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TITLE VIII--ACQUISITION POLICY, ACQUISITION MANAGEMENT, AND RELATED MATTERS

Subtitle F — Improve Acquisition Act

P. L. 111-

Joint Explanatory Statement of the Committees on Armed Services of the U. S. Senate and House of Representatives on H. R. 6523

From H. R. 6523

SEC. 866. PILOT PROGRAM ON ACQUISITION OF MILITARY PURPOSE NONDEVELOPMENTAL ITEMS.

(a) Pilot Program Authorized-

(1) IN GENERAL- The Secretary of Defense may carry out a pilot program to assess the feasability and advisability of acquiring military purpose nondevelopmental items in accordance with this section.

(2) SCOPE OF PROGRAM- Under the pilot program, the Secretary may enter into contracts with nontraditional defense contractors for the acquisition of military purpose nondevelopmental items in accordance with the requirements set forth in subsection (b).

(b) Contract Requirements- Each contract entered into under the pilot program--

(1) shall be a firm, fixed price contract, or a firm, fixed price contract with an economic price adjustment clause awarded using competitive procedures in accordance with chapter 137 of title 10, United States Code;

(2) shall be in an amount not in excess of $50,000,000, including all options;

(3) shall provide--

(A) for the delivery of an initial lot of production quantities of completed items not later than nine months after the date of the award of such contract; and

(B) that failure to make delivery as provided for under subparagraph (A) may result in the termination of such contract for default; and

(4) shall be--

(A) exempt from the requirement to submit certified cost or pricing data under section 2306a of title 10, United States Code, and the cost accounting standards under section 26 of the Office of Federal Procurement Policy Act (41 U.S.C. 422); and

(B) subject to the requirement to provide data other than certified cost or pricing data for the purpose of price reasonableness determinations, as provided in section 2306a(d) of title 10, United States Code.

(c) Regulations- If the Secretary establishes the pilot program authorized under subsection (a), the Secretary shall prescribe regulations governing such pilot program. Such regulations shall be included in regulations of the Department of Defense prescribed as part of the Federal Acquisition Regulation and shall include the contract clauses and procedures necessary to implement such program.

(d) Reports-

(1) REPORTS ON PROGRAM ACTIVITIES- Not later than 60 days after the end of any fiscal year in which the pilot program is in effect, the Secretary shall submit to the congressional defense committees a report on the pilot program. The report shall be in unclassified form but may include a classified annex. Each report shall include, for each contract entered into under the pilot program in the preceding fiscal year, the following:

(A) The contractor.

(B) The item or items to be acquired.

(C) The military purpose to be served by such item or items.

(D) The amount of the contract.

(E) The actions taken by the Department of Defense to ensure that the price paid for such item or items is fair and reasonable.

(2) PROGRAM ASSESSMENT- If the Secretary establishes the pilot program authorized under subsection (a), not later than four years after the date of the enactment of this Act, the Comptroller General of the United States shall submit to the congressional defense committees a report setting forth the assessment of the Comptroller General of the extent to which the pilot program--

(A) enabled the Department to acquire items that otherwise might not have been available to the Department;

(B) assisted the Department in the rapid acquisition and fielding of capabilities needed to meet urgent operational needs; and

(C) protected the interests of the United States in paying fair and reasonable prices for the item or items acquired.

(e) Definitions- In this section:

(1) The term `military purpose nondevelopmental item' means a nondevelopmental item that meets a validated military requirement, as determined in writing by the responsible program manager, and has been developed exclusively at private expense. For purposes of this paragraph, an item shall not be considered to be developed exclusively at private expense if development of the item was paid for in whole or in part through--

(A) independent research and development costs or bid and proposal costs that have been reimbursed directly or indirectly by a Federal agency or have been submitted to a Federal agency for reimbursement; or

(B) foreign government funding.

(2) The term `nondevelopmental item'--

(A) has the meaning given that term in section 4(13) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(13)); and

(B) also includes previously developed items of supply that require modifications other than those customarily available in the commercial marketplace if such modifications are consistent with the requirement in subsection (b)(3)(A).

