Does a Foreign Military Sales purchase share U.S. production priority?

There are many defense articles produced by U.S. industry using production equipment provided by the DoW or in USG-owned facilities. Such production equipment and facilities are made available to the contractor to fulfill DoW requirements, including FMS requirements. Contractors may use such facilities and equipment for DCS only with USG approval and only when there is no adverse impact on DoW requirements. Except in times of crisis, the prioritization of such equipment or facilities is not a problem.

The USG has established an industrial priority system to resolve conflicts in production priorities. Each U.S. defense program is assigned a specific priority based on the program’s relative importance to the USG. The USG uses its relative need for a system to settle production conflicts rather than leaving such resolution to the discretion of contractors. FMS equipment normally is purchased together with U.S. equipment and shares the U.S. industrial priority. DCS involves independent contracts that do not automatically receive the same production priorities as DoW procurements.

Another consideration involves government-furnished equipment (GFE) or government-furnished material (GFM). The contractor generally incorporates such items into larger systems, which are then delivered to either the DoW or an international partner. Contractor access to GFE or GFM in support of DCS could significantly impact the capability of a contractor to make a direct sale. By contrast, under the FMS system, the DoW coordinates the delivery of GFE or GFM directly to the prime contractor for both U.S. and FMS requirements.

If GFE and GFM components are not available directly to a contractor, the international partner could acquire them under FMS procedures and provide them to the contractor for incorporation in the end item. This procedure, of course, would make a commercial acquisition more complex for the international partner and would require careful coordination of both the commercial and the FMS transaction.