Original Date: 07/08/2002
Revision Date: 01/18/2007
Information : Production/R&D Memorandum of Understanding
The Directorate for Missiles and Surface Launchers is currently engaged in discussions for two Memorandums of Understanding with the countries of Germany, Canada, and the Netherlands. These Memorandums of Understanding seek to establish cooperative programs between these countries and the U. S. Navy STANDARD Missile production and R&D programs.
The Directorate for Missiles and Surface Launchers (PEO TSC-M/L) is currently engaged in discussions with Germany, Canada, and the Netherlands for a Memorandum of Understanding (MOU) for the purchase of STANDARD Missiles (SMs). The typical method of sales to other countries is through Foreign Military Sales (FMS). The FMS program represents a one-time transaction in a buyer/seller relationship. The purchasing country has no voice in system changes, and must pay for any R&D required for their use. Only the U.S. Navy requirements are considered in upgrades and improvements. The FMS method does not allow for combined buying power of multiple procurements, and administration and offset fees are charged. This method of sales results in costing the allied countries time and money trying to adapt the missiles to their particular requirements.
Two separate MOUs are in process one for R&D, one for production units. These MOUs allow the buyer to be part of the process for product improvements and upgrades, thereby avoiding additional costs when changes are required for their use. When the allies are part of the R&D effort, they benefit from having a say in the requirements as they are developed. The production MOU sets up five-year procurement that guarantees an agreed upon number of units over that time. The production MOU allows for combined procurements, which lowers the cost to all involved, stabilizing production cycles and permits more effective planning in subsequent procurements. Configurations and logistics are synchronized, allowing for more insight into production and provisioning requirements for future builds. The MOU development process (Figure 2-1) identifies the involvement by all parties in the process. The most obvious benefit of this program is the synergy associated with the world market collaborative effort possible in this process. PEO TSC-M/L can schedule and budget many years down the road for their procurement requirements as a whole, as opposed to procurement cycles that require contingencies causing delays in procurement schedules and increased costs.
Figure 2-1. MOU Development Process
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