U. S. Acquisition Cost Reduction and Avoidance Due to Foreign Military Sales
LAWRENCE TECHNOLOGICAL UNIV SOUTHFIELD MI SOUTHFIELD United States
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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, learningexperience 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.
- Logistics, Military Facilities and Supplies