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Audit of the Department of Defense Process for Developing Foreign Military Sales Agreements (DODIG-2021-003)

Audit

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Publicly Released: October 14, 2020

 

Objective

The objective of this audit was to determine whether the DoD coordinated foreign partner requirements for defense articles and services with the Defense Security Cooperation Agency (DSCA), Military Departments, and other organizations, and whether the metrics used by these Components maximize the results of the Foreign Military Sales (FMS) agreement development process. This audit focused on the timeliness of the DoD FMS agreement development process.

We conducted this audit in response to a reporting requirement contained in House Report 115-676, to accompany the National Defense Authorization Act for Fiscal Year 2019. We reviewed a nonstatistical sample of 80 DoD FMS cases, valued at $16.3 billion, that were in an open status as of March 2019 and managed by the Military Department Implementing Agencies. The sample focused on 70 delayed cases to determine the cause of the delays and also included 10 cases developed within the DSCA processing standard to determine why the cases were processed in a timely manner.

 

Background

U.S. national security benefits from providing military equipment and services to foreign partners and allies so they may build or enhance their security capability. To support partner countries and allies, the U.S. Government procures defense equipment and services on behalf of the foreign partner through various security cooperation and assistance programs, October 9, 2020 such as the FMS program. The Department of State has overall responsibility for the FMS program, while the DoD administers the program through the DSCA and the Military Department Implementing Agencies.

According to DSCA officials, at the end of FY 2019, the DoD FMS program included 14,762 open cases, valued at $579 billion, and involved 189 countries and international organizations. The DSCA requires foreign partners to submit a Letter of Request, which provides the details of the requested defense articles and services. Implementing Agencies are organizations that the DSCA authorized to receive foreign partner requests for defense articles and services and are responsible for developing and processing sales agreements in accordance with DSCA policy. The Implementing Agencies carry out the procurements to fulfill FMS agreements between the United States and foreign partners.

 

Findings

Although the DoD coordinated foreign partner requirements with the DSCA, Military Departments, and other organizations, the Military Department Implementing Agencies exceeded the DSCA’s processing standards for how long it should take to develop FMS agreements for 70 delayed cases reviewed. This occurred because:

• foreign partners submitted incomplete Letters of Request or changed their requirements after  
   submitting the Letter of Request for 27 cases,

• agreements required extraordinary coordination with other DoD organizations and Federal
   agencies to obtain mandatory waivers or other approvals for 21 cases,

• agreements involved complex pricing efforts or funding issues for 12 cases, and

• Implementing Agency processing delayed 10 cases.

The congressional reporting requirement that prompted this audit stated that the committee was aware of concerns raised by U.S. military leaders, the defense industry, and foreign partners that the DoD FMS process is slow, cumbersome, and overly complicated. The results of this audit identified concerns with the DoD FMS agreement development process similar to those expressed in the congressional request. The congressional reporting requirement also emphasized that an efficient, thorough, and effective FMS process is vital to U.S. foreign policy and national security, and contributes to the health of the U.S. defense industrial base.

For the 10 timely cases reviewed that met the DSCA processing standards, the cases involved non-unique items, such as computers and munitions, and spare parts support for previously approved cases.

Recent congressionally mandated reporting requirements have increased visibility over the timeliness of the DoD FMS process. In addition, the DSCA and the Implementing Agencies had several ongoing and recently completed initiatives to improve the DoD FMS agreement development process. We believe that the outcomes and actions of the initiatives address the deficiencies this audit identified, and the timeliness of the FMS agreement development process is improving. Therefore, we are not making any recommendations and will consider a followup audit at a later date to review the outcomes and actions regarding the initiatives.

In addition, the Military Department Implementing Agencies did not accurately record receipt of foreign partner Letters of Request in the Defense Security Assistance Management System (DSAMS) for 72 of 80 sampled cases. Specifically, an average of 70 days elapsed between the receipt of the foreign partner’s Letter of Request and the Letter of Request receipt date recorded in DSAMS. In addition, the Implementing Agencies did not comply with DSCA policy on establishing the case initialization and Letter of Request complete milestones in DSAMS and did not:

• initialize 65 cases within 10 days of receiving the Letter of Request, or

• record Letters of Request as complete for 45 cases within 20 days of receiving the Letter of
   Request.

Furthermore, of the 6,096 cases included in our audit universe:

• 1,392 cases (23 percent) exceeded the 10-day initialization standard, and

• 873 cases (14 percent) exceeded the 20-day Letter of Request complete standard.

This occurred because the DSCA did not establish adequate controls and oversight to ensure that the Implementing Agencies complied with DSCA policy requirements. As a result, the DSAMS data that the DSCA used to measure timelines for developing FMS agreements were inaccurate. Specifically, the actual processing times for developing FMS agreements exceeded those reflected in DSAMS. The DSCA needs accurate and well-maintained data to effectively monitor the Implementing Agencies’ performance in developing timely agreements and to improve transparency for all stakeholders. In addition, the DSCA uses DSAMS data to prepare congressionally mandated reports on the timeliness of FMS case processing, and inaccurate DSAMS data negatively impacts the integrity of those reports.

 

Recommendations

We recommend that the DSCA Director coordinate with the Military Department Implementing Agencies to establish controls and oversight mechanisms and require compliance with DSCA policy for accurately entering foreign partner Letters of Request and establishing the case initialization and Letters of Request complete milestones in DSAMS.

 

Management Comments and Our Response

The DSCA Director agreed with the recommendation, stating that the DSCA will update guidance within the DSCA Security Assistance Management Manual and continue to work with the Military Departments to improve management controls and oversight to ensure compliance. Comments from the Director addressed all specifics of the recommendation; therefore, the recommendation is resolved but will remain open. We will close the recommendation when we receive documentation showing that all agreed-upon actions to implement the recommendation are completed.

 

This report is the result of Proj. No. D2019-D000AX-0128.000