SEC. 815. Amendments to other
transaction authority.
(a) Authority of the Department of Defense To carry out certain
prototype projects.—
(1) IN GENERAL.—Chapter 139 of title
10, United States Code, is amended by inserting after
section
2371a the following new section:
Ҥ 2371b. Authority of the Department of
Defense to carry out certain prototype projects
“(a) Authority.— (1) Subject to paragraph (2), the Director of
the Defense Advanced Research Projects Agency, the Secretary of
a military department, or any other official designated by the
Secretary of Defense may, under the authority of section 2371 of
this title, carry out prototype projects that are directly
relevant to enhancing the mission effectiveness of military
personnel and the supporting platforms, systems, components, or
materials proposed to be acquired or developed by the Department
of Defense, or to improvement of platforms, systems, components,
or materials in use by the armed forces.
“(2) The authority of this section—
“(A) may be exercised for a
prototype project that is expected to cost the Department of
Defense in excess of $50,000,000 but not in excess of
$250,000,000 (including all options) only upon a written
determination by the senior procurement executive for the
agency as designated for the purpose of section 1702(c) of
title 41, or, for the Defense Advanced Research Projects
Agency or the Missile Defense Agency, the director of the
agency that—
“(i) the requirements of
subsection (d) will be met; and
“(ii) the use of the authority of this section is
essential to promoting the success of the prototype
project; and
“(B) may be exercised for a
prototype project that is expected to cost the Department of
Defense in excess of $250,000,000 (including all options)
only if—
“(i) the Under Secretary of
Defense for Acquisition, Technology, and Logistics
determines in writing that—
“(I) the requirements of
subsection (d) will be met; and
“(II) the use of the authority of this section is
essential to meet critical national security objectives;
and
“(ii) the congressional defense
committees are notified in writing at least 30 days before
such authority is exercised.
“(3) The authority of a senior
procurement executive or director of the Defense Advanced
Research Projects Agency or Missile Defense Agency under
paragraph (2)(A), and the authority of the Under Secretary of
Defense for Acquisition, Technology, and Logistics under
paragraph (2)(B), may not be delegated.
“(b) Exercise of authority.—
“(1) Subsections (e)(1)(B) and
(e)(2) of such section 2371 shall not apply to projects
carried out under subsection (a).
“(2) To the maximum extent practicable, competitive
procedures shall be used when entering into agreements to
carry out projects under subsection (a).
“(c) Comptroller general access to
information.— (1) Each agreement entered into by an official
referred to in subsection (a) to carry out a project under
that subsection that provides for payments in a total amount
in excess of $5,000,000 shall include a clause that provides
for the Comptroller General, in the discretion of the
Comptroller General, to examine the records of any party to
the agreement or any entity that participates in the
performance of the agreement.
“(2) The requirement in paragraph (1) shall not apply with
respect to a party or entity, or a subordinate element of a
party or entity, that has not entered into any other
agreement that provides for audit access by a Government
entity in the year prior to the date of the agreement.
“(3) (A) The right provided to the Comptroller General in a
clause of an agreement under paragraph (1) is limited as
provided in subparagraph (B) in the case of a party to the
agreement, an entity that participates in the performance of
the agreement, or a subordinate element of that party or
entity if the only agreements or other transactions that the
party, entity, or subordinate element entered into with
Government entities in the year prior to the date of that
agreement are cooperative agreements or transactions that
were entered into under this section or section 2371 of this
title.
“(B) The only records of a party, other entity, or
subordinate element referred to in subparagraph (A) that the
Comptroller General may examine in the exercise of the right
referred to in that subparagraph are records of the same
type as the records that the Government has had the right to
examine under the audit access clauses of the previous
agreements or transactions referred to in such subparagraph
that were entered into by that particular party, entity, or
subordinate element.
“(4) The head of the contracting activity that is carrying
out the agreement may waive the applicability of the
requirement in paragraph (1) to the agreement if the head of
the contracting activity determines that it would not be in
the public interest to apply the requirement to the
agreement. The waiver shall be effective with respect to the
agreement only if the head of the contracting activity
transmits a notification of the waiver to Congress and the
Comptroller General before entering into the agreement. The
notification shall include the rationale for the
determination.
“(5) The Comptroller General may not examine records
pursuant to a clause included in an agreement under
paragraph (1) more than three years after the final payment
is made by the United States under the agreement.
“(d) Appropriate use of authority.— (1) The Secretary of
Defense shall ensure that no official of an agency enters
into a transaction (other than a contract, grant, or
cooperative agreement) for a prototype project under the
authority of this section unless one of the following
conditions is met:
“(A) There is at least one
nontraditional defense contractor participating to a
significant extent in the prototype project.
“(B) All significant participants in the transaction other
than the Federal Government are small businesses or
nontraditional defense contractors.
“(C) At least one third of the total cost of the prototype
project is to be paid out of funds provided by parties to
the transaction other than the Federal Government.
