Foreign Military Sales (FMS) w/ Bill Mooney (Podcast Transcript)

[01:12] Richard C. Howard: Well, hey, thanks, everyone, for joining the Government Sales Momentum podcast. Today we are with Bill Mooney, president at Mooney International, LLC. Hey, Bill, how's it going today?

[01:22] Bill Mooney: Real fine. How are you?

[01:24] Richard C. Howard: Oh, fantastic. And Bill and I have had a conversation before starting the podcast for everyone listening, a couple of conversations, and what I want to focus on today is foreign military sales, direct commercial sales, selling to partner nations. And I really wanted to bring somebody on that had that legitimate long-standing expertise in that area. And Bill certainly has a tremendous background there. I've touched on it, but nowhere near as much experience as you do. Bill and I found our conversation enlightening and want to have you on the podcast to talk about what you do and maybe explain to some of the businesses out there what FMS and DCs actually is.

[02:04] Bill Mooney: Oh, happy to do it. And thank you for having me on the podcast. Just by way of background. I'm a 29-year army veteran. Started in the army as an enlisted private in the infantry, in the National Guard. Won a scholarship, an army scholarship to go to Norwich University, graduated Magna Cum Lade, distinguished military graduate. Went into the aviation branch, flew Cobra's in the 101st Airborne Division, apaches in the Third Infantry Division and then later Blackhawks in the First Cavalry Division. And then in my area, you had to have a secondary specialty. So the army decided I was going to be a foreigner officer, and so they sent me off to study Arabic, and off I went to Saudi Arabia to do essentially foreign military sales. I was part of a one $6 billion foreign military sales case. And so that was at a very young age. I was captain then my first exposure to the foreign military sales process. And then from there, I ended up doing tours in Saudi Arabia, Jordan, Egypt, Yemen. Two tours in Iraq, Germany and the majority of those I was involved in one way, shape, or form with exporting, military training, hardware services. And then I retired from the Pentagon as the Assistant deputy director J five Middle East on the Joint staff. And so when I did that, I was hired by Oshkosh Defense. I went over to the Middle East and became their regional vice president for the Middle East and North Africa. And so it was an interesting fit. I'm a helicopter pilot. I've spent a lot of time in the Middle East to inform military sales, ended up selling trucks. And as it turned out, I was a pretty good truck salesman. Sold about $1.4 billion in the three years that I spent over there, and my timing was pretty good. But then I realized that there was more to what I wanted to achieve with our partners that was not just focused on hardware, but rather, if you're familiar with the PF, the Doctor, and the organization training. And so I had an opportunity to start in the consulting world. I took that, and I've been working as a consultant, both helping US. Companies achieve their goals in the foreign markets, but also helping select friendly foreign countries, organize better, train better, create leadership opportunities so that they're better utilizing the hardware that they have. And so I've been spending the last five, six years on that. And so with that, having worked on both the US. Government side of foreign military sales and the commercial side, I've got a lot of security cooperation. I've got experience with the direct commercial sale process, and we'll talk about what that is and the foreign military sales process, which is the US. government contractual process. If I understand correctly, this podcast is designed for small to medium sized companies who have a product or service that they want to sell internationally. And I'm happy to talk about some of that. So I would suggest that we kind of start with and feel free to interrupt me at any point with questions or if you have a specific area you want me to explore. But why are military sales to foreign countries important? And I think what people have to realize is the size of the market. It's a pretty immense market in Fiscal 2020 US. Companies exported $175,000,000,000 worth of hardware, services and data to foreign countries, and those were classified as orange transfers. And so the State Department, who controls arms transfers, has a long list of categories of hardware, services, and data that comprise an arms transfer. That would probably be a separate discussion for a later date on a podcast because it gets very complex, but we can cover that later. But suffice it to say that there's a lot of money to be made. And so of that 175,000,000,000, there are two ways to pursue those sales. You can either enter into a direct commercial sale where a company, a US. Company enters into a contract with a foreign government or a foreign company outside the United States to sell its product or service. Direct commercial sales are when the contract is directly between a US. company in either the foreign government or a foreign company outside the United States or foreign entity and so the US. government is not a party to that contract. The US. Government's role in a direct commercial sale is only to do the export control, licensing, the issue of the license that says you can export that commodity or service. And so 70% of arms transfers internationally are direct commercial sales. So it's the norm, if you will. And we'll talk about some of the pros and cons of DCs versus FMS. But let me first introduce, so we said that a direct commercial sale is a contract between a US. company and somebody abroad, a foreign military sale and I'm getting the internet connection unstable message again.

