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

Subtitle A — Acquisition Policy and Management

NDAA Section

House Conference Report 110-477

SEC. 804. CLARIFICATION OF THE PROTECTION OF STRATEGIC MATERIALS CRITICAL TO NATIONAL SECURITY.

(a) Prohibition- Subsection (a) of section 2533b of title 10, United States Code, is amended--

(1) by striking `Except as provided in subsections (b) through (j), funds appropriated or otherwise available to the Department of Defense may not be used for the procurement of--' and inserting `Except as provided in subsections (b) through (m), the acquisition by the Department of Defense of the following items is prohibited:';

(2) in paragraph (1)--

(A) by striking `the following' and inserting `The following'; and

(B) by striking `; or' and inserting a period; and

(3) in paragraph (2), by striking `a speciality' and inserting `A specialty'.

(b) Applicability to Acquisition of Commercial Items- Subsection (h) of such section is amended to read as follows:

`(h) Applicability to Acquisitions of Commercial Items- (1) Except as provided in paragraphs (2) and (3), this section applies to acquisitions of commercial items, notwithstanding sections 34 and 35 of the Office of Federal Procurement Policy Act (41 U.S.C. 430 and 431).

`(2) This section does not apply to contracts or subcontracts for the acquisition of commercially available off-the-shelf items, as defined in section 35(c) of the Office of Federal Procurement Policy Act (41 U.S.C. 431(c)), other than--

`(A) contracts or subcontracts for the acquisition of specialty metals, including mill products, such as bar, billet, slab, wire, plate and sheet, that have not been incorporated into end items, subsystems, assemblies, or components;

`(B) contracts or subcontracts for the acquisition of forgings or castings of specialty metals, unless such forgings or castings are incorporated into commercially available off-the-shelf end items, subsystems, or assemblies;

`(C) contracts or subcontracts for commercially available high performance magnets unless such high performance magnets are incorporated into commercially available off the shelf end items or subsystems; and

`(D) contracts or subcontracts for commercially available off-the-shelf fasteners, unless such fasteners are--

`(i) incorporated into commercially available off-the-shelf end items, subsystems, assemblies, or components; or

`(ii) purchased as provided in paragraph (3).

`(3) This section does not apply to fasteners that are commercial items that are purchased under a contract or subcontract with a manufacturer of such fasteners, if the manufacturer has certified that it will purchase, during the relevant calendar year, an amount of domestically melted specialty metal, in the required form, for use in the production of such fasteners for sale to the Department of Defense and other customers, that is not less than 50 percent of the total amount of the specialty metal that it will purchase to carry out the production of such fasteners.'.

(c) Electronic Components- Subsection (g) of such section is amended by striking `commercially available' and all that follows through the end of the subsection and inserting `electronic components, unless the Secretary of Defense, upon the recommendation of the Strategic Materials Protection Board pursuant to section 187 of this title, determines that the domestic availability of a particular electronic component is critical to national security.'.

(d) Additional Exceptions- Section 2533b of title 10, United States Code, as amended by subsections (a), (b), and (c), is further amended--

(1) by redesignating subsections (i) and (j) as subsections (l) and (m), respectively; and

(2) by inserting after subsection (h) the following new subsections:

`(i) Exceptions for Purchases of Specialty Metals Below Minimum Threshold- (1) Notwithstanding subsection (a), the Secretary of Defense or the Secretary of a military department may accept delivery of an item containing specialty metals that were not melted in the United States if the total amount of noncompliant specialty metals in the item does not exceed 2 percent of the total weight of specialty metals in the item.

`(2) This subsection does not apply to high performance magnets.

`(j) Streamlined Compliance for Commercial Derivative Military Articles- (1) Subsection (a) shall not apply to an item acquired under a prime contract if the Secretary of Defense or the Secretary of a military department determines that--

`(A) the item is a commercial derivative military article; and

`(B) the contractor certifies that the contractor and its subcontractors have entered into a contractual agreement, or agreements, to purchase an amount of domestically melted specialty metal in the required form, for use during the period of contract performance in the production of the commercial derivative military article and the related commercial article, that is not less than the greater of--

`(i) an amount equivalent to 120 percent of the amount of specialty metal that is required to carry out the production of the commercial derivative military article (including the work performed under each subcontract); or

`(ii) an amount equivalent to 50 percent of the amount of specialty metal that is purchased by the contractor and its subcontractors for use during such period in the production of the commercial derivative military article and the related commercial article.

