Report of the Advisory Panel on 

Streamlining and Codifying 

Acquisition Regulations

Volume 3 of 3

January 2019
   
Report of the Advisory Panel on 

Streamlining and Codifying 

Acquisition Regulations 

Volume 3 of 3 

January 2019 

1400 Key Boulevard, Suite 210, Arlington, VA 22209 

sec809@dau.mil | www.section809panel.org 

January 15, 2019 

Publication of Volume 3 of the Final Report marks the culmination of more than 2 years 

of stakeholder engagement and research aimed at streamlining DoD’s acquisition 

process. In the Supplement to the Section 809 Panel Interim Report, published in May 2017, 

the panel affirmed that meeting the agency mission should be the primary goal of DoD 

acquisition. Throughout its tenure, the Section 809 Panel has remained committed to 

ensuring its recommendations, including the 58 featured in Volume 3, honor that 

mission-first spirit, focusing on ways to improve DoD acquisition that support 

delivering lethality and sustaining technical dominance inside the turn of near-peer 

competitors and nonstate actors. DoD’s acquisition system must recognize the urgency 

the country faces and adopt a war footing for its acquisition system that will allow DoD 

to obtain technological superiority and to sustain the technological superiority it 

delivers to warfighters. 

The Section 809 Panel’s Interim Report recommended modifying or eliminating statutory 

and regulatory requirements to reduce the burden and improve the functioning of 

DoD’s acquisition system. Congress adopted all of the statutory recommendations 

made in the Interim Report in the FY 2018 NDAA. 

Volume 1 of the Final Report, released January 31, 2018 introduced a concept called the 

Dynamic Marketplace and contains recommendations to update the process by which 

DoD acquires IT systems, streamline DoD’s auditing requirements, reduce barriers to 

entry into the DoD market for small businesses, and redirect DoD’s use of small 

businesses to focus on mission accomplishment. Volume 1 also contains 

recommendations to update commercial buying processes, clarify the definitions of 

personal and nonpersonal services, remove statutory requirements for acquisitionrelated DoD offices, and repeal acquisition-related statutory reporting requirements. 

Many of these recommendations were included in the FY 2019 NDAA. 

Building on the panel’s commitment to proposing actionable recommendations, 

Volume 2, published June 28, 2018, contained recommendations addressing the 

acquisition workforce, commercial source selection, relocating the Cost Accounting 

Standards (CAS) Board, increasing the thresholds at which CAS would apply to 
1400 Key Boulevard, Suite 210, Arlington, VA 22209 

sec809@dau.mil | www.section809panel.org 

contracts (reducing another barrier to small business participation) and services 

contracting. Volume 2 also introduced portfolio management as an approach for 

addressing the sizable delays and costs caused by the current program-centric 

acquisition model and continued the discussion of the Dynamic Marketplace concept. 

Volume 3, the last installment of the Section 809 Panel’s Final Report, begins by providing 

a process for implementing the Dynamic Marketplace. The discussion of the Dynamic 

Marketplace identifies how a number of recommendations in the prior three volumes 

help to streamline acquisition in the defense-unique space, but also outlines acquisition 

of products and services that are readily available and readily available with 

customization in the public-sector marketplace. The portfolio management approach, 

first discussed in Volume 2, is described in detail in Volume 3 and coupled with specific 

recommendations for establishing portfolio management, implementing best practices 

within that framework, as well as aligning requirements management and sustainment 

operations with the portfolio framework. Volume 3 continues the work in the previous 

volumes related to managing the acquisition workforce, streamlining and improving 

compliance, simplifying procurement, and reorganizing Title 10. It also includes 

recommendations related to information technology procurement, budget reform, 

government–industry interactions, data analytics, understanding the complexities of the 

FAR and DFARS, and creating a center for continuing the Section 809 Panel’s 

acquisition reform efforts. 

The Section 809 Panel produced a total of 98 recommendations with additional 

subrecommendations, (five as part of its Interim Report and 93 spread across Volumes 1, 

2, and 3 of the Final Report). Without support provided by Congress, DoD, the DoD 

acquisition community, and industry, the Section 809 Panel could not have produced 

more than 1,000 pages of recommendation text and an additional 1,000-plus pages of 

statutory and regulatory solutions for implementing the panel’s recommendations. 

Because of the many individuals who spoke at panel meetings, participated in 

interviews and engagement events, facilitated opportunities for site visits, offered 

recommendations and suggestions, and provided peer review, the Section 809 Panel’s 

body of work truly represents a collective effort from across the acquisition community. 

A broad and diverse collection of acquisition team members have been key in shaping 

the panel’s recommendations, which are aimed at more quickly and cost-effectively 

delivering lethality, obtaining technical dominance, and sustaining technical dominance 

inside the turn of near-peer competitors and nonstate actors.

 
1400 Key Boulevard, Suite 210, Arlington, VA 22209

sec809@dau.mil | www.section809panel.org

Mr. David G. Ahern Maj Gen Casey D. Blake, USAF 

Mr. Elliott B. Branch The Honorable Allan V. Burman 

VADM Joseph W. Dyer, USN (Ret.) Ms. Cathleen D. Garman 

BG Michael D. Hoskin, USA The Honorable William A. LaPlante 

Maj Gen Kenneth D. Merchant, USAF (Ret.) Dr. Terry L. Raney 

Maj Gen Darryl A. Scott, USAF (Ret.) LTG N. Ross Thompson III, USA (Ret.) 

Mr. Laurence M. Trowel Mr. Charlie E. Williams, Jr. 

Mr. David A. Drabkin, Chair

Respectfully Submitted,
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Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Table of Contents Volume 3 | Page iii 

Table of Contents 

EXECUTIVE SUMMARY ............................................................................... EX-1 

INTRODUCTION ........................................................................................... 1 

RECOMMENDATIONS 

Section 1 – Marketplace Framework ....................................................................... 7 

 Implementation Details 

Section 2 – Portfolio Management Framework ......................................................... 49 

 Implementation Details including proposed changes to DoDD 5000.01 

Section 3 – IT Procurement ............................................................................... 133 

 Implementation Details 

Section 4 – Budget .......................................................................................... 173 

 Implementation Details 

Section 5 – Acquisition Workforce ....................................................................... 271 

 Implementation Details 

Section 6 – Streamlining and Improving Compliance ................................................. 319 

 Implementation Details including a Draft Professional Practice Guide 

Section 7 – Simplifying Procurement and Contracting ............................................... 387 

 Implementation Details 

Section 8 – Government–Industry Interactions ........................................................ 453 

 Implementation Details 

Section 9 – Acquisition Data .............................................................................. 475 

 Implementation Details 

Section 10 – Title 10 Reorganization .................................................................... 499 

 Implementation Details including a List Proposed Chapters for New Part V of Subtitle A of 

Title 10, United States Code, that have been submitted as of December 31, 2018 

Section 11 – FAR Reference Document ................................................................. 505 

 Implementation Details 

Section 12 – Minimize Flowdown of Government-Unique Terms in Commercial Buying ...... 511 

 Implementation Details 

Section 13 – Center for Acquisition Innovation ....................................................... 515 

 Implementation Details 

CONCLUSION .......................................................................................... 523 

LIST OF SECTION 809 PANEL RECOMMENDATIONS ............................................. 525 

APPENDICES 

Appendix A – Enabling Legislation ....................................................................... A-3 

Appendix B – Statutory, Regulatory, and Policy Information Concerning the 

Clinger-Cohen Act ...................................................................................... A-5 

Appendix C – Hiring and Educational Financial Assistance Authorities.......................... A-11 

Appendix D – Panel Activities ........................................................................... A-13 

Appendix E – Panel Teams .............................................................................. A-23 

Appendix F – Panel Members and Professional Staff ............................................... A-25 

Appendix G – Acronym List .............................................................................. A-29 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page iv | Volume 3 Table of Contents 

LIST OF FIGURES 

Figure 1-1. Dynamic Marketplace Framework .............................................................. 9 

Figure 1-2. DoD and Private-sector Research and Development Spending ........................... 21 

Figure 2-1. Acquisition Decision-Making Structure ....................................................... 55 

Figure 2-2. Portfolio Management Construct (Notional) ................................................ 60 

Figure 2-3. Portfolio Acquisition Executive (Notional) .................................................. 62 

Figure 2-4. Defense Acquisition Decision Support Systems (DSS – Big A Acquisition) ............... 65 

Figure 2-5. Description and Guidance for the DSS ....................................................... 66 

Figure 2-6. Notional Enterprise Capability Portfolio Management .................................... 69 

Figure 2-7. Portfolio Allocation ............................................................................. 78 

Figure 2-8. Multitiered Portfolio Management System .................................................. 79 

Figure 2-9. Service Execution Portfolio and Enterprise Portfolio Information Flow ................ 80 

Figure 2-10. Interaction of JCIDS Documents and Early Acquisition Lifecycle ....................... 88 

Figure 2-11. Requirements Process Interactions ......................................................... 90 

Figure 2-12. IT Box Primer .................................................................................. 91 

Figure 2-13. Example of Agile Backlogs ................................................................... 92 

Figure 2-14. Interplay of Portfolio R&D, Requirements, and Analysis ................................ 95 

Figure 2-15. DoD RM Billets ................................................................................ 100 

Figure 2-16. Sustainment Program Baseline in the Acquisition Lifecycle ........................... 109 

Figure 2-17. Product Support Elements .................................................................. 115 

Figure 2-18. Percentage of Program Lifecycle Cost Average for MDAP Categories ................ 124 

Figure 2-19. Complexity of Product Support Strategy Funding ....................................... 126 

Figure 2-20. Current Product Improvement Funding Policy ........................................... 127 

Figure 2-21. Proposed Product Investment Decision Tree ............................................. 128 

Figure 3-1. FY 2017 DoD Contract Obligations that Could Potentially Be Priced Using 

Consumption-Based Models ............................................................................ 146 

Figure 4-1. Current PA Reprogramming Process ........................................................ 182 

Figure 4-2. Current Decision Authority Flowchart for PA Reprogramming Actions ................. 184 

Figure 4-3. Current and Proposed Decision Authority Flowchart for BTR ........................... 185 

Figure 4-4. Reprogramming Dollar Thresholds, Not Adjusted For Inflation ......................... 187 

Figure 4-5. Reprogramming Dollar Thresholds in Inflation-Adjusted U.S. Dollars .................. 188 

Figure 4-6. Reprogramming Dollar Thresholds as Percentage of Individual Title Outlays ......... 189 

Figure 4-7. Weekly Obligations on Contracts under O&M Appropriations Account, FY 2017 ..... 196 

Figure 4-8. Multiyear Appropriation Examples from FY 2018 .......................................... 200 

Figure 4-9. Weekly DoD Contract Obligations over the Course of FY 2017 .......................... 204 

Figure 4-10. Weekly Obligations on Contracts under O&M Appropriations Account, FY 2017 .... 205 

Figure 4-11. Weekly Obligations on Contracts under RDT&E Appropriations Account, FY 2017 .. 206 

Figure 4-12. FY 2017 Weekly DoD Contract Obligations, as Percentage of Fiscal Year Total ..... 210 

Figure 4-13. Number of Days During Which DoD Operated under CRs ............................... 222 

Figure 4-14. Multiyear Appropriation Examples from FY 2018 ........................................ 232 

Figure 4-15. DoD Invoice Processing Workflow .......................................................... 245 

Figure 4-16. Volume of MOCAS Interest Payments to Businesses in FY 2017 ........................ 247 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Table of Contents Volume 3 | Page v 

LIST OF FIGURES (CONTINUED) 

Figure 4-17. DCMA Projected Cancelling Year Funds at Risk ($B) .................................... 258 

Figure 4-18. Contract Closeout Complexities to Stay Within Statutory Fund Periods ............. 259 

Figure 4-19. SMC Cancelled Year Bills Analysis (more than $10K) By Reason ....................... 262 

Figure 4-20. DCMA Historical Over-aged Contract Backlog ............................................ 265 

Figure 4-21. DCMA Projected Cancelling Year Funds at Risk ($B) .................................... 266 

Figure 4-22. DCMA Over-aged Contract Burn-down Projection ....................................... 268 

Figure 4-23. DCMA Over-aged Contracts (Total Contract Value) ..................................... 269 

Figure 5-1. Defense Acquisition Workforce Certification Rates ....................................... 275 

Figure 5-2. DAU’s Acquisition Learning Model: The Three Diamonds ................................ 278 

Figure 6-1. DoD Contract Actions for FY 2017 and Dollar Total of DoD Contract 

Actions for FY 2017 ..................................................................................... 339 

Figure 6-2. DoD Procurement Protests at GAO, FYs 1989-2016 ....................................... 349 

Figure 6-3. Days to Close a Protest Action at GAO, FYs 2008-2016 ................................... 351 

Figure 6-4. Number of Days to Close Cases with the COFC, CYs 2008-2017 ......................... 353 

Figure 6-5. Distribution of DoD Workforce ............................................................... 369 

Figure 7-1. Acquisition Strategy Schedule – Actual ..................................................... 392 

Figure 7-2. Comparison of DoD Contract Dollar Obligations and DoD Contract 

Actions, FY 2017 ......................................................................................... 400 

Figure 7-3. Paths to a Production OT under the Current 10 U.S.C. § 2371b ........................ 444 

Figure 7-4. Recommended Changes to 10 U.S.C. § 2371b Paths to Production ..................... 447 

 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page vi | Volume 3 Table of Contents 

LIST OF TABLES 

Table 1-1. Comparison of Current DoD Commercial Buying Practices to Proposed 

Readily Available Pathways ............................................................................. 19 

Table 2-1. Appropriation Limits ............................................................................ 57 

Table 3-1. Resource Unit Examples ....................................................................... 149 

Table 4-1. Reprogramming Dollar Thresholds, if Reset to 1963 or 1982 Equivalents ............... 191 

Table 4-2. Number of FY 2019 Budget Request Line Items that Would Face Artificially 

Low BTR Thresholds Due to the Lesser of 20 Percent Rule ....................................... 193 

Table 4-3. Comparison of Spending Targets, DoD and Department of the Army .................... 203 

Table 4-4. Carry-Over Authority in Selected Countries ................................................ 218 

Table 4-5. Transaction Costs for DFAS and Industry (FY 2017 Estimated) ........................... 248 

Table 4-6. DFAS Data Analytics Root Cause Analysis ................................................... 260 

Table 5-1. Chapter 87, Title 10 U.S.C., Statute Governing Career Development .................. 287 

Table 5-2. DoD Instruction Governing Career Paths and Development ............................... 289 

Table 7-1. Army Competitive Procurement Timelines ................................................. 393 

Table 7-2. Examples of Redundancy in FAR-Directed Acquisition Planning ......................... 396 

Table 7-3. Summary of Distinctions between the Acquisition Strategy and Acquisition Plan .... 404 

Table 7-4. Acquisition Plan and Acquisition Strategy Requirements and Commonalities ......... 405 

Table 7-5. FAR 15.3 and 16.5 Terminology Comparison ............................................... 420 

Table 9-1. Selected Federal Data Strategy Draft Practices ........................................... 480 

Table 13-1. Duties of the Panel and Future Center .................................................... 517 

Table B-1. Legal Provenance of 11-Item CCA Checklist from DoDI 5000.02 and DoDI 5000.74 .... A-5 

Table B-2. Redundancies with CCA in IT Acquisition .................................................... A-8 

FPDS: The Federal Procurement Data System—Next Generation is the primary source for DoD prime 

contract award data. FPDS is the source for much of the data cited in this report. 

 

FPDS is a living database, updated in real time. For this reason, the same query will produce different results 

when run at different points in time. In accordance with FAR Subpart 4.604(c), DoD submits an annual 

certification within 120 days of the end of the fiscal year, which serves as an official statement of FPDSrecorded contract procurement for that year. The underlying data, however, continues to change. 

Charts, tables, and calculations in this report are cited with date of data extraction. Because these data 

extractions occurred at various times over the course of 809 Panel research, officially certified DoD data may 

differ slightly from the data in this report. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Table of Contents Volume 3 | Page vii 

PHOTO CREDITS 

All photos from www.defense.gov. 

Page EX-1 Photo by Lance Cpl. Audrey Rampton 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040800/ 

Page 1 Photo by Senior Master Sgt. David H. Lipp 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040449/ 

Page 7 Photo by Ashley Keasler 

https://www.defense.gov/observe/photo-gallery/igphoto/2002052837/ 

Page 49 Photo by Cpl. Dylan Chagnon 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040425/ 

Page 133 Photo by Airman 1st Class Tristan Viglan 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040735/ 

Page 173 Photo by Army Spc. Liem Huynh 

https://www.defense.gov/observe/photo-gallery/igphoto/2002058486/ 

Page 271 Photo by Petty Officer 3rd Class Ryan M. Breeden 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040866/ 

Page 319 Photo by Master Sgt. Caycee Watson 

https://www.defense.gov/observe/photo-gallery/igphoto/2002048787/ 

Page 389 Photo by Charles Rosemond 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040822/ 

Page 453 Photo by Seaman Raymond Maddocks 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040860/ 

Page 475 Photo by Air Force Airman 1st Class Michael S. Murphy 

https://www.defense.gov/observe/photo-gallery/igphoto/2002049102/ 

Page 499 Photo by Army Sgt. Zackary Nixon 

https://www.defense.gov/observe/photo-gallery/igphoto/2002056155/ 

Page 505 Photo by Staff Sgt. Daniel Wetzel 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040767/ 

Page 511 Photo by Staff Sgt. Amy Picard 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040646/ 

Page 515 Photo by Maj. Thomas Cieslak 

https://www.defense.gov/observe/photo-gallery/igphoto/2002049547/ 

Page 523 Photo by 1st Lt. Leland White 

https://www.defense.gov/observe/photo-gallery/igphoto/2002047919/ 

Page A-1 Photo by Marine Corps Lance Cpl. Menelik Collins 

https://www.defense.gov/observe/photo-gallery/igphoto/2002052938/ 

Last Page Photo by Master Sgt. Matt Hecht 

https://www.defense.gov/observe/photo-gallery/igphoto/2002040513/ 

 
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Executive Summary 

Volume 3 of the Final Report represents the culmination of more than 2 years of collective brainstorming, 

engagement, and intense research about how to change defense acquisition from an outdated, 

industrial-era bureaucracy to a more streamlined, agile system able to evolve in sync with the speed of 

technology innovation. The Section 809 Panel has recommended both evolutionary and revolutionary 

changes. The panel’s recommendations, in part, will allow DoD to make purchases in a manner similar 

to the way private-sector businesses do—which is difficult, and in some cases impossible under the 

current acquisition system. If implemented, these recommendations would reduce barriers that deny 

DoD timely access to innovative technology and creative solutions from nontraditional companies and 

bridge the technical superiority gap that is beginning to develop today between the United States and 

near-peer competitors and nonstate actors. 

To defend against potential enemies, DoD must move to a war footing approach for acquiring and 

delivering capabilities to ensure warfighters have the tools they need. The DoD acquisition system’s 

ability to meet threats that exist today is questionable. DoD lacks flexibility the nation’s near-peer 

competitors have, limiting its ability to field innovative solutions before potential adversaries do. In 

deliberating its recommendations, the Section 809 Panel considered ways in which DoD still uses Cold 

War-era approaches while operating in a cyber-war-era society. 

The 58 recommendations (and associated subrecommendations) in this volume add to the 

35 recommendations (and associated subrecommendations) released in Volumes 1 and 2 of the Final 

Report and the five recommendations put forth in the Supplement to the Section 809 Panel Interim Report. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Page EX-2 | Volume 3 Executive Summary 

It has been no small task to tackle the formidable challenges facing the United States as it strategizes 

how best to defend its citizens and interests when the pace of technological change dramatically affects 

the nature of the threats the nation faces and the capabilities at its disposal. Ultimately, the Section 809 

Panel aimed to make recommendations that allow DoD to deliver and sustain technologically superior 

capability inside the turn of near-peer competitors and nonstate actors. 

SECTION 1: MARKETPLACE FRAMEWORK 

Operating in a complex security environment with rapidly changing technology, the defense 

acquisition system must deliver a wide variety of warfighting and combat support capabilities as 

efficiently as possible. Not all capabilities are acquired in the same way, and DoD must adjust its 

acquisition processes to meet the demands of the diverse markets in which it operates. The Volume 1 

Report introduced a framework for optimizing how DoD operates across this dynamic marketplace. 

The Volume 2 Report further refined the Dynamic Marketplace Framework into three capability lanes 

and introduced the Section 809 Panel plan to develop the framework’s concepts into procedures and 

policy recommendations. DoD must be able to rapidly buy cutting-edge innovation for warfighters to 

use in addressing emerging threats. 

The Dynamic Marketplace Framework is shaped by dividing what DoD buys into three categories. 

Defense-unique development includes DoD-financed development, either to repurpose a readily available 

product or solution or to develop a new product or solution, to deliver a defense-unique capability. 

Readily available includes any product or service that requires no customization by the vendor and can 

be ordered directly by customers, to include products and services that only governments buy. Readily 

available with customization includes products and services that are sold in the private sector for which 

customization, consistent with what is offered to existing private-sector customers, is necessary to meet 

DoD’s needs. 

As set forth in the Volume 1 and Volume 2 Reports, reform is required for all three market segments in 

the Dynamic Marketplace Framework. Many of the recommendations in the preceding volumes, as 

well as in Volume 3, address issues related to defense-unique acquisition, as outlined in Section 1. For 

those items that can be purchased without development on DoD’s part, Section 1 puts forth a plan for 

purchasing products and services that are readily available and readily available with customization. 

This approach will facilitate acquiring the most up-to-date products and services in the least amount of 

time possible from the open, accessible marketplace, including nontraditional and other private-sector 

suppliers. 

 Rec. 35: Replace commercial buying and the existing simplified acquisition procedures and 

thresholds with simplified readily available procedures for procuring readily available products 

and services and readily available products and services with customization. 

SECTION 2: PORTFOLIO MANAGEMENT FRAMEWORK 

Portfolio management is a disciplined process that helps organizations optimize investments by 

prioritizing needs and allocating resources. Through portfolio management, all of an organization’s 

product investments are addressed at an enterprise level, rather than as independent and unrelated 

projects or activities. In a threat environment that is increasingly dynamic and complex, defense 
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Executive Summary Volume 3 | Page EX-3 

acquisition must deliver capabilities in an equally dynamic and effective way, and moving from a 

program-centric model to a portfolio-based model would meet this objective. DoD has previously 

struggled to adopt and implement the best practices of portfolio management. The main challenges to 

DoD transitioning to portfolio management include a fragmented governance structure, a lack of 

sustained leadership and policy, and a perceived lack of decision-making authority delegated to the 

appropriate level.1

Section 2 addresses all three of these challenges in its recommendations to establish an enterprise 

portfolio execution framework first introduced in the Volume 2 Report. The recommendations in this 

section offer a comprehensive, robust solution set for DoD portfolio management, expanding on 

portfolio best practices outlined by the Government Accountability Office (GAO). Section 2 provides 

specific recommendations related to a portfolio management framework at the enterprise and 

execution levels, including portfolio best practices. It also addresses a portfolio view for requirements 

and professionalizing the requirements management (RM) workforce, as well as establishing a 

sustainment program baseline and addressing issues related to sustainment funding. 

 Rec. 36: Transition from a program-centric execution model to a portfolio execution model. 

 Rec. 37: Implement a defensewide capability portfolio framework that provides an enterprise 

view of existing and planned capability, to ensure delivery of integrated and innovative 

solutions to meet strategic objectives. 

 Rec. 38: Implement best practices for portfolio management. 

 Rec. 39: Leverage a portfolio structure for requirements. 

 Rec. 40: Professionalize the requirements management workforce. 

 Rec. 41: Establish a sustainment program baseline, implement key enablers of sustainment, 

elevate sustainment to equal standing with development and procurement, and improve the 

defense materiel enterprise focus on weapon system readiness. 

 Rec. 42: Reduce budgetary uncertainty, increase funding flexibility, and enhance the ability to 

effectively execute sustainment plans and address emergent sustainment requirements. 

SECTION 3: IT PROCUREMENT 

Due to the limited interaction between commercial and DoD information technology (IT) markets, the 

two now operate at substantially different paces of technological advancement. Because the commercial 

IT market has outpaced the DoD market for decades, DoD regularly acquires outdated and inferior 

technology, often at higher prices and slower rates. DoD’s slower acquisition pace has a direct effect on 

warfighting capability in a defense era defined by technological edge. Warfighters, and their support 

commands, are often operating with less functionality and at higher operating costs. This market 

 

1

 GAO, Weapon System Acquisitions: Opportunities Exist to Improve the DOD’s Portfolio Management, GAO-15-466, August 2015, 

Highlights, accessed November 26, 2018, https://www.gao.gov/assets/680/672205.pdf. 
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Page EX-4 | Volume 3 Executive Summary 

segregation is caused by the vastly different way in which DoD and the wider federal government 

acquire IT. Rather than operating in the private-sector market of readily available options, DoD often 

creates detailed, intricate and unique requirements for its IT systems and services. 

DoD must acknowledge its acquisition system suffers from processes and procedures that are obsolete, 

redundant, or unnecessary and work to move quickly enough to keep pace with private-sector 

innovation. The recommendations in Section 3 offer strategies for transforming DoD’s IT acquisition 

from both the top down and bottom up. Strategic revisions to how DoD understands and acquires IT 

are integrated with smaller-scale changes that restore efficiency to routine processes that have become 

bogged down by layers of bureaucracy. None of the actions recommended in Section 3 alone will solve 

the challenges associated with IT market segregation; however, together they offer a series of changes 

that can better align DoD acquisition with private-sector practices. Allowing DoD to buy in a manner 

similar to private-sector companies will reduce barriers to sellers in the marketplace. 

 Rec. 43: Revise acquisition regulations to enable more flexible and effective procurement of 

consumption-based solutions. 

 Rec. 44: Exempt DoD from Clinger–Cohen Act Provisions in Title 40. 

 Rec. 45: Create a pilot program for contracting directly with information technology 

consultants through an online talent marketplace. 

SECTION 4: BUDGET 

In a very real sense, DoD must move to a war footing to maintain technological dominance—

competitors already have—yet the budget-related issues described in Section 4 hamper efforts in that 

regard. Delivering capability to warfighters depends on integration of the budgeting process and 

authorization and appropriation of funds. The ongoing unreliable availability of new-start funding 

from fiscal year to fiscal year puts DoD’s mission at risk. Secretaries of Defense perennially identify this 

unreliability as the biggest risk to the nation’s defense. Current rules limit the flexibility of DoD’s 

acquisition workforce in dealing with the realities of the marketplace such that near-peer competitors 

and nonstate actors have a decided innovation advantage. 

Section 4 contains recommendations intended to reduce inefficiency and dysfunction in the defense 

acquisition system’s budget formulation and appropriations processes; however, the section does not 

include specific reforms to the planning, programming, or budget formulation processes. Instead, 

overarching goals of these recommendations include empowering DoD managers to reallocate 

resources between programs as needed; flowing down decision authority to the lowest possible levels; 

eliminating or mitigating some of the perverse incentives that exist in fiscal law; and mitigating the 

harmful effects of late funding on DoD acquisition programs. 

 Rec. 46: Empower the acquisition community by delegating below threshold reprogramming 

decision authority to portfolio acquisition executives. 

 Rec. 47: Restore reprogramming dollar thresholds to match their previous levels relative to 

inflation and the DoD budget. 
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Executive Summary Volume 3 | Page EX-5 

 Rec. 48: Increase to 50 percent the lesser of 20 percent restriction that creates artificially low 

reprogramming thresholds for smaller programs. 

 Rec. 49: Provide increased flexibility to the time periods within which contract obligations are 

permitted to occur. 

 Rec. 50: Enact regular appropriations bills on time. 

 Rec. 51: Mitigate the negative effect of continuing resolutions by allowing congressional 

regular appropriations to remain available for a standardized duration from date of enactment. 

 Rec. 52: Permit the initiation of all new starts, provided Congress has appropriated sufficient 

funding. 

 Rec. 53: Permit the initiation of all production rate increases, provided Congress has 

appropriated sufficient funding. 

 Rec. 54: Permit the initiation of multiyear procurements under a CR. 

 Rec. 55: Raise the Prompt Payment Act threshold. 

 Rec. 56: Use authority in Section 1077 of the FY 2018 NDAA to establish a revolving fund for 

information technology modernization projects and explore the feasibility of using revolving 

funds for other money-saving investments. 

 Rec. 57: Modify fiscal law to extend the duration of when funds cancel from 5 years to 8 years 

in expired status to align program acquisitions with funding periods and prevent putting 

current funds at risk and to support meeting appropriation intent. 

 Rec. 58: Address the issue of over-age contracts through (a) establishing an end-to-end, 

integrated, streamlined process, (b) codifying DCMA’s Quick Close Out class deviation in the 

DFARS, and (c) extending DCMA’s Low Risk Quick Close Out initiative by 2 years. 

SECTION 5: ACQUISITION WORKFORCE 

As the rapid transformation of the defense acquisition system continues, DoD will require a 

professional, talented, experienced, flexible, and broad-minded workforce to succeed on warfighters’ 

behalf. Career management is a critical element for the acquisition workforce (AWF), and the 

recommendations in Section 5 concentrate on workforce development issues. In this chapter, the 

Section 809 Panel proposes a series of changes to DoD’s career development framework for AWF 

members. 

The recommendations in Section 5 revolve around three crucial aspects of career development: 

qualifications as opposed to certifications, career paths for all acquisition career fields with a 

competency model for the entire workforce, and public–private exchange programs (PPEPs). The 

current three-level certification system, established by DoD 3 decades ago, leads to early-career 

workforce members who are certified, but not necessarily qualified. This system lacks clear-cut career 
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paths and a competency model to help workforce members identify a clear career trajectory and then 

gain the right skills to navigate that path. Additionally, the system lacks successful opportunities for 

public–private exchange programs that could help acquisition leaders enhance their knowledge. 

Addressing these shortcomings will ultimately lead to a workforce that is better equipped to navigate 

the global macro-business environment and embolden appropriate risk-taking skills. 

 Rec. 59: Revise the Defense Acquisition Workforce Improvement Act to focus more on 

building professional qualifications. 

 Rec. 60: Implement acquisition career paths that are integrated with an institutionalized 

competency model tailored to mission needs. 

 Rec. 61: Create a comprehensive public–private exchange program for DoD’s acquisition 

workforce. 

SECTION 6: STREAMLINING AND IMPROVING COMPLIANCE 

DoD is not a typical private-sector buyer; complying with its many layers of requirements is 

burdensome for both DoD and contractors. Federal procurement law, federal acquisition regulations, 

and DoD’s internal regulations combine to create a labyrinth of challenges to the acquisition workforce, 

in both the public and private sectors. The recommendations in Section 6 acknowledge that DoD’s 

processes and procedures are outdated, creating barriers to entry for prospective industry partners and 

that a compliance-driven culture needs to be recalibrated to address the body of laws and regulations 

in a more efficient way. 

Section 6 addresses a variety of topics under the compliance umbrella. Included among these topics are 

subcontracting clauses that are flowed down from prime contractors to their suppliers, socioeconomic 

policy objectives unrelated to contract requirements, bid protests, the Inventory of Contracted Service, 

and adapting to commercial financial auditing practices. Making changes in these areas would alleviate 

some of the unnecessary burdens of the current compliance requirements, reduce the barriers to doing 

business with DoD, reduce the lengthy bid protest process, and optimize the auditing process. 

 Rec. 62: Update the FAR and DFARS to reduce burdens on DoD’s commercial supply chain to 

decrease cost, prevent delays, remove barriers, and encourage innovation available to the 

Military Services. 

 Rec. 63: Create a policy of mitigating supply chain and performance risk through requirements 

documents. 

 Rec. 64: Update socioeconomic laws to encourage purchasing from nontraditional suppliers by 

(a) adopting exceptions for DoD to domestic purchasing preference requirements for 

commercial products, and (b) adopting a public interest exception and procedures for the Berry 

Amendment identical to the ones that exist for the Buy American Act. 

 Rec. 65: Increase the acquisition thresholds of the Davis–Bacon Act, the Walsh–Healey Public 

Contracts Act, and the Services Contract Act to $2 million. 
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Executive Summary Volume 3 | Page EX-7 

 Rec. 66: Establish a purpose statement for bid protests in the procurement system to help 

guide adjudicative bodies in resolving protests consistent with said purpose and establish a 

standard by which the effectiveness of protests may be measured. 

 Rec. 67: Reduce potential bid protest processing time by eliminating the opportunity to file a 

protest with the COFC after filing at the GAO and require the COFC to issue a decision within 

100 days of ordering a procurement be delayed. 

 Rec. 68: Limit the jurisdiction of GAO and COFC to only those protests of procurements with 

a value that exceeds, or are expected to exceed, $75,000. 

 Rec. 69: Provide as part of a debriefing, in all procurements where a debriefing is required, 

a redacted source selection decision document and the technical evaluation of the vendor 

receiving the debriefing. 

 Rec. 70: Authorize DoD to develop a replacement approach to the inventory of contracted 

services requirement under 10 U.S.C. § 2330a. 

 Rec. 71: Adopt the professional practice guide to support the contract audit practice of DoD 

and the independent public accountants DoD may use to meet its contract audit needs, and 

direct DoD to establish a working group to maintain and update the guide. 

 Rec. 72: Replace 18 system criteria from DFARS 252.242-7006, Accounting System 

Administration, with an internal control audit to assess the adequacy of contractors’ accounting 

systems based on seven system criteria. 

 Rec. 73: Revise the definition of business system deficiencies to more closely align with 

generally accepted auditing standards. 

SECTION 7: SIMPLIFYING PROCUREMENT AND CONTRACTING 

The topics addressed in Section 7 vary across the range of defense acquisition practices, yet they all aim 

to streamline defense acquisition regulations and return time and flexibility to the acquisition 

workforce. These recommendations undertake streamlining in one of four ways: decluttering excess 

documentation requirements or procedures; utilizing existing authorities in a more efficient way; 

removing rigidity; or clarifying definitions. Regulatory decluttering is a constant challenge for DoD; 

these recommendations take aim at improving some particularly timely and important acquisition 

issues. 

The recommendations in Section 7 address eliminating duplicative or non-value-added documentation 

requirements, using existing authorities and processes to greatly reduce burden in the field, removing 

the rigidity of the regulatory system in specific circumstances, allowing energy to be purchased in a 

manner more consistent with the private sector, encouraging use of advanced payments to finance 

small business contracts, modernizing the Armed Services Board of Contract Appeals, and clarifying 

regulations related to commercial preference and use of Other Transaction authority. These regulatory 

adjustments have the potential to reverberate across DoD and to deliver great efficiencies to the 

acquisition workforce. 
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 Rec. 74: Eliminate redundant documentation requirements or superfluous approvals when 

appropriate consideration is given and documented as part of acquisition planning. 

 Rec. 75: Revise regulations, instructions, or directives to eliminate non-value-added 

documentation or approvals. 

 Rec. 76: Revise the fair opportunity procedures and require their use in task and delivery order 

competitions. 

 Rec. 77: Require role-based planning to prevent unnecessary application of security clearance 

and investigation requirements to contracts. 

 Rec. 78: Include the supply of basic energy as an exemption under FAR 5.202. 

 Rec. 79: Enable enhanced use of advanced payments, at time of contract award, to small 

businesses. 

 Rec. 80: Preserve the preference for procuring commercial products and services when 

considering small business set-asides. 

 Rec. 81: Clarify and expand the authority to use Other Transaction agreements for production. 

 Rec. 82: Provide Armed Services Board of Contract Appeals authority to require filing of 

contract appeals through an electronic case management system. 

 Rec. 83: Raise the monetary threshold to provide agency boards of contract appeals 

accelerated, small business, and small claims (expedited) procedures to $250,000 and $150,000 

respectively. 

SECTION 8: GOVERNMENT–INDUSTRY INTERACTIONS 

Communication is key to harnessing private-sector technology in a complex regulatory environment. 

For DoD to regain strategic overmatch and achieve goals set out in the National Defense Strategy, 

Congress must mandate that the defense acquisition workforce and the private sector improve the way 

in which they exchange information and communicate needs. Without appropriate communications 

with industry, warfighters are likely to receive more costly, less advanced equipment later than 

desired. A culture of open communication would allow the entire acquisition workforce to identify 

innovative capabilities, share best practices, learn from mistakes, and align missions among buyers and 

sellers in the marketplace. Such a culture would also allow the federal government and its contractors 

to better understand each other’s needs, constraints, and areas for confluence all focused on delivering 

capability to warfighters inside the turn of DoD’s near-peer competitors. 

Section 8 focuses on DoD’s communication with contractors and potential contractors. In many cases, 

the FAR and other regulations allow for more interaction with industry than is common practice. The 

following recommendations offer specific ways in which DoD can better communicate with industry. 

The recommendations in Section 8 work together in an effort to foster behavior that values interaction 
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Executive Summary Volume 3 | Page EX-9 

with industry and reduces fear of missteps and risk-taking normally associated with interacting with 

marketplace. 

 Rec. 84: Direct DoD to communicate with the marketplace concerning acquisition from 

development of the need/requirement through contract closeout, final payment, and disposal. 

 Rec. 85: Establish a Market Liaison at each procuring activity to facilitate communication with 

industry. 

 Rec. 86: Encourage greater interaction with industry during market research. 

 Rec. 87: Establish a market intelligence capability throughout DoD to facilitate communication 

that enhances the government’s industry knowledge through open, two way communication. 

SECTION 9: ACQUISTION DATA 

For several decades, DoD has worked to more effectively use enterprise acquisition and financial data 

in forming decisions. This process involves enormous technical complexity, and requires institutional 

improvements to accompany any IT upgrades. DoD does not lack this type of data, but rather lacks the 

full capacity and capability to use information systems to access data and provide for standardized 

data architectures. The recommendations in Section 9 aim to address these inadequacies. 

 Rec. 88: Use existing defense business system open-data requirements to improve strategic 

decision making on acquisition and workforce issues. 

 Rec. 89: Direct DoD to consolidate or eliminate competing data architectures within the 

defense acquisition and financial system. 

SECTION 10: TITLE 10 REORGANIZATION 

The acquisition-related statutory provisions that apply to the rest of the federal government were 

recently recodified in Title 41. No similar effort has been made with regard to Title 10, where the 

organization of the acquisition-related statutory provisions has become problematic. Reorganizing 

defense acquisition statutes into a cohesive structure provides a long-term benefit to the acquisition 

community and those companies doing business with DoD or seeking to enter the DoD marketplace. 

Section 10 addresses the need to reorganize Title 10, so it is easier to locate key acquisition statutes, 

many of which are currently hidden within note sections of the code. 

 Rec. 90: Reorganize Title 10 of the U.S. Code to place all of the acquisition provisions in a 

single part, and update and move acquisition-related note sections into the reorganized 

acquisition part of Title 10. 

SECTION 11: FAR REFERENCE DOCUMENT 

The FAR and DFARS provide the primary regulatory framework by which the federal government and 

DoD respectively contract for supplies and services and implement pertinent statutes, policies, and 

Executive Orders (EOs). It is difficult to effectively navigate and understand the regulations, which 

prevents acquisition personnel from leveraging the flexibilities, methods, and authorities available to 
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maximize speed in the acquisition process and encourage innovation, competition, and investment by 

the private sector. Section 11 highlights the problems with navigating FAR and DFARS requirements 

and recommends a resource that would make researching related statutes, policies, EOs and FRNs 

easier for government and private-sector acquisition team members. 

 Rec. 91: Require the Administrator of General Services and the Secretary of Defense to 

maintain the FAR and DFARS respectively, as electronic documents with references to the 

related statutes, Executive Orders, regulations, and policies, and with hyperlinks to Federal 

Register Notices. 

SECTION 12: MINIMIZE FLOWDOWN OF GOVERNMENT-UNIQUE TERMS IN 

COMMERCIAL BUYING 

Currently the FAR and DAR Councils hold the authority to determine if procurement-related statutes, 

Executive Orders (EOs), or regulation should apply to commercial buying. Recently, Congress has 

mandated that the councils conduct comprehensive reviews of all the procurement-related statutes, 

EOs, and regulations and determine which government-unique terms should flow down to the 

acquisition of commercial products and services. The FAR and DAR Councils have proven constrained 

in their ability to reduce the number of government-unique terms required to flow down. Section 12 

reiterates the need for Congress to take the lead in minimizing the government-unique terms 

applicable to commercial buying, which was first addressed in Recommendation 2. 

 Rec. 92: Minimize the flowdown of government-unique terms in commercial buying by 

implementing the Section 809 Panel’s Recommendation 2. 

SECTION 13: CENTER FOR ACQUISITION INNOVATION 

Pursuant to its congressional authorization, the Section 809 Panel will complete its work and cease to 

exist on July 15, 2019. The need to identify challenges associated with the DoD acquisition system will 

continue to exist, as will the need to propose policy alternatives for addressing those challenges. The 

need exists to maintain the Section 809 Panel’s records for future research and to create a center for 

acquisition policy research that continues the work of reforming DoD acquisition. Section 13 addresses 

these issues. 

 Rec. 93: Create a Center for Acquisition Innovation located at the National Defense University, 

Eisenhower School. 
 Volume 3 | Page 1 

Introduction 

Volume 3 of the Final Report represents the culmination of more than 2 years of collective brainstorming, 

engagement, and intense research about how to move defense acquisition from an outdated, industrialera bureaucracy to a more streamlined, agile system able to evolve in sync with the information age. 

The Section 809 Panel heard from multiple sources that DoD’s acquisition system lacks a sense of 

urgency. DoD must put its acquisition system on a war footing to meet the threat represented by nearpeer competitors and nonstate actors. The panel provides recommendations which, if adopted, will 

make both evolutionary changes to the current system and revolutionary changes that will reshape the 

acquisition system, reducing barriers to entry for companies with innovative products and services by 

adopting processes more akin to those used in the private sector. The 58 recommendations (and 

associated subrecommendations) in this volume add to the 35 recommendations (and associated 

subrecommendations) proposed in Volumes 1 and 2 of the Final Report and the five recommendations 

proposed in the Supplement to the Section 809 Panel Interim Report. Tackling the formidable challenges 

facing DoD as it strategizes how best to defend the nation’s citizens and interests when faced with the 

dramatic pace of technological change, the nature of the threats the nation faces, and the capabilities 

gap in its arsenal has been no small task. 

Numerous challenges mire the current acquisition system. Today’s system, built on industrial-age 

principles, is not responsive to 21st century market practices and serves as a barrier to both DoD’s 

ability to reach innovative companies and the ability of innovative companies to reach into DoD. No 

clear points of entry or effective outreach programs exist. DoD acquisition operates within a stovepiped management structure that values strict adherence to processes and procedures over meeting the 
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Volume 3 of 3 | January 2019 

Page 2 | Volume 3 Introduction 

mission. The system fails to value time, yet potential U.S. adversaries lack the many constraints with 

which DoD contends and are able to access innovative technology as it becomes available in the 

marketplace. The system’s process orientation is often characterized by demands to satisfy non-valueadded activities that detract from meeting more vital defense acquisition requirements. Despite 

congressional encouragement and support of purchasing as many products and services as possible 

from the marketplace, the acquisition team often interprets statutes and regulations narrowly to avoid 

oversight criticism, forgoing use of more flexible approaches to buying even when they would save 

time and money. All too often, DoD is buying yesterday’s technology for delivery tomorrow at inflated 

prices, rather than buying tomorrow’s technology for delivery today at competitive market prices. 

New statutes and regulations can help this situation, but more important to meeting DoD’s mission is 

recruiting, training, and retaining an acquisition workforce that is skilled in operating not just within a 

narrow comfort zone, but within the full margins of its broad statutory authorities, an acquisition 

workforce that can use the FAR to its broadest interpretation and greatest efficiency. To promote a 

culture that values taking risks, rather than preserving antiquated but safe approaches, DoD must 

recruit, train, and retain a quality workforce and provide it with appropriate training and 

qualifications. Addressing these and other challenges is fundamental to providing warfighters the 

capabilities needed to achieve DoD’s mission. 

Mission—delivering lethality to warfighters quickly enough to stay inside the turn of near-peer 

competitors and nonstate actors—must be DoD’s top priority. The Section 809 Panel has remained 

dedicated to imagining a defense acquisition system that puts mission first and values time. To that 

end, the panel has engaged with hundreds of stakeholders from both the public and private sectors. In 

doing so, it has become clear that the greatest resource for building and maintaining an acquisition 

system that will serve current and future needs is the people who make up the acquisition team. The 

acquisition team comprises more than program managers and contracting officers; it includes many 

different disciplines and includes both the public and private sector. Among its recommendations, the 

Section 809 Panel has strived to capitalize on DoD’s most valuable resource, human capital, as part of 

an integrated strategy for DoD to achieve its fundamental mission. 

The panel’s recommendations acknowledge the need to enable acquisition workforce members, to trust 

them to do what needs to be done, and to support them to innovate. The Section 809 Panel recognizes 

that the workforce will be at the heart of all meaningful change, just as it has been at the heart of the 

panel’s research and recommendations for the last 2-plus years. The experiences and opinions shared 

by the acquisition workforce have aided the panel in formulating recommendations that it anticipates 

will make the acquisition team’s work more rewarding and DoD’s mission more easily attainable. 

The Section 809 Panel’s collective recommendations work together to change the overall structure and 

operations of defense acquisition both strategically and tactically. Some changes hold potential for 

immediate effect, such as those that remove unnecessary layers of approval in the many steps 

contracting officers and program managers must take and remove unnecessary and redundant 

reporting requirements. Other changes require a large shift in how the system operates, such as buying 

readily available products and services in a manner similar to the private sector and managing 

capabilities from a portfolio, rather than program, perspective. Such an array of proposed 
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Volume 3 of 3 | January 2019 

Introduction Volume 3 | Page 3 

improvements offers short-term gains that will help inspire enthusiasm and a commitment to achieving 

the long-term systemic changes proposed by the panel. 

