Cooperative projects under the Arms Export Control Act

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1. A second route to joint programs

Alongside the Defense Department’s own research and development agreements, the Arms Export Control Act contains a broader authority for cooperative projects. The President may enter into a cooperative project agreement with the North Atlantic Treaty Organization or with one or more of its member countries (22 U.S.C. 2767(a)). The same may be done with any friendly country outside NATO, on the same general terms, if the President determines the agreement would serve American foreign policy or national security interests (22 U.S.C. 2767(j)). The research and development authority in title 10 is covered in cooperative research and development agreements.

2. What a cooperative project is

A cooperative project is a jointly managed arrangement set out in a written agreement among the parties (22 U.S.C. 2767(b)). With NATO members, it is undertaken to further standardization, rationalization and interoperability of NATO forces. With other countries, it is undertaken to improve the participants’ conventional defense capabilities.

The arrangement must provide for at least one of three things (22 U.S.C. 2767(b)). Other participants may share with the United States the costs of research, development, testing, evaluation or joint production, including follow-on support, of certain defense articles. The article jointly developed may be produced concurrently in the United States and another participant’s country. Or the United States may procure a defense article or service from another participant.

3. Equitable shares, and no side deals on workshare

Each agreement must provide that every participant contributes its equitable share of the full cost and receives an equitable share of the results (22 U.S.C. 2767(c)). Full cost includes overhead, administrative costs and the costs of claims. Shares may be contributed in funds or in defense articles or services the project needs. Military assistance and financing from the United States may not be used by another participant to pay its share.

The same subsection addresses industrial participation directly. "Such agreements shall provide that no requirement shall be imposed by a participant for worksharing or other industrial or commercial compensation in connection with such agreement that is not in accordance with such agreement" (22 U.S.C. 2767(c)). Workshare, in other words, is whatever the agreement itself says.

4. Contracting on behalf of partners

The President may enter into contracts or other obligations for a project on behalf of the other participants, without charge to any appropriation or contract authorization (22 U.S.C. 2767(d)). Each participant must first agree to pay its equitable share, and to make funds available in the amounts and at the times the contract requires. It must also agree to pay in advance any damages and costs from performing or cancelling the contract before they fall due.

Where that authority is delegated to the Secretary of Defense, the Secretary may use title 10 authority to carry out the contracts (10 U.S.C. 2350b(a)(1)). The ordinary procurement chapter of title 10 and other procurement laws apply, except where waived (10 U.S.C. 2350b(a)(2)). The Secretary may require particular subcontractors to receive subcontracts in furtherance of the project (10 U.S.C. 2350b(b)).

5. Waivers for contracts abroad

For contracts and obligations outside the United States, the Secretary of Defense may waive laws that specifically prescribe contract formation procedures, contract terms, domestic source requirements or preferences, or contract performance requirements (10 U.S.C. 2350b(c)(1)). The Arms Export Control Act itself and one listed title 10 procurement provision cannot be waived.

A waiver needs a determination that it is necessary to ensure the project will significantly further standardization, rationalization and interoperability (10 U.S.C. 2350b(c)(2)). The power may be delegated only to the Deputy Secretary of Defense or the Office of the Secretary of Defense’s designated Acquisition Executive (10 U.S.C. 2350b(c)(3)).

Congress is told each time. The Secretary notifies Congress whenever a prime contract or subcontract must go to a particular contractor to comply with a cooperative agreement, with the reason, and whenever a waiver is used, naming the provisions waived (10 U.S.C. 2350b(d)).

A partner, or a NATO organization, may also contract for American requirements under the project if the Secretary finds that will significantly further standardization, rationalization and interoperability (10 U.S.C. 2350b(e)). Unless waived, such a contract must be competitive and must not preclude American sources, though the contracting party may follow its own procedures.

6. Sales, surcharges and the certification to Congress

Charges on sales made as part of a project can be reduced or waived if the other participants reciprocate (22 U.S.C. 2767(e)(1)). Surcharges on other sales may not be raised to make up the difference (22 U.S.C. 2767(e)(2)). For projects with NATO countries, the congressional review provisions for government sales and commercial licenses in section 36 of the Act are switched off. They do not apply to sales, production, exports and licenses that are part of the project (22 U.S.C. 2767(g)).

Instead, a project gets its own notice. At least 30 days before an agreement is signed, the President sends a numbered certification to Congress. It goes to the Speaker, the House Committee on Foreign Affairs, and the chairmen of the Senate Committees on Foreign Relations and Armed Services (22 U.S.C. 2767(f)). It describes the project and estimates production quantities, the full cost and the American share, and each participant’s funds and contributed articles and services. It states the expected foreign policy and national security benefits. To the extent known, it also says whether particular prime contractors or subcontractors are likely to receive contracts.

7. Property and what cannot be waived

Jointly acquired property can be disposed of without applying American property disposal laws. Disposal may include transferring the American interest to another participating government, or a sale, with payment as the agreement provides (10 U.S.C. 2350b(f)). Two things stay fixed. The section does not let the Secretary waive the Treasury’s financial management responsibilities, or the cargo preference laws (10 U.S.C. 2350b(g)).

Key terms

Cooperative project	A jointly managed arrangement in a written agreement for shared development, concurrent production or procurement.
Full cost	The project cost each participant shares, including overhead, administrative costs and claims.
Numbered certification	The notice to Congress at least 30 days before a cooperative project agreement is signed.
Standardization, rationalization and interoperability	The objective a waiver or partner contract must significantly further.

Every statement above links to the document behind it. The full source list for this piece is on the sources page.

This page describes public United States government programs for general information. It is not legal, regulatory or procurement advice, and it does not address the facts of any particular case.

How Sentfore supports this

Cooperative production depends on components and equipment moving securely between partner countries. Sentfore works at the delivery end of defense programs in difficult environments, providing secure movement, protective security, facilities and life support. Requirements can be sent through the contact page.