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DEFENSE SECURITY COOPERATION AGENCY |
3/15/2012 |
MEMORANDUM FOR :
DEPUTY UNDER SECRETARY OF THE AIR FORCE FOR INTERNATIONAL AFFAIRS SUBJECT : Revision of DSCA Policy Regarding Expenditure of Foreign Military Sales (FMS) Administrative Funds for Pre-Letter of Request (LOR) and Case Development Activities, DSCA Policy Memo 12-12, E-Change 199 This memorandum revises Defense Security Cooperation Agency (DSCA) policy regarding Implementing Agency (IA) expenditure of FMS administrative surcharge funds for pre-LOR and case development activities, as contained in the Security Assistance Management Manual (SAMM) Table C5.T6. In response to concerns regarding the increasing gap between the cost of pre-LOR activities and the level of expenditure permitted by the SAMM, DSCA worked with MILDEP representatives to develop a revised policy that would more effectively balance IA requirements to provide this critical support with the need to ensure efficient use of FMS administrative surcharge funds. Pre-LOR activities include obtaining information required to assist our international partners in selecting those defense articles, training, and services that will build partner capacity while also supporting U.S. acquisition and international security objectives. These activities include meetings, briefings, equipment demonstrations, and when necessary, efforts required to respond to Requests for Proposal (RFP) and participate in international competitions. Presently, the SAMM limits IA expenditure of FMS administrative surcharge funds for pre-LOR activities to $25,000 or 1/4 work-year (whichever is greater) for each program. However, IAs are increasingly faced with situations in which an FMS customer expresses interest in advanced U.S. military systems while lacking the ability to perform the necessary analysis to identify basic requirements. Without a rudimentary understanding of requirements, FMS customers are often reluctant to submit a formal LOR or invest in a technical assistance case and instead rely upon multiple informal requests for information. If the customer submits an LOR, the LOR may be un-informed and too vague to be useful in developing an LOA, requiring IAs to conduct follow-up consultations, requirements analysis, and site surveys as part of case development activities, which are also restricted to $25,000 or 1/4 work year. The attached SAMM E-Change provides IAs with additional flexibility in executing pre-LOR activities to assist FMS customers in defining requirements in sufficient detail to produce complete LORs, thus reducing the need for extensive definitization work and expense during the case development phase of the FMS process. It also puts more definitive procedures in place to ensure DSCA can provide adequate oversight of pre-LOR expenditures. A summary of changes follows:
The attached policy changes are effective immediately. These changes will be included in the on-line version of the SAMM found on the DSCA Web Page as SAMM E-Change 199. Questions regarding this policy should be directed to Mr. Clayton Holt, DSCA/STR/POL at (703) 601-3658 or e-mail: clayton.holt@dsca.mil or Mr. Glenn Anderson, DSCA/DBO/FPIO at (703) 602-2006 or email: glenn.anderson@dsca.mil. William E. Landay III ATTACHMENT : |
Expenditure of FMS Administrative Surcharge Funds for Pre-LOR Activities The following paragraphs are added to section C4.6. GENERAL FMS FINANCIAL POLICIES C4.6.2. Pre-LOR and Case Development Activities. Pre-LOR activities are those necessary to assist the purchaser in defining requirements in sufficient detail to produce a complete LOR. A complete LOR is one that contains all of the information necessary for the Implementing Agency (IA) to develop an LOA response. Pre-LOR activities include research and analysis, meetings, briefings, responses to requests for proposals and participation in international competitions, equipment demonstrations, and travel directly related to those efforts. Case development activities are those required to prepare LOAD quality data after an LOR is complete. Case development activities are complete when the LOA has been signed by the purchaser. C4.6.2.1. Priority to Case Execution. IAs must make prudent choices when expending FMS administrative surcharge funds. In budgeting FMS administrative surcharge funds, priority should be placed upon providing support to IA case execution activities. C4.6.2.2. Limits on Pre-LOR Expenditures. No more than 8% of the total FMS administrative surcharge funds allocated to an IA in a fiscal year may be expended on pre-LOR activities. Requests for an exception to policy to exceed the 8% limit on IA expenditure of FMS administrative surcharge funds on pre-LOR activities require DSCA Director approval. Requests for an exception to policy must include an accounting of expended and remaining funds and priorities for the remainder of the year. C4.6.2.3. Pre-LOR and Case Development Notifications to DSCA. IAs will notify DSCA Business Operations and Strategy Directorates of planned pre-LOR and case development activities in the annual FMS administrative funds POM and budget process. Thereafter, IAs must notify DSCA Business Operations and Strategy Directorates when: C4.6.2.3.1. There are any changes to information presented in the budget process and the change will result in a new or increased cost greater than 1% of the total IA pre-LOR budget approved by DSCA. C4.6.2.3.2. Expenditure of FMS administrative surcharge funds for case development activities associated with a potential FMS case (to include groups of closely related cases) are expected to exceed $1,000,000. C4.6.2.4. FMS administrative surcharge funding associated with these thresholds is all-inclusive (civilian pay, contracts, travel, etc.) and must be reported. Notifications should include an analysis of IA capability to fund other pre-LOR/case development efforts for the remainder of the current fiscal year. A notification memo template is provided at figure C4.F1. C4.F1. Notification Memo Template
C4.6.2.5. DSCA will reply to IA notifications within ten (10) working days if additional information or clarification is required. C4.6.2.6. Use of Appropriated Funds. Should IAs have additional pre-LOR and case development efforts that are not funded in the FMS administrative funds budget, on an exceptional basis and at the discretion of the IA, in accordance with AECA Section 43(a), these efforts may be funded with funds available to the IA for operations. AECA Section 43(a) provides: "Funds made available under other law for the operations of United States Government agencies carrying out functions under this Act shall be available for the administrative expenses incurred by such agencies under this Act." IA funds for operations may not be used to confer a subsidy on the foreign customer in violation of AECA sections 21 and 22. FMS administrative funds or case funds that subsequently become available may be used, as appropriate, to reimburse the IA funds. Pre-LOR and case development portions of SAMM Table C5.T6, "Case-Related Manpower Functions and Funding Source", are revised as follows: Table C5.T6. Case-Related Manpower Functions and Funding Source
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