### SUBCHAPTER II—CONTRACTING

Sec.
4231.
Major systems: determination of quantity for low-rate initial production.
4232.
Prohibition on use of lowest price technically acceptable source selection process.
4233.
[Reserved].
4234.
[Reserved].
4235.
[Reserved].
4236.
Negotiation of price for technical data before development, production, or sustainment of major weapon systems.

#### **Editorial Notes**

#### Amendments

**2021**—Pub. L. 117–81, div. A, title XVII, §1701(f)(8), Dec. 27, 2021, 135 Stat. 2139, added item 4232 and struck out former item 4232 "Use of lowest price technically acceptable source selection process: prohibition".

#### **Statutory Notes and Related Subsidiaries**

#### Limitation on use of Cost-Type Contracts

Pub. L. 112–239, div. A, title VIII, §811, Jan. 2, 2013, 126 Stat. 1828, as amended by Pub. L. 116–92, div. A, title IX, §902(66), Dec. 20, 2019, 133 Stat. 1550, provided that:

"(a) Prohibition With Respect to Production of Major Defense Acquisition Programs.—Not later than 120 days after the date of the enactment of this Act [Jan. 2, 2013], the Secretary of Defense shall modify the acquisition regulations of the Department of Defense to prohibit the Department from entering into cost-type contracts for the production of major defense acquisition programs.

"(b) Exception.—

"(1) In general.—The prohibition under subsection (a) shall not apply in the case of a particular cost-type contract if the service acquisition executive, in the case of a major defense acquisition program of the military department, or the Under Secretary of Defense for Acquisition and Sustainment, in the case of a Defense-wide or Defense Agency major defense acquisition program, provides written certification to the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] that a cost-type contract is needed to provide a required capability in a timely and cost-effective manner.

"(2) Scope of exception.—In any case for which the Under Secretary grants an exception under paragraph (1), the Under Secretary shall take affirmative steps to make sure that the use of cost-type pricing is limited to only those line items or portions of the contract where such pricing is needed to achieve the purposes of the exception. A written certification under paragraph (1) shall be accompanied by an explanation of the steps taken under this paragraph.

"(c) Definitions.—In this section:

"(1) Major defense acquisition program.—The term 'major defense acquisition program' has the meaning given the term in section 2430(a) of title 10, United States Code [now 10 U.S.C. 4201].

"(2) Production of a major defense acquisition program.—The term 'production of a major defense acquisition program' means the production and deployment of a major system that is intended to achieve an operational capability that satisfies mission needs, or any activity otherwise defined as Milestone C under Department of Defense Instruction 5000.02 or related authorities.

"(3) Contract for the production of a major defense acquisition program.—The term 'contract for the production of a major defense acquisition program'—

"(A) means a prime contract for the production of a major defense acquisition program; and

"(B) does not include individual line items for segregable efforts or contracts for the incremental improvement of systems that are already in production (other than contracts for major upgrades that are themselves major defense acquisition programs).

"(d) Applicability.—The requirements of this section shall apply to contracts for the production of major defense acquisition programs entered into on or after October 1, 2014."

#### Estimates of Potential Termination Liability of Contracts for the Development or Production of Major Defense Acquisition Programs

Pub. L. 112–239, div. A, title VIII, §812, Jan. 2, 2013, 126 Stat. 1829, directed the Under Secretary of Defense for Acquisition, Technology, and Logistics to review, not later than 180 days after Jan. 2, 2013, relevant acquisition guidance and ensure that program managers for major defense acquisition programs are preparing estimates of potential termination liability for certain covered contracts and directed the Comptroller General of the United States to submit to the congressional defense committees, not later than 270 days after Jan. 2, 2013, a report on the extent to which the Department of Defense is considering potential termination liability as a factor in entering into and in terminating covered contracts.

#### Determination of Contract Type for Development Programs

Pub. L. 109–364, div. A, title VIII, §818(b)–(f), Oct. 17, 2006, 120 Stat. 2329, 2330, as amended by Pub. L. 117–263, div. A, title VIII, §808(a), Dec. 23, 2022, 136 Stat. 2705, provided that:

"(b) Modification of Regulations.—Not later than 120 days after the date of the enactment of this Act [Oct. 17, 2006], the Secretary of Defense shall modify the regulations of the Department of Defense regarding the determination of contract type for development programs.

"(c) Elements.—As modified under subsection (b), the regulations shall require the Milestone Decision Authority for a major defense acquisition program to select the contract type for a development program at the time of a decision on Milestone B approval (or Key Decision Point B approval in the case of a space program) that is consistent with the level of program risk for the program. The Milestone Decision Authority may select—

"(1) a fixed-price type contract (including a fixed price incentive contract); or

"(2) a cost type contract.

"(d) Conditions With Respect to Authorization of Cost Type Contract.—As modified under subsection (b), the regulations shall provide that the Milestone Decision Authority may authorize the use of a cost type contract under subsection (c) for a development program only upon a written determination that—

"(1) the program is so complex and technically challenging that it would not be practicable to reduce program risk to a level that would permit the use of a fixed-price type contract; and

"(2) the complexity and technical challenge of the program is not the result of a failure to meet the requirements established in section 2366a of title 10, United States Code [now 10 U.S.C. 4251].

"(e) Justification for Selection of Contract Type.—As modified under subsection (b), the regulations shall require the Milestone Decision Authority to document the basis for the contract type selected for a program. The documentation shall include an explanation of the level of program risk for the program and, if the Milestone Decision Authority determines that the level of program risk is high, the steps that have been taken to reduce program risk and reasons for proceeding with Milestone B approval despite the high level of program risk.

"(f) Conditions With Respect to Certain Low-rate Initial Production.—

"(1) In general.—The number of low-rate initial production lots associated with a major defense acquisition program may not be more than one if—

"(A) the milestone decision authority authorizes the use of a fixed-price type contract at the time of a decision on Milestone B approval; and

"(B) the scope of the work of the fixed-price type contract includes both the development and low-rate initial production of items for such major defense acquisition program.

"(2) Waiver.—The limitation in paragraph (1) may be waived by the applicable service acquisition executive or a designee of such executive if—

"(A) such waiver authority is not delegated to the level of the contracting officer; and

"(B) written notification of a granted waiver, including the associated rationale, is provided to the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] not later than 30 days after issuance of the waiver.

"(3) Definitions.—In this subsection:

"(A) The term 'low-rate initial production' has the meaning given under section 4231 of title 10, United States Code.

"(B) The term 'milestone decision authority' has the meaning given in section 4211 of title 10, United States Code.

"(C) The term 'major defense acquisition program' has the meaning given in section 4201 of title 10, United States Code.

"(D) The term 'Milestone B approval' has the meaning given in section 4172(e) of title 10, United States Code."

[Pub. L. 117–263, div. A, title VIII, §808(b), Dec. 23, 2022, 136 Stat. 2705, provided that: "Not later than 120 days after the date of the enactment of this Act [Dec. 23, 2022], the Secretary of Defense shall revise the Department of Defense Supplement to the Federal Acquisition Regulation and any applicable regulations regarding the use of fixed-price type contracts for a major defense acquisition program (as defined in section 4201 of title 10, United States Code) to carry out this section [enacting section 818(f) of Pub. L. 109–364, set out above] and the amendments made by this section."]