“(D) The senior procurement executive for the agency
determines in writing that exceptional circumstances
justify the use of a transaction that provides for
innovative business arrangements or structures that would
not be feasible or appropriate under a contract, or would
provide an opportunity to expand the defense supply base
in a manner that would not be practical or feasible under
a contract.
“(2) (A) Except as provided in
subparagraph (B), the amounts counted for the purposes of
this subsection as being provided, or to be provided, by a
party to a transaction with respect to a prototype project
that is entered into under this section other than the
Federal Government do not include costs that were incurred
before the date on which the transaction becomes effective.
“(B) Costs that were incurred for a prototype project by a
party after the beginning of negotiations resulting in a
transaction (other than a contract, grant, or cooperative
agreement) with respect to the project before the date on
which the transaction becomes effective may be counted for
purposes of this subsection as being provided, or to be
provided, by the party to the transaction if and to the
extent that the official responsible for entering into the
transaction determines in writing that—
“(i) the party incurred the costs
in anticipation of entering into the transaction; and
“(ii) it was appropriate for the party to incur the costs
before the transaction became effective in order to ensure
the successful implementation of the transaction.
“(e) Definitions.—In this section:
“(1) The term ‘nontraditional
defense contractor’ has the meaning given the term under
section 2302(9) of this title.
“(2) The term ‘small business’ means a small business
concern as defined under section 3 of the Small Business
Act (15 U.S.C. 632).
“(f) Follow-on production contracts
or transactions.— (1) A transaction entered into under this
section for a prototype project may provide for the award of
a follow-on production contract or transaction to the
participants in the transaction.
“(2) A follow-on production contract or transaction provided
for in a transaction under paragraph (1) may be awarded to
the participants in the transaction without the use of
competitive procedures, notwithstanding the requirements of
section 2304 of this title, if—
“(A) competitive procedures were
used for the selection of parties for participation in the
transaction; and
“(B) the participants in the transaction successfully
completed the prototype project provided for in the
transaction.
“(3) Contracts and transactions
entered into pursuant to this subsection may be awarded
using the authority in subsection (a), under the authority
of chapter 137 of this title, or under such procedures,
terms, and conditions as the Secretary of Defense may
establish by regulation.
“(g) Authority To provide prototypes and follow-on
production items as government-furnished equipment.—An
agreement entered into pursuant to the authority of
subsection (a) or a follow-on contract or transaction
entered into pursuant to the authority of subsection (f) may
provide for prototypes or follow-on production items to be
provided to another contractor as Government-furnished
equipment.
“(h) Applicability of procurement ethics requirements.—An
agreement entered into under the authority of this section
shall be treated as a Federal agency procurement for the
purposes of chapter 21 of title 41.”.
(2) CLERICAL AMENDMENT.—The table
of sections at the beginning of chapter 139 of such title
is amended by inserting after the item relating to section
2371a the following new item:
“2371b. Authority of the Department of
Defense to carry out certain prototype projects.”.
(b) Modification to definition of
nontraditional defense contractor.—Section 2302(9) of such
title is amended to read as follows:
“(9) The term ‘nontraditional
defense contractor’, with respect to a procurement or with
respect to a transaction authorized under section 2371(a) or
2371b 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 contract or subcontract for the Department of Defense
that is subject to full coverage under the cost accounting
standards prescribed pursuant to section 1502 of title 41
and the regulations implementing such section.”.
(c) Repeal of obsolete
authority.—Section 845 of the National Defense Authorization
Act for Fiscal Year 1994 (Public Law 103–160; 10 U.S.C. 2371
note) is hereby repealed. Transactions entered into under the
authority of such section 845 shall remain in force and effect
and shall be modified as appropriate to reflect the amendments
made by this section.
(d) Technical and conforming amendment.—Subparagraph (B) of
section 1601(c)(1) of the National Defense Authorization Act
for Fiscal Year 2004 (Public Law 108–136; 10 U.S.C. 2358 note)
is amended to read as follows:
“(B) sections 2371 and 2371b of
title 10, United States Code.”.
(e) Updated guidance.—Not later than
180 days after the date of the enactment of this Act, the
Secretary of Defense shall issue updated guidance to implement
the amendments made by this section.
(f) Assessment required.—Not later than 180 days after the
date of the enactment of this Act, the Secretary of Defense
shall submit to the congressional defense committees an
assessment of—
(1) the benefits and risks of
permitting not-for-profit defense contractors to be awarded
transaction agreements under section 2371b of title 10,
United States Code, for the purposes of cost-sharing
requirements of subsection (d)(1)(C) of such section; and
(2) the benefits and risks of removing the cost-sharing
requirements of subsection (d)(1)(C) of such section in
their entirety.
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Amendments to other transaction
authority (sec. 815)
The House bill contained a provision (sec. 853) would make
permanent the other transactions authority (OTA) for contracting
established in section 845 of the National Defense Authorization
Act for Fiscal Year 1994 (Public Law 103-160), as modified most
recently by section 812 of the Carl Levin and Howard P. ``Buck''
McKeon National Defense Authorization Act for Fiscal Year 2015
(Public Law 113-291). The provision would also make changes to
the authority to use such mechanisms.