Volume 3 begins with a final installment regarding what the Section 809 Panel has named the Dynamic 

Defense Marketplace. As discussed in Volumes 1 and 2, the preference for commercial buying has 

become far too complicated. Guidance in the FAR meant to assist government in making simple 

transactions in a manner similar to the private sector has turned into yet another series of bureaucratic 

hurdles, creating a cottage industry that hinders speed and imposes barriers to new entrants into the 

DoD market space. In Section 1, the panel recommends a revolutionary option for fundamentally 

changing that approach, leaving the federal government’s overly complex notion of commercial in the 

past. To start fresh, the panel recommends a new term: readily available. 

Millions of products and services are, in fact, readily available in the marketplace and require no 

customization to be used by DoD. These transactions, for something like paper, should be simple and 

quick. A wide array of items exist—even high-dollar items such as computer systems and airplanes—

requiring no defense-unique development, and they could conceivably be purchased as readily 

available or readily available with customization. Congress has given repeated guidance to use these 

resources without unnecessary complication. Over the years, however, concerns that defense-unique 

products and services were wrongly being acquired as commercial led to additional processes that 

ultimately made it harder to acquire private-sector goods and services. In replacing the concept of 

commercial with that of readily available, the panel provides a guide to what processes, terms, and 

conditions will apply to this new category of buying. When readily available products and services 

require modification to meet government standards, as long as that customization, or in some cases 

manufacturing, is consistent with existing private-sector practices, they will be considered readily 

available with customization. This change should create opportunities for DoD to access products and 

services, in particular innovative products and services, not otherwise available. 

For those acquisitions that are unique to defense, requiring DoD to develop the product or service in 

whole or part, the Section 809 Panel does not recommend a new category. Instead, as discussed in 

Section 2, the panel proposes making changes within the existing system, beginning with a new 

portfolio management framework that allows empowered decision makers to strategize how best to 

allocate resources and deliver capabilities from the broad vantage point of a portfolio, rather than the 

limited perspective of a single program. This portfolio approach follows best practices from the private 

sector and acknowledges the need for strategic management of the dynamic capabilities that DoD 

designs, develops, and fields. DoD’s military and technological superiority are at risk as adversaries 

grow increasingly able to exploit private-sector technologies for military purposes at a faster pace than 

DoD’s current systems allow. China, for example, has announced Made in China 2025, focused on 

making China dominant globally in the development of technology. Moving to a portfolio 

management approach will lead to improved efficiency and readiness. In Volume 1, the panel issued a 

similar recommendation for taking a portfolio approach to the management of defense business 

systems. Both sets of recommendations provide flexibility to decision makers empowered to view 

investments with both a short-term and long-term perspective, but most importantly with a focus on 

the need for speed, without forgetting integrity, competition, and transparency, and delivering lethality 

to the warfighter. 
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Page 4 | Volume 3 Introduction 

Section 3 adds another suite of recommendations that will improve the acquisition of information 

technology (IT), building on those released in Volume 1. This section considers important IT issues 

related to consumption-based solutions and buying services in a gig economy, which DoD must 

address if it is to obtain and maintain state-of-the-art technology. 

Section 4 makes a series of recommendations related to how defense funding is allocated and managed. 

More flexibility is needed to get maximum efficiency out of the funds Congress appropriates. Key 

topics addressed by the panel’s recommendations include reprogramming of funds, expanding DoD’s 

ability to obligate funds when Congress is unable to adopt an annual appropriations bill in a timely 

manner, reducing the burden of the Prompt Payment Act on both government and industry, and 

creating more flexibility related to availability of funds. 

Section 5 completes the panel’s recommendations for recruiting, training, and retaining the acquisition 

workforce. The recommendations in Volume 2 focus primarily on DoD’s ability to recruit, train and 

retain an adequately staffed acquisition workforce. Volume 3 addresses changes to provide needed 

training pathways to ensure that members of the acquisition workforce receive the right training when 

they need it. It also recommends creating career pathways that provide a clear picture of how members 

of the acquisition workforce can advance in their careers and what they will need to do to achieve 

personal and organizational goals. 

Sections 6 and 7 provide a collection of changes that will streamline processes for purchasing those 

products and services that are developed for DoD and include compliance, procurement, and 

contracting. Section 6 revisits audit requirements by providing a professional practice guide, which 

was recommended in Volume 1 and developed by the panel with assistance from the Government 

Accountability Office, Defense Contract Audit Agency, Defense Contract Management Agency, and 

industry. The section provides recommendations to implement the professional practice guide and to 

maintain it in the future. Section 6 also addresses new topics such as application of socioeconomic 

policies, bid protests, and supply chain issues. Section 7 includes a truly diverse set of 

recommendations aimed at eliminating requirements that slow the acquisition process and pose 

barriers to entry into the DoD marketspace. 

In Section 8, the panel recommends opening channels of communication between the government and 

industry, acknowledging that DoD and the private sector have an ongoing relationship that requires 

attention and ongoing collaboration, not a one-sided relationship. Recognizing that risk aversion and 

fear of prompting protests have stymied previous attempts to open robust interaction between 

government and industry, the Section 809 Panel urges Congress to take the lead by directing such 

communication—authorizing and encouraging communications has not been sufficient to overcome 

historical barriers. 

The discussion of data analytics in Section 9 adds to the conversation about how best to take advantage 

of the abundance of data generated in a system supported by IT. Potential exists for increased 

transparency enabled by the extensive data collection that already takes place, reducing the level of 

oversight currently characterized by multiple layers of reports and approvals. To realize this potential, 

DoD will need to consolidate or eliminate competing data architectures. 
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Introduction Volume 3 | Page 5 

One of the Section 809 Panel’s most far-reaching and impactful reforms is the reorganization of Title 10, 

the section of United States Code devoted to DoD. Section 10 describes the panel’s work to date, 

including those changes already implemented by Congress, and details how the work will conclude in 

2019. The effort to reorganize Title 10 will create invaluable ease of use for the entire DoD acquisition 

team and the marketplace with which DoD does business. 

Among the required tasks outlined in the Section 809 Panel’s authorizing legislation was reviewing the 

FAR and DFARS. The panel addressed this task by creating an annotated resource document that 

traces the origins of each part of the FAR and DFARS back to the statutes, policies, Executive Orders, 

and Federal Register Notices (FRN) that form their basis. Section 11 explains the meticulous work 

associated with this genealogy project and recommends that DoD continue the effort to hyperlink to 

the FRNs and reference the statutory and policy provisions that form the basis of a particular provision 

for future parts of the FAR/DFARS. 

In Section 12 the panel revisits a topic first addressed in Recommendation 2—minimizing flowdown of 

government-unique terms and conditions for commercial products and services acquisition. Congress 

has taken some action on this topic in recent NDAAs. This section emphasizes the Section 809 Panel’s 

belief that those actions will not produce the desired results absent further Congressional action. This 

brief section calls for Congress itself to reduce the flowdown of both existing laws and new laws 

instead of relying on the Executive Branch to identify which laws should flow down. Minimizing 

flowdown is too important in terms of its effect on DoD’s ability to support warfighters with 

innovative products and services from the broader marketplace for Congress to defer to the Executive 

Branch. 

As the Section 809 Panel’s work comes to a close, Section 13 addresses the question of what next?

Meaningful acquisition reform will not occur with quick, one-time fixes. Instead, it must be part of an 

ongoing effort to create sustainable and continuous improvement. That continuous improvement must 

come from a body capable of objectively examining the system while being guided by the experience of 

working with the system. Section 13 proposes establishing and authorizing the funding of an 

innovation center in the National Defense University (NDU) to support such an effort. NDU enjoys 

academic freedom and provides an environment where both DoD and industry come together with 

backgrounds in the full spectrum of DoD acquisition. 

Since the panel began its work, Congress and DoD have made numerous changes in defense 

acquisition. Middle Tier acquisition has provided a new, more flexible contracting authority. DoD has 

published its new guidebook on leveraging Other Transaction authorities as a means for making timely 

acquisitions. The Army stood up its Futures Command to leverage private-sector innovation, cuttingedge science and technology, prototyping, and warfighter feedback as it works to meet its mission to 

create a more lethal force that wins wars and returns home safely. The Air Force’s new innovation hub 

has been launched to harness research and technology for the military. In the midst of these, and many 

other manifestations of progress, dozens of the Section 809 Panel recommendations have been 

addressed in the FY 2018 and FY 2019 NDAAs and have spurred a consistent and challenging dialogue 

within the stakeholder groups supporting DoD’s mission. With adoption of each reform, DoD’s ability 

to meet its mission is enhanced. The energy for improving defense acquisition continues in many 
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Volume 3 of 3 | January 2019 

Page 6 | Volume 3 Introduction 

directions, and the Section 809 Panel anticipates its Final Report will provide a firm foundation for 

supporting needed reforms well into the future. 

The Section 809 Panel will publish one more document following Volume 3. This document will tie the 

panel’s work together from the Interim Report through Volume 3 and provide both Congress and the 

Secretary of Defense a single picture of how all of the recommendations come together to improve the 

way DoD acquisition delivers lethality to warfighters inside the turn of near-peer competitors and 

nonstate actors. The Section 809 Panel recommends the Secretary of Defense wait to draft its required 

review of the panel’s report to Congress until this final volume is published. The panel will publish this 

document by February 15, 2019. 
 

Volume 3 | Page 7 

Section 1 

Marketplace Framework 

It is time to implement changes that will make DoD’s acquisition system function in 

today’s private-sector-driven marketplace and establish a system that meets 

warfighters’ needs in a way that provides agility and values time. 

RECOMMENDATION

Rec. 35: Replace commercial buying and the existing simplified acquisition procedures 

and thresholds with simplified readily available procedures for procuring readily 

available products and services and readily available products and services with 

customization. 

 
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Page 8 | Volume 3 Marketplace Framework 

INTRODUCTION 

Operating in a complex security environment with rapidly changing technology, the defense 

acquisition system must deliver a wide variety of warfighting and combat support capabilities as 

efficiently as possible. Not all capabilities are acquired in the same way, and DoD must adjust its 

acquisition processes to meet the demands of the diverse markets in which it operates. The Volume 1 

Report introduced a framework for optimizing how DoD operates across this dynamic marketplace. 

The Volume 2 Report further refined the Dynamic Marketplace Framework into three capability lanes 

and introduced the Section 809 Panel plan to develop the framework’s concepts into procedures and 

policy recommendations. The Dynamic Marketplace Framework is shaped by dividing what DoD buys 

into three categories: 

 Defense-Unique Development: DoD-financed development, either to repurpose a readily 

available product or solution or to develop a new product or solution, to provide a defenseunique capability. 

 Readily Available: Any product or service that requires no customization by the vendor and 

can be ordered directly by customers, to include products and services that only governments 

buy. 

 Readily Available with Customization: Includes the products and services that are sold in the 

private sector, including to other public-sector customers, for which customization or 

manufacturing that is consistent with existing private-sector practices is necessary to meet 

DoD’s needs. 

As discussed in the Volume 1 and Volume 2 Reports, these three categories of products and services are 

loosely based on the defense industry segments described by the Center for New American Security’s 

(CNAS’s) Future Foundry report.1 These categories also closely align with the product categories 

developed by the Government Accountability Office (GAO) to better analyze DoD procurements.2 

The current defense acquisition system was built for a 20th century defense-industrial market. It is best 

suited for developing and procuring conventional products to be used in defined missions against 

known adversaries. This system has focused on mitigating risk through contract compliance, which has 

resulted in high barriers to entry and a limited number of traditional suppliers. Increased need to 

leverage the growing off-the-shelf capability options and expanding private-sector innovation has 

illuminated two important facts: 

 DoD must be an attractive business partner to a variety of suppliers, many of which are 

nontraditional and not accustomed to working with federal rules and procedures. 

 

1

 Ben FitzGerald, Alexandra Sander, and Jacqueline Parziale, Future Foundry: A New Strategic Approach to Military-Technical Advantage, 

Center for New American Security, December 2016, 23, accessed October 12, 2018, 

https://s3.amazonaws.com/files.cnas.org/documents/CNAS-Report-FutureFoundry-final.pdf?mtime=20161213162640. 

2

 GAO, Military Acquisitions: DoD is Taking Steps to Address Challenges Faced by Certain Companies, GAO-17-644, July 2017, 4, accessed 

October 31, 2018, https://www.gao.gov/assets/690/686012.pdf. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Marketplace Framework Volume 3 | Page 9 

 DoD must be able to adjust its behaviors according to the market in which it is operating—an 

expanded dynamic marketplace in which DoD’s relative importance and its ability to dictate the 

parameters and pace of business transactions can be minimal. 

As set forth in the Volume 1 and Volume 2 Reports, reform is required for all three market segments in 

the Dynamic Marketplace Framework. Recommendations that address the defense-unique market 

focus on incrementally improving the current acquisition system, for which DoD is still the largest (or 

only) player. Recommendations that address the markets where items are readily available focus on 

overhauling the way in which DoD conducts business with nontraditional and other private-sector 

suppliers. Overall, the Section 809 Panel’s recommendations work to ensure DoD can effectively 

acquire a wide variety of warfighting and combat support capabilities with the most appropriate 

procedures for each market. 

Figure 1-1. Dynamic Marketplace Framework 
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DEFENSE-UNIQUE DEVELOPMENT 

Much of the traditional debate surrounding acquisition reform is focused on the systems within this 

segment, and many challenges remain. While the DoD can still improve policy and process, its 

fundamental structure is appropriate.3

The defense-unique market comprises products and services that are purchased or developed only for 

defense purposes. In the most traditional sense, the defense-unique market segment is characterized by 

long development timelines, complex procurement processes, detailed contractor business process 

requirements, and relatively low volumes. Socioeconomic policies apply to defense-unique purchases, 

as do domestic purchasing preferences such as the Buy American Act (BAA) and the Berry 

Amendment. 4 Supply-chain risk mitigation is an important element of defense-unique development as 

well. In all three of these policy areas, contract clauses and subcontracting clause flow-downs are 

important features. Because competition can be limited, price reasonableness and other cost risks are 

emphasized. 

The Section 809 Panel’s incremental recommendations in Volumes 1, 2, and 3 address needed reforms in 

elements of the current defense acquisition system. Additionally, as noted below, Congress and DoD 

have instituted acquisition reform policies in recent years that could greatly improve defense-unique 

purchasing if implemented and used to their greatest possible extent. Beyond these reform efforts 

rooted in statute and policy tools, much of what can be improved in the defense acquisition system 

must be achieved by educating and empowering the acquisition workforce to use the full breadth of 

policies and tools already available to them. 

Section 809 Panel Recommendations 

Rather than develop an entirely new system for defense-unique acquisitions, the Section 809 Panel has 

put forward numerous recommendations in the Volumes 1, 2, and 3 Reports that together will improve 

DoD’s ability to acquire and field the capabilities necessary to win current and future conflicts. 

Although these recommendations were not explicitly set forth in the dynamic marketplace section of 

the reports, if implemented en masse, they would directly affect how products and services from this 

market segment are developed, acquired, sustained, and managed. Examples of recommendations 

focused on the defense-unique market include the following: 

 Contract Compliance and Oversight. Recommendations 5 through 15 clarify and streamline the 

responsibilities and reporting requirements of the Defense Contract Audit Agency (DCAA). For 

example, Recommendation 7 provides flexibility to contracting officers and auditors to use 

audit and advisory services when appropriate, and Recommendation 9 permits use of 

independent professional auditors to manage schedule and resources. 

 

3

 Ben FitzGerald, Alexandra Sander, and Jacqueline Parziale, Future Foundry: A New Strategic Approach to Military-Technical Advantage, 

Center for New American Security, December 2016, 22, accessed October 12, 2018, 

https://s3.amazonaws.com/files.cnas.org/documents/CNAS-Report-FutureFoundry-final.pdf?mtime=20161213162640. 

4

 American Materials Required for Public Use, 41 U.S.C. § 8302. Requirement to Buy Certain Articles from American Sources; Exceptions, 

10 U.S.C. § 2533a. 
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Marketplace Framework Volume 3 | Page 11 

 Cost Accounting Standards (CAS). Recommendation 29 revises 41 U.S.C. §§ 1501–1506 to 

designate the CAS Board as an independent federal organization within the Executive Branch. 

Recommendation 30 reshapes CAS program requirements to better function in a changed 

acquisition environment. 

 Portfolio Management. A series of recommendations in the Volume 3 Report outline the benefits 

of shifting DoD from a program-centric execution model to a portfolio-based execution model. 

Recommendations 36 and 37 implement portfolio management across the DoD enterprise. 

 Requirements. Recommendation 39 transitions the current requirements ownership structure 

into the portfolio management framework. 

 Sustainment and Sustainment Funding. Recommendation 41 establishes a Sustainment 

Program Baseline for product support and sustainment over the lifecycle of the program. 

Recommendation 42 creates a funding type to support the Sustainment Program Baseline. 

 Subcontracting Flow-down Clauses. Recommendations 62 and 63 encourage greater use of 

commercial and, in the future, readily available products and services, by proposing a 

departure from use of contract clauses, broadly applied and flowed down, as the primary 

means of supply chain risk mitigation. These recommendations also encourage use of 

commercial subcontracts by reducing the number of commercial flow-down clauses. 

Recent Developments in Defense Acquisition Reform 

In addition to the Section 809 Panel’s recommendations in the three report volumes, both Congress and 

DoD have introduced acquisition reform efforts in recent years. Several of these efforts are particularly 

relevant to the defense-unique market and work to streamline processes therein. These efforts 

demonstrate Congress’s commitment to enable DoD to develop and field defense-unique developed 

solutions at the speed of relevance, and achieve the Secretary of Defense’s intent found in the National 

Defense Strategy (NDS). 

Congress has been particularly active in legislating acquisition reform over the last three years. For 

FY2016-FY2018, NDAA titles specifically related to acquisition reform contained an average of 

82 provisions (247 in total), compared to an average of 47 such provisions (466 in total) in the NDAAs 

for the preceding 10 fiscal years.5

The three acquisition tools described below present numerous opportunities for DoD to enhance and 

streamline its acquisition processes and improve access to nontraditional sources. It is too early to 

comment on the current DoD initiatives that are designed to experiment with these new or expanded 

authorities. DoD should ensure full transparency with Congress regarding success and failures of these 

experimentation initiatives to 

 

5

 CRS, Acquisition Reform in the FY2016-FY2018 National Defense Authorization Acts (NDAAs), CRS Report 45068, January 19, 2018, 2, 

accessed October 31, 2018, https://fas.org/sgp/crs/natsec/R45068.pdf. 
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 Avoid Congressional overreaction through the restriction or elimination of authorities based on 

individual successes or failures, and 

 Ensure an orderly feedback mechanism for harvesting lessons learned to create process 

improvements as a result of acquisition experimentation. 

The goal must be to improve the overall speed and responsiveness of the DoD requirements and 

acquisition process. A deliberate experimentation process with an effective feedback loop enables the 

application of discipline and oversight where appropriate and maximum flexibilities wherever 

possible. 

Middle Tier Acquisition 

Middle Tier Acquisition (MTA), first authorized by Section 804 of the FY 2016 NDAA, is an acquisition 

pathway that focuses on delivering capabilities within 2 to 5 years. Currently, DoD is using an interim 

authority and an interim authority guidance memo to take advantage of this tool, pending permanent 

authority in October 2019. 

As per the interim implementing guidance, MTA is a “merit-based process for the consideration of 

innovative technologies and new capabilities [prototyping]... or existing products and proven 

technologies [fielding].”6 The Rapid Prototyping element of MTA must achieve residual operational 

capability within 5 years. The Rapid Fielding element must achieve initial production within 6 months 

and complete fielding within 5 years. Additionally, Section 804(d) establishes a Rapid Prototyping 

Fund to support MTA projects. The Rapid Prototyping Fund will operate with the onset of full MTA 

authority. In the interim, DoD components are funding their MTA efforts.7

Defense-unique acquisitions have already begun to benefit from the MTA pathway, despite its recent 

implementation. For example, the Air Force has established 18 MTA programs that are currently 

estimated to be saving 44 man-years of time.8 By allowing for merit-based evaluations, DoD can pursue 

multiple dissimilar solutions as the result of one competition and rapidly fund development, testing, 

and evaluation. The Rapid Prototyping Fund may also ease funding challenges associated with 

technology transition between prototyping and fielding. MTA and its separate funding may prove an 

exciting new tool in bridging the valley of death.

9

Commercial Solutions Opening Pilot 

The defense Commercial Solutions Opening (CSO) pilot program was authorized by Section 879 of the 

FY 2017 NDAA and allows DoD to acquire emerging technologies through a streamlined acquisition 

 

6

 USD(A&S) Memorandum, Middle Tier of Acquisition (Rapid Prototyping/Rapid Fielding) Interim Authority and Guidance, April 16, 2018, 

accessed November 3, 2018, http://acqnotes.com/wp-content/uploads/2018/05/OSD-Middle-Tier-of-Acquisition-Interim-Authority-andGuidance-16-Apr-2018..pdf. 

7

 For Component-specific MTA guidance, see “Acquisition Process: Middle Tier Acquisition (Section 804),” AcqNotes, accessed 

October 19, 2018, http://acqnotes.com/acqnote/acquisitions/middle-tier-acquisitions. 

8

 Air Force General Counsel, email to Section 809 Panel Staff, Nov. 6, 2018. 

9

 “In the Pentagon’s AT&L Reorg, Beware the Valley of Death,” Susanna V. Blume, Defense News, November 6, 2018, accessed 

October 22, 2018, https://www.defensenews.com/opinion/commentary/2017/11/06/in-the-pentagons-atampl-reorg-beware-the-valleyof-death-commentary/.
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authority, awarded within 60 days.10 The CSO pilot was built on the success achieved by the Defense 

Innovation Unit and the Defense Information Systems Agency (DISA) in using broad agency 

announcements (BAAs) to solicit technical proposals. Unlike the original CSO programs, the pilot does 

not use Other Transaction authority (OTA) for contracting or focus on nontraditional suppliers. Rather, 

the pilot allows for the award of fixed-price contracts up to $100 million.11

A class deviation issued on June 26, 2018 by Defense Procurement and Acquisition Policy (now known 

as Defense Pricing and Contracting), implements the CSO pilot.12 An important element of the CSO 

pilot is the merit-based evaluation procedure, which allows for single or multiple awards as a result of 

a notice of availability. Even if only one proposal meets the technical criteria established in the notice of 

availability, competition requirements are satisfied. Conversely, multiple awards may be made to 

pursue dissimilar solutions should they all meet the technical criteria and funds are available. 

The primary evaluation factors for selecting proposals for award shall be technical, importance to agency 

programs, and funds availability. Price shall be considered to the extent appropriate, but at a minimum, 

to determine that the price is fair and reasonable... Written evaluation reports on individual proposals are 

required, but proposals need not be evaluated against each other since they are not submitted in response 

to a common performance work statement or statement of work.13 

Although the focus of the CSO pilot is on rapidly procuring commercially-developed innovation, it 

improves defense-unique acquisitions in a number of ways. Prototypes or components may be 

purchased quickly for “advanced component development through operational systems 

development.”14 These technologies are intended to be further developed to meet defense-unique 

needs. In theory, technologies obtained through the CSO pilot represent the widest possible variety of 

technical options from all types of suppliers. The CSO allows DoD to quickly test and develop a 

number of capability options at the same time through a more traditional contracting process. Rather 

than entirely circumventing the FAR, the CSO and MTA pilots aim to streamline it. 

Expanded Authority for Other Transactions 

DoD’s rapid increase in the use of Other Transactions (OTs) for prototype projects and follow-on 

production in the past decade has sparked much debate about balancing innovation and speed with 

regulation and transparency.15 From FY 2016 through FY 2018, the combined total estimated value for 

 

10 FY 2017 NDAA, Pub. L. No. 114-328, 130 Stat. 2000 (2017). 

11 “In Pursuit of Innovative Technologies, DoD Creates Another Pathway Around Traditional Acquisition Rules,” Jared Serbu, Federal News 

Network, July 17, 2018, accessed October 22, 2018, https://federalnewsnetwork.com/dod-reporters-notebook-jared-serbu/2018/07/inpursuit-of-innovative-technologies-dod-creates-another-pathway-around-traditional-acquisition-rules/. 

12 “DoD Seeks Streamlined Procurements of Innovative Technologies – Other Transaction Agreements and the Commercial Solutions 

Opening Pilot Program,” Susan B. Cassidy, Jennifer Plitsch, and Tyler Evans, Covington, July 3, 2018, accessed October 22, 2018, 

https://www.insidegovernmentcontracts.com/2018/07/dod-seeks-streamlined-procurements-of-innovative-technologies-othertransaction-agreements-and-the-commercial-solutions-opening-pilot-program/. 

13 USD(A&S) Memorandum, Class Deviation—Defense Commercial Solutions Opening Pilot Program, June 26, 2018, accessed November 6, 

2018, https://www.acq.osd.mil/dpap/policy/policyvault/USA001228-18-DPAP.pdf. 

14 Ibid. 

15 See, for example, “Peering Into the Black Box of OTW Awards,” Scott Maucione, Federal News Network, July 24, 2018, accessed 

October 22, 2018, https://federalnewsnetwork.com/contracting/2018/07/peering-into-the-black-box-of-ota-awards/. 
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OT awards was around $40 billion, although it is important to note that this value is merely the 

potential value of contracts.16 Only 10 percent of that value, or about $4.2 billion, was spent.17 

Recent NDAA provisions point to a Congress that is largely permissive of expanding OT use. For 

example, Section 864 of the FY 2018 NDAA doubles the limit on OT prototype projects, from 

$250 million to $500 million.18 Section 806 of the FY 2017 NDAA19 creates a new authority for 

production OTs that is somewhat distinct from the existing 10 U.S.C. § 2371b. Recommendation 81 

builds on these expanded authorities, especially regarding how they affect use of follow-on production 

contracts. 

In opening the aperture for OT use for follow-on production, Congress has acknowledged DoD’s need 

to attract nontraditional suppliers and small businesses into the defense-unique sphere. Streamlined 

acquisition procedures, reduced regulatory burden, and fewer staffing touches are the rallying cry for 

quickly developing commercially-derived innovation into deployable warfighting capability. In recent 

years, Congress has granted DoD authorities that provide it with needed tools to more effectively 

leverage the entire marketplace. Like MTA and CSO, expanded OTA is very new. The real challenge 

for the future lies in implementation. OTs must be implemented in a way that incentivizes educated 

risk taking and harvests innovation from across the dynamic marketplace. 

Further Efforts Needed 

Much work has been done to improve the way in which DoD interacts with commercial markets to 

attract new suppliers and to leverage existing technology. In improving the pathways for rapidly 

prototyping defense-unique and commercial solutions, DoD has new acquisition tools for testing and 

fielding innovative technology. DoD must also work to fully use the acquisition tools that already exist. 

In conducting interviews on various topics with acquisition professionals working in the defenseunique space, the Section 809 Panel often heard that new tools were not required. 

One example of existing tools being applied to efficiently acquire advanced capabilities is the work of 

the Air Force Rapid Capabilities Office (RCO). The Air Force RCO operates within the defense 

acquisition system, without any special authorities, and strives to use all of the available tools to 

achieve its mission. The RCO’s unique ability to operate efficiently, even under FAR Part 15 

procedures, can be attributed to the following four characteristics: 

 Access to decision makers. 

 Integrated teams of high-performers. 

 

16 “Other Transaction Authority (OTA) Trends, Points of Interest, and Entry Points,” GovWin, September 7, 2018, accessed October 22, 

2018, https://iq.govwin.com/neo/marketAnalysis/view/3008?researchTypeId=1. 

17 Peering Into the Black Box of OTW Awards,” Scott Maucione, Federal News Network, July 24, 2018, accessed October 22, 2018, 

https://federalnewsnetwork.com/contracting/2018/07/peering-into-the-black-box-of-ota-awards/. 

18 FY 2018 NDAA, Pub. L. No. 115-91, 131 Stat. 1494 (2017). 

19 FY 2017 NDAA, Pub. L. No. 114-328, 130 Stat. 2256 (2016). 
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 Reduced bureaucratic layers of review because programs are delineated as Special Access 

Programs (SAPs) and not considered Major Defense Acquisition Programs. 

 Leadership and culture that encourage creative use of the available acquisition tools. 

Some argue that the RCO model cannot be scaled across DoD because not every program executive 

officer has access to the chief of staff’s office, but the principles above are scalable. DoD can and should 

empower decision makers at the appropriate level, seek to recruit, train, and retain the right people; 

eliminate unnecessary layers of review; and foster a culture within the acquisition workforce that 

focuses on leadership and enabling the use of the full gamut of authorities and procedures.20 

The two specific areas that present cultural challenge on which DoD should focus are competing 

dissimilar solutions and conducting value analysis. Improving how DoD addresses these practices 

would enhance the way it operates in the dynamic marketplace, without adding an additional layer of 

regulation. 

Rather than competing slight variations on a proscribed solution outlined in great detail in a request for 

proposal (RFP) as the current culture generally demands, DoD should encourage and enable competing 

dissimilar solutions. Fostering this approach would be especially beneficial when a desired capability is 

known, but its full set of requirements is not yet developed. When appropriate, DoD should solicit 

technical solutions from industry through established contracting tools like the Statement of Objectives 

(SOO)21 or BAA.22 These tools are similar to the notice of availability introduced by the CSO pilot 

program described above. In each case, different solutions to a specific technical challenge may be 

proposed. These processes enable DoD to select multiple proposals and explore how they might fill 

capability gaps or enhance operational capacity. 

One of the biggest challenges to competing dissimilar solutions is DoD’s understanding of the 

capability tradeoffs it is willing to make to achieve the best value for the chosen solution. DoD must 

also articulate those tradeoff criteria to industry as early as possible. This challenge was recently 

articulated by Frank Kendall, former Under Secretary of Defense for Acquisition, Technology and 

Logistics (USD(AT&L)): 

Often in these cases there is a competition between companies offering dissimilar capability levels based 

on existing products that may be modified to meet a need... In situations like this, the onus is on us, 

primarily on the user, to determine the value to the government of the different levels of capability and to 

apply that understanding objectively in the source selection process.23

Competing dissimilar solutions requires very few new acquisition tools, if any. Rather, the shift 

required in DoD is cultural. SOOs and BAAs operate within the rules governing defense-unique 

acquisitions: SOOs are an element of Joint Capabilities Integration and Development System 

 

20 See Section 809 Panel Recommendations 25, 26, and 27 in Volume 2, and Recommendations 59, 60, and 61 in this volume. 

21 “Statement of Work, Performance Work Statement, Statement of Objectives,” DAU Acquisition Encyclopedia, accessed October 23, 

2018, https://www.dau.mil/acquipedia/Pages/ArticleDetails.aspx?aid=488854b0-d8ee-4e32-aa3e-301d2ac8ffca. 

22 See, Broad Agency Announcement, FAR 35.016(a). 

23 Frank Kendall, Getting Defense Acquisition Right (Ft. Belvoir, VA: DAU Press, 2017), 23. 
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documentation, and BAAs are governed by the FAR.24 In an era of rapidly advancing technology and 

abundant commercial innovation, using such tools is key to understanding the technical state-of-theart. Rather than developing lengthy and specific technical requirements for a new capability, DoD may 

be better served by leveraging knowledge from its industrial base. The technical performance 

parameters of defense-unique solutions need not be developed by DoD prior to solicitation. Inviting 

dissimilar solutions offers a larger range of capabilities that may meet warfighter needs. 

As it continues to work with traditional and nontraditional suppliers, DoD also must continue to 

improve its processes for determining price reasonableness. To determine that a price is fair and 

reasonable, a contracting officer must conduct a price or cost analysis of the item or service. Although 

a variety of tools and techniques are available to conduct this analysis, DoD frequently limits itself to 

analyzing cost. Contracting officers often rely solely on cost or pricing data, as described in 

FAR Subpart 15.4, passing over other available alternatives. This practice adds a barrier to entry in 

several ways. It excludes new entrants to the market that may not have sufficient sales data for their 

products or a cost analysis system compliant with DoD practices (which is often inconsistent with 

private-sector practices).25 Those companies that do have such sales data may be unwilling to 

relinquish it for fear of disclosing trade-sensitive data. In all cases, DoD must work to use a broader set 

of established price reasonableness analysis techniques to remove those barriers and expand the 

defense industrial base. 

Defense-unique acquisitions would benefit from increased use of value analysis, which is a technique 

used to acknowledge noncost elements in the determination of price reasonableness.26 Through using 

value analysis as part of the overall calculation, contracting officers may include items such as foregone 

research and development costs, warranties, product sustainment, and saved DoD development time 

to determine price reasonableness. Cost data is an important element of DoD assessments, but 

perpetuating a culture that is focused primarily on cost prevents DoD from considering the full value 

of a product. Including value analysis in its evaluations, DoD is better able to understand the market in 

which it is operating and the costs incurred by industry to develop those products and helps ensure 

DoD acquires the best solutions for its needs. 

Value analysis has gained attention by Congress in recent years. Section 872 of the FY 2017 NDAA 

added language to allow inclusion of value analysis in price reasonableness determinations, as 

described in 10 U.S.C. §2379(d).27 Further training on value analysis was mandated in Section 850 of the 

FY 2018 NDAA.28 Like competing dissimilar solutions, however, the broader challenge of adoption is 

cultural. The defense acquisition workforce must be trained and empowered to use the full range of 

 

24 CJCSI 3170.01, Joint Capabilities Integration and Development System, January 23, 2015. Manual for the Operation of the Joint 

Capabilities Integration and Development System, accessed October 23, 2018, 

https://www.dau.mil/cop/esoh/pages/topics/JCIDS%20Documents.aspx. 

25 GAO, Military Acquisitions: DoD is Taking Steps to Address Challenges Faced by Certain Companies, GAO-17-644, July 2017, 15-16, 

accessed October 31, 2018, https://www.gao.gov/assets/690/686012.pdf. 

26 “Value Analysis,” DAU Acquisition Encyclopedia, accessed October 23, 2018, 

https://www.dau.mil/acquipedia/Pages/ArticleDetails.aspx?aid=477f4a02-9aaa-47e4-818f-0ff5a89551b2. 

27 FY 2017 NDAA, Pub. L. No. 114-328, 130 Stat. 2307 (2016). 

28 FY 2018 NDAA, Pub. L. No. 115-91, 131 Stat. 1488 (2017). 
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tools available. This will enable DoD to be more knowledgeable and agile across the dynamic 

marketplace. 

The recommendations in all three volumes of the Section 809 Panel’s Final Report and recent legislative 

changes go a long way to improve DoD’s ability to acquire and field defense-unique solutions. DoD 

continues to struggle to purchase those products and services that are not being developed for defenseunique purposes. In some of these private-sector markets, DoD must regain its relevance as an 

attractive business partner. To do so, it must abandon some of the elements of its current acquisition 

system to better align itself with private-sector practices. The following recommendation establishes a 

pathway for DoD to become a more sophisticated buyer, so that it may more effectively field readily 

available products and services that increase lethality, ensure technological dominance, and provide 

critical warfighter support. 

RECOMMENDATION 

Recommendation 35: Replace commercial buying and the existing simplified 

acquisition procedures and thresholds with simplified readily available 

procedures for procuring readily available products and services and readily 

available products and services with customization. 

What kind of a system requires a 47-page solicitation—that incorporates, by my guess, at least 500 pages 

of text by reference—in order to buy a max of $18,000 worth of cheap furniture? It's lunacy. You cannot 

reform such a system. You've got to destroy it in order to save it, and to save us. 

 - Vern Edwards, Wifcon Forum29

Problem 

Many of the products and services on which DoD relies are available in today’s marketplace for anyone 

to buy. These are products and services that both directly and indirectly enhance warfighting 

capabilities. DoD is just one of many customers in the dynamic marketplace. Many companies do not 

view DoD as a viable, much less a critical, business partner. In 2016, for example, FedEx received 

40 percent of all DoD contract actions, but the dollars associated with those contracts barely accounted 

for 1 percent of FedEx’s total annual revenue.30 GAO compiled a list of some of the top innovative 

companies in the United States with total sales or total revenue ranging from $7 billion to $216 billion 

and found that direct sales to DoD made up zero, less than one, or less than two percent of those 

figures.31 DoD’s business practices have only been able to evolve to a certain degree, leaving it with 

tools and processes that are not optimized for the current economic reality—one in which DoD often 

 

29 “This is What is Wrong with Government Contracting,” Vern Edwards, Wifcon Forums and Blogs, September 3, 2016, accessed July 23, 

2018, http://www.wifcon.com/discussion/index.php?/topic/3712-this-is-what-is-wrong-with-governmentcontracting/&tab=comments#comment-33249. 

30 Calculated from numbers included in Federal Express, FedEx Annual Report 2016, accessed November 3, 2018, 

http://s1.q4cdn.com/714383399/files/oar/2016/docs/FedEx_2016_Annual_Report.pdf. FPDS, Top 100 Contractors Report, Fiscal Year 

2016, accessed November 2, 2017, https://www.fpds.gov/fpdsng_cms/index.php/en/reports.html. 

31 GAO, Military Acquisitions: DoD is Taking Steps to Address Challenges Faced by Certain Companies, GAO-17-644, July 2017, 8, accessed 

October 31, 2018, https://www.gao.gov/assets/690/686012.pdf. 
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has limited or no influence in affecting price, terms and conditions, and product and service 

development in highly competitive markets. 

In the past, DoD may have been able to dictate the behavior of companies that made up the traditional 

military industrial base in which sellers relied on DoD as an integral part of their business strategy. 

Increasingly, sellers dictate how DoD will behave if DoD wants access to the products and services they 

offer in a particular market segment. Even traditional DoD suppliers like Boeing and Honeywell, which 

have substantial private-sector sales, are using business-to-business e-commerce portals to sell aircraft 

parts used by both public and private-sector buyers and provide logistical planning functions via 

online shopping carts.32 Today there is no mechanism available to DoD buyers to leverage these types 

of dynamically-priced streamlined acquisition tools. Creation of the Defense Innovation Unit and 

increased use of OTs for more than just research and development demonstrate DoD’s need to contract 

in a manner that is more consistent with how the private sector does business. Many believe the only 

way DoD can remain competitive with near-peer competitors and address emerging threats is to 

operate outside of the FAR, despite all the efforts over the past 25 years to improve and emphasize the 

use of simplified commercial buying procedures and terms and conditions.33 

To provide capability at the speed of relevance, Congress and DoD may continue to expand, or over 

rely, on tools like OTs to get around the FAR and the procurement system. Alternatively, Congress and 

DoD could walk the pathway laid out in this section. The Section 809 Panel’s recommendations that 

address commercial buying, simplified acquisition, and small business innovation in an evolutionary

manner are necessary to reform the existing acquisition system in the short term. This 

recommendation, however, would revolutionize the existing procurement system into something that 

does not require work-arounds to meet warfighter needs quickly and efficiently. It is clear a serious 

problem exists when venture capital firms looking to invest in cutting-edge commercial software 

companies advise those companies not to do business with the federal government, even via the 

existing work-arounds.34 It is time to stop creating or expanding authorities for DoD to operate outside 

the acquisition system and deliberately implement changes that will make DoD’s acquisition system 

function in today’s private-sector-driven marketplace; establishing a system that meets warfighters’ 

needs in a way that provides agility and values time. Table 1-1 highlights the differences between the 

complex way DoD currently buys from the commercial marketplace to the simplified and more 

private-sector-accessible way it would buy if this recommendation were adopted. 

 

32 “Honeywell Aerospace Flies High with its Redesigned B2B Portal,” Mark Brohan, B2B E-Commerce World, July 3, 2018, accessed 

November 2, 2018, https://www.digitalcommerce360.com/2018/07/03/honeywell-aerospace-files-high-with-its-redesigned-b2b-portal/. 

33 See “DoD is Buying Fewer, Yes, Fewer Commercial Items. Oops!,” Colin Clark, Breaking Defense, July 19, 2017, accessed October 3, 

2018, https://breakingdefense.com/2017/07/dod-is-buying-fewer-yes-fewer-commercial-items-oops/. 

34 Stakeholder meetings with the Section 809 Panel, May–October 2018. . 
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Table 1-1. Comparison of Current DoD Commercial Buying Practices to Proposed Readily Available Pathways 

Current DoD Commercial Buying Readily Available Readily Available with Customization 

 Narrow and complicated 8-part 

definition 

 Not-inclusive of all open market 

available products 

 Simpler, broader definition 

 Includes nondevelopmental items 

 Readily available products 

customized via commercial 

processes 

 Almost all services 

Procedures

 FAR 13.5 simplified acquisition 

procedures when under $7M, more 

complex Part 15 procedures over 

$7M 

 New DFARS 213.1 readily 

available procedures (RAPs) for 

under $15M – higher authority 

may authorize use above $15M 

 New DFARS 213.1 procedures with 

no upper threshold – contracting 

officer may rely on market based 

competition when below $15M 

Advertising/Competition

 Publicly post each procurement 

expected to exceed $25K and 

vendors submit proposals or 

quotes 

 Limited use of simplified 

procedures like standing price 

quotes and oral solicitation

 Competition standard is maximum 

extent practicable under $7M, “full 

and open” over $7M 

 No public advertising required; 

preference for relying on market 

research and market-based 

competition 

 Utilize standing price quotes and 

oral/direct solicitation 

 Contracting officer may waive 

System of Award Management 

(SAM) requirement for 

small/nontraditional businesses 

 Written or electronic solicitations 

will usually be necessary; must be 

publicly posted for all actions 

above $15M 

 Under $15M the contracting 

officer may rely on market-based 

competition 

 Contracting officer may waive SAM 

registration requirements for 

small/nontraditional businesses 

Contract/Transaction Method

 Firm fixed price, fixed price with 

economic price adjustment (EPA), 

or time and materials contracts 

with up to 165 FAR and DFARS 

clauses 

 Various FAR and DFARS clauses 

flow down to commercial 

subcontractors 

 Firm fixed price or fixed price with 

EPA purchase orders and 

Government Purchase Card (GPC) 

transactions 

 Firm fixed price, fixed price with 

EPA, or time and materials 

 Purchase orders, GPC transactions, 

and contracts with minimal clauses 

 Additional clauses must be 

approved by higher authority 

 Supply chain and other technical 

risks should be mitigated via 

requirements generation process 

Small Business Set-Asides

 All procurements below simplified 

acquisition threshold (SAT) are 

100% set-aside for small business; 

rule of two still applies above the 

threshold 

 No mandatory small business setasides; small businesses will 

receive a 5% price preference 

 DoD must still meet small 

business utilization goals 

 The same 5% price preference will 

be used with no mandatory setasides 

 DoD must still meet small business 

utilization goals 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Current DoD Commercial Buying Readily Available Readily Available with Customization 

Socioeconomic

 BAA applies above the micropurchase threshold (MPT); COTS 

are exempt 

 Berry Amendment does not apply 

below the SAT 

 Davis-Bacon (DBA) and Service 

Contract Act (SCA) labor rates 

apply, even below MPT 

 No BAA or Berry Amendment 

application due to established 

global supply chain/lack of tech 

advancement 

 DBA and SCA rates do not apply 

 No Buy American Act or Berry 

Amendment application due to 

established global supply 

chain/lack of tech advancement 

 DBA and SCA rates do not apply 

Transparency/Accountability

 Basic purchasing information 

posted to Federal Procurement 

Data System–Next Generation 

(FPDS-NG), notices of presolicitation, solicitation, and award 

published to FedBizOps 

 Pre- and postaward protests may 

be filed at the agency, GAO, and/or 

COFC 

 All awards will be posted online; 

including market research, price 

comparison, and award decision 

basis if based on factors other 

than price 

 Limited protests may be filed with 

agency 

 Awards made using market-based 

competition will be publicly posted 

 When solicitations are publicly 

advertised; procurements will be 

subject to pre- and postaward 

protests 

Background 

The Section 809 Panel’s June 2018, Volume 2 Report described operationalizing the Dynamic 

Marketplace as providing DoD with “a new set of simplified acquisition procedures to utilize when it is 

buying from the private sector, while also streamlining the way DoD develops and acquires everything 

else.”35 This section addresses the legal and regulatory changes necessary to effectively modernize and 

simplify DoD’s acquisition of readily available products and services consistent with the goal of 

behaving the way buyers in the private sector do. This recommendation is an effort to reduce barriers 

to doing business with DoD, to facilitate delivering capability and lethality to U.S. warfighters, and to 

out-pace near-peer competitors and nonstate actors. 

DoD leadership, Congress, and stakeholders interviewed by the Section 809 Panel indicated that DoD 

must become a more agile player in an increasingly dynamic and competitive marketplace. The Center 

for New American Security’s Future Foundry paper, GAO’s July 2017 report on military acquisitions to 

the Senate Armed Services Committee, and the commercial buying and small business chapters of the 

Section 809 Panel’s Volume 1 and Volume 2 Reports highlight challenges DoD faces in leveraging the 

private-sector marketplace.

36 Challenges persist, in part, because decades of legislation and policy 

initiatives that governed, and often attempted to reform, the acquisition system continue to rely on 

 

35 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, 184 (2018). 