[07:17] Richard C. Howard: Okay then for everybody listening. But just so we had a couple of little hiccups here, but we'll make it work. And if we have to, we can turn the video off on your bill and that might make it a little bit easier.

[07:27] Bill Mooney: Okay. A foreign military sale is a sale that is negotiated and contracted between the US. government and a foreign government entity. So in other words, a foreign government or entity says I want this commodity or service, and they enter into a contract or agreement with the US. government to provide it. The US. Government then goes out into the marketplace here in the United States and awards a contract to a US. Company. So from a US. company perspective, your contract is with the US. Government. It's not with the foreign customer. Now as I'll explain later, you still have to have a relationship with a foreign customer that has to be managed. But that's really the difference. And so again, about 30% of all exports fall under foreign military sales. Got you.

[08:10] Richard C. Howard: So predominantly direct commercial sales, it's the norm.

[08:15] Bill Mooney: But there are some, and we'll talk about this, there are some reasons why sometimes you have to go foreign military sales. And so both types of sale, DCs and FMS, are both licensed and approved by the US. Government. And so before doing any foreign business development, you want to consult with an expert on export control to determine first is your product exportable? If you have something that is classified or particularly in certain sensitive areas, the US. Government, if it's something that's their secret sauce that is critical to US national security, it may not be exportable. And so you'll want to understand that if I could ask you a couple.

[08:55] Richard C. Howard: Of questions about that. So a lot of the companies that are listening to this, some of them are involved with different technologies. I know you'll probably get into that and I know there's US munitions list and some other things there, but some of them are just selling office supplies. So if they're selling something that at least on the surface appears like it's not going to be classified technology or not even a gray area, how does that apply as far as if they wanted to go out and maybe engage in DCs?

[09:26] Bill Mooney: Yeah. So you do need to understand whether or not you fall on the US munitions List subject to the Arms export control, but there are also dual use technologies and things that are controlled by the Department of Commerce and so they're still export control even though they're not a military item.

[09:44] Richard C. Howard: Got you.

[09:45] Bill Mooney: You're going to need to spend some time looking into that and doing your due diligence before you start marketing overseas, right. And so on that in some cases, even to have a conversation with a foreign customer about your product or service, you have to get a license just to market. So I'll give you a good example. I was selling blast resistant vehicles over abroad. And of course when you're selling a blast resistant vehicle, the customer is going to ask, OK, up to what rating or what level of blast, how much can it withstand? And I would have to tell them you have to submit a request to the US government to find out the answer to that question. Because it's classified by the US government. Why? Because the truck that I was selling is in use with the US government. The level that it is protected to is then protected by the US government. And that's an issue of classification. But even when you're not dealing with classified information, if you are marketing a product and the customer is asking you for a list of technical specifications and data on that product and that technical data is not publicly available, that's an export that is subject to license. It gets a little complex and again, why you really need to sit down with an expert and kind of map out your strategy before you get started and answer these questions that makes sense.

[11:12] Richard C. Howard: And then one more question. So a lot of companies have asked me personally, hey, we have a government contract with US government and you alluded to this with the example of the trucks or maybe they're involved with SBIR and they're developing technology. Do I need permission to now sell this thing that the US government is using? Like to a country in the Middle East or South America? It sounds like the yes.

[11:37] Bill Mooney: Absolutely. And the answer may vary from country to country for political reasons, for reasons of history. If that country has a history of violating the Arms Export Control Act by retransferring to a third country, for example, or has a human rights abuse history, there's a number of reasons why the US government would block a sale to any particular country. We'll talk about that a little bit later. But basically, again, before you even get started, there's some additional questions that I would recommend you ask. Is your existing product appropriate for the country that you're going after? You've seen this on the US. Government side. US. Government product specifications are sometimes extremely complex. I was selling trucks, and there was a requirement for the Iraqi armed forces for a medium transport truck. And the medium transport truck that the US. Government uses has to be able to hydraulically kneel to get inside an aircraft for transport.

[12:48] Richard C. Howard: Right.

