United States General Accounting Office

GAO Report to Congressional Requesters

May 1995 MILITARY EXPORTS

Recovery of

Nonrecurring Research

and Development

Costs

GAO/NSIAD-95-147

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-259466 

May 31, 1995

The Honorable Benjamin Gilman

Chairman

The Honorable Lee Hamilton

Ranking Minority Member

Committee on International Relations

House of Representatives

As requested, we are providing information on (1) the government’s

recovery of nonrecurring research and development costs on sales of

major defense equipment, (2) the effect of charging a flat or standard rate

rather than the current pro rata fee, and (3) views from supporters and

opponents of the recovery of these costs. We believe that this information

will help the Congress in its deliberations on proposals concerning the

legislative requirement to collect such charges on future military sales.

Background The Department of Defense (DOD) has been recovering nonrecurring

research and development and one-time production costs on sales of

weapon systems to foreign governments since 1967. The requirement to

recover a proportionate amount of these costs was codified in the Arms

Export Control Act in 1976, 22 U.S.C. section 2761 (e)(1)(B). The intent of

the act was to control U.S. costs and the extent of weapons sales to

foreign governments. The law required the recovery of costs on foreign

military sales (government-to-government sales), but DOD retained its

policy to collect nonrecurring costs on direct commercial sales (between

the contractor and the buying entity) as it had been doing before the law

was enacted. In 1992, DOD canceled its policy to recover nonrecurring

costs on direct commercial sales in an effort to increase the

competitiveness of U.S. firms in the world market. In 1995, a number of

bills were introduced that could affect the recovery of nonrecurring costs

on military sales.

DOD interpreted the Arms Export Control Act as requiring the recovery of

research and development costs on a pro rata basis. Between 1974 and

1977, DOD used a pro rata rate up to 4 percent of the total sales price.

Currently, the services calculate the pro rata rate by dividing total research

and development and other one-time production costs by the anticipated

total number of units to be produced for both domestic and foreign use. A

separate charge is calculated for each item of major defense equipment.

The Defense Security Assistance Agency (DSAA) must approve all charges.

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They are published in the Major Defense Equipment List (MDEL) as part of

DOD Manual 5105.38-M. DSAA officials acknowledged that the current pro

rata calculation is complex and subject to error, particularly if sales fall

short of or exceed projections.

Nonrecurring cost charges are considered offsetting proprietary receipts

and are deposited into the U.S. Treasury General Fund. They are credited

to DOD’s total budget authority and total outlays but cannot be spent unless

specifically appropriated.

The Arms Export Control Act also specifies that waivers or reduced

charges of nonrecurring costs are permitted on sales to the North Atlantic

Treaty Organization (NATO) countries, Australia, New Zealand, and Japan

to further standardization and mutual defense treaties. However, each

waiver and reduction requires written justification.

Results in Brief DOD recovered $181 million in nonrecurring costs on foreign military sales

in fiscal year 1994 and estimated, based on historical trends, that

collections could amount to $845 million between fiscal years 1995 and

1999. However, DSAA waived almost $273 million in nonrecurring cost

charges on sales to NATO countries and Japan in fiscal year 1994. The total

value of waivers for fiscal years 1991 through 1994 amounted to

$773 million. If the charge for nonrecurring costs is repealed, as has been

proposed, some collections would continue for a few more years as the

charges are recovered on deliveries associated with prior years’ sales.

If the legislative requirement to collect nonrecurring cost charges is not

repealed, one alternative to the current pro rata charge is a flat rate

charge. A flat rate would be easy to calculate and would not need to be

periodically updated, as is the case in calculating a pro rata charge.

However, the effect of using a flat rate varies, depending on the way it is

applied. In some cases, the amount the U.S. government would collect on

each unit sold would be less than the pro rata charge; in others, it would

be considerably more. We calculated flat rate charges of 3, 5, 8, and

10 percent on the acquisition cost of 68 weapons and compared them to

current pro rata charges. We used two different methods of calculation.

