[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                         [H.A.S.C. No. 114-123]
                         

                        ASSESSING THE DEPARTMENT

                       OF DEFENSE'S EXECUTION OF

                      RESPONSIBILITIES IN THE U.S

                     FOREIGN MILITARY SALES PROGRAM

                               __________

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                              MAY 17, 2016

                                     
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              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                  VICKY HARTZLER, Missouri, Chairwoman

JEFF MILLER, Florida                 JACKIE SPEIER, California
K. MICHAEL CONAWAY, Texas            JIM COOPER, Tennessee
JOSEPH J. HECK, Nevada               HENRY C. ``HANK'' JOHNSON, Jr., 
AUSTIN SCOTT, Georgia                    Georgia
MARTHA McSALLY, Arizona              GWEN GRAHAM, Florida
                 Heath Bope, Professional Staff Member
                 Katy Quinn, Professional Staff Member
                           Mike Gancio, Clerk
                            C O N T E N T S

                              ----------                              
                                                                   Page

              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Hartzler, Hon. Vicky, a Representative from Missouri, Chairwoman, 
  Subcommittee on Oversight and Investigations...................     1
Speier, Hon. Jackie, a Representative from California, Ranking 
  Member, Subcommittee on Oversight and Investigations...........     2

                               WITNESSES

Grady, Claire, Director, Defense Procurement and Acquisition 
  Policy, Under Secretary of Defense for Acquisition, Technology 
  and Logistics..................................................     5
McCormick, Beth, Director, Defense Technology Security 
  Administration, Office Of the Secretary of Defense.............     7
Rixey, VADM Joseph, USN, Director, Defense Security Cooperation 
  Agency, Department of Defense..................................     4

                                APPENDIX

Prepared Statements:

    Grady, Claire................................................    43
    Hartzler, Hon. Vicky.........................................    31
    McCormick, Beth..............................................    61
    Rixey, VADM Joseph...........................................    33

Documents Submitted for the Record:

    Letters of Offers and Acceptance graph and chart.............    67

Witness Responses to Questions Asked During the Hearing:

    Ms. Bordallo.................................................    71
    Mrs. Hartzler................................................    71
    Ms. Speier...................................................    71

Questions Submitted by Members Post Hearing:

    Ms. Speier...................................................    75

 
ASSESSING THE DEPARTMENT OF DEFENSE'S EXECUTION OF RESPONSIBILITIES IN 
                THE U.S. FOREIGN MILITARY SALES PROGRAM

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
              Subcommittee on Oversight and Investigations,
                             Washington, DC, Tuesday, May 17, 2016.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
room 2212, Rayburn House Office Building, Hon. Vicky Hartzler 
(chairwoman of the subcommittee) presiding.

OPENING STATEMENT OF HON. VICKY HARTZLER, A REPRESENTATIVE FROM 
      MISSOURI, CHAIRWOMAN, SUBCOMMITTEE ON OVERSIGHT AND 
                         INVESTIGATIONS

    Mrs. Hartzler. Welcome and good morning. Before we begin, I 
would like to note that members of the full committee plan on 
attending today who may not be part of this committee. And so, 
therefore, I ask unanimous consent that these committee members 
be permitted to participate in this hearing, with the 
understanding that all sitting subcommittee members will be 
recognized for questions prior to those assigned to the 
subcommittee.
    Without objection, so ordered.
    This is the subcommittee's third event to review and assess 
the Department of Defense's [DOD's] role in the U.S. Foreign 
Military Sales program. As I noted at our hearing last week 
with representatives of the defense industry, foreign military 
sales, or FMS, is one component of the partnership-building 
tools the United States utilizes. It is a vital instrument of 
U.S. national security policy and is watched closely by our 
allies, partner nations, and adversaries alike.
    This subcommittee understands that FMS is a complex 
program. It is executed by many Federal agencies and policy 
stakeholders. All are dedicated professionals who strive to 
further U.S. national security. They recognize that building 
critical relationships and military capacities of our foreign 
partners and allies strengthens American security. It also aids 
our vital defense industrial base and in many ways eases the 
task of equipping our forces with the best equipment.
    But as with many large and multifaceted programs, FMS also 
comes with an inherent set of bureaucratic challenges. Some 
observers think the process is needlessly delayed and hinders 
the ability to deliver military capabilities to our partners 
engaged in many of the same conflicts or confronting the same 
threats we are.
    In recent weeks, our subcommittee has learned, through 
various avenues, about lengthy policy reviews that occur 
regarding some FMS cases. For example, it is my understanding 
that FMS cases for fighter aircraft that began well over 2 
years ago have been delayed due to opaque and bureaucratic 
deliberations at the National Security Council. This is very 
unfortunate. And I wholeheartedly agree with Chairman 
Thornberry's recent assessment that the NSC has become an 
organization making military operational decisions, building 
misinformation campaigns, and absorbing most national security 
functions from within the White House.
    I also strongly support the amendments filed by both 
Chairman Thornberry and Representative Jackie Walorski during 
floor consideration of the fiscal year 2017 NDAA [National 
Defense Authorization Act] this week, and I am glad that they 
were made in order so that we can vote to implement overdue 
accountability and congressional oversight to the processes and 
deliberations of the NSC.
    We have also heard of delays stemming from the need to 
ensure technology embedded in U.S. products is properly 
protected. It is important to note that as we seek to 
streamline this process, the foundational basis of the FMS 
program is to support and preserve the national security 
interests of the United States.
    Concerns have also been expressed about initial 
requirements or final design configurations which have been 
poorly developed. We have heard that the Defense Department 
does not always efficiently collaborate with industry in 
appropriately determining and developing end-item 
configurations based on the defined requirements. We have been 
told the Department also sometimes insists on undesirable 
contractual vehicles and upfront financial requirements that 
may dissuade allies from coming to the U.S. for their military 
equipment and support service needs. I also am concerned about 
the size and alignment of the Department's acquisition 
workforce and how the workforce is trained in prioritizing of 
FMS cases.
    The goal of our FMS oversight activities has been to gain a 
better understanding of the strengths, weaknesses, 
opportunities, and challenges associated with DOD's role in the 
FMS program, how this committee can help streamline the process 
without sacrificing technology, security, and support the 
dedicated and hardworking people of our defense industrial 
base.
    It is essential that the program is executed effectively 
and efficiently, and results in timelier acquisition and 
delivery of military capability where and when it is needed, 
both for the security of the United States and our reputation 
as an international partner.
    But before I introduce the witnesses, I turn to the 
Oversight and Investigations Subcommittee ranking member for 
any opening remarks she wishes to make.
    [The prepared statement of Mrs. Hartzler can be found in 
the Appendix on page 31.]

    STATEMENT OF HON. JACKIE SPEIER, A REPRESENTATIVE FROM 
   CALIFORNIA, RANKING MEMBER, SUBCOMMITTEE ON OVERSIGHT AND 
                         INVESTIGATIONS

    Ms. Speier. Madam Chair, thank you. And thank you to our 
witnesses who are here today.
    Last week, the subcommittee heard industry's perspective on 
the process for U.S. foreign military sales. We heard 
suggestions for improving the process, but we also heard about 
delays, including assertions that delays led to lost sales.
    I think it is important for us to dig deeper. How many 
sales have actually been lost? Let's get specific. Is the 
process slow because foreign countries are unwilling to sign 
agreements with the United States not to share technology with 
other countries who are not our allies? Last week's industry 
witnesses were unable to provide specific examples where 
foreign governments have walked away from an FMS sale because 
the process was too slow.
    The quality, prestige, and servicing agreements involved in 
purchasing U.S. weapons systems cannot be matched by foreign 
competitors. So I want to get a better sense of how much of an 
issue this really is.
    At the last hearing, industry also complained that the 
technology transfer review was slowing down the process. But I 
want to reiterate that we need reassurance that these weapons 
do not fall into the wrong hands. Obtaining these assurances is 
a necessary part of the process.
    Despite these potential challenges, based on current sales 
this year, foreign military sales are robust. Let me repeat: 
they are robust. A recent Defense Security Cooperation Agency 
announcement indicated about $29 billion in FMS sales through 
the end of April, which is on track with last year, so the 
demand is still clearly there.
    Regardless, there are always improvements that can be made, 
and I look forward to hearing about several ongoing initiatives 
across the DOD to make the process more efficient. I also look 
forward to better understanding about benefits and potential 
pitfalls of the program.
    Foreign military sales support the U.S. defense 
manufacturing base and strengthen our international 
partnerships. Through FMS, our interoperability with other 
international partners increases as does their capability to 
respond to shared global security challenges.
    One issue where we are failing to maximize the benefits 
from this program is in recouping the hundreds of billions of 
dollars of taxpayer money that has gone to research and 
development for these weapons systems. Historically, we used to 
recoup a portion of these investments when we sold weapons to 
foreign governments. However, due to a policy change, DOD now 
waives all research and development fees. As a result, we are 
leaving nearly $800 million, and I suggest even more, of 
taxpayer money on the table each and every year and allowing 
industry and foreign governments to benefit at the American 
taxpayer's expense. Given the high demand for these sales, we 
need to do a better job of getting a return on our investment.
    In our oversight role of the DOD and its part in the FMS 
process, the subcommittee continues to learn more about whether 
the FMS process is suitably efficient, effective, and timely. 
Yet I will reiterate what I said last week: We must not forget 
that FMS is an instrument of U.S. foreign policy. As we sell 
weapons systems and services to foreign countries, we must 
ensure they are used appropriately, responsibly, and are in our 
best interests. Although that may delay the process, it is a 
policy we must always keep in mind.
    With that, I yield back, Madam Chair.
    Mrs. Hartzler. Sure. Thank you, Ms. Speier.
    So I am pleased to recognize our witnesses today, and I 
want to thank them for taking time to be with us. We have today 
Vice Admiral Joseph Rixey, director of the Defense Security 
Cooperation Agency [DSCA] for the Department of Defense. Thank 
you for coming back. We have Ms. Claire Grady, director of 
Defense Procurement and Acquisition Policy from the Office of 
the Under Secretary of Defense for Acquisition, Technology and 
Logistics. And Ms. Beth McCormick, director of the Defense 
Technology Security Administration [DTSA], also from the Office 
of the Under Secretary of Defense for Acquisition, Technology 
and Logistics.
    Thank you all for being with us here today. And so now we 
will begin with your opening statements.
    So, Vice Admiral Rixey, we will begin with you.

