Foreign Assistance

Pursuant to a congressional request, GAO determined: (1) the amount of Foreign Military Sales (FMS) funds that Israel spent on its Lavi fighter aircraft program after it decided to terminate the program; (2) how Israel used the funds; and (3) whether Israel planned to export any items or technology developed with U.S. funds and, if so, whether U.S. export controls would apply.

GAO found that: (1) at the time it terminated the Lavi program, Israel had to terminate or complete 136 open contracts and 1,500 active purchase orders with U.S. companies; (2) Israel paid $218.4 million to U.S. companies and $212.1 million to Israeli companies to terminate the contracts and fund continuing programs; (3) $69.8 million of the $152.2 million that Israel paid to one U.S. contractor terminated a contract, while $82.4 million went to continuing programs; (4) Israel paid $147.4 million in contract termination costs to one Israeli contractor and $0.3 million to another contractor, of which the larger contractor paid $3.6 million to subcontractors; (5) the terminated contractors used their own funds to make severance payments to former employees; (6) continuing programs included development of selected Lavi avionics systems, completion of the technology demonstrator, and upgrading of 30 Israeli F-15 aircraft engines, and accounted for $167.8 million of the $430.5 million in FMS funds Israel used after it terminated the program; (7) many companies involved in the program tried to increase their exports to compensate for reduced purchases, but had not made agreements with foreign purchasers; and (8) retransfer of any Lavi article was subject to prior U.S. approval or export license retransfer conditions, since virtually all the components had some U.S. content.