[12:48] Bill Mooney: That's a level of complexity and cost and then maintenance that the foreign customers didn't have. They're not going to airlift these trucks anywhere. They wanted a standard four x four truck, preferably with a manual transmission that is easy to service. And so many times the US. Procurement requirements drive a level of complexity and cost that is not appropriate for the foreign customer or maybe not desirable. You have to ask, where does your product fit? And it may be appropriate for a European market. It may not be appropriate for a developing country, or another example is in the European market, they have some very stringent environmental standards for engines and lighting and things like that. And so a us. Product built to us. Government specifications may or may not meet that. And so, again, you have to understand what it is you're going after. I would recommend, again, you really need to spend some time at a strategic level stratifying your market, asking yourself, where do we think our product is a good fit? Are they interested in our product? Do they have a budget for our product? Is it going to be exportable and acceptable to the US. government for us to send it to that location? And these are all conversations you have before you ever spend a dime to get on a plane and go somewhere and start marketing.

[14:11] Richard C. Howard: That makes a lot of sense. In fact, it's right in line with when I talk about US. federal sales, really. It's before you get going and start spending money or going after contract vehicles, who's buying what you sell? What agencies have the budget are spending on your particular item? How are they making purchases, and what are the complexities of selling to that organization? Now, foreign military sales, I know you're going to in DCs. You're going to get to it is a lot more complex. It can take a little bit longer than the US. Federal marketplace, which may seem daunting to some of the people listening to this, but where might they start to do some of that research that you're talking about?

[14:49] Bill Mooney: Right.

[14:49] Richard C. Howard: So in the US. Federal side, everything's public, right. We have different databases that we can go to look at past contracts, their acquisitions forecasts. So if a company is trying to do what may be preliminary before they talk to an expert like yourself, where might they start to find, hey, what are these countries even interested in? Do they have a budget? Is it something that, are there countries out there that might be interested in what I have?

[15:16] Bill Mooney: Right, that's a service that my company and others provide is trying to give that market intelligence for where the countries may be right to purchase this type of hardware or service. And I'll talk about this a little later. In terms of the business development process, you really need to have some local knowledge that understands because the procurement processes and the procurement priorities are not public knowledge in many cases. And so you're relying on people with relationships who have inside knowledge of who the decision makers are, is their budget availability, is this feasible and how long is it going to take? And so those are some of the things that we'll talk about. But before I get into that, we talked about direct commercial sales and foreign military sales. I wanted to talk about some of the advantages and disadvantages of the two. And so direct commercial sale, which again is the predominant, the majority of the sales, the reason for that is that when your contract and delivery direct with the customer, it's usually faster, so the customer can get the commodity or service quicker than going through the government bureaucratic process of establishing a case and then the government awarding a contract. Sure, normally a direct commercial sale is more profitable to the US companies selling because again, when you sell to the US government the Truth and Negotiation Act, you've got to open up your books to the US government, display all your costs, you're going to negotiate how much profit you're going to make, it's all in the open. Not so in a private sale. So it's what the market will bear. So in many cases you can achieve a higher profit margin to DCs. On the con side of DCs. There's more financial and legal risk for the company. So with the US. government, you've got a pretty good assurance of getting paid with a foreign government or foreign entity. It depends on the client, on the customer, on the vagaries of their system, and if there's a conflict. And it depends on how you write the contract, whether you end up in the court system of that host country or if you end up in arbitration in a third country. And I've seen both scenarios and of course you never want to really end up in court with your client, right? So there are many scenarios where you're waiting a good amount of time to get paid on something that you've delivered. And so there's more financial and legal risk in a direct commercial sale.

[17:52] Richard C. Howard: One thing I wanted to ask is one thing we share is we both served in Saudi Arabia and I was involved with FMS out of their Ministry of Defense. And I recall often with foreign military sales, the country would have to make a deposit in a US. bank account in order to move the sale forward, which to me would kind of bolster. What you're saying is that's security for the company because they don't have to go out and now try to get paid by that country. Is that something we see in all FMS cases or most of them? What do you think?