STATEMENT OF VADM JOSEPH RIXEY, USN, DIRECTOR, DEFENSE SECURITY 
           COOPERATION AGENCY, DEPARTMENT OF DEFENSE

    Admiral Rixey. Thank you, Chairwoman Hartzler, Ranking 
Member Speier, and members of the subcommittee. I am pleased to 
be here today to share with you my thoughts on the overall 
health and well-being of the foreign military sales process and 
the Department of Defense's role in the program from my vantage 
point as the director of the Defense Security Cooperation 
Agency.
    FMS is a longstanding foreign policy and national security 
program that supports partner and regional security, enhances 
military-to-military cooperation, enables interoperability, and 
develops and maintains international relationships. The system 
is performing very well, and the United States remains the 
provider of choice for our international partners with over 
1,700 new FMS cases implemented in fiscal year 2015 worth more 
than $47 billion.
    FMS is operated under the title 22 authority in which 
direction and guidance is delegated to DOD from both the 
President and from the Department of State. DOD manages the FMS 
life cycle, overseen by DSCA; conducts technology transfer 
reviews overseen by the Defense Technology Security 
Administration; and manages the defense acquisition and 
logistics systems which are overseen by DOD Acquisition, 
Technology and Logistics, and the military departments.
    The FMS process is executed through a system designed to 
fulfill requirements of the Arms Export Control Act, ensuring 
three fundamental and critical validations occur before a 
capability can be offered: that the sale is of mutual benefit 
to the partner nation and the U.S. government, that the 
technology will be protected, and that the transfer is 
consistent with U.S. conventional arms transfer policies.
    Criticism of the alleged slow approval timelines is largely 
associated with a few high profile cases, and this criticism is 
actually misplaced. These delays are the natural outcomes of 
the required validations rather than a negative reflection of 
the performance of the FMS system itself.
    The FMS system is burdened, but it is not broken, and we 
have made important strides, not only within the Department of 
Defense, but across the interagency in mapping out and 
beginning to develop and implement important initiatives that 
target areas for improvement to keep the FMS system responsive 
to our partner needs and agile to support national security 
objectives.
    We have identified approximately 40 interagency initiatives 
to better enable the United States to remain the provider of 
choice for our foreign partners, providing them with the full 
spectrum of required capability to receive, maintain, and 
sustain the products they receive through the FMS program.
    Initiatives range from professionalizing of the Security 
Cooperation workforce, providing ways in which we can better 
understand and help define partner requirements earlier, and 
surely we are properly resourced for FMS contracting manpower 
and establishing ways we can more effectively respond to the 
requirements, such as our ability to buy ahead of need with the 
Special Defense Acquisition Fund.
    And that is a broad overview. My written statement has 
greater detail that I am happy to discuss in response to your 
questions.
    Distinguished committee members, I want to thank you again 
for the opportunity to sit before you today, and I look forward 
to your questions.
    [The prepared statement of Admiral Rixey can be found in 
the Appendix on page 33.]
    Mrs. Hartzler. Thank you.
    Ms. Grady.

 STATEMENT OF CLAIRE GRADY, DIRECTOR, DEFENSE PROCUREMENT AND 
ACQUISITION POLICY, UNDER SECRETARY OF DEFENSE FOR ACQUISITION, 
                    TECHNOLOGY AND LOGISTICS

    Ms. Grady. Thank you.
    Good morning, Chairman Hartzler, Ranking Member Speier, and 
distinguished members of the subcommittee and committee. Thank 
you for the opportunity to appear before you to discuss the 
role the defense acquisition community plays in supporting 
foreign military sales.
    In acquiring goods and services on behalf of FMS customers, 
we employ the same rigorous policies and procedures that we use 
to meet our own requirements. When an FMS customer seeks to 
acquire major weapons systems, whenever possible, the same 
acquisition program management office that oversees the DOD 
acquisition and sustainment of that system is also responsible 
for delivering the FMS requirements. In this way, the 
Department and the FMS customers enjoy the benefits of synergy, 
not only from the perspective of staffing, but also in 
realizing efficiencies in achieving economies of scale, which 
results in lowered negotiated prices from industry.
    To increase the efficiency and effectiveness of the overall 
acquisition system, the Under Secretary of Defense for 
Acquisition, Technology and Logistics, Frank Kendall, has 
advanced a series of continuous improvement initiatives we 
refer to as Better Buying Power. One of the central elements of 
Better Buying Power is our focus on the people who comprise our 
acquisition workforce and ensure we provide the training and 
tools to enable them to secure the best possible value for our 
warfighters, the American taxpayer, and our FMS customers.
    The Department has invested significant resources, with the 
support of Congress, to ensure that our acquisition workforce 
is properly sized, with the right skills, experience, and 
training to execute the responsibilities entrusted to us. Last 
year, DOD's talented contracting officers obligated over $274 
billion on contract actions, of which about $26 billion were 
for foreign military sales.
    DOD training and certification programs for the defense 
acquisition workforce are considered to be the gold standard 
within the Federal Government. The professionalism and 
capability of our acquisition workforce is a significant 
contributing factor in our international partners' choice to 
acquire goods and services through the U.S. FMS program.
    Another pillar of Better Buying Power is to incentivize 
productivity and innovation in industry and the government. A 
key tenet of that is the need to employ appropriate contract 
types and to properly align incentives. There is no one 
preferred contract type. The contract type that is employed 
should reflect the balance of risk between the government and 
the contractor and provide the contractor with the greatest 
incentive to achieve the outcomes necessary to make the program 
successful. If the Department were precluded from using the 
appropriate type contract in any particular environment, it 
would effectively constrain our ability to deliver best value 
to the FMS customer and eliminate opportunities to achieve 
efficiencies by combining U.S. and FMS requirements on the same 
contract.
    As detailed in the tables I included in my written 
statement, the Department's contracting officers employ a 
variety of contract types that will best support the FMS 
customer's needs, with the predominant contract type being firm 
fixed price.
    Recognizing the importance of being responsive to 
customers' needs, we are continuing to work with Vice Admiral 
Rixey, DSCA, and the implementing agencies to shorten the times 
involved in the portion of the process that the acquisition 
community can influence. For example, as is the case with U.S. 
requirements, sole source foreign military sales contracts for 
military items require the contractor to submit certified cost 
or pricing data in accordance with the Truth in Negotiations 
Act. We are exploring opportunities to reduce procurement lead 
time and realize efficiencies by extrapolating from prior cost 
history to price future requirements and reduce the 
administrative costs for contractors to submit and certify 
proposals for FMS requirements.
    Another area where we are looking to improve is in the 
final pricing of undefinitized contract actions [UCAs]. The 
preferred practice is to finalize the terms and conditions and 
negotiate the price prior to award of a contract. However, due 
to urgent needs of FMS customers, it is often necessary to 
authorize the contractor to begin work prior to reaching final 
agreement on price and other terms. Although the statute 
exempts undefinitized contract actions awarded for FMS 
customers from restrictions and procedures otherwise required 
for UCAs, by policy, the Department has mandated that these 
management procedures be employed whenever practicable. And if 
it is not possible to improve those--if it is not possible to 
apply those management techniques, they're required to notify 
their acquisition chain of command as well as my office.
    We also have instituted internal reporting procedures to 
provide management and attention and visibility on our use of 
UCAs and provide semiannual reports to the Congress. In these 
reports, we identified a number of UCAs that have remained 
undefinitized for extended periods of time. Definitizing UCAs 
in a timely manner is important to both the government and 
industry and requires the mutual cooperation of both to 
achieve. We are committed to doing better in that area.
    Responsive to your hearing invitation letter, I have 
included in my written statement information about DOD's 
technology security and foreign disclosure process and the 
Defense Exportability Features Pilot Program. For acquisition, 
these initiatives are led by my colleague in the Office of the 
Under Secretary for Acquisition, Technology and Logistics, the 
director of International Cooperation.
    I thank you for the opportunity to address the acquisition 
perspective of this important element of the Security 
Cooperation program, and I look forward to your questions.
    [The prepared statement of Ms. Grady can be found in the 
Appendix on page 43.]
    Mrs. Hartzler. Thank you, Ms. Grady.
    Ms. McCormick.

