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

House Conference Report 109-360

SEC. 812. MANAGEMENT STRUCTURE FOR THE PROCUREMENT OF CONTRACT SERVICES.

(a) Management Structure-

(1) IN GENERAL- Section 2330 of title 10, United States Code, is amended to read as follows:

`Sec. 2330. Procurement of contract services: management structure

`(a) Requirement for Management Structure- The Secretary of Defense shall establish and implement a management structure for the procurement of contract services for the Department of Defense. The management structure shall provide, at a minimum, for the following:

`(1) The Under Secretary of Defense for Acquisition, Technology, and Logistics shall--

`(A) develop and maintain (in consultation with the service acquisition executives) policies, procedures, and best practices guidelines addressing the procurement of contract services, including policies, procedures, and best practices guidelines for--

`(i) acquisition planning;

`(ii) solicitation and contract award;

`(iii) requirements development and management;

`(iv) contract tracking and oversight;

`(v) performance evaluation; and

`(vi) risk management;

`(B) work with the service acquisition executives and other appropriate officials of the Department of Defense--

`(i) to identify the critical skills and competencies needed to carry out the procurement of contract services on behalf of the Department of Defense;

`(ii) to develop a comprehensive strategy for recruiting, training, and deploying employees to meet the requirements for such skills and competencies; and

`(iii) to ensure that the military departments and Defense Agencies have staff and administrative support that are adequate to effectively perform their duties under this section;

`(C) establish contract services acquisition categories, based on dollar thresholds, for the purpose of establishing the level of review, decision authority, and applicable procedures in such categories; and

`(D) oversee the implementation of the requirements of this section and the policies, procedures, and best practices guidelines established pursuant to subparagraph (A).

`(2) The service acquisition executive of each military department shall be the senior official responsible for the management of acquisition of contract services for or on behalf of the military department.

`(3) The Under Secretary of Defense for Acquisition, Technology, and Logistics shall be the senior official responsible for the management of acquisition of contract services for or on behalf of the Defense Agencies and other components of the Department of Defense outside the military departments.

`(b) Duties and Responsibilities of Senior Officials Responsible for the Management of Acquisition of Contract Services- (1) Except as provided in paragraph (2), the senior officials responsible for the management of acquisition of contract services shall assign responsibility for the review and approval of procurements in each contract services acquisition category established under subsection (a)(1)(C) to specific Department of Defense officials, subject to the direction, supervision, and oversight of such senior officials.

`(2) With respect to the acquisition of contract services by a component or command of the Department of Defense the primary mission of which is the acquisition of products and services, such acquisition shall be conducted in accordance with policies, procedures, and best practices guidelines developed and maintained by the Under Secretary of Defense for Acquisition, Technology, and Logistics pursuant to subsection (a)(1), subject to oversight by the senior officials referred to in paragraph (1).

`(3) In carrying out paragraph (1), each senior official responsible for the management of acquisition of contract services shall--

`(A) implement the requirements of this section and the policies, procedures, and best practices guidelines developed by the Under Secretary of Defense for Acquisition, Technology, and Logistics pursuant to subsection (a)(1)(A);

`(B) authorize the procurement of contract services through contracts entered into by agencies outside the Department of Defense in appropriate circumstances, in accordance with the requirements of section 854 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 (10 U.S.C. 2304 note), section 814 of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (31 U.S.C. 1535 note), and the regulations implementing such sections;

`(C) dedicate full-time commodity managers to coordinate the procurement of key categories of services;

`(D) ensure that contract services are procured by means of procurement actions that are in the best interests of the Department of Defense and are entered into and managed in compliance with applicable laws, regulations, directives, and requirements;

`(E) ensure that competitive procedures and performance-based contracting are used to the maximum extent practicable for the procurement of contract services; and

`(F) monitor data collection under section 2330a of this title, and periodically conduct spending analyses, to ensure that funds expended for the procurement of contract services are being expended in the most rational and economical manner practicable.

`(c) Definitions- In this section:

`(1) The term `procurement action' includes the following actions:

`(A) Entry into a contract or any other form of agreement.

`(B) Issuance of a task order, delivery order, or military interdepartmental purchase request.

`(2) The term `contract services' includes all services acquired from private sector entities by or for the Department of Defense, other than services relating to research and development or military construction.'.

(2) CLERICAL AMENDMENT- The table of sections at the beginning of chapter 137 of such title is amended by striking the item relating to section 2330 and inserting the following new item:

`2330. Procurement of contract services: management structure.'.

(b) Phased Implementation- The requirements of section 2330 of title 10, United States Code (as added by subsection (a)), shall be implemented as follows:

(1) The Under Secretary of Defense for Acquisition, Technology, and Logistics shall--

(A) establish an initial set of contract services acquisition categories, based on dollar thresholds, by not later than June 1, 2006; and

(B) issue an initial set of policies, procedures, and best practices guidelines in accordance with section 2330(a)(1)(A) by not later than October 1, 2006.