`(2) For the purposes of this subsection, the amount of specialty metal that is required to carry out the production of the commercial derivative military article includes specialty metal contained in any item, including commercially available off-the-shelf items, incorporated into such commercial derivative military article.

`(k) National Security Waiver- (1) Notwithstanding subsection (a), the Secretary of Defense may accept the delivery of an end item containing noncompliant materials if the Secretary determines in writing that acceptance of such end item is necessary to the national security interests of the United States.

`(2) A written determination under paragraph (1)--

`(A) may not be delegated below the level of the Deputy Secretary of Defense or the Under Secretary of Defense for Acquisition, Technology, and Logistics;

`(B) shall specify the quantity of end items to which the waiver applies and the time period over which the waiver applies; and

`(C) shall be provided to the congressional defense committees prior to making such a determination (except that in the case of an urgent national security requirement, such certification may be provided to the defense committees up to 7 days after it is made).

`(3)(A) In any case in which the Secretary makes a determination under paragraph (1), the Secretary shall determine whether or not the noncompliance was knowing and willful.

`(B) If the Secretary determines that the noncompliance was not knowing or willful, the Secretary shall ensure that the contractor or subcontractor responsible for the noncompliance develops and implements an effective plan to ensure future compliance.

`(C) If the Secretary determines that the noncompliance was knowing or willful, the Secretary shall--

`(i) require the development and implementation of a plan to ensure future compliance; and

`(ii) consider suspending or debarring the contractor or subcontractor until such time as the contractor or subcontractor has effectively addressed the issues that lead to such noncompliance.'.

(e) Additional Definitions- Subsection (m) of section 2533b of title 10, United States Code, as redesignated by subsection (c), is further amended by adding at the end the following:

`(3) The term `acquisition' has the meaning provided in section 4 of the Office of Federal Procurement Policy Act (41 U.S.C. 403).

`(4) The term `required form' shall not apply to end items or to their components at any tier. The term `required form' means in the form of mill product, such as bar, billet, wire, slab, plate or sheet, and in the grade appropriate for the production of--

`(A) a finished end item delivered to the Department of Defense; or

`(B) a finished component assembled into an end item delivered to the Department of Defense.

`(5) The term `commercially available off-the-shelf', has the meaning provided in section 35(c) of the Office of Federal Procurement Policy Act (41 U.S.C. 431(c)).

`(6) The term `assemblies' means items forming a portion of a system or subsystem that can be provisioned and replaced as an entity and which incorporates multiple, replaceable parts.

`(7) The term `commercial derivative military article' means an item procured by the Department of Defense that is or will be produced using the same production facilities, a common supply chain, and the same or similar production processes that are used for the production of articles predominantly used by the general public or by nongovernmental entities for purposes other than governmental purposes.

`(8) The term `subsystem' means a functional grouping of items that combine to perform a major function within an end item, such as electrical power, attitude control, and propulsion.

`(9) The term `end item' means the final production product when assembled or completed, and ready for issue, delivery, or deployment.

`(10) The term `subcontract' includes a subcontract at any tier.'.

(f) Conforming Amendments- Section 2533b of title 10, United States Code, is further amended--

(1) in subsection (c)--

(A) in the heading, by striking `Procurements' and inserting `Acquisitions'; and

(B) in paragraphs (1) and (2), by striking `Procurements' and inserting `Acquisitions';

(2) in subsection (d), by striking `procurement' each place it appears and inserting `acquisition'; and

(3) in subsections (f) and (g), by striking `procurements' each place it appears and inserting `acquisitions'.

(g) Implementation- Not later than 120 days after the date of the enactment of this Act, the Secretary of Defense shall prescribe regulations on the implementation of this section and the amendments made by this section, including specific guidance on how thresholds established in subsections (h)(3), (i) and (j) of section 2533b of title 10, United States Code, as amended by this section, should be implemented.