• First, we calculated the charges after aggregating the weapon systems into

four categories—projectiles, missiles, aircraft, and aircraft engines. In this

case, the total charges for each group of weapon systems were generally

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B-259466 

lower than the current pro rata charges when using 3 and 5 percent but

were comparable or higher for the most part when using 8 and 10 percent.

• Second, we calculated the charges on the individual weapon systems. In

this case, the differences between the pro rata charges and the flat rate

charges varied widely for each flat rate and, for example, were

considerably higher for some aircraft but lower for some missiles.

We also calculated the average of the current pro rata charge on the

acquisition cost of the 68 weapon systems; the average was 5.18 percent.

Supporters and opponents of the recovery of nonrecurring costs differ on

its benefits and drawbacks. Supporters, including some arms control

advocates, believe that the charges serve national security interests by

keeping weapon systems out of unstable regions of the world and the

weapons industry should not be subsidized at taxpayers’ expense.

Opponents of the charges, on the other hand, believe the charges

adversely affect U.S. industry’s competitiveness in the world market and

could affect the U.S. economy in the long run. The United States has been

the world’s leading defense exporter since 1990, and based on orders

received but not yet filled, the United States is likely to retain its first place

position in the world market at least for the short term.

Nonrecurring Cost

Collections and

Waivers

DOD collected $181 million in nonrecurring costs under the foreign military

sales program in fiscal year 1994. Fiscal year 1990-92 collections total

$559.4 million—$337.3 million for foreign military sales and $222.1 million

for direct commercial sales. Fiscal year 1993 collections totaled

$177.9 million. DSAA estimated in February 1995 that collections during

fiscal years 1995-99 could amount to $845 million.1 DSAA based these

estimates primarily on past sales. DSAA also estimated that if the charge on

foreign military sales is dropped as proposed, collections would decrease

by $73 million through 1999. Some collections would continue based on

deliveries to be made on current contracts. (See fig. 1.) A DSAA official

stated that collections would probably stop completely in fiscal year 2002

if the charge is repealed in fiscal year 1995.

1

A DSAA official stated that the fiscal years 1993 and 1994 actual and fiscal years 1995-99 estimates

include amounts due on commercial sales, but the amounts are not available.

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B-259466 

Figure 1: Impact of Repealing the

Nonrecurring Cost Charge on Foreign

Military Sales

Dollars in millions

100

120

140

160

180

1995 1996 1997 1998 1999

Year

177 177

173 173

169 169

165

140

161

113

Retaining surcharge

Dropping surcharge

Note: Estimates include amounts due on remaining direct commercial sales deliveries.

Source: DSAA.

In May 1995, DSAA estimated that if a requirement to collect nonrecurring

costs on direct commercial sales were reimposed in fiscal year 1996, it

would resume collections in fiscal year 1998, given production and

delivery lead times, and recover about $198 million through fiscal year

1999. Table 1 shows estimated collections on both foreign military and

direct commercial sales (including a charge on direct commercial sales).

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B-259466 

Table 1: Estimated Nonrecurring Cost

Collections If Charge Is Reimposed on

Direct Commercial Sales

Dollars in millions

Fiscal year

Foreign military

sales

Direct commercial

sales Total

1995 $177 0 $177

1996 173 0 173

1997 169 0 169

1998 165 $90 255

1999 161 108 269

Total $845 $198 $1,043

Source: DSAA.

Waivers Constitute a Major

Loss of Revenue

DOD waived $273 million in nonrecurring costs to NATO members and Japan

in fiscal year 1994, about $92 million more than DOD collected in

nonrecurring cost charges in the same year.2

 About 90 percent of the

waivers involved Norway’s purchase of missiles and Turkey’s purchase of

missiles, aircraft, gun mounts, sonars, and vertical launchers. DOD’s

justification for the waivers involving Norway was to help achieve

standardization, and the justification for waivers involving Turkey related

to base rights agreements. Table 2 shows the aggregated totals of

authorized waivers to NATO, 12 individual NATO countries, Australia, and

Japan for fiscal years 1991 to 1994. Waivers on direct commercial sales

represent sales agreements signed before the 1992 repeal.