[18:26] Bill Mooney: Yeah, I'm going to get to that when we talk about the FMS process, because there's two different ways that that happens in Saudi Arabia. They're using their own national funds and putting them on deposits in the United States in a trust fund that then is used for the contracting process. In other cases, it's US government money. And I'll talk about the differences in those. But just to finish on the cons of DCs, some cases in Saudi Arabia is now a good example. In Saudi Arabia and in the Emirates, you may have offset requirements, meaning if Saudi Arabia is going to award you a contract to purchase trucks, they're going to want them built in Saudi Arabia at a Saudi factory, and expect you to establish a joint venture with a local partner. And all that costs money. And so you've got to understand that market, it can occur with the foreign military sale offsets, but it's rare. It's more common with direct commercial sales. So in foreign military sales, the pros with that is reduced financial and legal risk for the company, but also for the partner nation. There have been several countries to include Saudi Arabia, very public knowledge that they've had corruption issues within their defense purchases, and so they're trying to clean that up. And so increasingly, you're finding some countries going foreign military sales because they don't trust their local acquisition practices to be able to avoid some of the corruption issues. And I'll tell you that there are risks there for direct commercial sales. There is a risk there for companies to be exposed to the Foreign Corrupt Practices Act. And if you're not familiar with that act, again, before you start thinking about selling overseas, you have to do some homework on that because there's things you can and cannot do overseas in terms of what you're spending to get a contract. So with FMS reduce risk, transparent federal Acquisition rules. Because your contract is with the US government, it avoids the Foreign Corrupt Practices Act problem in most cases, and this is a big one. You have US. economy of scale. Back to my experience with Boshkosh defense, they were, a few years ago, awarded a $6 billion contract to build what could ultimately be 60,000 trucks. Well, there's no country in the world that's building 600 trucks other than the United States. It's an incredible economy of scale. So now when a small country in Eastern Europe wants 20 trucks, they simply put in a letter of request and they're getting that same pricing on that economy of scale, approximately. And so it's a great opportunity for a foreign partner with a small number that would be hugely expensive for a company to mobilize and produce ten or 20 of something. They can piggyback off a US government contract and get that done fairly quickly. So if the commodity or service is already on contract with US government, that makes a foreign military sale very easily and then total package fielding is the other good thing about foreign military sales. The US government, when they do foreign military sales. They want to see total package feeling where you're not only getting the end item. You're getting all the support. You're getting the spares. You're getting the new equipment, training. It's all part of a packaged case. Unfortunately, on the direct commercial sales side of the house. While most companies want to do that. What ends up happening in many cases is the end item gets sold. They put off to a later contract buying the spare parts. The end item ends up getting delivered and there's no spares and it becomes a rough situation for the client and for the company's reputation in that country just because the support is not there. On the downside of foreign military sales, it can be very slow because you have to get through this process that I'll explain of getting a foreign military sales agreement between the US government and foreign government and then and only then does the US government initiate a contract action with the US company to make that commodity or service and then deliver that. It can literally take years depending on particularly if the item is not currently on contract with the US government. That process can take a long time. Sure. And then as I mentioned, the flip side is FMS can be lower profit margins as expenses are audited and profits negotiated with the US government. And so let's talk about because this is mostly about the foreign military sales part of it the government to government piece, let's talk about how that works. So the first thing as we talked about earlier is you've got to identify a customer that's interested in your products. So there's a business development and capture management process that we've all done here in the United States, but it's a little different in a foreign market because that data may not be readily available on what are their acquisition priorities, what is their acquisition budget, who are the decision makers and then is my product or service appropriate for that target country? And that's where hiring some specific expertise, consultants and others to help you identify that and develop that and build your business development strategy and in some cases execution is very important. Help you identify, stratify your market so you can apply your resources, you can't send business development people to every country in the world. So you're going to stratify your market and decide where the best return on your investment is going to be. Identify those decision makers requirements, identification, what are the current processes and budget cycles because countries do have different budget cycles and availability, and it's very important to work with the Security Cooperation Office in the embassy at the target country, not unlike when you were with you submit them. That would be an example of a Security Cooperation Office in a foreign country. Those guys have immense knowledge about what the local needs are, who are the decision makers, is their budget availability. They're going to have knowledge of that, and that's something that you can tap into. I'll give you just one vignette. I was in Cairo for two years as a colonel, as the chief of the foreign military sales program there, and about $30 billion of active cases and management in Egypt. Very large program. And I had this very large defense company come into Cairo, meet with the Egyptian armed forces. I had a very good meeting with the head of their armor department, where they said, oh yeah, we need an entire new battalion of what you're selling. They came to my office and had an office call with me, having just come from that meeting, and they were ready to pop the corks because the commander of the armor court says that he wants their product. And I'm like, hey, brother, sorry to break it to you, but the Egyptians have spent because Egypt is a country that spends us money on hardware, FMF and I'll talk about that for military financing. And so at the time, they were able to forward spend because of the way that the trust fund work. And so they had already obligated new money for the next five years on an F 16 sale, and there was zero money available for the next five years for any new starts for anything else. I had to break that to them again. So it's an example of a lack of understanding of local knowledge. A unit commander could tell you something, but unless you're talking to the acquisition executive who actually controls the funding at a national level, that's not going anywhere.