(3) The term `nontraditional defense contractor' has the meaning given that term in section 2302(9) of title 10, United States Code (as added by subsection (g)).

(4) The terms `independent research and developments costs' and `bid and proposal costs' have the meaning given such terms in section 31.205-18 of the Federal Acquisition Regulation.

(f) Sunset-

(1) IN GENERAL- The authority to carry out the pilot program shall expire on the date that is five years after the date of the enactment of this Act.

(2) CONTINUATION OF CURRENT CONTRACTS- The expiration under paragraph (1) of the authority to carry out the pilot program shall not affect the validity of any contract awarded under the pilot program before the date of the expiration of the pilot program under that paragraph.

(g) Statutory Definition of Nontraditional Defense Contractor-

(1) NONTRADITIONAL DEFENSE CONTRACTOR- Section 2302 of title 10, United States Code, is amended by adding at the end the following:

`(9) The term `nontraditional defense contractor', with respect to a procurement or with respect to a transaction authorized under section 2371(a) of this title, means an entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any of the following for the Department of Defense:

`(A) Any contract or subcontract that is subject to full coverage under the cost accounting standards prescribed pursuant to section 26 of the Office of Federal Procurement Policy Act (41 U.S.C. 422) and the regulations implementing such section.

`(B) Any other contract in excess of $500,000 under which the contractor is required to submit certified cost or pricing data under section 2306a of this title.'.

(2) CONFORMING AMENDMENT- Section 845(f) of the National Defense Authorization Act for Fiscal Year 1994 (10 U.S.C. 2371 note) is amended to read as follows:

`(f) Nontraditional Defense Contractor Defined- In this section, the term `nontraditional defense contractor' has the meaning provided by section 2302(9) of title 10, United States Code.'.

From H.R. 5136:  National Defense Authorization Act for Fiscal Year 2011

SEC. 108. PROCUREMENT OF MILITARY PURPOSE NONDEVELOPMENTAL ITEMS.

(a) In General-

(1) PROCUREMENT OF MILITARY PURPOSE NONDEVELOPMENTAL ITEMS- Chapter 141 of title 10, United States Code, is amended by adding at the end the following new section:

`Sec. 2410r. Military purpose nondevelopmental items

`(a) Definitions- In this section:

`(1) The term `military purpose nondevelopmental item' means an item--

`(A) developed exclusively at private expense;

`(B) that meets a validated military requirement, as certified in writing by the responsible program manager;

`(C) for which delivery of an initial lot of production-representative items may be made within 9 months after contract award; and

`(D) for which the unit cost is less than $10,000,000.

`(2) The term `item' has the meaning provided in section 2302(3) of this title.

`(b) Requirements- The Secretary of Defense shall ensure that, with respect to a contract for the acquisition of a military purpose nondevelopmental item, the following requirements apply:

`(1) The contract shall be awarded using competitive procedures in accordance with section 2304 of this title.

`(2) Certain contract clauses, as specified in regulations prescribed under subsection (c), shall be included in each such contract.

`(3) The type of contract used shall be a firm, fixed price type contract.

`(4) Nothing in the contract shall further restrict or otherwise affect the rights in technical data of the Government, the contractor, or any subcontractor of the contractor for items developed by the contractor or any such subcontractor exclusively at private expense, as prescribed in regulations implementing section 2320(a)(2)(B) of this title.

`(c) Regulations- The Secretary of Defense shall prescribe regulations to carry out this section. Such regulations shall be included in regulations of the Department of Defense prescribed as part of the Federal Acquisition Regulation. At a minimum, the regulations shall include--

`(1) a list of contract clauses to be included in each contract for the acquisition of a military purpose nondevelopmental item;

`(2) definitions for the terms `developed' and `exclusively at private expense' that--

`(A) are consistent with the definitions developed for such terms in accordance with 2320(a)(3) of this title; and

`(B) also exclude an item developed in part or in whole with--

`(i) foreign government funding; or

`(ii) foreign or Federal Government loan financing at nonmarket rates; and

`(3) standards for evaluating the reasonableness of price for the military purpose nondevelopmental item, in lieu of certified cost or pricing data.'.