   STATEMENT OF BETH McCORMICK, DIRECTOR, DEFENSE TECHNOLOGY 
  SECURITY ADMINISTRATION, OFFICE OF THE SECRETARY OF DEFENSE

    Ms. McCormick. Thank you, Chairman Hartzler, Ranking Member 
Speier, and members of the subcommittee. I appreciate the 
opportunity to discuss the Department of Defense ongoing 
technology, security, and foreign disclosure process 
improvements.
    As part of the Office of the Under Secretary of Defense for 
Policy, my agency, the Defense Technology Security 
Administration, collaborates with our sister agency, the 
Defense Technology Cooperation Agency, to build the capacities 
and capabilities of international allies and partners through 
the transfer of defense articles. Whether through the foreign 
military sales or direct commercial sales, providing the right 
equipment to match the security requirements of partners is a 
must.
    My agency also partners with several organizations in the 
Office of the Under Secretary of Defense for Acquisition, 
Technology and Logistics. The Arms Transfer and Technology 
Release Senior Steering Group, which I co-chair with Keith 
Webster, Director of International Cooperation, in the Office 
of the Acquisition, Technology and Logistics, brings together 
all of the key DOD stakeholders and process owners, breaking 
down longstanding stovepipes and focusing attention on the 
considerable factors so we can get capability to our global 
partners effectively and efficiently.
    We recognize that in some complex export transactions, if 
we wait for a formal letter of request from the international 
partner, we will be behind the power curve in the technology 
security and foreign disclosure review process. As a result, 
for select high-demand or sensitive systems, we seek to develop 
anticipatory policies addressing several of the technology 
security and foreign disclosure reviews in advance of a request 
or export license authored submission. Also, we are able to 
avoid false impressions when the answer will be ``no'' and, in 
some cases, address challenges early enough in order to get to 
a quick ``yes'' decision.
    Partnership between the U.S. Government and U.S. defense 
industry is also imperative, and I would note that last week 
this committee had several presentations by those key industry 
associations. Last October, I had the privilege of co-hosting a 
U.S. DOD-industry partnership forum with Keith Webster. As co-
chairs of the Arms Transfer and Technology Release Senior 
Steering Group, we thought it was high time to have a dialogue 
about ways industry and government can work together to 
facilitate defense exports. While we developed the initial 
concept for the event, the forum became a reality only through 
collaboration with the Aerospace Industries Association and the 
National Defense Industrial Association.
    This was a great opportunity to foster communication 
between the Department of Defense and our industry partners on 
how we can work together to ensure our industry remains 
competitive internationally. Industry is counting on increased 
exports of defense technology to new and emerging markets. We 
had industry and DOD panels addressing a variety of defense 
export-related topics, with a healthy exchange of perspectives. 
We took stock of the many reforms undertaken, including the 
administration's Export Control Reform Initiative, improvement 
to the foreign military sales process, DOD participation in 
many international trade shows, and thinking about 
exportability capabilities to partners and allies from the 
start.
    Again, thank you for the opportunity to share our 
technology security and foreign disclosure-related process 
improvements with you today. I look forward to additional 
questions from the committee. Thank you.
    [The prepared statement of Ms. McCormick can be found in 
the Appendix on page 61.]
    Mrs. Hartzler. Thank you, Ms. McCormick.
    General Rixey, I would like to start asking questions of 
you. You said in your testimony that your written statement 
will provide more information on the different initiatives, 
over 40 initiatives, that you shared with us two hearings ago, 
the list here of all these initiatives.
    Admiral Rixey. Yes.
    Mrs. Hartzler. And I was very much looking forward to you 
coming and sharing details about some of these----
    Admiral Rixey. Sure.
    Mrs. Hartzler [continuing]. But in your written--in your 
oral testimony, you just mentioned a couple of them and you 
said to look at the written testimony. We did not receive this 
till 8:30 last night. I was at that time reading Ms. Grady and 
Ms. McCormick's testimony, which didn't arrive 48 hours, 
either, before.
    Do you realize there is a requirement that the testimony be 
here 48 hours before, and how come you didn't meet that 
deadline?
    Admiral Rixey. Yes, ma'am, I do realize. And I apologize. I 
wanted to make sure that my chop went through the interagency 
properly. And I admit that it was my fault and I should have 
had it to you sooner.
    Mrs. Hartzler. So there is no way that I have had a chance 
to read this and nobody else on this committee has, so can you 
outline some of the things in the written testimony, some of 
the initiatives that you are doing to help speed up the 
process?
    Admiral Rixey. Yes, ma'am.
    Mrs. Hartzler. Thank you.
    Admiral Rixey. I will talk about three or four specifically 
that I think are critically important. The first is we are 
working very closely with the services to ensure that we have 
adequate manpower to execute our programs. As I have shown 
earlier, it is a system of systems that has many artisans 
involved with ensuring that we get a good requirement from our 
customer, that we are able to process the case in a timely 
manner, that we are able to do the technology review, we can do 
the foreign policy review, and then, finally, to ensure that we 
have enough artisans to get the acquisition process moving 
forward.
    We want to ensure that the services realize that it is in a 
critical mission area and that they support staffing of these 
key positions, as well as we are working with the services and 
the comptrollers to find a way to fund these personnel with 
nonappropriated funds to ensure that we can meet the demands of 
a very robust FMS system. So that is the very first initiative, 
is to ensure that we have adequate manpower to execute these 
programs.
    Mrs. Hartzler. Can I stop you just a second?
    Now, in Ms. Grady's testimony, you say you have oversight 
of over 30,000.
    Ms. Grady. I am sorry. To clarify, the 30,000 that I have--
--
    Mrs. Hartzler. You want to----
    Ms. Grady. Good point. Thank you. Sorry.
    The 30,000 that I highlighted I have personal oversight of 
is the contracting professionals. The acquisition workforce 
writ large is just over 150,000, about 153,000 to 156,000.
    Mrs. Hartzler. So how many of those, Admiral Rixey, are you 
speaking of that you are making sure you have adequate manpower 
of?
    Admiral Rixey. Well, we fund--overall, the whole system, I 
fund about 10,000. And I would--I would say roughly about 7,000 
of the majority of those are in the acquisition community. So--
--
    Mrs. Hartzler. Do you feel like you need to hire more to 
meet the needs?
    Admiral Rixey. I do believe that we will, if the demand 
continues. And there are three items that our international 
partners tend to purchase. If they purchase an item that is 
from our program of record or something that we are already 
developing, I can leverage, for the most part, the program 
offices that exist for those types of equipment. For example, 
the F-18 Hornet. I would go to the F-18 program office and 
say--and they actually have a contingent that do international 
sales, and we can facilitate that.
    Sometimes our international partners want to buy an item 
from us, but they want to add capability that is unique to 
their country. Well, then I have to go to the same program 
office and ask them for engineers and technicians to help me 
understand how we are going to integrate these capabilities in, 
and that is usually supported very well.
    Where we run into some difficulties is when a country asks 
us for nonprogram of record-type procurements, for example, a 
patrol boat that is not in our inventory. Then I have to go 
find--there is no program office. We have to establish a 
program office. And that sometimes is a challenge finding those 
artisans, because we are always running up against manpower 
constraints or caps in manpower.
    The way we fund our personnel right now is through 
reimbursable accounts, which at this point count against their 
caps. We are working with the comptrollers to figure out how to 
pay direct site and establish these types of program offices 
and this type of support without counting against the service's 
manpower. And that is one of the initiatives that we are 
working on, is to be able to both expand and contract with 
sales.
    Mrs. Hartzler. To have the flexibility.
    Admiral Rixey. Have the flexibility, yes, ma'am.
    Mrs. Hartzler. So how many people are you planning on 
hiring in the next 6 months to help meet----
    Admiral Rixey. In the next 6 months?
    Mrs. Hartzler. Uh-huh.
    Admiral Rixey. I think we have a lot of work to do in 
determining--understanding anticipated demand, and I still have 
to go through the mechanisms of how to hire. So not many in the 
next 6 months. I will be able to project, over the life of 
these cases, what we think we are going to need in terms of as 
contracts start to become required for case execution. In the 6 
months, I don't have enough time right now to change the 
policies.
    Mrs. Hartzler. Okay. So the adequate workforce is one of 
the things that you are trying to get ahold of and----
    Admiral Rixey. Yes.
    Mrs. Hartzler [continuing]. Figure out manning.
    Admiral Rixey. Yes.
    Mrs. Hartzler. Why don't you go ahead and give another 
example? Then we will go to the questions of other----
    Admiral Rixey. So the next one, I think, is probably the 
most important and it is within our control, is we need to 
certify and train our Security Cooperation workforce almost in 
the same manner that we did a couple decades back with the 
acquisition community.
    Right now Security Cooperation, I would say, is basically 
an ad hoc operation. We do train our folks, we send them to 
school at Wright-Patterson called DISAM [Defense Institute of 
Security Assistance Management]. I would say that that would 
probably be like a level one certification. We need to expand 
upon that. We need to make sure that the 800-plus Security 
Cooperation officers that I am responsible for in the embassies 
down in these particular countries are fully trained. And in 
some of these countries, we may need a level of certification 
above an entry level certification.
    So we need to professionalize the Security Cooperation 
workforce, from the Security Cooperation and also within the 
services, and we also need to reach out to the acquisition 
community--which I think you will explain--Claire will explain 
how we are training our acquisition professionals to be savvy 
in acquisition for foreign partners. And so this is what I 
think we need to embark on and is very important.
    Mrs. Hartzler. I was going to go, but since you mentioned 
Ms. Grady, there is something in her testimony--which I very 
much enjoyed your testimony. It was getting right at the heart 
of the changes that you are making to try to address and 
expedite FMSes. So I very much appreciate that.
    But you mentioned that there is now an international 
acquisition billeting that you are doing to train people in 
this specific area. Can you expound on that and tell how many 
people, how many billets you have that deals just with foreign 
military sales?
    Ms. Grady. Absolutely. And, first of all, as part of our 
standard acquisition training, we apply the same processes to 
