Industry pushes hard for Congress to modernize foreign military sales

Three contractor trade associations have banded together on the issue of foreign military sales. Last year they sent a long list of suggested changes to the Defense Department. This year they’re focusing on the State Department. For a summary,  Federal Drive with Tom Temin spoke with Stephanie Kostro, the executive vice president for policy at the Professional Services Council.

Interview Transcript: 

Tom Temin And Stephanie, I guess let’s start with what is the problem with the foreign military sales system? And just briefly, what does DoD have to do with it and how does State Department support that effort?

Stephanie Kostro It’s one of those areas where the problem is defined by wherever you tend to sit. Right. So if you ask our foreign partners, countries and allies’ partners, they will tell you one set of issues. I’m going to give you the defense industry perspective, which is to say the foreign military sales process is taking far too long to actually go from requirement to agreement to actual sales and fielding of equipment and services. And so last fall, in November of 2022, the Defense Department came to the three associations, Professional Services Council being one of them, that act in the defense space and said, listen, we’re having an FMS tiger team process to identify areas where DoD, the Department of Defense, can make improvements for foreign military sales. Please send us your ideas. And so we banded together, as you said, and we provided a response last fall. We shared then that response with the oversight committees on Capitol Hill. And this also generated some interest from the State Department and the Commerce Department, both of which play active roles in foreign sales of military equipment. And so this is volume two that we sent over on June 8th. This was quite extensive. There are more than 30 individual recommendations that we have beyond the Department of Defense. It’s things like there is an office at the State Department which handles defense trade controls, export licensing and whatnot. We’re suggesting that they have a senior career civil servant in there for continuity and to fill that vacant billet as soon as possible. It’s things that are that practical all the way over to can we not streamline the export control process that several administrations have taken a crack at. But we have some suggestions there.

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Tom Temin Just the fact that there’s the Commerce Department and the State Department and the Defense Department gives you an idea of how bureaucratic this has become. So the issue then, when you say the time it takes, if Country X would like to buy some technology that is, in fact legally exportable to that country, it takes a long time before they can actually get delivery of the howitzers or the tank or whatever the case might be.

Stephanie Kostro That’s exactly right. We’re not talking months. We’re talking years. You mentioned the many cooks that are in this kitchen, and they’re all there for a very good reason. The additional cook that’s in the kitchen is Congress. And there are congressional notification requirements that can take months, again, in order to get clearance to send this material and services over to our closest friends and allies.

Tom Temin So Congress has say so then, over it.

Stephanie Kostro They do. Depending on the dollar figure, there are different thresholds for NATO allies versus other countries, for example, and that will trigger congressional notification and that will take on paper 30 days. But there is a lengthy pre-notification process. So our volume that we submitted over to the State Department last week talks about that and talks about ways in which we can shorten timelines. One of the impetuses for talking about this is, as you, the Australia, U.K., U.S. AUKUS deal, I would say, if we’re going to have streamlined or accelerated relationships, foreign military sales with certain countries, can we not learn the lessons and figure out how to accelerate it for many of our allies and partners?

Tom Temin And a theme running through all of the recommendations, and it’s a ten page document, so it’s something someone can get through, that you have sent to the State Department. And by the way, we should mention the other organizations involved, the Aerospace Industries Association and the National Defense Industrial Association are your kind of partners here in non-crime, let’s say. But a recurring theme is that there is a strained workforce in DoD and in the State Department that handle these things, that they are overloaded. And that’s part of the delay.

Stephanie Kostro That is part of the delay. And workforce issues are not limited to the defense industry. It’s also within the government itself. If you look at some of the contracting officer billets, you have vacancy rates that range from 5% vacancy to 40% vacancy throughout the government. In this area in particular, you’re looking at a workforce that is very, very understaffed and under-resourced and we do make recommendations regarding bulking that up and also giving them training in what they’re looking at and some of the relationships that we have with our allies and partners. And so workforce is going to be something that you hear PSC, NDIA and AIA all of our three associations talk about at length.

Tom Temin We’re speaking with Stephanie Kostro, executive vice president for policy at the Professional Services Council. And another suggestion allied to that is outsource some of these things that are non inherently governmental decisions. And a lot of this is routine stuff that is just process that could be outsourced to contractors to speed up.

