ABSTRACT
The Foreign Military Sales Program is intended to provide eligible foreign governments with Department of Defense (DOD) articles and services such as aircraft, missiles, tanks, ships, and training. Implementing the Foreign Military Sales Act of 1968, the Department of Defense included full cost recovery provisions in the standard contract used for sales of defense articles and services to foreign governments. The General Accounting Office (GAO), although expressing concern that further change should be made to insure full cost recovery, acknowledged that the guidance resulted in substantial improvements in the pricing of foreign military training. The GAO reported that DOD was not recovering normal inventory losses on sales of articles to foreign governments. The GAO pointed out that the military services, as required by DOD directive, should attempt to recover normal inventory losses on sales of stock fund items by applying surcharges to the standard price of the article being sold.
