Navy Reforms International Programs Office. (Analysis).

The Department of the Navy's International Programs Office has adopted a host of new business practices designed to enhance U.S. military interoperability with foreign allies, bolster the efficiency of the Foreign Military Sales program and improve service to international customers.

Navy IPO deals in policy matters such as international research agreements and the application of export controls to limit the spread of sensitive technologies. But it's been in Foreign Military Sales and FMS program management where recent business reengineering efforts have resulted in significant benefits to the U.S. and allied defense communities.

International programs are important for military, political and economic reasons. First, international programs contribute to cooperation between militaries, enhancing interoperability between U.S. forces and allies. Second, an active set of international programs supports political objectives by strengthening ties among allies. Third, international cooperation in the defense sector leads to reduced unit cost in the acquisition of ships, aircraft, communications gear, support or training equipment.

International programs, it should be noted, are mandated by Defense Department acquisition regulations, known as the DOD 5000 series. Regulations explain that all Defense Department systems, where applicable, need to support joint and combined operations with allied nations.

Early in the life of a program, an analysis of alternatives needs to include a review of what technologies allies can offer. The acquisition strategy must consider foreign participation, whether that means turning to similar projects by allies or NATO organizations, pursuing cooperative development and production, using commercial options or making direct sales of U.S. equipment.

Since 1997, Navy IPO has relied on in-house teams known as JPTs (integrated product teams) to study and realign business practices. These IPTs made the following recommendations: expedite contracts close-out, cut out unnecessary steps in the processing of LOAs (Letters of Offer and Acceptance, the primary contractual vehicle between governments) and find ways to make the foreign customer's money go farther.

In September 1998, the secretary of the Navy chartered the Navy IPO as a "Reinvention Laboratory" that would focus on improving workforce training, identifying new ideas for cutting red tape and improving customer service.

In partnership with industry professionals, three separate teams worked to identify systemic problems with Foreign Military Sales. They submitted a set of more than 150 specific concerns raised by customer countries, the Navy, the Department of Defense and U.S. industry.

Armed with this information, in 1999 the Navy IPO established 12 new groups, each charged with the responsibility of studying specific concerns. This effort engaged more than 100 FMS professionals, with industry and foreign attaches volunteering their time.

Recurring Criticism

One recurring criticism was the penchant of Navy IPO and other FMS agencies to rely solely on government-to-government agreement--via a signed LOA--as the vehicle to provide goods and services to a foreign military.

An alternative was proposed, in the form of a "hybrid" arrangement. That means a country can choose to combine FMS, direct commercial sales and other requirements, such as logistics, training and software upgrades.

Although the U.S. government cannot speak for industry, and vice-versa, the exchange of information permits the customer to take maximum advantage of the U.S. industrial base and arrive at individual agreements that add up to a complete and often innovative approach to building the total package.

This is nor without challenges, however. The Navy IPO and the Defense Security Cooperation Agency are still working out the details on how FMS and direct commercial sales efforts match the funding received.

A second change from the old ways of doing business was to provide a forum for cooperation, a concept first dubbed Team USA. Iris now more appropriately called Team International. Program offices and agencies, industry, the foreign customer, policy and disclosure authorities together identify, early on, the needs of the international customer.

This gives industry insights into the real needs of the customer, allows Navy and Marine Corps program managers to consider international sales implications in their production lines, improves communications on complex subjects such as licensing requirements and lets the customer be clear about the desired timing, quantity, contracting and payment schedules.

Team International also allows early identification of technologies that require licensing approval from the Navy, Defense and State Departments. The teaming approach has proved successful in various international Navy and Marine Corps programs, such as Harpoon, Aegis, Cobra, maritime patrol aircraft and torpedoes.

FMS reinvention was aimed to improve responsiveness to the customer as well as to the U.S. industry. This helped to provide better guidance on how to write Letters of Request, shorter processing times for LOAs, and better customer participation in the final review of LOAs.

Case closure, meanwhile, has been an intractable problem in foreign military sales cases. The FMS process lacked incentives to locate old records needed to reconcile obligations with disbursements, close old contracts, and return the balance of the customer's funds. Since the spring of 2000, the rate of FMS case close out has improved by 54 percent, returning approximately $500 million to international partners.

To bolster responsiveness, the Navy Inventory Control Point in Philadelphia (NAVICP) created a commercial option to speed the delivery of spare parts. NAVICP now offers customers the use of a commercial buying service to help expedite deliveries when their requests cannot be filled promptly from U.S. spare-parts bins.

Another consideration in FMS reform is visibility of the process- sometimes referred to as transparency-that can help eliminate unnecessary steps and reduce customer frustration. A measure of visibility is simply offering international partners a seat at the table, either while planning out the program, or during the execution, delivery, and financial management of the FMS case. Visibility requires access. The customer needs to reach someone who can answer questions.

