Foreign Military Sales (FMS)

Foreign Military Sales (FMS) is a United States government-to-government program through which eligible foreign allies and partners acquire U.S. defence articles, services and training. Canada is among the eligible customers. Public Services and Procurement Canada (PSPC) describes the program on its U.S. Foreign Military Sales and congressional notification page.

The U.S. Department of State oversees FMS, and the U.S. Department of Defense manages and executes it. The transaction takes place between governments, not directly between a foreign government and a contractor. FMS is a U.S. defence-transfer mechanism, not a NATO procurement program, and it is one of the two principal ways a country obtains U.S. military equipment. The other is Direct Commercial Sales.

How an FMS case is built: LOR, LOA and case numbers

An FMS purchase begins with a request to the U.S. government. For Canada, PSPC acts for the Government of Canada in purchases through the program. After the relevant U.S. process is complete, including congressional notification, the U.S. implementing agency issues a Letter of Offer and Acceptance (LOA). The LOA sets out the terms, conditions and requirements for that specific FMS case.

The Communications Security Establishment guidance on purchasing CSEC-approved cryptographic equipment shows the steps in detail. The request is made through a Letter of Request (LOR). After receiving it, the U.S. National Security Agency opens an FMS case file and assigns a case number. The LOA that follows includes the U.S. government's general FMS terms and conditions, plus notes specific to the requirement.

An FMS case can cover:

• Defence equipment and other defence articles
• Support and sustainment services
• Training
• Contractor logistics support and related capability elements

How the Government of Canada uses FMS

National Defence and the Canadian Armed Forces use FMS for defence equipment and associated support. PSPC leads defence procurement for the Canadian Armed Forces, the Canadian Coast Guard and other federal departments, as described on its defence and marine procurement page. Three Canadian examples show how FMS is applied:

• Joint Light Tactical Vehicle (JLTV). Canada identified the JLTV as equipment that can only be procured through the U.S. FMS program. The next generation fighting vehicles page records this.
• Cryptographic equipment. PWGSC, now PSPC, is the only Canadian authorized point of contact for FMS contracts for CSEC-approved cryptographic equipment. The requesting department submits an approved requirement to PSPC, which then enters into a government-to-government arrangement with the U.S. Department of Defense.
• Long-range missiles. National Defence's announcement on a long-range missile capability shows FMS covering equipment and some in-service support, with a separate acquisition used for longer-term support.

FMS compared with Direct Commercial Sales

In an FMS case, the foreign customer buys from the U.S. government, which then arranges delivery of the articles and services. In a Direct Commercial Sale, the supplier contracts directly with the foreign customer under the U.S. commercial defence-trade system. The U.S. Department of State describes both channels in its overview of U.S. arms sales and defence trade. A buyer's choice of channel determines who holds the contract, which terms apply and who a supplier deals with.

What FMS means for a Canadian supplier

The Canadian customer's primary contractual relationship in an FMS case is with the U.S. government, not with a Canadian supplier. A Canadian company will usually meet FMS indirectly, for example by supplying equipment or services to the U.S. government or its implementing contractor under an FMS case.

Before bidding or teaming, a supplier should work out which of these situations applies:

• An FMS acquisition from the U.S. government
• A Canadian contract that supports an FMS case
• A separate Canadian procurement of equipment originally developed or supplied under FMS
• A Direct Commercial Sale rather than FMS

The solicitation, the contract and any LOA-related documents define the supplier's obligations. Read them closely and confirm the contracting channel with the named contracting authority before committing resources to a response.