our national security, but for our allies as well. And it is not 

an easy process. So I appreciate all of your efforts. Thank you for 

being here today. 

This hearing is now done. 

[Whereupon, at 11:15 a.m., the subcommittee was adjourned.] 
A P P E N D I X 

MAY 17, 2016 

PREPARED STATEMENTS SUBMITTED FOR THE RECORD 

MAY 17, 2016 

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DOCUMENTS SUBMITTED FOR THE RECORD 

MAY 17, 2016 

(67) 
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WITNESS RESPONSES TO QUESTIONS ASKED DURING 

THE HEARING 

MAY 17, 2016 

(71) 

RESPONSE TO QUESTION SUBMITTED BY MRS. HARTZLER 

Admiral RIXEY. These initiatives were developed with stakeholders across the enterprise and are led by different offices within the Department of Defense, as well 

as Department of State—as depicted by ‘‘lane owners’’ in the FMS System chart 

(slide 1). The initiatives are organized to align to the FMS System Grid chart (slide 

2) that segments the process into coordinates, major milestones/validation points of 

the process. The first group of initiatives, ‘‘Phase 0’’, are considered shaping, enterprise activities—that is, they affect multiple lanes and benefit the process in the 

broadest sense. Subsequent initiatives are focused on specific activities within the 

different lanes—whether the FMS case development process, the technology release 

and foreign disclosure review process, foreign policy oversight, or acquisition. Taken 

together, these initiatives endeavor to fundamentally and comprehensively improve 

the performance of the FMS enterprise. [See page 20.] 

[The slides referred to are retained in the subcommittee files and can be viewed 

upon request.] 

RESPONSES TO QUESTIONS SUBMITTED BY MS. SPEIER 

Admiral RIXEY. DSCA does not have any data points or documentation indicating 

numbers of FMS cases that might have been lost due to slowness (or perceived slowness) of the system. We noted in industry testimony on May 11 that the industry 

witnesses did not provide specific examples supporting this concern. If industry representatives do provide specific examples of FMS cases lost due to slowness in the 

FMS system, DSCA could research the specifics of the individual case(s) and perhaps provide more information. [See page 12.] 

Admiral RIXEY. This chart and graph include numbers of FMS cases newly implemented each year from Fiscal Year 2000–2015. [See page 12.] 

[The information referred to can be found in the Appendix on pages 67 and 68.] 

RESPONSES TO QUESTIONS SUBMITTED BY MS. BORDALLO 

Admiral RIXEY. At the Shangri-La Dialogue on May 30, 2015, Secretary Carter 

announced the Department of Defense’s (DOD) Southeast Asia Maritime Security 

Initiative (MSI), a comprehensive, multi-year effort that will reinforce our partners’ 

and allies’ maritime security efforts and address shared challenges. This initiative 

is made possible through a new authority focused on building partner capacity in 

the maritime domain—Section 1263 of the National Defense Authorization Act 

(NDAA) for Fiscal Year (FY) 2016. 

DOD is using MSI to provide training, equipment, supplies, and small-scale construction to eligible countries—the Philippines, Vietnam, Indonesia, Malaysia, and 

Thailand—in an effort to enhance their ability to ‘‘sense, share, and contribute’’ to 

maritime security and maritime domain awareness. 

To carry out the authority, DOD provided $50 million in funding for MSI in FY 

2016 and has requested an additional $60 million in FY 2017. The Department has 

also programmed an additional $315 million through FY 2020 for an initial total of 

$425 million over the duration of the existing authority. However, the lack of cross 

fiscal year authority in Section 1263 makes it more difficult for our planners and 

acquisition professionals to implement comprehensive programs that ensure we 

maximize the use of resources to deliver full and sustainable capability. 

For fiscal year 2017 and beyond, we recommend Section 1263 include provisions 

for cross-fiscal year authority and the achievement of full operational capability. 

Specifically, we would like to see the same language in NDAA Section 1263 that 

currently exists in 10 U.S.C. 2282 to allow for the availability of funds across fiscal 

years: 

Cross Fiscal Year Authority—Amounts made available in a fiscal year to carry out 

the authority may be used for programs under that authority that begin in the fiscal 

year such amounts are made available but end in the next fiscal year. 
72 

Achievement of Full Operational Capability—If equipment is delivered under a 

program under the authority in the fiscal year after the fiscal year in which the program begins, amounts for supplies, training, defense services, and small-scale military construction associated with such equipment and necessary to ensure that the 

recipient unit achieves full operational capability for such equipment may be used 

in the fiscal year in which the foreign country takes receipt of such equipment and 

in the next fiscal year. 