Stephanie Kostro There’s a little bit of outsourcing, but also perhaps automation. For example, you’ve approved Widget A for Country X that is in a certain alliance. Say, could you not parallel that process to make it easier for Country Y to get that same widget A? So it’s one of those things where we see a lot of opportunity, not just outsourcing, but automation as well as streamlining, accelerated processing that can help in this regard. Again, it shouldn’t take at least two years, potentially more for a close NATO ally to access some of the material and services that we should be sharing with them.

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Tom Temin And there’s a lot of arcane inside baseball, if you will, suggestions which will resonate, I guess, with people involved in foreign military sales. For example, strengthen authorities for dual use items initially sold via the foreign military sales process so that if there’s another use for a howitzer, they keep using that. Well, you might go hunting with one, I don’t know for big game, but the idea is that something could be dual used without a lot of rigmarole. Once they have possession of it.

Stephanie Kostro I think that is one of the areas that we’re exploring. It’s again, going to the State Department and talking to two different oversight committees. I mentioned earlier that we were talking the Department of Defense in their oversight committees last year. This is a different set of oversight committees when you’re working with the State Department and the Commerce Department. And so talking with them about the Arms Export Control Act, talking to them about the Foreign Assistance Act, talking to them about, international traffic and arms regulations, etc., and talking, it’s never easy to amend legislation as it shouldn’t be. It needs to be a thoughtful, deliberate process. But we think we can get there on some of this dual use issue.

Tom Temin Right. And that brings me to another question. A lot of these suggestions that you’ve aimed to the departments involved, is there something Congress can do legally or is there some statutory reform that could help?

Stephanie Kostro We do talk a little bit in the recommendations about looking at the AECA. I just mentioned the Arms Export Control Act, as well as some of the other legislative authorities. Again, congressional notification requirements are in statute or in regulation, depending on what you’re talking about. And so I think there is room for Congress to move on this. And I hope that there’s appetite because I think everyone recognizes, well, let’s use Ukraine as a case study. We want it to be able to flow equipment and services to support the Ukrainian government after the Russian invasion of 2022. But we need it to move fast. And I think there are lessons to learn from that experience.

Tom Temin Right. In the case of Ukraine, there was almost no bureaucratic process. They need this. They need that, Congress appropriated it. I mean, it takes a long time to ship some of the stuff, but they drew down U.S. stockpiles in this kind of thing. That was a case history of how fast it can happen.

Stephanie Kostro And that’s assuming, of course, that there is a validated requirement and you actually have the material and services on hand. I think where we are going to run into some issues is that some of these long lead items that have to be manufactured or you have to train the workforce to be able to provide the services required, that’s going to take a long time, but it shouldn’t be because of a bureaucratic process. It should be because of the natural production process.

Tom Temin Right. And I guess a good cause would be, say, Russia is attacking us. That might stimulate a little bit of alacrity there, too.

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Stephanie Kostro The wartime footing is always the outlier. But if we could get regular order, be a little bit faster for foreign military cells, we would all appreciate it.

Tom Temin Okay. And so, again, these are pretty detailed recommendations. Create proviso, rectification processes, there’s a lot of language like that in there. But basically you got the request from the State Department that said, since you’re suggesting changes to DoD, we can help here also. So I guess what I’m asking is there’s a sense that the State Department also understands this is overly lengthy and bureaucratic.

Stephanie Kostro I think there is common understanding across the board on the Hill, in the executive branch and in industry, and certainly with our foreign partners. I would say when AIA NDIA and PSC went out to our member companies and said, Give us what you got, what are some recommendations, what are some pain points that you’re experiencing? We did get a lot of feedback. We provided the DoD specific feedback last fall. So then we were sitting on this treasure trove of recommendations for state and commerce, etc. And so when State Department heard that they were very, very open to hearing what our member companies had to say, and that’s a great sign. It’s a great sign for industry collaboration with the government to make things a little bit easier.

Tom Temin And by the way, is there a sense on the part of these associations that demand is on the rise from foreign countries for U.S. military stuff?

Stephanie Kostro That is generally the sense. We talked about Ukraine earlier. We were not the only ones who drew down from our existing stocksriends, allies, partners also drew down to support the Ukrainian government and military. In addition, we’ve heard Chairman of the Joint Chiefs Milley talk about the pacing threat of China. We’ve heard the whole of Department of Defense Infrastructure talk about the pthreat of China. And no one feels that more poignantly than the folks in the Indo-Pacific area. So I think we are seeing increased interest. The tempering effect, though, of it’s such a bureaucraticrocess does make our friends think twice about if we need something immediately or in the short term, can we rely on the U.S. system to provide that. And we want the answer to be yes.

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