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Foreign Military Sales: A Potential Drain on the U.S. Defense Posture (Unclassified Digest)

Published by the Government Accountability Office on 1977-07-25.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          DOCUMENT RESUME

02770 - [A2133238]   (O   o

Foreign Military Sales: A Potential Drain on the U.S. Defense
Posture (Unclassified Digest). LCD-76-455. Jujy 25, 1977.

Report to the Congress; by Elmer B. Staats, Comptroller General.

Issue Area: tMilitary Preparedness Plans (800); Intetnational
    Economic and Military Programs (600) ;Facilities and Material
    Management (700).
Contact: Logistics and Communications Div.
Budget Function: National Defense: Department of lefense -
    Military (except procurement s contracts) (051).
Organization Concerned: Arms Control and Di.sarmament Agency;
    Department of Defense; Department of the Treasury;
    Department of State.
Congressional Relevance: House Committee on Armed Services;
    Senate Committee on Armed Services; Congress.
          Records of the United States Arms Control and
Disarmament Agency indicate that the United States has dominated
the world arms market since 1965 and now controls it by almost
50%. This domination is attributable to the high technology
embodied in the weapon systems sold; the ability to provide
follow-on support through the systems' life cycle; and, in some
cases, a political preference on the part of some countries for
buying from the United States rather than from other nations.
Findings/Conclusions: Many of the problems affecting the
management of the foreign military sales process can be solved
at the Department of Defense. Recommendations: The Secretary of
Defense should require: inclusion, in all cases, of detailed
impact statements in the foreign military sales decisionmaking
process so that relevant information is not omitted
inadvertently; a supply support agreement or other mechanism to
be a part of any sale when it is feasible so that the Department
of Defense can program and fund future support without affecting
U.S. defense capabilities adversely; and development of a
forecasting mechanism to identify the probable quantities of
future critical support items for U.S. and foreign sales
customers, including long le.dtime items used on more than one
weapon system. Such a mechanism will require a system that will
couple existing data on sales and deliveries by country, weapon
system, quantities, and delivery dates with current assets. (£Ct
                 This is an unclassified digest furnished in lieu of
               a report containing classified security information.



 °O       COMPTROLLER GENERAL'S        FOREIGN MILITARY SALES--
      -   REPORT TO THE CONGRESS       A POTENTIAL DRAIN ON
                                       'THE U.S. DEFENSE POSTURE
rVi                                    Departments of Defense and   State

                  DIGEST

                  Sales of military equipment by the United
                  States to foreign buyers have increased
                  from $952 million in 1970 to $8.7 billion
                  in 1976.

                 Continued congressional concern over the im-
                 pact of such sales on the U.S. defense posture
                 prompted GAO to review effects of certain weap-
                 on systems' sales on U.S. Forces and to exam-
                 ine the considerations given to these effects
                 on the decisionmakinq process.

                 Records of the United States Arms Control and
                 Disarmament Agency indicate that the United
                 States has dominated the world arms market since
                 1965 and now controls it by almost 50 nercent.
                 This domination is attributable to the high
                 technology embodied in the weapon systems
                 sold; the ability to provide follow-on sup-
                 port through systems' life cycles; and,
                 in some cases, a political preference on
                 the part of some countries for buying from
                 the United States rather than from other
                 nations.

                 Foreign military sales include some of the
                 most advanced weapons and support systems
                 in the U.S. inventory and represent a large
                 percentage of new weapons or equipment.   Fo:
                 example, in fiscal vear 1975 about 50 per-
                 cent of the Army's procurement activities
                 were for the support of foreign sales.
                 Similarly, the chief customers oave changed
                 from primarily North Atlantic Treatv Organi-
                 zation countries and other allies to Middle
                 East countries not allied with the United
                 States--iran, Israel, and Saudi Arabia.
                 These countries accounted for over half of
                 the $8.7 billion foreign sales in 1976.



                 JUL 2 5 19S"                                 rCD-76-455
                                         i
Foreign military sales are intricately woven
throughout the U.S. political, economic, and
defense fabric, which makes management of
these sales complex and assessment of their
effects difficult.   However, reasonable as-
sessments from Defense indicate that the arma-
ment management and decisionmaking process
has, on occasion, allowed foreign deliveries
to affect [I.S. defense capabilities adversely.
GAO believes that, even though some sales are
made from a purely political standpoint,
there are opportunities to improve the man-
agemenu process for satisfying these and
other foreign sales so as to minimize the
impact on the U.S. defense posture.