36 Ben FitzGerald, Alexandra Sander, and Jacqueline Parziale, Future Foundry: A New Strategic Approach to Military-Technical Advantage, 

Center for New American Security, December 2016, accessed October 12, 2018, 

https://s3.amazonaws.com/files.cnas.org/documents/CNAS-Report-FutureFoundry-final.pdf?mtime=20161213162640. GAO, Military 

Acquisitions: DoD is Taking Steps to Address Challenges Faced by Certain Companies, GAO-17-644, July 2017, accessed October 31, 2018, 

https://www.gao.gov/assets/690/686012.pdf. 
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Marketplace Framework Volume 3 | Page 21 

unique terms, conditions, and processes better suited to the industrial age, not the information age, 

much less the rapidly approaching artificial intelligence age. These industrial-age artifacts are not agile, 

do not value time, and serve as barriers to small and nontraditional businesses. 

The Section 809 Panel’s vision of a future DoD acquisition system is one that is agile, efficient, and 

effective at procuring products and services offered for sale to the public or other government agencies, 

or are otherwise readily available in the marketplace. Figure 1-1 demonstrates the dramatic growth of 

private-sector research and development spending, compared to DoD. As a result of this investment, 

the progress of commercial technology has dramatically expanded over the last 2 decades, driving 

incredible growth in the public’s demand for technologies that at one time were limited to government 

or defense-specific applications. The fact that the computing power of a smart phone in the average 

American teenager’s pocket dwarfs that of the Apollo guidance computer used to navigate to the moon 

and back is a well-worn anecdote of the advancement in commercial technology.37 In addition to 

cutting-edge consumer electronics and software being readily available in the marketplace, the growth 

of a globally accessible marketplace and the rise of global corporations and supply chains drives 

private-sector demand for complex logistics, data analytics, and other specialized services. 

Figure 1-2. DoD and Private-sector Research and Development Spending38

The Section 809 Panel has thus far recommended an important evolution in commercial buying to 

narrow the gap between how DoD behaves in today’s marketplace and how other buyers behave, but a 

revolution in the way DoD functions in the marketplace is necessary. How Congress and DoD think 

about competition, total procurement costs, pricing, value, and transparency must be further expanded 

to enable DoD to effectively leverage today’s, and more importantly tomorrow’s, marketplace to 

 

37 “How the Computing Power in a Smartphone Compares to Supercomputers Past and Present,” infographic, Business Insider, accessed 

November 2, 2018, http://www.businessinsider.com/infographic-how-computing-power-has-changed-over-time-2017-11. 

38 GAO, Military Acquisitions: DoD is Taking Steps to Address Challenges Faced by Certain Companies, GAO-17-644, 6, accessed 

October 31, 2018, https://www.gao.gov/assets/690/686012.pdf. The expenditures have been adjusted for inflation in accordance with 

DoD National Defense Budget Estimates for Fiscal Year 2017. Industry research and development spending may include funding provided 

by DoD for research performed by industry. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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empower “the warfighter with the knowledge, equipment, and support systems to fight and win.”39 It 

is time to abandon some of the more onerous and outdated concepts, as compared to private-sector 

practices, that create unnecessary friction in the acquisition system. This friction inhibits rapid fielding 

of readily available products and services that increase lethality, ensure technological dominance, and 

provide critical warfighter support. This section lays out a pathway for DoD to become a more 

sophisticated buyer in the increasingly Internet-based, globally interconnected, privately-funded, and 

innovation-rich marketplace. 

Discussion: Readily Available 

In the Volume 1 Report and the Volume 2 Report, the Section 809 Panel has recommended changes to the 

FAR’s commercial buying processes and procedures, which if implemented wholesale, will 

substantially improve DoD’s ability to rapidly and efficiently acquire those products and services that 

meet the statutory definition of commercial. Even with those proposed changes, the definition of what 

is commercial is far too narrow to provide access to today’s marketplace and is too complicated in its 

application. Inconsistent or stalled commercial determinations made by contracting officers as well as 

requirements for companies to produce supporting data to prove a product or service is commercial, 

are challenges that persist and will continue even if all of the Section 809 Panel’s earlier commercial 

recommendations are adopted.40 Some industry stakeholders explained, in the context of their 

purchasing systems under government prime contracts, that they do not attempt to make a commercial 

determination and use the current simplified commercial buying procedures because of the scrutiny 

applied by DCMA to their determinations and a lack of certainty as to what DCMA might evaluate in a 

given case. This lack of certainty is exacerbated by the potential for reviews by various inspection 

regimes like the DoD Inspector General (DoD IG) and GAO and during audits conducted by DCAA. 

The effect is a culture of risk aversion that is characterized by a lack of agility and unnecessary delays 

in the procurement process. 

Effectively accessing the full extent of the capabilities readily available in the private sector, necessitates 

abandoning the terms commercial and commercial buying for something simpler and more inclusive. This 

revolution is necessary to implement the simple and effective process for accessing the marketplace as 

envisioned by Congress when the Federal Acquisition Streamlining Act (FASA)41 was passed. 

The concept of readily available products and services, is defined in the Volume 2 Report as 

Any product or service that requires no customization by the vendor and can be put on order by 

customers. 42 Optional priced features of products and services in a form that is offered for sale in the 

normal course of business, fall within the definition of readily available. 

 

39 DoD, Summary of the 2018 National Defense Strategy of the United States of America: Sharpening the American Military’s Competitive 

Edge, 5, accessed June 5, 2018, https://www.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf. 

40 USD(AT&L) Memorandum, Guidance on Commercial Item Determinations and the Determination of Price Reasonableness for 

Commercial Items, accessed July 23, 2018, https://www.acq.osd.mil/dpap/policy/policyvault/USA003554-16-DPAP.pdf. 

41 The Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103-355 (1994). 

42 This includes products and services that only governments buy or only governments can buy due to export controls or other legal 

limitations. 
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The terms readily available and readily available with customization subsume everything that would 

currently meet the commercial product and services definitions and also includes many products and 

services that would not. Nondevelopmental items and products and services that may only be sold or 

offered for sale to other defense departments and other federal or local government entities would also 

generally be considered readily available.43 These products or services are developed and paid for by 

private investment (not DoD or the U.S. government), have established supply chains, and are 

available for potential customers to put on order, although production lead times and available stock 

levels may delay delivery. DoD needs greater flexibility to procure these products and services in a 

manner that more closely resembles other consumers in the market and makes DoD a more attractive 

business partner. 

Near-peer competitors and nonstate actors are not encumbered by the same bureaucracy in their 

purchasing systems as the U.S. government. A story, recounted at the signing ceremony of FASA, 

highlighted the issue of the U.S. government not being able to buy Motorola radios from the company’s 

commercial line in support of Operation Desert Storm. The Japanese government ended up purchasing 

the radios for DoD. Such situations still exist, albeit at a different level of sophistication. DoD must be 

able to rapidly field existing technology that might be the 80 or 90 percent solution, and let its smart 

and talented operators innovatively use that technology to realize tomorrow’s solutions today. 

Spending years developing and fielding yesterday’s solution is the wrong strategy. The following are 

the key elements of this proposal: 

 Readily Available Procedures: The readily available procedures (RAPs) and the authorities 

recommended in this section apply to procurement of readily available products and services 

below a $15 million threshold. In many cases, the increased dollar value of readily available 

products and services does not result in increased procurement risk. In those cases, a 

contracting officer should request authorization to use these procedures for procurements in 

excess of the threshold. These procedures would replace existing Simplified Acquisition 

Procedures (SAPs) in FAR Part 13 for DoD, and readily available buying would replace 

FAR Part 12 commercial buying for DoD. In situations for which DoD requires capabilities not 

offered by the private-sector, RAPs would not be used. 

 Competition: Competition would be achieved primarily through documented market research, 

recognizing that readily available products and services exist in the market and can be found 

through a variety of private-sector tools. Market forces set the prices that consumers pay for 

these products and services because they are publicly available for consumers to compare and 

evaluate. Even when a new product is only offered by one vendor, pricing and product quality 

are driven by what the market will bear. Issuing a competitive RFP for these products typically 

does not increase competition. In fact, soliciting the product or service using today’s processes 

presents a barrier to entry for many companies, and likely increases the total procurement cost 

and delivery timelines. 

 

43 Congress, for decades, to no avail, has tried to move the DoD to buy more non-developmental items. GAO, Procurement: DoD Efforts 

Relating to Nondevelopmental Items, GAO/NSIAD-89-51, February 1989, accessed August 23, 2018, 

https://www.gao.gov/assets/220/210964.pdf. 
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 Applicable Laws: The statutory relief that currently only applies to commercially available off-theshelf (COTS) items would be expanded to apply to all readily available products and services. 

The current system of small business set-asides would be changed in favor of a small business 

price preference for evaluation purposes. The Military Services and Defense Agencies, through 

their contracting activities, would be required to use small-businesses strategically, as discussed 

in the small-business policy pivot described in the Volume 1 Report and directed by Section 851 

of the FY 2019 NDAA.44

 Price Reasonableness: Contracting officers should, in most cases, be able to determine price 

reasonableness based on multiple offerings of similar products and services in the marketplace. 

When a new or substantially updated product is offered for sale, the end-user should be able to 

provide input into the price reasonableness determination by articulating whether the products 

or services provide value at a given price. Price should be the primary factor for making an 

award decision in many instances, but past performance, capability, warranties, and other 

similar factors may also be considered. 

 Transaction Methods: Transactions for readily available products and services should be 

conducted using Government Purchase Cards (GPCs) and simple fixed-price purchase orders. 

The terms and conditions that would be included in a purchase order are a subset of what is left 

of the Contract Terms and Conditions – Commercial Items clause at FAR 52.212-4 after all of the 

Section 809 Panel’s commercial buying recommendations have been implemented.45 Prime 

contractors would not be required to flow down any DoD clauses when procuring readily 

available products and services from subcontractors in support of defense-unique development 

contracts. This recommendation includes authorizing contracting officers to make purchases 

with their GPCs up to their warrant or the $15 million threshold, whichever is lower, without 

issuing a purchase order. This practice means accepting sellers’ terms and conditions and using 

terms and conditions included in DoD’s agreements with the financial institutions that issue the 

GPCs. 

 Transparency and Accountability: To improve transparency and provide for public 

accountability, award information would be published for each award, to include the results of 

the contracting officer’s market research and a short award decision document when a decision 

was based on factors other than low price. Protests would be limited to agency-level protests 

with the grounds for a protest limited to situations for which the product or service that was 

procured using the readily available procedures was not readily available or the contracting 

officer did not conduct market research consistent with these procedures. 

In general, procuring readily available products and services poses few risks that must be managed by 

government-unique contract terms and conditions. As a result, the process for procuring these 

 

44 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 167-194 (2018). 

45 See, Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 32-42 and 

Tables F-5, 6, and 7, A-39-67 (2018). 
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Marketplace Framework Volume 3 | Page 25 

products and services should be very simple. When exceptions to this rule exist, additional terms and 

conditions should be applied only by exception and as required by the end-user. 

To adequately streamline procurement of readily available products and services, the same statutory 

relief that is currently reserved for COTS products and services must be expanded to the broader 

universe of readily available. This recommendation would achieve what the Section 809 Panel argued 

for in the Commercial Buying section of the Volume 1 Report.46 DoD would be able to seek out “hightech, cutting-edge solution(s), that...will likely not satisfy the sold in substantial quantities...criteria of the 

COTS definition,”47 and engage those vendors on their terms. This new construct must replace existing 

commercial buying and simplified acquisition procedures for DoD. Maintaining the current construct, 

as an alternative, would undermine the objectives of these recommendations by adding complexity and 

confusion to a process that needs to be more simple and straightforward. 

Determining what is a readily available product or service should be much simpler than the current 

commercial item determination process, and the applicable implementing guidance must direct that 

any reviewing body, such as DCMA, DoD IG, or GAO, must presume the determination made by a 

contracting officer, or a DoD prime contractor, will not be subject to criticism unless it can affirmatively 

prove a product or service was not readily available at the time of the procurement. A readily available 

service that requires no customization is one for which the contracting officer can purchase the service 

exactly as it is offered by the vendor at prices advertised to the public. Examples of readily available 

services include subscription services like cable television, commercial Internet service, or cloud 

storage for which the contracting officer selects from priced options that are available. In addition, onetime services like maintenance service calls or short-term expert consultant services and simple 

transactional services like dry cleaning or an oil change may also be procured using these readily 

available procedures. 

Most of the readily available products and services DoD procures are available from multiple reputable 

vendors meeting generally accepted quality standards with basic commercial terms and conditions. 

Not all products that meet the minimum requirements in a purchase request are created equal, and not 

all businesses offer the same policies regarding shipping, returns, or warranties. Contracting officers 

may generally be able to rely on price as the only factor in making an award decision, but they should 

consider reliable past performance information related to the vendor and the product to inform the 

award decision. There are also publicly available consumer and expert reviews of products and 

vendors that should be considered, in addition to the government’s past performance database and the 

experience of the contracting officer and the requiring activity. Favorable shipping or return policies 

and other considerations, like the length of a manufacturer- or vendor-offered warranty, should also be 

considered in making a best-value determination when appropriate. Market research and 

understanding the requiring activity’s need will enable the contracting officer to determine what 

factors should be considered in making an award decision. 

 

46 Ibid, 20-21. 

47 Ibid, 21. 
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Stakeholders interviewed by the Section 809 Panel indicated the intellectual property (IP) of privatesector companies will not be protected by DoD under existing policy.48 The readily available 

procedures must clearly state that DoD receives no more IP from vendors than that which the vendors 

typically include in the sale of their products and services in the marketplace. 

Stakeholders in industry and the government shared concerns about the desire of some acquisition 

programs and contracting officers in DoD to procure source code for commercial software products, 

even though they do not have capacity to do anything with that source code. In addition, a number of 

software companies, and the private investors many of the companies rely on, fear that if DoD 

partnered with the company to develop an innovative solution, it could lead to DoD taking the idea 

and turning it into an RFP to find someone who might be able to produce the solution at a cheaper 

price. It must be clear to the private sector that DoD values the intellectual capital companies invest in 

their products and services and that their IP and their solutions will be protected. DoD must be more 

strategically selective with decisions to pursue IP rights and technical data related to privately 

developed, readily available products and services. 

The statutory changes needed to implement these readily available procedures are detailed in the 

subrecommendations at the end of this section. In addition, changes to the existing simplified 

acquisition procedures found in FAR Part 13 are also provided at the end of this section, with the intent 

being to heavily amend DFARS Part 213 to provide RAPs for DoD. These procedures would be 

applicable up to a threshold of $15 million, which, according to Bloomberg analysis of Federal 

Procurement Data System (FPDS) data, could streamline as much as 90 percent of DoD’s transactions, 

and up to 55 percent of the dollars spent based on FY 2017 spending.49 Understanding that the 

monetary value of a procurement does not necessarily translate into increased procurement risk, the 

authority to use these procedures may be granted to the contracting officer by the chief of the 

contracting office when the expected value of the procurement exceeds $15 million.50 One of the 

fundamental changes that Congress and DoD must be willing to embrace in implementing these 

procedures is the manner in which effective competition is achieved for readily available products and 

services—competition that allows DoD access to the entire marketplace, not just those companies that 

have been able to navigate the complex and confusing government system. 

Competition 

The current universal standard for competition is the federal government’s requirement for full and 

open competition. For simplified acquisitions, FASA recognized in 1994 that the competition standard 

should be exercised to the “maximum extent practicable.”51 In today’s commercial marketplace, DoDadministered full and open competitions result in an artificial competition that is neither full nor open. 

Countless stakeholders have shared frustration with the barriers to entry that prevent them from being 

considered for a DoD contract and the full and open competition process is chief among them. 

 

48 Commercial Items, Components, or Processes, DFARS 227.7102(b). 

49 Bloomberg provided analysis of FPDS-NG data. This data captures all DoD contract actions and therefore would include in the number 

of transactions valued below $15 million a large number of contract modifications and actions for products and services that would not 

meet the definition of readily available. 

50 For the definition of the Chief of the Contracting Office term, see, Definitions, FAR 2.1. 

51 Contracts: Competition Requirements, 10 U.S.C. § 2304. Promoting Competition, FAR 13.104. 
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To participate in a full and open competition, a company must monitor FedBizOps, register in the 

System for Award Management (SAM), and be willing and able to respond to an RFP laden with 

FAR/DFARS clauses and provisions. Most of the readily available products and services DoD 

contracting officers buy every day are available from multiple easily accessed sources, with prices 

transparently advertised online or through catalogues. These products and their prices are available to 

anyone, including the nation’s near-peer competitors and nonstate actors, which also see them. These 

prices, along with product quality, shipping rates, warranties, and vendors’ commercial business 

practices are subject to continuous competition and are transparent to the public. DoD should have the 

authority to leverage this continuous market-based competition, which constitutes true full and open, 

transparent, competition. 

The private sector uses market-based competition in everyday transactions to buy readily available 

products and services. Companies that sell in the private sector do not need to see a publicly posted 

RFP to know that their products, prices, and related terms and conditions must be competitive, if they 

are going to succeed. To remain competitive, they constantly adjust their prices and terms and 

conditions. 

For DoD purposes, market-based competition, as discussed in the Volume 2 Report, means: 

The consideration of sources that offer readily available products and services at prices available to any 

potential buyer, resulting in competition being established through market forces. 

Adopting the definition above would give contracting officers discretion to use standing price 

quotations as defined by recommendations in the Volume 2 Report, use oral solicitations, or send a short 

electronic solicitation that may be no more than an email or the completion of an online request for a 

quote. 52 If a contracting officer determines that a publicly posted solicitation is necessary, nothing 

would prevent posting one for a period determined by the contracting officer based on the nature of 

the requirement. 

The contracting officer’s market research must be thorough but does not need to be exhaustive. The 

requirement to post elements of the contract file on award provides information on whether the rules 

for market-based competition were followed and an opportunity to search for trends that indicate 

process corruption. The process would be more transparent to the taxpayers because pricing 

information for competitors in the market would be publicly available. 

Online buying through individual vendor websites and e-marketplaces like Amazon, Grainger, and the 

Boeing Parts Page “is becoming the new normal for American businesses.”53 Congress has recognized 

this trend and directed the General Services Administration (GSA) to implement a program for 

procuring COTS products through commercial e-commerce portals.54 GSA is considering how to 

implement this authorization by examining a mixture of e-commerce, e-marketplace, and e-portal 

 

52 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 2, 9 (2019). 

53 “B2B E-Commerce Trends to Take Notice of in 2018,” Jary Carter, Forbes, February 15, 2018, accessed July 25, 2018, 

https://www.forbes.com/sites/theyec/2018/02/15/b2b-e-commerce-trends-to-take-notice-of-in-2018/#57a6500f7339. 

54 FY 2018 NDAA, Pub. L. No. 115-91 (2017). 
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concepts, which could be extraordinarily useful in procuring readily available products and services.55

Although the statute authorizes purchases through the portal up to the simplified acquisition 

threshold, the House of Representatives proposed increase of the micro-purchase threshold from 

$10,000 to $25,000 for purchases made through the e-commerce portal did not get enacted in the 

FY 2019 NDAA.56 The e-commerce portal provisions are a step in the right direction, but will provide 

limited benefit because they will not provide access to the entire marketplace and will not accelerate 

DoD’s ability to procure innovative, readily available products and technology solutions, other than 

COTS products valued at less than $10,000. The existing e-commerce portal concept would provide a 

source contracting officers could use in doing market research for some readily available products. An 

e-commerce portal that provides a gateway to all the products and services offered for sale on the 

Internet could be the primary source from which DoD might acquire readily available products and 

services under the authorities provided in this proposal. 

E-commerce portals could also provide DoD a tool for collecting data on spending patterns to 

“critically analyze an organization’s spending and use the information to make better business 

decisions.”57 Such analysis is the goal of spend management, strategic sourcing, and category 

management—concepts that are gaining momentum within DoD.58 Often strategic sourcing translates 

to awarding large indefinite-delivery/indefinite-quantity (IDIQ) contracts, with negotiated pricing. The 

practice of concentrating buying under a limited number of large-agency or governmentwide contracts 

has the potential to inhibit innovation and limit competition. Rather than creating a complex multiple 

award IDIQ, the Section 809 Panel’s readily available proposal would enable DoD to bargain with 

vendors for enterprise or agencywide discounts when organizations place individual orders. The 

vendors would not need to decide which IDIQ vehicles to spend their bid and proposal costs on and 

incur operating costs to meet the compliance requirements associated with an IDIQ.59

Facilitating contracting officers’ ability to make individual transactions with vendors in the open 

market has the potential to reduce reliance on multiple award IDIQs, the GSA schedules, and other 

governmentwide contracts that limit competition. More decentralized buying, relying on the open 

market, however, may increase the chances that contracting officers could procure counterfeit products 

or information technology products that present cybersecurity concerns. Approved product lists and 

qualified vendor lists—created when only certain products meet DoD’s requirements or only certain 

vendors are qualified to provide certain products or services—would provide a means of mitigating 

this concern. An example would be the existing DoD Information Network (DoDIN) Approved 

 

55 GSA, Procurement Through E-Commerce Portals: Implementation Plan, March 2018, accessed August 30, 2018, 

https://interact.gsa.gov/sites/default/files/Commercial%20Platform%20Implementation%20Plan.pdf. 

56 FY 2019 NDAA, Pub. L. 115-232, Conference Report, H. Rept. 115-874, 905. 

57 “Category Management and Strategic Sourcing Defined,” Defense Pricing and Contracting (DPC), accessed November 6, 2018, 

https://www.acq.osd.mil/dpap/ss/index.html. 

58 “AF Aims to Save $2B, Improve Lethality with New Acquisition Approach,” Debbie Aragon, U.S. Air Force, April 26, 2018, accessed 

August 7, 2018, https://www.af.mil/News/Article-Display/Article/1504349/af-aims-to-save-2b-improve-lethality-with-new-acquisitionapproach/. “Category Management and Strategic Sourcing Defined,” Defense Pricing and Contracting (DPC), accessed November 6, 2018, 

https://www.acq.osd.mil/dpap/ss/index.html. 

59 See, “An Excess of Multiple-Award Contracts is Creating New Problems for Government,” Brian Freel, Government Executive, April 20, 

2016, accessed August 7, 2018, https://www.govexec.com/excellence/promising-practices/2016/04/excess-multiple-award-contractscreating-new-problems-government/127645/. 
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Products List (APL) managed by DISA.60 The DoDIN APL provides “a consolidated list of products 

that have complete interoperability and cybersecurity certification” and DISA has established 

procedures for testing and certifying products to be added to the APL.61 The e-commerce portal being 

developed by GSA could provide simultaneous access to all products and services advertised and 

searchable on the Internet, while only allowing buyers to purchase approved products. Some have 

advanced the theory that by not advertising upcoming purchases to the world, individual DoD 

procurement actions for readily available products will facilitate hiding in plain sight and make 

sabotage and fraud against the purchasing process less likely. 

Some of the basic tenants of public procurement, like publicly posting RFPs for readily available 

products and services, have become outdated and create barriers to entry for nontraditional companies 

and barriers to innovation for DoD. Continued use of complicated RFPs poses challenges for DoD in 

maintaining its edge over near-peer competitors. To resolve this issue, the United States must reshape 

public procurement provisions in trade agreements to which it is a party. The following, describing the 

North American Free Trade Agreement’s public procurement chapter, is true regarding other trade 

agreements, including the foundational World Trade Organization Agreement on Government 

Procurement (GPA): 

NAFTA’s current government procurement chapter was written before digital technologies changed not 

only the products and services being purchased but also how the purchases are made in the procurement 

market both in the U.S. and with our key trading partners.62 

These trade agreements apply to most of the products and services that are readily available in the 

marketplace. The GPA, for instance, provides very specific requirements for publicly advertising RFPs 

for any covered procurement.63 All covered procurements must follow these rules. For commercial 

buying, each procurement must be publicly advertised for a minimum of 10 days.64 The concept of 

readily available will need to be incorporated into these trade agreements. As a whole, the concept 

should be agreeable to the international community, as it recognizes the global nature of supply chains 

and should further open the United States defense market to responsible foreign sources of supply. 

Practices like BAAs and the newly implemented CSO push the boundaries of the advertising 

requirements found in these trade agreements.65 CSO is a step in the right direction for contracting 

officers to have greater flexibility to access innovative commercial solutions, including research and 

 

60 “Approved Product List Integrated Tracking System,” DISA, accessed November 2, 2018, https://aplits.disa.mil/processAPList.action. 

61 Ibid. 

62 “Government Procurement Moves to Center Stage in NAFTA Renegotiations,” Eminence Griffin, TechWonk Blog, January 23, 2018, 

accessed July 28, 2018, https://www.itic.org/news-events/techwonk-blog/government-procurement-moves-to-center-stage-in-naftarenegotiations. 

63 See, World Trade Organization, Revised Agreement on Government Procurement, Articles VII and XI, accessed July 25, 2018, 

https://www.wto.org/english/docs_e/legal_e/rev-gpr-94_01_e.pdf. 

64 Ibid.

65 Section 879 of FY 2017 NDAA, Pub. L. 114-328 (2016). USD(A&S) Memorandum, Class Deviation—Defense Commercial Solutions 

Opening Pilot Program, June 26, 2018, accessed November 6, 2018, https://www.acq.osd.mil/dpap/policy/policyvault/USA001228-18-

DPAP.pdf. 
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development, and authorizes competition requirements to be met through technical analysis.66 Other 

than the fact that CSO is only a pilot program, and is not a permanent authority, there is a single, large, 

problem with the statutory definition of innovative. The commercial solution opening may only be used 

to acquire “innovative commercial items, technologies, and services” with innovative being defined as 

(1) any technology, process, or method, including research and development, that is new as of the date of 

submission of a proposal; or 

(2) any application that is new as of the date of submission of a proposal of a technology, process, or 

method existing as of such date. 67

How the term new in the definition is interpreted could be problematic and will likely be inconsistent 

across DoD, if not across individual contracting offices. It is unclear whether the term means new to 

DoD or new to the private sector. It is also unclear what happens if a solution is not considered new, 

but the concept is evaluated and the program office or operator wants to procure it and field it quickly. 

Broader authority to compete solutions and negotiate the business arrangement after the technical 

competition is necessary for DoD to adequately leverage industry expertise and commercial technology 

advancement. Such authority should not be limited by how an acquisition official or agency attorney 

might interpret the term new. 

Maximizing competition and access to innovation requires that contracting officers have authority to 

waive SAM registration requirements for vendors offering readily available products and services 

when doing so is in DoD’s best interest. Contracting officers should encourage companies to register in 

SAM if the companies are seeking to do business with DoD on a regular basis. 

Under the proposed readily available procedures, contracting offices would need to periodically 

publish notices of anticipated procurements on FedBizOps and other online media likely to reach small 

and nontraditional businesses in a given industry. These notices would be published by individual 

contracting activities and indicate that they only apply to the specific contracting activity issuing the 

notice. In addition to the list of readily available products and services the buying activity expects to 

procure, the notice would explain that contracting officers will rely on publicly available product 

information and pricing to conduct market research and make award decisions in procuring those 

products and services. 

Applicable Laws 

In addition to applying the same statutory relief to readily available products and services as is 

currently provided for COTS items, the proposed new system should allow for eliminating domestic 

purchasing preferences and certain labor rate protections. BAA and the Berry Amendment undermine 

DoD’s ability to acquire the most innovative products at reasonable prices due to their restriction on 

non-U.S. components.68 BAA and Berry Amendment provisions are increasingly out of step with 

 

66 USD(A&S) Memorandum, Class Deviation—Defense Commercial Solutions Opening Pilot Program, June 26, 2018, accessed November 6, 

2018, https://www.acq.osd.mil/dpap/policy/policyvault/USA001228-18-DPAP.pdf. 

67 Section 879 of FY 2017 NDAA, Pub. L. 114-328 (2016). 

68 Requirement to Buy Certain Articles from American Sources; Exceptions, 10 U.S.C. § 2533a. 
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commercial practices and global supply chains across most product categories. Domestic sourcing 

needs should be addressed by DoD’s Industrial Base office and the Commerce Department in 

identifying critical needs and allocating resources to stimulate cutting-edge domestic capacity. The 

labor rate protections of the Service Contract Act, Davis–Bacon Act, and Public Contracts Act (formerly 

Walsh–Healey Act) are both inflationary and duplicative of regulations like the Occupational Safety 

and Health Act (OSHA) and the Fair Labor Standards Act (FLSA).69 The challenges these statutes pose 

to DoD’s effective use of precious resources are more fully discussed in Recommendations 64 and 65 of 

this report. Implementation of these recommendations will dramatically improve how the vast majority 

of DoD procurements are made, but will only remove the application of these laws from a small 

portion of the dollars spent.70 

Removing application of BAA and the Berry Amendment to readily available products and services 

will likely have a more substantial effect. Much of the textiles, clothing, and footwear currently subject 

to the Berry Amendment would generally meet the definition of readily available, as would many 

product categories currently under BAA restrictions. The limits BAA and the Berry Amendment place 

on accessing cutting-edge products produced outside of the United States are antithetical to efficiently 

procuring the most advanced readily available products and solutions.71 Removing the requirement to 

apply these provisions to readily available products may also remove barriers to entry into the defense 

marketplace caused by supply chain restrictions. Small and nontraditional businesses unable to source 

U.S.-made components for readily available products now would be able to compete for DoD business 

under the proposed system. 

Removing the federal government-unique labor rate requirements would have little to no effect on the 

service, construction, or manufacturing industries, especially considering the fairly limited scope of 

service contracts and construction projects that could be considered readily available without any 

customization. The safety and wage standards required by OSHA and the FLSA would continue to 

apply without including them as specific terms and conditions—they are laws of general applicability. 

The statutory reservation of all contract awards under the current simplified acquisition threshold, and 

additional set-aside provisions in FAR Part 19, are inconsistent with the strategy proposed in the 

Volume 1 Report and directed by the FY 2019 NDAA. 72 For DoD to fully implement a strategy that 

focuses on investing in innovative small businesses and ensures DoD maintains technical dominance 

over near-peer competitors and emerging adversaries, DoD needs flexibility to determine how it meets 

the goals established by the Small Business Administration (SBA). Consequently, DoD must be able to 

implement a deliberate strategy to meet its small business goals through investments in innovation to 

ensure a robust industrial base. Much of that investment could come in the form of procuring privately 

developed, readily available technology solutions. Set-asides do not create the proper incentives for 

 

69 Service Contract Labor Standards, 41 U.S.C. §§ 6701-6707. Rate of Wages for Laborers and Mechanics, 41 U.S.C. § 3142. Contracts for 

Materials, Supplies, Articles, and Equipment Exceeding $10,000, 41 U.S.C. §§ 6501-6511. 

70 Based on FY 2017 FPDS-NG data collected and analyzed by Bloomberg and the Section 809 Panel staff. 

71 “Berry Amendment FAQ,” Defense Pricing and Contracting (DPC), accessed November 6, 2018, 

https://www.acq.osd.mil/dpap/cpic/ic/berry_amendment_faq.html. 

72 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 167-194 (2018). 

FY 2019 NDAA, Pub. L. No. 115-262, 130 Stat. 2139 (2018). 
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DoD to procure readily available products, and these programs have the potential to stunt, rather than 

encourage, small business growth. 

As discussed in the Volume 1 Report, set-asides and other small business programs incent small 

businesses to make extraordinary efforts to remain small.73 Setting-aside all procurements under a 

certain dollar threshold does not encourage a small business to grow beyond that threshold, especially 

if that business relies on competing for procurements that are currently set aside for small business. 

Outgrowing the size standard makes those businesses ineligible to compete for the same contracts that, 

in many cases, were critical to the success of the small business. Using a price preference and requiring 

DoD to continue to meet the overarching small business use goal established by SBA will ensure the 

same amount of DoD dollars are invested in small business, while allowing capable small businesses to 

grow and compete for opportunities. Such a requirement could help achieve Congress’s direction to 

DoD to “create opportunities and a pathway for small businesses to grow and compete for future DoD 

contracts as larger entities” where set-asides fall short for one reason or another.74 

The Section 809 Panel is not recommending that readily available products and services be exempt 

from mandatory sourcing required by FAR Part 8; however, prime contractors would not be required 

to procure from mandatory sources any products or services that may be included in the readily 

available solution that is being provided to DoD.75 Readily available products and services have 

established supply chains and DoD should not be requiring contractors to develop unique supply 

chains, unless there is a national security-related basis for the requirement, which could necessitate 

customization or development that would make using these procedures inappropriate. 

Pricing and Value 

Most of the readily available products and services that DoD acquires are available from multiple 

sources, with publicly posted prices. In those cases, contracting officers would able to compare 

available pricing and seek quantity or preferred-buyer discounts to determine price reasonableness. 

The existing FAR Part 13 procedures for determining price reasonableness are available to contracting 

officers in the proposed readily available procedures. In addition to those factors, contracting officers 

need to be able to rely on input from the requirement owner and consider value to the end user when 

existing pricing information may not be adequate to make a timely price reasonableness determination. 

Value relative to price, not cost, is what matters in the private sector. Many companies that sell 

products that are expected to perform a certain function at a high standard invest substantial amounts 

of time, energy, and money in research, design, and the development of their intellectual capital. 

Technology companies like Apple, Microsoft, and Samsung price their products based on the 

capabilities their products provide and the value those capabilities provide to the consumer. If DoD 

wanted to buy an iPhone in 2006, a contracting officer would not have had a similar product, previous 

purchases, or earlier iterations of the iPhone against which to compare the price. In the case of a firstmover, like Apple in the touchscreen smartphone arena, contracting officers should seek input from end 

 

73 Section 809 Panel, Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 176-177 (2018). 

74 FY 2017 NDAA, Senate Armed Services Committee Report, S. Rept. 114-255, May 18, 2016, accessed August 30, 2018, 

https://www.congress.gov/congressional-report/114th-congress/senate-report/255/1. 

75 See, Contract Clause, FAR 8.005. Contractor Qualifications Provisions and Clauses, FAR 52.208-9. 
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users or requirements owners as to whether a product or service represents value to the mission at the 

price being offered. This determination by the requirement owner could be a critical component of 

contracting officers’ price reasonableness determination. Even in the case of emerging technologies, 

cost or pricing data and other-than cost or pricing data, should not be requested from vendors. Pricing 

of readily available products and services will need to be emphasized in training curriculum for DoD 

acquisition professionals when implementing this recommendation. 

Contracting officers should contact vendors found through market research and bargain for quantity 

discounts, preferred customer discounts, or other benefits such as free shipping and extended 

warranties. In the consumer and business-to-business e-commerce world, vendors use unique discount 

or customer codes that provide better pricing or other benefits for recurring and high-volume 

customers. For example, Home Depot negotiated a standard discount for DoD which is automatically 

captured at the point of sale when the GPC is used.76

Transaction Methods 

The transaction methods and terms and conditions used by DoD were often cited by stakeholders as 

the most challenging part of doing business with DoD. The example provided in the Vern Edwards 

quote at the beginning of this section is typical of many federal government commercial procurements. 

Time, energy, and cost are expended across the system unnecessarily—time is not valued. It is difficult 

to understand how 47 pages of documentation, with 500 more pages incorporated by reference, are 

really necessary for the federal government to manage the risk associated with purchasing $18,000 in 

sleeper sofas.77 Most of the content in those 47 pages likely comprised boilerplate clauses, provisions, 

and terms and conditions, but it still took man-hours to assemble, review, and publish. This drill 

provides little benefit to the agency or the tax payer and deters new entrants from doing business with 

the government. 

A phone call to a number of local sources, or an Internet search could have identified multiple potential 

sources willing to sell the needed product at a reasonable price. A simple credit card transaction would 

have saved time and resources, returned a rebate to the agency, and achieved the desired results.78 The 

competitive nature of the market place and the terms and conditions offered by sellers in the readily 

available marketplace adequately mitigate most risks associated with buying these products. This 

recommendation would provide agencies with the authority to issue GPCs to contracting officers with 

a credit limit up to their warrant or the $15 million threshold, if the contracting officer’s warrant 

exceeds that threshold. 

This proposal leaves the micro-purchase threshold and procedures in place so that contracting officers 

may continue to issue purchase cards and delegate the authority to make purchases that fall below the 

 

76 See, “Solutions for Government Buyers,” Home Depot, accessed August 27, 2018, 

https://www.homedepot.com/c/Government_Customers. 

77 “This is What is Wrong with Government Contracting,” Vern Edwards, Wifcon Forums and Blogs, September 3, 2016, accessed July 23, 

2018, http://www.wifcon.com/discussion/index.php?/topic/3712-this-is-what-is-wrong-with-governmentcontracting/&tab=comments#comment-33249. 

78 In FY 2012 alone, the GPC rebates totaled $306 million, which would increase dramatically if GPC use was expanded to purchase readily 

available products and services up to $15 million. See, “SmartPay Benefits,” GSA, accessed August 7, 2018, 

https://smartpay.gsa.gov/content/about-gsa-smartpay#sa26. 
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micro-purchase threshold to operators and end users outside of the contracting office.79 The vast 

majority of DoD’s transactions fall below the recently increased micro-purchase threshold.80

Maintaining the capability for cardholders in a military unit to procure needed supplies and services 

that fall below the micro-purchase threshold is an effective force multiplier and efficient means of 

quickly acquiring capabilities. 

The contracting officer would be able to execute transactions using the GPC, without the need for an 

underlying purchase order or existing contract vehicle. This situation is an obvious expansion of the 

traditional use of the GPC as a way of delegating buying authority for purchases under the micropurchase threshold to cardholders within operational units outside of the contracting office. The 

U.S. Air Force instruction governing the use of the GPC currently states that the GPC is also the 

preferred payment method for placing task and delivery orders against prepriced contracts if 

authorized in the contract or agreement, and for contract payments on fully funded contracts for which 

it is advantageous to the government and the contractor accepts the GPC.81 Air Force contracting 

officers are also authorized to make purchases from non-DoD contract vehicles with the GPC up to the 

Simplified Acquisition Threshold.82 Using the GPC to make purchases of readily available products and 

services would maximize rebates to the agency, provide immediate payment to vendors, and would 

provide additional risk mitigation in the form of dispute resolution through the financial institution 

that issues the purchase cards. 

In some cases, such as commercial software licensing agreements, there may need to be some standard 

government terms and conditions developed through the Office of Federal Procurement Policy Act 

rule-making process that would apply to all readily available transactions, but these terms and 

conditions must be kept to a minimum.83 There also may be cases for which it is advantageous to DoD, 

and consistent with industry practices, to issue an RFP or purchase order with a DFARS 252.213-1 

clause similar to the reduced FAR 52-212-4 clause described in the Volume 1 Report.

84 None of these 

clauses would be required to flow down to vendors’ supply chains, which are likely made up of 

existing, often long-term, agreements. The contracting officer would have the flexibility to issue the 

RFP directly to the sources identified during market research, or post it publicly for a period of time 

that the contracting officer determines to be reasonable. DoD prime contractors subcontracting for 

readily available products and services in support of a FAR Part 15 defense-unique development 

contract would not be required to flow-down any clauses. Requirements the prime contractor needs to 

meet and any vendor within the supply chain needs to meet, must be treated as requirements and 

included in the requirements documents.85

 

79 Actions At or Below the Micro-Purchase Threshold, FAR 13.2. 

80 Per Section 829, FY 2019 NDAA, Pub. L. 115-262, 130 Stat. 2139 (2018), the MTP is now $10,000. 

81 AFI 64-117, Government Purchase Card Program, June 22, 2018, 8, accessed November 2, 2018, http://static.epublishing.af.mil/production/1/saf_aq/publication/afi64-117/afi64-117.pdf. 

82 Ibid. 

83 Office of Federal Procurement Policy Act of 1974, Pub. L. No. 93-400 (1974). 

84 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 32-42 (2018). 

85 This is an extension of Recommendations 62 and 63. 
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Transparency and Accountability 

Transparency in federal procurement is currently achieved by posting opportunities on FedBizOps and 

post-procurement data in the Federal Procurement Data System-Next Generation (FPDS-NG), 

USAspending.gov, and through protests. Currently, only through protest litigation does that 

transparency include information regarding the extent to which officials followed the procurement 

rules established by statute and regulation. FedBizOps, FPDS-NG, and USAspending.gov data do not 

provide any insight into why a specific contract award was made. In the existing system, only interested 

parties may file either preaward or postaward protests to elucidate the decision-making process to 

ensure that the appropriate statutes and regulations were followed. Protests come at a cost to the 

interested parties who file protests, the agency, and the procurement system. 

To achieve transparency and accountability in this recommendation, contracting officers would be 

required to post to a centralized public website, within 3 business days, each award made. FPDS-NG or 

FedBizOps could be modified to receive and display this data or a separate website could be created. 

Postings would include the products or services procured and the price paid. They would also include 

the results of contracting officers’ market research efforts and a short award decision document when 

the award was based on factors other than price. When the award was based entirely on price, an 

abstract of the pricing found during market research would be sufficient to document how the award 

decision was made. If posting each procurement presents an operational security risk, the contracting 

officer could delay publishing for up to 60 days. The minimal documentation required should already 

be stored electronically and would only require uploading to a web-accessible database. This process 

would provide public access to much more DoD procurement information than is currently available. 

Industry and government oversight groups would be able to examine DoD and individual contracting 

activity compliance with these procedures and call out instances of bad behavior to appropriate 

officials. 

This recommendation would eliminate the opportunity for preaward protests in cases for which 

contracting officers select a source based on market research or direct solicitation. Because solicitations 

or RFPs would not be publicly posted, there would be nothing to protest. This proposal would limit 

postaward protests to complaints filed with the competition advocate for the contracting activity. There 

would be only two bases for protests or complaints: the product or service procured was not readily 

available or the contracting officer failed to conduct market research in accordance with the readily 

available procedures. Competition advocates would be given authority, through the chief of the 

contracting office, to direct contracting officers to cancel purchases and return products, if they have 

been delivered but not consumed, or cancel services when doing so is in the best interest of the 

government. Contracting officers would be required to redo the procurement through proper marketbased competition. Competition advocates should play a role in ensuring adequate market research is 

being accomplished and contracting officers are seeking the best products and services that provide the 

best value to DoD. All contracting personnel (including the competition advocate) responsible for 

procuring readily available products and services would require enhanced market research and 

private-sector pricing training. 

Conclusions: Readily Available 

Aligning DoD’s procurement policies and practices with the state of today’s marketplace is the 

overarching goal of this recommendation, and to do so requires changes that are revolutionary, 
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compared to today’s processes, in how DoD thinks about competition, pricing, market research, and 

transparency. Small business policies, which are focused on meeting quotas through indiscriminate setasides and reservations, are not benefiting DoD or small businesses in a way that ensures DoD has 

access to a robust, innovative, and globally competitive small business vendor-base. The example of a 

47-page solicitation for a simple commercial buy further demonstrates the extent to which the existing 

system fails to keep pace with a dynamic marketplace, makes DoD an unappealing business partner, 

and requires Congress to create work-arounds for DoD acquisition to remain relevant. Rather than 

continuing to determine how to circumvent the acquisition system, it is time to overhaul the acquisition 

system, especially for procuring those products and services that are readily available in the 

marketplace. This substantially streamlined approach to procuring these products and services requires 

statutory changes, regulatory changes, and a culture shift away from buyers perfecting a process to 

buyers delivering the right capabilities to warfighters inside the turn of near-peer competitors and 

nonstate actors. 

Some of the readily available products DoD requires must meet flight safety, cybersecurity, and other 

standards peculiar to that product or class of products and the systems of which they ultimately 

become a part. These standards may be addressed by qualifying vendors, creating approved product 

lists, and incorporating them into the requirements package. It is the requirement owner that 

understands what assurances are necessary for a given product. The commercial airline industry 

maintains fleets of aircraft at a very high reliability rate with airlines procuring and installing parts on a 

regular basis. DoD requirements, even when it comes to sustaining weapon systems, are no longer 

unique, and reliable business practices exist in the private sector that DoD could learn from and must 

seek to emulate if it is going to maintain sufficient access to those markets. This proposal seeks to move 

DoD and federal procurement in that direction. 

Discussion: Readily Available with Customization 

Updating DoD procurement practices will be the difference between a U.S. military that benefits from 

commercial innovation and one that is superseded by it. 

 - Ben Fitzgerald and Katrina Timlin, War on the Rocks86

CNAS’s Future Foundry paper, the foundation for the Dynamic Marketplace concept, argues that DoD 

“does not possess a viable, standardized method to acquire commercial technologies, adapt them for 

military purposes, and incorporate them into CONOPs, doctrine, and training at scale.”87

This general indictment of the acquisition system focuses on DoD’s inability to acquire customized 

commercial or private-sector technologies and services, and this recommendation proposes a necessary 

step in filling that gap. As explained in the Volume 1 Report, increased use of streamlined commercial 

buying procedures and commercial-specific terms and conditions has been a priority for Congress and 

 

86 “Time for a Private-Sector Pivot on Military Technology,” Ben FitzGerald and Katrina Timlin, War on the Rocks, May 14, 2015, accessed 

August 8, 2018, https://warontherocks.com/2015/05/time-for-a-private-sector-pivot-on-military-technology/. 

87 Ben FitzGerald, Alexandra Sander, and Jacqueline Parziale, Future Foundry: A New Strategic Approach to Military-Technical Advantage, 

Center for New American Security, December 2016, 22, accessed October 12, 2018, 

https://s3.amazonaws.com/files.cnas.org/documents/CNAS-Report-FutureFoundry-final.pdf?mtime=20161213162640. 
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DoD since the passage of FASA in 1994. Despite this focus by Congress and DoD, commercial-item 

spending declined by 29 percent between FY 2012 and FY 2017.88 This decline is attributable to the 

expansion of commercial contract terms and conditions, confusing definitions and policies, and 

criticism of DoD’s navigation of this complex web by DoD IG and GAO.89 The Section 809 Panel’s 

proposal for procuring readily available products and services eliminates complex commercial product 

and service definitions in favor of the terms readily available and readily available with customization. The 

intent is to simplify even the concept of customization, so that a formal determination is not necessary 

for contracting officers and prime contractors to use the simplified procedures included in this section 

to purchase readily available products and services and readily available products and services that are 

customized for DoD. 