The Senate amendment contained a similar
provision (section 804) that modified the authority, as well as
modifying the definition of a ``non-traditional'' defense
contractor.
The House recedes with an amendment that
would: (1) make section 845 authority permanent; (2) clarify the
authority to use section 845 authority to acquire prototypes or
follow-on production items to be provided to contractors as
government-furnished equipment; (3) ensure that innovative small
business firms are authorized to participate in other
transactions under section 845 without the requirement for a
cost-share (except where the small business is partnered with a
large business in a transaction); and (4) clarify the use of
follow-on production contracts or other transactions authority.
The provision further requires the Department of Defense to
study the benefits of permitting not-for-profit entities to
enter into other transactions agreements without the requirement
for cost sharing.
The conferees believe that the
flexibility of the OTA authorities of section 2371 of title 10,
United States Code, and the related and dependent authorities of
section 845 of the National Defense Authorization Act for Fiscal
Year 1994 (Public Law 103-160) as modified and codified in this
provision, can make them attractive to firms and organizations
that do not usually participate in government contracting due to
the typical overhead burden and ``one size fits all'' rules. The
conferees believe that expanded use of OTAs will support
Department of Defense efforts to access new source of technical
innovation, such as Silicon Valley startup companies and small
commercial firms.
House Report
114-201 to accompany H. R. 1735 as it was reported out of
the House Armed Services Committee.
Section 853--Codification of Other
Transaction Authority for Certain Prototype Projects
This section would make permanent the
other transactions authority (OTA) for contracting established
in section 845 of the National Defense Authorization Act for
Fiscal Year 1994 (Public Law 103-160), as modified most recently
by section 812 of the Carl Levin and Howard P. ``Buck'' McKeon
National Defense Authorization Act for Fiscal Year 2015 (Public
Law 113- 291). This section would also make changes to the
authority to use such contracting mechanisms to clarify that all
participants to the contract be small business or nontraditional
defense contractors, unless exceptional circumstances exist that
require innovative business arrangements that are not feasible
under another contract type.
OTA has been an effective tool for
research and development contracts, particularly for innovative
organizations like the Defense Advanced Research Projects
Agency. Due to the ability to tailor the contracting language
and thus eliminating many aspects of the Federal acquisition
regulations that may not be pertinent, OTA requires some
discretion to allow for effective and seamless execution. The
benefits of this flexibility have been recognized most recently
by the Air Force, which would like to extensively rely on OTA
contracting vehicles to more rapidly acquire information
technology systems. The committee supports the Department of
Defense in using flexible tools for its contracting and believes
such permanence will give the Department additional confidence
in the type of experimentation and organizational learning that
is necessary if the Department is to remain competitive in the
commercial marketplace. The committee will continue to review
efforts utilizing such contracting mechanisms to prevent abuse
or misuse by the Department.
Senate Report
114-49 to accompany S. 1376 as it was reported out of the
Senate Armed Services Committee.
Amendments to other transaction
authority (sec. 804)
The committee recommends a provision
that would establish a new section in title 10, United States
Code, to codify section 845 of the National Defense
Authorization Act for Fiscal Year 1994 (Public Law 103-160),
which authorizes the use of ``other transactions'' to carry out
prototype projects that should lead to more effective and
broader usage of this authority. The amendments would: (1) make
section 845 authority permanent; (2) clarify the authority to
use section 845 authority to acquire prototypes or follow-on
production items to be provided to contractors as
government-furnished equipment; (3) clarify that a contractor
who has not been required to provide certified cost or pricing
data under the Truth in Negotiations Act (Public Law 87-653; 10
U.S.C. section 2306a) in the previous year may qualify as a
``non-traditional contractor'' under the statute; (4) ensure
that innovative small business firms are authorized to
participate in other transactions under section 845 without the
requirement for a cost-share (except where the small business is
partnered with a large business in a transaction); and (5)
clarify the use of follow-on production contracts or other
transactions authority.
The committee believes that other
transactions continue to serve as an important mechanism to
provide the Department of Defense with access to innovative,
cutting-edge technologies developed by companies that might
otherwise be unwilling to do business with the government. The
committee supports the use of other transaction authority by the
Defense Advanced Research Projects Agency (DARPA) for this
purpose, and urges the military departments to make similar use
of the authority.
The committee supports the rapid
regulatory implementation of the definitional change in section
812(a) of the Carl Levin and Howard P. ``Buck'' McKeon National
Defense Authorization Act for Fiscal Year 2015 (Public Law
113-291). The committee is also aware of many interpretive and
cultural barriers that have been put in place to impede the use
of other transactions.
The committee believes that the
authorities of section 3871 of title 10, United States Code, and
the related and dependent authorities of Section 845 of the
National Defense Authorization Act for Fiscal Year 1994 (Public
Law 103-160), as modified by this provision, should be used to
their maximum extent by the Department of Defense and other
federal agencies in order to streamline acquisition of
innovative research and technology from the private sector.
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