Table 2: Nonrecurring Cost Waivers

Fiscal year

Dollars in millions

Type of sale 1991 1992 1993 1994 Total

Foreign military $185.9 $88.2 $119.6 $272.5 $666.2

Direct

commercial

58.0 5.9 43.0 0.3 107.2

Total $243.9 $94.1 $162.6 $272.8 $773.4

Source: DSAA.

2

In addition, DOD does not collect nonrecurring cost charges from countries using U.S foreign military

financing to buy weapon systems.

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B-259466 

Comparison of

Current Pro Rata

Charges With Flat

Rates

We focused our analysis on the comparison of current pro rata charges

with flat rate charges of 3, 5, 8, and 10 percent on the acquisition cost of 

68 weapon systems sold.3

 First, we calculated the charges on four

categories of weapons—projectiles, missiles, aircraft, and aircraft engines.

The flat rate charges of 3 and 5 percent generally resulted in lower total

charges for each category of weapon systems—in the aircraft category, the

charge was considerably less at 3 percent—than the total pro rata charges.

Flat rate charges of 8 and 10 percent in most cases resulted in comparable

or considerably higher total charges than the current pro rata charges for

the four categories of weapon systems. For example, a 3-percent flat rate

charged on the sale of each of 27 aircraft resulted in total charges of

$20.4 million, or $9.5 million less than the $29.9 million recovered under

the pro rata system. On the other hand, a 10-percent flat rate charge on the

sale of each of the 27 aircraft resulted in a total charge of $67.9 million, or

$38 million more than the $29.9 million recovered under the pro rata

system.

On the 68 weapon systems we examined, current pro rata charges ranged

from 0.07 percent to 15.95 percent of acquisition cost and averaged 5.18

percent. Thus, for a given flat rate of 3, 5, 8, or 10 percent, the difference

between the flat rates and pro rata charges varies widely. For example, a

3-percent flat rate would be greater than a pro rata charge for 19 of the 27

aircraft we examined whereas a 3-percent flat rate was larger than the pro

rata charge for only 2 of the 13 missiles we examined. However, on some

sales of commonly sold military items, DOD might not recover the same

level of charges using a nominal flat rate that it would under the pro rata

system. For example, DOD anticipated collections of $279 million in

nonrecurring cost charges on the sales of 228 F-16 A/B aircraft and 131

F-16 C/D aircraft when they are delivered to the buying countries.4

 A flat

rate of 3 percent on these sales would yield about one-half the pro rata

charges; a 6-percent flat rate would yield an amount comparable to the pro

rata charges. On sales of HARM AGM-88 missiles to three countries, total

pro rata charges for the 181 missiles sold amount to $3.85 million. A

3-percent flat rate on these sales would provide only 40 percent of the pro

rata charges; a 7.5-percent flat rate would yield an amount comparable to

the pro rata charges.

Appendix I compares the current pro rata charges with flat rate charges of

3, 5, 8, and 10 percent on the weapon systems we examined.

3

We did not analyze the impact of different flat rates on total charges recovered by the U.S.

government because total recoveries would depend on the level of sales.

4

Actual charges vary based on how an aircraft is equipped.

Page 6 GAO/NSIAD-95-147 Military Exports
B-259466 

The benefit of computing nonrecurring cost charges with a flat rate is its

ease of administration. In addition, some of the U.S. government’s

research and development investment would be recovered, though

perhaps not accurately or equitably for some specific weapons or

categories of weapons. Total recoveries are affected by sales, which are

affected by a buyer’s assessment of economic factors such as price,

quality, availability, and competition, and must also be considered. We did

not analyze flat rate charges on commercial sales because of the

proprietary nature of commercial sales prices. However, DSAA officials

stated that the same rate would apply to both types of sales should the

nonrecurring cost charge be reimposed on direct commercial sales.