The Section 809 Panel proposes that a product or service is readily available unless DoD is funding the 

development and the product or service is something that only defense entities would procure. 

Challenges to whether a product or service is readily available or readily available with customization 

would require the challenger to prove the product or service does not fit into these two categories. If a 

contracting officer or prime contractor followed a rational and reasonable process for determining a 

product or service is readily available, reviewers, whether they be from DCMA, DCAA, or the IG, may 

not substitute their judgement for that of the contracting officer or prime contractor.90 These 

fundamental shifts in how DoD does business are essential in changing the acquisition system so 

warfighters benefit from commercial innovation, rather than become casualties of it. 

The Section 809 Panel defined customization in the Volume 2 Report. The definition of customization is 

bifurcated into customization for products and customization for services, based on a similar rationale 

for the panel’s recommendation to bifurcate the commercial item definition.91 For products 

customization means 

Changes, beyond optional, priced product features, made to a readily available product to meet a DoD 

need using commercial processes and equipment; or the manufacturing of a product based on a 

specification using only commercial processes and equipment.92

Services are considered customized when 

A performance work statement, statement of objectives, or other form of direction about how to perform 

the services is necessary to identify the services to be performed.93

Although the category of services that meets the definition of readily available, discussed above, may 

be small, nearly all of the services DoD procures should meet the definition of readily available with 

customization. Everything from janitorial services to engineering services and even armed security 

 

88 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 16-17 (2018). 

89 Ibid, 17. 

90 See Recommendations 62 and 63 regarding the existing commercial item determinations made by prime contractors. 

91 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 19-20 (2018). 

92 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, 181 (2018). 

93 Ibid, 181-182. 
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services, are regularly contracted for in the private sector with vendors providing customization based 

on specific customer needs. DoD’s need for customization is most often the same or similar to what 

other customers require. The mere fact of a DoD application of a service does not change the nature of 

the service. For instance, additively manufactured parts printed to meet a military specification, 

whether procured as a service or as a product, are a prime example of how DoD should be taking 

advantage of an established private-sector process in an efficient and expedient manner. 

There are two circumstances under which DoD requires customization that may be DoD-unique: when 

services are provided in a combat zone, and in the business arrangement for which DoD acquires 

services under a cost reimbursable contract. Stakeholders explained that DoD’s version of a cost 

reimbursable contract is inconsistent with private-sector practices. The private-sector application of 

cost reimbursable contracts does not provide customers with access to a service provider’s accounting 

system to the same extent as DoD. Cost reimbursable contracts in the private sector more closely 

resemble what DoD would consider time and materials contracts. Despite time and materials contracts 

being the standard in the industry when fixed price contracts are not appropriate, DoD describes time 

and materials contracts as the least favorable contract type.94 If DoD is going to gain access to a broader 

market of knowledge-based services, especially those offered by experts not affiliated with CAS 

compliant defense contractors, it must contract in ways that are more consistent with the private sector. 

The private sector does not track and report costs to customers consistent with what DoD requires 

under CAS. Their systems comply with generally accepted accounting practices, but more importantly 

it is extremely rare for a seller of goods and services in the private sector to give the buyer access to 

their financial systems, much less give them the right to dictate how those systems function. 

Even when services are to be performed in a combat zone, which certainly adds risk and cost, the 

services being performed are typically logistical or base operating support services that are similar to 

those procured in the private sector. Procuring customized readily available products and, especially, 

services, will often result in longer-term contractual relationships rather than the more transactional 

buys characterized by procuring readily available products and services. These different procedures 

and contract types are aimed at addressing the differences in how the private sector buys and sells. The 

following are the key elements of this recommendation, and are intended to enable rapid acquisition 

and, in-turn, rapid fielding of existing private-sector innovation regularly customized in the private 

sector and tailored to DoD’s needs. 

 Readily Available Procedures: Expand the use of a slightly modified version of existing FAR 12 

and FAR 13.5 simplified commercial buying procedures to be used when procuring readily 

available with customization. Additional flexibility to use market-based competition under 

certain circumstances would also be included, as discussed below. The procedures would be 

part of the new DFARS Part 213 discussed above.95 Similar to the existing FAR Part 12 

 

94 USD(AT&L) Memorandum, Guidance on Using Incentive and Other Contract Types, April 1, 2016, 40, accessed November 6, 2018, 

https://www.acq.osd.mil/dpap/policy/policyvault/USA001270-16-DPAP.pdf. 

95 The Panel has already recommended moving simplified commercial buying procedures into Part 13. This recommendation expands that 

concept by putting all the simplified readily available procedures in one consolidated and organized location. 
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limitation, the use of cost reimbursement contracts requiring certified cost or pricing data are 

prohibited when procuring readily available products and services with customization. 

 Competition: Market-based competition is still the primary driver of product or service quality 

and price as well as availability of sources for customized readily available products and 

services. Publicly posted RFPs or requests for quote (RFQs) would only be required when the 

value of a procurement is expected to exceed $15 million or the period of performance for a 

service or requirements contract would exceed 12 months. An RFP or RFQ would typically be 

necessary to communicate between the buyer and seller so the seller understands the buyer’s 

requirement and the buyer understands how the seller proposes to meet that requirement. 

When the expected value of the procurement does not exceed $15 million or the contract period 

of performance is less than 12 months, the contracting officer has the discretion to directly solicit 

sources found as a result of market research. In many cases, even above this threshold, a 

publicly posted RFP or RFQ would not increase the competition that already exists in the 

marketplace and would not add value to the procurement. Where those circumstances exist, the 

Chief of the Contracting Office could authorize a contracting officer to rely solely on marketbased competition despite the value of the procurement exceeding the threshold. 

 Applicable Laws: The statutory relief that currently only applies to simplified commercial 

acquisition procedures for commercial buying below the threshold ($7 million) should be 

expanded to apply to all readily available products and services with customization. In 

addition, relief from the labor standards of the Davis–Bacon Act, Service Contract Act, and 

Public Contracts Act as well as domestic preference statutes, BAA and the Berry Amendment, is 

necessary to leverage the entire marketplace and allow DoD to behave like other buyers. As 

with buying readily available products and services, a small business price preference for 

evaluation purposes would be used instead of a small business set-aside program. DoD 

contracting activities would be required to use small businesses consistent with the small 

business policy pivot described in the Volume 1 Report96 and directed by the FY 2019 NDAA.97 

 Price Reasonableness: Contracting officers should be able to determine price reasonableness 

based on competitive quotes or proposals, but prices paid by other DoD buyers for similar 

products and services and an understanding of private-sector pricing, among other methods, 

may be necessary. Pricing would not be based on information not available in the marketplace 

or not normally communicated between buyers and sellers. Specifically, this would mean 

pricing would not be based on certified cost or pricing data, or other than certified cost or 

pricing data, that is outside of private-sector norms. Similar to the readily available proposal, 

contracting officers would be permitted to rely on value determinations by the requirement 

owner to assist in determining if a price being offered is reasonable. 

 Transaction Methods: Customized readily available products and services would be contracted 

for using contract types that do not require contractors to have DoD-approved accounting 

systems, which are inconsistent with private-sector accounting methods. Contracts consistent 

 

96 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 167-194 (2018). 

97 Section 851, FY 2019 NDAA, Pub. L. 115-232, 130 Stat. 2139 (2018). 
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with private-sector practices provide adequate risk management for every consumer including 

DoD. The terms and conditions should be limited, to the maximum extent practicable, to the 

Contract Terms and Conditions—Commercial Items clause at FAR 52.212-4 as modified by the 

Section 809 Panel’s commercial buying recommendations in the Volume 1 Report.

98 Because 

customized readily available products and services encompass almost all the services, including 

construction, that DoD buys, additional clauses may be necessary. To add such additional 

clauses, the contracting officer must obtain approval from the Chief of the Contracting Office, 

and any such clauses must be limited to what is actually necessary for a specific procurement. 

Such clauses must closely approximate standard private-sector terms and conditions to the 

maximum extent practicable. 

 Transparency and Accountability: Transparency and accountability are no less important when 

it comes to procuring customized readily available products and services. The reformed bid 

protest process recommended by the Section 809 Panel could be used to ensure transparency 

and accountability continue to be achieved when a publicly posted RFP or RFQ is used. 99 In 

those cases, the process for procuring customized readily available products and services 

remains conducive to both preaward and postaward protests to identify situations in which 

DoD did not follow the law or federal acquisition rules. In situations when a publicly posted 

RFP or RFQ is not used, market research documentation, a redacted source selection decision 

document (SSDD), and a copy of the contract would be posted to the public-facing website 

where readily available procurements are posted. 

The new DFARS Part 213 included in this recommendation would consolidate all of the policy 

guidance necessary for procuring readily available products and services, and customization of those 

products and services. Architect and engineering contracts would be the one exception. These contracts 

are solicited and competed through a unique process that the Section 809 Panel does not intend to 

upset, even though these services neatly fit into the definition of readily available with customization.100 The intent is to provide contracting officers and other acquisition professionals with an 

organized and consistent set of procedures for procuring almost all readily available products and 

services, with or without customization. Some references to other parts of the FAR are inevitable, but 

should be minimized to avoid the complexity-creep the panel has identified in the trend toward using 

complex FAR Part 15 procedures where FAR Part 12, 13, or 16.5 procedures are appropriate.101 In fact, 

this proposal would require use of RAPs when procuring readily available products and services and 

readily available products and services with customization. A contracting officer would obtain 

approval to use other procedures available in the FAR/DFARS. A streamlined process for acquiring 

customized readily available products and services as defined by this recommendation would enable 

 

98 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 32-42 (2018). 

99 See Recommendations 66–69. 

100 Construction and Architect – Engineer Contracts, FAR 36. 

101 For example, Contract Clauses, FAR 36.5. 
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DoD to leverage, for example, 3-D printing and additive manufacturing that does not meet the current 

definition of commercial products or services.102

Competition 

Conducting more traditional full and open competitions for readily available products and services 

with customization may be viewed as more advantageous to the government and competition in 

general. Yet, conducting traditional full and open competitions not only results in participation by a 

limited number of competitors, it also creates an environment in which market research and market 

intelligence are not valued. This approach deprives warfighters access to innovation available in the 

marketplace. The current full and open competition standard is achieved by simply posting an RFP to 

FedBizOps and waiting for potential sources that are actively seeking opportunities with the 

government and understand how to do so, to respond. Instead, DoD needs competition standards that 

incentivize contracting officers to obtain market intelligence, so they can leverage the continuous 

competition that exists in the marketplace and provide warfighters with cutting-edge, readily available 

capabilities tailored for DoD that represent the best value for the dollar. The current full and open 

competition standard is not effective at achieving this end state. 

There are a number of products and services that DoD procures for which there is a limited market and 

buyers are fully aware of the universe of suppliers that exist. In these cases, publicly posting an RFP or 

RFQ and waiting 20 or 30 days for quotes or proposals is not going to increase competition or the 

potential supply sources. Publishing a justification and approval would not increase competition either. 

An RFP sent directly to each of the known, through market research, suppliers would ensure each is 

aware of the opportunity to submit a proposal. The same holds true, for example, when only 

prequalified vendors or original equipment manufacturers (OEMs) may supply a product or provide 

repair services. 

This recommendation establishes a $15 million threshold under which contracting officers may 

determine when a public solicitation is advantageous to an acquisition or when market-based 

competition and direct solicitation is most advantageous. The threshold also includes a time factor. The 

contract’s period of performance must not exceed 12 months, for the contracting officer to have 

discretion in publicly posting the requirement. A chief of a contracting office may authorize a 

contracting officer to use direct solicitation and market-based competition for procurements that exceed 

this threshold, when doing so is justified by the nature of the acquisition. 

Empowering contracting officers to determine whether publicly posting a solicitation is in the best 

interests of the government and in the best interest of competition would eliminate process, where 

process does not add value. It would also make the contracting officers and the requirement owners 

responsible for seeking out the best solutions from the most capable sources, thus creating a demand 

for the acquisition workforce to develop the requisite market research and market intelligence skills. 

These skills are necessary for DoD’s acquisition workforce to ensure DoD is benefitting from the most 

 

102 See Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, 20 (2018). 

This recommendation would expand the commercial products and services definition to enable DoD to utilize commercial additive 

manufacturing much more efficiently. 
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effective form of competition, obtaining greater access to the marketplace, and getting the best value for 

the taxpayer. 

Applicable Laws 

Readily available products and services should be included under the umbrella of statutory relief 

currently provided for COTS items, and readily available with customization needs the same statutory 

relief or at a minimum the same statutory relief currently afforded to commercial products and 

services. This statutory relief is necessary to conform the way DoD buys with the way the private sector 

sells. The domestic preferences found in BAA and the Berry Amendment threaten DoD’s access to 

innovative products at reasonable prices due to the prevalence of private-sector reliance on non-U.S., or 

mixed U.S.–foreign supply chains by much of the private sector, even with customized products or 

services.103 The labor rate protections of the Service Contract Act, Davis–Bacon Act, and Public 

Contracts Act (formerly Walsh–Healey Act) pose the same problems as well, and actually have 

minimal effect on labor rates in today’s market as compared to the market when they were enacted.104

Today unemployment is at a historical low and there is a shortage nationwide of skilled labor. 

It may be even more critical in the world of customized readily available products and services, for 

small and nontraditional businesses, unable to source U.S.-made components for readily available 

products, to be able to compete for DoD contracts. DoD has a number of legacy systems with electronic, 

and other types of parts, that OEMs no longer produce or are willing to repair at a competitive price, 

yet they could be replaced or repaired by a larger pool of available small and nontraditional sources in 

the marketplace. To take advantage of this opportunity, DoD would need to assess which parts, for 

strategic national security or industrial base purposes, require certain elements to be sourced 

domestically, rather than a blanket application of the domestic sourcing statutes, alleviating the need to 

pursue waivers when the products are not available domestically. This would shorten the time it takes 

to get capability to warfighters. 

Because almost all services DoD procures, to include construction, would meet the definition of 

customized readily available products and services, this recommendation would effectively relieve 

DoD of enforcing compliance with the Davis–Bacon and Service Contract Acts through government 

contracts/transactions. Yet, as noted above, the safety and wage standards required by OSHA and 

FLSA would continue to apply without including them as specific terms and conditions in each 

transaction. Using the readily available with customization buying vehicle should also expand 

opportunities for small businesses to compete for projects for which Davis–Bacon or Service Contract 

Act wages are out of synch with actual private-sector rates.105 Maintaining accurate wage rate 

determinations has proven almost impossible for the Department of Labor; the last DoD IG review 

found that 46 percent of nonunion-provided data used in establishing Davis–Bacon wage 

 

103 Buy American Act, 41 U.S.C. §§ 8301-8305. Requirement to Buy Certain Articles from American Sources; Exceptions, 10 U.S.C. § 2533a. 

104 Service Contract Labor Standards, 41 U.S.C. §§ 6701-6707. Rate of Wages for Laborers and Mechanics, 41 U.S.C. § 3142. Contracts for 

Materials, Supplies, Articles, and Equipment Exceeding $10,000, 41 U.S.C. §§ 6501–6511. 

105 GAO also found that in 2010, about 63 percent of DOL’s published wage rates were effectively the union-prevailing rate, but only 

14 percent of construction workers nationwide were represented by unions. See, GAO, Davis–Bacon Act: Methodological Change Needed 

to Improve Wage Survey, GAO-11-152, March 22, 2011, 18, accessed November 2, 2018, www.gao.gov/products/GAO-11-152. 
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determinations were decades old.106 It is difficult for small businesses to pay wages competitive in a 

private-sector market on private-sector projects, while also paying, tracking, and reporting inflated 

wages on public projects. 

Small business reservations and set-asides pose the same problems for DoD and the market regardless 

of whether DoD is procuring readily available or readily available with customization products and 

services. There are no data to evaluate the price preference DoD pays due to reservations or set-asides, 

making it impossible to compare the effect of the 5 percent price preference recommended by the 

Section 809 Panel. The current set-aside practice limits competition to only those vendors who qualify 

for the set-aside; therefore, DoD has no reference as to what a large or midsize company might have 

proposed for a given procurement. 

The Section 809 Panel is not recommending readily available products and services be exempt from 

mandatory sourcing required by FAR Part 8. This recommendation would not affect the government’s 

requirement to use sources of supply like AbilityOne and Federal Prison Industries. 

Pricing and Value 

Many stakeholders inside and outside of DoD observed that DoD has never developed expertise in 

how the public sector determines pricing. The absence of expertise in the government results in 

requests for certified cost or pricing data, and information other than cost or pricing data that closely 

resembles certified cost or pricing data. The desire for cost or pricing data to help justify a price 

reasonableness determination appears to be one of the factors contributing to reduced use of 

commercial buying procedures. This recommendation would prohibit requesting any cost or pricing 

data from suppliers of readily available products and services, including those being customized for 

DoD. Successful implementation would require improved pricing, market research, and market 

intelligence training for acquisition personnel in the contracting and program management 

communities. 

Elements that contracting officers should consider when pricing readily available and customized 

readily available products and services are included in the recommended DFARS 213. These elements 

are very similar to those listed in the existing FAR Part 13, and approximate commercial or privatesector means for accomplishing price analysis. Rather than relying on suppliers to validate their price 

for a product or service with cost, pricing, or sales data, DoD is capable of using available market 

intelligence, technical analysis provided by the requirement owner, and data collected from similar 

previous procurement actions to make price reasonableness determinations. Requirement owners must 

be involved with contracting officers in determining at what price certain capabilities represent value 

to the mission. Understanding the value and capability provided by a customized, readily available 

product or service is more determinative of a fair and reasonable price than a cost build-up. Cost buildups required by cost reimbursement contracts are complex and expensive, and those costs are passed 

on to DoD and taxpayers. Given DoD’s general inability to determine whether direct costs and indirect 

costs are fair, these exercises devolve to a determination of whether the profit being earned is 

appropriate. In the world of readily available, the government should not expect to tell a seller that its 

 

106 GAO, Davis–Bacon Act: Methodological Change Needed to Improve Wage Survey, GAO-11-152, March 22, 2011, 18, accessed 

November 2, 2018, www.gao.gov/products/GAO-11-152. 
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profit is too high. DoD’s focus on limiting profit margins—an odd focus in a capitalist society—creates 

a barrier to doing business with DoD according to many of the companies with which the Section 809 

Panel spoke. 

Across the DoD acquisition enterprise, there are organizations that have implemented advanced 

market intelligence practices in procuring readily available products and services, with or without 

customization. The Air Force Installation Contracting Agency (AFICA), for example, has invested in 

commercially available market intelligence reports and developed the Air Force Business Intelligence 

Tool to better understand private-sector markets and the government’s buying practices.107 Using 

market intelligence and understanding of the Air Force’s existing buying practices to inform AFICA’s 

category management project, AFICA claims to have saved more than $1 billion.108 The savings that 

could be realized across DoD with the expansion of market-intelligence-driven initiatives like AFICA’s, 

combined with the streamlined procedures in this proposal, would not only improve DoD’s ability to 

access customized private-sector technology, but also free up resources for allocation to more complex 

weapon systems. 

Under these simplified procedures, contracting officers would be encouraged to bargain with vendors 

for a better price, additional features, more favorable delivery terms, or for other terms that provide 

value to the acquisition. DoD may be more interested in obtaining or bargaining for IP and data rights 

for products and services customized for a DoD purpose than for readily available products and 

services that are purchased as offered. In the July 2017 GAO report on military acquisition, nine of 

12 nontraditional companies identified IP rights as a barrier to seeking business opportunities with 

DoD.109 DoD must better understand the value of IP associated with readily available products and 

services and the customization DoD might require and develop greater sophistication in how it 

contracts for and intends to use that IP. 

Transaction Methods 

Expanding on the transaction methods prescribed for readily available products and services, 

customized products and services would more often than not require written RFPs or RFQs to 

articulate requirements and terms and conditions. A contract or possibly a simple purchase order 

would document the transaction. This practice is not inconsistent with the private sector. Private-sector 

buying practices deviate from DoD’s in the selection of sources. Companies only solicit from the 

sources they choose to solicit. This proposal expands the use of direct solicitation and reliance on 

market-based competition to ensure that DoD considers the entire marketplace, not just those who 

already understand how to do business with DoD. Procurements above $15 million dollars, or when 

 

107 “The AFICA Business Intelligence Competency Cell: ‘Bringing Life’ to Mission Innovation,” Brian Ripple, Wright-Patterson AFB, 

January 9, 2017, accessed September 14, 2018, https://www.wpafb.af.mil/News/Article-Display/Article/1044960/the-afica-businessintelligence-competency-cell-bringing-life-to-mission-innova/. 

108 “AFICA Hosts 2018 Enterprise Sourcing Summit, Aims to Save $2B,” John Herrington, Wright-Patterson AFB, July 19, 2018, accessed 

September 14, 2018, https://www.wpafb.af.mil/News/Article-Display/Article/1579241/afica-hosts-2018-enterprise-sourcing-summitaims-to-save-2b/. 

109 GAO, Military Acquisitions: DoD is Taking Steps to Address Challenges Faced by Certain Companies, GAO-17-644, July 2017, 18, 

accessed October 31, 2018, https://www.gao.gov/assets/690/686012.pdf. 
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the period of performance exceeds 12 months, contracting activities would be required to publicly post 

RFPs and RFQs for a minimum of 10 days. 

Many procurements that do not exceed this threshold would also result in publicly posted solicitations, 

when contracting officers determine that doing so is in the best interest of the government. These RFPs 

must be simpler and more straightforward than what DoD currently employs. The Section 809 Panel’s 

efforts in the Volume 1 Report to minimize the commercial terms and conditions included in commercial 

solicitations and the resulting contracts are being expanded for use in procuring readily available 

products and services with customization. No clauses included in contracts for readily available 

products and services should be flowed down to the private-sector supply chains these vendors rely 

on, otherwise DoD will remain excluded from accessing certain companies and the capabilities they 

offer. For instance, one company that participated in the 2017 GAO study stated that a supplier turned 

down a $20 million performance-based logistics contract because of the difficulty in managing all the 

unique federal contract clauses.110 

Even though the products and services are customized for DoD, the customization is being 

accomplished using private-sector equipment and processes, and the products or services being 

customized are readily available in the market. Customization of these products and services is 

contracted for daily in the marketplace and buyers and sellers are able to sufficiently manage risk, 

agree on price, and ensure delivery of the agreed on outcome without some of the unique hurdles 

presented by DoD’s acquisition process. As discussed above, DoD does not need cost reimbursement 

contracts to determine price reasonableness, and there are other contracting options available for those 

situations for which a requirement is not well defined. 

When buying readily available products and services, like the current commercial buying policies, the 

preferred contract type is a firm-fixed-price contract or fixed-price with economic price adjustment 

contract.111 The FAR allows for use of a time and materials contract for procuring certain commercial 

services.112 This recommendation would apply similar limits on the contract types that may be used to 

procure customized readily available products and services. The available contract types are firm-fixed 

price; fixed-price with economic price adjustment; firm-fixed price level-of-effort; and time and 

materials.113 DoD procures a substantial portion of its services as noncommercial, outside of FAR Part 

12, and uses cost-reimbursement contracts. To behave more like the private sector, eliminate additional 

costs and complexity, and to ultimately reduce barriers to entry, DoD must shift its preference for cost 

reimbursement contracts to a preference for time and materials contracts for which fixed-price 

contracts are not possible. 114 Time and materials contracts may also be appropriate when a readily 

available product requires further development that is of a commercial, not defense-unique, nature. 

 

110 Ibid, 16. 

111 See, Acquisition of Commercial Items – Contract Types, FAR 12.207(a). 

112 Ibid. 

113 See, Types of Contract, FAR Part 16. 

114 Most of the 12 non-traditional companies interviewed by GAO for its July 2017 report, stated that DoD had expressed interest in 

further developing a commercial product they offered for sale, but they did not enter into contract with DoD to do so. They cited to 

unique government accounting systems as one of the primary reasons for making that decision. GAO, Military Acquisitions: DoD is Taking 

Steps to Address Challenges Faced by Certain Companies, GAO-17-644, July 2017, 16, accessed October 31, 2018, 

https://www.gao.gov/assets/690/686012.pdf. 
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There is flexibility within these contract types that would allow contracting officers to incorporate 

performance incentives that do not involve complex equations and cost reporting, and this 

recommendation does not prevent awarding indefinite-quantity contracts or blanket purchase 

agreements in cases for which they would be advantageous.115

The GPC should also be considered as a flexible method for procuring customized readily available 

products and services. The Undersecretary of the Air Force for Acquisition, Technology, and Logistics, 

Dr. William Roper, has recognized that the GPC presents DoD with the unique ability to contract for 

products and services while providing immediate payment, which is critical for transacting with startups that may offer innovative solutions to DoD problems but have immediate cash flow 

requirements.116 This initiative is an attempt to solve the same problems the Section 809 Panel identified 

with the existing commercial buying structure and problems this proposal would solve on a broader 

scale. In many cases, contracting officers should have the discretion to use their GPC, up to their 

warrant, or other administrative threshold provided by the agency, to procure customized products 

and services after issuing an RFP or an RFQ and selecting the proposal or quote that represents the best 

value to the government. Along with the streamlining of terms and conditions and broader outreach as 

a result of market research, providing notice in the RFP or RFQ that the contracting officer intends to 

use a GPC to complete the transaction and provide immediate payment, may incentivize vendors to 

submit an offer. 

Transparency and Accountability 

Although the simplified procedures do not allow for protests to GAO or the Court of Federal Claims, 

the simplified procedures for acquiring readily available with customization provides for transparency 

either through the protest process or as a result of publicly posting the results of a procurement. In 

situations for which the contracting officer would publicly post an RFP or RFQ, GAO and the Court 

would have jurisdiction over any preaward protest that might be filed, and any postaward protest as a 

result of the contract award.117 The process described above for readily available procurements would 

apply in situations for which the contracting officer is authorized to use market-based competition. In 

addition, if the contracting officer issues an RFP or RFQ, even directly to a limited number of vendors, 

those in receipt of the solicitation maintain a right as an interested party to file a postaward protest. 

The postaward publication of the contract award, the market research documentation, and a redacted 

SSDD would be required any time a solicitation is not publicly posted. This process would ensure 

adequate transparency into the government’s actions in situations for which time is a critical factor or a 

publicly posted solicitation adds no value to the procurement, and the contracting officer is authorized 

to use market-based competition. Procurement actions that are not adequately supported by the 

publicly posted documentation, would undoubtedly draw scrutiny from industry, public interest 

 

115 The complicated fixed-price incentive contracts found in FAR 16.403 are not what is contemplated here. Instead, contracting officers 

should be able to offer and negotiate performance or delivery incentives where certain performance characteristics or delivery timelines 

would provide added value, but there is also added risk for the contractor. 

116 “Air Force Busts Out Credit Cards to Buy High Tech Gear,” Paul Mcleary, Breaking Defense, September 19, 2018, accessed 

September 21, 2018, https://breakingdefense.com/2018/09/air-force-busts-out-credit-cards-to-buy-high-techgear/?utm_source=Sailthru&utm_medium=email&utm_campaign=ebb%2009.20.18&utm_term=Editorial%20-%20Early%20Bird%20Brief. 

117 Recommendations 66–69 are critical to ensuring protests meet their intended purpose, and is how the Panel envisions protests being 

adjudicated in this framework. 
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groups, the agencies, and Congress. This proposal would allow for greater transparency than is present 

in the existing acquisition system, while also providing DoD the discretion necessary to rapidly acquire 

and field customized private-sector products and services that fill DoD capability gaps. 

Conclusions: Readily Available With Customization 

The ability to effectively procure readily available products and services and leverage actual marketbased competition will thrust DoD procurement into the information age and have it poised to make 

the next leap into the artificial intelligence age. If DoD’s procurement system is going to achieve the 

outcomes required of it by the national security challenges the nation faces, certain long-held 

institutional perceptions of public procurement must be completely reimagined. This proposal reduces 

or eliminates barriers to entry, provides for flexibility and agility, values time, and eliminates processes 

that do not add value to the system. These are bold changes, which will not be welcomed by those who 

benefit from the idiosyncrasies of the existing system and those who view this proposed approach as 

an abandonment of socioeconomic and domestic preference programs. But defense acquisition is the 

business of providing lethality to a Joint force responsible for conducting full-spectrum combat and 

noncombat operations. 

These changes are necessary to ensure DoD is able to efficiently access the extraordinary advances in 

technology and innovation present in the private sector that is led by small businesses and 

nontraditional sources and enables DoD to shift resources to its more complex procurements. These 

recommendations would achieve the goal of allowing DoD to behave the way buyers in the private 

sector behave, increasing access to and speeding delivery of readily available capabilities, and 

improving the lethality of the Joint force. A revolution of this scale is necessary to remain at the cutting 

edge of technology and innovation. The Section 809 Panel’s recommendations would allow DoD to 

employ innovation in defense instead of being the victim of that innovation employed by others. 

Implementation 

Legislative Branch 

 Amend Title 10 by creating a statutory authority for DoD to procure readily available products 

and services and readily available products and services with customization via the simplified 

readily available procedures outlined in this recommendation. 

 Amend Title 10 Competition in Contracting Act provisions to include market-based competition 

as the preferred method for achieving competition when DoD is procuring readily available 

products and services and readily available products and services with customization. 

 Amend Title 10 Competition in Contracting Act provisions to include merit-based selection as a 

means of satisfying competition requirements. 

 Repeal Title 10 provisions related to procurement of commercial products and services. 

 Revise Title 10 provisions to remove the terms commercial products, commercial services, and 

nondevelopmental items and replace them with readily available products and services and 

readily available products and services with customization. 
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Executive Branch 

 Amend DFARS Part 205 to implement procedures for market-based competition. 

 Amend DFARS Part 213 and repeal DFARS Part 212to implement procedures for acquiring 

readily available products and services and readily available products and services with 

customization. 

 Publish a DFARS clause for use as the standard terms and conditions for procuring readily 

available products and services. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details pages at the end of Section 1. 

Implications for Other Agencies 

 This proposal will likely reduce DoD reliance on GSA and other governmentwide contract 

vehicles to procure readily available products and services. 

 The Director of OMB and the U.S. Trade Representative will need to renegotiate the public 

procurement portion of applicable trade agreements to include the concept of readily available 

products and services and the use of market-based competition for procuring readily available 

products and services. 
Section 1 

Marketplace Framework 

Implementation Details 

Recommendation 35 

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Volume 3: Section 1 Implementation Details

Marketplace Framework Rec. 35 | Page 1

RECOMMENDED REPORT LANGUAGE

SEC.___01. ACQUISITION OF READILY AVAILABLE PRODUCTS AND SERVICES.

This section would amend title 10, United States Code by inserting a new chapter 247 to 

facilitate the acquisition of readily available products and services for the Department of 

Defense (DoD) and would establish a preference for the acquisition of readily available 

products and services to meet DoD requirements. This section would introduce market-based 

competition as the preferred method for acquiring readily available products and services, 

which would enable the Department to function more like other buyers in the private-sector 

marketplace. To do so, this section would limit the application of certain government-wide and 

defense specific procurement related statutes to buying readily available products and services, 

and would require the Secretary of Defense to focus more on the price and value of these 

products and services than on cost. 

The committee recognizes that the current DoD acquisition system, built for a 20th 

century defense-industrial market, is best suited for developing and procuring conventional 

products to be used in defined missions against known adversaries. This system has focused on 

mitigating risk through multiple layers of procedural contract compliance protocols, unlike 

those found in normal market place transactions. As a result, the barriers to entry for innovative 

and non-traditional suppliers, in many cases, are insurmountable. The committee is aware that

in today’s complex security environment, with rapidly changing private-sector developed 

technology, the Department must be able to deliver a wide variety of warfighting and combat 

support capabilities as efficiently as possible. Since not all capabilities are acquired in the same 

way, the Department must adjust its acquisition processes to meet the demands of the diverse 

markets in which it operates. 

This section would address the statutory and regulatory changes necessary to 

modernize and simplify the Department’s acquisition of products and services readily available 

in the private-sector to ensure the defense acquisition system is agile, efficient, and effective at 

procuring such products and services offered for sale to the public or other government 

agencies. It would require the Department to implement new readily available acquisition 

procedures to be used in place of the existing commercial buying and simplified acquisition 

procedures. The committee notes that the amendments made by this section are based on 

recommendations for a new defense dynamic marketplace outlined in Volume 2 (dated June 28, 

2018) and Volume 3 (dated January 15, 2019) reports of the acquisition advisory panel 

established under Section 809 of the National Defense Authorization Act for Fiscal Year 2016 

(Public Law 114-92). 
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SEC. ___02. IMPLEMENTATION OF DEPARTMENT OF DEFENSE READILY AVAILABLE 

ACQUISITION AUTHORITIES. 

This section would make a number of conforming amendments to title 10, United States 

Code to replace the existing commercial buying and simplified acquisition procedures and 

thresholds with simplified readily available acquisition procedures for procuring readily 

available products and services and readily available products and services with customization 

for the Department of Defense. In addition to incorporating market-based competition into the 

competition requirements for the Department, this section would also establish merit-based 

selection processes as an acceptable method for achieving competition. This would enable the 

Department to compete dissimilar readily available products and services as well as products 

and technologies that require further development. This section would facilitate the 

implementation of such readily available procedures which would be set out in the new 

chapter 247 created by section ___01.
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For the NDAA provision: 

Implementation—These 2 sections will be implemented in the Defense Federal 

Acquisition Regulation Supplement and will replace existing simplified acquisition 

procedures and commercial buying procedures for the Department of Defense. 

1 SEC. __01. ACQUISITION OF READILY AVAILABLE PRODUCTS AND SERVICES. 

2 (a) CHAPTER IN NEW PART V.— 

3 (1) NEW CHAPTER.—Part V of subtitle A of title 10, United States Code, as added 

4 by section 801 of the John S. McCain National Defense Authorization Act for Fiscal 

5 Year 2019 (Public Law 115-232), is amended by striking chapter 247 and inserting the 

6 following:

7 “CHAPTER 247—ACQUISITION OF READILY AVAILABLE PRODUCTS 

8 AND SERVICES

Sec. 

3451. Definitions. 

3452. Acquisition of readily available products and services: preference. 

3453. Readily available acquisition procedures: thresholds. 

3454. Readily available acquisition procedures: use of. 

3455. Procurement of major weapon systems as readily available products: prior determination by 

Secretary of Defense and notification to Congress. 

3456. Acquisition of readily available products and services: inapplicability of procurement related 

provisions of law and executive orders. 

9 §3451. Definitions 

10 In this chapter: 

11 (1) The term “readily available”, with respect to a product or service, means a 

12 product or service that requires no customization by the vendor and can be put on order 

13 by customers. Such term includes optional, priced features of products and services in a 

14 form that is offered for sale in the normal course of business.

15 (2) The term “customization” means— 
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1 (A) with respect to a product— 

2 (i) a change, beyond an optional, priced product feature, that is 

3 made to a readily available product to meet a Department of Defense need 

4 using commercial processes and equipment; or 

5 (ii) the manufacturing of a product based on a specification using 

6 only commercial processes and equipment; and 

7 (B) with respect to a service, that a performance work statement, statement 

8 of objectives, or other form of direction about how to perform the service is 

9 necessary to identify the service to be performed. 

10 (3) The term “defense-unique development” means a Department of Defense11 financed development, either to repurpose a readily available product or solution or to 

12 develop a new product or solution, to provide a defense-unique capability. 

13 (4) The term “market-based competition” means the consideration of sources that 

14 offer readily available products and services at prices available to any potential buyer, 

15 resulting in competition being established through market forces.

16 (5) The term “market research” means obtaining information about capabilities, 

17 products, and services available in the private sector through a variety of means, which 

18 may include— 

19 (A) contacting knowledgeable individuals in government and industry; 

20 (B) interactive communication among industry, acquisition personnel, and 

21 customers; and 

22 (C) interchange meetings or pre-solicitation conferences with potential 

23 offerors. 
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1 (6) The term “component acquisition executive” means— 

2 (A) in the case of a military department, the service acquisition executive 

3 of that military department; and 

4 (B) in the case of a component of the Department of Defense other than a 

5 military department, the authority performing for that component the functions 

6 that a service acquisition executive performs for a military department. 

7 (7) The term “value assessment” means an assessment by a requiring activity or 

8 program office of the value of a product or service to the requiring activity or program 

9 office’s mission relative to the price offered that is provided to the contracting officer to 

10 aid in determining that a price is fair and reasonable. 

11 §3452. Acquisition of readily available products and services: preference 

12 (a) Relationship to Commercial and Non-Commercial Products and Services.—The 

13 Secretary of Defense may not use the term “commercial products and services” or the term 

14 “nondevelopmental item”, as those terms are defined in title 41, or the authorities associated with 

15 those terms, except as described in in this chapter or chapter 137 of this title as applying to— 

16 (1) readily available products and services; 

17 (2) readily available products and services with customization; or 

18 (3) defense-unique development. 

19 (b) Preference.—The Secretary of Defense shall ensure that, to the maximum extent 

20 practicable— 

21 (1) requirements of the Department of Defense with respect to a procurement of 

22 products or services are stated in terms of— 

23 (A) functions to be performed; 
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1 (B) outcome required; or 

2 (C) essential physical characteristics; 

3 (2) such requirements are defined so that readily available products and services 

4 may be procured to meet such requirements; and 

5 (3) when offers are publicly solicited, vendors of readily available products and 

6 services are provided an opportunity to compete in any procurement to meet such 

7 requirements. 

8 (c) Determination to develop or procure defense-unique products.—(1) A defense-unique 

9 development product may not be procured if there is a readily available product, with or without 

10 customization, that meets the basic requirements of the Department of Defense. 

11 (2) A determination to develop or purchase a defense-unique product shall be made in 

12 writing and signed by the program manager and the contracting officer. If there is no program 

13 manager, the contracting officer and the head of the requiring activity shall sign the 

14 determination. 

15 (d) Readily Available Services.—A service purchased by the Secretary of Defense 

16 shall be considered readily available, with or without customization, unless the head of the 

17 contracting activity, for a contract valued at $15,000,000 or less, or the component acquisition 

18 executive, or the Under Secretary of Defense for Acquisition and Sustainment (as applicable) for 

19 a contract valued in excess of $15,000,000— 

20 (1) makes a written determination that the service does not meet the definition of 

21 readily available, with or without customization; and 

22 (2) for a contract with an anticipated value of $15,000,000 or less, makes a 

23 written determination that the use of procedures other than the readily available 
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1 acquisition procedures under section 3454 of this title are more appropriate due to the 

2 defense-unique nature of the requirement. 

3 (e) Preliminary Market Research.—(1) The Secretary of Defense shall conduct market 

4 research appropriate to the nature of the requirement— 

5 (A) before developing new specifications for a procurement by the Department of 

6 Defense; 

7 (B) before soliciting bids or proposals in a case in which a solicitation is required 

8 or a determination has been made that solicitations should be used,; and 

9 (C) before awarding a task order or delivery order. 

10 (2) The Secretary of Defense shall use the results of market research to determine 

11 whether there are readily available products and services, with or without customization, that— 

12 (A) meet the requirements of the Department of Defense; or 

13 (B) could meet those requirements if those requirements were modified to a 

14 reasonable extent. 

15 (3) In conducting market research, the Secretary may not request potential sources to 

16 submit more than the minimum information that is necessary to make the determinations 

17 required in paragraph (2). 

18 (4) The Secretary of Defense shall ensure that any prime contractor of a contract (or task 

19 order or delivery order) in an amount in excess of $5,000,000 for the procurement of items other 

20 than readily available products and services engages in such market research as may be 

21 necessary to carry out the requirements of subsection (b)(2) unless the prime contractor already 

22 has established commercial supply chains in place. 
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1 (f) Market Research for Price Analysis.—The Secretary of Defense shall ensure that 

2 procurement officials in the Department of Defense conduct or obtain market research to support 

3 the determination of the reasonableness of prices for readily available products and services 

4 contained in any bid or offer submitted in response to a solicitation. To the extent necessary to 

5 support such market research, the procurement official for a solicitation— 

6 (1) in the case of a product or service acquired under section 3455 of this title, 

7 shall use information submitted under subsection (d) of that section; and 

8 (2) in the case of other products or services, may require the offeror to submit 

9 relevant information only if market research, available market intelligence resources, and 

10 a value assessment by the requiring activity is not sufficient to support the price analysis. 

11 (g) Market Research Training and Tools Required.—The Secretary of Defense shall 

12 provide mandatory training and tools for members of the armed forces and employees of the 

13 Department of Defense responsible for the conduct of market research required under 

14 subsections (e) and (f). 

15 (h) Pricing Training and Tools Required.—The Secretary of Defense shall provide 

16 mandatory training and tools for the procurement officials responsible for price analysis and 

17 value-based assessments under subsection (d) for situations in which competitive price 

18 comparison (through comparison of publicly available prices, prior sales data, or prices 

19 submitted in response to a solicitation) is not available. Such training shall— 

20 (1) provide comprehensive information on private sector pricing practices and the 

21 role intellectual capital and innovation play in private sector pricing; 

22 (2) teach best practices for conducting and documenting price analysis; and 
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1 (3) provide means for collecting and sharing prices paid for readily available 

2 products and services across the Department. 

3 (i) Implementation.—The Secretary of Defense shall ensure that procurement officials in 

4 the Department of Defense, to the maximum extent practicable— 

5 (1) acquire readily available products and services, with or without customization, 

6 to meet the needs of the Department; 

7 (2) require prime contractors and subcontractors at all levels under Department of 

8 Defense contracts to incorporate readily available products and services, with or without 

9 customization, as components of products and services supplied to the Department of 

10 Defense; 

11 (3) modify requirements in appropriate cases to ensure that the requirements can 

12 be met by readily available products and services, with or without customization; 

13 (4) state specifications in terms that enable and encourage bidders and offerors to 

14 supply readily available products and services, with or without customization, in response 

15 to Department of Defense solicitations; 

16 (5) revise the procurement policies, practices, and procedures of the Department 

17 of Defense not required by law to reduce any impediments in those policies, practices, 

18 and procedures to the acquisition of readily available products and services, with or 

19 without customization; and 

20 (6) require training of all personnel involved in the acquisition of readily available 

21 products and services. 

22 §3453. Readily available acquisition procedures: thresholds 
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1 (a)Threshold for the Use of Readily Available Acquisition Procedures.—A procurement 

2 official of the Department of Defense shall use the readily available acquisition procedures under 

3 section 3454(a) of this title to acquire readily available products and services, with or without 

4 customization, in a case in which the value, or anticipated value, of the acquisition is 

5 $15,000,000 or less, unless the head of the contracting activity determines in writing that the use 

6 of procedures other than the procedures under section 3454(a) of this title is necessary to manage 

7 an unusually high risk acquisition. 

8 (b) Threshold for the Use of Market Based Competition.—A procurement official of the 

9 Department of Defense may use market based competition and is not required to publicly post a 

10 notice of solicitation, notwithstanding the requirements in section 1708 of title 41 and section 

11 8(e) of the Small Business Act (15 U.S.C. 637(e)), when acquiring a readily available product or 

12 service, with or without customization, if the value, or anticipated value, of the acquisition is 

13 $15,000,000 or less and, in the case of a service contract, if the period of performance does not 

14 exceed 12 months. 

15 (c) Authority to Exceed Threshold.—The chief of the contracting office— 

16 (1) may make a determination that readily available acquisition procedures under 

17 section 3454 of this title are appropriate for a given acquisition of readily available 

18 products or services, with or without customization, when the value, or anticipated value, 

19 of the acquisition exceeds $15,000,000; and 

20 (2) may make a determination that market-based competition is appropriate for a 

21 given acquisition of readily available products and services, with or without 

22 customization, when the value, or anticipated value, of the acquisition exceeds 

23 $15,000,000 or the period of performance of a service contract exceeds 12 months. 
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1 §3454. Readily available acquisition procedures: use of 

2 (a) When Procedures Are To Be Used.—To promote efficiency and economy in 

3 contracting, take advantage of competitive forces in the marketplace, and increase access by the 

4 Department of Defense to private sector markets by using procedures that are more consistent 

5 with the private sector, the Defense Federal Acquisition Regulation Supplement shall provide for 

6 simplified procedures for purchases of readily available products and services subject to the 

7 thresholds established in section 3453 of this title. Additional procedures under subsection (h) of 

8 this section apply to the acquisition of readily available products and services with 

9 customization. 

10 (b) Prohibition on Dividing Purchases.—A proposed purchase or contract for an amount 

11 in excess of the threshold specified in section 3453(a) of this title may not be divided into several 

12 purchases or contracts in order to use the acquisition procedures provided under subsection (a). 

13 (c) Promotion of Competition Required.—(1) When using the acquisition procedures 

14 provided under subsection (a), the Secretary of Defense, to the maximum extent practicable, 

15 shall promote competition through the use of market-based competition pursuant to sections 

16 3453(b) and 2304(a)(2)(C) of this title by— 

17 (A) requiring contracting activities to periodically post widespread electronic 

18 public notices of anticipated requirements for readily available products and services; and 

(B) considering vendors not registered with the Government’s award management system 

provided the contracting officer determines that the vendor is responsible. 

19 (2) In a case in which a contracting officer conducting an acquisition of a readily 

20 available product or service expects that competition will be significantly enhanced by 

21 solicitation of competitive proposals, the contracting officer may solicit such proposals by— 
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1 (A) direct solicitation of sources identified through market research; or 

2 (B) widespread electronic public notice of the solicitation. 