(2) The contract services acquisition categories established by the Under Secretary shall include--

(A) one or more categories for acquisitions with an estimated value of $250,000,000 or more;

(B) one or more categories for acquisitions with an estimated value of at least $10,000,000 but less than $250,000,000; and

(C) one or more categories for acquisitions with an estimated value greater than the simplified acquisition threshold but less than $10,000,000.

(3) The senior officials responsible for the management of acquisition of contract services shall assign responsibility to specific individuals in the Department of Defense for the review and approval of procurements in the contract services acquisition categories established by the Under Secretary, as follows:

(A) Not later than October 1, 2006, for all categories established pursuant to paragraph (2)(A).

(B) Not later than October 1, 2007, for all categories established pursuant to paragraph (2)(B).

(C) Not later than October 1, 2009, for all categories established pursuant to paragraph (2)(C).

(c) Report- Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit to the Committees on Armed Services of the Senate and House of Representatives a final report on the implementation of section 2330 of title 10, United States Code, as added by this section.

The Senate amendment contained a provision (sec. 802) that would require the secretary of each military department to establish a Contract Support Acquisition Center to act as the executive agent for the acquisition of contract services for that military department. The Secretary of Defense would be required to establish an additional acquisition center within the Defense Logistics Agency to act as the executive agent for the acquisition of contract services by the defense agencies.

The House bill contained no similar provision.

The House recedes with an amendment that would rewrite section 2330 of title 10, United States Code, to strengthen the requirement for the Secretary to implement a management structure for the procurement of contract services for the Department of Defense.

Section 2330, as amended, would establish a senior official responsible for the management of the acquisition of contract services for each of the military departments and for the defense agencies and components outside the military departments. Under the amended section 2330, the Under Secretary of Defense for Acquisition, Technology, and Logistics would be responsible for developing and maintaining policies, procedures, and best practices guidelines for the acquisition of contract services, while the senior officials responsible for the acquisition of contract services would be responsible for the implementation of those policies, procedures, and guidelines by the military departments and defense agencies. Each senior official would be required to assign responsibility for the review and approval of procurements to specific individuals in the Department, subject to the direction, supervision, and oversight of the senior official. This provision would give the Department flexibility as to the number, qualifications, and location of officers and employees authorized to make day-to-day decisions regarding the acquisition of contract services while ensuring that, in making such decisions, these officers and employees are subject to the direction, supervision, and control of an acquisition chain of command.

The conference amendment would provide for phased implementation of the amended section 2330 to ensure that the Department has the time needed to fully implement the new requirements.

Senate Report 109-69

The committee recommends a provision that would require the secretary of each military department to establish a Contract Support Acquisition Center to act as the executive agent for the acquisition of contract services for that military department. The Secretary of Defense would be required to establish an additional Acquisition Center within the Defense Logistics Agency to act as the executive agent for the acquisition of contract services by the defense agencies.

The committee notes that the budget request includes a reduction of $2.0 billion in funds available for contract support in fiscal year 2006 and a total planned reduction of $12.0 billion across the Future Years Defense Program. The committee believes that the Department of Defense should be able to achieve a significant portion of these savings through the improved use of contract management tools, without having to cut programs or reduce needed services.

In particular, section 802 of the National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107), as amended, establishes an objective for the Department of Defense to achieve efficiencies in procurements of services through the increased use of: (1) performance-based service contracting; (2) competitive procedures for the award of task orders and contracts; and (3) program review, spending analyses, and improved management of services contracts. Similar steps have enabled private sector companies to achieve considerable savings.

Unfortunately, the goals established in section 802 for competition in services contracting and the use of performance-based services contracting have not been met. Moreover, it appears that the Department has yet to undertake the comprehensive program review, spending analyses, and improved management of services contracts envisioned by section 802. The committee notes that a number of civilian agencies (including the Internal Revenue Service, the Department of Agriculture and the U.S. Postal Service) report that they have achieved significant savings through the use of spending analyses and strategic sourcing decisions.

The committee believes that the Department of Defense has been unable to achieve comparable savings, in part, because the decentralized nature of the Department of Defense's services contracting and the absence of any organization dedicated to the acquisition of contract support hamper efforts to perform spending analyses, make strategic sourcing decisions, and institute comprehensive management improvements. The provision would address this problem by creating an organizational hub for the acquisition of contract support services by the military departments and defense agencies.

The provision would also require the Contract Support Acquisition Centers to develop and maintain policies, procedures, and best practices guidelines for contract tracking and oversight. The committee notes that the Department of Defense is currently in the process of developing a business enterprise architecture and transition plan to guide the modernization of its business systems. The committee expects the business systems developed by the Department of Defense to have the capability of tracking basic information about interagency transactions, including the number and dollar value of transactions under each interagency contract vehicle, the status of open transactions, the status of funds under interagency transactions (including appropriation type; appropriation year; and fund balance received, obligated, expended, and available), and the amount of any funds returned or to be returned to the Department of Defense or to the Department of Treasury due to the completion or modification of contracts or the expiration of funds.