Defense Acquisition and Contracting Approaches: Implications for Foreign Military Sales

Abstract

This paper examines how contracting structures shape the United States’ Foreign Military Sales (FMS) system. It challenges explanations that attribute FMS inefficiencies to the limited use of acquisition “innovation pathways,” such as Other Transaction Authority (OTA) or the Middle Tier of Acquisition (MTA), and instead argues that outcomes are better explained by established Federal Acquisition Regulation (FAR)-based contracting instruments. Using data from the Federal Procurement Data System (FPDS), the analysis compares FMS and non-FMS procurement across contract types, platform portfolios, vendor composition, and time trends. The findings show that FMS contracting is concentrated in mature production and sustainment activities, dominated by Firm-Fixed-Price (FFP) contracts with limited but growing use of incentive-based structures. Indefinite Delivery/Indefinite Quantity (IDIQ) contracts play a supporting role, while Undefinitized Contract Actions (UCAs) remain marginal. Compared to domestic procurement, FMS relies more heavily on large contractors, reflecting both the scale and complexity of procured systems as well as institutional constraints such as pricing transparency and intergovernmental coordination. Overall, the study reframes FMS as a constrained system in which performance is shaped less by new acquisition authorities and more by how conventional contracting tools are applied, highlighting opportunities for reform through improved implementation of existing mechanisms.