[26:09] Richard C. Howard: There's a parallel to us. Federal sales just for the companies listening, where often they'll talk to the user may be in the army or the air force of the technology or product they have, and they may be in the colonel that says, hey, this is really great. We want it only to find out that the individual they talk to will never have the authority to put them on contract and probably doesn't understand they really need to talk to the acquisition guys, which is kind of what you're saying here with form military sales. You really need to not only understand the user needs, but you also need to be speaking with the security cooperation experts that are out there to really understand, hey, how does this country sit? What kind of funding are they using?

[26:49] Bill Mooney: What is the other? In many of the countries that I deal with on a routine basis in the Middle East, their process is changing because they're going through a transformation where they're trying to develop their Ministry of Defense. And it used to be they would give a budget to each of the services, and that service commander would decide how it's spent. And now it's being centralized at the ministry level and requirements are being racked and stacked and then budget applied against. It almost like a US model. You need to understand the state of play and how things are evolving. But let's say you've done it all correctly. You've hired the appropriate experts, you stratified the market, you understand where is the appropriate place. They've got a need, they've got budget, you know who the decision makers are. And so you've got a foreign customer who's interested in what you're offering. So the first step that they've got to do is submit what's called a Letter of Request or a LOR. Okay? So there's two types of LOR. The first type is a letter of request for pricing and availability. And that's usually a first step so that the foreign customer can identify. Is this something that the US government is willing to export to Egypt, for example? And if so, what's it going to cost roughly so that they can put it in their budget for next year's budget cycle? And so that's fairly cut and dry. It's a good first step to align with national budget, but the more common one in how you actually get a case developed is an Lara for Loa or a Letter of Request for Letter of Offer and acceptance. And that's how you actually get a case established in something sold abroad. And this is where a company would do well to have somebody with good local knowledge that's working with the foreign partner, that's working with the embassy in that country to help them develop the LOR in sufficient detail and written in a way that when it comes into the US government cycle that it makes sense. And it's something that they can action and it's not something that they have to turn around and spend six months asking for clarify this and do you want that? And so the better the Lord comes in, the better the outcome of the process will be. So once a letter of request is received for good or service, the US Embassy in that country in many cases, will have to write up a formal cable called a Country Team Assessment. What does the embassy think? There's a Country Team Assessment where the US government will write up its opinion or the Country Team will write up its opinion that will then go back to the Combatant Command, who also gets to comment, go back to the Joint Staff, will go back to the State Department. And so there's this staffing process that goes on once that letter of request is received. And the focal point back in Washington for all these letters of requests coming in from foreign countries is the. Defense Security Cooperation Agency. And so it's a DOD agency that sits in Washington that then manages this process and then assigns this requirement to develop a case out to it and implementing agency, whether it be the Air Force, the army, and so, for example, if you wanted to purchase an F 16, the implementing agency is going to be the Air Force, right? They've got a number of organizations you're probably familiar with, Sapphire, that will then manage the whole process and put all the details together. So it goes out to an implementing agency. Then a case is developed, assigned a unique Identifier with a bunch of letters and dashes. And then the amount of time to develop an Loa varies from a minimum of 45 days to, as I mentioned, years, depending on the complexity of the ask, how available is it and how many staffing items need to be resolved. But if the LOR is not well defined, the implementing agency may have to deploy a survey team out to the country. Again, back to my F 16 example, and I was involved in an F 16 sale to Egypt. Survey teams have got to come out. Do we need to build new hangers? Do we need to build simulation facilities? What's the existing infrastructure? Can they absorb more? And all that would be built into the case. And then the case is developed and it requires an evaluation of releaseability, current pricing data for the commodity delivery support, spares, total package building, what would the delivery schedule be? And then back to your example, what's the payment schedule? How is the country going to pay for that? They have to provide an initial deposit and then a payment schedule on certain milestones. And if it's US government money, that will be obligated. And then the case data is then uploaded by the implementing agency back to