foreign military sales as we do to U.S. So one of the important 
elements of that training is addressing foreign military sales 
early in all of our acquisition training so that when our 
program managers are embarking on a new program, they are 
considering the full spectrum of potential requirements, 
including partner or allied sales in the future when they are 
standing up programs.
    So we want people to have, acquisition professionals to 
have awareness of the full scope of the acquisition 
responsibilities they have, including the foreign military 
sales.
    In addition to what is included as part of the standard 
certification training for functional communities, we also have 
subspecialties in international acquisition where we have 
identified positions that are predominantly or have a need to 
have greater knowledge of the international acquisition. We--
that as a subspecialty emerged in 2007 exclusively for program 
managers. It wasn't until 2014 that we looked and said, it is 
much broader than just the program manager who needs awareness 
associated with that.
    We have put through about 7,500 students in training, and 
we have recently put a lot of emphasis on two foundational 
courses, Acquisition 120 and Acquisition 130. Acquisition 120 
deals predominantly with the Security Cooperation enterprise 
and what the acquisition role is in that. Acquisition 130 
focuses on technical rights and disclosure of technology. And 
we have had about 6,000 people take those courses just since 
they have stood up in 2014.
    So it has been an area of emphasis. And when we look at our 
acquisition workforce and our planning for the future, we look 
not just for the U.S. requirements, but the total capabilities 
that we need to deliver and make sure that we are working with 
the service acquisition executives to forecast their workforce 
needs for the full body of work we are going to ask them to 
perform.
    Mrs. Hartzler. It sounds like it certainly makes a lot of 
sense to me that you would train people and give them the 
specialty background that they need to deal with that.
    Okay. Ranking Member Speier.
    Ms. Speier. Thank you, Madam Chair. And thank you again to 
the witnesses for your testimony.
    Vice Admiral Rixey, when you refer to non-program-of-record 
cases, you are talking about designer products, are you not, 
for specific countries?
    Admiral Rixey. Yes, ma'am. They will be unique.
    Ms. Speier. So, I mean, I think it is really important for 
us to appreciate that when a country comes to us and says, ``We 
don't want something off the shelf. We want you to build us 
something special,'' that is a designer product, that is a one 
of a kind. And, frankly, they should pay for that and they 
should pay, in my view, the R&D [research and development] for 
that as well, because we are building them something unique.
    Now, let's get to the crux of this. How many cases do you 
have in any given year----
    Admiral Rixey. Well, in fiscal year 2015----
    Ms. Speier [continuing]. In sales?
    Admiral Rixey [continuing]. We had 1,774.
    Ms. Speier. Okay. 1,774 sales that actually went through 
the process?
    Admiral Rixey. That were implemented. Cases that were 
implemented.
    Ms. Speier. And how many of those were for weapons?
    Admiral Rixey. I would say roughly--we broke that out, and 
the rough order of magnitude is about 75 percent goes to end 
items and 25 percent to things like training and services.
    Ms. Speier. So 75 percent of all of those were for weapons 
systems?
    Admiral Rixey. Yes.
    Ms. Speier. If you were to chart that year to year, how 
would that compare?
    Admiral Rixey. I will have to take that for the record, but 
if I were to guess, that would be consistent, but----
    [The information referred to can be found in the Appendix 
on page 71.]
    Ms. Speier. Do you expect sales to increase?
    Admiral Rixey. I expect sales to be steady this year to 
match what we did in 2016--or 2015.
    Ms. Speier. Okay. There has been a lot of talk in this 
committee about lost sales. And the witnesses that testified 
last week, I specifically asked them, give me some examples, 
and they were hard pressed to do it.
    Could you tell us, how many sales have we lost because of 
the slowness of the process?
    Admiral Rixey. I cannot. I would have to take that back for 
the record as well. There has been--industry has told me that 
they have lost sales, but I don't have any proof, and so I will 
have to go back and do more research on that.
    I know that the fact that we do get delayed in certain 
items, the international partners do convey to me that they 
will look elsewhere for products. But I will have to take that 
question back for the record to get you an exact answer.
    [The information referred to can be found in the Appendix 
on page 71.]
    Ms. Speier. But when all is said and done, if they want an 
F-16, they are probably not going to go somewhere else to get 
it.
    Admiral Rixey. Well, they can. They can go to the French, 
they can go for a Mirage, they can go to Saab, and occasionally 
they do, but that is not the--they don't tell me the reason. It 
could be for their competitive advantage within their country, 
and so--they can go to other places. There are other 
opportunities to buy generation 4, generation 4.5 fighters from 
other countries.
    Ms. Speier. But if they are allies of ours, do we--is that 
a bad thing?
    Admiral Rixey. Not necessarily. If it is a NATO-compliant 
solution and it is interoperable, it is a capability. And, 
again, the business of DSCA is to provide capability. And if 
they find that through, like I said, a NATO-compliant solution, 
that is a capability.
    What we strive for in foreign military sales is building 
our partnership capacity and interoperability. That is what 
we--that is what our mission statement is for. And the reason 
we encourage foreign military sales is that we are involved 
with the contracting, we can design the contract itself and the 
specifications, and to ensure maximum interoperability. That is 
an extension of our warfighting capability if they are 
interoperable. And----
    Ms. Speier. So where does the slowness start to be seen? 
Where is the logjam?
    Admiral Rixey. Ma'am, we have actually tried to look at 
that in terms of--I built a Gantt chart that shows from, again, 
when the customer makes a requirement down through all the 
different lanes that have to--we have to go through, where we 
have to discuss a mutual benefit, is it a technology transfer 
issue, is it a foreign policy concern, and is it available in 
our acquisition community?
    We are seeing holdups throughout various places, whether it 
is foreign policy review or going from once we have approval to 
contract award. It is everywhere. And it is a complex system of 
systems. I would like to think that the front end of it, where 
we have that deliberate conversation, goes at a pace that is 
required to make sure that we have a deliberative conversation.
    Ms. Speier. Well, in a private conversation that I had with 
you yesterday, you seemed to indicate to me that the delays 
start to occur in the foreign policy area when the purchaser is 
unwilling to sign the agreements relative to retaining the 
technology and not sharing it with third parties that are not 
our friends.
    Admiral Rixey. I would argue that of the 1,774 cases that 
we had go through the system, the ones that gain a lot of 
attention are those very few high profile cases that are hung 
up in policy review. And for the most part, most of what we 
have goes through the system relatively quickly.
    Some of these major defense articles that get these 
headlines, the few happen to have huge production lines and 
have huge workforces depend on the sales of these end items. 
But when I look at the system as a whole writ large, I think 
fundamentally we get through the system quickly.
    I am worried and concerned about, with $47 billion of sales 
this year and matching next year, the sheer number of contracts 
going through our acquisition community could cause the major 
delay. And I think if you ask industry where they focus, their 
concerns are, is getting to contractor award once we have had 
approval, and we are working very hard on these things. And I 
think Claire will talk about some of the initiatives that are 
in place.
    The foreign policy issue that I see really are on high 
profile cases and really not that many when you look at the 
1,774 cases that we push through. So--and why are they hung up? 
Well, things tend to get hung up when some of the countries 
don't sign security agreements with us. So when we come to 
technology transfer and technology review, we pause on whether 
or not we are going to provide that capability from a 
technology transfer perspective.
    Ms. Speier. Okay. On the issues of research and 
development, historically we were reimbursed for the research 
and development that we have provided for all these complicated 
weapons systems. You had indicated to me that if we were to 
receive the R&D licensing fee, so to speak, we would be talking 
about, I think the figure you said was over $800 billion a 
year.
    Admiral Rixey. Yes.
    Ms. Speier. So when did we stop receiving those funds? What 
year was it?
    Admiral Rixey. I don't know the exact date. I understand it 
was in the 1990s. I know that just--I--when it comes to waiving 
nonrecurring--or nonrecurring costs, I execute that in 
accordance with the Arms Export Control Act. That authority has 
been delegated from the President down to the Secretary of 
Defense and down to me.
    Ms. Speier. Well, at one point, as I understand it, there 
was an amendment to just get rid of the R&D----
    Admiral Rixey. Yes.
    Ms. Speier [continuing]. Reimbursement, and Congress said, 
no, that what we will give you instead is a waiver.
    Admiral Rixey. Is a waiver.
    Ms. Speier. But as I understand it from you, you have 
waived every single request.
    Admiral Rixey. Almost every single. There has been one or 
two exceptions, but for the most part, yes. And the criteria 
that we use is--so in the last 3\1/2\ years, we waived for 
not--for NATO standards. So a NATO country, Australia, New 
Zealand, and a few others, we waived; 38 percent of the waives 
associated with that.
    The other two reasons that we are authorized to waive is 
there is a likely loss of a sale, or if there is economies of 
scale to be gained by selling, for example, more jets on a 
line, incorporating it into our contract, our unit costs come 
significantly down, then we won't----
    Ms. Speier. But, Vice Admiral, those three potential 
reasons to do it basically cover the waterfront, right?
    Admiral Rixey. Yes, they do.
    Ms. Speier. You can basically make that argument for 
everything, and that is what you've done.
    Admiral Rixey. Yes, ma'am.
    Ms. Speier. So we have received, the taxpayers have 
received zero, basically zero back for all the R&D that we 
invest in these various weapons systems.
    Now, the F-35, as I understand it, can only be purchased 
through FMS. Is that correct?
    Admiral Rixey. That is not correct. We have--we have FMS 
customers as well.
    Ms. Speier. No.
    Admiral Rixey. Of the F-35.
    Ms. Speier. From direct military sales? I thought----
    Admiral Rixey. Oh. Oh, only through FMS. I am sorry. I was 
confused whether it is a cooperative program, and we have FMS 
customers. You are absolutely correct.
    Ms. Speier. So in that kind of situation, they are not 
buying it from anyone else.
    Admiral Rixey. Yes, ma'am.
    Ms. Speier. They want that particular weapon. And why 
wouldn't we recoup the R&D that we have invested in that 
particular weapons system?
    Admiral Rixey. Well, again, I apply the logic of likely 
loss of----
    Ms. Speier. Well, but you are not going to lose it because 
