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

Subtitle C—Amendments to General Contracting Authorities, Procedures, and Limitations

JWNDAA Section

House Conference Report 109-702

(a) Limitation- Except as provided in subsection (b), the Secretary of Defense may not enter into a service contract to acquire a military flight simulator.

(b) Waiver- The Secretary of Defense may waive subsection (a) with respect to a contract if the Secretary--

(1) determines that a waiver is necessary for national security purposes; and

(2) provides to the congressional defense committees an economic analysis as described in subsection (c) at least 30 days before the waiver takes effect.

(c) Economic Analysis- The economic analysis provided under subsection (b) shall include, at a minimum, the following:

(1) A clear explanation of the need for the contract.

(2) An examination of at least two alternatives for fulfilling the requirements that the contract is meant to fulfill, including the following with respect to each alternative:

(A) A rationale for including the alternative.

(B) A cost estimate of the alternative and an analysis of the quality of each cost estimate.

(C) A discussion of the benefits to be realized from the alternative.

(D) A best value determination of each alternative and a detailed explanation of the life-cycle cost calculations used in the determination.

(d) Definitions- In this section:

(1) The term `military flight simulator' means any major system to simulate the form, fit, and function of a military aircraft that has no commonly available commercial variant.

(2) The term `service contract' means any contract entered into by the Department of Defense the principal purpose of which is to furnish services in the United States through the use of service employees.

(3) The term `service employees' has the meaning provided in section 8(b) of the Service Contract Act of 1965 (41 U.S.C. 357(b)).

The House bill contained a provision (sec. 822) that would prohibit the Secretary of Defense from entering into a contract for covered services if the amount of the contract exceeds 75 percent of the estimated value of the asset required for the provision of services under the contract or exceeds $150.0 million in payments over the life of the contract.

The Senate amendment contained no similar provision.

The Senate recedes with an amendment that would prohibit the Secretary from entering into a service contract to acquire a military flight simulator unless doing so is necessary for national security purposes and a written economic analysis is provided to the congressional defense committees at least 30 days in advance. The required economic analysis would include a clear explanation for the need for the contract and an examination of at least two alternatives for fulfilling the contract requirement. The conferees are aware that in some cases the military departments are using operations and maintenance funds for service contracts and activities traditionally associated with procurement and military construction. The conferees are concerned that such a contracting methodology reduces oversight, potentially increases life-cycle costs, requires aggressive contract management, and reduces the flexibility of the Department of Defense in allocating funds to meet future defense needs. Furthermore, the use of service contracts for military training may have readiness consequences. The conferees are also aware that the Secretary of the Air Force entered into a service contract for the Initial Flight Screening program at Pueblo Memorial Airport, Pueblo, Colorado, without conducting a full economic analysis to determine the best alternative for meeting the Air Force flight screening requirement. Therefore, the conferees direct the Secretary of the Air Force to perform an economic analysis as described in this section and provide the congressional defense committees written certification, not later than 180 days after the date of the enactment of this Act, whether such analysis supports continuation of the service contract.

House Armed Services Committee Report 109-452

SECTION 822--LIMITATION ON CONTRACTS FOR THE ACQUISITION OF CERTAIN SERVICES

This section would prohibit the Secretary of Defense from entering into a contract for covered services if the amount of the contract exceeds 75 percent of the estimated value of the asset required for the provision of services under the contract or exceeds $150.0 million in payments over the life of the contract.