(h) Revision of Domestic Nonavailability Determinations and Rules- No later than 180 days after the date of the enactment of this Act, any domestic nonavailability determination under section 2533b of title 10, United States Code, including a class deviation, or rules made by the Department of Defense between December 6, 2006, and the date of the enactment of this Act, shall be reviewed and amended, as necessary, to comply with the amendments made by this section. This requirement shall not apply to a domestic nonavailability determination that applies to--

(1) an individual contract that was entered into before the date of the enactment of this Act; or

(2) an individual Department of Defense program, except to the extent that such domestic nonavailability determination applies to contracts entered into after the date of the enactment of this Act.

(i) Transparency Requirement for Commercially Available Off-the-Shelf Item Exception- The Secretary of Defense shall submit to the Committees on Armed Services of the Senate and House of Representatives, not later than December 30, 2008, a report on the use of authority provided under subsection (h) of section 2533b of title 10, United States Code, as amended by this section. Such report shall include, at a minimum, a description of types of items being procured as commercially available off-the-shelf items under such subsection and incorporated into noncommercial items. The Secretary shall submit an update of such report to such committees not later than December 30, 2009.

The House bill contained a provision (sec. 809) that would address the use of domestic non-availability determinations and commercial item exceptions with regard to the requirement to buy strategic materials from American sources pursuant to section 2533b of title 10, United States Code.

The Senate amendment contained no similar provision.

The Senate recedes with an amendment that would revise section 2533b to address the availability and use of domestic non-availability determinations, commercial item exceptions, purchases of fasteners, purchases of high-performance magnets, purchases of electronic components, de minimis purchases, purchases of commercial derivative military articles, and national security waivers. The conferees intend the revised provision to ensure that defense contractors comply with requirements to purchase domestic specialty metals without impeding the ability of the Department of Defense to acquire weapon systems when and as needed.

The conferees agree that the term `electronic components', as used in this provision, does not include any assembly, such as a radar, that incorporates structural or mechanical parts. In addition, the conferees agree that the term `high performance magnet', as used in the provision, means permanent magnets containing 10 or more percent by weight of materials such as cobalt, samarium, or nickel. The conferees note that high performance magnets have been fully or partially excluded from some of the exceptions added by this section. The conferees intend in doing so to ensure that the Department continues to procure such magnets from domestic sources whenever possible and consistent with this section.

Section 2533b, as amended, would authorize streamlined compliance for commercial derivative military articles, based on a contractor's certification that minimum threshold quantities are being purchased during the period of contract performance. The provision specifies that the specialty metal must be purchased for use during the period of contract performance in the production of the commercial derivative military article and the related commercial article. Domestically-melted specialty metal that is purchased for use in the production of commercial derivative military articles acquired under one contract may not be used as a basis for an exception to the requirements of this section for the acquisition of the same or other commercial derivative military articles under a different contract.

The conferees note that commercially available off-the-shelf fasteners would be exempt from the requirements of subsection (a) of section 2533b of title 10, United States Code, only to the limited extent provided in paragraph (h)(2)(D). However, nothing in this section precludes the use of other exceptions or waivers available to the Secretary with regard to such fasteners, to the extent that they are applicable.

The conferees direct the Secretary of Defense to ensure, in promulgating rules to implement the minimum threshold in subsection (j) of section 2533b, as amended, that such threshold applies to the specialty metals contained in an item delivered to the Department of Defense and may not be applied on a piecemeal basis to a subsystem or component of such item.

Finally, the conferees understand that the recently published rule regarding commercially available off-the-shelf items, and other recent domestic non-availability determinations that apply to multiple contracts and which were based on the availability of components, rather than speciality metals, will have to be reviewed and amended to comply with section 2533b of title 10, United States Code, as amended by this provision. The conferees encourage the Department to ensure that the exceptions provided by subsections (b) through (k) of the revised section 2533b are utilized through an open and transparent process, to the extent consistent with the protection of national security information and confidential business information.

House Armed Services Committee Report 110-146

SECTION 809--CLARIFICATION OF THE PROTECTION OF STRATEGIC MATERIALS CRITICAL TO NATIONAL SECURITY

This section would amend section 2533b of title 10, United States Code, which relates to restrictions on the procurement of specialty metals, to define the term `required form' in that section as mill products such as slab, plate and sheet in the required form necessary. This section would also clarify the definition of `commercial item' used in section 2533b of title 10, United States Code to include commercial off the shelf items. This section would require that any domestic non-determinations made between December 6, 2006 and the date 60 days after the date of enactment of this act shall comply with this section.