Prior

Recommendations for

Flat Rates

We reported in 1986 that the pro rata system had inaccuracies that

prevented DOD from collecting accurate nonrecurring cost charges.5

 For

example, DOD was unable to accurately predict future costs and future U.S.

and foreign quantity requirements. At that time, we recommended that DOD

improve the existing pro rata system or develop a new approach for

recovering research and development costs. The approach we suggested

was to apply a flat rate to the acquisition price of all equipment sold

abroad. We reported that with the use of a flat rate, DOD would recover

comparable research and development costs yet simplify the complex

administrative and review process of calculating a pro rata fee.

In 1986, DOD opted to retain the pro rata calculation and stated that the

Arms Export Control Act would need to be revised to permit the use of a

flat rate fee. DOD’s reasoning at the time was that a flat rate would not

recover a “proportionate” share of investment on individual items as the

law required. DSAA’s General Counsel now interprets 22 U.S.C. section 2761

(e)(1)(B) as allowing a flat rate to be collected because the law requires

recovery of a proportionate amount, not a pro rata share. Thus, the DSAA

General Counsel concluded that the law would not have to be amended to

permit the use of a flat rate. In our view, it is not clear that DOD would have

authority under current law to use a flat rate.

Opposing Views on

Cost Recovery

Supporters and opponents of recovery of nonrecurring costs differ on its

benefits and drawbacks. On one hand, supporters of nonrecurring cost

recovery that we spoke with, including arms control advocates, argue that

5

Nonrecurring Costs: Improvements Needed in DOD Cost Recovery Efforts (GAO/NSIAD-86-95,

Apr. 18, 1986).

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B-259466 

nonrecurring cost charges should be collected on both foreign military

sales and direct commercial sales for a number of reasons.

• Some supporters believe that, from an economic standpoint, the United

States should recover all its costs and not subsidize the weapons industry

by forgoing recovery of a portion of its research and development

investments.

• Others believe that arms sales decisions should be based on national

security concerns, not the economic interests of private firms. One group

pointed to successful conversions of elements of the defense industry to

competitive members of the international market for civilian goods as a

means to counter declining defense production.

• Some arms control advocates assert that higher prices may deter sales and

lessen any threat to the United States by reducing the availability of arms

worldwide.

• Some supporters told us that recovered charges are deposited into the U.S.

Treasury and thus relieve the U.S. budget deficit and benefit U.S.

taxpayers. Some groups believe waivers to NATO and other foreign

countries should be abolished as well.

Opponents of recovery that we spoke with, generally industry

representatives, favor repeal of the charge on foreign military sales and are

adamantly against reimposing it on direct commercial sales. They

expressed concerns that the charges raise sales prices and inhibit U.S.

businesses’ competitiveness in the world market. They asserted that any

addition to the cost of weapons could price U.S. industry out of the world

market with a cascading adverse impact on U.S. jobs, income, and tax

revenue. They also stated that lost sales, whether

government-to-government or direct commercial sales, raise prices to the

U.S. military services because they lose the benefit of lower unit costs.

Industry officials also stated that the charge is an unfair tax that does not

accurately represent U.S. research and development investment and is

applied in an arbitrary manner. Many industry representatives said that the

U.S. research and development investment benefits U.S. forces regardless

of foreign sales and should not be imposed on foreign customers.

DOD officials stated that they believe the elimination of the recovery charge

would not negatively affect national security interests and the elimination

of the recovery charge would, overall, be beneficial to the United States.

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B-259466 

In a May 1995 report, we compared U.S. government support for military

exports with that of France, Germany, and the United Kingdom. We

pointed out that, among other things, (1) the United States has been the

world’s leading defense exporter since 1990, with almost 50 percent of the

global market; (2) based on orders placed but not yet filled, U.S. industry

will likely remain strong in the world market, at least for the short term;

and (3) the U.S. government already provides substantial financial and

other support to the U.S. defense exporters. Because of the large size of

the U.S. domestic defense program, European businesses believe they are

at a disadvantage when competing with U.S. firms.6

Agency Comments

and Our Evaluation

In written comments on a draft of this report, DOD concurred with the

report. DOD indicated that (1) the Department fully supported the

administration’s proposal to repeal the statutory requirement to recover

nonrecurring costs on foreign military sales of major defense equipment,

(2) a consistent policy for foreign military and direct commercial sales is

essential, and (3) the current imbalance between the two types of sales

should be eliminated. DOD’s comments are reprinted in appendix II. DOD

also provided technical suggestions to clarify the report and they have

been incorporated where appropriate. It should be pointed out that our

review was not to assess the legislative proposals, but rather to focus

primarily on the financial effects of using a flat rate instead of the current

pro rata fees.

