Accession Number : AD1049965

Title :   U. S. Acquisition Cost Reduction and Avoidance Due to Foreign Military Sales

Descriptive Note : Technical Report


Personal Author(s) : Arepally,Sudhakar

Full Text :

Report Date : 08 Apr 2016

Pagination or Media Count : 135

Abstract : Foreign Military Sales (FMS) is a Department of Defense (DOD) process through which defense goods and services produced by U.S. manufacturers are sold to foreign purchasers. It is the primary mechanism administered by Defense Security Cooperation Agency (DSCA), an organization under DOD and integrated with several key DOD agencies, to build defense capacities of allies and partners of the U.S. to enhance global security and peace. Sales through the FMS program create an opportunity for cost reduction and avoidance for U.S. defense acquisition programs through several familiar pathways such as economies of scale and scope, learning/experience curve advantages, R and D recoupments and Production Line Gap measures. In addition, a non-traditional approach was considered in the study to associate the concept of brand equity to the FMS distribution channel, resulting in brand dividends that are used to lower U.S. acquisition costs. A notional scenario analysis was conducted in the study to determine cost savings based on FMS growth of 2%, 10% and 25%. Two variations of the notional scenarios, one using 90% experience curve and the other using 70% experience curve, were considered for the cost savings due to FMS. With 90% experience curve, R and D recoupments and brand equity considerations, for sales through the FMS process, total cost reductions of $781.6 M, $886.3 M and $1075.3 M were realized from revenues of $11.8 B, $12.8 B and $14.6 B respectively; and with 70% experience curve, R and D recoupments and brand equity considerations, for sales through the FMS process, cost savings of $1252.1 M, $1433.6 M and $1768.7 M were generated for $11.8 B, $12.8 B and $14.6 B of revenues respectively.

Descriptors :   foreign military sales , cost reductions , military acquisition , department of defense , scenarios , defense industry , markets , strategy

Subject Categories : Logistics, Military Facilities and Supplies

Distribution Statement : APPROVED FOR PUBLIC RELEASE