they are not going to get it through direct military sales, and 
they specifically want that airplane and not someone else's 
airplane.
    Admiral Rixey. Not in all cases. They can--they have 
alternatives. There are other generation 4, 4.5 fighters that 
they can go to if they find it too costly. And so, again, I 
apply the waiver criteria that has been provided.
    Ms. Speier. Okay. I am just going to say for the record, 
Madam Chair, we are talking about taxpayer money. And 
historically the R&D was recouped. It has morphed into a 
situation where it is waived unilaterally and ubiquitously, and 
the result is the taxpayer is just fronting this R&D money 
without any benefit. And we wouldn't expect that from a license 
that a university was providing to a pharmaceutical company. 
They get recoupment. And I think the Federal taxpayer should 
get recoupment as well.
    With that, I yield back.
    Mrs. Hartzler. Thank you.
    Representative Scott.
    Mr. Scott. Thank you, Madam Chair.
    Admiral, you mentioned patrol boats. And just as an 
example, a country like Australia, if they wanted to buy a 
patrol boat from a U.S. company, would they have to go through 
the foreign military sales?
    Admiral Rixey. No, sir. They could go direct commercial.
    Mr. Scott. Because they are a NATO ally?
    Admiral Rixey. I think when we look at the technology, we 
would do an evaluation based on technology. But a patrol craft, 
if it didn't have any sensitive technologies that were of 
concern for our technology release, they could go direct 
commercial sale.
    Mr. Scott. Okay. So it is really--it is not the vessel; it 
is the weapons systems and the technology that is on the vessel 
where foreign military sales comes in?
    Admiral Rixey. There are two reasons. If we designated--and 
Ms. McCormick can talk about it. If it is designated as FMS 
only, then it has to go through the FMS system. There are some 
countries that don't have mature enough procurement officials 
to buy anything, and they come to us to purchase it for them.
    Mr. Scott. Okay. Well, that answers one question. There are 
smaller countries who don't have the ability to do this, to 
negotiate the contracts for themselves is one of the reasons 
they would come through foreign military sales.
    Admiral Rixey. Yes, sir.
    Mr. Scott. But a country like Australia, who is a friend, 
if they want to buy a patrol craft, they can just negotiate 
directly with U.S. manufacturers. And if there are any 
questions about the technology or the weapons systems that 
might be on that patrol craft, then they would get either a 
waiver from foreign military sales or----
    Admiral Rixey. Well, we would--what we would do is we would 
call it a hybrid. They could buy 95 percent of it via direct 
commercial sale and then maybe, for example, if it is a system 
that is so classified for even Australia, we would deem that 
FMS, and that piece would be--just that piece would be FMS and 
then it would be provided to the vendor.
    Mr. Scott. Okay. So of the thousands of contracts that you 
have, if you broke them down by the dollar volume, is it 10 
percent of the contracts that would make up 90 percent of the 
dollar volume? Do we have a----
    Admiral Rixey. Oh.
    Mr. Scott. Are there several supersized contracts that make 
up the vast majority of the volume----
    Admiral Rixey. There are some supersized cases that make up 
the majority of the volume. And I can--if you want to in a 
closed session, I could walk you through the specific countries 
and those contracts themselves.
    Mr. Scott. Well, certainly, to me, if we can simplify the 
process, I think that would be better for everybody. It would 
be better for the three of you and it would be better for the 
industry that is trying to sell the weapons and it would be 
better for the consumer as well. And so some of the stuff that 
is not sensitive, getting it out of the backlog sooner rather 
than later, I think probably helps everybody.
    But for all of you, and I hope you will be specific with 
this, if there are any Federal acquisition regulations or 
statutory policy requirements that could be altered or 
eliminated, what would make DOD's force of the FMS program more 
efficient or effective? And just pick one thing, if you would. 
What is the one thing you would do you if could--if you had 
control that would make the system better?
    Admiral Rixey. Well, I would support DASD [Deputy Assistant 
Secretary of Defense for] Security Cooperation's initiative 
consolidating some of these title 10 authorities down to be a 
little bit more flexible than they are. And so we do also run 
title 10 authorities through the FMS system, and they come with 
some restrictions, like time, region, and there is about 20 
authorities. So anything we can do to streamline those title 10 
authorities, I think, would be--would help alleviate a lot of 
the strain on our contracting commands because of the 
restrictions associated with them, and that is to support that 
initiative.
    Ms. Grady. From an acquisition and procurement perspective, 
we largely follow the identical regulations for both foreign 
military sales and U.S. sales. There is maybe less than five 
pages of unique requirements associated with foreign military 
sales in our procurement and acquisition regulations.
    Most recently, though, last year in the National Defense 
Authorization Act, we got specific guidance--or authority from 
the Hill relative to treatment of offset costs, and that has 
been one of the areas that has historically slowed us down 
significantly from foreign military sales. We are in the 
process of implementing that from a regulation perspective, and 
that should expedite the contracting process.
    It is one of the unique aspects of a foreign military sale 
that would not have been--that is not applicable to U.S., which 
because it is foreign, it is different and, therefore, it takes 
some time--or added time to the process. The treatment of 
indirect offset costs that we got the authorization for last 
year will help us in terms of speeding up our timeline.
    Mr. Scott. All right. I am down to 10 seconds, so hurry. 
Please.
    Ms. McCormick. Congressman, I don't really have any 
specifics, because I think the role in my process is one that 
has to be a fairly deliberate one, and so it takes some time to 
make the decisions that we need to make. But I would echo 
Admiral Rixey's comments that some of the authorities that we 
have under title 10 should be looked at and streamlined.
    Mr. Scott. Thank you.
    Mrs. Hartzler. Thank you.
    Ms. Graham.
    Ms. Graham. Thank you, Madam Chairwoman. And thank you all 
for being here today.
    Admiral, following up on Congressman Scott's question, so 
there are FMS contracts and there are commercial contracts. Do 
we keep track of those that are getting FMS contracts, what 
they are doing commercially as well?
    Admiral Rixey. Yes. And that is the State Department 
program. So we handle FMS; and then the license requirements, 
they go through State. And State manages and tracks the direct 
commercial sales.
    Ms. Graham. Is there somewhere where you can go where you 
can see what foreign governments have in terms of commercial 
contracts as well?
    Admiral Rixey. Well, I would defer that to State, but we 
track, obviously, the FMS cases that come through DSCA.
    Ms. Graham. So they do have a tracking system where they 
keep track of that?
    Admiral Rixey. Yeah, definitely.
    Ms. McCormick. Maybe I could--maybe I could----
    Ms. Graham. Okay.
    Ms. McCormick [continuing]. Handle the question, since I 
get--my agency actually is in a situation that we get the 
licenses referred to us by the Department of State.
    So in this particular case, under the title 22 authorities 
of the State Department, the Directorate of Defense Trade 
Controls actually receives license authorizations from our 
industry directly to sell basically some of the same products 
through the direct commercial sale process. And the State 
Department Bureau of Political-Military Affairs also oversees 
the foreign military sales process. So all of defense trade is 
under their authorities and under the title 22.
    So--but my agency actually gets to review those direct 
commercial sale licenses. So we provide that technology 
security input into the Department of State on those matters as 
well.
    Ms. Graham. And how is a decision made if--I am assuming we 
have countries that have both commercial and FMS contracts. How 
is the decision made whether it is required FMS or whether it 
can be done commercially?
    Ms. McCormick. I will go ahead and take that one again.
    The decision basically is really a choice by the recipient 
country, unless we have made a decision between the Department 
of Defense and the Department of State that a particular item 
must go through the foreign military sales process. And that 
decision is normally made, what we were just answering 
Congressman Scott's question, it is normally because that 
technology is so sensitive that we want to put in place the 
various agreements between ourselves and the other government 
for the protection of that technology. Otherwise, it is really 
driven by the international partner, the international 
customer's decision.
    Ms. Speier. Will the gentlelady yield?
    Ms. Graham. Absolutely.
    Ms. Speier. Isn't it also, the difference is with direct 
military sales, you don't have the support provided in terms of 
maintenance? Isn't that the distinction between the two?
    Admiral Rixey. It is not that it's not provided. It is that 
we aren't ensuring that it is provided. So if the partner 
nation is, like, Australia, who wants to go direct commercial 
sale, they are strong enough and capable enough that they are 
going to build in a logistic support plan and they have the 
absorption capability. So that is dependent upon the nation 
that is procuring.
    So going direct commercial sale doesn't mean they are not 
going to get the logistic support or the--or will they be able 
to absorb it.
    When they go foreign military sales, we ensure full-
spectrum capability, so we will deliver the end product, 2 
years of initial support, we will encourage them to have a 
follow-on technical support case so that it is being supported 
properly, and we ensure that they can absorb it through our 
conversations with the COCOMs [combatant commands] and our 
country teams.
    So the difference between a foreign military sale and a 
direct commercial sale is we feel it is necessary, again, as 
the mission of Defense Security Cooperation, to deliver full-
spectrum capability. And so we have to have very candid 
conversations, deliberate conversations, which also slow down 
the process, to assure that they get the product, they have the 
support, and they can absorb it.
    DCS [direct commercial sale] is between the country and the 
contractor. We have no idea about the configuration, we have no 
idea about supportability. The times that we recommend DCS is 
when the technology is mature and the procuring officials are 
mature. Any time you deviate from that, they are setting 
themselves up for a nonsupportable system.
    Ms. Speier. I thank the gentlelady for yielding.
    Ms. Graham. Of course. Thank you.
    In the two processes, is there--if a country--is there an 
advantage in terms of timing or challenges that the countries 
face to choose one over the other, other than what 
Congresswoman Speier just pointed out, that one has more of a 
support system attached to it than the other?
    Admiral Rixey. Well, I will tell you what I am told is the 
advantage of going direct commercial sales. First of all, they 
can go direct to the international--or they can go direct to 
the vendor. In their minds, they think they are saving on the 
3.5 percent administrative fee that we charge them to manage 
these cases. However, they are still going to go through the 