3 (3) When a contracting officer solicits competitive proposals under paragraph (2)(A), the 

4 contracting officer may require offerors to respond to the solicitation electronically and may 

5 establish a deadline for the submission of proposals in response to the solicitation without regard 

6 to any deadline that may otherwise be applicable under another provision of law. Any such 

7 deadline for the submission of offers shall afford potential offerors a reasonable opportunity to 

8 respond. 

9 (d) Consideration of Offers Timely Received.—The readily available acquisition 

10 procedures provided in the Defense Federal Acquisition Regulation Supplement under 

11 subsection (a) shall include a requirement that, when a solicitation of competitive proposals is 

12 used, the contracting officer shall consider each responsive offer timely received from a 

13 responsible offeror. 

14 (e) Evaluation of Prices for Small Businesses.— 

15 (1) A small business concern (within the meaning of section 3 of the Small 

16 Business Act (15 U.S.C. 632)) that offers a product or service that meets a requirement of 

17 the Department of Defense shall be provided a 5 percent price preference in the 

18 evaluation of offers or in comparing publicly available pricing from sources of readily 

19 available products and services. 

20 (2) In procuring readily available products and services, the Secretary of Defense 

21 shall apply the requirements of this section in preference to applying section 15(j) of the 

22 Small Business Act (15 U.SC. 644(j)). 
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1 (f) Commercially Acceptable Transaction and Payment Methods.—(1) In the case of 

2 contracts entered into using the readily available acquisition procedures provided in the Defense 

3 Federal Acquisition Regulation Supplement under subsection (a), procurement officials of the 

4 Department of Defense shall use the most efficient, expeditious, and commercially acceptable 

5 transaction and payment methods practicable. 

6 (2) In the case of an acquisition of readily available products and services up to the 

7 threshold established in 3453(a) of this title, a procurement official— 

8 (1) may use the Government purchase card as a transaction and payment method 

9 subject to the limitations of the contracting officer’s warrant and Department of Defense 

10 purchase card procedures and limitations; and 

11 (2) may not use flexibly priced contracts that require the application of the 

12 Government’s cost accounting standards or cost principles. 

13 (g) Equitable Distribution.—The Secretary of Defense, in acquiring readily available 

14 products and services, with or without customization, as a result of market-based competition 

15 shall, to the extent practicable, ensure purchases are distributed equitably among responsible 

16 vendors if the products or services they offer provide the same or similar value to the Department 

17 of Defense. 

18 (h) Additional Requirements for Acquiring Readily Available Products and Services 

19 Valued in Excess of $15 Million.—When a contract is to be awarded for the acquisition of 

20 readily available products and services and readily available products and services with 

21 customization for an amount in excess of $15,000,000, the contracting officer shall— 
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1 (1) publish a notice in accordance with section 1708 of title 41 and, as provided 

2 in section 1708(c)(4) of title 41, permit all responsible sources to submit a bid, proposal, 

3 or quotation (as appropriate) that the Department of Defense shall consider; 

4 (2) use simplified evaluation factors for award; and 

5 (3) include in the contract file a written description of the procedures used in 

6 awarding the contract and the number of offers received. 

7 (i) Transparency and Accountability.—(1) In the case of an acquisition awarded as a 

8 result of market-based competition, notice of the award shall be publicly posted within a 

9 reasonable period of time after the award is made, taking into consideration operational security. 

10 The notice of award shall include— 

11 (A) the purchase order or other record of the transaction that includes quantities 

12 and prices of the products or services being acquired; 

13 (B) documentation of market research results, including prices offered by each 

14 vendor considered for the award; and 

15 (C) if the award decision is based on factors other than price, a brief description of 

16 how the contracting officer made the award decision. 

17 (2) The Comptroller General, notwithstanding sections 3551-3557 of title 31, and the 

18 United States Court of Federal Claims, notwithstanding section 1491 of title 28, shall not have 

19 jurisdiction to review protests or actions filed in relation to pre-award matters or award decisions 

20 resulting from market-based competitions. 

21 (3) Protests may be filed with the competition advocate at the contracting activity. The 

22 basis for a protest shall be limited to assertions that— 
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1 (A) the product or service procured using readily available procedures was not a 

2 readily available product or service, with or without customization, or 

3 (B) the contracting officer failed to conduct market research pursuant to the 

4 readily available procedures. 

5 (4) In adjudicating a protest, the competition advocate shall make recommendations to 

6 the chief of the contracting office to cancel a procurement made under these procedures and re7 procure the readily available products and services when it is in the best interest of the 

8 Department of Defense. 

9 (5) The competition advocate shall be responsible for ensuring that the contracting 

10 activity— 

11 (A) is performing adequate market research; 

12 (B) considers an appropriate number of vendors; and 

13 (C) meets the requirements of subsection (g). 

14 (j) Micro-Purchase Procedures.—Nothing in this chapter shall affect the ability of the 

15 Department of Defense to use micro-purchase procedures for acquisitions below the micro16 purchase threshold under section 1902 of title 41. 

17 §3455. Procurement of major weapon systems as readily available products and services: 

18 prior determination by Secretary of Defense and notification to Congress 

19 (a) Requirement for Determination and Notification.—A major weapon system of the 

20 Department of Defense may be treated as a readily available product or service, or purchased 

21 under procedures established for the procurement of readily available products and services, only 

22 if— 

23 (1) the Secretary of Defense determines that— 
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1 (A) the major weapon system is a readily available product or service; and 

2 (B) such treatment is necessary to meet national security objectives; and 

3 (2) the congressional defense committees are notified at least 30 days before such 

4 treatment or purchase occurs. 

5 (b) Treatment of Subsystems as Readily Available Products and Services.—A subsystem 

6 of a major weapon system shall be treated as a readily available product or service and purchased 

7 under the readily available acquisition procedures under section 3454 of this title if the 

8 subsystem meets the definition of a readily available product or service, with or without 

9 customization, unless the head of the contracting activity determines in writing that it is in the 

10 best interest of the Government not to treat the product or service as readily available. 

11 (c) Treatment of Components and Spare Parts as Readily Available Products and 

12 Services.—(1) A component or spare part for a major weapon system shall be treated as a readily 

13 available product or service for the purposes of section 2306a of this title if the subsystem meets 

14 the definition of a readily available product or service, with or without customization, unless the 

15 head of the contracting activity determines in writing that it is in the best interest of the 

16 Department of Defense not to treat the product or service as readily available. 

17 (2) This subsection shall apply only to components and spare parts that are acquired by 

18 the Department of Defense through a prime contract or a modification to a prime contract (or 

19 through a subcontract under a prime contract or modification to a prime contract on which the 

20 prime contractor adds no, or negligible, value). 

21 (d) Information Submitted.—(1)(A) To the extent necessary to determine the 

22 reasonableness of the price for items acquired under this section, the contracting officer shall 

23 require the offeror to submit prices actually paid by other buyers, during the previous six months, 
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1 for the same or similar readily available products or services under comparable terms and 

2 conditions by both Government and commercial customers. 

3 (B) However, if the contracting officer determines that the offeror does not have access to 

4 and cannot provide sufficient information described in subparagraph (A) to determine the 

5 reasonableness of price, the contracting officer shall require the offeror to submit information 

6 on— 

7 (i) prices for the same or similar items sold under different terms and conditions; 

8 (ii) prices for similar levels of work or effort on related products or services; 

9 (iii) prices for alternative solutions or approaches; and 

10 (iv) other relevant information that can serve as the basis for a price assessment. 

11 (2) An offeror may submit information or analysis relating to the value of a readily 

12 available product or service to aid in the determination of the reasonableness of the price of such 

13 item. A contracting officer may consider such information or analysis in addition to the 

14 information submitted pursuant to paragraph (1). 

15 (e) Value assessment.—In addition to information provided by an offeror under 

16 subsection (d), the contracting officer may request and rely on a value assessment provided by 

17 the requiring activity or program office to aid in determining the reasonableness of the price of a 

18 readily available product or service. 

19 (f) Delegation.—The authority of the Secretary of Defense to make a determination 

20 under subsection (a) may be delegated only to the Chief Management Officer, without further 

21 redelegation. 
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1 (g) Major Weapon System Defined.—In this section, the term "major weapon system" 

2 means a weapon system acquired pursuant to a major defense acquisition program (as that term 

3 is defined in section 2430 of this title). 

4 §3456. Acquisition of readily available products and services: inapplicability of 

5 procurement related provisions of law and executive orders 

6 (a) Inapplicability of Procurement-Related Statutes and Contract Clause Requirements to 

7 Contracts for Readily Available Products and Services.— (1) A provision of law that sets forth 

8 policies, procedures, requirements, or restrictions for the procurement of property or services by 

9 the Federal Government or the Department of Defense shall not apply to a contract by the 

10 Department of Defense for the procurement of readily available products and services, with or 

11 without customization, unless that provision expressly refers to this section and expressly states 

12 that the provision is applicable to such a contract. 

13 (2) The provisions of law that are inapplicable to the procurement of readily available 

14 products and services, with or without customization, by the Department of Defense pursuant to 

15 paragraph (1) include the following: 

16 (A) Chapter 83 of title 41. 

17 (B) Section 2533a of this title. 

18 (C) Chapter 67 of title 41. 

19 (D) Sections 3141-3144, 3146, and 3147 of title 40. 

20 (E) Chapter 65 of title 41. 

21 (3) A contract clause requirement based on a Government-wide or Defense-specific 

22 acquisition regulation, policy, or executive order, not expressly required in law, shall not apply to 

23 a contract by the Department of Defense for the procurement of readily available products and 
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1 services, with or without customization, unless the acquisition regulation, policy, or executive 

2 order expressly refers to this section and expressly states that the acquisition regulation, policy, 

3 or executive order is applicable to such a contract. 

4 (4) The Defense Federal Acquisition Regulation Supplement shall include a list of the 

5 Government-wide and Defense-specific provisions of law and contract clause requirements 

6 described in paragraphs (1) and (3) that are applicable to contracts for the procurement of readily 

7 available products and services, with or without with customization. A provision of law or 

8 contract clause requirement that is not included on that list shall not be applicable to the 

9 procurement of readily available products and services, with or without customization, by the 

10 Department of Defense. 

11 (b) Contract Clauses Applicable to the Acquisition of Readily Available Products and 

12 Services.—(1) The Defense Federal Acquisition Regulation Supplement shall provide that, for 

13 any contract for the acquisition of readily available products and services, with or without 

14 customization, entered into using readily available acquisition procedures, all contract clause 

15 requirements shall be stated in a single contract clause. No additional Federal Acquisition 

16 Regulation or Defense Federal Acquisition Regulation Supplement contract clause or provision 

17 may be included in such a contract unless the chief of the contracting office determines that an 

18 additional clause is required due to the nature of any customization that is required and that the 

19 additional clause is consistent with existing private-sector practices. 

20 (2) No Federal Acquisition Regulation contract clause or provision or Defense Federal 

21 Acquisition Regulation Supplement contract clause or provision may be required in a subcontract 

22 for the acquisition of readily available products and services under a Department of Defense 

23 contract. 
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1 (3) In this subsection, the term "subcontract" includes a transfer of readily available 

2 products or services, with or without customization, between divisions, subsidiaries, or affiliates 

3 of a contractor or subcontractor. The term does not include agreements entered into by a 

4 contractor for the supply of commodities that are intended for use in the performance of multiple 

5 contracts with the Department of Defense and other parties and are not identifiable to any 

6 particular contract.”.

7 (2) TABLES OF CHAPTERS.—The tables of chapters at the beginning of subtitle A, 

8 and at the beginning of part V of subtitle A, of title 10, United States Code, are amended 

9 by striking the items relating to chapter 247 and inserting the following:

‘‘247. Acquisition of Readily Available Products and Services............................................... 3451’’. 

10 (b) CONTINUATION OF APPLICABILITY OF CHAPTER 140 TO NON-DOD AGENCIES.— 

11 (1) COVERED AGENCIES.—Paragraphs (2) and (3) of section 2376 of title 10, 

12 United States Code, are amended to read as follows: 

13 “(2) The term ‘head of an agency’ means the Secretary of Homeland Security and 

14 the Administrator of the National Aeronautics and Space Administration. 

15 “(3) The term ‘agency’ means the Coast Guard and the National Aeronautics and 

16 Space Administration.”. 

17 (2) REPEAL OF DOD-SPECIFIC PROVISIONS.—Chapter 140 of title 10, United States 

18 Code, is amended as follows: 

19 (A) Section 2375 is amended by striking subsections (b), (c), (d), and (e). 

20 (B) Section 2377 is amended by subsections (d) and (e). 

21 (C) Section 2379 is repealed. 

22 (D) Section 2380 is repealed. 

23 (E) Section 2380B is repealed. 
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1 SEC. __02. IMPLEMENTATION OF DEPARTMENT OF DEFENSE READILY 

2 AVAILABLE ACQUISITION AUTHORITIES. 

3 (a) DEFINITIONS.—Section 2302 of title 10, United States Code, is amended— 

4 (1) in paragraph (2)— 

5 (A) in subparagraph (C)(ii), by striking “lowest overall cost alternative” 

6 and inserting “best value”; 

7 (B) by striking “and” at the end of subparagraph (D); 

8 (C) by striking the period at the end of subparagraph (E) and inserting a 

9 semicolon; and 

10 (D) by adding at the end the following new subparagraphs: 

11 “(F) the procurement of readily available products and services, with or 

12 without customization, by the Department of Defense through market-based 

13 competition under the procedures for acquiring readily available products and 

14 services pursuant to sections 3454 and 2304 of this title; and 

15 “(G) merit-based processes for considering innovative technologies, new 

16 capabilities, and existing products and proven technologies proposed as a result of 

17 a general solicitation.”; and 

18 (2) by adding at the end the following new paragraph: 

19 “(10) The following terms have the meanings provided such terms in section 3451 

20 of this title: 

21 “(A) The term ‘readily available’. 

22 “(B) The term ‘customization’. 

23 “(C) The term ‘defense-unique development’. 
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1 “(D) The term ‘market-based competition’.”. 

2 (b) SIMPLIFIED ACQUISITION PROCEDURES.—Sections 2302a(a) and 2302b of such title 

3 are amended by inserting “paragraphs (5) and (6) of” after “named in”. 

4 (c) COMPETITION REQUIREMENTS.—Section 2304 of such title is amended— 

5 (1) in subsection (a)(2)— 

6 (A) by striking “and” at the end of subparagraph (A); 

7 (B) by striking the period at the end of subparagraph (B) and inserting a 

8 semicolon; and 

9 (C) by adding at the end the following new subparagraphs: 

10 “(C) shall, to the maximum extent practicable, rely on market-based competition 

11 to determine sources when— 

12 “(i) the Department of Defense is procuring readily available products and 

13 services, with or without customization, with a value, or a period of performance, 

14 that does not exceed the threshold specified in section 3453(b) of this title, unless 

15 the contracting officer determines that requesting competitive proposals is in the 

16 best interest of the Government; or 

17 “(ii) the Department of Defense is procuring readily available products 

18 and services, with or without customization, with a value, or a period of 

19 performance, in excess of the threshold specified in section 3453(b) of this title, if 

20 authorized by the chief of the contracting office; and 

21 “(D) shall use merit-based selection processes or peer reviews when appropriate 

22 to identify and acquire innovative, developmental, and existing or proven products and 
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1 services through a general solicitation, such as a problem statement, statement of 

2 objectives, or broad agency announcement.”; 

3 (2) in subsection (d)(3)(B), by inserting before the period at the end the following: 

4 “or, in the case of an agency named in paragraphs (1)-(4) of section 2302(a) of this title, 

5 when entered into using procedures other than readily available acquisition procedures 

6 under section 3454 of this title”; 

7 (3) in subsection (g)— 

8 (A) in paragraph (2), by inserting “or the readily available threshold 

9 specified in section 3453 of this title” after “simplified acquisition threshold”; and 

10 (B) by adding at the end the following new paragraphs: 

11 “(5) To promote efficiency and economy in contracting, take advantage of competitive 

12 forces in the marketplace, and enable the Department of Defense to use business practices that 

13 are more consistent with the private sector, the Defense Federal Acquisition Regulation 

14 Supplement shall provide for special simplified procedures for purchases of readily available 

15 products and services, with or without customization, pursuant to the thresholds specified in 

16 section 3453 of this title. 

17 “(6) When using readily available acquisition procedures, the Secretary of Defense shall 

18 promote competition by relying, to the maximum extent practicable, on market-based 

19 competition pursuant to section 3453(b) of this title.”; and 

20 (4) in subsection (i)(3), by striking “an item of supply” and all that follows and 

21 inserting “a readily available product or service, with or without customization, acquired 

22 using readily available acquisition procedures.”. 
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1 (d) CONTRACT EVALUATION AND AWARD PROCEDURES.—Section 2305(a) of such title is 

2 amended— 

3 (1) in paragraph (1)— 

4 (A) by striking “In preparing” and all that follows through “head of an 

5 agency” and inserting “Except as provided in subparagraph (D), the head of an 

6 agency, in preparing for the procurement of property or services,”; and 

7 (B) by adding at the end the following new subparagraph: 

8 “(D) Subparagraph (A) does not apply in the case of a procurement by the 

9 Department of Defense using either market-based competition or merit-based selection.”; 

10 and 

11 (2) in paragraph (2), by inserting “, a procurement by an agency named in 

12 paragraphs (1)-(4) of section 2302(a) of this title using readily available acquisition 

13 procedures,” after “simplified procedures” in the matter preceding subparagraph (A). 

14 (e) COST OR PRICING DATA.—Section 2306a of such title is amended as follows: 

15 (1) Subsection (b) is amended— 

16 (A) in paragraph (1)— 

17 (i) by striking “or” at the end of subparagraph (C); 

18 (ii) by striking the period at the end of subparagraph (D) and 

19 inserting “; or”; and 

20 (iii) by adding at the end the following new subparagraph: 

21 “(E) when an agency named in paragraphs (1)-(4) of section 2302(a) of 

22 this title is acquiring readily available products and services, with or without 

23 customization.”; 
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1 (B) by striking paragraph (2) and inserting the following: 

2 “(2) MODIFICATIONS OF CONTRACTS AND SUBCONTRACTS FOR COMMERCIAL ITEMS 

3 AND DEPARTMENT OF DEFENSE CONTRACTS OR SUBCONTRACTS FOR READILY AVAILABLE 

4 PRODUCTS OR SERVICES, WITH OR WITHOUT CUSTOMIZATION.—In the case of a 

5 modification of a contract or subcontract for a commercial item that is not covered by the 

6 exception to the submission of certified cost or pricing data in paragraph (1)(A) or (1)(B), 

7 and in the case of a Department of Defense contract for a readily available product or 

8 service, with or without customization, that is not covered by the exception to the 

9 submission of certified cost or pricing data in paragraph (1)(A) or (1)(E), submission of 

10 certified cost or pricing data shall not be required under subsection (a) if— 

11 “(A) the contract or subcontract being modified is a contract or 

12 subcontract for which submission of certified cost or pricing data may not be 

13 required by reason of paragraph (1)(A), (1)(B), or (1)(E); and 

14 “(B) the modification would not change the contract or subcontract, as the 

15 case may be— 

16 “(i) from a contract or subcontract for the acquisition of a 

17 commercial item to a contract or subcontract for the acquisition of a 

18 product or service other than a commercial item; 

19 “(ii) from a contract or subcontract for the acquisition of a readily 

20 available product or service to a contract or subcontract for the acquisition 

21 of a product or service other than a readily available product or service; or 

22 “(iii) from a contract or subcontract for the acquisition of a readily 

23 available product or service with customization to a contract or 
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1 subcontract for the acquisition of a product or service other than a readily 

2 available product and services with customization.”; 

3 (C) in paragraph (3)— 

4 (i) by striking “NONCOMMERCIAL MODIFICATIONS” in the 

5 paragraph heading and all that follows through “expected to cost” in 

6 subparagraph (A) and inserting “NONCOMMERCIAL MODIFICATIONS OF 

7 COMMERCIAL ITEMS AND READILY AVAILABLE PRODUCTS AND SERVICES 

8 FURTHER DEVELOPED FOR A DEFENSEUNIQUE PURPOSE.—(A) The 

9 exceptions in paragraph (1)(B) and (1)(E) do not apply to cost or pricing 

10 data on noncommercial modifications of a commercial item, or 

11 modifications that require further development of a readily available 

12 product or service such that it is repurposed in a defense-unique way for 

13 the Department of Defense inconsistent with private sector practices, that 

14 are expected to cost”; and 

15 (ii) in subparagraph (C)— 

16 (I) in clause (i), by inserting “or a readily available product 

17 or service further developed for a defense-unique purpose by the 

18 Department of Defense” before the semicolon at the end; and 

19 (II) in clause (ii), by striking “acquisition of” and all that 

20 follows and inserting “acquisition of a commercial item or readily 

21 available product or service other than the cost and pricing of 

22 noncommercial modifications of such item or defense-unique 
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1 development of such product or service for the Department of 

2 Defense.”; 

3 (D) in paragraph (4)— 

4 (i) by inserting “AND DEFENSE-UNIQUE” in the paragraph 

5 heading after “COMMERCIAL ITEM”; 

6 (ii) by striking “a military department, a Defense Agency, 

7 or another component of the Department of Defense” in 

8 subparagraph (A) and inserting “an agency”; and 

9 (iii) by adding at the end the following new subparagraph: 

10 “(D) For purposes of applying the readily available exception under paragraph 

11 (1)(E) to the required submission of certified cost or pricing data for the Department of 

12 Defense, a product or service that is offered for sale, with or without customization, and 

13 that does not require any defense-unique development shall be presumed to be readily 

14 available unless the contracting officer makes a written determination that the product or 

15 service is not readily available or readily available with customization.”; and 

16 (E) in paragraph (5), by striking “recent purchase prices” and all that 

17 follows through “in establishing” and inserting “recent actual net prices paid by 

18 the Government or any other buyer for the same or similar commercial items or 

19 readily available products or services in establishing”. 

20 (2) Subsection (c) is amended— 

21 (A) in paragraph (2), by striking “subparagraph (A) or (B)” and inserting 

22 “subparagraph (A), (B), or (E)”; and 
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1 (B) in paragraph (3), by striking “this paragraph” and inserting “this 

2 subsection”. 

3 (3) Subsection (d) is amended— 

4 (A) in paragraph (2), by inserting “FOR COMMERCIAL ITEMS” in the 

5 paragraph heading after “AUTHORITY”; and 

6 (B) by adding at the end the following new paragraph: 

7 “(3) LIMITATIONS ON AUTHORITY FOR READILY AVAILABLE PRODUCTS AND 

8 SERVICES, WITH OR WITHOUT CUSTOMIZATION.—The Defense Federal Acquisition 

9 Regulation Supplement shall include the following provisions regarding the types of 

10 information that contracting officers may require under paragraph (1): 

11 “(A) A reasonable limitation on requests for sales data relating to readily 

12 available products and services, with or without customization. 

13 “(B) A requirement that a contracting officer limit, to the maximum extent 

14 practicable, the scope of any request for information relating to readily available 

15 products and services, with or without customization, from an offeror to only that 

16 information that is in the form regularly maintained by the offeror in private 

17 sector business operations. 

18 “(C) A statement that any information received relating to readily 

19 available products and services, with or without customization, that is exempt 

20 from disclosure under section 552(b) of title 5 shall not be disclosed by the 

21 Federal Government.”. 

22 (4) Subsection (h)(2) is amended by inserting “, readily available products or 

23 services, with or without customization,” after “commercial items”. 
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1 (f) CONTRACT FINANCING.—Section 2307(f) of such title is amended— 

2 (1) in the subsection heading, by inserting “, READILY AVAILABLE PRODUCTS AND 

3 SERVICES, WITH OR WITHOUT CUSTOMIZATION” after “COMMERCIAL ITEMS”; 

4 (2) in paragraph (1), by inserting “, readily available products and services, with 

5 or without customization,” after “commercial items”; 

6 (3) in paragraph (2), by inserting “, readily available products and services, with 

7 or without customization,” after “items”; and 

8 (4) in paragraph (3), by inserting “or private sector” after “commercial”. 

9 (g) TECHNICAL DATA RIGHTS.—Section 2320(b) of such title is amended— 

10 (1) in paragraph (1), by striking “commercial item, the item” and inserting 

11 “commercial item or readily available product or service, with or without customization, 

12 the item, product, or service”; and 

13 (2) in paragraph (9)— 

14 (A) in subparagraph (A), by inserting “, nonreadily available product or 

15 service, with or without customization,” after “noncommercial item”; and 

16 (B) in subparagraph (B)(i), by inserting “, product, service,” after “item”. 

17 (h) PROPRIETARY DATA RESTRICTIONS.—Section 2321(f) of such title is amended by 

18 inserting “or readily available products or services, with or without customization,” after 

19 “commercial items”. 

20 (i) ACQUISITION OF COMPUTER SOFTWARE.— 

21 (1) Section 2322a of such title is amended— 

22 (A) in subsection (a)— 
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1 (i) by striking “noncommercial computer software” the first place 

2 it appears and inserting “computer software and software that meets the 

3 definition of defense-unique development under section 2302 of this title”; 

4 and 

5 (ii) by striking “noncommercial computer” after “life-cycle of the”; 

6 and 

7 (B) in subsection (b), by striking “noncommercial computer software” and 

8 inserting “defense-unique developmental computer software“. 

9 (2) The heading of such section is amended to read as follows: 

10 “§2322a. Requirement for consideration of certain matters during acquisition of defense11 unique developmental computer software”. 

12 (j) ALLOWABLE COSTS.—Section 2324(l)(1)(A) of such title is amended by striking 

13 “commercial items” and inserting “readily available products and services, with or without 

14 customization,”. 

15 (k) PROHIBITION ON COLLECTION OF POLITICAL INFORMATION.—Section 2335(b) of such 

16 title is amended— 

17 (1) by striking “the procurement” and all that follows through “manufactured 

18 items,” and inserting “all agency procurement actions”; and 

19 (2) by striking “and basic ordering agreements” and inserting “basic ordering 

20 agreements, and other transactions”. 

21 (l) FISCAL YEAR 2019 NDAA.—The John S. McCain National Defense Authorization 

22 Act for Fiscal Year 2019 (Public Law 115-232) is amended as follows: 
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1 (1) Section 226(b)(3)(C) (10 U.S.C. 2302 note) is amended by inserting “, readily 

2 available products or services, with or without customization,” after “commercial-off-the3 shelf”. 

4 (2) Section 866(d) (10 U.S.C. 2321 note) is amended by striking “noncommercial 

5 software” and inserting “software that meets the definition of defense-unique 

6 development under section 3451 of title 10, United States Code”. 

7 (m) FISCAL YEAR 2018 NDAA.—Section 1698 of the National Defense Authorization 

8 Act for Fiscal Year 2018 (Public Law 115-91; 10 U.S.C. 2302 note) is amended— 

9 (1) in subsections (a) and (b), by striking “section 2377” and inserting “section 

10 3453”; 

11 (2) by redesignating subsection (c) as subsection (d); 

12 (3) by inserting after subsection (b) the following new subsection (c): 

13 “(c) READILY AVAILABLE PRODUCTS AND SERVICES, WITH OR WITHOUT 

14 CUSTOMIZATION.—Not later than 30 days after the implementation of the acquisition procedures 

15 for acquiring readily available products and services, with or without customization, under 

16 section 3453 of title 10, United States Code, the service acquisition executive responsible for 

17 each covered Distributed Common Ground System shall certify to the appropriate congressional 

18 committees that the procurement process for increments of the system procured after the date of 

19 the enactment of this subsection will be carried out in accordance with section 3452 of title 10, 

20 United States Code.”; and 

21 (4) by amending the section heading to read as follows: 
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1 “SEC. 1698. USE OF READILY AVAILABLE PRODUCTS AND SERVICES, WITH OR 

2 WITHOUT CUSTOMIZATION, IN DISTRIBUTED COMMON GROUND 

3 SYSTEMS.”.

4 (n) FISCAL YEAR 2017 NDAA.— 

5 (1) REVISION TO PILOT PROGRAM.—Section 879 of the National Defense 

6 Authorization Act for Fiscal Year 2017 (Public Law 114-328; 10 U.S.C. 2302 note) is 

7 amended— 

8 (A) in the section heading, by striking “COMMERCIAL ITEMS, AND 

9 TECHNOLOGIES,” and inserting “TECHNOLOGIES”; 

10 (B) in subsection (a)— 

11 (i) by striking “defense commercial solutions opening pilot 

12 program” and inserting “defense innovative solutions pilot program”; 

13 (ii) by striking “innovative commercial items, technologies, and 

14 services” and inserting “innovative products, technologies, and services”; 

15 and 

16 (iii) by inserting “pursuant to section 2304(a)(2)(D) of title 10, 

17 United States Code” before the period at the end; 

18 (C) by striking subsection (b); 

19 (D) by redesignating subsection (c) as subsection (b) and in that 

20 subsection— 

21 (i) in paragraph (2), by striking “including fixed-price incentive fee 

22 contracts”; and 

23 (ii) by striking paragraph (3) and inserting the following: 
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1 "(3) TREATMENT AS READILY AVAILABLE PRODUCTS AND SERVICES, WITH 

2 OR WITHOUT CUSTOMIZATION.—Notwithstanding section 3451(1) of title 10, 

3 United States Code, products, technologies, and services acquired under the pilot 

4 program shall be treated as readily available products and services, with or 

5 without customization.”; 

6 (E) by striking subsection (d); 

7 (F) by redesignating subsection (e) as subsection (c) and in paragraph (2) 

8 of that subsection— 

9 (i) in subparagraph (A), by striking “commercial item, technology, 

10 or service” and inserting “readily available products or services, with or 

11 without customization,”; and 

12 (ii) in subparagraph (B), by striking “commercial item, technology, 

13 or service” and inserting “product or service”; 

14 (G) by redesignating subsection (f) as subsection (d) and in that 

15 subsection— 

16 (A) in paragraph (1), by striking “that is new” and inserting “that 

17 uniquely meets a requirement, fills a capability gap, or presents a potential 

18 technological advancement or is new”; and 

19 (B) in paragraph (2), by striking “that is new” and inserting “that 

20 uniquely meets a requirement, fills a capability gap, or presents a potential 

21 technological advancement or is new”; and 

22 (H) by redesignating subsection (g) as subsection (e). 
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1 (2) GUIDANCE.—Not later than six months after the date of the enactment of this 

2 Act, the Secretary of Defense shall issue guidance for the implementation of the pilot 

3 program under section 879 of the National Defense Authorization Act for Fiscal Year 

4 2017 (Public Law 114-328; 10 U.S.C. 2302 note), as amended by paragraph (1), within 

5 the Department of Defense. Such guidance shall be posted for access by the public. 

6 (o) FISCAL YEAR 2015 NDAA.—Section 843(3) of the Carl Levin and Howard P. “Buck” 

7 McKeon National Defense Authorization Act for Fiscal Year 2015 (Public Law 113-291; 10 

8 U.S.C. 2302 note) is amended by striking “includes” and all that follows and inserting “includes 

9 a contract for commercial items or readily available products and services, with or without 

10 customization, but is not limited to a contract for commercial items or readily available products 

11 and services, with or without customization.”. 

12 (p) FISCAL YEAR 2009 NDAA.—Section 254 of the Duncan Hunter National Defense 

13 Authorization Act for Fiscal Year 2009 (Public Law 110-417; 10 U.S.C. 2302 note) is 

14 amended— 

15 (1) in subsection (b), by striking “commercial sources” and inserting “private 

16 sector sources”; and 

17 (2) in subsection (c)(2)(D), by striking “commercially acquired systems” and 

18 inserting “readily available products and services, with or without customization or 

19 private sector acquired systems”. 

20 (q) FISCAL YEAR 2008 NDAA.—Section 805 of the National Defense Authorization Act 

21 for Fiscal Year 2008 (Public Law 110-181; 10 U.S.C. 2330 note) is repealed. 

22 (r) FISCAL YEAR 2007 NDAA.—Section 852(b)(2)(A)(ii) of the John Warner National 

23 Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364; 10 U.S.C. 2324 note) is 
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1 amended by striking “commercial item, as defined in section 103 of title 41,” and inserting 

2 “readily available products and services, with or without customization, as defined in section 

3 3451 of title 10,”. 

4 (s) FISCAL YEAR 1996 NDAA.—Section 822(g)(2) of the National Defense Authorization 

5 Act for Fiscal Year 1996 (Public Law 104-106; 10 U.S.C. 2302 note) is amended by striking 

6 “procurement of items other than commercial items” and inserting “procurement of products or 

7 services other than readily available products and services, with or without customization,”. 

8 (t) FISCAL YEAR 1992/1993 NDAA.—Section 806(b) of the National Defense 

9 Authorization Act for Fiscal Years 1992 and 1993 (Public Law 102-190; 10 U.S.C. 2302 note) is 

10 amended by inserting “or readily available products and services, with or without customization, 

11 (as defined in section 3451 of title 10, United States Code)” before the period at the end. 

————— 

SECTIONS AFFECTED BY THE PROPOSAL 

[The material below shows changes proposed to be made by the legislative text above to the text of 

existing statutes. Matter proposed to be deleted is shown in stricken through text; matter proposed to be 

inserted is shown in bold italic.] 

TITLE 10, UNITED STATES CODE 

§2302. Definitions 

 (2) *** 

****** 

(C) the procedures established by the Administrator of General Services for the multiple 

award schedule program of the General Services Administration if— 

 (i) participation in the program has been open to all responsible sources; and 

 (ii) orders and contracts under such program result in the lowest overall cost alternative best 

value to meet the needs of the United States; 

(D) procurements conducted in furtherance of section 15 of the Small Business Act (15 U.S.C. 

644) as long as all responsible business concerns that are entitled to submit offers for such 

procurements are permitted to compete; and 
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(E) a competitive selection of research proposals resulting from a general solicitation and peer 

review or scientific review (as appropriate) solicited pursuant to section 9 of the Small Business 

Act (15 U.S.C. 638).; 

(F) the procurement of readily available products and services, with or without 

customization, by the Department of Defense through market-based competition under the 

procedures for acquiring readily available products and services pursuant to section 3454 and 

2304 of this title; and 

(G) merit-based processes for considering innovative technologies, new capabilities, and 

existing products and proven technologies proposed as a result of a general solicitation.

(3) *** 

****** 

(10) The following terms have the meanings provided such terms in section 3451 of this title: 

(A) The term “readily available”. 

(B) The term “customization”. 

(C) The term “defense-unique development”. 

(D) The term “market-based competition”. 

§2302a. Simplified acquisition threshold 

 (a) SIMPLIFIED ACQUISITION THRESHOLD.—For purposes of acquisitions by agencies 

named in paragraphs (5) and (6) of section 2303 of this title, the simplified acquisition threshold is 

as specified in section 134 of title 41.

***** 

§2302b. Implementation of simplified acquisition procedures 

 The simplified acquisition procedures contained in the Federal Acquisition Regulation pursuant 

to section 1901 of title 41 shall apply as provided in such section to the agencies named 

in paragraphs (5) and (6) of section 2303(a) of this title. 

§2304. Contracts: competition requirements 

(a)(1) Except as provided in subsections (b), (c), and (g) and except in the case of procurement 

procedures otherwise expressly authorized by statute, the head of an agency in conducting a 

procurement for property or services- 

(A) shall obtain full and open competition through the use of competitive procedures in 

accordance with the requirements of this chapter and the Federal Acquisition Regulation; and 

(B) shall use the competitive procedure or combination of competitive procedures that is best 

suited under the circumstances of the procurement. 

(2) In determining the competitive procedure appropriate under the circumstances, the head of an 

agency- 

(A) shall solicit sealed bids if- 

 (i) time permits the solicitation, submission, and evaluation of sealed bids; 

 (ii) the award will be made on the basis of price and other price-related factors; 

 (iii) it is not necessary to conduct discussions with the responding sources about their bids; and 

 (iv) there is a reasonable expectation of receiving more than one sealed bid; and 
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(B) shall request competitive proposals if sealed bids are not appropriate under clause (A).; 

(C) shall rely on market-based competition to the maximum extent practicable to determine 

sources when- 

 (i) the Department of Defense is procuring readily available products and services, with or 

without customization, with a value, or a period of performance, that does not exceed the threshold 

established under section 3453(b), unless the contracting officer determines that requesting 

competitive proposals is in the best interest of the government; 

 (ii) the Department of Defense is procuring readily available products and services or readily 

available products and services, with or without customization, with a value, or period of 

performance, in excess of the threshold established under section 3453(b) when authorized by the 

chief of the contracting office; and 

 (D) shall utilize merit-based selection processes or peer reviews when appropriate to identify 

and acquire innovative, developmental, and existing or proven products and services through a 

general solicitation, such as a problem statement, statement of objectives, or broad agency 

announcement. 

(b)*** 

***** 

(d)*** 

(3)(A) The contract period of a contract described in subparagraph (B) that is entered into by an 

agency pursuant to the authority provided under subsection (c)(2)- 

(i) may not exceed the time necessary- 

(I) to meet the unusual and compelling requirements of the work to be performed under the 

contract; and 

(II) for the agency to enter into another contract for the required goods or services through 

the use of competitive procedures; and 

(ii) may not exceed one year unless the head of the agency entering into such contract 

determines that exceptional circumstances apply. 

(B) This paragraph applies to any contract in an amount greater than the simplified acquisition 

threshold or, in the case of an agency named in paragraphs (1)-(4) of section 2302(a) of this title, 

when entered into under procedures other than readily available acquisition procedures. 

(e) *** 

***** 

(g)(1) In order to promote efficiency and economy in contracting and to avoid unnecessary burdens 

for agencies and contractors, the Federal Acquisition Regulation shall provide for- 

(A) special simplified procedures for purchases of property and services for amounts not greater 

than the simplified acquisition threshold; and 

(B) special simplified procedures for purchases of property and services for amounts greater 

than the simplified acquisition threshold but not greater than $5,000,000 with respect to which the 

contracting officer reasonably expects, based on the nature of the property or service s 

sought and on market research, that offers will include only commercial items. 

(2) A proposed purchase or contract for an amount above the simplified acquisition or the readily 

available threshold found in section 3453 of this title may not be divided into several purchases or 

contracts for lesser amounts in order to use the simplified procedures required by paragraph (1). 
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(3) In using simplified procedures, the head of an agency shall promote competition to the 

maximum extent practicable. 

(4) The head of an agency shall comply with the Federal Acquisition Regulation provisions 

referred to in section 1901(e) of title 41. 

(5) To promote efficiency and economy in contracting, take advantage of competitive forces in 

the marketplace, and enable the Department of Defense to use business practices that are more 

consistent with the private sector, the Defense Federal Acquisition Regulation Supplement shall 

provide for special simplified procedures for purchases of readily available products and services 

and readily available products and services with customization pursuant to the thresholds 

established in section 3453 of this title. 

(6) When using readily available acquisition procedures, the Secretary of Defense shall promote 

competition, by relying, to the maximum extent practicable, on market-based competition pursuant 

to section 3453(b) of this title. 

(h) For the purposes of the following, purchases or contracts awarded after using procedures other 

than sealed-bid procedures shall be treated as if they were made with sealed-bid procedures: 

(1) Chapter 65 of title 41. 

(2) Sections 3141–3144, 3146, and 3147 of title 40. 

(i)(1) The Secretary of Defense shall prescribe by regulation the manner in which the Department 

of Defense negotiates prices for supplies to be obtained through the use of procedures other than 

competitive procedures, as defined in section 2302(2) of this title. 

(2) The regulations required by paragraph (1) shall- 

(A) specify the incurred overhead a contractor may appropriately allocate to supplies referred to 

in that paragraph; and 

(B) require the contractor to identify those supplies which it did not manufacture or to which it 

did not contribute significant value. 

(3) Such regulations shall not apply to an item of supply included in a contract or subcontract for 

which the price is based on established catalog or market prices of commercial items sold in 

substantial quantities to the general public a readily available product or service, with or without 

customization, acquired using readily available acquisition procedures. 

(j) *** 

***** 

§2305. Contracts: planning, solicitation, evaluation, and award procedures 

 (a)(1)(A) In preparing for the procurement of property or services, the head of an agency shall 

Except as provided in subparagraph (D), the head of an agency, in preparing for the procurement 

of property or services- 

 (i) specify the agency's needs and solicit bids or proposals in a manner designed to achieve full 

and open competition for the procurement; 

 (ii) use advance procurement planning and market research; and 

 (iii) develop specifications in such manner as is necessary to obtain full and open competition 

with due regard to the nature of the property or services to be acquired. 

 (B) *** 

***** 
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 (D) Subparagraph (A) does not apply in the case of a procurement by the Department of Defense 

using either market-based competition or merit-based selection. 

(2) In addition to the specifications described in paragraph (1), a solicitation for sealed bids or 

competitive proposals (other than for a procurement for commercial items using special simplified 

procedures, procurement by the an agency named in paragraphs (1)-(4) of section 2302a of this 

title using readily available acquisition procedures, or a purchase for an amount not greater than the 

simplified acquisition threshold) shall at a minimum include- 

 (A)*** 

***** 

§2306a. Cost or pricing data: truth in negotiations 

 (a) ***

***** 

 (b) EXCEPTIONS.— 

 (1) IN GENERAL.—Submission of certified cost or pricing data shall not be required under 

subsection (a) in the case of a contract, a subcontract, or modification of a contract or subcontract— 

 (A) for which the price agreed upon is based on— 

 (i) adequate competition that results in at least two or more responsive and viable 

 competing bids; or 

 (ii) prices set by law or regulation; 

 (B) for the acquisition of a commercial item; 

 (C) in an exceptional case when the head of the procuring activity, without delegation, 

determines that the requirements of this section may be waived and justifies in writing the reasons 

for such determination; or 

 (D) to the extent such data— 

 (i) relates to an offset agreement in connection with a contract for the sale of a weapon 

 system or defense-related item to a foreign country or foreign firm; and 

 (ii) does not relate to a contract or subcontract under the offset agreement for work 

 performed in such foreign country or by such foreign firm that is directly related to the weapon 

 system or defense-related item being purchased under the contract.; or

 (E) when an agency named in paragraphs (1)-(4) of section 2302(a) of this title is 

 acquiring readily available products and services, with or without customization. 

(2) MODIFICATIONS OF CONTRACTS AND SUBCONTRACTS FOR COMMERCIAL 

ITEMS.—In the case of a modification of a contract or subcontract for a commercial item that is not 

covered by the exception to the submission of certified cost or pricing data in paragraph (1)(A) or 

(1)(B), submission of certified cost or pricing data shall not be required under subsection (a) if- 

 (A) the contract or subcontract being modified is a contract or subcontract for which submission 

of certified cost or pricing data may not be required by reason of paragraph (1)(A) or (1)(B); and 

(B) the modification would not change the contract or subcontract, as the case may be, from a 

contract or subcontract for the acquisition of a commercial item to a contract or subcontract for the 

acquisition of an item other than a commercial item. 

(2) MODIFICATIONS OF CONTRACTS AND SUBCONTRACTS FOR COMMERCIAL 

ITEMS AND DEPARTMENT OF DEFENSE CONTRACTS OR SUBCONTRACTS FOR 
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READILY AVAILABLE PRODUCTS OR SERVICES, WITH OR WITHOUT 

CUSTOMIZATION.—In the case of a modification of a contract or subcontract for a commercial 

item that is not covered by the exception to the submission of certified cost or pricing data in 

paragraph (1)(A) or (1)(B), and in the case of a Department of Defense contract for a readily 

available product or service, with or without customization, that is not covered by the exception to 

the submission of certified cost or pricing data in paragraph in (1)(A) or (1)(E), submission of 

certified cost or pricing data shall not be required under subsection (a) if— 

 (A) the contract or subcontract being modified is a contract or subcontract for which 

submission of certified cost or pricing data may not be required by reason of paragraph (1)(A), 

(1)(B), or (1)(E); and 

 (B) the modification would not change the contract or subcontract, as the case may be— 

 (i) from a contract or subcontract for the acquisition of a commercial item to a contract or 

 subcontract for the acquisition of a product or service other than a commercial item; 

 (ii) from a contractor or subcontractor for the acquisition of a readily available product or 

 service to a contract or subcontract for the acquisition of a product or service other than a 

 readily available product or service; or 

(iii) from a contractor or subcontract for the acquisition of a readily available product or 

 service with customization to a contract or subcontract for the acquisition of a product or 

 service other than a readily available product 

 

 (3) NONCOMMERCIAL MODIFICATIONS OF COMMERCIAL ITEMS.—(A) The exception in 

paragraph (1)(B) does not apply to cost or pricing data on noncommercial modifications of a 

commercial item that are expected to cost NONCOMMERCIAL MODIFICATIONS OF 

COMMERCIAL ITEMS AND READILY AVAILABLE PRODUCTS AND SERVICES 

FURTHER DEVELOPED FOR A DEFENSE-UNIQUE PURPOSE.—(A) The exceptions in 

paragraph (1)(B) and (1)(E) do not apply to cost or pricing data on noncommercial modifications 

of a commercial item, or modifications that require further development of a readily available 

product or service such that it is repurposed in a defense-unique way for the Department of 

Defense inconsistent with private sector practices, that are expected to cost, in the aggregate, more 

than the amount specified in subsection (a)(1)(A)(i), as adjusted from time to time under subsection 

(a)(7), or 5 percent of the total price of the contract (at the time of contract award), whichever is 

greater. 

 (B) In this paragraph, the term "noncommercial modification", with respect to a commercial item, 

means a modification of such item that is not a modification described in section 103(3)(A) of title 

41. 

 (C) Nothing in subparagraph (A) shall be construed— 

 (i) to limit the applicability of the exception in subparagraph (A) or (C) of paragraph (1) to cost 

or pricing data on a noncommercial modification of a commercial item or a readily available 

product or service further developed for a defense-unique purpose by the Department of 

Defense; or 

(ii) to require the submission of cost or pricing data on any aspect of an acquisition of a 

commercial item other than the cost and pricing of noncommercial modifications of such item

acquisition of a commercial item or readily available product or service other than the cost and 

pricing of noncommercial modifications of such item or defense-unique development of such 
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product or service for the Department of Defense. 

