U.S. PRICING POLICY ON THE SALE OF M60A3 TANKS -- HON. LEE H. HAMILTON (Extension of Remarks - November 24, 1993) [Page: E3033] --- HON. LEE H. HAMILTON in the House of Representatives MONDAY, NOVEMBER 22, 1993
- Mr. HAMILTON. Mr. Speaker, earlier this year, the Committee on Foreign Affairs received correspondence indicating potential irregularities in the pricing policy on the sale of U.S. M60A3 tanks to foreign nations. In this regard, the Committee on Foreign Affairs received notifications on the sale of U.S. M60A3 tanks pursuant to the Arms Export Control Act with unit prices ranging between a low of $215,000 per tank to a high of $790,000 per tank. Earlier this month, the Committee on Foreign Affairs received yet another information notification on the sale of U.S. M60A3 tanks that included a unit price of $130,000 per tank. As a result of these variations in pricing, I requested the Defense Security Assistance Agency to provide the Committee on Foreign Affairs with a memorandum explaining the pricing policy of U.S. defense equipment--specifically, the M60A3 tank. I have attached a copy of that memorandum to this statement so that Members can review it and gain a better understanding of the U.S. pricing policy on the sale of M60A3 tanks to foreign nations.
Pricing of defense equipment is based on Department of Defense guidance contained in Financial Management Regulation DOD 7000.14-R, Volume 15, Security Assistance Policy and Procedures, March 1993
Price is determined as follows:
A. Determine the normal peacetime life of the item to be sold.
B. Determine the percentage of useful life remaining.
C. Determine condition of item to be sold.
D. Apply the percentage to the acquisition price.
In 1990 M60A3 tanks were sold to Oman, Bahrain, and Saudi Arabia.
Normal peacetime life: 20 years
Average age of tanks sold: 8 years
Condition: Serviceable used--Good--Not Overhauled
Percentage of acquisition price considering age/condition: 60%
Army Master Data File Acquisition Price: $1,291,865
Base price of tanks (less radios, machine guns, overhaul or non-recurring costs), $1,291,865 X 60% = $775,119
In 1993 a world-wide survey was conducted to identify foreign requirements for the aging M60A3 fleet.
Normal peacetime life: 20 years
Average age of tanks offered: 16 years
Condition: Serviceable used--Fair condition--Not Overhauled
Percentage of acquisition price considering age/condition: 20%
Location of tanks: Korea
Acquisition price: $1,291,865
Survey price, less radios, machine guns, or overhaul:
$1,291,865 X 20% = $258,373 less reduction for condition--20%
($51,675), plus 20% of nonrecurring cost ($31,000 X 20% = $6,200), = $212,898
Two countries have inspected the 111 serviceable tanks located in Korea which were offered at $212,000. Bahrain indicated a requirement for 14 and Taiwan for 97. Taiwan has not yet submitted a letter of request for these tanks.
Of the 1,435 tanks located in Europe, 1,311 have been cascaded to other NATO Countries under the terms of the Conventional Forces Europe (CFE) Agreement. 124 are awaiting transfer decisions.
In view of the 3,976 tanks located in CONUS, and the minimal response to the world-wide survey, the Army requested an exception from the DOD Comptroller to sell the M60A3 tanks at 10% of the acquisition price to realize a return to the taxpayer before the tanks become excess. On 6 August 1993 the exception (in accordance with the DOD Regulation) was approved and a quantity of 340 M60A3 tanks was offered to Egypt at a unit price of $129,865 (copy attached). Egypt has inspected 411 tanks at Fort Hood and 91 at Fort Knox. They have tentatively selected 299 of these 502. An additional quantity of the CONUS fleet of M60A3 tanks is available at this price for other approved purchasers. In the near term the Army will declare the M60A3 tanks as excess to requirements and dispose of them through grant programs or demilitarization at additional costs to the taxpayer.