technology review. They are not going to skip that. There is 
this thought out there that they won't have to go through the 
technology review process. They do. But in terms of going 
direct to the vendor, they can negotiate their fee, they can 
negotiate the contract.
    An FMS case, when they come to us, we go through our entire 
processes to get there. And I think they are necessary 
processes. Because sometimes some of these countries that don't 
have mature contracting offices get themselves into bad 
contracting vehicles or--and so we are providing a service and 
we are charging for a service. We also make sure, in our terms 
and conditions of a foreign military sale, that they can't do 
third-party transfers and that they are subject to our end-use 
monitoring processes.
    So they think that when they go direct, they are skipping 
this. They are not. And they are also putting themselves at 
risk of dealing with our industry.
    Now, again, when they have very mature contracting offices, 
that is not a problem.
    Ms. Graham. We sell F-35s to international----
    Admiral Rixey. Correct.
    Ms. Graham [continuing]. Obviously. Would that be 
considered something--that goes through FMS every time?
    Admiral Rixey. That does.
    Ms. Graham. Okay.
    Admiral Rixey. And I would highly recommend a major end 
item, especially that is involved with still completing its 
phases of development, to go foreign military sales. It is a 
huge risk if they do otherwise.
    Ms. Graham. Okay. Thank you.
    I yield back, Madam Chairwoman.
    Mrs. Hartzler. Thank you.
    Madam Bordallo.
    Ms. Bordallo. Thank you, Madam Chairman.
    Admiral Rixey, I think many of us see the FMS process as 
integral to our Asia-Pacific rebalance strategy in terms of 
reassuring allies and partners, as well as building capacity in 
that region. Now, in recent years, we have made progress with 
regard to South Korea, and I am hopeful that efforts will 
continue to streamline sales to our partners in the South China 
Sea.
    You touched very briefly on this in your testimony, but to 
what extent is DSCA, in coordination with the Department of 
State, working to prioritize FMS, particularly related to 
maritime capabilities for countries in the Asia-Pacific region?
    Admiral Rixey. Well, yes, ma'am. We work very closely with 
our combatant commanders, with OSD Policy, and with State to 
ensure that we understand our priorities writ large. I think 
once you understand that FMS, I told you, is a burdened 
process. We have to have some mechanism for prioritizing this 
finite workforce. We actually reorganized at DSCA along 
regional lines, and so I now have an integrated regional team 
lead at DSCA that has a relationship with the combatant command 
and the specific SCO [Security Cooperation Officer] that does 
foreign--does security cooperation, has a relationship with OSD 
Policy to ensure that we are, in fact, executing those 
priorities. And those folks in the Pacific are very much tied 
in to these initiatives that you are talking about.
    Ms. Bordallo. Very good. Now, from the DSCA perspective, 
what tools can Congress provide to enhance and facilitate 
internal as well as external processes with regards to the 
South China Sea FMS? Is there anything that----
    Admiral Rixey. I can't think of anything on hand, but let 
me take that back for the record, I will get you a response.
    [The information referred to can be found in the Appendix 
on page 71.]
    Ms. Bordallo. Okay. And though this hearing isn't an 
evaluation of the Excess Defense Articles or Foreign Military 
Financing programs, they do fall under a similar purview. And I 
welcome any additional relevant comments that you may have.
    Admiral Rixey. Yes, ma'am. Again, I will follow up, take 
that for the record, and provide that for you.
    [The information referred to can be found in the Appendix 
on page 71.]
    Ms. Bordallo. Very good.
    Admiral Rixey. But we are executing those programs as 
diligently as possible so----
    Ms. Bordallo. Well, I am pleased to hear that.
    Admiral Rixey. Yes, ma'am.
    Ms. Bordallo. And I yield back, Madam Chair.
    Mrs. Hartzler. Thank you very much.
    Vice Admiral Rixey, I have had a chance to look just 
briefly at your testimony as others have been talking here. You 
say I will not address each of the initiatives that you 
outlined, but you do cover a few of them. I was wondering if 
you and your office could take each one of these and write a 
summary of what you are doing in each of these initiative areas 
for us. That would be very helpful.
    Admiral Rixey. Yes, ma'am. We will forward you the--we 
actually have built PowerPoint quad charts that talk about 
those specifically, and I have them and I will provide those to 
you.
    [The information referred to can be found in the Appendix 
on page 71.]
    Mrs. Hartzler. Great. Well, we appreciate your efforts 
there.
    Ms. Grady, last week at our hearing with the industry, they 
indicated and were talking about how when a project comes 
through, it is mixed together with a domestic sale project at 
the same time and sometimes might be put on the back burner 
until the domestic program goes through first.
    And I was just wondering, so how are acquisition programs 
prioritized within the DOD for interagency acquisition programs 
and FMS case acquisition programs?
    Ms. Grady. Certainly. We look collectively at our total 
requirements, both U.S. and foreign allies, and coalition 
partners. And when I say ``we,'' that begins at the highest 
levels. We have warfighter senior integration groups where you 
look at emerging needs from COCOMs and from the Joint Staff, 
working in conjunction with Acquisition, Technology and 
Logistics, Admiral Rixey's staff in DSCA, DTSA, as well as all 
the implementing agencies to ensure we have visibility on the 
highest priority needs across the Department.
    Those obviously, particularly where you impact warfighter, 
are going to get the highest priority across the Department 
from an acquisition perspective. When you come to more routine 
recapitalization, that is balanced as part of a total workload 
of a particular implementing agency. And when we do forecast 
our requirements, we forecast both what we need for U.S. and 
what we need for FMS, and make sure that we track and--we track 
and get the management attention across the board, including 
looking at acquisition milestones to make sure we continue to 
progress.
    Wherever possible, we combine U.S. and foreign military 
requirements. That is where we find the greatest efficiencies 
so we can put everything on one contract. Budget cycles or 
needs don't always align that way, in which case then we would 
enter into a separate procurement action associated with that. 
But, again, using the same program office to the greatest 
extent possible so you have the sustaining engineering 
benefits, as well as production efficiencies, as well as 
management of the vendor's efforts.
    So we look at it as a collective workload management 
perspective. And in some cases, a U.S. requirement will be a 
higher priority; in some cases, an FMS requirement will be a 
higher priority. That is coming from the customers, and we make 
sure that is reflected in how we execute the workload.
    Mrs. Hartzler. Great. Thank you.
    Ms. McCormick, so to put this question in context, industry 
expressed frustration to the subcommittee last week in their 
testimony that they would--kind of generalities--say, show up 
to DOD with, say, a certain rock and DOD would, in turn, tell 
them to bring us a different rock without providing much detail 
on why the first rock wasn't sufficient. And it related to 
understanding technology, exportability, and configuration 
management of end items.
    So, therefore, what processes do you use to collaborate 
with the defense industry to provide predictability and policy 
guidance about which U.S. defense technologies are exportable 
and which are not?
    Ms. McCormick. Well, thank you, Chairwoman. That is 
interesting that they say that because, actually, they bring me 
a lot of rocks and I help to shape the rocks that they bring us 
usually. I do it really through a couple of different ways. The 
first thing is, I have a very open-door policy with industry 
where I actually encourage industry to come in and talk to us, 
actually, even before they submit their export licenses. We 
also do deep-dive sessions. In fact, Admiral Rixey and I just 
did one a couple of weeks ago with one of the major defense 
companies where we spent over 3 hours talking about all of 
their international projects.
    In fact, I really encourage companies now, particularly as 
companies are increasing the amount or looking to increase 
their international sales and, particularly, doing sales in 
countries, perhaps, where we don't have a lot of experience, 
don't have a lot of track record, to come in and really share 
with us, you know, their plans. And that gives us a great 
opportunity, I believe, to talk about sort of what is the art 
of the possible and to give them a clear sense of it.
    The final area, I think, that has been very helpful in this 
regard to clarify sort of what is in the art of the possible 
has been the significant changes that we have made as part of 
the administration's Export Control Reform Initiative where we 
have gone through a comprehensive review of our export control 
regulations, both the Commerce Department's and the Department 
of State. My agency has played a very key role in the technical 
review of those regulations in actually determining what type 
of technology we believe should stay in the jurisdiction of the 
Department of State.
    And we have moved a variety of items, many items, actually, 
over from the Department of State over to the Department of 
Commerce, including items, to be honest with you, that are 
military items. And now they are over in the Commerce's 
jurisdiction and they are allowed to go to our friends and 
allies more easily, in fact, in a very--oftentimes, without any 
additional authorization by the United States Government.
    So I think those bright-line exercises we have done as part 
of export control where we have published those regulations and 
industry has had a chance to comment on them, I think through 
all of those vehicles they have a very good opportunity to know 
exactly where the sensitive technologies are and what type of 
technology they would be able to sell internationally.
    Mrs. Hartzler. Okay, good. Do you believe that the 
Department is sufficiently staffed with the necessary skills to 
adequately perform end-use monitoring and enhanced end-use 
monitoring activities for those U.S. technologies that are 
exported to foreign customers?
    Ms. McCormick. I will tell you what I am going to do, I am 
going to leave the staffing answer to Admiral Rixey, but I will 
give you my piece of the puzzle. So what my agency is very much 
involved in is working with Admiral Rixey, as well as the 
Department of State, to determine what types of technology, 
first off, as we have talked previously, need to go through 
that FMS process and which technology needs to have certain 
levels of either end-use monitoring or enhanced end-use 
monitoring.
    And so a lot of that is driven by that technology level. So 
I am--my staff and I are very involved in actually setting the 
determination of the frequency with which that end-use 
monitoring needs to be done. But in terms of the staffing 
level, I will leave that to Admiral Rixey since it is usually 
the workforce that he actually helps to fund that do that work.
    Mrs. Hartzler. Okay. Thank you.
    Admiral Rixey. Yes, ma'am. Well, first of all, staffing 
concerns with end-use monitoring is the same as staffing 
concerns with contracting and everything else. So as the 
foreign military sales increase, we will need to staff to meet 