(4) COMMERCIAL ITEM AND DEFENSE-UNIQUE DETERMINATION.—(A) For purposes 

of applying the commercial item exception under paragraph (1)(B) to the required submission of 

certified cost or pricing data, the contracting officer may presume that a prior commercial item 

determination made by a military department, a Defense Agency, or another component of the 

Department of Defense an agency shall serve as a determination for subsequent procurements of 

such item. 

(B) If the contracting officer does not make the presumption described in subparagraph (A) and 

instead chooses to proceed with a procurement of an item previously determined to be a commercial 

item using procedures other than the procedures authorized for the procurement of a commercial 

item, the contracting officer shall request a review of the commercial item determination by the head 

of the contracting activity. 

(C) Not later than 30 days after receiving a request for review of a commercial item determination 

under subparagraph (B), the head of a contracting activity shall— 

(i) confirm that the prior determination was appropriate and still applicable; or 

(ii) issue a revised determination with a written explanation of the basis for the revision. 

 (D) For purposes of applying the readily available exception under paragraph (1)(E) to the 

required submission of certified cost or pricing data for the Department of Defense, a product or 

service that is offered for sale, with or without customization, and that does not require any 

defense-unique development shall be presumed to be readily available unless the contracting 

officer makes a written determination that the product or service is not readily available or readily 

available with customization. 

 (5) A contracting officer shall consider evidence provided by an offeror of recent purchase prices 

paid by the Government for the same or similar commercial items in establishing recent actual net 

prices paid by the Government or any other buyer for the same or similar commercial items or 

readily available products or services in establishing price reasonableness on a subsequent purchase 

if the contracting officer is satisfied that the prices previously paid remain a valid reference for 

comparison after considering the totality of other relevant factors such as the time elapsed since the 

prior purchase and any differences in the quantities purchased or applicable terms and conditions. 

 (6) DETERMINATION BY PRIME CONTRACTOR.—A prime contractor required to submit 

certified cost or pricing data under subsection (a) with respect to a prime contract shall be responsible 

for determining whether a subcontract under such contract qualifies for an exception under paragraph 

(1)(A) from such requirement. 

(c) COST OR PRICING DATA ON BELOW-THRESHOLD CONTRACTS.— 

 (1) AUTHORITY TO REQUIRE SUBMISSION.—Subject to paragraph (2), when certified cost 

or pricing data are not required to be submitted by subsection (a) for a contract, subcontract, or 

modification of a contract or subcontract, such data may nevertheless be required to be submitted by 

the head of the procuring activity, but only if the head of the procuring activity determines that such 

data are necessary for the evaluation by the agency of the reasonableness of the price of the contract, 

subcontract, or modification of a contract or subcontract. In any case in which the head of the 

procuring activity requires such data to be submitted under this subsection, the head of the procuring 

activity shall justify in writing the reason for such requirement. 
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 (2) EXCEPTION.—The head of the procuring activity may not require certified cost or pricing 

data to be submitted under this paragraph for any contract or subcontract, or modification of a 

contract or subcontract, covered by the exceptions in subparagraph (A), or (B), subparagraph (A), 

(B), or (E) of subsection (b)(1). 

 (3) DELEGATION OF AUTHORITY PROHIBITED.—The head of a procuring activity may not 

delegate functions under this paragraph this subsection. 

(d)*** 

***** 

 (2) LIMITATIONS ON AUTHORITY FOR COMMERCIAL ITEMS.—The Federal Acquisition 

Regulation shall include the following provisions regarding the types of information that contracting 

officers may require under paragraph (1): 

(A) Reasonable limitations on requests for sales data relating to commercial items. 

 (B) A requirement that a contracting officer limit, to the maximum extent practicable, the scope 

of any request for information relating to commercial items from an offeror to only that 

information that is in the form regularly maintained by the offeror in commercial operations. 

 (C) A statement that any information received relating to commercial items that is exempt from 

disclosure under section 552(b) of title 5 shall not be disclosed by the Federal Government. 

 (3) LIMITATIONS ON AUTHORITY FOR READILY AVAILABLE PRODUCTS AND 

SERVICES, WITH OR CUSTOMIZATION.—The Defense Federal Acquisition Regulation 

Supplement shall include the following provisions regarding the types of information that 

contracting officers may require under paragraph (1): 

(A) A reasonable limitations on requests for sales data relating to readily available products 

and services and readily available products and services with customization. 

 (B) A requirement that a contracting officer limit, to the maximum extent practicable, the 

scope of any request for information relating to readily available products, with or without 

customization, from an offeror to only that information that is in the form regularly 

maintained by the offeror in private sector operations. 

(C) A statement that any information received relating to readily available products and 

services and readily available products and services with customization that is exempt from 

disclosure under section 552(b) of title 5 shall not be disclosed by the Federal Government. 

 (e) ***

****** 

 (h) DEFINITIONS.—In this section:

(1) Cost or pricing data.—The term "cost or pricing data" means all facts that, as of the date of 

agreement on the price of a contract (or the price of a contract modification), or, if applicable 

consistent with subsection (e)(1)(B), another date agreed upon between the parties, a prudent buyer 

or seller would reasonably expect to affect price negotiations significantly. Such term does not 

include information that is judgmental, but does include the factual information from which a 

judgment was derived.

 (2) Subcontract.—The term "subcontract" includes a transfer of commercial items, readily 

available products or services, with or without customization, between divisions, subsidiaries, or 

affiliates of a contractor or a subcontractor.

 (3) *** 
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******

§2307. Contract financing 

 (a)*** 

****** 

 (f) CONDITIONS FOR PAYMENTS FOR COMMERCIAL ITEMS, READILY AVAILABLE 

PRODUCTS AND SERVICES, WITH OR WITHOUT CUSTOMIZATION.—(1) Payments under 

subsection (a) for commercial items, readily available products and services, with or without 

customization, may be made under such terms and conditions as the head of the agency determines 

are appropriate or customary in the commercial marketplace and are in the best interests of the United 

States. The head of the agency shall obtain adequate security for such payments. If the security is in 

the form of a lien in favor of the United States, such lien is paramount to all other liens and is 

effective immediately upon the first payment, without filing, notice, or other action by the United 

States. 

 (2) Advance payments made under subsection (a) for commercial items, readily available products 

and services, with or without customization, may include payments, in a total amount of not more 

than 15 percent of the contract price, in advance of any performance of work under the contract. 

 (3) The conditions of subsections (d) and (e) need not be applied if they would be inconsistent, as 

determined by the head of the agency, with commercial or private sector terms and conditions 

pursuant to paragraphs (1) and (2). 

***** 

§2320. Rights in technical data 

 (a)***

****** 

 (b) Regulations prescribed under subsection (a) shall require that, whenever practicable, a contract 

for supplies or services entered into by an agency named in section 2303 of this title contain 

appropriate provisions relating to technical data, including provisions—

 (1) defining the respective rights of the United States and the contractor or subcontractor (at any 

 tier) regarding any technical data to be delivered under the contract and providing that, in the case 

 of contract for a commercial item, the item commercial item or readily available product or 

 service, with or without customization, the item, product, or service shall be presumed to be 

 developed at private expense unless shown otherwise in accordance with section 2321(f);

 (2) ***

****** 

 (9) providing that, in addition to technical data that is already subject to a contract delivery 

 requirement, the United States may require, until the date occurring six years after acceptance 

 of the last item (other than technical data) under a contract or the date of contract termination, 

 whichever is later, the delivery of technical data that has been generated in the performance of the 

 contract, and compensate the contractor only for reasonable costs incurred for having converted 

 and delivered the data in the required form, upon a determination that— 

 (A) the technical data is needed for the purpose of reprocurement, sustainment, modification, 

or upgrade (including through competitive means) of a major system or subsystem thereof, a 
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weapon system or subsystem thereof, or any noncommercial item, nonreadily available product 

or service, with or without customization, or process; and 

 (B) the technical data— 

 (i) pertains to an item, product, service, or process developed in whole or in part with 

 Federal funds; or 

 (ii) is described in subparagraphs (D)(i)(II), (F), and (G) of subsection (a)(2); and 

(10) providing that the United States is not foreclosed from requiring the delivery of the 

technical data by a failure to challenge, in accordance with the requirements of section 2321(d) of 

this title, the contractor's assertion of a use or release restriction on the technical data. 

****** 

§2321. Validation of proprietary data restrictions 

 (a)*** 

******

 (f) PRESUMPTION OF DEVELOPMENT EXCLUSIVELY AT PRIVATE EXPENSE.—In the 

case of a challenge to a use or release restriction that is asserted with respect to technical data of a 

contractor or subcontractor under a contract for commercial items or readily available products or 

services, with or without customization, the contracting officer shall presume that the contractor or 

subcontractor has justified the restriction on the basis that the item was developed exclusively at 

private expense, whether or not the contractor or subcontractor submits a justification in response to 

the notice provided pursuant to subsection (d)(3). In such a case, the challenge to the use or release 

restriction may be sustained only if information provided by the Department of Defense demonstrates 

that the item was not developed exclusively at private expense. 

****** 

§2322a. Requirement for consideration of certain matters during acquisition of 

noncommercial defense-unique developmental computer software 

 (a) CONSIDERATION REQUIRED.—As part of any negotiation for the acquisition of 

noncommercial computer software computer software that meets the definition of defense-unique 

development under section 2302 of this title, the Secretary of Defense shall ensure that such 

negotiations consider, to the maximum extent practicable, acquisition, at the appropriate time in the 

life cycle of the noncommercial computer software, of all software and related materials necessary— 

 (1) to reproduce, build, or recompile the software from original source code and required 

 libraries; 

 (2) to conduct required computer software testing; and 

 (3) to deploy working computer software system binary files on relevant system hardware. 

 (b) DELIVERY OF SOFTWARE AND RELATED MATERIALS.—Any noncommercial 

computer software defense-unique developmental computer software or related materials required to 

be delivered as a result of considerations in subsection (a) shall, to the extent appropriate as 

determined by the Secretary— 
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****** 

§2324. Allowable costs under defense contracts

 (a)***

****** 

 (l) DEFINITIONS.—In this section: 

 (1)(A) The term "covered contract" means a contract for an amount in excess of $500,000 that is 

 entered into by the head of an agency, except that such term does not include a fixed-price contract 

 without cost incentives or any firm fixed-price contract for the purchase of commercial items 

 readily available products and services, with or without customization.

******

§2335. Prohibition on collection of political information 

 (a)*** 

****** 

 (b) SCOPE.—The prohibition under this section applies to the procurement of commercial items, 

the procurement of commercial-off-the-shelf-items, and the non-commercial procurement of supplies, 

property, services, and manufactured items all agency procurement actions, irrespective of contract 

vehicle, including contracts, purchase orders, task or deliver orders under indefinite 

delivery/indefinite quantity contracts, blanket purchase agreements, and basic ordering agreements, 

basic ordering agreements, and other transactions.

 (c) *** 

****** 

______ 

National Defense Authorization Act for Fiscal Year 2019 

(Pub. L. 115-223)

“SEC. 226. ACTIVITIES ON IDENTIFICATION AND DEVELOPMENT OF 

ENHANCED PERSONAL PROTECTIVE EQUIPMENT AGAINST 

BLAST INJURY. (10 U.S.C. 2302 note) 

"(b) *** 

****** 

"(3) PARTNERSHIPS FOR CERTAIN ASSESSMENTS.—As part of the activities, the 

Secretary should continue to establish partnerships with appropriate academic institutions for 

purposes of assessing the following: 
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"(A) The ability of various forms of personal protective equipment to protect against 

common blast injuries, including traumatic brain injuries. 

"(B) The value of real-time data analytics to track the effectiveness of various forms 

of personal protective equipment to protect against common blast injuries, including 

traumatic brain injuries. 

"(C) The availability of commercial-off the-shelf, readily available products or 

services, with or without customization, personal protective technology to protect against 

traumatic brain injury resulting from blasts. 

"(D) *** 

****** 

“SEC. 866(d). GUIDANCE ON TECHNICAL DATA RIGHT NEGOTIATION 

 (10 U.S.C. 2321 note) 

"The Secretary of Defense shall develop policies on the negotiation of technical data rights for 

noncommercial software software that meets the definition of defense-unique development 

under section 3451 of Title 10, United States Code that reflects the Department of Defense's 

needs for technical data rights in the event of a protest or replacement of incumbent contractor to 

meet defense requirements in the most cost effective manner." 

______ 

National Defense Authorization Act for Fiscal Year 2018 

(Pub. L. 115-91)

“SEC. 1698. USE OF COMMERCIAL ITEMS READILY AVAILABLE PRODUCTS AND 

SERVICES, WITH OR WITHOUT, CUSTOMIZATION IN DISTRIBUTED 

COMMON GROUND SYSTEMS. (10 U.S.C. 2302 note) 

 

"(a) IN GENERAL.—The procurement process for each covered Distributed Common 

Ground System shall be carried out in accordance with section 2377 section 3543 of title 10, 

United States Code. 

"(b) CERTIFICATION.—Not later than 30 days after the date of the enactment of this Act 

[Dec. 12, 2017], the service acquisition executive responsible for each covered Distributed 

Common Ground System shall certify to the appropriate congressional committees that the 

procurement process for increments of the system procured after the date of the enactment of this 

Act will be carried out in accordance with section 2377 Section 3543 of title 10, United States 

Code. 

(c) READILY AVAILABLE PRODUCTS AND SERVICES, WITH OR WITHOUT 

CUSTOMIZATION.—Not later than 30 days after the implementation of the acquisition 

procedures for acquiring readily available products and services, with or without 

customization, under section 3453 of title 10, United States Code, the service acquisition 

executive responsible for each covered Distributed Common Ground System shall certify to the 

appropriate congressional committees that the procurement process for increments of the 
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system procured after the date of the enactment of this Act will be carried out in accordance 

with section 3452 of title 10, United States Code. 

"(cd) DEFINITIONS.—In this section: 

"(1) The term 'appropriate congressional committees' means— 

"(A) the congressional defense committees [Committees on Armed Services and 

Appropriations of the Senate and the House of Representatives]; and 

"(B) the Select Committee on Intelligence of the Senate and the Permanent Select 

Committee on Intelligence of the House of Representatives. 

"(2) The term 'covered Distributed Common Ground System' includes the following: 

"(A) The Distributed Common Ground System of the Army. 

"(B) The Distributed Common Ground System of the Navy. 

"(C) The Distributed Common Ground System of the Marine Corps. 

"(D) The Distributed Common Ground System of the Air Force. 

"(E) The Distributed Common Ground System of the Special Operations Forces." 

______ 

National Defense Authorization Act for Fiscal Year 2017 

(Pub. L. 114-328) 

 “SEC. 879. DEFENSE PILOT PROGRAM FOR AUTHORITY TO ACQUIRE 

INNOVATIVE COMMERCIAL ITEMS, TECHNOLOGIES, 

TECHNOLOGIES AND SERVICES USING GENERAL SOLICITATION 

COMPETITIVE PROCEDURES. (10 U.S.C. 2302 note) 

"(a) AUTHORITY.—The Secretary of Defense and the Secretaries of the military departments 

may carry out a pilot program, to be known as the 'defense commercial solutions opening pilot 

program defense innovative solutions opening pilot program', under which the Secretary may 

acquire innovative commercial items, technologies, and services innovative products, 

technologies, and services through a competitive selection of proposals resulting from a general 

solicitation and the peer review of such proposals pursuant to section 2304(a)(2)(D) of title 10, 

United States Code. 

"(b) TREATMENT AS COMPETITIVE PROCEDURES.—Use of general solicitation 

competitive procedures for the pilot program under subsection (a) shall be considered to be use 

of competitive procedures for purposes of chapter 137 of title 10, United States Code. 

"(cb) LIMITATIONS.— 

"(1) IN GENERAL.—The Secretary may not enter into a contract or agreement under the 

pilot program for an amount in excess of $100,000,000 without a written determination from 

the Under Secretary for Acquisition, Logistics, and Technology or the relevant service 
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acquisition executive of the efficacy of the effort to meet mission needs of the Department of 

Defense or the relevant military department. 

"(2) FIXED-PRICE REQUIREMENT.—Contracts or agreements entered into under the 

program shall be fixed-price, including fixed-price incentive fee contracts. 

"(3) TREATMENT AS COMMERCIAL ITEMS.—Notwithstanding section 2376(1) of 

title 10, United States Code, items, technologies, and services acquired under the pilot 

program shall be treated as commercial items. (3) Treatment as readily available products 

and services, with or without customization.—Notwithstanding section 3451(1) of Title 10, 

United States Code, products, technologies, and services acquired under the pilot program 

shall be treated as readily available products and services, with or without customization. 

"(d) GUIDANCE.—Not later than six months after the date of the enactment of this Act [Dec. 

23, 2016], the Secretary shall issue guidance for the implementation of the pilot program under 

this section within the Department of Defense. Such guidance shall be issued in consultation 

with the Director of the Office of Management and Budget and shall be posted for access by the 

public. 

"(ec) CONGRESSIONAL NOTIFICATION REQUIRED.— 

"(1) IN GENERAL.—Not later than 45 days after the award of a contract for an amount 

exceeding $100,000,000 using the authority in subsection (a), the Secretary of Defense shall 

notify the congressional defense committees [Committees on Armed Services and 

Appropriations of the Senate and the House of Representatives] of such award. 

"(2) ELEMENTS.—Notice of an award under paragraph (1) shall include the following: 

"(A) Description of the innovative commercial item, technology, or service readily 

available products or services, with or without customization, acquired. 

"(B) Description of the requirement, capability gap, or potential technological 

advancement with respect to which the innovative commercial item, technology, or service 

product or service acquired provides a solution or a potential new capability. 

"(C) Amount of the contract awarded. 

"(D) Identification of contractor awarded the contract. 

"(fd) DEFINITION.—In this section, the term 'innovative' means— 

"(1) any technology, process, or method, including research and development, that is new 

that uniquely meets a requirement, fills a capability gap, presents a potential technological 

advancement or is new as of the date of submission of a proposal; or 

"(2) any application that is new that uniquely meets a requirement, fills a capability gap, 

presents a potential technological advancement or is new as of the date of submission of a 

proposal of a technology, process, or method existing as of such date. 

"(ge) SUNSET.—The authority to enter into contracts under the pilot program shall expire on 

September 30, 2022. 

“(f) GUIDANCE.—Not later than six months after the date of the enactment of this Act, the 

Secretary of Defense shall issue guidance for the implementation of the pilot program under 

section 879 of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-
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328; 10 U.S.C. 2302 note), as amended by paragraph (1), within the Department of Defense. 

Such guidance shall be posted for access by the public.” 

 ______ 

National Defense Authorization Act for Fiscal Year 2015 

(Pub. L. 113-291) 

"SEC. 843. DEFINITIONS. (10 U.S.C. 2302 note)

 “(1)*** 

****** 

"(3) CONTRACT.—The term 'contract' includes a contract for commercial items but is 

not limited to a contract for commercial items includes a contract for commercial items, 

readily available products and services, with or without customization, but is not limited to a 

contract for commercial items or readily available products and services, with or without 

customization. 

"(4) *** 

****** 

______ 

National Defense Authorization Act for Fiscal Year 2009 

(Pub. L. 110-417) 

"SEC. 254. TRUSTED DEFENSE SYSTEMS. (10 U.S.C. 2302 note)

"(a) *** 

****** 

"(b) ASSESSMENT OF METHODS FOR VERIFYING THE TRUST OF 

SEMICONDUCTORS PROCURED FROM COMMERCIAL SOURCES.—The Under 

Secretary of Defense for Acquisition, Technology, and Logistics, in consultation with 

appropriate elements of the Department of Defense, the intelligence community, private industry, 

and academia, shall conduct an assessment of various methods of verifying the trust of 

semiconductors procured by the Department of Defense from commercial sources private sector 

sources for use in mission-critical components of potentially vulnerable defense systems. The 

assessment shall include the following: 

"(1) *** 

****** 
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"(c) *** 

****** 

"(2) REQUIREMENTS.—At a minimum, the strategy shall— 

"(A) address the vulnerabilities identified by the assessment under subsection (a); 

"(B) reflect the priorities identified by such assessment; 

"(C) provide guidance for the planning, programming, budgeting, and execution 

process in order to ensure that covered acquisition programs have the necessary resources to 

implement all appropriate elements of the strategy; 

"(D) promote the use of verification tools, as appropriate, for ensuring trust of 

commercially acquired systems readily available products and services, with or without 

customization or private sector systems; 

"(E) increase use of trusted foundry services, as appropriate; and 

"(F) ensure sufficient oversight in implementation of the plan. 

______ 

National Defense Authorization Act for Fiscal Year 2007 

(Pub. L. 109-364) 

"SEC. 852. REPORT AND REGULATIONS ON EXCESSIVE PASS-THROUGH 

 CHARGES. (10 U.S.C. 2324 note) 

“(a) *** 

****** 

"(b) REGULATIONS REQUIRED.— 

"(1) IN GENERAL.—Not later than May 1, 2007, the Secretary of Defense shall 

prescribe regulations to ensure that pass-through charges on contracts or subcontracts (or task 

or delivery orders) that are entered into for or on behalf of the Department of Defense are not 

excessive in relation to the cost of work performed by the relevant contractor or subcontractor. 

"(2) SCOPE OF REGULATIONS.—The regulations prescribed under this subsection— 

"(A) shall not apply to any firm, fixed-price contract or subcontract (or task or 

delivery order) that is— 

"(i) awarded on the basis of adequate price competition; or 

"(ii) for the acquisition of a commercial item, as defined in section 103 of title 

41 readily available produce or service, with or without customization, as defined in 

section 3451 of title 10, United States Code; and 

"(B) may include such additional exceptions as the Secretary determines to be 

necessary in the interest of the national defense. 

"(3) *** 
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****** 

______ 

National Defense Authorization Act for Fiscal Year 1996 

(Pub. L. 104-106) 

"SEC. 822. DEFENSE FACILITY-WIDE PILOT PROGRAM. (10 U.S.C. 2302 note)

“(a)*** 

****** 

"(g) SPECIAL AUTHORITY.—The authority provided under subsection (a) includes 

authority for the Secretary of Defense— 

"(1) to apply any amendment or repeal of a provision of law made in this Act [see Tables 

for classification] to the pilot program before the effective date of such amendment or repeal; 

and 

"(2) to apply to a procurement of items other than commercial items procurement of 

products or services other than readily available products and services, with or without 

customization, under such program— 

"(A) the authority provided in section 34 of the Office of Federal Procurement 

Policy Act ([former] 41 U.S.C. 430) [now 41 U.S.C. 1906] to waive a provision of law in 

the case of commercial items, and 

"(B) any exception applicable under this Act or the Federal Acquisition Streamlining 

Act of 1994 (Public Law 103–355) [see Tables for classification] (or an amendment made 

by a provision of either Act) in the case of commercial items, before the effective date of 

such provision (or amendment) to the extent that the Secretary determines necessary to test 

the application of such waiver or exception to procurements of items other than commercial 

items. 

______ 

National Defense Authorization Act for Fiscal Year 1992/1993 

(Pub. L. 102-190) 

"SEC. 806. PAYMENT PROTECTIONS FOR SUBCONTRACTORS AND SUPPLIERS.

 (10 U.S.C. 2302 note) 

“(a)*** 

****** 

"(b) INAPPLICABILITY TO CERTAIN CONTRACTS.—Regulations prescribed under this 

section shall not apply to a contract for the acquisition of commercial items (as defined in section 
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103 of title 41, United States Code) or readily available products and services, with or without 

customization (as defined aby section 3451 of title 10, United States Code). 

“(c) *** 

****** 

______ 
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RECOMMENDED REGULATORY REVISIONS 

SUBPART 205.2--SYNOPSES OF PROPOSED CONTRACT ACTIONS 

205.202 -- Exceptions 

(a)(13) When using market-based competition to acquire readily available products and 

services pursuant to 10 U.S.C. 3453, the notice required in FAR 5.201 is not required. 

205.203 Publicizing and response time.

(b) Allow at least 45 days response time when requested by a qualifying or designated 

country source (as these terms are used in Part 225) and the request is consistent with the 

Government's requirement. 

(1) When using readily available acquisition procedures found in part 213 there is 

no minimum response time required. When a solicitation is used, the contracting 

officer will provide a response time that is reasonable based on the nature of the 

acquisition. 

(2) The contracting officer will use a combined synopsis/solicitation in all cases 

where the Department of Defense is using readily available acquisition procedures 

and a solicitation is being issued. 

(S-70) When using competitive procedures, if a solicitation allowed fewer than 30 days 

for receipt of offers and resulted in only one offer, the contracting officer shall resolicit, 

allowing an additional period of at least 30 days for receipt of offers, except as provided 

in 215.371-4 and 215.371-5. 

[The following would create a new DFARS Subpart 213.0 and replace Subpart 213.1.] 

PART 213—Readily Available Acquisition and Micro-Purchase Procedures 

213.000 -- Scope of Part. 

This part prescribes policies and procedures for the acquisition of readily available products and 

services and readily available products and services with customization. These policies and 

procedures replace policies and procedures found in part 12 and subparts 13.0 and 13.1, for the 

Department of Defense pursuant to 10 U.S.C. 3454. The remainder of this part supplements part 

13 to implement the statutorily authorized readily available acquisition procedures. See 36.602-5

for simplified procedures to be used when acquiring architect-engineer services. These 

procedures may be used to procure readily available products and services, the aggregate amount 

of which does not exceed $15 million. This part establishes acquisition policies and procedures 

that much more closely resemble those of the private sector or commercial marketplace and 

encourages the acquisition of readily available products and services as directed by 10 U.S.C. 

3454. A contract awarded using these procedures is not required to be set-aside for small 
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business, or any subset of small business concerns, but small business concerns will receive a 

five percent price preference in furtherance of sections 9 and 15 of the Small Business Act (15 

U.S.C. 638, 644). 

213.001 -- Definitions. 

As used in this part -- 

“Authorized individual” means a person who has been granted authority, in accordance with 

agency procedures, to acquire supplies and services in accordance with this part. 

“Customization” means: 

(1) With respect to products: 

(a) changes, beyond optional, priced product features, made to a readily available 

product to meet a DoD need using commercial processes and equipment; or 

(b) the manufacturing of a product based on a specification using only 

commercial processes and equipment. 

(2) With respect to services means: 

(c) Services are considered customized when a performance work statement, 

statement of objectives, or other form direction about how to perform the 

services is necessary to identify the services to be performed. 

“Defense-Unique Development” means DoD financed development, either to repurpose a readily 

available product or service or to develop a new product or service, to provide a defense unique 

capability. 

“Governmentwide commercial purchase card” means a purchase card, similar in nature to a 

commercial credit card, issued to authorized agency personnel to use to acquire and to pay for 

products and services. 

“Imprest fund” means a cash fund of a fixed amount established by an advance of funds, without 

charge to an appropriation, from an agency finance or disbursing officer to a duly appointed 

cashier, for disbursement as needed from time to time in making payment in cash for relatively 

small amounts. 

“Market-based competition” means the consideration of sources that offer readily available 

products, services, and solutions at prices available to any potential buyer, resulting in 

competition being established through market forces. 

“Readily available” means any product or service that requires no customization by the vendor 

and can be put on order by customers. Optional, priced features of products and services in a 

form that is offered for sale in the normal course of business, fall within the definition of readily 

available. 
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“Third party draft” means an agency bank draft, similar to a check, that is used to acquire and to 

pay for supplies and services. (See Treasury Financial Management Manual, Section 3040.70.) 

“Value Assessment” means an assessment by a requiring activity or program office of the value 

of a product or service to the requiring activity or program office’s mission relative to the price 

offered provided to the contracting officer to aid in determining a price fair and reasonable. 

213.002 -- Purpose. 

The purpose of this part is to prescribe simplified readily available acquisition procedures in 

order to -- 

(a) Ensure timely delivery of lethality, technical dominance and the maintenance of that 

dominance to the warfighter; 

(b) Provide integrity in the contracting process; 

(c) Obtain value for money when acquiring readily available products and services and readily 

available products and services with customization; 

(d) Reduce the administrative costs and burdens for agencies and contractors; 

(e) Take advantage of market-based competition and market pricing; and 

(f) Reduce barriers for small and non-traditional companies. 

213.003 -- Policy. 

(a) Agencies shall use market-based competition for acquiring readily available products and 

services, with or without customization, not exceeding $15 million and will use these readily 

available acquisition procedures for the acquisition of all readily available products and services, 

with or without customization, below that threshold. This policy does not apply if an agency can 

meet its requirement using required sources of supply under part 8 except for those found in part 

8.4. Contracting officers should consider Federal Supply Schedules as part of their market 

research. 

(b) Agencies shall— 

 (1) Conduct market research to determine whether readily available products and services 

are available that meet the agency’s requirements; 

 (2) Acquire readily available products and services when they meet the needs of the 

agency; 

(3) Acquire the development of a defense-unique product or service, when a readily 

available product or service, with or without customization, meets the needs of an angency only 

when a written determination to do so is made by the contracting officer and the program 

manager or head of the requiring activity; 

(4) Consider all services procured by the agency to be readily available, either with or 

without customization, unless the appropriate authority, pursuant to 10 U.S.C. 3452(d). 

 (5) Require prime contractors and subcontractors at all tiers to incorporate readily 

available products and services as components of products and services supplied to the agency, 

to the maximum extent practicable; and 
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(6) Use these readily available acquisition procedures to acquire all readily available 

products and services with an anticipated value of $15 million or less, and a period of 

performance of less than 12 months in the case of service contracts, unless the head of the 

contracting activity determines that more complex procedures found in part 15 are necessary to 

manage an unusually high risk acquisition. 

(c) Acquisitions using these procedures may be set-aside for small business consistent with 

service/agency strategic guidance. Purchases from small businesses using these procedures may 

be counted towards DoD’s small business goals. If a small business concern is identified during 

market research or responds to a solicitation the following procedure applies:

(1) Small business offerors will be given a five (5) percent price preference for evaluation 

purposes. (d) (1) The chief of the contracting office may authorize use of these procedures to 

acquire readily available products and services if the anticipated award will exceed $15 million.

(2) Do not break down requirements aggregating more than the $15 million threshold or 

the micro-purchase threshold into several purchases that are less than the applicable 

threshold merely to –

(i) Permit use of readily available procedures; or

(ii) Avoid any requirement that applies to purchases exceeding the micropurchase threshold.

(e) Agencies shall use the Governmentwide commercial purchase card and electronic purchasing 

techniques to the maximum extent practicable in conducting readily available acquisitions (but 

see 32.1108(b)(2)).(f) Agencies shall maximize the use of electronic commerce when practicable 

(see Subpart 4.5). Drawings and lengthy specifications can be provided off-line in hard copy or 

through other appropriate means.

(g) Authorized individuals shall make purchases using the readily available acquisition 

procedures that are most suitable, efficient, and economical based on the circumstances of each 

acquisition.

(h) In addition to other considerations, contracting officers shall --

(1) Use market-based competition to the maximum extent practicable (see 213.103-1);

(2) Conduct market research commensurate with the complexity and dollar value of the 

acquisition. Presolicitation communication is encouraged, including, for example, the use 

of industry days, presolicitation conferences, market surveillance, requests for sources 

(RFS) and requests for information (RFIs). 

(3) Establish deadlines for the submission of responses, when using solicitations that 

afford suppliers a reasonable opportunity to respond (see 205.203);
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(4) When a solicitation is issued, consider all quotations or offers that are timely received. 

For evaluation of quotations or offers received (see 213.103-5); and 

(5) Use innovative and private sector accepted approaches, to the maximum extent 

practicable, in awarding contracts using readily available acquisition procedures. 

213.004 -- Legal Effect of Quotations. 

(a) A quotation is not an offer and, consequently, cannot be accepted by the Government to form 

a binding contract. Issuance by the Government of an order, either a purchase order or 

Governmentwide purchase card order, in response to a supplier’s quotation does not establish a 

contract. A contract is established when the supplier accepts the offer by signing the purchase 

order, performing, or charging the Governmentwide purchase card. 

(b) If the Government issues an order resulting from a quotation, the Government may (by notice 

to the supplier, at any time before acceptance occurs) withdraw, amend, or cancel its offer. (See 

13.302-4 for procedures on termination or cancellation of purchase orders.) 

213.005 – List of Laws, Executive Orders, and Regulations Applicable to Contracts and 

Subcontracts for Readily Available Products and Services. 

(a) The following list includes all Federal procurement related laws applicable to all contracts 

and subcontracts (if otherwise applicable to subcontracts) for the procurement of readily 

available products and services, with or without customization, pursuant to 10 U.S.C. 3456(a): 

 (1) [Include those laws amended by Congress to refer to 10 U.S.C. 3456 be applicable to 

contracts for readily available products and services and readily available products and 

services with customization.] 

(b) The following list includes all Federal procurement related executive orders, regulations and 

policies applicable to all contracts and subcontracts (if otherwise applicable to subcontracts) for 

the procurement of readily available products and services, with or without customization, 

pursuant to 10 U.S.C. 3456(a): 

(1) [Include those executive orders, regulations, and policies that refer to 10 U.S.C. 3456 

as being applicable to contracts for the procurement of readily available products and 

services and readily available products and services with customization.] 

(c) The Defense Acquisition Regulatory (DAR) Council will include in the lists set forth in 

paragraph (a) and (b) only those laws, executive orders, regulations, and policies that set forth 

policies, procedures, requirements, or restrictions for the acquisition of property or services, and 

specifically state that the law, executive order, regulation or policy will be applicable to contracts 

or subcontracts for readily available products and services. 
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(d) Any individual may petition the Deputy Director for Defense Acquisition Regulation 

Systems (DARS), Defense Procurement and Acquisition Policy (DPAP), to include any 

applicable provision of law not included on the list set forth in paragraph (a) of this section. 

(e) Nothing in this subpart renders a law of general applicability such as the Fair Labor Standards 

Act (29 U.S.C. 203) or criminal statutes found in title 18 inapplicable. 

213.006 -- Required Provisions and Clauses. 

The following clause is the only clause applicable to contracts and subcontracts awarded using 

readily available acquisition procedures, regardless of the method of procurement (e.g. 

governmentwide purchase card, purchase order, e-commerce portal): 

(a) 252.213-1, Contract Terms and Conditions – Readily Available Products and Services. 

Subpart 213.1 –Readily Available Acquisition Procedures 

213.101 -- General. 

(a) In making purchases, contracting officers shall -- 

(1) Comply with the policy in 7.202 relating to economic purchase quantities, when 

practicable; 

(2) Include only the Readily Available Products and Services Clause (252.213-1) in 

purchase orders for readily available products and services and provide for the inspection 

of supplies or services as prescribed in such clause. 

(3) Procure the product or service that presents the best value to the agency; considering 

mission requirements, price, quality, delivery schedule, etc. 

(4) Utilize market-based competition to the maximum extent practicable for all proposed 

contract actions with an anticipated value of $15 million or less, unless the contracting 

officer determines that posting a solicitation to the GPE or distributing a solicitation 

directly to potential suppliers would significantly increase competition relative to the 

value of the procurement. (see 205.202) 

(b) In making purchases, contracting officers should -- 

(1) Make maximum effort to obtain quantity, preferred customer, prompt payment, or 

other regularly offered discounts (see 14.408-3). Prompt payment discounts shall not be 

considered in the evaluation of quotations; and 

213.102 -- Use of Standing Price Quotations. 
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Authorized individuals will utilize standing price quotations as part of the competitive 

procedures for purchasing -- 

(a) Readily available products and services with an anticipated value of $15 million or less. 

These lists should be considered in the contracting officer’s market research as a source of 

market-based pricing. As long as-- 

(1) The pricing information is current; and 

(2) The Government obtains the benefit of maximum discounts before award. 

213.103 -- Competition, Evaluation of Quotations or Offers, Award and Documentation. 

213.103-1 – Leveraging Competition. 

(a) Considerations. In determining how to best leverage competition when using readily 

available acquisition procedures, the contracting officer shall consider the following: 

(1) (i) The nature of the product or service to be purchased and whether the product or 

service is generally sold through the internet, a catalogue, or other source of published 

pricing and seller terms and conditions; and 

(ii) The urgency of the proposed purchase; 

(iii) The dollar value of the proposed purchase; 

(iv) Past experience acquiring the specific product or service and experience 

working with specific vendors; and 

(v) The likelihood of receiving significantly more advantageous pricing or 

contract terms and conditions through a public or direct solicitation process, 

relative to the value of the purchase. 

(b) The contracting officer shall use market-based competition to the maximum extent 

practicable when acquiring readily available products and services with an anticipated contract 

value of $15 million or less. The contracting officer must purchase from the source, identified 

through market research, whose offer presents the best value to the agency. The contracting 

officer must not -- 

(1) Solicit quotations based on personal preference; or 

(2) Restrict market research or solicitation to suppliers of well-known and widely 

distributed makes or brands. 

(c) When a contracting officer does not make an award based on market-based competition and 

issues a solicitation, the contracting officer shall notify potential quoters or offerors of the basis 
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on which the award will be made (price alone or price and other factors, e.g., past performance 

and quality). Contracting officers shall use best value. Solicitations are not required to state the 

relative importance assigned to each evaluation factor and should avoid the use of subfactors. 

(d) Contracting officers may utilize general solicitation procedures, similar to broad agency 

announcements, to solicit readily available products and services. The solicitation may use a 

problem statement or statement of a desired end-state to describe a particular problem to be 

solved or operational capability to be achieved in order to incentivize dissimilar competition of 

products and services. 

(e) The contracting officer shall ensure that sources of readily available products and services 

resulting from market-based competition are rotated, to the extent that the products or services 

offered by the sources being rotated represent the same or similar value to the agency. 

213.103-2 – Market Research. 

(a) Market-based Competition. Contracting officers will utilize market-based competition and 

conduct market research commensurate with the value and complexity of the procurement to 

identify potential sources of readily available products and services and procure those products 

and services with an anticipated value of $15 million or less using the most efficient means 

necessary. When utilizing market-based competition, authorized individuals may directly solicit 

sources of readily available products and services identified through market research either 

orally, electronically, or in writing when necessary to ensure the agency receives the benefit of 

available discounts or other preferential terms and conditions not included in a vendor’s online or 

catalogue-based marketing. 

(b) Communication. An agency should respond to questions or requests for information 

regarding current solicitations or potential future acquisitions received through any medium 

(including electronic commerce) if doing so would not interfere with the efficient conduct of the 

acquisition. 

213.103-3 – Public Posting of Anticipated Requirements. 

Contracting offices will publicly post notices of anticipated readily available products and 

services to be acquired using these procedures on at least a semi-annual basis. These notices 

should be published by the contracting office that will be responsible for the anticipated 

purchases. The notices will indicate that the contracting office intends to utilize market-based 

competition for the acquisition of all readily available products and services with an anticipated 

value of $15 million or less. 

213.103-4 – Solicitation of Sources. 

(a) Public posting of solicitations

(1) When a contracting officer is acquiring readily available products and services with 

an anticipated value in excess of $15 million, a service contract with a period of 
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performance in excess of 12 months, or determines that public notice of a proposed 

procurement will significantly increase competition and add value to the procurement, a 

combined synopsis and solicitation may be used to provide such notice. A separate 

synopsis is not required. The contracting officer must include, in the solicitation, enough 

information to permit suppliers to develop quotations or offers. Contracting officers who 

post such notices to the GPE are encouraged to distribute the notice of the solicitation 

through relevant mediums likely to reach the most potential offerors. 

(2) The contracting officer will comply with the public notice requirements for 

commercial items when procuring readily available products and services with an 

expected contract value in excess of $15 million and for service contracts with a period of 

performance in excess of 12 months. (see 5.203(b)) The chief of the contracting office 

may authorize in writing the use of market-based competition, with no public notice 

requirement, for a procurement of readily available products and services that exceeds 

this threshold. 

(b) Direct Solicitation. 

(1) Contracting officer may directly solicit a source or sources identified during market 

research. The contracting officer must include, in the solicitation, enough information to 

permit suppliers to develop quotations or offers. Solicitation may be oral or in writing 

and shall be used to secure pricing discounts and/or more favorable terms and conditions 

than what is offered as part of a publicly available standing price quotation. 

(c) Written solicitations. If obtaining electronic or oral quotations is uneconomical or 

impracticable a written solicitation may be used. 

(d) Use of general solicitations. Contracting officers may use a general solicitation, when using 

merit-based selection processes to solicit readily available solutions to problem statements or to 

solicit capabilities based on a desired outcome. Contracting officers may also solicit readily 

available products and services that might fit into broad categories of technology or capabilities 

similar to a broad agency announcement. 

213.103-5 -- Evaluation of Market-based Pricing, Quotations, or Offers. 

(a) General.

(1) The contracting officer shall evaluate market-based pricing, quotations or offers -- 

(i) In an impartial manner; and 

(ii) Inclusive of transportation charges from the shipping point of the supplier to 

the delivery destination. 

(2) When a solicitation is used, quotations or offers shall be evaluated on the basis 

established in the solicitation. 
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(3) When a solicitation is used, all quotations or offers submitted in response to a 

solicitation shall be considered (see paragraph (b) of this subsection). 

(b) Evaluation procedures.

(1) The contracting officer has broad discretion in fashioning suitable evaluation 

procedures to determine the offer that represents the best value. The procedures 

prescribed in parts 14 and 15 are generally not applicable. 

(2) Contracting officers shall describe how price will be evaluated in the solicitation. 

Prices can be considered on a line item or total evaluated price basis. All qualifying 

quotes will be ordered from lowest to highest price. 

(i) Prices quotes or proposals provided by verified small businesses will be 

decremented by 5% for evaluation purposes. 

(3) When evaluating quotes, contracting officers may communicate with all some or none 

of the bidders to gain a better understanding of the features of the quoted product or 

service. The communications need not be conducted with any or all bidders and may 

result in a revised quote by a particular bidder. The objective of communications is to 

provide additional information to the contracting officer to inform the best value 

decision. 

(4) If using price and other factors, ensure that quotations or offers can be evaluated in an 

efficient and minimally burdensome fashion. Formal evaluation plans and establishing a 

competitive range, conducting discussions, and scoring quotations or offers are not 

required or encouraged. Contracting offices may conduct comparative evaluations of 

offers. Evaluation of other factors, such as past performance -- 

(i) Does not require the creation or existence of a formal data base; and 

(ii) May be based on one or more of the following: 

(A) The contracting officer’s knowledge of and previous experience with 

the supply or service being acquired; 

(B) Customer surveys, publicly available reviews of products or suppliers, 

and past performance questionnaire replies; 

(C) The Governmentwide Past Performance Information Retrieval System 

(PPIRS) at www.ppirs.gov; or 

(D) Any other reasonable basis. 

(5) If using merit-based selection procedures, contracting officers will facilitate peer 

reviews of each proposed solution to determine if the proposed solution meets the 
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solicitation’s objective for consideration. Proposed solutions need not be evaluated 

against each other. Multiple solutions may be selected for award based on a single 

solicitation. 

213.103-6 -- Award and Documentation. 

(a) Basis for award. Before making award, the contracting officer must determine that the 

proposed price is fair and reasonable. 

(1) Whenever possible, base price reasonableness on market-based competition or 

competitive quotations or offers if competitive quotations or offers are solicited. 

(2) If only one response is received or one offeror is identified during market-based 

competition, include a statement of price reasonableness in the contract file. The 

contracting officer may base the statement on -- 

(i) Market research; 

(ii) Comparison of the proposed price with prices found reasonable on previous 

purchases; 

(iii) Current price lists, catalogs, or advertisements. However, inclusion of a price 

in a price list, catalog, or advertisement does not, in and of itself, establish 

fairness and reasonableness of the price; 

(iv) A comparison with similar items in a related industry, taking into account 

additional capabilities the item being procured may provide; 

(v) The contracting officer’s personal knowledge of the item being purchased; 

(vi) Comparison to an independent Government estimate; 

(vii) A value assessment provided by the requiring activity or program office; or 

(vii) Any other reasonable basis. 

(3) Registration in the System of Award Management is not required in order to make an 

award to a supplier found as a result of market research-based competition or direct 

solicitation as long as the contracting officer can determine the supplier responsible. 

 (b) File documentation and retention. Keep documentation to a minimum. Purchasing offices 

shall retain data supporting purchases (to the maximum extent practicable electronically) to the 

minimum extent and duration necessary for management review purposes (in lieu of the 

requirements in Subpart 4.8). The following illustrate the extent to which quotation or offer 

information should be recorded: 
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(1) Market-based Competition. For acquisitions conducted using market-based 

competition, document is limited to a record of the extent of the market research 

conducted, an abstract of prices offered by sources identified during market research, and 

if award was made based on factors other than price, a brief explanation of the best value 

determination. 

(2) Oral solicitations. The contracting office should establish and maintain records of 

oral price quotations in order to reflect clearly the propriety of placing the order at the 

price paid with the supplier concerned. In most cases, this will consist merely of showing 

the names of the suppliers contacted and the prices and other terms and conditions quoted 

by each. 

(3) Written solicitations. For acquisitions made using these readily available acquisition 

procedures, limit written records of solicitations or offers to notes or abstracts to show 

prices, delivery, references to printed price lists used, the supplier or suppliers contacted, 

and other pertinent data. 

(4) Special situations. Include additional statements -- 

(i) Explaining the limitation of sources considered or solicited, if only one source 

is solicited or considered (does not apply to an acquisition of utility services 

available from only one source); 

(ii) When a value assessment from the program office or requiring activity is 

relied upon in making the price reasonableness determination; or 

(iii) To document peer reviews of solutions offered as part of a merit-based 

process using a general solicitation. 