(2) CLERICAL AMENDMENT- The table of sections at the beginning of such chapter is amended by adding at the end the following new item:

`2410r. Military purpose nondevelopmental items.'.

(b) Cost or Pricing Data Exception- Section 2306a(b)(1) of title 10, United States Code, is amended--

(1) by striking `or' at the end of subparagraph (B);

(2) by striking the period at the end of subparagraph (C) and inserting `; or'; and

(3) by adding at the end the following new subparagraph:

`(D) for the acquisition of a military purpose nondevelopmental item, as defined in section 2410r of this title, if the contracting officer determines in writing that--

`(i) the contract, subcontract or modification will be a firm, fixed price type contract; and

`(ii) the offeror has submitted sufficient information to evaluate, through price analysis, the reasonableness of the price for the military purpose nondevelopmental item.'.

(c) Effective Date- Section 2410r of title 10, United States Code, as added by subsection (a), and the amendment made by subsection (b), shall apply with respect to contracts entered into after the date that is 120 days after the date of the enactment of this Act.

From H. R. 5013:  Implementing Management for Performance and Related Reforms to Obtain Value in Every Acquisition Act of 2010

SEC. 108. PROCUREMENT OF MILITARY PURPOSE NONDEVELOPMENTAL ITEMS.

(a) In General-

(1) PROCUREMENT OF MILITARY PURPOSE NONDEVELOPMENTAL ITEMS- Chapter 141 of title 10, United States Code, is amended by adding at the end the following new section:

`Sec. 2410r. Military purpose nondevelopmental items

`(a) Definitions- In this section:

`(1) The term `military purpose nondevelopmental item' means an item--

`(A) developed exclusively at private expense;

`(B) that meets a validated military requirement, as certified in writing by the responsible program manager;

`(C) for which delivery of an initial lot of production-representative items may be made within nine months after contract award; and

`(D) for which the unit cost is less than $10,000,000.

`(2) The term `item' has the meaning provided in section 2302(3) of this title.

`(b) Requirements- The Secretary of Defense shall ensure that, with respect to a contract for the acquisition of a military purpose nondevelopmental item, the following requirements apply:

`(1) The contract shall be awarded using competitive procedures in accordance with section 2304 of this title.

`(2) Certain contract clauses, as specified in regulations prescribed under subsection (c), shall be included in each such contract.

`(3) The type of contract used shall be a firm, fixed price type contract.

`(4) Nothing in the contract shall further restrict or otherwise affect the rights in technical data of the Government, the contractor, or any subcontractor of the contractor for items developed by the contractor or any such subcontractor exclusively at private expense, as prescribed in regulations implementing section 2320(a)(2)(B) of this title.

`(c) Regulations- The Secretary of Defense shall prescribe regulations to carry out this section. Such regulations shall be included in regulations of the Department of Defense prescribed as part of the Federal Acquisition Regulation. At a minimum, the regulations shall include--

`(1) a list of contract clauses to be included in each contract for the acquisition of a military purpose nondevelopmental item;

`(2) definitions for the terms `developed' and `exclusively at private expense' that--

`(A) are consistent with the definitions developed for such terms in accordance with 2320(a)(3) of this title; and

`(B) also exclude an item developed in part or in whole with--

`(i) foreign government funding; or

`(ii) foreign or Federal Government loan financing at nonmarket rates; and

`(3) standards for evaluating the reasonableness of price for the military purpose nondevelopmental item, in lieu of certified cost or pricing data.'.

(2) CLERICAL AMENDMENT- The table of sections at the beginning of such chapter is amended by adding at the end the following new item:

`2410r. Military purpose nondevelopmental items.'.

