Foreign Military Sales (FMS) Warranties: An Assessment

摘要

The world of procurement has been turned upside down with the recent 1984/85 laws prescribing our new day-to-day regulations. One of the most debated aspects of the new laws involves mandatory warranty provisions. Our own acquisition personnel, as well as foreign customers, are asking some important questions. How much will a warranty cost. What will I get for my money. What kind of administration is required. Do I really need it. And, last but not least, what is a warranty. The U.S. Government (USG) Federal Acquisition Regulation defines a warranty as 'a promise or affirmation given by a contractor to the Government regarding the nature, usefulness, or condition of the supplies or performance of services furnished under the contract.' In effect, a warranty or guarantee (both are used interchangeably) is a legal contractual bet or gamble. The USG is betting that the items supplied by the contractor will fail, whereas the contractor wages that the warranty will not be evoked. Picture the typical negotiations. During the purchasing of the end item, the contractor is telling the USG how great his item is and why he should be demanding such a high price. The USG, of course, is negotiating the opposite. Then, when the warranty is negotiated, the contractor and USG change roles. The contractor, to raise the price of the warranty, is telling the USG how bad his item is and how much work it will need. Meanwhile the USG is taking the approach that the item is now superior and should not need an expensive warranty.