|THE LETTER OF OFFER
AND ACCEPTANCE (LOA)
WHAT WILL WE DO WITH YOUR LOR?
||Once we receive your LOR, the USG
will take several actions. Depending on your request, an appropriate
response might be, an addition to one of your existing FMS cases, a
new sale LOA, etc. For the purposes of this guide, we will assume that
an LOA is the most appropriate response to your request---therefore,
the following USG actions would be taken:
Acknowledge Receipt: Within five days of
receipt of a valid LOR, the U.S. Implementing Agency (IA) will
acknowledge receipt of your LOR.
Request More Information: If information
is unclear or is missing from your LOR, you will be contacted to
provide the missing information. While, it may be possible to continue
limited processing of some portions of the request, a complete
response from the USG may be delayed until the information is provided
or the request amended.
Assign a FMS Case Identifier: A FMS case
identifier is assigned to each LOR. A case identifier consists of a
Country Code, the IA code of the U.S. agency developing your FMS case
and, a unique three-position FMS case designator. For example,
“BN-B-UXP” is a FMS case for Bandaria (“BN”-a make-believe
country) being prepared by the U.S. Army (“B” is the Implementing
Agency code for the U.S. Army). The “UXP” denotes a particular FMS
case for this country.
Assign a FMS Case Manager: A FMS Case
Manager is assigned to every FMS case and is responsible for ensuring
that the FMS case meets your requirements as identified in your LOR.
The FMS Case Manager acts as the coordinator for both development of
the FMS case, and the subsequent “execution,” or performance of
the FMS case. If you have questions about the development progress of
your FMS case, they should be directed to the appropriate FMS Case
Manager. DSCA has assigned a Country Program Director (CPD) for each
country and the IAs may also assign a Country Program Director for
your programs. These managers may also be contacted if you have
questions concerning the progress of your FMS case.
Review Releasability Issues: Part of the
USG review process involves determining if the technology involved is
releasable for export. The releasability review takes place for both
FMS sales (government to government) and for Direct Commercial Sales (DCS)
that are directly negotiated between your country and a specific
manufacturer. If the sale involves a system with technology that has
not been previously approved for export, this process will generally
take longer than if the system has already been reviewed and approved
for export. An LOA will not be written for systems that you are not
eligible to receive.
the U.S. Congress: There
are many U.S. laws that the FMS case Manager must comply with as the
FMS case is being developed. If
the FMS case is expected to exceed $14 million ($25 million for NATO,
Australia, New Zealand and Japan SAMM C5.T11) of Major Defense
Equipment (MDE), or will exceed a total FMS case value of $50 million
($100 million for NATO, Australia, New Zealand and Japan SAMM C5.T11)
($200 million ($300 million for NATO, Australia, New Zealand and Japan
SAMM C5.T11) for construction cases), then the U.S. Congress must be
notified of the prospective sale.
This notification process must be completed before the FMS case
can be countersigned by DSCA and formally offered to your country for
consideration. When the official notification of a sale has been made to the
U.S. Congress, this information is normally posted on the DSCA
|WHAT WILL THE LOA
||As stated earlier, the LOA is the
government-to-government agreement that identifies the defense
articles and services that the USG proposes to sell to you to meet the
requirements identified in your LOR. The LOA spells out all of the
terms and conditions that will apply. Much of the content, especially
the Standard Terms and Conditions, is dictated by U.S. law. We have
included a sample LOA which you can see in C5.F2
in chapter 5 of the SAMM.
SAMM table C5.F7 contains the Standard
Terms and Conditions.
There are three basic types of FMS cases. The
type used depends on what is being sold. These are:
- Defined Order: This type of FMS case
is for defense articles, services and training that are specified
in your LOR and stated explicitly in the LOA. This type would most
likely be used for a weapon system sale.
- Blanket Order: This type of FMS case
is used to purchase a specific category of items or services at a
set dollar value ceiling with no definitive listing of the exact
items or quantities desired. This type would most likely be used
for follow-on support.