(b) Cost or Pricing Data Exception- Section 2306a(b)(1) of title 10, United States Code, is amended--

(1) by striking `or' at the end of subparagraph (B);

(2) by striking the period at the end of subparagraph (C) and inserting `; or'; and

(3) by adding at the end the following new subparagraph:

`(D) for the acquisition of a military purpose nondevelopmental item, as defined in section 2410r of this title, if the contracting officer determines in writing that--

`(i) the contract, subcontract or modification will be a firm, fixed price type contract; and

`(ii) the offeror has submitted sufficient information to evaluate, through price analysis, the reasonableness of the price for the military purpose nondevelopmental item.'.

(c) Effective Date- Section 2410r of title 10, United States Code, as added by subsection (a), and the amendment made by subsection (b), shall apply with respect to contracts entered into after the date that is 120 days after the date of the enactment of this Act.

From S. 3454, National Defense Authorization Act for Fiscal Year 2011

SEC. 831. PILOT PROGRAM ON ACQUISITION OF MILITARY PURPOSE NONDEVELOPMENTAL ITEMS.

(a) Pilot Program Authorized-

(1) IN GENERAL- The Secretary of Defense may carry out a pilot program to assess the feasability and advisability of acquiring military purpose nondevelopmental items in accordance with this section.

(2) SCOPE OF PROGRAM- Under the pilot program, the Secretary may enter into contracts with nontraditional defense contractors for the acquisition of military purpose nondevelopmental items in accordance with the streamlined procedures set forth in subsection (b).

(b) Procedures- Each contract entered into under the pilot program--

(1) shall be a firm, fixed price contract, or a firm, fixed price contract with an economic price adjustment clause;

(2) shall be in an amount not in excess of $50,000,000, including all options;

(3) shall provide--

(A) for the delivery of an initial lot of production quantities of completed items not later than nine months after the date of the award of such contract; and

(B) that failure to make delivery as provided for under subparagraph (A) may result in the termination of such contract for default; and

(4) shall be--

(A) exempt from the requirement to provide cost or pricing data under section 2306a of title 10, United States Code, and the cost accounting standards under section 26 of the Office of Federal Procurement Policy Act (41 U.S.C. 422); and

(B) subject to the requirement to provide data other than certified cost or pricing data for the purpose of price reasonableness determinations, as provided in section 2306a(d) of title 10, United States Code.

(c) Treatment of Items as Developed Exclusively at Private Expense- For purposes of this section, an item shall not be considered to be developed exclusively at private expense if development of the item was paid for in whole or in part through independent research and development costs or bid and proposal costs that have been reimbursed directly or indirectly by a Federal agency or have been submitted to a Federal agency for reimbursement.

(d) Reports-

(1) REPORTS ON PROGRAM ACTIVITIES- Not later than 60 days after the end of the first fiscal year in which the pilot program is in effect, and each year thereafter, the Secretary shall submit to the congressional defense committees a report on the pilot program. Each report shall set forth, for each contract entered into under the pilot program in the preceding fiscal year, the following:

(A) The contractor.

(B) The item or items to be acquired.

(C) The military purpose to be served by such item or items.

(D) The amount of the contract.

(E) The actions taken by the Department of Defense to ensure that the price paid for such item or items is fair and reasonable.

(2) PROGRAM ASSESSMENT- Not later than four years after the date of the enactment of this Act, the Comptroller General of the United States shall submit to the congressional defense committees a report setting forth the assessment of the Comptroller General of the extent to which the pilot program--

(A) enabled the Department to acquire items that otherwise might not have been available to the Department;

(B) assisted the Department in the rapid acquisition and fielding of capabilities needed to meet urgent operational needs; and

(C) protected the interests of the United States in paying fair and reasonable prices for the item or items acquired.

(e) Definitions- In this section:

(1) The term `military purpose nondevelopmental item' mean a nondevelopmental item that meets a validated military requirement, as determined in writing by the responsible program manager, and has been developed exclusively at private expense.

(2) The term `nondevelopmental item' has the meaning given that term in section 4(13) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(13)).