DSEA, who finalizes the letter of offer and acceptance, coordinates approval with the Department of State. And then here we get to something very tricky. Depending on if it's a major defense article like an F 16 or the value of the sale exceeds certain thresholds, and those thresholds vary whether you're a NATO country or not a NATO country, you can look it up online. It's all on DSCA, Mil. And so there's a congressional notification requirement. So before that case is offered to a foreign country, and you'll see this often published by the State Department and DSCA, you'll see a notice saying DSCA is formally notifying Congress of a potential military sale of F 16 to the country of Egypt in the amount of X. And so that's publicly available knowledge, and the case goes over to Congress. And they can either do nothing for a certain period of time that has to elapse, or they can issue a joint resolution of Congress to say that they object to the sale. And this has actually happened a number of times in recent years in the middle east, with places like Egypt that have some human rights issues, with places like Saudi Arabia and the UAE, who have, again, various issues with the conflict in Yemen and other places. And so there have been congressional resolutions. So if the resolution happens, the sales stops, unless the administration issues a presidential waiver, which they can do. The Trump administration did it, for example, with Saudi Arabia and the Emirates to complete the sale, even though there was a joint resolution of Congress. Those sales went forward because the administration decided it was in the national security interests of the United States to waive that right. So that went forward. But typically congressional objections are a full stop. If it clears congressional notifications, then PSA authorizes the implementing agency to then offer that letter of offer and acceptance. So a physical document, a letter of offer and acceptance, many pages saying what you're going to get, what's the timeline, what's included, how much it costs, what's the payment schedule. All that goes out to the embassy. The embassy delivers it to the foreign country. They then have a period of time to sign it. There are sometimes a back and forth for changes if they sign it before the deadline, and there's often extensions once they sign it and make the initial deposit that is required on the payment schedule. Congratulations. Now you have a case. But guess what? You the US. company, don't have a contract yet. And that's the rub. There's just a funded case. And so now it goes back to the implementing agency. They go out to industry. There might be a request for proposals for multiple companies to bid on this opportunity. It might be sold source to one company just because of what it is and there's only one person who makes it, or in some cases, and it has to be justified, the country can request a sole source even though there's multiple sources for the item the country can request. But they've got to justify that, and it's not always honored. Again, it's different when we talk about funds. So in your Saudi Arabian example, they are a self-paying customer. So when they do a foreign military sales case, it's with national Saudi funds that have been deposited with the United States and then the US. government uses that money to go out to industry and acquire whatever commodity or service. And then in other cases, the most notable examples are Egypt and Israel are the two biggest recipients of foreign military aid from the United States. Israel gets about $3.3 billion annually in US. Military assistance. Egypt gets 1.3 billion annually in US. Military assistance. And that's results of the 1979 Camp David Accords that they get those. But those are Title 22 funds obligated to the State Department under the Foreign Appropriations Act. Foreign aid, those types of funds can be used for military sales case there's. Some other lesser recipients, like Jordan gets about $25 million in foreign aid, foreign military aid from the United States. And then there are other types of authorities that you may have heard about like international narcotics and law enforcement funding against State Department Title 22 money obligated to help law enforcement agencies. That could be something that results in a defense export. There's something called Section Three, three building partner capacity so that's DOD money obligated in the defense appropriations bill that is then used to build partner capacity for counterterrorism all kinds of things that are our priorities and those can result in what looks very much like a foreign military sales case. They're called pseudo FMS cases. And so it's the same idea. So again, if you're a company looking to export, you can tap into all these various authorities and pots of money in order to get your good or service out to that foreign country. Okay, so congratulations. You finally got an FMS case in place and it's funded whether it's the foreign partner money or US money. Now we've got to get a contract in place between the US. government and that entity. And so this is the important part for the US. company because the US Government contracting process and you all are probably more familiar with that and don't need to go into that, but this can happen relatively quickly if you're already on contract and what, the government and the foreign partner is not asking for a ton of modifications to what you're already selling.

