What is the difference between an LOA amendment and a modification?

An international partner’s requirements and the conditions and circumstances of the accepted LOA may change during the course of implementation and execution. Examples of changes include the following:

• Increased or decreased costs of LOA items
• Revised delivery dates
• Additional items required
• Changes in system configuration

To authorize these changes and establish an audit trail, proper documentation must be prepared for accurate and complete case management. The decision to use a new LOA, an amendment, or a modification to implement a change will be shaped by the special conditions surrounding each change. FMS interests are best served through use of the document that best safeguards U.S. and international partner’s interests while most efficiently accomplishing the needed program change. The scope of the case is a key issue to consider in deciding whether to prepare an Amendment, Modification, or new LOA. A scope change takes place when the original purpose of a case line or note changes. This may be reflected through either an increase or decrease in dollar value, quantity, or lead-time.

Specific details on identifying the correct document to use and on complying with the necessary administrative requirements of review and/or countersignature by DSCA are found in SAMM, Section C6.7. A case manager who has doubt as to which document is appropriate after reviewing the SAMM guidance should consult the Implementing Agency SC policy office and/or DSCA.

Revisions that significantly change original requirements are normally considered to be major changes in scope. Examples are the addition or deletion of Significant Military Equipment (SME) or a substantial expansion of a program. Major changes normally require the preparation of a new LOA. New LOAs for major changes to an ongoing program will cross reference the previous LOA.

An LOA amendment represents a bilateral change to the case. By virtue of being bilateral, an amendment will not become effective unless the international partner accepts the change. The international partner has a choice to either accept or reject an amendment offered by the USG.

Acceptance of the change is signified by the international partner signing the amendment. Some amendments may require initial deposits, and these will not be implemented until sufficient payments have been received to cover the current financial requirements, including termination liability. Rejection of the change is signified by declining to sign the amendment.

Changes to existing cases that do not impact the scope of the case are accomplished via modifications. When the SC partner accepts the original LOA, they agree to accept the provisions of the standard terms and conditions. Section 4 of the standard terms and conditions permits the U.S. to make changes to the case under certain circumstances. An LOA modification is the document the U.S. uses to inform the international partner of these unilateral changes. Because the international partner already agreed to such unilateral modifications by the USG in the standard terms and conditions of the LOA, the international partner is not required to accept a modification. A modification is implemented on countersignature, or on U.S. Government signature when countersignature is not required. A modification does have a signature block for the international partner to sign but, in this instance, the signature simply acknowledges receipt rather than signifying acceptance. Examples of changes implemented by a modification are outlined in the SAMM C6.T7.

The modification also plays a critical role in financial management by the U.S. security assistance community. Under Section 4.1 of the standard terms, the U.S. uses its best efforts to advise the partner of cost increases above ten percent, payment schedule changes and significant delays; a modification is the usual way that notice is given. A modification should also be provided for cost reductions, even if relatively minor, when all items are on order and prices are reasonably firm.

A pen and ink change refers to a minor change that is authorized after an LOA or LOA amendment is offered to the international partner but is made prior to the international partner’s acceptance. Pen and ink changes are generally used to correct minor administrative or arithmetic errors. The IA authorizes the international partner to make any pen and ink changes by issuing an email or memorandum. Minor changes the IA may approve include a small arithmetic change that does not raise total case value, an address correction or minor note wording. A pen and ink change to the initial deposit or payment schedule needs DSCA (OBO/FPRE/CFD) approval. Pen and ink changes made by the international partner without prior authorization by the IA are considered a counteroffer and are not valid.

Pen and ink changes to modifications are not authorized. The reason for this is that a modification is a unilateral document and becomes effective upon issuance by the USG without requiring international partner acceptance. Any required changes to a modification must be accomplished by issuing another modification.