New Foreign Military Sales (FMS) recently passed $65 billion for FY2012, according to AOL Defense online, and are expected to continue growing through the end of the fiscal year.
Were the FY2012 numbers a fluke, or part of a long-term trend? The AOL Defense article points out that this year’s number could be an outlier due to large, one-time sales of high-value items, specifically, large fighter plane deals with Saudi Arabia and Japan.
However, even without these two sales, FMS for FY2012 are nearly $30 billion (and counting). DSCA historical data (pdf file) shows a dramatic rise in FMS sales over the last few years. FMS sales totaled $28.4 billion in FY2011, and about $24.4 billion in FY2010. Just 10 years earlier, in FY2002, FMS sales were only 11.5 billion (see table below).
What would explain this increase? The recent explosion in FMS agreements results from growing interest both from the defense industry, and from foreign governments, in using FMS to facilitate international sales. With the threat of sequestration, defense companies are increasingly looking toward the international market for new growth opportunities. As I’ve discussed, FMS is often the best way for defense companies to reach an international market.
Foreign governments, as well, have realized that the FMS model is often the most convenient way to procure defense items. Foreign governments may benefit politically by signing a government-to-government deal with the USG, and they gain the confidence that the DOD will manage all the logistics of their purchase. Depending on local procurement regulations, government-to-government agreements may be non-competitive, avoiding the long and burdensome process of an open competition.
Given this growing focus on FMS, these numbers will only continue to rise as U.S. defense companies further expand into the international market.