that demand. I am responsible for the Golden Sentry program. 
That is for foreign military sale. The State is responsible for 
Blue Lantern.
    Under the Golden Sentry program, we have our staff that are 
in the embassies in each country, so we are working very 
closely with the services to identify those needs. Also, how 
they are allocated, working with the Joint Staff and then how 
those folks are allocated. Again, we are going to have to look 
at staffing mechanisms that don't count against manpower 
counts. And then I also have a team at DSCA that is responsible 
for assessing. We do assessment visits with each country to 
determine, are they managing their end-use monitoring programs 
carefully?
    With that assessment, we rate them, and if satisfactory, 
they can continue. We have rated some unsatisfactory when they 
are not meeting the requirements associated with that. And that 
is the team that I have that do those assessments and do those 
courtesy visits back at DSCA. We are staffed for that, but I 
will be concerned with the folks that we have in the embassies 
in terms of numbers if these sales continue to rise.
    Mrs. Hartzler. Okay. Very good.
    Ms. Grady, in your testimony you talk a little bit about 
the different types of contracts, and that was also brought up 
last week with industry. And you make a case there for enabling 
the fixed price incentive to continue. And you say that you 
require a lot of customers of FMS to participate in this at 
times--let's see. It says, ``Simply put, sufficient funding 
needs to be in place to ensure that the FMS customer pays the 
final bill, no more, no less.'' And this is alluding to the 3.5 
percent fee that is----
    Ms. Grady. Actually, ma'am, that was in reference to a 
point that industry had raised last week----
    Mrs. Hartzler. Right.
    Ms. Grady [continuing]. About the length of time that we 
need to hold on to excess funds before we can close out the 
contract. So it was specifically to contract type, not to the 
fee that is payable for the FMS process.
    Mrs. Hartzler. Yes. Right. We are talking about the same 
thing.
    Ms. Grady. Okay.
    Mrs. Hartzler. Let me get around to my question here. 
Because they did raise that concern that sometimes it could be 
7 to 10 years that the money is held up by the country until 
the contract is completely filled. So I just wondered, has 
there been examples of a country not having enough money to pay 
their final bill, and when did that happen?
    Ms. Grady. I am not aware of a specific example. We can go 
back and look associated with that. We monitor throughout the 
contract performance to ensure that there are adequate funds in 
the case to pay all of the costs associated with that.
    When we talk about cases versus contracts, cases are 
usually a compilation of support that we are providing to a 
particular country. And it is usually typically more than just 
one specific contract. So it is the broader package of support 
that we are delivering to that foreign government.
    So we monitor both the estimate up front of what we think 
it will cost to complete the contract and then we monitor 
contract performance throughout the entire life of the contract 
to ensure that we have adequate funds.
    In the event the funds are different than what we 
anticipated, we would either notify the customer that we are--
through DSCA, that we have excess funds or notify them that we 
need to potentially amend the case to add additional funding 
associated with that. We track that throughout the process. 
That is part of the case management function, and we want to be 
as transparent and as timely as possible in terms of notifying 
them where we are relative to the expenditure of their money.
    Mrs. Hartzler. Would you be supportive of allowing the 
country to choose which type of contract that they enter into?
    Ms. Grady. So what is somewhat unique about the FMS process 
is the letter of offer and agreement is a contract between the 
country and DSCA. The contract that we are entering into itself 
is actually between the U.S. Government and U.S. industry. So 
while we are doing that on behalf of the FMS customer, they are 
not actually a party to the legal contract that we enter into. 
What we look at and we apply the same rigor and discipline 
associated with selection of contract type for our FMS 
customers as we do for our U.S. customers.
    In a mature production environment, it would be fairly 
typical to see a firm fixed price contract type. Where we have 
seen uses of fixed price incentive has been instances where 
when we look at what we negotiated versus what the actual costs 
incurred were and there was a significant variation. And when I 
say significant variation, we define that back in 2008 in our 
acquisition regulations as greater than 4 percent.
    So, basically, there is some factor that is driving 
uncertainty into the cost of performance that we didn't account 
for when we negotiated with industry. Using a fixed price 
incentive contract allows for sharing between either the 
overrun or underrun associated with those excess or surplus 
funds to be shared between the customer, ultimately, the 
customer and industry.
    So our preference is to use firm fixed price, but only if 
we have cost certainty that allows us to fairly price those 
contracts.
    Mrs. Hartzler. Got you. Thank you very much.
    I just have a couple more here for Ms. McCormick. Can you 
tell me anything about what internal benchmarks DTSA has in 
place to guide decision timelines, and how are DTSA and DSCA 
communicating decision timelines to our country's partners to 
ensure that they are making the best decisions in their 
national security interests and not seeking goods/services from 
alternative sources, such as China or Russia?
    Ms. McCormick. Thank you for that question. So the first 
one, as I alluded in my--I mentioned in my opening statement, 
and it is also in my written statement about the Arms Transfer 
and Technology Release Senior Steering Group that we use. I 
think this is a very good forum that we use really as a 
benchmark because that is a forum where we get the DOD 
stakeholders together and we identify priority release 
decisions that were working across the different processes.
    I also, every week, get together with my staff, and I am 
constantly looking at the timelines associated with our review 
of export licenses. Obviously, we do provide the technical 
input, particularly to the Department of State, on those direct 
commercial sale munitions licenses. And I certainly--we don't 
have a statutory timeline in that case, but I try to move very 
quickly. I try to do that in sort of the 60-day timeframe. On 
the dual-use side with the Commerce license, we actually have 
statutory requirements that we have to meet. Those licenses 
have to be reviewed in a 30-day period.
    And so I think through the last couple of years, the 
processes that we have used to really track this are really 
trying to, again, be anticipatory with these release decisions. 
And as I indicated in my testimony, to actually do that in 
release of--basically, before a country actually asks for that 
capability.
    Admiral Rixey and I also work very closely together where 
the whole issue of defense trade is a constant discussion point 
that we have with international partners. We both work for 
Under Secretary Christine Wormuth, the Under Secretary of 
Defense for Policy, and she has many bilateral dialogues with 
countries. And I can tell you that the defense trade portion, 
including foreign military sales, is always a key part of those 
dialogues.
    And so I think that keeps our feet to the fire where we are 
working very closely with those international partners and they 
realize that the capability--we want to provide that capability 
to them and we certainly want to do it in a timely manner and 
be a provider of choice.
    Mrs. Hartzler. Very good. So given the constraints on the 
U.S. budgets and foreign military sales are increasingly 
important to ensuring that the U.S. defense companies are able 
to remain competitive and provide for a more robust industrial 
base. So how are DTSA and DSCA communicating with industry to 
ensure that they have visibility on expected timelines in order 
to plan and ensure that they meet critical FMS needs and what 
can we be doing better here?
    Admiral Rixey. Well, ma'am, first of all, we have a very 
robust industry engagement. And I meet with them regularly, 
unilaterally--or bilaterally, sorry. And sometimes I meet with 
Ms. McCormick. She joins me, and we have discussions with our 
industry partners.
    I have an entire team called my weapons group that is 
really an ombudsman to our industry partners to have as much 
dialogue as they are willing to have on those particular cases. 
In addition to that, I sit with Mr. Kendall and when he meets 
with the significant primes of industry to discuss foreign 
military sales. So we have what I consider an extraordinarily 
robust industry engagement across all three fronts to make sure 
that we are managing their expectations.
    Mrs. Hartzler. Great. All right. Looks like Ms. Speier had 
to leave, so I think we are done with the questions from our 
end. But I wanted to give each one of you an opportunity to 
make any closing statements or anything else you would like to 
share on this topic that you haven't had a chance to cover yet.
    So Vice Admiral.
    Admiral Rixey. Well, I would like to close by saying, first 
of all, thanks for this opportunity. I do want to emphasize 
that we are defending the foreign military sales system. We 
think it is--you know, the Arms Export Control Act and all it 
entails is critically important to ensure that it is, as a 
foreign policy too, we are doing it the right way.
    An FMS case as opposed to direct commercial sale case 
really establishes a mil-to-mil relationship for 25 to 40 
years. It is a very effective foreign policy tool, for building 
that relationship, for interoperability, for building out our 
capacity. And so, anyway, ma'am, thanks for the opportunity to 
speak today.
    Mrs. Hartzler. You bet. Thank you.
    Ms. Grady.
    Ms. Grady. Good morning. Thank you for the opportunity. And 
I think I have emphasized this repeatedly, but also I just 
wanted to make one more reiteration. One of the strengths of 
the acquisition system and our ability to support the foreign 
military sales agilely, when you have potentially large swings 
in customer requirements and don't always have the ability to 
anticipate as well as we would like what those requirements 
are, keeping the processes as consistent as possible, and 
providing the full range of acquisition tools we have available 
are the best way we can support our foreign military sale 
customers.
    Mrs. Hartzler. Great.
    Ms. Grady. Thank you.
    Mrs. Hartzler. Thank you.
    Ms. McCormick. And I appreciated the opportunity to join 
this panel today. I was sort of a late add, I believe, last 
week, but I was very pleased to be asked because, obviously, it 
is very important. We do want to share advanced technology with 
international partners, but we also have to strike that balance 
to make sure that that technology is going to be used in the 
manner in which it should be used and for which we have 
authorized it. So I hope you have gotten the impression this 
morning, we have a great collaboration within the Department of 
Defense to work these issues, and we also have a very strong 
partnership with industry as well. So thank you.
    Mrs. Hartzler. You bet. Well, thank you for all that you 
are doing for our country. This is a very important process, 
not only for our national security, but for our allies as well. 
And it is not an easy process. So I appreciate all of your 
efforts. Thank you for being here today.
    This hearing is now done.
    [Whereupon, at 11:15 a.m., the subcommittee was adjourned.]