[37:37] Richard C. Howard: In that case, Bill, let's say you're a company that's on contract with the government. Do you see that type of case happen more because that company had already been reaching out and speaking with that government or maybe that government? Does this ever happen where the government is interested in a particular technology they put in the letter of request and then our government approaches a company that they're already on contract with?

[38:09] Bill Mooney: I would tell you that more often there's already been a conversation between the foreign government and the company. Right. The other example does happen, but much less frequently. So you've got to do your business development process. You've got to get out there and press the flesh. And whether that's big trade shows like AUSA or IDX over in the Emirates or the Paris Air Show, these are places where companies put themselves out there, have these initial conversations with foreign partners and then start to explore what the real is.

[38:46] Richard C. Howard: Sure. And that makes sense. It's the same on the US. Federal side. And I think what you're saying too is some companies may see if they're looking at opportunities, they may see an FMS opportunity just come through for competition just like they see a US. Federal one. My guess is, just like with US. companies on a regular contracting action, there's probably companies that have already spoken with that country, maybe with the embassy, maybe with security corporations, agency to do a little bit of that business development that you're talking about in informing requirements and whatnot.

[39:20] Bill Mooney: And I'll tell you, and this has actually happened to me in the consulting domain where I've been approached by a foreign country to enter into a direct commercial sale with them for me to provide consulting services to them. And we have that discussion, and then I see it pop up in government channels as US government acquisition for the country of that. So they're working both sides of it. What they'll often do is try to ferret out the pricing by going through both channels and see which one is better. Now, I will say that when a country decides to go foreign military sales, they are paying generally what the US government will pay for the commodity. But there's an administrative surcharge that is added to that. At last, if I recall correctly, it's about 3.4%. But it does vary. And what that does is that pays for all of the overhead of administering that case, the case management meetings, the security assistance staff like you submit them. That administrative surcharge pays for all that overhead. Okay, so it's not entirely true that they're getting the US government price. Okay.

[40:38] Richard C. Howard: No, that is excellent information.

[40:40] Bill Mooney: So if there's no active contract, I will tell you this can be a real slog. And this was something that was very frustrating for me when I was out selling trucks in the Middle East, is that I had a funded demand signal from a client for a truck that was in service in the US government, but it wasn't an active production with the US government. And so getting the US government to award a new production contract and then start that production line, I'm telling you, it can take years. I will tell you that if you're interested in doing international sales, you got to bring some patience to the table. Sure. And you've got to be willing to invest in a long-term relationship with the client because that's generally what they're going to want anyway. But there is quite a bit of money to be made. I think, with that, it's kind of where I wanted to kind of sum up was that you really need to understand that the foreign export market has immense potential, as we talked about, lots of money in play, lots of requirements out there. But you've got to hire the right expertise to help you get to where you're going to go and make that money to both the development and the execution of your export strategy. The process for both DCs and FMS and export control for each needs to be understood and worked to achieve your goals. And then I'm happy to have additional conversations with specific clients about their needs and requirements. And you can find me on LinkedIn and I think you're going to put my email address up at some point, but at this point, let me stop there and see if there's something else you want to explore or questions you may have.

[42:21] Richard C. Howard: Yeah, so this has been great. You covered most of the questions I think that a company is going to ask. Right. So like you mentioned, you have small, medium sized companies for the most part listening to this. We have some large companies too, but really a lot of their questions around strategy, business development for US. Federal sales, but a lot of them are interested in foreign military sales. It's something that comes up quite often, and I think some people are surprised when they hear about the timelines with regular US. Federal contracting. I think one of the takeaways for me and probably some of the audience from our conversation is you do have to have patience. The timeline is not sure. For the most part, this is not going to be a two or three month sale. You've got to be prepared for the long game. But like us, federal sales, once you establish those relationships and once you have an understanding of the laws that are in place, the rules, and in this case also what's going on with this specific country and there's a lot going on there, it can be very lucrative, but it is something that you need to be able to patiently work over a period of time. It also sounds like, from your perspective, FMS, I think I believe you mentioned, is about 30% of the foreign sales and DCs comprising the other 70%. A question for you is with your business, do you help with both? And I believe the answer is yes. But with DCs and FMS, that's something you can help a company decide which path is right for me, absolutely.

[43:53] Bill Mooney: And again, it depends on both what you're trying to sell, because there are some end items that are more suitable to go FMS and some that are more suitable to go DCs. But it also has a lot to do with the target country because they may or may not have a mature enough acquisition cycle and a legal system to support factual sales that you'd want to take that risk of entering direct commercial sale. Sure.

[44:24] Richard C. Howard: And that does bring up one additional question I had. Which was as they're looking at that and maybe they're talking with you or someone that's asked me a few questions. Or looking at DCs versus SMS. Could you speak to maybe certain technologies or weapons systems that is. There a scenario where the government would mandate it has to be through the FMS process that it would not be allowed through DCs? Does that exist?

[44:49] Bill Mooney: Yes, absolutely. Typically where you see that the most are the items that are subject to enhanced and use monitoring, things like surface air missiles, certain types of rockets, certain types of UAVs that would have to go foreign military sales just to ensure that the US. Government had oversight over the process and execution and then was able to do because with an enhanced end use monitoring. The US government puts restrictions even after you delivered. They have to be able to go in every year and verify that those surface air missiles haven't been retransferred to a country that wasn't supposed to get them.