Finally, we recommend Congress rename the Section 1263 authority the ‘‘Southeast Asia Maritime Security Initiative’’ (versus ‘‘South China Sea Initiative’’). The 

current name inadvertently discourages partners in the region from participating in 

a program that, to some, appears politically charged. [See page 20.] 

Admiral RIXEY. The U.S. Foreign Military Financing (FMF) and the Excess Defense Articles (EDA) programs continue to be essential tools for the Department of 

Defense (DOD) in building the capacity of partner nations. We find that the best 

results are achieved when these programs are used in tandem, or when we combine 

them with other available authorities such that we can provide a full-spectrum capability, to include platform, enhancements, training, and sustainment. 

All countries in the South China Sea region are eligible to receive EDA through 

either sale or grant and, in FY16 alone, $75 million in bilateral FMF is available 

for partner nations. To build capacity in the Southeast Asian region, DOD is working closely with the Department of State and regional partners to co-invest and integrate partner nation funds, EDA, and FMF. An example of this can be found in the 

Philippines where EDA grant assistance provided two high endurance cutters and 

investment from FMF and Philippine national funds refurbished the cutters to operational capability. In addition to FMF and EDA, the U.S. Government is also integrating a new security assistance program as part of the rebalance to Asia—the Department of Defense’s (DOD) Southeast Asia Maritime Security Initiative (MSI), 

which is a comprehensive, multi-year effort that will reinforce our partners’ and allies’ maritime security efforts and address shared challenges. This initiative is made 

possible through a new authority focused on building partner capacity in the maritime domain—Section 1263 of the National Defense Authorization Act (NDAA) for 

Fiscal Year 2016. MSI will complement other ongoing U.S., partner, and allied efforts. Fundamental to our vision, MSI views maritime capacity building through a 

regional lens that prioritizes building multi-mission capabilities and fosters interoperability, not just with the United States, but among key Southeast Asian countries. [See page 20.] 
QUESTIONS SUBMITTED BY MEMBERS POST HEARING 

MAY 17, 2016 

(75) 

QUESTIONS SUBMITTED BY MS. SPEIER 

Ms. SPEIER. To what extent are foreign military sales driven by U.S. defense manufacturing companies courting foreign countries? How sizable and influential is their 

role upon other countries in their deliberation of the military purchasing process? 

Are there instances in which defense companies created a need for FMS abroad 

when it may not exist? 

Admiral RIXEY and Ms. GRADY. Foreign military sales arise from foreign partner 

requirements. Ultimately, the decision to procure defense articles and services from 

the U.S. defense industrial base lies with the foreign partner country. U.S. DOD security cooperation offices, under the direction of the Geographic Combatant Commander and supported by the Defense Security Cooperation Agency (DSCA), are positioned overseas at our embassies and consulates as the principal DOD points of 

contact to respond to our foreign partners and to help them to identify and define 

requirements for defense capabilities. Procurement of defense capabilities can be 

satisfied through Foreign Military Sales (FMS), Direct Commercial Sales (DCS), a 

combination of both, or other arrangements such as coproduction agreements. U.S. 

defense industry participate in all of these alternatives. They market the capabilities of their companies’ products and services and help DOD inform our foreign 

partners on the price and availability of defense goods and services available to 

meet their requirements. Prior to any discussions of systems that involve the provision of International Traffic in Arms Regulations (ITAR)-controlled information, 

U.S. industry is required to submit an export license for U.S. Government approval 

to do so. This allows the U.S. Government to conduct due diligence review to ensure 

that a potential resulting sale is in line with these three fundamental and critical 

validations: 

• The sale is of mutual benefit to the partner nation and the U.S. Government; 

• The technology will be protected; and 

• The transfer is consistent with U.S. Conventional Arms Transfer policy 

In addition, the Department of Commerce’s Advocacy Center coordinates U.S. 

Government interagency advocacy efforts on behalf of U.S. exporters bidding on 

public-sector contracts with overseas governments and government agencies. The 

degree to which both DOD and U.S. industry work together to help influence this 

outcome, while ensuring that efforts are coordinated and in line with U.S. foreign 

policy and technology transfer limitations, should be viewed as a positive national 

defense priority. 

Ms. SPEIER. To what extent are foreign military sales driven by U.S. defense manufacturing companies courting foreign countries? How sizable and influential is their 

role upon other countries in their deliberation of the military purchasing process? 

Are there instances in which defense companies created a need for FMS abroad 

when it may not exist? 

Ms. MCCORMICK. DTSA has a limited role in the execution of FMS programs and, 

as a result, has little insight into the specific impact of industry on FMS cases. We 

defer to DSCA, who in response to the same question from Representative Speier, 

provided the following: [see answer above from Admiral Rixey and Ms. Grady]. 

Æ