The Economics of FMS: An Analysis of the Impact of FMS Policy Changes.
AIR FORCE INST OF TECH WRIGHT-PATTERSON AFB OHIO SCHOOL OF ENGINEERING
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This research effort was conducted to analyze the potential impact of several recent foreign military sales FMS policy changes on the Defense Industrial Base DIB and in turn the Department of Defense DOD. Policy changes examined included the deletion of the one to four percent profit factor for FMS contracts from the weighted guidelines profit formula and President Carters 16 May 1977 policy statement on conventional arms transfers. The analysis of the effects of FMS policy changes began by examining the effects of FMS on the US economy, US government, and the DIB. This portion of the research effort provided the background for the evaluation of the effects of the FMS policy changes. FMS has a significant effect on the US economy, government, and DIB. FMS directly affects the gross national product, balance of trade, unemployment rates, and several other economic indicators. The US governmentDOD incur significant cost savings on foreign military sales from RD recoupments, tax recoupment, shared overhead costs, learning curve effects, and reduced production line closings and openings. The DIB is strongly affected by the volume and value of foreign military sales. In fact, some sectors of the DIB are economically dependent of FMS. Author
- Economics and Cost Analysis