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
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)