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Economic Value of Army Foreign Military Sales

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Technical Report

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Naval Postgraduate School Monterey United States

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This project identifies current sources of cost savings and cost avoidance generated through Army foreign military sales FMS. Using a comparative high-low case-study approach, a high-demand volume case and a low-demand volume case were selected in major weapons categories. The cases were analyzed on an internal basis to determine cost savings, cost avoidance, and public value. Once the cases were analyzed and compared against each other, advantages or trends in cost savings, cost avoidance, and public value became apparent. Upon completion of our analysis, we determined that cost savings were usually gained from reduced system unit costs due to higher economic order quantities, reduced overhead costs per unit, and reduced unit costs resulting from manufacturing learning curves. Additional costs were avoided by reducing gaps in production lines. Furthermore, we determined that the Armys FMS strategy needs improvement in order to take full advantage of these sources of cost savings and cost avoidance.

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