Military Coproduction:

U.S. Management of Programs Worldwide

NSIAD-89-117: Published: Mar 22, 1989. Publicly Released: Mar 22, 1989.

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In response to a congressional request, GAO reviewed U.S. military coproduction agreements and programs worldwide, focusing on: (1) how the Departments of Defense (DOD) and State manage the programs to ensure compliance with agreement restrictions on production quantities and third-country sales; (2) how DOD and State review and approve the programs; and (3) the remedies available if a foreign country fails to comply with quantity and sales restrictions.

GAO found that: (1) although DOD coproduction and international agreement directives did not clearly specify the procedures and criteria to use in the memorandum-of-understanding (MOU) review and approval process, DOD and State reasonably coordinated and reviewed the cases GAO reviewed; (2) DOD guidance did not require the military services or overseas security assistance organizations to monitor or ensure compliance with MOU restrictions on quantities and third-country sales; (3) DOD lacked established criteria for closing out or terminating oversight of coproduction programs when the programs were no longer active; (4) although DOD withheld certain critical components from foreign production and monitored the quantities that the United States purchased, it only controlled the end items produced, not unauthorized sales; (5) DOD revised its coproduction management guidance to provide more specific guidance on MOU provisions, including production validation clauses, management responsibilities, and compliance-related activities; (6) State usually issued a diplomatic protest against violations of sales agreements, since State and DOD considered suspension of foreign military sales (FMS) credits too severe; and (7) existing reporting requirements applied mostly to sales, rather than to coproduction MOU.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: The House International Relations Committee does not plan to reintroduce legislation to implement the GAO matters for congressional consideration.

    Matter: Congress may wish to require DOD and/or State to notify it of all coproduction MOU, whether implemented by letter of offer and acceptance under FMS procedures or by commercial licensing or technical assistance agreements, regardless of the coproducing country or the value of the related sale.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Chapter 14 of the Security Assistance Management Manual does not provide procedures and guidance on closing out mature programs.

    Recommendation: The Secretary of Defense should incorporate procedures and guidance on closing out coproduction programs in the updated directive, including considerations for continued spare parts production, some level of oversight, and periodic reviews of mature programs and agreements.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: Chapter 14 of the Security Assistance Management Manual does not provide criteria for terminating U.S. oversight of mature programs. DOD plans no further action.

    Recommendation: The Secretary of Defense should establish criteria for deciding when to close out or terminate U.S. oversight of mature coproduction programs.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD amended chapter 14 of the Security Assistance Management Manual to incorporate this recommendation.

    Recommendation: The Secretary of Defense should direct the military services to include a section on compliance-related activities in the required semiannual coproduction status reports.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: DOD amended chapter 14 of the Security Assistance Management Manual to incorporate this recommendation.

    Recommendation: The Secretary of Defense should include in the updated directive guidance on provisions to be included in coproduction agreements regarding verification of production quantities reported or inventories. In the event that such provisions cannot be negotiated, the Secretary should design and incorporate alternative control measures in the program.

    Agency Affected: Department of Defense

  5. Status: Closed - Not Implemented

    Comments: The Deputy Secretary of Defense has determined that it is unnecessary to update the Directive. DOD will, instead, issue a handbook which will not have the force of a directive.

    Recommendation: The Secretary of Defense should update Directive 2000.9 and incorporate management objectives and specific responsibilities for the military services and overseas security assistance organizations related to monitoring for compliance with coproduction agreement restrictions. Since the Defense Security Assistance Agency (DSAA) is currently responsible for coproduction agreements involving fielded U.S. weapons and equipment, it may be the appropriate agency to update the directive.

    Agency Affected: Department of Defense

 

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