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A Comparison of Foreign Military Sales (FMS) and Direct Commercial Sales (DCS) Procedures for the Acquisition of US Defence Articles and Services
This study presents an objective and systematic comparison of the two main systems by which foreign governments may acquire US defence articles and services; i.e., government-to-contractor Direct Commercial Sales (DCS), and government-to-government Foreign Military Sales (FMS). Both systems have been designed to achieve a common result - the enhancement of mutual security objectives through the provision of US military items and services to allied and friendly foreign governments.
The two systems may differ in style and substance, but they share important similarities which sometimes go unnoticed. For example, weapon system acquisitions made through either system require US government approval. Similarly, both systems are governed by the Arms Export Control Act (AECA) and related legislation.
From the marketplace viewpoint of a foreign purchaser, a variety of perceived advantages and disadvantages are seen to rest in the choice of either acquisition system. However, unless an item or service is available only via FMS due to a US Department of State's decision, there are few absolutes which dictate the selection by a foreign government of either FMS or commercial channels for any given requirement. Moreover, the selection of one system for a particular acquisition does not require the exclusive use of that same system for subsequent purchases. Thus, the choice of either FMS or DCS is ultimately driven by the special circumstances of the foreign purchaser, rather than by substantive differences in the two systems.
General Considerations
The basic distinction between FMS and DCS is that they are different contracting methods. In the commercial case, a US contractor and a foreign government enter into a direct contract in accordance with US law and regulations, as well as applicable foreign laws and regulations, and provisions of international commercial law. The US government is not a party to these commercial contractual transactions. The foreign government has the responsibility in such purchases to select the source and manage the awarded contract directly with the US contractor. Under the FMS system, the US government and the foreign purchaser enter into and sign an agreement (the FMS LOA) which specifies the terms and conditions of the sale. Thereafter, except for...