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TITLE II--ACQUISITION POLICY

Section 207

House Conference Report 111-124

(a) Revised Regulations Required- Not later than 270 days after the date of the enactment of this Act, the Secretary of Defense shall revise the Defense Supplement to the Federal Acquisition Regulation to provide uniform guidance and tighten existing requirements for organizational conflicts of interest by contractors in major defense acquisition programs.

(b) Elements- The revised regulations required by subsection (a) shall, at a minimum--

(1) address organizational conflicts of interest that could arise as a result of--

(A) lead system integrator contracts on major defense acquisition programs and contracts that follow lead system integrator contracts on such programs, particularly contracts for production;

(B) the ownership of business units performing systems engineering and technical assistance functions, professional services, or management support services in relation to major defense acquisition programs by contractors who simultaneously own business units competing to perform as either the prime contractor or the supplier of a major subsystem or component for such programs;

(C) the award of major subsystem contracts by a prime contractor for a major defense acquisition program to business units or other affiliates of the same parent corporate entity, and particularly the award of subcontracts for software integration or the development of a proprietary software system architecture; or

(D) the performance by, or assistance of, contractors in technical evaluations on major defense acquisition programs;

(2) ensure that the Department of Defense receives advice on systems architecture and systems engineering matters with respect to major defense acquisition programs from federally funded research and development centers or other sources independent of the prime contractor;

(3) require that a contract for the performance of systems engineering and technical assistance functions for a major defense acquisition program contains a provision prohibiting the contractor or any affiliate of the contractor from participating as a prime contractor or a major subcontractor in the development or construction of a weapon system under the program; and

(4) establish such limited exceptions to the requirement in paragraphs (2) and (3) as may be necessary to ensure that the Department of Defense has continued access to advice on systems architecture and systems engineering matters from highly-qualified contractors with domain experience and expertise, while ensuring that such advice comes from sources that are objective and unbiased.

(c) Consultation in Revision of Regulations-

(1) RECOMMENDATIONS OF PANEL ON CONTRACTING INTEGRITY- Not later than 90 days after the date of the enactment of this Act, the Panel on Contracting Integrity established pursuant to section 813 of the John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364; 120 Stat. 2320) shall present recommendations to the Secretary of Defense on measures to eliminate or mitigate organizational conflicts of interest in major defense acquisition programs.

(2) CONSIDERATION OF RECOMMENDATIONS- In developing the revised regulations required by subsection (a), the Secretary shall consider the following:

(A) The recommendations presented by the Panel on Contracting Integrity pursuant to paragraph (1).

(B) Any findings and recommendations of the Administrator for Federal Procurement Policy and the Director of the Office of Government Ethics pursuant to section 841(b) of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Public Law 110-417; 122 Stat. 4539).

(d) Extension of Panel on Contracting Integrity- Subsection (e) of section 813 of the John Warner National Defense Authorization Act for Fiscal Year 2007 is amended to read as follows:

`(e) Termination-

`(1) IN GENERAL- Subject to paragraph (2), the panel shall continue to serve until the date that is 18 months after the date on which the Secretary of Defense notifies the congressional defense committees of an intention to terminate the panel based on a determination that the activities of the panel no longer justify its continuation and that concerns about contracting integrity have been mitigated.

`(2) MINIMUM CONTINUING SERVICE- The panel shall continue to serve at least until December 31, 2011.'.

Congressional Record, Senate, February 23, 2009, Summary of S. 454, the Weapon Systems Acquisition Reform Act of 2009, P. S2368

Defense Science Board Task Force on Defense Industrial Structure for Transformation reported in July 2008 that "many of the systems engineering firms which previously provided independent assessment [of major defense acquisition programs] have been acquired by the large prime contractors." As a result, the Task Force reported, "different business units of the same firm can end up with both the service and product side in the same program or market area." This structural conflict of interest may result in "bias [and] impaired objectivity," which cannot be resolved through firewalls or other traditional mitigation mechanisms. Section 205 would address this problem, as recommended by the Task Force, by: (1) prohibiting systems engineering contractors from participating in the development or construction of the major weapon systems on which they are advising the Department of Defense; and (2) requiring tightened oversight of organizational conflicts of interests by contractors in the acquisition of major weapon systems.

House Committee on Armed Services Report 111-101 with H. R. 2101

SECTION 205--ORGANIZATIONAL CONFLICTS OF INTEREST IN THE ACQUISITION OF MAJOR WEAPONS SYSTEMS

This section would require the Panel on Contracting Integrity of the Department of Defense to present recommendations to the Secretary of Defense on measures to eliminate or mitigate organizational conflicts of interest in the acquisition of major weapons systems within one year after the date of enactment of this Act. The specific areas that the Panel would be required to review for potential organizational conflicts of interest include: lead system integrator contracts; systems engineering and technical assistance contracts; the award of major subcontracts to a prime's own business units; and contractor performance of technical evaluations. This section would further require the Secretary of Defense to revise the Defense Supplement to the Federal Acquisition Regulations to address organizational conflicts of interest by contractors within 180 days after receiving the recommendations of the Panel. This section would also extend the existence of the Panel on Contracting Integrity until December 30, 2011, or a date that is 18 months after the Secretary of Defense notifies the congressional defense committees of an intention to terminate the Panel, whichever is later.