- Cooperative Logistics Supply Support
Arrangement (CLSSA): CLSSA is a unique arrangement where you
are able to invest in the U.S. supply system and receive access to
DoD stocks. This arrangement involves two separate FMS cases. The
first FMS case covers your investment in specific USG supply
system items. The second FMS case is used to requisition these
LOA Sections: Your LOA will be made up of
several sections. The first page will be an overview of the proposal
and will include a space for the signatures of our USG representative
and your government. It will provide a total cost estimate and will
identify any initial deposit that might be required upon acceptance.
The first page will also reflect the Terms of Sale (i.e., CASH WITH
ACCEPTANCE, FMS CREDIT, etc.) and will identify the expiration date of
The next several pages of the LOA will describe
in greater detail the material and services being offered and
responsibilities for transportation and delivery of the items.
Separate FMS “case lines” will be included on your LOA. Each line
will cover a specific category of material or service. Most of the
information is in plain text or monetary terms, but in several
situations we use codes to convey information. The codes are explained
in greater detail in the “Letter
of Offer and Acceptance Information”
provided with each FMS case.
A sample FMS case line might look like the
Unit of Issue
Shelter Carrier with Desert Package, including CTIS, Sand
Colored Paint (CARC 686)
The LOA will also include notes to provide
additional information unique to this FMS case. It will include a cost
summary and an estimated payment schedule along with instructions on
where to return the signed LOA and how to submit payments.
The LOA also includes “Letter of Offer and
Acceptance Standard Terms and Conditions.” These are included with
every FMS case we write---they are not unique to your particular
country or FMS case. These Standard Terms and Conditions identify
specific requirements regarding liability, discrepancy reporting, etc.
LOA Pricing and Delivery Estimates:
Dollar values and delivery schedules shown on the LOA are estimates
based on the best available information at the time that the LOA is
prepared. These estimates are based either on contractors’ quotes
and/or on the current or projected cost and availability of the
desired items. As noted in the LOR section of this guide, a key
element in obtaining accurate LOA data is complete identification of
each of the required items and services. During the life of the FMS
case, the amounts billed to the FMS case will be the actual costs
incurred by the USG, which may differ from those on the LOA.
Payment Schedule: Each FMS case will
include an estimated payment schedule identifying when each of your
payments is due. The schedule consists of two financial categories:
(1) your initial deposit, and (2) future estimated quarterly billing
amounts. Your initial deposit is for the costs anticipated to be
incurred from FMS case acceptance until your first quarterly FMS
billing statement is provided and monies collected. If the FMS case is
written as “CASH WITH ACCEPTANCE,” the initial deposit will be for
the entire FMS case value. Some of the factors used in computing your
payment schedule include:
- Progress Payments: Those payments made
to contractors or DoD activities as work progresses under a
- Contractor Holdback: Amount earned by
contractors or suppliers during the period, but held back by the
USG, to ensure future performance of the Contractor.
- Termination Liability: That amount
collected from you in advance to protect the USG if you decide to
terminate a program before performance is complete on contracts
for your program.
|WHAT HAPPENS AFTER
YOUR LOA IS PREPARED?
||Once the FMS case has been written,
it is reviewed by the Implementing Agency (IA) to ensure that it meets
the requirements of your LOR and U.S. laws and regulations.
Most FMS cases must also be approved and
countersigned by DSCA. This coordination/ countersignature is done
electronically using the Defense Security Assistance Management System
(DSAMS). There are many FMS cases, known primarily as “follow-on”
or “support” FMS cases, which do not contain Major Defense
Equipment. These FMS cases are often written and signed by the IA and
do not require a formal DSCA review.
Once a FMS case has been approved and
countersigned (if required) the IA will print the LOA, sign it and
deliver it to you for your review.
|WHEN WILL YOU GET
maximum processing time between IA receipt of your LOR and release of
the LOA or Amendment should normally be no more than 120 days if the
proposed sale is below congressional notification thresholds (see SAMM
unforeseen delays may occur while processing some LOAs, the standard
for IAs is that they should process at least 80% of their total number
of LOAs within 120 days. The
processing time for potential sales requiring congressional
notification is difficult to predict since factors such as the
congressional recess schedule and consultation with different
committees enter into consideration before release of the LOA.