(c) Contract award. The Governmentwide commercial purchase card or fixed price purchase 

orders are the preferred methods for procuring readily available products and services using 

these procedures. For a procurement under these procedures, a contracting officer may use a 

Governmentwide commercial purchase card as the contract vehicle without the need for an 

accompanying purchase order, subject to the limitations of the contracting officer’s warrant. No 

flexibly priced contracts may be used under these procedures. 

(d) Notification. For acquisitions that do not exceed $15 million and for which a solicitation is 

issued and automatic notification is not provided through an electronic commerce method that 

employs widespread electronic public notice, notification to unsuccessful suppliers shall be given 

only if requested or required by 5.301. For procurements that exceed the micro-purchase 

threshold, and are accomplished using market-based competition, contracting activities will 

publish on a weekly basis, each contract awarded along with the documentation described in 

213.105-3(b)(1), subject to operational security considerations. 

(e) Request for information. If a supplier requests information on an award that was based on 

factors other than price alone, a brief explanation of the basis for the contract award decision 
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shall be provided. The documentation posted pursuant to paragraph (d) will satisfy this 

requirement. 

(f) Taxpayer Identification Number. If an oral solicitation is used or market-based competition 

with no solicitation is used, the contracting officer shall ensure, to the maximum extent 

practicable, that the copy of the award document sent to the payment office, or documentation of 

a Governmentwide commercial purchase card transaction, is annotated with the contractor’s 

Taxpayer Identification Number (TIN) and type of organization (see 4.203), unless this 

information will be obtained from some other source (e.g., centralized database). The contracting 

officer shall disclose to the contractor that the TIN may be used by the Government to collect 

and report on any delinquent amounts arising out of the contractor’s relationship with the 

Government (31 U.S.C. 7701 (c)(3)). 

213.104 – Additional Policy for the Procurment Readily Available Products and Services 

with Customization. 

213.104-1 – Limitation on Additional Procedures and Terms and Conditions

(a) Purchases of readily available products and services with customization, with an anticipated 

value of $15 million or less will be accomplished using the procedures outlined in subpart 213.1

to the maximum extent practicable. Additional procedures and terms and conditions may be 

necessary due to -- 

(1) Increased need for solicitations; and 

(2) Longer term contractual relationships associated with customized service contracts. 

(b) Any additional terms and conditions shall be – 

 (1) Limited to those necessary to ensure effective competition, 

 (2) Consistent with private sector practices, and 

(3) Implemented in a manner that minimizes the requirement for additional review by 

senior procurement officials or higher headquarters and prioritizes the timely delivery of 

capabilities. 

(4) Inclusion of additional FAR and DFARS clauses may be required 

(c) In addition to fixed price purchase orders and Governmentwide commercial purchase card 

transactions, contracting officers may utilize any other contract type that does not require the 

submission of certified cost or pricing data and the application of Government cost accounting 

standards or cost principles. Time and materials contracts shall be preferred over a cost-type 

contract. 
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(d) Use of market-based competition for service contracts with a period of performance that 

exceeds 12 months is prohibited, unless authorized in writing by the Chief of the Contracting 

Office pursuant to 10 U.S.C 3453. 

(e) The following clauses and provisions may be utilized in solicitations and contracts for the 

acquisition of readily available products and services with customization, but the application of 

any additional FAR or DFARS clauses or provisions must be approved by the head of the 

contracting activity on a procurement by procurement bases: 

(1) The provision at 52.212-1, Instructions to Offerors -- Commercial Items. This 

provision provides a single, streamlined set of instructions to be used when soliciting 

offers for commercial items and is incorporated in the solicitation by reference (see Block 

27a, SF 1449). The contracting officer may tailor these instructions or provide additional 

instructions tailored to the specific acquisition in accordance with 12.302. 

(2) The provision at 52.212-3, Offeror Representations and Certifications -- Commercial 

Items. This provision provides a single, consolidated list of representations and 

certifications for the acquisition of commercial items and is attached to the solicitation 

for offerors to complete. This provision may not be tailored except in accordance 

with Subpart 1.4. Use the provision with its Alternate I in solicitations issued by DoD, 

NASA, or the Coast Guard. 

(3) The clause at 52.212-4, Contract Terms and Conditions -- Commercial Items. This 

clause includes terms and conditions which are, to the maximum extent practicable, 

consistent with customary commercial practices and is incorporated in the solicitation 

and contract by reference (see Block 27, SF 1449). Use this clause with its Alternate I 

when a time-and-materials or labor-hour contract will be awarded. The contracting 

officer may tailor this clause in accordance with 12.302

213.105 – Adoption of Private Sector Practices. 

It is a common practice in the marketplace for both the buyer and seller to propose terms and 

conditions written from their particular perspectives. The terms and conditions prescribed in this 

part seek to balance the interests of both the buyer and seller. These terms and conditions are 

generally appropriate for use in a wide range of acquisitions. However, market research may 

indicate other private sector practices that are appropriate for the acquisition of the particular 

item. These practices should be considered for incorporation into the solicitation and contract if 

the contracting officer determines them appropriate in concluding a business arrangement 

satisfactory to both parties and not otherwise precluded by law or Executive order. 

213.106 -- Technical Data. 

Except as provided by agency-specific statutes, the Government shall acquire only the technical 

data and the rights in that data customarily provided to the public with a readily available product 

or service, with or without customization. Readily available products and services are by 

definition developed exclusively at private expense. When a contract for readily available 
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products and services, with or without customization, requires the delivery of technical data, the 

contracting officer may need to include additional provisions and clauses. 

213.107 -- Computer Software. 

(a) Readily available computer software, with or without customization, or readily available 

computer software documentation, with or without customization, shall be acquired under 

licenses customarily provided to the public to the extent such licenses are consistent with Federal 

law and otherwise satisfy the Government’s needs. Generally, offerors and contractors shall not 

be required to -- 

(1) Furnish technical information related to readily available computer software or 

computer software documentation, with or without customization, that is not customarily 

provided to the public; or 

(2) Relinquish to, or otherwise provide, the Government rights to use, modify, reproduce, 

release, perform, display, or disclose readily available computer software or computer 

software documentation, with or without customization, except as mutually agreed to by 

the parties. 

(b) With regard to readily available computer software and computer software documentation, 

with or without customization, the Government shall have only those rights specified in the 

license contained in any addendum to the contract. For additional guidance regarding the use and 

negotiation of license agreements for commercial computer software, see 27.405-3. 

SUBPART 213.2--ACTIONS AT OR BELOW THE MICRO-PURCHASE THRESHOLD

(Revised August 11, 2016)

213.201 *** 

******

SUBPART 213.3--SIMPLIFIED ACQUISITION METHODS

(Revised September 19, 2014)

213.301 Governmentwide commercial purchase card.

Follow the procedures at PGI 213.301 for authorizing, establishing, and operating a 

Governmentwide commercial purchase card program. 

(1) “United States,” as used in this section, means the 50 States and the District of 

Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, the Commonwealth of 
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the Northern Mariana Islands, Guam, American Samoa, Wake Island, Johnston Island, 

Canton Island, the outer Continental Shelf, and any other place subject to the jurisdiction 

of the United States (but not including leased bases). 

(2) An individual appointed in accordance with 201.603-3(a) also may use the 

Governmentwide commercial purchase card to make a purchase that exceeds the micropurchase threshold but does not exceed $25,000, if— 

(i) The purchase— 

(A) Is made outside the United States for use outside the United States; 

and 

(B) Is for a commercial item; but 

(C) Is not for work to be performed by employees recruited within the 

United States; 

(D) Is not for supplies or services originating from, or transported from or 

through, sources identified in FAR Subpart 25.7; 

(E) Is not for ball or roller bearings as end items; 

(F) Does not require access to classified or Privacy Act information; and 

(G) Does not require transportation of supplies by sea; and 

(ii) The individual making the purchase— 

(A) Is authorized and trained in accordance with agency procedures; 

(B) Complies with the requirements of FAR 8.002 in making the purchase; 

and 

(C) Seeks maximum practicable competition for the purchase in 

accordance with FAR 13.104(b). 

(3) A contracting officer may use the Governmentwide commercial purchase card to 

purchase readily available products and services, with or without customization, with an 

aggregate value of $15 million or less, subject to the limitations of the contracting 

officer’s warrant and agency purchase card use limitations. No accompanying purchase 

order is required, but the Governmentwide commercial purchase card may be used as the 

payment method for purchase orders of readily available products and services. 

(4) Guidance on DoD purchase, travel, and fuel card programs is available in the 

“Department of Defense Government Charge Card Guidebook for Establishing and 
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Managing Purchase, Travel, and Fuel Card Programs” 

at http://www.acq.osd.mil/dpap/pdi/pc/policy_documents.html. Additional guidance on 

the fuel card programs is available at http://www.energy.dla.mil. 

213.302 Purchase orders.

213.302-3 Obtaining contractor acceptance and modifying purchase orders.

(1) Require written acceptance of purchase orders for classified acquisitions. 

(2) See PGI 213.302-3 for guidance on the use of unilateral modifications. 

(3) A supplemental agreement converts a unilateral purchase order to a bilateral 

agreement. If not previously included in the purchase order, incorporate the clause 

at 252.243-7001, Pricing of Contract Modifications, in the Standard Form 30, and obtain 

the contractor’s acceptance by signature on the Standard Form 30. 

213.302-5 Clauses.

(a) Use the clause at 252.213-1 252.243-7001, Pricing of Contract Modifications, in all 

bilateral purchase orders. 

(d) When using the clause at FAR 52.213-4, delete the reference to the clause at FAR 

52.225-1, Buy American—Supplies. Instead, if the Buy American statute applies to the 

acquisition, use the clause at— 

(i) 252.225-7001, Buy American and Balance of Payments Program, as prescribed 

at 225.1101(2); or 

(ii) 252.225-7036, Buy American–Free Trade Agreements–Balance of Payments 

Program, as prescribed at 225.1101(10). 

213.303 Blanket purchase agreements (BPAs).

213.303-5 Purchases under BPAs.

(b) *** 

***** 

213.306 SF 44, Purchase Order-Invoice-Voucher.
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(a)(1) The micro-purchase limitation applies to all purchases, except that purchases not 

exceeding the simplified acquisition threshold threshold for the use of readily available 

acquisition procedures (see 10 U.S.C. 3453) may be made for— 

(A) Fuel and oil. U.S. Government fuel cards may be used in lieu of an SF 

44 for fuel, oil, and authorized refueling-related items (see PGI 

213.306 for procedures on use of fuel cards); 

(B) Overseas transactions by contracting officers in support of a 

contingency operation as defined in 10 U.S.C. 101(a)(13) or a 

humanitarian or peacekeeping operation as defined in 10 U.S.C. 2302(8); 

and 

(C) Transactions in support of intelligence and other specialized activities 

addressed by Part 2.7 of Executive Order 12333. 

213.307 Forms.

See PGI 213.307 for procedures on use of forms for purchases made using simplified acquisition 

procedures. 

SUBPART 213.4--FAST PAYMENT PROCEDURE

(Revised January 15, 1999)

213.402 Conditions for use.

(a) Individual orders may exceed the simplified readily available acquisition threshold 

for— 

(i) Brand-name commissary resale subsistence; and 

(ii) Medical supplies for direct shipment overseas. 

SUBPART 213.5—SIMPLIFIED PROCEDURES FOR CERTAIN

COMMERCIAL ITEMS

(Revised September 21, 2015)

213.500-70 Only one offer.

If only one offer is received in response to a competitive solicitation issued using simplified 

acquisition procedures authorized under FAR subpart 13.5, follow the procedures at 215.371-2. 

213.501 Special documentation requirements.
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(a) Sole source (including brand name) acquisitions. For non-competitive follow-on 

acquisitions of supplies or services previously awarded on a non-competitive basis, 

include the additional documentation required by 206.303-2(b)(i) and follow the 

procedures at PGI 206.304(a)(S-70). 

252.213-1 -- Contract Terms and Conditions – Readily Available Products and Services. 

As prescribed in 213.006, insert the following clause: 

Contract Terms and Conditions – Readily Available Products and Services (Oct 2018)

(a) Inspection/Acceptance. The Contractor shall only tender for acceptance those items that 

conform to the requirements of this contract. The Government reserves the right to inspect or test 

any supplies or services that have been tendered for acceptance. The Government may require 

repair or replacement of nonconforming supplies or reperformance of nonconforming services at 

no increase in contract price. If repair/replacement or reperformance will not correct the defects 

or is not possible, the government may seek an equitable price reduction or adequate 

consideration for acceptance of nonconforming supplies or services. The Government must 

exercise its post-acceptance rights -- 

(1) Within a reasonable time after the defect was discovered or should have been 

discovered; and 

(2) Before any substantial change occurs in the condition of the item, unless the change is 

due to the defect in the item. 

(b) Assignment. The Contractor or its assignee may assign its rights to receive payment due as a 

result of performance of this contract to a bank, trust company, or other financing institution, 

including any Federal lending agency in accordance with the Assignment of Claims Act (31 

U.S.C.3727). However, when a third party makes payment (e.g., use of the Governmentwide 

commercial purchase card), the Contractor may not assign its rights to receive payment under 

this contract. 

(c) Changes. Changes in the terms and conditions of this contract may be made only by written 

agreement of the parties. 

(d) Disputes. This contract is subject to 41 U.S.C. chapter 71, Contract Disputes. Failure of the 

parties to this contract to reach agreement on any request for equitable adjustment, claim, appeal 

or action arising under or relating to this contract shall be a dispute to be resolved in accordance 
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with FAR Part 33. The Contractor shall proceed diligently with performance of this contract, 

pending final resolution of any dispute arising under the contract. 

(e) Definitions. The definitions, found in FAR Part 2, DFARS Parts 202 and 213 apply to this 

contract. 

(f) Excusable delays. The Contractor shall be liable for default unless nonperformance is caused 

by an occurrence beyond the reasonable control of the Contractor and without its fault or 

negligence such as, acts of God or the public enemy, acts of the Government in either its 

sovereign or contractual capacity, fires, floods, epidemics, quarantine restrictions, strikes, 

unusually severe weather, and delays of common carriers. The Contractor shall notify the 

Contracting Officer in writing as soon as it is reasonably possible after the commencement of 

any excusable delay, setting forth the full particulars in connection therewith, shall remedy such 

occurrence with all reasonable dispatch, and shall promptly give written notice to the Contracting 

Officer of the cessation of such occurrence. 

(g) Invoice. 

(1) The Contractor shall submit an original invoice and three copies (or electronic 

invoice, if authorized) to the address designated in the contract to receive invoices. An 

invoice must include -- 

(i) Name and address of the Contractor; 

(ii) Invoice date and number; 

(iii) Contract number, line item number and, if applicable, the order number; 

(iv) Description, quantity, unit of measure, unit price and extended price of the 

items delivered; 

(v) Shipping number and date of shipment, including the bill of lading number 

and weight of shipment if shipped on Government bill of lading; 

(vi) Terms of any discount for prompt payment offered; 

(vii) Name and address of official to whom payment is to be sent; 

(viii) Name, title, and phone number of person to notify in event of defective 

invoice; and 

(ix) Taxpayer Identification Number (TIN). The Contractor shall include its TIN 

on the invoice only if required elsewhere in this contract. 

(x) Electronic funds transfer (EFT) banking information. 
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(A) The Contractor shall include EFT banking information on the invoice 

only if required elsewhere in this contract. 

(B) If EFT banking information is not required to be on the invoice, in 

order for the invoice to be a proper invoice, the Contractor shall have 

submitted correct EFT banking information in accordance with the 

applicable solicitation provision, contract clause (e.g., 52.232-33, Payment 

by Electronic Funds Transfer— System for Award Management, or 

52.232-34, Payment by Electronic Funds Transfer—Other Than System 

for Award Management), or applicable agency procedures. 

(C) EFT banking information is not required if the Government waived 

the requirement to pay by EFT. 

(2) Invoices will be handled in accordance with the Prompt Payment Act (31 U.S.C. 

3903) and Office of Management and Budget (OMB) prompt payment regulations at 5 

CFR part 1315. 

(h) Patent indemnity. The Contractor shall indemnify the Government and its officers, employees 

and agents against liability, including costs, for actual or alleged direct or contributory 

infringement of, or inducement to infringe, any United States or foreign patent, trademark or 

copyright, arising out of the performance of this contract, provided the Contractor is reasonably 

notified of such claims and proceedings. 

(i) Payment. 

(1) Items accepted. Payment shall be made for items accepted by the Government that 

have been delivered to the delivery destinations set forth in this contract. 

(2) Prompt Payment. The Government will make payment in accordance with the Prompt 

Payment Act (31 U.S.C. 3903) and prompt payment regulations at 5 CFR Part 1315. 

(3) Electronic Funds Transfer (EFT). If the Government makes payment by EFT, see 

52.212-5(b) for the appropriate EFT clause. 

(4) Discount. In connection with any discount offered for early payment, time shall be 

computed from the date of the invoice. For the purpose of computing the discount earned, 

payment shall be considered to have been made on the date which appears on the 

payment check or the specified payment date if an electronic funds transfer payment is 

made. 

(5) Overpayments. If the Contractor becomes aware of a duplicate contract financing or 

invoice payment or that the Government has otherwise overpaid on a contract financing 

or invoice payment, the Contractor shall— 
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(i) Remit the overpayment amount to the payment office cited in the contract 

along with a description of the overpayment including the— 

(A) Circumstances of the overpayment (e.g., duplicate payment, erroneous 

payment, liquidation errors, date(s) of overpayment); 

(B) Affected contract number and delivery order number, if applicable; 

(C) Affected line item or subline item, if applicable; and 

(D) Contractor point of contact. 

(ii) Provide a copy of the remittance and supporting documentation to the 

Contracting Officer. 

(6) Interest. 

(i) All amounts that become payable by the Contractor to the Government under 

this contract shall bear simple interest from the date due until paid unless paid 

within 30 days of becoming due. The interest rate shall be the interest rate 

established by the Secretary of the Treasury as provided in 41 U.S.C. 7109, which 

is applicable to the period in which the amount becomes due, as provided in 

(i)(6)(v) of this clause, and then at the rate applicable for each six-month period at 

fixed by the Secretary until the amount is paid. 

(ii) The Government may issue a demand for payment to the Contractor upon 

finding a debt is due under the contract. 

(iii) Final decisions. The Contracting Officer will issue a final decision as 

required by 33.211 if— 

(A) The Contracting Officer and the Contractor are unable to reach 

agreement on the existence or amount of a debt within 30 days; 

(B) The Contractor fails to liquidate a debt previously demanded by the 

Contracting Officer within the timeline specified in the demand for 

payment unless the amounts were not repaid because the Contractor has 

requested an installment payment agreement; or 

(C) The Contractor requests a deferment of collection on a debt previously 

demanded by the Contracting Officer (see 32.607-2). 

(iv) If a demand for payment was previously issued for the debt, the demand for 

payment included in the final decision shall identify the same due date as the 

original demand for payment. 
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(v) Amounts shall be due at the earliest of the following dates: 

(A) The date fixed under this contract. 

(B) The date of the first written demand for payment, including any 

demand for payment resulting from a default termination. 

(vi) The interest charge shall be computed for the actual number of calendar days 

involved beginning on the due date and ending on— 

(A) The date on which the designated office receives payment from the 

Contractor; 

(B) The date of issuance of a Government check to the Contractor from 

which an amount otherwise payable has been withheld as a credit against 

the contract debt; or 

(C) The date on which an amount withheld and applied to the contract 

debt would otherwise have become payable to the Contractor. 

(vii) The interest charge made under this clause may be reduced under the 

procedures prescribed in 32.608-2 of the Federal Acquisition Regulation in effect 

on the date of this contract. 

(j) Risk of loss. Unless the contract specifically provides otherwise, risk of loss or damage to the 

supplies provided under this contract shall remain with the Contractor until, and shall pass to the 

Government upon: 

(1) Delivery of the supplies to a carrier, if transportation is f.o.b. origin; or 

(2) Delivery of the supplies to the Government at the destination specified in the contract, 

if transportation is f.o.b. destination. 

(k) Taxes. The contract price includes all applicable Federal, State, and local taxes and duties. 

(l) Termination for the Government’s convenience. The Government reserves the right to 

terminate this contract, or any part hereof, for its sole convenience. In the event of such 

termination, the Contractor shall immediately stop all work hereunder and shall immediately 

cause any and all of its suppliers and subcontractors to cease work. Subject to the terms of this 

contract, the Contractor shall be paid a percentage of the contract price reflecting the percentage 

of the work performed prior to the notice of termination, plus reasonable charges the Contractor 

can demonstrate to the satisfaction of the Government using its standard record keeping system, 

have resulted from the termination. The Contractor shall not be required to comply with the cost 

accounting standards or contract cost principles for this purpose. This paragraph does not give 

the Government any right to audit the Contractor’s records. The Contractor shall not be paid for 

any work performed or costs incurred which reasonably could have been avoided. 
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(m) Termination for cause. The Government may terminate this contract, or any part hereof, for 

cause in the event of any default by the Contractor, or if the Contractor fails to comply with any 

contract terms and conditions, or fails to provide the Government, upon request, with adequate 

assurances of future performance. In the event of termination for cause, the Government shall not 

be liable to the Contractor for any amount for supplies or services not accepted, and the 

Contractor shall be liable to the Government for any and all rights and remedies provided by law. 

If it is determined that the Government improperly terminated this contract for default, such 

termination shall be deemed a termination for convenience. 

(n) Title. Unless specified elsewhere in this contract, title to items furnished under this contract 

shall pass to the Government upon acceptance, regardless of when or where the Government 

takes physical possession. 

(o) Warranty. The Contractor warrants and implies that the items delivered hereunder are 

merchantable and fit for use for the particular purpose described in this contract. 

(p) Limitation of liability. Except as otherwise provided by an express warranty, the Contractor 

will not be liable to the Government for consequential damages resulting from any defect or 

deficiencies in accepted items. 

(q) Other compliances. The Contractor shall comply with all applicable Federal, State and local 

laws, executive orders, rules and regulations applicable to its performance under this contract. 

(r) Compliance with laws unique to Government contracts. The Contractor agrees to comply with 

31 U.S.C. 1352 relating to limitations on the use of appropriated funds to influence certain 

Federal contracts; 18 U.S.C. 431 relating to officials not to benefit; 40 U.S.C. chapter 37, 

Contract Work Hours and Safety Standards; 41 U.S.C. chapter 87, Kickbacks; 41 U.S.C. 4712 

and 10 U.S.C. 2409 relating to whistleblower protections; 49 U.S.C. 40118, Fly American; and 

41 U.S.C. chapter 21 relating to procurement integrity. 

(s) Order of precedence. Any inconsistencies in this solicitation or contract shall be resolved by 

giving precedence in the following order: 

(1) The schedule of supplies/services. 

(2) The Assignments, Disputes, Payments, Invoice, Other Compliances, Compliance with 

Laws Unique to Government Contracts, and Unauthorized Obligations paragraphs of this 

clause. 

(3) The clause at 52.212-5. 

(4) Addenda to this solicitation or contract, including any license agreements for 

computer software. 

(5) Solicitation provisions if this is a solicitation. 
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(6) Other paragraphs of this clause. 

(7) The Standard Form 1449. 

(8) Other documents, exhibits, and attachments. 

(9) The specification. 

(t) Reserved 

(u) Unauthorized Obligations. 

(1) Except as stated in paragraph (u)(2) of this clause, when any supply or service 

acquired under this contract is subject to any End Use License Agreement (EULA), 

Terms of Service (TOS), or similar legal instrument or agreement, that includes any 

clause requiring the Government to indemnify the Contractor or any person or entity for 

damages, costs, fees, or any other loss or liability that would create an Anti-Deficiency 

Act violation (31 U.S.C. 1341), the following shall govern: 

(i) Any such clause is unenforceable against the Government. 

(ii) Neither the Government nor any Government authorized end user shall be 

deemed to have agreed to such clause by virtue of it appearing in the EULA, 

TOS, or similar legal instrument or agreement. If the EULA, TOS, or similar legal 

instrument or agreement is invoked through an “I agree” click box or other 

comparable mechanism (e.g., “click-wrap” or “browse-wrap” agreements), 

execution does not bind the Government or any Government authorized end user 

to such clause. 

(iii) Any such clause is deemed to be stricken from the EULA, TOS, or similar 

legal instrument or agreement. 

(2) Paragraph (u)(1) of this clause does not apply to indemnification by the Government 

that is expressly authorized by statute and specifically authorized under applicable 

agency regulations and procedures. 

(v) Incorporation by reference. The Contractor’s representations and certifications, including 

those completed electronically via the System for Award Management (SAM), are incorporated 

by reference into the contract. 
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 Volume 3 | Page 49 

Section 2 

Portfolio Management Framework 

In a threat environment that is increasingly dynamic and complex, defense 

acquisition must deliver capabilities in an equally dynamic and efficient way. 

Moving to a total lifecycle, multitiered, capability portfolio management 

framework promises to considerably improve the capital investments and 

management process in the near and longer term. 

RECOMMENDATIONS

Rec. 36: Transition from a program-centric execution model to a portfolio execution 

model. 

Rec. 37: Implement a defensewide capability portfolio framework that provides an 

enterprise view of existing and planned capability, to ensure delivery of integrated and 

innovative solutions to meet strategic objectives. 

Rec. 38: Implement best practices for portfolio management. 

Recommendations continued on following page.
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RECOMMENDATIONS

Rec. 39: Leverage a portfolio structure for requirements. 

Rec. 40: Professionalize the requirements management workforce. 

Rec. 41: Establish a sustainment program baseline, implement key enablers of 

sustainment, elevate sustainment to equal standing with development and procurement, 

and improve the defense materiel enterprise focus on weapon system readiness. 

Rec. 42: Reduce budgetary uncertainty, increase funding flexibility, and enhance the 

ability to effectively execute sustainment plans and address emergent sustainment 

requirements. 
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INTRODUCTION 

In general, agencies should establish and manage portfolios of programs, projects, and other work in 

accordance with Federal policy and nationally recognized standards.1

In June 2018, the Section 809 Panel submitted its Volume 2 Report, which presented rationale for 

structural and procedural changes for DoD’s acquisition and sustainment enterprise that included 

forging closer relationships among requirements, PPBE, and acquisition; delegating authority; and 

“moving from program-centric to portfolio-driven management.”2 

Although there have been numerous acquisition reform efforts and substantive changes to strategy, 

structure, processes, and procedures in DoD acquisition and sustainment, a recent paper nonetheless 

stated, “DoD [acquisition] support systems are grounded in 50-year old structures which ... brought in 

systems analysis and centralized management processes. By the end of the 60s we had the PPBES 

(Planning, Programming, Budgeting, Execution System) as well as the underlying structures of JCIDS (Joint 

Capability Integrated Development System) and the [acquisition] 5000 series (DoD 5000 directives and 

instructions). Many revisions have been proposed and made along the way, but the fundamental structure 

remains centralized management.3 Program executive officers (PEOs) were created to enable the 

possibility of implementing a portfolio approach, but the focus on program-centric management continues. 

As the Section 809 Panel noted in its Volume 2 Report, 

The 2018 National Defense Strategy refocuses DoD on long-term, strategic competition with revanchist 

powers. Interstate competition from actors such as China and Russia are now DoD’s top priority. DoD 

aims to increase its competitiveness and restore dominance by building a more lethal Joint Force, 

rebuilding readiness, and attracting new partners through business practices that improve performance 

and affordability. The defense acquisition system serves as a critical enabler, and as such must accomplish 

the following objectives of the National Defense Strategy: 

 Deliver performance at the speed of relevance. 

 Organize for innovation. 

 Drive budget discipline and affordability. 

 Streamline rapid, iterative approaches from development to fielding. 

 Harness and protect the national security innovation base. 

Speed, innovation, and iterative capability development are essential, as are funding availability and 

flexibility; however, these vital characteristics remain elusive in the program-centric requirements 

development and procurement processes. In the current system, process and cost supersede delivery of upto-date, well-conceived, and effective capabilities to warfighters. Delivering advanced capabilities at speed 

and scale must be a strategic DoD priority to outpace the threat and seize technological opportunities. 

Speed and scale, however, rely on a robust, risk-taking culture to deliver advanced capabilities. Defense 

 

1

 OMB Circular No. A-11: Preparation, Submission, and Execution of the Budget, accessed December 30, 2018, 

https://www.whitehouse.gov/wp-content/uploads/2018/06/a11.pdf. 

2

 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, 4 (2018). 

3

 Charles R. Mahon and John D. Driessnack, Winning in the 21st Century: Command by Negation within a Portfolio, Program, Project 

Structure, a Point Paper to the Section 809 Panel, September 2017, accessed June 7, 2018, 

https://www.pmi.org/learning/library/winning-21st-century-point-paper-section-809-panel-11314. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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acquisition should do more to leverage prototyping, experimentation, and other developmental activities, 

balancing innovation and operational risk. ... An example of this experimentation is the United States 

Special Operations Command’s acquisition model comprising speed, risk tolerance, scale, inclusivity, and 

relationships. The acquisition culture in this model is a portfolio approach which emphasizes an 

aggressive, operator-focused and innovative acquisition culture with an emphasis on agility and speed of 

delivery to the customer.4

The Section 809 Panel’s portfolio management framework asserts that DoD should transition from 

program-centric to portfolio-centric capability development and sustainment. Such a shift is 

fundamental to positioning DoD strategically and structurally for success in the 21st Century. Portfolio 

management has matured in industry, with ANSI and ISO standards published for more than a 

decade. GAO found in 2015 that “DOD is not using an integrated portfolio management approach to 

optimize its weapon system investments at the enterprise level, as called for in best practices.”5 The 

consequences of a continued program-centric approach are well documented: redundancy, increased 

costs, delays, and fewer quantities or capabilities, among others.6

Despite the many changes during the past 50 years, the Section 809 Panel found the existing decision 

support framework, centered around major programs with a centralized structure, inhibits 

achievement NDS-desired characteristics. “Agility is possible in large organizations when current 

knowledge of organizational structural theories are understood” and implemented.7 As outlined in the 

Volume 2 Report, the structural change to a portfolio-centric framework would address four elements: 

portfolio execution, enterprise capability portfolio management, sustainment, and requirements. 

This section has five recommendations with supporting analysis that expand on those elements of 

portfolio management, along with recommendations on professionalizing the requirements 

management (RM) workforce in a portfolio framework and sustainment budget issues. Despite recent 

changes in organizational structure and authorities based on recent NDAAs, substantial structural and 

process/procedural challenges need to be addressed. Recommendation 36 presents the case for 

transitioning PEOs in the Military Services and Defense Agencies to portfolio acquisition executives 

(PAEs). PAEs would have a portfolio of systems supporting a specific capability to manage from 

inception to disposal, a total lifecycle, multi-tiered, capability portfolio management framework. 

Recommendation 37 addresses need for, and operation of, capability portfolios at the enterprise level to 

assist in investment decisions, as well as gap and overlap assessment. Recommendation 38 presents a 

selection of portfolio best practices. Recommendations 39 and 40 consider requirements in a portfolio 

setting and professionalizing the RM workforce. Recommendations 41 and 42 establish a sustainment 

program baseline and address issues related to sustainment funding. 

 

4

 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, 4 (2018). 

5

 GAO, Weapon System Acquisitions: Opportunities Exist to Improve the DOD’s Portfolio Management, GAO-15-466, August 2015, 10, 

accessed November 26, 2018, https://www.gao.gov/assets/680/672205.pdf. 

6

 GAO, Best Practices: An Integrated Portfolio Management Approach to Weapon System Investments Could Improve DOD’s Acquisition 

Outcomes, GAO-07-388, March 2007, 5, accessed November 26, 2018, https://www.gao.gov/assets/260/258331.pdf. 

7

 Charles R. Mahon and John D. Driessnack, Winning in the 21st Century: An Acquisition Point Paper to the Section 809 Panel, September 

2017, accessed June 7, 2018, https://www.pmi.org/learning/library/winning-21st-century-point-paper-section-809-panel-11314
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Portfolio Management Framework Volume 3 | Page 53 

All recommendations recognize and address challenges to reach the end goal of a total lifecycle, 

multitiered, capability portfolio management framework that integrates the decision support systems 

into a Defense Capabilities Acquisition and Sustainment Framework (DCASF). (See recommended 

draft revision to DoDD 5000.01 attached in the Implementation Details at the end of Section 2.) 

RECOMMENDATIONS 

Recommendation 36: Transition from a program-centric execution model to a 

portfolio execution model. 

Problem 

The defense acquisition system (DAS) is beleaguered by a number of issues that challenge the United 

States ability to maintain military superiority. The following characteristics of the current DAS require 

immediate change: 

 A compliance-heavy culture driven by fear of failure. 

 A workforce belief that failures will be punished rather than celebrated, despite leadership 

pronouncements to take more risk and to fail fast. 

 Until recently, a highly centralized organizational structure under which sequentially made 

decisions and a long coordination process led to unacceptable timelines, causing program delays 

and administrative inefficiencies.8

 Milestone decisions that require excessive program documentation, multiple program reviews, 

and protracted coordination. 

 Individual program-centric thinking and decision making versus mission and kill-chain-centric 

thinking. 

 A rigid funding environment that stifles agility. 

 Lack of decision authority commensurate with management responsibilities. 

Background

DoD’s acquisition process comprises three decision systems: the Joint Capabilities Integration and 

Development System (JCIDS) for identifying and validating user requirements; the Planning, 

Programming, Budgeting, and Execution (PPBE) System, for allocating resources and budgeting; and 

DAS, for developing and procuring the item. JCIDS, PPBE, and DAS—the defense acquisition Decision 

Support Systems (DSS)—together make up what is called big A acquisition, a system in which each of 

the three processes operates independently with separate chains of command. 

 

8

 GAO, Best Practices: An Integrated Portfolio Management Approach to Weapon System Investments Could Improve DOD’s Acquisition 

Outcomes, GAO-07-388, March 2007, accessed November 26, 2018, https://www.gao.gov/assets/260/258331.pdf. 
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Although there have been numerous acquisition reform efforts in recent decades, acquisition reforms in 

the 1980s that stemmed from the Goldwater–Nichols Act are most pertinent to the concerns listed 

above. It was among these reforms that the acquisition, requirements, and budgeting organizations 

were separated throughout DoD. “Goldwater–Nichols historically changed DoD acquisition by 

directing the establishment of the Office of the Under Secretary of Defense for Acquisition (USD[A]), 

and directing a similar structure of service component acquisition executives in authority over PEOs 

[program executive officers] and PMs [program managers].”9 This reform came amidst damaging 

reports of overpriced spare parts and other forms of alleged waste and fraud that drew scrutiny from 

Congress in 1985. President Ronald Reagan appointed the Blue Ribbon Commission on Defense 

Management (commonly referred to as the Packard Commission) to identify issues in the defense 

acquisition process. Two of the key problems identified were fragmented responsibility for acquisition 

and no senior official at the Office of the Secretary of Defense (OSD) level to provide acquisition system 

supervision. The commission recommended establishing a USD(A), a comparable senior position for 

each of the Military Services, and PEOs to resolve gaps in major weapons systems acquisition. A key 

attribute of this organization structure was an acquisition chain of command through the Service 

Civilian Secretaries, not the uniformed military leadership, as illustrated in Figure 2-1 below. 

The weapon systems organization and management framework established by Goldwater–Nichols is 

program centric: PMs report through PEOs to Service acquisition executives (SAEs) and then the 

defense acquisition executive (DAE) as required. The milestone decision authority (MDA) for major 

programs, typically the DAE or SAE, makes the key acquisition decisions for the program. These 

decisions include the overall strategy, contracting and acquisition approaches, entrance and exit criteria 

for key milestones, and the milestone decision itself. PEOs are often responsible for overseeing 

execution of multiple acquisition programs and can have acquisition authorities over smaller programs 

as delegated from the DAE–SAE chain of command. The PEO, as the executive manager of assigned 

programs, typically oversees one or more PMs. PMs are responsible for weapons systems development, 

production, and sometimes lifecycle sustainment. Classic program performance metrics are cost, 

schedule, and performance results as compared to the approved acquisition program baseline (APB). 

 

9

 Dale P. Bond, Scott M. Davis, and Aaron D. Pearsall, The Goldwater–Nichols Act of 1986: 30 Years of Acquisition Reform, Naval 

Postgraduate School, MBA Professional Report, December 2016, accessed September 27, 2018, 

https://calhoun.nps.edu/bitstream/handle/10945/51649/16Dec_Bond_Davis_Pearsall.pdf?sequence=1&isAllowed=y. 
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Figure 2-1. Acquisition Decision-Making Structure 

Discussion 

The Section 809 Panel researched major defense acquisition programs and met with PEOs, PMs, and 

program personnel from programs that were identified as being successful. Key enablers common to 

these successful programs include the following: 

 Requirements that are well developed and understood to the user and acquisition communities. 

 Continuous and open communication across requirements, acquisition, and programming 

communities. 

 Direct access to decision makers for timely decisions that cross the three communities. 

 A tie to the warfighting mission and delivery to an operational cadence. 

 Social rewards for risk taking and delivering product-mission fit, with all functionals—including 

ideally colocated contracting officers and supporting program management—believing they are 

accountable to program success. 

 A culture of trust.
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Lacking of trust continues to exist across the system in areas such as the following: 

 PMs must navigate through an inefficient and time-consuming process to reach key acquisition 

decision makers. 

 Delays in program decision making are costly, ineffective, and add undue risk and schedule to 

the program and ultimately the warfighter. 

 Valuable talent and resources are wasted. 

 Each individual in the coordination chain to the MDA has the potential to delay advancement 

of the signature package in return for some changes in the acquisition plan. Those individuals 

are not accountable for the program success. 

Typically, overall requirements generation originates with the Combatant Commanders (CCDRs) in 

conjunction with the Military Service Chiefs. The process is to identify capability gaps that correlate to 

operational requirements and enter the requirements validation process. Ideally, candidate solutions 

are postulated, analyzed, and evaluated by OSD, the Joint Chiefs of Staff (JCS), and the Military 

Services and iterated with the acquisition community. In rare cases, requirements are monetized so 

decision makers can choose how much they want to spend for what capability. This ideal chain of 

events rarely happens because of the degree of collaboration and continuous work needed to get the 

requirement right. Further effort and collaboration is needed to assure the funding profile, which is 

owned by the PPBE community, is correct. If modifying a current system or developing a new system 

is required to meet a new threat, resources and requirements are passed to the acquisition system. Too 

often the acquisition community is brought in—after all the requirements and funding decisions have 

been made—to execute what has already been planned by the other two communities. Additionally, 

there is a need to ensure innovative capabilities for which there is no current requirement. 

Because the PEO and PM must execute to requirements and budgets established outside their control, 

their ability to optimize efficiencies or interoperability across programs or a strategic enterprise vision 

is extremely limited. Although this process may have sufficed during previous eras of slower 

technological and threat advances, it is hampering acquisition agility today. As an extreme example, in 

modern iterative software development (such as Agile or DevOps) there are constant trade-offs on 

requirements, budget, and priorities per iteration (sometimes called sprints), as often as every 2 weeks. 

Such modern development techniques are extremely difficult to accomplish across the three separate 

authority areas, each of which has its own chain of command and decision-making processes. 

The table below shows the limits per type of appropriation, which illustrate the current lack of 

budgetary flexibility allowed to the acquisition chain. The PEO is limited to a BTR of $10 million or 

20 percent (whichever is less) of RDT&E, or $20 million or 20 percent (whichever is less) of 

Procurement funding. Anything above these thresholds requires congressional approval as ATR. Major 

defense acquisition program (MDAP) designation is baselined at $480 million in FY 2014 dollars in 

RDT&E and $2.79 billion in FY 2014 dollars in Procurement. BTR authority provides less than 2 percent 

flexibility for program execution. The current changes in operations, threats, and priorities warrant 

faster and greater fund shifting to optimize investments. 
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Table 2-1. Appropriation Limits 

PEO Authority Congressional 

Approval 

MDAP Baseline % of MDAP Baseline 

Appropriation Below Threshold 

Reprogramming (BTR) 

Above Threshold 

Reprogramming 

(ATR) 

 

Research, 

Development, Test 

and Evaluation 

(RDT&E) 

$10M or 20% 

(whichever is less) 

Above $10M or 

20% 

$480M 2.0% 

Procurement $20M or 20% 

(whichever is less) 

Above $20M or 

20% 

$2,790M 0.7% 

Congress recognized this overly centralized acquisition execution in DoD. In Section 825 of the FY 2016 

NDAA, it designated MDAPs be managed at the SAE level or lower unless otherwise directed by the 

Secretary of Defense. SAEs have further delegated milestone decision authority (MDA) of Acquisition 

Category (ACAT) II Programs and below to PEOs. On the requirements, Section 802 of the FY 2016 

NDAA designated Military Service Chiefs responsible for requirements. Despite this progress, more is 

required to increase agility, responsiveness, and efficiency within defense acquisition, specifically with 

requirements and budget. Both FY 2016 NDAA sections underscore the utility of moving to a portfolio 

approach. 

Transitioning defense acquisition from a program-centric model to a portfolio model will enable the 

agile, flexible, and decentralized organization DoD needs. To reduce decision delay time, unnecessary 

workarounds, and inefficiencies seen in the current system, PAEs would be delegated a substantial 

level of acquisition, requirements, and budget decision authority. PAEs’ ability to integrate, manage, 

and execute programs within the portfolio would provide the flexibility, agility, and increased lethality 

required for responding to evolving threats and technology. The PAE would optimize cost reduction 

and schedule effectiveness and manage risks and opportunities, such as introduction of new 

technologies across the portfolio to maximize mission impact. To capitalize on the benefits of portfolio 

management, DAS must transition the current PEO role to a PAE role. The PAE role would replace the 

current Title 10 definition of the PEO with expanded roles and responsibilities as discussed below. 

The PAE would be responsible for iteratively delivering capabilities based on technological maturity, 

cost, schedule, system performance, risks, and threat assessments. As seen in the success of the Air 

Force Rapid Capabilities Office, the PAE should have the authority to shape system requirements 

below key performance parameters (KPPs) within the portfolio to maximize the agility and flexibility 

required. Requirements organizations and operational commands currently invest substantial time on 

system requirements documents and collaboration with program offices with varying levels of success. 

Increased integration of the operational and acquisition communities is required to deliver mission 

capabilities with greater speed and agility. 
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One possible approach would be to apply mission engineering to map system capabilities to mission 

needs at the capability portfolio level. Mission engineering—which combines the structure of systems 

engineering with the tactical insights of operational planning—could provide a basis for the following: 

 Assessing portfolio contributions to the delivery of capabilities against assigned kill chains and 

threads. 

 Understanding the effects of investment decisions on operational priorities. 

 Assessing the fighting capability of existing and planned weapon systems. 

 Identifying capability gaps in light of existing and planned acquisitions. 

 Providing a common mission picture to senior leaders and customer communities. 

Although programs would still comply with JCIDS requirements documentation (approved at the 

Military Service level), the Military Services and Defense Agencies should develop a set of capstone 

requirements and related materials for each execution portfolio. These requirements would guide the 

iterative delivery of an integrated suite of capabilities to maximize operational impact. (See 

Recommendation 38). 

The Military Service headquarters leadership, operational commands, and Joint Staff should 

collaborate to provide each execution portfolio with an integrated set of capstone requirements and 

threat assessments from the intelligence community. This approach would focus the Joint Staff and 

Military Service Chiefs on the strategic operational requirements, while enabling portfolios to manage 

speed and agility of capability requirements for specific systems/programs at lower levels. The PAE 

would require an embedded, empowered operational representative. This person would provide 

insight on operations and threats to shape portfolio priorities and capability roadmaps and provide 

rapid feedback and connections with operational end users. The capstone requirements document 

would provide flexibility for PAE’s to make appropriate trade-offs between program capabilities and 

program cost, schedule, and performance. In cases for which substantial program changes require 

higher-level approval, Configuration Steering Boards should work with the PAE to ensure expedited 

decisions. 

One of the biggest challenges to implementing a portfolio structure is allocation of program budgets. 

Most procurement programs today are funded and managed through budget line items, yet research 

and development (R&D) programs are funded and managed through accounts called program 

elements (PEs). A single weapon system is likely to include multiple budget items and PEs. The 

multiple programs included in the portfolio of a PAE could, unless modified, include hundreds of line 

items and PEs. Reallocating funds between budget items and PEs requires approvals by senior DoD 

officials (for BTR) and by Congress (for ATR). Such approvals can be time-consuming to obtain (and in 

some cases are denied), limiting the ability of PEOs and PMs to respond to changes in available 

technology and other portfolio and program developments. 

In several cases, DoD has successfully developed and procured a system of systems within a single line 

item or PE. The Evolved Expendable Launch Vehicle (EELV) program, for example, provides for the 
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development of a range of domestic space launch systems and upgrades within a single PE. As another 

example, the Family of Medium Tactical Vehicles (FMTV) program provides for the procurement of a 

series of trucks and trailers that vary by mission and payload within a single line item. The budget 

structures of the missile defense program and the Stryker family of vehicles include examples of 

similarly broad line items and PEs. These more broadly structured budget items and PEs provide 

portfolio managers more flexible budgeting and enable them to make responsible decisions to move 

money within their portfolios in an agile manner. In these cases, transparency and accountability have 

been maintained by accounting for expenditures within the line item or PE through subaccounts— 

known variously as project codes, end items, cost elements, or budget program activity codes. 