Scope and

Methodology

We obtained information for this review from officials of DOD, DSAA, and

the military services. We reviewed applicable statutes and DOD regulations

governing recovery of nonrecurring costs on foreign military sales. We

also discussed the benefits and drawbacks of recovering nonrecurring

costs with supporters and opponents of recovery.

To determine the effect of imposing a flat rate charge, we obtained from

each of the services the acquisition value7

 of selected major defense

equipment sold under the foreign military sales program. We calculated

nonrecurring cost charges using flat rates of 3, 5, 8, and 10 percent of the

acquisition values of the selected weapon systems.

6

Military Exports: A Comparison of Government Support in the United States and Three Major

Competitors (GAO/NSIAD-95-86, May 18, 1995).

7

We defined acquisition value as the amount paid by the U.S. government to the contractor plus the

cost of government-furnished equipment for major defense equipment.

Page 9 GAO/NSIAD-95-147 Military Exports
B-259466 

We did our work between January and March 1995 in accordance with

generally accepted government auditing standards.

Unless you publicly announce its contents earlier, we plan no further

distribution of this report until 10 days from its issue date. At that time, we

will send copies to the Chairmen of the Senate and House Committees on

Appropriations, the Secretaries of Defense and State, and the Director of

the Office of Management and Budget. Copies will also be made available

to others on request.

Please contact me on (202) 512-4128 if you or your staff have any

questions concerning this report. Major contributors to this report were

Diana Glod, Barbara Schmitt, and George Taylor.

Joseph E. Kelley

Director-in-Charge

International Affairs Issues

Page 10 GAO/NSIAD-95-147 Military Exports
Page 11 GAO/NSIAD-95-147 Military Exports
Contents

Letter 1

Appendix I 

Pro Rata and Flat

Rate Charges

14

Appendix II 

Comments From the

Department of

Defense

18

Tables Table 1: Estimated Nonrecurring Cost Collections If Charge Is

Reimposed on Direct Commercial Sales

5

Table 2: Nonrecurring Cost Waivers 5

Table I.1: Pro Rata and Flat Rate Charges on Projectiles 14

Table I.2: Pro Rata and Flat Rate Charges on Missiles 15

Table I.3: Pro Rata and Flat Rate Charges on Aircraft 16

Table I.4: Pro Rata and Flat Rate Charges on Aircraft Engines 17

Figure Figure 1: Impact of Repealing the Nonrecurring Cost Charge on

Foreign Military Sales

4

Abbreviations

DOD Department of Defense

DSAA Defense Security Assistance Agency

MDEL Major Defense Equipment List

NATO North Atlantic Treaty Organization

Page 12 GAO/NSIAD-95-147 Military Exports
Page 13 GAO/NSIAD-95-147 Military Exports
Appendix I 

Pro Rata and Flat Rate Charges

Table I.1: Pro Rata and Flat Rate Charges on Projectiles

Flat rate charge

155 mm projectile

Acquisition

cost

Nonrecurring pro

rata charge

(percent of

acquisition cost)

Nonrecurring

pro rata charge 3 percent 5 percent 8 percent 10 percent

M107 $156 2.13 $3 $5 $8 $12 $16

M483/483A1 456 0.48 2 14 23 36 46

M549 HE RAP 635 2.17 14 19 32 51 64

M692/M731 HE

ADAM

4,328 2.56 111 130 216 346 433

M712 GLGP

Copperhead

34,057 12.19 4,152 1,022 1,703 2,725 3,406

M718/M741

RAAMS

1,638 3.49 57 49 82 131 164

M864 HE 765 6.14 47 23 38 61 77

Average 4.17

Total $4,386 $1,262 $2,102 $3,362 $4,206

Note: Numbers for tables I.1 through I.4 have been rounded.