(3) The term `nontraditional defense contractor' has the meaning given that term in section 845(f) of the National Defense Authorization Act for Fiscal Year 1994 (10 U.S.C. 2371 note).

(4) The terms `independent research and developments costs' and `bid and proposal costs' have the meaning given such terms in section 31.205-18 of the Federal Acquisition Regulation.

(f) Sunset-

(1) IN GENERAL- The authority to carry out the pilot program shall expire on the date that is five years after the date of the enactment of this Act.

(2) CONTINUATION OF CURRENT CONTRACTS- The expiration under paragraph (1) of the authority to carry out the pilot program shall not affect the validity of any contract awarded under the pilot program before the date of the expiration of the pilot program under that paragraph.

The House bill contained a provision (sec. 108 of division D) that would establish procedures for the procurement of military purpose nondevelopmental items.

The Senate committee-reported bill contained a provision (sec. 831) that would establish a pilot program on acquisition of military purpose nondevelopmental items. The agreement includes the Senate provision with a clarifying amendment.

From H. Rpt. 111-465, accompanying  H. R. 5013: Implementing Management for Performance and Related Reforms to Obtain Value in Every Acquisition Act of 2010

SECTION 108--PROCUREMENT OF MILITARY PURPOSE NONDEVELOPMENTAL ITEMS

This section would create an exception to the requirement for an offer or to submit certified cost or pricing data with a bid or proposal in accordance with section 2306a of title 10, United States Code, in certain circumstances involving the acquisition of a military purpose non-developmental item (MPNDI). This section would also amend chapter 141 of title 10, United States Code, by inserting a new section 2410r, which would define a MPNDI as an item developed exclusively at private expense; that meets a validated military requirement; that can be delivered in production quantities within nine months of contract award; and has a unit cost less than $10.0 million. Additionally, section 2410r, as added by this section, would require the Secretary of Defense to issue regulations regarding the procurement of a MPNDI, specifying at a minimum, that a contract for a MPNDI be awarded utilizing competitive procedures in accordance with section 2304 of title 10, United States Code; that the contract be a firm fixed price contract; that an item developed exclusively at private expense may not have been funded in whole or in part with funding from a foreign government or through a government sponsored loan whose terms are more favorable than the prevailing market terms for a similar loan; and standards to evaluate price reasonableness in lieu of certified cost or pricing data from the contractor. The amendments to title 10 made by this section would apply with respect to contracts entered into 120 days after the date of enactment of this Act.

From S. Rpt. 111-201, to accompany S. 3454, NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2011

Pilot program on acquisition of military purpose nondevelopmental items (sec. 831)

The committee recommends a provision that would authorize the Secretary of Defense to carry out a pilot program to assess the feasibility and advisability of streamlined procedures for the acquisition of military purpose nondevelopmental items. Under the streamlined procedures, covered contractors would not be required to provide certified cost or pricing data under section 2306a of title 10, United States Code, but would be required to provide other data for the purpose of price reasonableness determinations.

The most recent Quadrennial Defense Review (QDR), released in February 2010, suggests that as the Department of Defense (DOD) tries to acquire innovative technologies and solutions to meet military requirements faster and cheaper, it should find more ways to involve commercial and small business firms in defense acquisitions. While the Federal Acquisition Regulation (FAR) already includes a preference for both commercial items and other nondevelopmental items, the FAR does not include any procedures to incentivize the private development of items that serve solely a military purpose. In fact, the military purpose of an item developed exclusively at private expense may prevent DOD from using streamlined acquisition processes that are available for the purchase of commercial items.

The pilot program under this section is designed to test whether the streamlined procedures similar to those available for commercial items can serve as an effective incentive for non-traditional defense contractors to: (1) channel investment and innovation into areas that are useful to DOD; and (2) provide items developed exclusively at private expense to meet validated military requirements.

The committee notes that the streamlined acquisition procedures developed under this section may have a particular utility in the Department's efforts to rapidly field military capabilities in response to urgent operational needs.