Contracts Make the World Go 'Round (or "Boom")

Behind every great arms transaction, there's a great contract. Slate's "Explainer" column tackles the Venezuelan F-16 kerfuffle in the news this past week by examining the Department of Defense's foreign arms sales practices:

When you buy weapons from the United States, do you get a service contract?

In most cases, yes. The sale of fighter jets can be negotiated in one of two ways: Either the buyer country works out a deal with a U.S. contractor (with State Department and Pentagon approval), or it goes through the Pentagon's Foreign Military Sales program. Contractors provide warranties and technical support as they would for any sale.

. . . .

To make sure their F-16s don't end up in a museum, buyer countries typically get several years' worth of spare parts with their purchase. (Subsequent spare-parts contracts are negotiated as needed.) They can also buy into long-term maintenance contracts, which include "repair and return" programs for any equipment that wears out. The standard contract provided by the Pentagon promises to "repair or replace at no extra cost" any items that are initially damaged or defective, but it does not ensure their continued function—long-term warranties for specific weapons cost extra.

An FMS contract often includes surcharges for packing, shipping, and handling that can amount to around 20 percent of the purchase price. If you go through the FMS system, you'll also have to pay a 2.5 percent administrative surcharge to the government. The Pentagon accepts payment—in U.S. dollars only—via check or wire transfer. Checks should be made out to the "U.S. Treasury" with an identifying note: "Payment from Government of [country] for [FMS code]."

What's more, if there's a dispute between the parties, you can literally bring out the big guns to resolve it. Lawyers and Litigation are dandy, but Marines and laser-guided smart bombs are so much more persuasive.