At Navy IPO, a so-called Country Program Director is designated as the single point of contact for a particular country or countries. The Security Assistance Directorate was reorganized to give primary advocacy to the customer, with others acting as advisors on Navy and Marine Corps systems. FMS reinvention also led to the appointment of an ombudsman, who serves as the customer advocate and problem solver. But the ombudsman does not bypass the Country Program Director. Rather, he serves as a listener and technical advisor to help customers deal with a government bureaucracy that can appear complex and confusing to outsiders.

Most recently, the military departments have been working with the Defense Security Cooperation Agency on four integrated product teams. A "Personnel and Training" IPT is developing certification guidelines for the civilian workforce involved in international affairs. It has also implemented a security cooperation internship program. The "Financial" IPT has institutionalized the use of a Standby Letter of Credit, simplified payment schedules and worked to improve the caseclosure process among all military departments, the Defense Department and related agencies.

The "Partnering" IPT established guidelines to permit international customer participation in the contracting process and has developed a customer handbook that will be available electronically and on paper. The "Business Process" IPT drew on the U.S. Army's concept of a Customer Satisfaction Index to measure the execution of FMS cases, implemented an electronic LOA countersignature to speed up processing and developed guidance on LOR preparation.

U.S. defense acquisition professionals generally look to the Defense Systems Management College (DSMC) to provide education on international programs. The Navy IPO is partnering with DSMC to present specific case studies on defense cooperation.

The themes and tools of FMS reinvention have become part of the Navy IPO's daily routine. The momentum of change continues along several lines:

* Information Technology and Disclosure-During the past several years, Navy IPO developed software to automate the review of export licenses and streamline the Navy's internal processes for disclosure. Given the large volume of license requests from industry, the Navy is seeking the capability to upload technical data from contractors electronically, instead of via mail. Navy IPO is performing electronic distribution of licenses, including technical and supplemental data, directly to Naval System Command field activities. For export controls and disclosure policy, Navy staffing times have been reduced thanks to the web-based TTSARB (Technology Transfer Security Assistance Review Board). This system allows secure electronic staffing for Navy offices, informing them of the background and proposals of each case.

* Active Teaming with Industry-Communication between Navy IPO and industry has improved as a result of meetings known as Company Day and the Navy-Industry International Dialogue. Company Day permits individual companies to meet, one-on-one, with Navy IPO leaders. They trade briefings on each other's missions, goals, products and processes. Even more effective is the exchange of issue papers, where specific concerns are submitted formally for discussion, in order to correct wrong perceptions or take action as needed to fix problems. The biannual Navy-Industry International Dialogue is an adjunct to the assistant secretary of the Navy for research, development and acquisition annual meeting with industry CEOs.

* Active Teaming with International Customers-Navy IPO has developed close relationships with embassies and acquisition communities in the Washington, D.C. area. Representatives meet periodically with the Foreign Procurement Group, a committee representing the acquisition staffs who work most closely with FMS. The Navy also profits from the cooperation between the Navy Inventory Control Point's International Office with, foreign navy and air force logisricians. The Security Assistance Foreign Representatives are provided offices at NAyICP in Philadelphia to monitor the delivery and support of U.S. components and spares.

* Project Oversight-The Navy FMS community encompasses all Navy and Marine Corps systems commands, program offices, program executive offices, the Navy Ammunition Logistics Command, and training field activities, which plan and execute some 4,000 FMS cases valued at about $2 billion each year. To oversee these transactions, the director of the Navy IPO chairs a monthly video teleconference, at which FMS offices brief on their performance. Further, Navy IPO has developed performance measures that are now being applied to high-profile FMS cases and contracts to keep our program offices, and the foreign customer, out of trouble.

* Campaign Plan-There is a need to match the schedule of new U.S. acquisitions to the procurement plans of foreign allies. Accordingly, the director of Navy IPO has asked for a list of key programs-the Campaign Plan-describing individual systems that merit advocacy by Navy and Marine Corps leaders when meeting with their foreign counterparts. This includes programs such as the Joint Strike Fighter, the FIA-18 ElF Super Hornet, heavyweight and lightweight torpedoes, and MIDS- Multifunctional Information Distribution Systems-the miniaturized version of Link-16.

* Performance-Based Budgeting-The Government Performance Review Act of 1993 requires agencies to link their goals and priorities to the actual budget requests. Navy IPO, along with the Defense Security Cooperation Agency, is working to create tools and common terms so all government agencies that conduct FMS programs will be able to measure their worldoad and the funding that supports it.

Gibson LeBoeuf is assistant deputy assistant secretary of the Navy for international programs