What follows is intended to highlight some
of the ways in which foreign sales have had
an impact, and may continue to have an im-
pact, on the U.S. defense posture.  However,
none of the examples, by themselves, create
insurmountable problems, and they should not
L-e considered out of context.      But when the
examples are   considered    together,   their   cu-
mulative effect demonstrates how foreign sales
aggravate the already difficult task of man-
aging the U.S. defense posture in a peacetime
environment.  Moreover, the examples provide
a valuable insight into the need for imrrove-
ments today in order to avert potentially
greater management complexities in the fu-
ture.

The report identifies problems that affect
the management of the foreign military sales
process and attempts to place the potential
long-range effects of the sales in perspec-
tive.  For example:
-- Foreign sales agreements provide for future
   support. At the beginning of fiscal year
   1976, undelivered orders totaled about
   $24 billion. As more deliveries of such
   systems are made, problems encountered vith
   production limitations and competing de-
   mands for key components will be magnified.
  (Sec p. 34.)



                        ii
 -- Over 45 percent of support requirements
                                              for
    sales of major end-items from 1970 to
    have not been programed.               1975
                               Unless these re-
    quirements are definitizce  and planned for
    in advance, the United States may not
                                           be
    able to satisfy future forzign support
                                            re-
   quirements without affecting the U.S.
                                           read-
    iness.  (See pp. 33 and 34.)

 -- Management information systems for
                                       foreign
    military sales have data of individual
    sales satisfied from present production,
    but the systems do not identify future
    port requirements for U.S. and foreign sup-
    customers.  (See p. 18.!

 -- Inadeauate consideration has been diven
    the cumulative effect of foreign militaryto
    sales on weapon systems with common
                                        com-
    ponents.  Sales thus made affect not only
    the system being delivered but also other
   systems.   (See D. 29.)

Many of the problems can be solved at
                                      the
Department of Defense.  The Secretary of
Defense should require:

-- Inclusion, in all cases, of detailed
                                         impact
   statements iin the foreign military sales
                                              de-
   cisionmaking process so that relevant
   formation is not omitted inadvertently.in-
   (See pp. 19 and 20.)

--A supply support agreement or other
                                        mech-
  anism to be a part of any sale when
                                        it is
  feasible, so that the Department of
                                        Defpnse
  can program and fund future support   without
  affecting U.S. defense capabilities
                                        adversely.
  (See p. 38.)

-- Development of a forecasting mechanism
   to identify the probable quantities
                                         of
   future critical support items for U.S.
                                            and
   foreign sales customers, including long
   leadtime items used on more than onp
                                          weapon
   system.  S'uch a mechanism will reauire
   a system that will couple existing data
  on sales and deliveries by country,
                                        wea-
  pon system, quantities, and delivery
                                          dates,
  with current assets.    (See pD. 38 and 39.)

                       iii
AGENCY COMMENTS

The Department of Defense concurred in GAO's
recommendations.    It said that it had issued
instructions informing the military services
of the prw,.edures to be followed when sub-
mitting i'.;:act statements. The instructions.
however, do not specif- the criteria to be
considered.    (See p. 20.)

Explicit criteria should be given to the
three services to facilitate the preparation
of complete and consistent impact statements.

'the Department of Defense said that agreementE
for supply and support would be made a part of
any foreign military sale for major weapons
when it was feasible to do so.   It did not, how-
ever, cite any instructions issued or planned
that would emphasize to negotiatrs that every
effort should be made to include such aqree-
ments as part ot all foreign military sales
for major weaponi systems.  Specific instruc-
tions emphasizing this policy are irrmperative.

The Department of Defense noted that fore-
castinq future foreign military sales for ma-
jr,r system reauiremnents was being done by
tracking inventories, production, training.
and foreign demand on 60 major weapon systems
to the extent that the reauirements of tor-
eiqn governments are known to them or to the
Department of State.    However, the system
does not address future support reauirmrnents.
(See p. 39.)

Eefense's system on the b) major systers is a
btep in the riqht direction, but it 9hould
be expanded to provide for forecasting re-
auirements in future critical support for
those items, whether in the hands of U.S.
Forces or foreign customers.  Although De-
fense noted that it planned to issue a direc-
tive that would require the services to mein-
tain infc-mation on past, present, and fore-
casted sales of major weapon systems, GAO's




                      iv
review of the proposed directive disclosed
that it did not address the n.aintenance of
such data specifically.

The Department of State had no objecton to
GAO's recommendations. However, it noted
that many foreign military sales that had
caused major effects on U.S. capabilities
in recent years were the r-sult of politi-
cal, rather than management, decisio.ns.




                     V