      
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                            A P P E N D I X

                              May 17, 2016
     
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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                              May 17, 2016

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                   DOCUMENTS SUBMITTED FOR THE RECORD

                              May 17, 2016

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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                              May 17, 2016

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            RESPONSE TO QUESTION SUBMITTED BY MRS. HARTZLER

    Admiral Rixey. These initiatives were developed with stakeholders 
across the enterprise and are led by different offices within the 
Department of Defense, as well as Department of State--as depicted by 
``lane owners'' in the FMS System chart (slide 1). The initiatives are 
organized to align to the FMS System Grid chart (slide 2) that segments 
the process into coordinates, major milestones/validation points of the 
process. The first group of initiatives, ``Phase 0'', are considered 
shaping, enterprise activities--that is, they affect multiple lanes and 
benefit the process in the broadest sense. Subsequent initiatives are 
focused on specific activities within the different lanes--whether the 
FMS case development process, the technology release and foreign 
disclosure review process, foreign policy oversight, or acquisition. 
Taken together, these initiatives endeavor to fundamentally and 
comprehensively improve the performance of the FMS enterprise.   [See 
page 20.]
    [The slides referred to are retained in the subcommittee files and 
can be viewed upon request.]
                                 ______
                                 
             RESPONSES TO QUESTIONS SUBMITTED BY MS. SPEIER
    Admiral Rixey. DSCA does not have any data points or documentation 
indicating numbers of FMS cases that might have been lost due to 
slowness (or perceived slowness) of the system. We noted in industry 
testimony on May 11 that the industry witnesses did not provide 
specific examples supporting this concern. If industry representatives 
do provide specific examples of FMS cases lost due to slowness in the 
FMS system, DSCA could research the specifics of the individual case(s) 
and perhaps provide more information.   [See page 12.]
    Admiral Rixey. This chart and graph include numbers of FMS cases 
newly implemented each year from Fiscal Year 2000-2015.   [See page 
12.]
    [The information referred to can be found in the Appendix on pages 
67 and 68.]
                                 ______
                                 
            RESPONSES TO QUESTIONS SUBMITTED BY MS. BORDALLO
    Admiral Rixey. At the Shangri-La Dialogue on May 30, 2015, 
Secretary Carter announced the Department of Defense's (DOD) Southeast 
Asia Maritime Security Initiative (MSI), a comprehensive, multi-year 
effort that will reinforce our partners' and allies' maritime security 
efforts and address shared challenges. This initiative is made possible 
through a new authority focused on building partner capacity in the 
maritime domain--Section 1263 of the National Defense Authorization Act 
(NDAA) for Fiscal Year (FY) 2016.
    DOD is using MSI to provide training, equipment, supplies, and 
small-scale construction to eligible countries--the Philippines, 
Vietnam, Indonesia, Malaysia, and Thailand--in an effort to enhance 
their ability to ``sense, share, and contribute'' to maritime security 
and maritime domain awareness.
    To carry out the authority, DOD provided $50 million in funding for 
MSI in FY 2016 and has requested an additional $60 million in FY 2017. 
The Department has also programmed an additional $315 million through 
FY 2020 for an initial total of $425 million over the duration of the 
existing authority. However, the lack of cross fiscal year authority in 
Section 1263 makes it more difficult for our planners and acquisition 
professionals to implement comprehensive programs that ensure we 
maximize the use of resources to deliver full and sustainable 
capability.
    For fiscal year 2017 and beyond, we recommend Section 1263 include 
provisions for cross-fiscal year authority and the achievement of full 
operational capability. Specifically, we would like to see the same 
language in NDAA Section 1263 that currently exists in 10 U.S.C. 2282 
to allow for the availability of funds across fiscal years:
    Cross Fiscal Year Authority--Amounts made available in a fiscal 
year to carry out the authority may be used for programs under that 
authority that begin in the fiscal year such amounts are made available 
but end in the next fiscal year.
    Achievement of Full Operational Capability--If equipment is 
delivered under a program under the authority in the fiscal year after 
the fiscal year in which the program begins, amounts for supplies, 
training, defense services, and small-scale military construction 
associated with such equipment and necessary to ensure that the 
recipient unit achieves full operational capability for such equipment 
may be used in the fiscal year in which the foreign country takes 
receipt of such equipment and in the next fiscal year.
    Finally, we recommend Congress rename the Section 1263 authority 
the ``Southeast Asia Maritime Security Initiative'' (versus ``South 
China Sea Initiative''). The current name inadvertently discourages 
partners in the region from participating in a program that, to some, 
appears politically charged.   [See page 20.]
    Admiral Rixey. The U.S. Foreign Military Financing (FMF) and the 
Excess Defense Articles (EDA) programs continue to be essential tools 
for the Department of Defense (DOD) in building the capacity of partner 
nations. We find that the best results are achieved when these programs 
are used in tandem, or when we combine them with other available 
authorities such that we can provide a full-spectrum capability, to 
include platform, enhancements, training, and sustainment.
    All countries in the South China Sea region are eligible to receive 
EDA through either sale or grant and, in FY16 alone, $75 million in 
bilateral FMF is available for partner nations. To build capacity in 
the Southeast Asian region, DOD is working closely with the Department 
of State and regional partners to co-invest and integrate partner 
nation funds, EDA, and FMF. An example of this can be found in the 
Philippines where EDA grant assistance provided two high endurance 
cutters and investment from FMF and Philippine national funds 
refurbished the cutters to operational capability. In addition to FMF 
and EDA, the U.S. Government is also integrating a new security 
assistance program as part of the rebalance to Asia--the Department of 
Defense's (DOD) Southeast Asia Maritime Security Initiative (MSI), 
which is a comprehensive, multi-year effort that will reinforce our 
partners' and allies' maritime security efforts and address shared 
challenges. This initiative is made possible through a new authority 
focused on building partner capacity in the maritime domain--Section 
1263 of the National Defense Authorization Act (NDAA) for Fiscal Year 
2016. MSI will complement other ongoing U.S., partner, and allied 
efforts. Fundamental to our vision, MSI views maritime capacity 
building through a regional lens that prioritizes building multi-
mission capabilities and fosters interoperability, not just with the 
United States, but among key Southeast Asian countries.   [See page 
20.]

      
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                              May 17, 2016

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                   QUESTIONS SUBMITTED BY MS. SPEIER

    Ms. Speier. To what extent are foreign military sales driven by 
U.S. defense manufacturing companies courting foreign countries? How 
sizable and influential is their role upon other countries in their 
deliberation of the military purchasing process? Are there instances in 
which defense companies created a need for FMS abroad when it may not 
exist?
    Admiral Rixey and Ms. Grady. Foreign military sales arise from 
foreign partner requirements. Ultimately, the decision to procure 
defense articles and services from the U.S. defense industrial base 
lies with the foreign partner country. U.S. DOD security cooperation 
offices, under the direction of the Geographic Combatant Commander and 
supported by the Defense Security Cooperation Agency (DSCA), are 
positioned overseas at our embassies and consulates as the principal 
DOD points of contact to respond to our foreign partners and to help 
them to identify and define requirements for defense capabilities. 
Procurement of defense capabilities can be satisfied through Foreign 
Military Sales (FMS), Direct Commercial Sales (DCS), a combination of 
both, or other arrangements such as coproduction agreements. U.S. 
defense industry participate in all of these alternatives. They market 
the capabilities of their companies' products and services and help DOD 
inform our foreign partners on the price and availability of defense 
goods and services available to meet their requirements. Prior to any 
discussions of systems that involve the provision of International 
Traffic in Arms Regulations (ITAR)-controlled information, U.S. 
industry is required to submit an export license for U.S. Government 
approval to do so. This allows the U.S. Government to conduct due 
diligence review to ensure that a potential resulting sale is in line 
with these three fundamental and critical validations:
      The sale is of mutual benefit to the partner nation and 
the U.S. Government;
      The technology will be protected; and
      The transfer is consistent with U.S. Conventional Arms 
Transfer policy
    In addition, the Department of Commerce's Advocacy Center 
coordinates U.S. Government interagency advocacy efforts on behalf of 
U.S. exporters bidding on public-sector contracts with overseas 
governments and government agencies. The degree to which both DOD and 
U.S. industry work together to help influence this outcome, while 
ensuring that efforts are coordinated and in line with U.S. foreign 
policy and technology transfer limitations, should be viewed as a 
positive national defense priority.
    Ms. Speier. To what extent are foreign military sales driven by 
U.S. defense manufacturing companies courting foreign countries? How 
sizable and influential is their role upon other countries in their 
deliberation of the military purchasing process? Are there instances in 
which defense companies created a need for FMS abroad when it may not 
exist?
    Ms. McCormick. DTSA has a limited role in the execution of FMS 
programs and, as a result, has little insight into the specific impact 
of industry on FMS cases. We defer to DSCA, who in response to the same 
question from Representative Speier, provided the following: [see 
answer above from Admiral Rixey and Ms. Grady].``Foreign 
military sales arise from foreign partner requirements. Ultimately, the 
decision to procure defense articles and services from the U.S. defense 
industrial base lies with the foreign partner country. U.S. DOD 
security cooperation offices, under the direction of the Geographic 
Combatant Commander and supported by the Defense Security Cooperation 
Agency (DSCA), are positioned overseas at our embassies and consulates 
as the principal DOD points of contact to respond to our foreign 
partners and to help them to identify and define requirements for 
defense capabilities. Procurement of defense capabilities can be 
satisfied through Foreign Military Sales (FMS), Direct Commercial Sales 
(DCS) a combination of both, or other arrangements such as coproduction 
agreements. U.S. defense industry participate in all of these 
alternatives. They market the capabilities of their companies' products 
and services and help DOD inform our foreign partners on the price and 
availability of defense goods and services available to meet their 
requirements. Prior to any discussions of systems that involve 
provision of ITAR-controlled information, U.S. Industry is required to 
submit an export license for USG approval to do so. This allows the USG 
to conduct due diligence review to ensure that a potential resulting 
sale is in line with these three fundamental and critical validations:
      The sale is of mutual benefit to the partner nation and 
the USG;
      The technology will be protected; and
      The transfer is consistent with U.S. Conventional Arms 
Transfer policy
    In addition, the Department of Commerce's Advocacy Center 
coordinates U.S. government interagency advocacy efforts on behalf of 
U.S. exporters bidding on public-sector contracts with overseas 
governments and government agencies. The degree to which both U.S. DOD 
and U.S. industry work together to help influence this outcome, while 
ensuring that efforts are coordinated and in line with U.S. foreign 
policy and technology transfer limitations, should be viewed as a 
positive national defense priority.'' deg.

                                  [all]