Secretary Hegseth Speech – Foreign Military Sales Reform

Overview

According to press reports, during his speech to industry leaders on acquisition reform on Friday, Nov. 7, Secretary of War Pete Hegseth also plans to announce significant changes to the U.S. foreign military sales systems (FMS). Foreign miliary sales, which are sales of U.S. defense articles/weapons to foreign governments, totaled nearly $118 billion in fiscal year 2024.

Press reports indicate that Secretary Hegseth will announce that he is moving control of arms sales from the Pentagon policy chief to the acquisition chief. The Defense Security Cooperation Agency (DSCA), which is the implementing agency for arms transfers, would now report to Michael Duffey, the undersecretary of defense for acquisition and sustainment (A&S) instead of Elbridge Colby, the undersecretary of defense for policy.

Significance

This potential move would consolidate all of the Pentagon’s acquisition systems, both for the U.S. military and for foreign governments, under one roof. A&S already manages the contracting, related supply chain and production issues on the domestic side and would now also manage those issues for foreign sales.

Key questions

Secretary Hegseth’s goal is to speed up the foreign military sales process so U.S. companies can compete in the world market. However, for this effort to succeed, the Pentagon will need to make significant changes as it brings the two teams together to work through the complicated foreign military sales process.

Key questions include:

• How will the new system balance the needs of the U.S. military with defense exports?
• Will the new structure create a new focus on defense exports within the existing acquisitions teams?
• Will contracting officers be incentivized to focus on foreign military sales?
• Will acquisition officials now address key questions—like how to make a weapon or weapons system exportable—at an earlier phase of the acquisitions process?
• How will policy officials weigh into the new process?

Trump Administration Arms Sales Reform

The potential changes in the Pentagon structure would be the next significant step in the Trump administration’s plans to reform the arms sales/defense trade systems.

All of these changes take place under the umbrella of Trump’s April executive order (EO), which announced a new initiative to reform the defense sales system, with a focus on speed and accountability and reducing rules and regulations. The EO proposed significant changes including changing how Congress reviews arms sales, prioritization based on weapons systems and countries, and improving financing and exportability.

The Trump administration has already taken two steps required under the EO:

• Easier Export of Drones: In September, the State Department announced that it would loosen the rules on the export of larger armed drones, treating them as if they were crewed fighter jets. Previously, these types of drones had been subject to specific additional reviews under the Missile Technology Control Regime.

• Updating FMS only lists: On Oct. 15, DSCA announced changes that will likely reduce the kinds of defense articles that can be sold only through the foreign military sales system and will allow more items to go through the direct commercial sale system.

If you would like to learn more about how the Trump administration’s plans for foreign military sales reform impacts you and your company, Brownstein’s International and Defense teams have extensive expertise within the foreign arms sales sector and connecting industry leaders, U.S. businesses and foreign entities with the U.S. or foreign governments. Our teams are uniquely positioned and have deep experience facilitating connections within the defense sector with key government and diplomatic officials to leverage our clients’ needs. As announcements related to Secretary Hegseth’s upcoming speech are released, the Brownstein International and Defense teams can work with you to understand the challenges and opportunities available for the sector. For more information on how to get involved, please contact one of the authors of this alert.

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THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING A SPEECH DELIVERED BY SECRETARY HeGSETH. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.