[Federal Register Volume 59, Number 137 (Tuesday, July 19, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-17511]


[[Page Unknown]]

[Federal Register: July 19, 1994]


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DEPARTMENT OF DEFENSE

Office of the Secretary

 

Department of Defense Policy Revision Concerning Foreign Military 
Financing for Direct Commercial Contracts

AGENCY: Office of the Secretary, DOD.

ACTION: Notice.

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SUMMARY: Section 572 of the FY94 Foreign Operations Appropriations Act 
(Public Law 103-87), required DOD to continue the use of Foreign 
Military Financing (FMF) for funding Direct Commercial Contracts (DCCs) 
until all parties affected by any such changes were consulted. 
Accordingly, DOD completed consultations with eligible countries, U.S. 
Industry, and Congress on the new policy and recommended that the 
Secretary of Defense continue FMF of DCCs on an exception basis. The 
Deputy Secretary of Defense accepted the recommendation and has 
approved the continued use of FMF of DCCs on an exception basis. This 
new policy is effective as on July 1, 1994, and will be phased-in with 
full implementation effective January 1, 1995. Implementation of the 
new policy will require new Guidelines and Contractor's Certification 
which are expected to be published by the end of September 1994. The 
following are the major changes to be included:

--DCCs will not be permitted for standard DOD items. Exceptions may be 
granted on a case-by-case basis if DOD determines that the Foreign 
Military Sales (FMS) system cannot satisfy the requirement. The 
purchasing country must request exceptions for procurement of standard 
DOD items through the Defense Security Assistance Agency (DSAA) and 
provide written justification explaining why the requirement should be 
obtained through DCC.
--Proof of competition, to include offer prices, will be required on 
all competitive buys. If the lowest offeror is not selected, the 
country will be required to justify its choice.
--Cost analysis/price evaluations will be conducted by the Defense 
Logistics Agency (paid for by the foreign country) on all sole-source 
contracts of $500,000 or more.
--Contract administration services will be performed by the Defense 
Logistics Agency (paid for by the foreign country) on contracts over 
$500,000.
--The Defense Contract Audit Agency will continue to conduct audits of 
contracts.
--Commissions and agent's fees will not be permitted unless paid for 
from country national funds. Progress or milestone payments to the 
contractor will be limited to actual costs incurred.

    DOD will continue to consider financing contracts or amendments 
signed by December 31, 1994, and submitted to the Defense Security 
Assistance Agency (DSAA) by March 30, 1995, under existing guidelines. 
All contracts or amendments regardless of signature date received after 
this cut-off date will be processed under the new policy procedures. 
For additional information contact the Defense Security Assistance 
Agency, Operations Management Division, (703) 604-6365 or FAX (703) 
604-6541.

    Dated: July 14, 1994.
Patricia L. Toppings,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 94-17511 Filed 7-18-94; 8:45 am]
BILLING CODE 5000-04-M