Source: DSAA and GAO computations.

Page 14 GAO/NSIAD-95-147 Military Exports
Appendix I 

Pro Rata and Flat Rate Charges

Table I.2: Pro Rata and Flat Rate Charges on Missiles

Flat rate charge

Missile

Acquisition

cost

Nonrecurring pro

rata charge

(percent of

acquisition cost)

Nonrecurring

pro rata charge 3 percent 5 percent 8 percent 10 percent

AIM/RIM-7F/M $260,000 2.94 $7,646 $7,800 $13,000 $20,800 $26,000

AIM/RIM-7P 260,000 15.48 40,258 7,800 13,000 20,800 26,000

AIM-9L 45,000 5.79 2,604 1,350 2,250 3,600 4,500

AIM-9H 59,009 5.86 3,457 1,770 2,950 4,721 5,901

AIM-9M 96,000 6.63 6,368 2,880 4,800 7,680 9,600

AGM-88 281,953 7.54 21,249 8,459 14,098 22,556 28,195

RGM-84D-1 1,003,559 4.39 44,083 30,107 50,178 80,285 100,356

RGM-84D-3 981,131 4.49 44,083 29,434 49,057 78,490 98,113

UGM-84-1 1,258,630 3.50 44,083 37,759 62,932 100,690 125,863

AGM-84D-1 835,648 5.28 44,083 25,069 41,782 66,852 83,565

RIM-66B-2/66B/

66E (MR)/67A

438,542 2.87 12,602 13,156 21,927 35,083 43,854

RIM-66G/H/I 358,352 7.09 25,423 10,751 17,918 28,668 35,835

RIM-66K/L 400,597 9.73 38,965 12,018 20,030 32,048 40,060

Average 6.28

Total $334,904 $188,353 $313,922 $502,273 $627,842

Source: DSAA and GAO computations.

Page 15 GAO/NSIAD-95-147 Military Exports
Appendix I 

Pro Rata and Flat Rate Charges

Table I.3: Pro Rata and Flat Rate Charges on Aircraft

Flat rate charge

Dollars in millions

Aircraft

Acquisition

cost

Nonrecurring pro

rata charge

(percent of

acquisition cost)

Nonrecurring

pro rata charge 3 percent 5 percent 8 percent 10 percent

A-7D without FLIR $10.6 2.26 $0.240 $0.318 $0.530 $0.848 $1.060

A-10 without TF-34

engines

9.4 4.15 0.390 0.282 0.470 0.752 0.940

C-5A Galaxy 129.9 9.78 12.700 3.897 6.495 10.392 12.990

C-130 Hercules

w/4 T56 engines

14.6 0.68 0.100 0.438 0.730 1.168 1.460

C-141A Starlifter 29.8 2.99 0.890 0.894 1.490 2.384 2.980

C-141B Starlifter 42.6 2.09 0.890 1.278 2.130 3.408 4.260

F-4E 11.0 1.45 0.160 0.330 0.550 0.880 1.100

F-4G Wild Weasel

(MOD only)