[45:35] Richard C. Howard: Sure, yeah. What you're saying is bring back some maybe not so fond memories for me because I remember a couple of people on my team in Saudi Arabia, that was their job. At least one of the jobs they had was to account widgets that have been sold to the country. And sometimes finding those can be a difficult process. Again, I can see why that it would be relegated to the FMS process because you might need a major or captain in the military out there permanently to just be able to go out there every day and make sure that all of those and that's just for.

[46:08] Bill Mooney: The ones that are enhanced and use monitoring. All defense articles that are exported are subject to end use monitoring.

[46:14] Richard C. Howard: Right.

[46:14] Bill Mooney: Just on a routine basis.

[46:16] Richard C. Howard: Right. That's fascinating. And I think for companies that are interested in this, based on the conversation that we had here today and what their current state of their company looks like, they have the timeline. I am going to put into the notes Bill, how they can reach you on LinkedIn and via your email. Feel free to reach out to Bill if you're already in contact with me. You'd like me to put you with Bill and set up an introductory email? I'd be glad to do that as well. This has been great. Do you have any party words for companies considering this right now before we end the podcast?

[46:52] Bill Mooney: Yeah, there's a lot of exciting opportunities and I think it's a great way if you're already established in the US government market, to broaden your sales portfolio and broaden your bottom line. And so I've found it to be very rewarding, both financially and professionally to be out there and engage with these partners. And I would just mention that you're also doing a service to the US government because as our national strategy says, we're not going to fight the next war alone. We are going to fight it with our partners and our allies. And so you're being out there and getting the latest in the hardware and services and technology out to our allies and partners is going to bolster US national security. So thanks for what you did.

[47:40] Richard C. Howard: That's an amazing point. And maybe we even should have led with that, which is, granted, every company out there is trying to increase sales in some capacity and do good, but this is something that actually this is great for the country and it might get missed when we're talking about selling to I call it partner nation selling because these are partner nations. And one thing I like about you, Phil, is we both share a background where we started off operationally and then went into acquisitions and then some for you. More so in the foreign military piece. But being operational, that really gives you the experience. When we go to war, you're right. We're flying with different countries. And when they have the same systems that we have, when the US makes what they're using, that makes interoperability communication, everything just sink a lot better. And you're right, all of this is to really enable that, keep the US war fighters safe and help us with victory around the world.

[48:38] Bill Mooney: Yeah, one last thought on that is I really encourage, particularly those who are selling services, the number one thing that I see haven't done this for so long is that there's way too much money being spent by foreign partners on buying stuff and not enough money being spent on developing their education systems, their leadership development, their doctrine to better utilize the stuff that they have. And it's really important. So if you're in that business, I really encourage you to get out there and get in the game.

[49:13] Richard C. Howard: That is a good point and great insight. Well, thank you, Bill Mooney for coming on the podcast. President of Mooney International, and everything is going to be in the show notes. Everyone listening. Thanks again.

[49:26] Bill Mooney: Thanks, Rick. Take care.

[49:28] Richard C. Howard: All right, take care.

[49:30] Richard C. Howard: Hey, guys, Ricky here. I hope you enjoyed this episode of government sales momentum. If you did enjoy the episode, please subscribe to the podcast and leave a review. It's very much appreciated. If you're interested in selling products and services to the Department of Defense, I have something for you that you're not going to find anywhere else in the world. The team and I created a program that takes everything you need to win defense contracts and put it into one place. Up until now, only large defense companies and a small amount of people in the know have had access to how products and services are really sold to the Department of Defense. I've taken all of that information and put it in a step-by-step training module that shows you how to consistently sell to the US. Military. If you join our membership, not only do you get the model, but you get weekly sessions with former DOD acquisitions officers for training guidance to answer your questions. In a community of like-minded business owners that want to partner on different opportunities to bid for subcontracting and teaming. Or just to discuss general strategy on how to sell to the DOD. You'll have access to every course I've created. Every coaching session I've ever recorded in every interview with an acquisition professional that I've ever conducted. And we cover topics that range from defense sales planning and competitor analysis to SBIR and STTR foreign military sales. The list goes on. Go to Dodcontract.com if you are interested, and I would love to see you in the membership. Thanks.

If you enjoyed this episode, you can also check out 2022 Overview & the Discipline of Gov Business Development to get an overview of discipline in Gov Sales.