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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. 809. IMPLEMENTATION AND ENFORCEMENT OF REQUIREMENTS APPLICABLE TO UNDEFINITIZED CONTRACTUAL ACTIONS.

(a) Guidance and Instructions- Not later than 180 days after the date of the enactment of this Act, the Secretary of Defense shall issue guidance, with detailed implementation instructions, for the Department of Defense to ensure the implementation and enforcement of requirements applicable to undefinitized contractual actions.

(b) Elements- The guidance and instructions issued pursuant to subsection (a) shall address, at a minimum--

(1) the circumstances in which it is, and is not, appropriate for Department of Defense officials to use undefinitized contractual actions;

(2) approval requirements (including thresholds) for the use of undefinitized contractual actions;

(3) procedures for ensuring that timelines for the definitization of undefinitized contractual actions are met;

(4) procedures for ensuring compliance with regulatory limitations on the obligation of funds pursuant to undefinitized contractual actions;

(5) procedures for ensuring compliance with regulatory limitations on profit or fee with respect to costs incurred before the definitization of an undefinitized contractual action; and

(6) reporting requirements for undefinitized contractual actions that fail to meet required timelines for definitization or fail to comply with regulatory limitations on the obligation of funds or on profit or fee.

(c) Reports-

(1) REPORT ON GUIDANCE AND INSTRUCTIONS- Not later than 210 days after the date of the enactment of this Act, the Secretary of Defense shall submit to the congressional defense committees a report setting forth the guidance and instructions issued pursuant to subsection (a).

(2) GAO REPORT- Not later than two years after the date of the enactment of this Act, the Comptroller General of the United States shall submit to the congressional defense committees a report on the extent to which the guidance and instructions issued pursuant to subsection (a) have resulted in improvements to--

(A) the level of insight that senior Department of Defense officials have into the use of undefinitized contractual actions;

(B) the appropriate use of undefinitized contractual actions;

(C) the timely definitization of undefinitized contractual actions; and

(D) the negotiation of appropriate profits and fees for undefinitized contractual actions.

The Senate amendment contained a provision (sec. 848) that would require the Secretary of Defense to issue guidance, with detailed implementation instructions, for the Department of Defense (DOD) to ensure the implementation and enforcement of requirements applicable to undefinitized contractual actions (UCAs).

The House bill contained no similar provision.

The House recedes with an amendment clarifying the issues to be addressed in the guidance.

The conferees note that the DOD already has requirements in place regarding the use of UCAs. However, the Government Accountability Office (GAO) reported in June 2007 that DOD has frequently failed to comply with these requirements.

For example, the Defense Federal Acquisition Regulation Supplement (DFARS) states that when the final price of a UCA is negotiated after a substantial portion of the required performance has been completed, the negotiated profit rate should reflect any reduced cost risk to the contractor for costs incurred during contract performance before negotiation of the final price. Section 215.404-71-3(d)(2) of the DFARS states: `When costs have been incurred prior to definitization, generally regard the contract type risk to be in the low end of the designated range. If a substantial portion of the costs have been incurred prior to definitization, the contracting officer may assign a value as low as 0 percent, regardless of contract type.' However, GAO found no evidence that DOD contracting officers have been observing these requirements in the negotiation of contract fees. The conferees expect the guidance issued pursuant to this section to include procedures for ensuring compliance with these and other requirements regarding UCAs.