15.1 4.44 0.670 0.453 0.755 1.208 1.510

F/RF-5A/B Tigera 3.7 1.08 0.040 0.111 0.185 0.296 0.370

F/RF-5E Tiger IIa 5.3 1.32 0.070 0.159 0.265 0.424 0.530

F/RF-5F Tiger IIa 8.4 2.50 0.210 0.252 0.420 0.672 0.840

F-15A/B Eagleb 25.5 7.25 1.850 0.765 1.275 2.040 2.550

F-15C/D Eagleb 28.2 6.74 1.900 0.846 1.410 2.256 2.820

F-15E Eagleb 30.0 13.13 3.940 0.900 1.500 2.400 3.000

F-16A/B Fighting

Falcon

12.4 5.16 0.640 0.372 0.620 0.992 1.240

F-16C/Dc 15.0 6.80 1.020 0.450 0.750 1.200 1.500

F-106A/B Delta

Dart

25.2 0.63 0.160 0.756 1.260 2.016 2.520

F-111A 37.2 1.64 0.610 1.116 1.860 2.976 3.720

F-111D 36.5 1.67 0.610 1.095 1.825 2.920 3.650

F-111E 37.8 1.61 0.610 1.134 1.890 3.024 3.780

F-111F 39.4 1.55 0.610 1.182 1.970 3.152 3.940

KC-10 Extender 77.8 1.52 1.180 2.334 3.890 6.224 7.780

KC-135A

Stratotanker

18.0 1.22 0.220 0.540 0.900 1.440 1.800

RF-4C Phantom 10.0 1.10 0.110 0.300 0.500 0.800 1.000

T-33A 0.7 0.40 0.003 0.021 0.035 0.056 0.070

T-37 1.0 2.00 0.020 0.030 0.050 0.080 0.100

T-38A 3.9 2.05 0.080 0.117 0.195 0.312 0.390

Average 3.22

Total $29.853 $20.370 $33.950 $54.320 $67.900

(Table notes on next page)

Page 16 GAO/NSIAD-95-147 Military Exports
Appendix I 

Pro Rata and Flat Rate Charges

aWithout two J-85 engines.

bWithout engines, AN/APG-63 radars, multistage improvement program, and towed electronic

warfare system.

cWith engines.

Source: DSAA and GAO computations.

Table I.4: Pro Rata and Flat Rate Charges on Aircraft Engines

Flat rate charge

Dollars in millions

Aircraft engine

Acquisition

cost

Nonrecurring pro

rata charge

(percent of

acquisition cost)

Nonrecurring

pro rata charge 3 percent 5 percent 8 percent 10 percent

CFM-56 $2.959 0.07 $0.020 $0.089 $0.148 $0.237 $0.296

F100-PW-100/200

(AFE)

2.670 10.64 0.284 0.080 0.134 0.214 0.267

F100-PW-220 (AFE) 3.270 11.16 0.365 0.098 0.164 0.262 0.327

F100-PW-229 (IPE) 4.700 13.57 0.638 0.141 0.235 0.376 0.470

F110-GE-100 (AFE) 2.954 12.36 0.365 0.089 0.148 0.236 0.295

F110-GE-129 (IPE) 4.000 15.95 0.638 0.120 0.200 0.320 0.400

F404 1.236 5.18 0.065 0.037 0.062 0.099 0.124

F404-GE-400/402 1.236 13.29 0.164 0.037 0.062 0.099 0.124

J60P-3/3A 0.63 4.76 0.003 0.002 0.003 0.005 0.006

J75 0.300 9.67 0.029 0.009 0.015 0.024 0.030

J79-GE 17/17A/119 0.686 3.94 0.027 0.021 0.034 0.055 0.069

J85 0.520 3.46 0.018 0.016 0.026 0.042 0.052

T53-L-703 0.020 10.00 0.002 0.001a 0.001 0.002 0.002

T56 0.819 1.59 0.013 0.025 0.041 0.066 0.082

T58 0.500 4.00 0.020 0.015 0.025 0.040 0.050

T64 0.767 5.03 0.039 0.023 0.038 0.061 0.077

T700-GE-701/

701A/701A1

0.505 5.94 0.030 0.015 0.025 0.040 0.051

T700-GE-701C 0.505 4.95 0.025 0.015 0.025 0.040 0.051

TF30 1.354 3.25 0.044 0.041 0.068 0.108 0.135

TF34 1.018 2.06 0.021 0.031 0.051 0.081 0.102

TF39 3.654 12.10 0.442 0.110 0.183 0.292 0.365

Average 7.33

Total $3.252 $1.015 $1.688 $2.699 $3.375

aActual amount is $600.

Source: DSAA and GAO computations.

Page 17 GAO/NSIAD-95-147 Military Exports
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(711110) Page 18 GAO/NSIAD-95-147 Military Exports
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