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

Subtitle D—Provisions Relating to Contracts in Support of Contingency Operations in Iraq or Afghanistan

P. L. 112-81

House Conference Report 112-329

(a) Department of Defense Contracts, Grants, and Cooperative Agreements-

(1) IN GENERAL- Not later than 30 days after the date of the enactment of this Act, the Secretary of Defense shall revise the Department of Defense Supplement to the Federal Acquisition Regulation to require that--

(A) the clause described in paragraph (2) shall be included in each covered contract, grant, and cooperative agreement of the Department of Defense that is awarded on or after the date of the enactment of this Act; and

(B) to the maximum extent practicable, each covered contract, grant, and cooperative agreement of the Department that is awarded before the date of the enactment of this Act shall be modified to include the clause described in paragraph (2).

(2) CLAUSE- The clause described in this paragraph is a clause authorizing the Secretary, upon a written determination pursuant to paragraph (3), to examine any records of the contractor, the recipient of a grant or cooperative agreement, or any subcontractor or subgrantee under such contract, grant, or cooperative agreement to the extent necessary to ensure that funds available under the contract, grant, or cooperative agreement--

(A) are not subject to extortion or corruption; and

(B) are not provided directly or indirectly to persons or entities that are actively supporting an insurgency or otherwise actively opposing United States or coalition forces in a contingency operation.

(3) WRITTEN DETERMINATION- The authority to examine records pursuant to the contract clause described in paragraph (2) may be exercised only upon a written determination by the contracting officer or comparable official responsible for a grant or cooperative agreement, upon a finding by the Commander of the United States Central Command, that there is reason to believe that funds available under the contract, grant, or cooperative agreement concerned may have been subject to extortion or corruption or may have been provided directly or indirectly to persons or entities that are actively supporting an insurgency or otherwise actively opposing United States or coalition forces in a contingency operation.

(4) FLOWDOWN- A clause described in paragraph (2) shall also be required in any subcontract or subgrant under a covered contract, grant, or cooperative agreement if the subcontract or subgrant has an estimated value in excess of $100,000.

(b) Reports- Not later than March 1 of each of 2013, 2014, and 2015, the Secretary shall submit to the congressional defense committees a report on the use of the authority provided by this section in the preceding calendar year. Each report shall identify, for the calendar year covered by such report, each instance in which the Department of Defense exercised the authority provided under this section to examine records, explain the basis for the action taken, and summarize the results of any examination of records so undertaken, Any report under this subsection may be submitted in classified form.

(c) Definitions- In this section:

(1) The term `contingency operation' has the meaning given that term in section 101(a)(13) of title 10, United States Code.

(2) The term `covered contract, grant, or cooperative agreement' means a contract, grant, or cooperative agreement with an estimated value in excess of $100,000 that will be performed in the United States Central Command theater of operations in support of a contingency operation.

(d) Sunset-

(1) IN GENERAL- The clause described by subsection (a)(2) shall not be required in any contract, grant, or cooperative agreement that is awarded after the date that is three years after the date of the enactment of this Act.

(2) CONTINUING EFFECT OF CLAUSES INCLUDED BEFORE SUNSET- Any clause described by subsection (a)(2) that is included in a contract, grant, or cooperative agreement pursuant to this section before the date specified in paragraph (1) shall remain in effect in accordance with its terms.

The House bill contained a provision (sec. 823) that would allow the Secretary of Defense to examine the records of a foreign contractor or subcontractor in Iraq or Afghanistan under certain circumstances.

The Senate amendment contained a similar provision (sec. 862).

The House recedes with an amendment clarifying that the authority provided by the section is available only to the Department of Defense.

House Report 112-078

SECTION 823--AUTHORITY TO EXAMINE RECORDS OF FOREIGN CONTRACTORS PERFORMING CONTRACTS IN SUPPORT OF CONTINGENCY OPERATIONS IN IRAQ OR AFGHANISTAN

This section would allow the Secretary of Defense to examine the records of a foreign contractor, or a foreign subcontractor, performing a contract in support of contingency operations in the Republic of Iraq or the Islamic Republic of Afghanistan. This authority would not apply if the contract was being performed by a contractor or a subcontractor that is a foreign government, or agency of a foreign government, or if precluded by applicable laws. This section also would require the Secretary to issue guidance, not later than 30 days after the date of enactment of this Act, to implement this section.

Senate Report 112-26

Additional access to contractor and subcontractor records in the United States Central Command Theater of Operations (sec. 862)

The committee recommends a provision that would authorize the Secretary of Defense to examine any records of a contractor or subcontractor in the Central Command (CENTCOM) Theater of Operations to the extent necessary to ensure that funds available under the contract or subcontract: (1) are not subject to extortion or corruption; and (2) are not provided directly or indirectly to persons or entities that are actively opposing U.S. forces in Afghanistan.

The Department of Defense (DOD) has informed the committee that extortion and corruption in the U.S. supply chain continues to hamper the achievement of national security objectives in Afghanistan. CENTCOM efforts to uncover linkages between DOD contractors and corruption and criminal networks in Afghanistan have been undermined by limitations on the Department's authority to examine contractor records under fixed price contracts, contracts for commercial items, and contracts awarded through sealed bid procedures. The committee concludes that audit access to such contracts is needed, in limited circumstances and subject to appropriate controls, to address this problem.