Congress and DoD should work together to increase acquisition system agility by building on these 

examples to provide greater funding flexibility at the portfolio level. The Military Services should 

review and rationalize the line item and PE structure for each major portfolio. This review should: 

(a) address cases in which programs or systems have been subdivided into multiple line items or PEs, 

making them more difficult to manage and (b) identify cases in which multiple programs or systems 

intended to provide a common capability could be combined into a single line item or PE (in the 

manner of the EELV or FMTV programs). Enhanced BTR authority could provide additional resource 

flexibility. Several proposed funding flexibility initiatives are described elsewhere in this report. 

A pilot program should be established under which an entire portfolio in each Military Service would 

be funded under a single line item or PE. It is unlikely that Congress would be willing to grant such 

resource flexibility for a portfolio like the Navy PEO for Ships or the Army PEO for Ground Combat 

Systems, which includes multiple, highly visible major weapon systems. DoD may be able to build 

trust with Congress, however, if it shows that it can responsibly manage less visible portfolios. 

Examples of such portfolios include the portfolio of the Army PEO for Simulation, Training and 

Instrumentation or the Air Force PEO for Command, Control, Communications, Intelligence and 

Networks. 

The PAE should be delegated MDA authority whenever appropriate. The PAE should have an 

assigned chief of contracting office (COCO) (see Recommendation 38), along with other senior 

functional staff with authority to allow the PAE to manage cost, schedule, and performance within the 

portfolio. As addressed more fully in Recommendation 41, the PAE should be responsible for 

sustainment management through sustainment program baselines (SPBs) managed by the PMs and 

product support managers (PSMs) throughout the process. 

 PAEs should have the authority, autonomy, and accountability to iteratively deliver an integrated 

suite of capabilities through empowered portfolio management. Enterprise capability portfolio 

managers should also be established and paired with existing functional capability boards (FCBs), at 

the OSD level. This shift would ensure an enterprise perspective on capability trade-offs and provide 

for the integration of requirements, acquisition, and resource decisions throughout the organization. 

Conclusions 

Transitioning defense acquisition from a program-centric model to a portfolio model will enable the 

agile, flexible, and decentralized organization DoD needs. To reduce decision delay time and 

unnecessary workarounds and inefficiencies seen in the current system, the PAE would be empowered 
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with roles and responsibilities, including resources, programming, budgeting, and acquisition 

authorities. The PAE’s ability to integrate, manage, and execute programs within the portfolio would 

provide the necessary flexibility, agility, and increased lethality required to be responsive to evolving 

threats and technology. The PAE would optimize cost and schedule and manage risks across the 

portfolio to maximize mission impact of the portfolio’s capabilities. 

The PAE should make acquisition, procurement, and sustainment decisions for agility and 

responsiveness in executing emerging needs in a timely and effective manner. PAEs need to be 

empowered to prioritize needs, make early go/no-go decisions about alternative solutions, and allocate 

resources to portfolio priorities for mission impact within fiscal constraints. The PAE would manage 

risk and opportunities across the portfolios for greater overall cost, schedule, and operational 

effectiveness. 

Under this structure, notionally shown in Figure 2-2, the PAE would be responsible and accountable 

for the development, procurement, and lifecycle management of the operational capability across the 

portfolio as captured in the baseline documents. 

Figure 2-2. Portfolio Management Construct (Notional) 

PAEs would be given broader flexibility to move funds by rationalizing line item and PE structures, 

identifying cases in which families of capabilities could be funded under a single line item or PE, 

providing enhanced BTR authority, and developing a pilot program under which an entire portfolio in 

each Military Service would be managed under a single line item or PE. This more agile funding 

approach would increase the effective use of constrained resources and enable PAEs to direct funds 

toward the highest-priority capabilities with the greatest enterprise impact. The initial change would 

not require a wholesale restructuring of the PPBE process but simply would call for shaping a few PEs 
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Portfolio Management Framework Volume 3 | Page 61 

for an initial set of portfolios.10 As Congress and DoD gain trust in a more flexible resource allocation 

system, DoD should be able to delegate more and more authority to PAEs, enabling them to optimize 

acquisition outcomes. 

PMs focus on executing the cost, schedule, and technical performance of the acquisition program; PAEs 

must look beyond the current state. The PAE must continually assess emerging threats, operational 

effectiveness, and the portfolio’s capabilities and harness opportunities evolving from technologies and 

innovation. A key enabler of the portfolio management concept will be the requirement to develop and 

maintain a portfolio capability and technology roadmap as part of the 20-year portfolio strategy under 

Recommendation 38. 

The PAE responsibilities should include the following: 

 Developing and maintaining portfolio roadmaps, including mission engineering plans, to 

strategically plan current and future program development and current program execution. 

 Coordinating with Enterprise Capability Portfolio Managers to ensure a cross-cutting view of 

capability trade-offs. 

 Ensuring interoperability is maintained with the enterprise capability architecture. 

 Managing the full lifecycle, including acquisition and sustainment management via APBs and 

SPBs. 

 Working with the science and technology (S&T) and R&D communities to prototype, 

experiment, and demonstrate solutions to shape new programs, increments, and capabilities. 

 Shaping lower level requirements based on technology, cost, schedule, threat, and risk tradeoffs, in active collaboration with key stakeholders within a Capstone Requirements Document. 

 Managing and prioritizing resources across programs within the portfolio with budget transfer 

authority and other funding flexibility initiatives. 

The PAE structure, notionally depicted in Figure 2-3, would enable the following: 

 Increased responsiveness and mission impact. 

 Greater system interoperability and system-of-systems designs/architectures. 

 Increased cost efficiency. 

 Reduced review and decision timelines. 

 Reduced program documentation and reviews outside of the portfolio. 

 Reduced reporting requirements to DAE, SAE, and Congress. 

 

10 Mike Janiga and Pete Modigliani, “Think Portfolios, Not Programs,” Defense Acquisition Research Journal, November–December 2014, 

accessed November 26, 2018, http://dau.dodlive.mil/2014/12/19/think-portfolios-not-programs/#content. 
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Figure 2-3. Portfolio Acquisition Executive (Notional)

In a complex, integrated environment, the DAS can no longer rely on a structure based on individual 

systems but rather should embrace a capability-focused, portfolio-centric structure modeled on the 

commercial sector. Managing requirements, budgets, and staffs at the portfolio level would enable 

dynamic allocation to high-priority programs. Portfolio strategies, roadmaps, and architectures would 

guide program development.11 Establishing a management of portfolio capabilities would allow the 

Military Services to execute in a speed to the fleet environment in which requirements, resources, and 

acquisition decisions are made at the portfolio level instead of the individual program-level. 

Implementing a portfolio approach would require a substantial shift in authority and a shift in the 

culture from fear and mistrust to trust and empowerment. 

To transition from a program-centric execution model to a portfolio execution model the following 

should take place: 

 Establish the position of a portfolio acquisition executive (PAE) to manage portfolio execution. 

Title 10 change is required to enable PAEs to have enhanced responsibilities and authorities for 

optimal execution and integration of requirements, acquisition, and budgets to deliver mission 

 

11 Ibid. 

Service Acquisition 

Executive (SAE & SPE)

Portfolio Acquisition 

Executive 

Deputy 

Sustainment

Requirements Contracts Comptroller System 

Engineering

Product 

Support ...

Program Manager 

Program Functions and 

Integrated Product 

Teams

Service 

Comptroller

Requirements

Staff Staff Staff Staff Staff

Program Manager 

Program Functions and 

Integrated Product 

Teams

Teams

Program Manager 

Program Functions and 

Integrated Product 

Teams

Teams

Teams

Service 

Secretary

Service Chief ...

SPE is Senior Procurement Executive

Deputy 

Acquisition
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Portfolio Management Framework Volume 3 | Page 63 

capabilities to warfighters. PAEs should have authority, autonomy, and accountability to 

iteratively deliver an integrated suite of capabilities through empowered portfolio management. 

 Rationalize budget line item and PE structure within acquisition portfolios to maximize 

resource flexibility and responsiveness. Establish a pilot program under which each Military 

Service would designate an acquisition portfolio to be managed under a single line item or PE. 

 Identify requirements at the portfolio level in a capstone requirements document. 

Implementation 

Legislative Branch 

Note: Legislative implementation here are identified as subrecommendations to allow for better reference to them 

in the draft legislation text in the Implementation Details section that follows. 

 Subrec. A: Direct DoD to establish a PAE structure using a portfolio-centric approach that 

integrates requirements, PPBE, and acquisition. 

 Subrec. B: Direct DoD to conduct a comprehensive review of the existing budget line item and 

program element structure for acquisition programs, with the objective of (a) addressing cases 

in which programs or systems have been subdivided into multiple line items or PEs, making 

them more difficult to manage and (b) identifying cases in which multiple programs or systems 

intended to provide a common capability could be combined into a single line item or PE. 

 Subrec. C: Authorize DoD to establish a pilot program, under which one acquisition portfolio 

for each Military Service would be managed under a single budget line item or PE, providing 

the portfolio manager with flexibility to move money in response to changes in technology and 

other program developments. 

Executive Branch 

 Revise procurement line items and R&D PEs in accordance with the findings of the 

comprehensive review; develop and submit new budget and program documents to Congress 

in accordance with the revised line item and PE structure. 

 Identify acquisition portfolios in each Military Service to be managed under a single line item or 

PE, and submit to Congress for approval. The PAE responsibilities will include the following: 

 Direct development and maintenance of portfolio roadmaps, including mission engineering 

plans, to strategically plan current and future program development and current program 

execution. 

 Enable coordinating between execution and enterprise capability portfolio managers to 

ensure a cross-cutting view of capability trade-offs. 

 Ensure interoperability is maintained with the enterprise capability architecture. 

 Manage the full lifecycle, including acquisition and sustainment management via APBs and 

SPBs. 
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 Work with the S&T and R&D communities to prototype, experiment, and demonstrate 

solutions to shape new programs, increments, and capabilities; 

 Shape lower-level requirements based on technology, cost, schedule, threat, and risk tradeoffs, in active collaboration with key stakeholders within a Capstone Requirements 

Document. 

 Manage and prioritize resources across programs within the portfolio 

 Implement process changes with empowered portfolio management experience 

 Reduce review and decision timelines. 

 Reduce documentation and reviews outside of the portfolio. 

 Reduce reporting requirements. 

 Incorporate the above recommendations in a revision to DoDD 5000.01, The Defense 

Acquisition System and Operating Instructions. A revised DoDD 5000.01 has been developed 

and is attached in the Implementation Details for this section. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 2. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

Recommendation 37: Implement a defensewide capability portfolio framework 

that provides an enterprise view of existing and planned capability, to ensure 

delivery of integrated and innovative solutions to meet strategic objectives. 

Problem

DoD’s separate requirements, budgets, and acquisition decision-making processes fail to enable an 

enterprisewide view of existing and planned capabilities across Military Services and Defense Agencies 

to support timely and informed resource allocation decisions. The disjointed systems that make up the 

defense acquisition DSS (big A acquisition depicted in Figure 2-4), is one of the major inhibitors to 

achieving timeliness, flexibility, agility, and innovation.12 The second major inhibitor is lack of a DoDwide capability view and awareness to inform resource allocation decisions at all levels. 

The friction and lack of connectivity among the three systems can impede rapid response to priority 

needs and timely delivery of material solutions. 

 

12 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, 30–43 (2018). 
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Figure 2-4. Defense Acquisition Decision Support Systems (DSS – Big A Acquisition) 

Background 

DSS consists of three interrelated systems, with extensive, complex, and centralized decision-making 

processes driven by different timelines and system owners (see Figure 1-5).13 

 The requirements system, known at the enterprise level as JCIDS, is administered by the Joint 

Staff and governed by the Chairman of the JCS Instruction (CJCSI) 5123.01H. 

 The resourcing system, known as the PPBE system, is administered by the Director of Cost 

Assessment and Program Evaluation (D/CAPE) and the DoD Comptroller, and governed by 

DoDD 7045.14. 

 DAS, is administered by acquisition personnel pursuant to guidance promulgated by the 

USD[A&S], including DoDD 5000.01 and DoDI 5000.02. 

 

13 Ibid. 
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Figure 2-5. Description and Guidance for the DSS 

Each of these systems is initiated by inputs at the Military Services working level and includes a series 

of hierarchical reviews at the Military Service and enterprise levels. The senior enterprise-level 

decision-making body for requirements is the Joint Requirements Oversight Council (JROC), and for 

resources is the Deputy Secretary’s Management Action Group (DMAG). Before the devolution of 

acquisition authority over the last 2 years, the Defense Acquisition Board (DAB) and the Under 

Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) played parallel roles in 

the acquisition decision-making process. 

The initiation and progress of an MDAP require successful navigation of all three systems. For 

example, an MDAP cannot be initiated without the development of an initial capabilities document 

(ICD) through the requirements process, an MDA through the acquisition process, and funding 

delivery through the PPBE process. Similarly, a substantial change in requirements for an ongoing 

program is likely to require separate approvals through the requirements chain, the resourcing chain, 

and the acquisition chain. 

For DSS to be responsive, the individual PM must coordinate and synchronize the activities to deliver 

warfighter capabilities. Because these processes are stove-piped and have separate decision makers and 

timelines, they are often out of synch. The result can be substantial delays and even stop-go-stop 

sequences based on inconsistent decisions that inhibit rapid response to priority needs and timely 

delivery of material solutions, as evidenced by late capability deliveries, cost overruns, and 

deteriorating technical dominance. 
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DoD has tried to coordinate the three processes using integrated product teams and to provide for 

cross-functional membership on decision-making entities (for example, the designation of the Under 

Secretary of Defense (AT&L) (USD[AT&L]) as a statutory advisor to JROC and the designation of the 

Vice Chairman of the JCS (VCJCS) as a DAB member. Because requirements, budget, and acquisition 

officials exert the greatest control when they stay within their own stovepipes, efforts to coordinate the 

three processes have been less successful than hoped, and decision-making has remained largely a 

sequential process. 

In another effort to overcome DoD’s stove-piped decision-making structure and better coordinate the 

three acquisition components, DoDD 7045.20 (promulgated in 2008), called for the establishment of 

capability portfolio managers (CPMs) with military and civilian coleads. The directive expressly 

provided that CPMs “have no independent decision-making authority, shall not infringe on any 

existing statutory or regulatory authorities, and shall work within established coordination processes.” 

Because of these limitations, the portfolio approach quickly proved to be unenforceable, and although 

the directive is still in effect, it has had no discernible effect on the defense acquisition DSS processes. 

The utility and power of portfolio management constructs has been used to help inform investment 

decision makers in the Army’s PEO Ground Combat Systems (GCS). PEO GCS, teaming with Sandia 

National Laboratories, adopted a portfolio management approach to optimally invest in ground 

combat modernization over a 25- to 35-year timeframe. Through tightly knit, cross-functional 

stakeholder collaboration and use of decision analysis tools (Capability Portfolio Analysis Tool 

[CPAT]), the team was able to provide decision makers with key alternatives and scenarios to “help 

shape decisions to continue modernization of the $10 [billion] Stryker family of vehicles (originally 

slated for cancellation) and to strategically reallocate over $20 [billion] to existing modernization 

programs by not pursuing the Ground Combat Vehicle program as originally envisioned.”14

Ultimately, the Army estimated the decisions amounted to more than $5 billion in cost avoidance and 

30 percent greater fleet performance per dollar spent.15

In the Volume 2 Report, the Section 809 Panel concluded that structural change—from program-centric 

management to a more robust, multitiered portfolio management system at the execution and 

enterprise level—is needed to reduce the current organization’s time and information challenges 

created by the centralized command structure and provide greater agility in the requirements, 

resourcing, and acquisition processes. There are four key elements of this proposed shift to a portfolio 

management framework: 

 Replacing the traditional PEO role with that of the PAE, as described earlier in 

Recommendation 36. 

 Establishing Enterprise Capablity Portfolios (ECPs) with civilian and military coleads to 

conduct cross-cutting analysis and to identify needed capabilities and gaps in such capabilities. 

 

14 Scott J. Davis et al., “Maximizing the US Army’s Future Contribution to Global Security Using the Capability Portfolio Analysis Tool 

(CPAT),” Informs Journal on Applied Analytics, 46, no. 1 (2016): 91-108, https://doi.org/10.1287/inte.2015.0824. 

15 Capability Portfolio Analysis Tool (CPAT) Overview, Stephen Henry, Sandia National Laboratories, presentation to Section 809 Panel, 

August 9, 2018. 
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 Improving the defense sustainment enterprise, including developing SPBs to improve 

sustainment planning and execution. 

 Improving the current requirements process governed by JCIDS with a management structure 

that allows for tradeoffs within the multi-tiered portfolio structure. 

Discussion 

At the enterprise level, the proposed portfolio management approach has four major features, each of 

which would represent a substantial improvement in the operation of the defense acquisition DSS: 

 The capability portfolio approach would enable DoD, when making capital investment and 

sustainment decisions, to break out of the current, program-centric and process-focused 

approach across the DSS and consider instead capabilities and desired outcomes for those key 

decisions. 

 The capability portfolio approach, if resourced with a stable funding source through the 

Undersecretary of Defense (Research and Engineering) (USD[R&E]), would enable DoD to 

employ a more agile and coordinated approach to innovation, experimentation, demonstration, 

and rapid prototyping. 

 As requirements, budget, and acquisition decision authority are delegated in the Military 

Services and Defense Agencies to empowered subordinates, the portfolio approach would bring 

together DoD’s decision processes, establishing a collaborative process that presents a 

complementary view at the enterprise and execution level. 

 The new portfolio system would bring the three systems together by bridging the gap between 

stove-piped decision-making systems through linked, collaborative processes, enabling DoD to 

field innovative solutions in a more timely and agile manner, moving the system from a serial 

decision-making process to a more concurrent process. 

Implementation of capability portfolio management (CPM) at execution and enterprise levels is 

consistent with the current objective of the Combatant Command (CCMD), Military Service, and 

Defense Agency leadership: balancing investments in the future against today’s requirements. With 

implementation of CPM, decision makers would consider capital investments differently—not as the 

latest in a series of weapons systems with enhanced capability but as an investment for which 

resources might better be applied to weapon systems modernizations or readiness in the same 

capability area. This portfolio structure would allow leadership to understand existing and planned 

capabilities across DoD. 

Under the envisioned process, Military Service/Defense Agency-level portfolios—managed by newlyempowered PAEs (see Recommendation 36)—would be the primary vehicle for execution of the 

requirements, resources, and acquisition processes in the Military Services and Defense Agencies. The 

new PAEs would also provide portfolio information to ECPs, enabling the coleads to assess capabilities 

and identify critical gaps by using mission engineering and other appropriate analytic tools. This flow 

of portfolio information would also enable the coleads to present a common capability portfolio picture 
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to decision makers in the enterprise-level requirements, resources, and acquisition decision-making 

chains. 

The intended flow of capability portfolio information from PAEs to enterprise-level ECP is shown in 

Figure 2-6, a version of which appeared in the Section 809 Panel’s Volume 2 Report. The graphic shows 

that a single enterprise-level capability portfolio is likely to include multiple execution-level portfolios 

– including portfolios from multiple Military Services, Defense Agencies, and from functional CCMDs 

with their own acquisition authority.16 

Figure 2-6. Notional Enterprise Capability Portfolio Management 

DoD should unite the defense acquisition DSS views at the DoD level by establishing civilian and 

military ECP coleads for each ECP. The military chairs of the six FCBs in the requirements process 

would be concurrently assigned by the VCJCS to serve as military coleads of the ECPs. Civilian coleads 

would be nominated and approved by the Under Secretary for Defense (Acquisition and Sustainment) 

(USD[A&S]) and/or Under Secretary for Defense Research and Engineering (USD(R&E)) and selected 

by the Deputy Secretary of Defense (DSD). The civilian coleads would also lead relevant issues teams 

for the D/CAPE and the Comptroller to support the enterprise-level resources process. The two coleads 

would work jointly with the Under Secretary of Defense for Policy (USD(P)) and other key players to 

support the enterprise-level strategic planning process. 

The ECPs would operate much as Military Services, Defense Agencies, and OSD Integrated Product 

Teams (IPTs). Each of the ECPs would have committed representatives from cognizant Military 

Service, Defense Agency, and CCMD offices. ECP coleads would propose a work plan to the DMAG 

for review and approval. With resources assigned (government and contractor), they would execute the 

 

16 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, 42 (2018). 
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plan and present recommendations to the DMAG. ECPs would also respond as tasked by D/CAPE to 

lead specific issue teams. 

Military Service-level PAEs—with delegated responsibility and authority for capability portfolio 

requirements, budgets, and acquisition—would bring together the three elements of the defense 

acquisition DSS in a single office, enabling rapid and comprehensive commitments. The PAEs would 

not only be responsible for acquisition execution, they would also have authority over requirements 

and budgets, feeding the Military Service- and enterprise-level requirements and programming 

processes. The new portfolio system would bring the three systems together through linked, 

collaborative processes, enabling DoD to field innovative solutions in a more timely and agile manner. 

Existing Decision-Making Processes 

Implementation of a new multilayered portfolio process would help address deficiencies in the existing 

DSS that cause DoD to do the following: 

 Focus on large, traditional programs instead of smaller, more innovative programs. 

 Provide inadequate attention to cross-functional gap analysis and nontraditional solutions. 

 Lack the agility needed to adjust to new technologies and new threats. 

 Focus too much on process and paperwork, rather than major strategy and risk decisions. 

The NDS calls for DSS to “prioritize speed of delivery, continuous adaptation, and frequent modular 

upgrades.” As the NDS acknowledges, however, current processes are “over-optimized for exceptional 

performance at the expense of providing timely decisions, policies, and capabilities to the warfighter.”17 

Because DSS decision-making processes are so burdensome, program advocates tend to focus their 

efforts on a few megaprograms that incorporate all available technologies in a single big bang

acquisition. Recent examples include the Joint Strike Fighter, designed to meet the tactical aviation 

needs of three Military Services, and the acceleration of multiple advanced technologies onto the lead 

ship of a new class of aircraft carriers. 

These megaprograms, which risk squeezing out available funding that could be used for rapid 

innovation and risk taking, too often fail to deliver as promised. When DoD tries to develop too many 

advanced capabilities within a single MDAP, delays in a single critical technology can slow down the 

entire program and cost billions of dollars. The resulting cost overruns can present funding difficulties 

for smaller, more innovative programs. 

To overcome this problem, DoD needs the ability to rapidly develop less ambitious, more innovative 

programs. A more diverse portfolio—including smaller, more flexible investments—would enable DoD 

to adapt more quickly to emerging technology and respond more effectively to changes in the threat 

environment. 

 

17 DoD, A Summary of the 2018 National Defense Strategy of the United States of America: Sharpening the American Military’s 

Competitive Edge, 10, accessed December 30, 2018, https://www.defense.gov/Portals/1/Documents/pubs/2018-National-DefenseStrategy-Summary.pdf. 
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Providing multiple alternative vehicles for maturing technology should also reduce the temptation for 

larger programs to try to incorporate all available technologies in a single increment and make larger 

systems more agile and flexible. Some of the smaller investments may fail, but unlike the megaprogram 

failures dominating the defense budget today, such failures would be an acceptable cost of progress. 

Cross-Functional Gap Analysis and Nontraditional Solutions 

The NDS calls for increased use of nontraditional suppliers, new entrants, and small-scale vendors that 

can provide cutting-edge technologies. This approach, the NDS states, will “allow the Department to 

more quickly respond to changes in the security environment and make it harder for competitors to 

offset our systems.”18 The current acquisition system relies on the traditional command organizational 

structure to develop new programs from the bottom up. Regardless of the problem, a tank and 

automotive command is likely to see a new land system as the appropriate solution, while a sea 

systems command is likely to identify a new surface combatant as the appropriate solution. As a result, 

the acquisition system tends to focus its energy on developing the next generation of existing systems, 

rather than identifying innovative new approaches. Gap analyses and analyses of alternatives are too 

often used to justify traditional programs, rather than seriously consider new technologies and new 

solutions. 

To overcome this problem, DoD needs an approach that considers alternative approaches before 

focusing on a solution. A cross-cutting analysis of gaps and overlaps should take place before, not after, 

DoD settles on a particular material solution to a military problem. A portfolio-based acquisition 

approach should enable such cross-cutting analysis. 

One possible approach would be to apply mission engineering. Mission engineering would provide 

leadership with tools to facilitate a view of current capabilities and future requirements, thus equipping 

decision makers with the information necessary to better prioritize limited resources. Successful 

mission engineering combines the structure of systems engineering with the tactical insights of 

operational planning. Mission engineering maps system capabilities to mission needs at the capability 

portfolio level.19 Mission engineering emphasizes data driven, capability-based assessments to produce 

integrated warfighting capabilities that can be translated into specific programmatic guidance for 

strategic programs and can visually identify gaps. 

The mission engineering analysis results are captured in effects/kill chains. These effects/kill chains 

identify operational needs based on the planned way to fight through mission threads captured in the 

CCMDs’ Operational Plans (OPLANs) and Contingency Plans (CONPLANs). The effects/kill chains 

may then be used to illuminate capability advantages and disadvantages of the alternatives; consider 

joint operational plans; examine sufficient feasible alternatives; characterize key assumptions, variables, 

and sensitivities; and assess technology risk and maturity. For example, the system’s ability to achieve 

the desired capability is assessed in terms of red, yellow, or green. Red would mean some significant 

degradation to mission; green would indicate the desired capability is being achieved. The analysis 

 

18 Ibid, 11. 

19 “Mission Engineering Integration and Interoperability (I&I),” James D. Moreland, Naval Sea Systems Command, accessed August 2, 

2018, https://www.navsea.navy.mil/Home/Warfare-Centers/NSWC-Dahlgren/Dahlgren-Resources/Leading-Edge/I-I-LeadingEdge/Moreland/. 
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provides decision makers with a view of the system capabilities and how investment in resolving 

issues affects the overall mission and capability delivery. 

Existing Decision-Making Processes Lack Sufficient Agility 

The NDS calls for a “rapid, iterative approach to capability development” with rapidly evolving 

platform electronics and software instead of “static configurations that last more than a decade,” to 

reduce costs, technological obsolescence, and acquisition risk.20 The current, centralized DSS, with its 

three separate decision stovepipes, hinders speed and innovation. Not only are small, innovative 

programs disfavored, but large programs designed to meet future threats rely on locked-in baselines 

that limit their ability to respond to new threats and new technology developments. 

Private-sector entities and some federal government elements (including the intelligence community) 

bring together requirements, resourcing, and acquisition decision-making processes to enable decision 

makers to promulgate needed changes at the speed of relevance. The DSS process, which separates 

these three processes, makes it extremely difficult to promulgate significant modifications after a 

program is underway. As a result, DoD adheres to existing requirements long after they clearly cannot 

be met at reasonable expense and defers critical and available new technologies to future upgrade 

programs that lie in the indefinite (and unfunded) future. To overcome this problem, DoD needs to 

create trade space in which reasonable decisions to trade cost, schedule, and performance against 

capability could be made in real time. 

Existing Decision-Making Processes Focus Too Much on Process and Paperwork 

The NDS notes that DoD’s management structure and processes “are not written in stone,” but are “a 

means to an end”—empowering warfighters with the knowledge, equipment, and support systems to 

fight and win.21

The current DoD organizational structure includes many separate stovepipes—each with its own 

bureaucracy and staff—that are empowered to say no, rather than work toward solutions to warfighter 

problems. The result is a system in which senior decision makers and their supporting staffs devote too 

much attention to process, procedure, and paperwork, rather than focusing on the major strategy and 

risk decisions that should be made at the enterprise level. Too often, innovative solutions are bogged 

down by a micromanaged process in which, as GAO found in a 2015 review, it takes an average of 

more than 2 years and 5,600 staff days to complete the 49 information requirements needed to support 

a single acquisition milestone decision.22

To overcome this problem, DoD needs a process by which senior decision makers make major strategy 

and risk decisions but leave the day-to-day management of individual portfolios and programs to 

 

20 DoD, A Summary of the 2018 National Defense Strategy of the United States of America: Sharpening the American Military’s 

Competitive Edge, 11, accessed December 30, 2018, https://www.defense.gov/Portals/1/Documents/pubs/2018-NationalDefense-Strategy-Summary.pdf. 

21 Ibid, 10. 

22 GAO, Acquisition Reform: DOD Should Streamline Its Decision-Making Process for Weapon Systems to Reduce Inefficiencies, GAO-15-19, 

February 2015, accessed December 30, 2018, https://www.gao.gov/assets/670/668629.pdf. 
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hands-on managers. A multitiered portfolio approach should address this problem by assigning 

management responsibility to strong, new portfolio managers. 

Conclusions

DoD needs a total lifecycle, multitiered, capability portfolio framework for capital investments that 

continuously seeks to integrate the separate requirements, resourcing, and acquisition decision 

stovepipes of the current DSS program-centric framework. DoD needs that framework for resource 

allocation at all management levels to compete in the 21st century where innovation, flexibility, and 

response time are critical. The multitiered portfolio framework under which authority is delegated can 

more effectively prioritize innovation and experimentation, consider nontraditional solutions, conduct 

more effective gap analysis, respond to new threats and rapidly integrate technologies in a more agile 

manner, and reduce the burdens of bureaucracy and micromanagement. Framework implementation 

would be facilitated by doing the following: 

 Expand or adopt successful portfolio management models developed in DoD—such as FCB 

portfolios—and the private sector to the special imperatives and relationships in DoD 

organization. Private-sector portfolio management principles have been adopted in some parts 

of the government, as exemplified most recently by Office of Management and Budget (OMB) 

Memorandum M–18–19, and over the longer term by the portfolio standards incorporated into 

OMB Circular A–11. With some adjustment to accommodate requirements of the appropriations 

process and the Military Service-based DoD organizational structure, these standards might be 

incorporated into DoD’s new capital investment system as well. 

 Empower PAEs in the Military Services and Defense Agencies with delegated authority to 

collaborate with peers in requirements and resourcing within trade space provided and to 

present a common portfolio and program picture to Military Service-level and OSD/JCS 

leadership. This framework would minimize time to commitment, resulting in a more agile 

system that has the flexibility to respond to changing threats and emerging technologies. 

 Designate senior DoD officials (military and civilian) as ECP coleads and charge them with 

integrating, synchronizing, and coordinating capability portfolio content to address capital 

investment alignment to strategic priorities and capability demand. ECP coleads would have no 

independent decision-making authority but would be responsible for providing cross-cutting 

analysis of capability portfolios and presenting a common capability portfolio picture to 

enterprise-level decision makers. ECPs will be aligned with the already-established FCBs 

initially; however, they may evolve together over time to provide as broad and segmented view 

of enterprise capabilities as possible to inform requirements, resourcing, and 

acquisition/sustainment decisions.23

 

23 There are currently six FCBs, with responsibility for C4/Cyber, Battlespace Awareness, Logistics, Force Integration, Protection, and Force 

Application, respectively. An additional Joint Capabilities Area (JCA), for Corporate Management and Support, does not have an FCB, and 

is included instead in a separate portfolio process led by the Chief Management Officer. 
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 Require ECP to develop strategic plans and roadmaps to provide a vision for the evolution 

of missions within their capability portfolios over time, help drive S&T investment and 

provide metrics for measuring capability portfolio performance. 

 Require a 20 year strategic plan which leverage the operational expertise of the CCMDs and 

the Senior Warfighter Forums—as well as scenario-based war games, mission engineering, 

and other strategic analysis that focus on desired outcomes rather than projected systems—

to identify capability and resource mismatches, including gaps, shortfalls, and redundancies 

 Require adequate resourcing of ECPs to produce these plans, as well as other portfolio-level 

documents. 

 Require aligned execution portfolios and ECPs to share information continuously because 

both assess current and needed capabilities, including cross-cutting capabilities, for 

presentation with recommendations to the DoD decision makers at all levels. 

 The ECP military coleads will serve concurrently as FCB chairs. The civilian coleads can 

lead issue teams on behalf of the D/CAPE and the Comptroller. The two coleads would also 

work together to identify cross-cutting acquisition issues that should be raised through the 

USD(A&S) and the USD(R&E) and VCJCS to the DMAG and JROC. 

 Approve a portion of the defensewide funding line for rapid development/prototyping 

(including the Rapid Prototyping Fund established pursuant to Section 804 of the FY 2016 

NDAA) controlled by the USD(R&E), a portion of which will be allocated to the ECPs to 

provide seed money for key Execution and Enterprise portfolio priorities in accordance with 

strategic plans. Such a dedicated fund for emergent (within budget cycle) innovative and agile 

acquisition initiatives would provide a lever with which ECPs could address unfunded gaps or 

opportunities in Military Service execution strategic plans in support of programs. 

Implementation 

Legislative Branch 

Note: Legislative implementation here are identified as subrecommendations to allow for better reference to them 

in the draft legislation text in the Implementation Details section that follows.

 Subrec. A: Direct DoD to transition the current DAS to a total lifecycle, multitiered (execution 

and enterprise), capability portfolio-centric framework that integrates requirements, budget, 

and acquisition/sustainment for capital investments/resource allocation. Incorporate above 

recommendations in a revision to DoDD 5000.01, The Defense Acquisition System Directive. 

A draft revised DoDD 5000.01 is attached in the Implementation Details for this section. 

 Subrec. B: Direct DoD to establish ECPs to integrate, synchronize, and coordinate capability 

portfolio content to address capital investment alignment to strategic priorities and capability 

demand. ECP should be led by senior civilian and military personnel of SES/flag/general rank, 

pointed by DSD and VCJCS respectively. ECP coleads would have no independent decisionmaking authority but would be responsible for providing cross-cutting analysis of capability 

portfolios and presenting a common capability portfolio picture to enterprise-level decision 

makers. 
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 Subrec. C: Direct DoD to establish processes for ECPs to use a portion of defensewide funding 

for rapid development/prototyping funding controlled by the USD(R&E) to provide seed 

money for key portfolio priorities in accordance with strategic plans. 

 Subrec. D: Provide increased flexibility in the appropriations and reprogramming processes, 

including the enhanced reprogramming authority discussed in Recommendations 46-48 of this 

report, to ensure that PAEs can provide timely responses to new threats, emerging technologies, 

and developments in portfolio performance. 

Executive Branch 

 Revise DoDD 5000.01, Defense Acquisition System, or cancel it and initiate a new directive that 

will be The Defense Capability Acquisition and Sustainment Framework that will: 

 Maintain and/or strengthen principles and policies in the existing DoDD 5000.01 while 

establishing a new model, Defense Capability Acquisition and Sustainment Framework 

(DCASF). The DCASF will be a through lifecycle, multitiered, capability portfolio 

acquisition and sustainment framework for capital investments that continuously seeks to 

integrate requirements, budget, acquisition/sustainment views of programs and services for 

more informed and collaborative decisions. Rescind DoDD 7045.20, Capability Portfolio 

Management, and include in revised DoDD 5000.01 or new Directive for Defense Capability 

Acquisition and Sustainment Framework and include its provisions for full-time civilian 

and military coleads to provide cross-cutting analysis and present a common capability 

portfolio picture to enterprise-level decision makers. 

 Provide for the DSD to appoint civilian ECP coleads who are experienced members of 

Senior Executive Service from a slate provided by USD(R&E) and USD(A&S). Nominees 

may come from any DoD acquisition activity or organization. 

 Provide for the military ECP colead to be a general or flag officer appointed by the VCJCS in 

consultation with Military Services and CCMDs. ECP military coleads will serve 

concurrently as chair of the relevant FCB in the JCIDS process. 

 Require that ECPs have visibility on the full range of weapon systems and any evolving crosscutting mission areas. 

 Note that the ECPs would not include business systems, because DoD is already developing 

separate business system portfolios under the Chief Management Officer’s leadership. 

 Require DSD and VCJCS to develop a DoD implementing directive for the operation of the 

ECPs that includes but are not limited to the following: 

 ECP coleads are jointly responsible for raising cross-cutting issues in the enterprise 

requirements, programming/budgeting, and acquisition review processes. 

 ECP coleads are responsible for identifying cross-cutting requirements, 

programming/budgeting, and acquisition/sustainment issues and raising them with the 

Military Services (and appropriate Defense Agencies). 

 ECP civilian colead leading issues teams through the 3-Star and DMAG review processes. 
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 ECP coleads are responsible for identifying cross-cutting acquisition issues, raising them to 

the Military Services (and appropriate Defense Agencies), and if necessary, working them 

through USD(A&S) and/or USD(R&E) to the DMAG. 

 ECP coleads develop strategic plans and roadmaps to show a vision for the development of 

capability portfolios over time and to help drive S&T and rapid capability investments. 

 ECP coleads establish positive relationships with PAEs, to include exchange of information, 

data, decisions, and planning, working toward a common view of every particular 

capability set. 

 Establish a defensewide funding line for rapid development/prototyping funding (including 

the Rapid Prototyping Fund established pursuant to Section 804 of the FY 2016 NDAA) 

under control of the USD(R&E), with a portion available to ECP coleads to provide funding 

for use by Military Service/Defense Agency execution portfolio to address priority 

opportunities when Military Service/Defense Agency funding is unavailable. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 2. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

Recommendation 38: Implement best practices for portfolio management. 

Problem 

In both Volume 2 and Volume 3 of the Final Report, the Section 809 Panel recommends DoD transition 

from program-centric to capability portfolio-centric acquisition management. Although 

implementation of a capability portfolio management framework is a best practice in itself, recognizing 

that the transition to portfolio management will not come easily nor without risk the best practices 

described below are put forth to help advance the transition and improve outcomes. Recommendations 

36 and 37 provide detailed rationale for portfolio management and outline implementation actions to 

transition to a capability portfolio management framework for acquisition and sustainment of weapon 

systems. This recommendation identifies several specific approaches (creating critical questions, 

leveraging data, using analytical strategy modeling, and empowering the workforce) that serve as 

portfolio management best practices and would improve the likelihood of a positive transition to a 

multitiered portfolio framework that enables integration of requirements, budget, and 

acquisition/sustainment with decentralized decision authority. 

The changes to acquisition and sustainment in Recommendations 36 and 37 are not totally unfamiliar 

to some aspects of DoD, but the key characteristics of portfolio management addressed within these 

recommendations have never been implemented as a comprehensive framework across DoD. The 

challenge is abandoning the deeply ingrained, stove-piped, program-based decision processes and 

procedures to adopt a new paradigm, while continuing to accomplish weapon systems development, 

testing, fielding, and sustainment. DoD, including OSD, JCS, Military Services and Defense Agencies 

have, over the decades, organized various collections of like capabilities into portfolios. An 
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infrastructure for capability portfolio management exists in the Military Services and Defense Agencies 

with PEOs who already supervise, if not manage, capability portfolios. 

In 2008 DoDD 7045.20 was signed directing DoD “to use capability portfolio management to advise 

the Deputy Secretary of Defense and the Heads of the DoD Components on how to optimize 

capability investments across the defense enterprise (both materiel and non-materiel) and 

minimize risk in meeting the Department’s capability needs in support of strategy.” 

Recommended implementation approaches, including enhancing PEO/PAE authority, establishing 

ECPs, rescinding both 5000.01 and DoDD 7045.20, and reissuing DoDD 5000.01 as the Defense 

Capabilities Acquisition and Sustainment Framework (DCASF), require commitment and 

leadership. Those activities, however, offer critical improvements to timeliness, flexibility, 

affordability, and technological innovation for weapon systems investments. It addresses and 

removes major challenges of the decades-old processes and procedures by focusing on managing 

by portfolio instead of program; by integrating requirements, budget, and acquisition/sustainment; 

and by delegating authority.

Background 

Currently, the USD(P) coordinates two strategic plans that are developed within the planning 

phase of PPBE—the NSS and the NDS.24 Subsequently, D/CAPE publishes fiscal guidance and DoD 

reprogramming guidance in coordination with the DoD Comptroller. More than 10 years ago, 

DoDD 7045.20 called for CPM strategies and alignment of PEs (the structure for funding) to 

these portfolios; however, no substantial changes to the program approach have materialized. 

The current DSS structure—comprising JCIDS, PPBE, and DAS—is not well suited for portfolio-based 

management because integration across DSS for capital assets occurs through formal, designated 

acquisition programs. These programs are either MDAPs or nonmajor programs (non-MDAPS). DoD 

groups many, but not all, of these programs into portfolios managed by PEOs. Although PEOs were 

created in the 1990s to align programs into portfolios, the DSS process maintained a program-centric 

view. PEOs were not assigned any additional duties in statute or DoDD 5000.01 to accomplish 

portfolio management. Instead, they are midlevel managers between the PM and Component or OSD 

MDA. Often, though not always, non-MDAP programs have MDA delegated to PEOs by SAEs. 

During the past 20 years, portfolio management has become widely accepted by industry as a best 

practice and has proven to offer many benefits. Organizations tend to perform best with centralized 

strategy and decentralized execution. The evolving industry methodology for managing capital assets 

in portfolios has shown increased efficiency and effectiveness “as portfolio management is the bridge 

between strategy and execution.”25 The Section 809 Panel’s recommendations regarding migration to 

a portfolio-based acquisition system move defense acquisition in this direction by establishing clear 

portfolio allocations from OSD to Military Services, then on to PAEs and PMs (see Figure 2-7). This 

decentralized structure both improves innovation and requires more coordination. 

 

24 The Planning, Programming, Budgeting, and Execution (PPBE) Process, DoDD 7045.14 (2017). 

25 Charles R. Mahon and John D. Driessnack, Winning in the 21st Century: An Acquisition Point Paper to the Section 809 Panel,

September 2017, accessed June 7, 2018, https://www.pmi.org/-/media/pmi/documents/public/pdf/white-papers/commandnegation.pdf. 
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Figure 2-7. Portfolio Allocation 

Industry guidance on project, program, and portfolio management has evolved since the 1960s, 

reflected in guidance published by the American National Standards Institute and the International 

Organization for Standardization.26 Many countries, including the United States, have adopted 

these evolving industry standards. OMB Circular A-11 and A-119 both encourage agencies to 

embrace industry standards.27 To move to a portfolio management approach in the management of 

capital asset projects and programs, DoD should transition to a portfolio governance model that 

aligns strategy, risk tolerance, resource capacity, and evaluation results. Doing so would add an 

integrated, tiered capital asset view (OSD to Military Service to execution portfolio to program) 

across DSS with enterprise-level capability views cross-cutting the Military Service-oriented view. 

The enterprise and execution views form the multitiered portfolio management system (see 

Figure 2-8). 

 

26 “The Standard for Portfolio Management, ANSI/PMI 08-003-2017,” and “Guidance on Portfolio Management, ISO 21504:2015,” 

International Organization for Standardization, accessed November 15, 2018, https://www.iso.org/standard/61518.html. 

27 Charles R. Mahon and John D. Driessnack, Winning in the 21st Century: An Acquisition Point Paper to the Section 809 Panel,

September 2017, accessed June 7, 2018, https://www.pmi.org/-/media/pmi/documents/public/pdf/white-papers/commandnegation.pdf. 
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Figure 2-8. Multitiered Portfolio Management System 

The ECP colead would provide senior decision makers views to resource allocation that would 

align objectives, capacity, and risk tolerance with execution portfolios managed by empowered and 

appropriately resourced PAEs. The PAEs could then optimize within their allocations down to PMs 

who have a lifecycle baseline (for both acquisition and sustainment). 

Discussion 

Taking a Portfolio View of Capital Asset Management 

In its Volume 2 Report, the Section 809 Panel advocated for shifting from a program-centric DAS to one 

cemented around portfolio capabilities, with corresponding tools and resources that will support more 

effective program management. CPM would enable analysis and integration of cross-cutting data and 

create an enterprise view that would support better-informed decision making. This approach would 

provide new perspectives at both the strategic and tactical levels. The strategic enterprise level could 

view portfolios based on technology or capability. At the tactical execution level, portfolios would be 

viewed based on their organization (see Figure 2-9). In this model, the capability and execution views 

are tiered from the OSD to the Military Services and to the PAE. To maximize the ability of these new 

perspectives to enhance decision making in a portfolio-centric system, there are several best practices 

that should be considered. 
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Figure 2-9. Service Execution Portfolio and Enterprise Portfolio Information Flow 

Moving from program-centric to portfolio-centric acquisition requires changing the primary view of 

how capital assets are managed. Portfolio management requires active management of the collection of 

programs/projects within the portfolio.28 Portfolio management does not require a change in the overall 

federal approach for capital budgeting, but it does incorporate aggregated product lines or product 

mixes that facilities portfolio capability value assessments and resource allocation based on a broader 

capability view. 

Industry portfolio management standards require portfolio-level strategic plans and roadmaps that 

enable strategic management. Included in these plans is value management, for which optimization is 

achieved by balancing benefits, risks, and resources. Additionally, a holistic, systems approach is 

needed given most portfolios are complex, adaptive systems. 

Portfolio and program leaders should be transparent with the challenges (constraints, assumptions, 

issues, risks, and opportunities) within the portfolio of programs. The allocation to a portfolio and 

within a portfolio should be informed by the challenges. Points to consider include the following: What 

is the challenge profile within the portfolio and the individual programs? Is the portfolio resilient enough to 

handle realized risks and lost opportunities that are historical within Defense Systems? Armed with 

empowerment and flexibility in how resources are allocated, the PAE would craft a portfolio allocation 

that is robust enough to handle—at least in the near-term execution and budget years—cost, schedule, 

 

28 Ibid. 
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and performance variations that are inherent in defense systems. The portfolio team, with improved 

stability in resource allocations and mission capability, should be able to anticipate the level of 

variation in the near term given credible data and clarity on the challenges. 

Creating Critical Questions on Portfolio Value 

A single approach or model for portfolio management would not be successful, as the 50-plus PEOs 

today represent a broad range of capital assets with various definitions of what would constitute 

portfolio capability value. DoD, through the tiered enterprise-execution portfolio concepts, should 

tailor capability value modeling to inform decisions relative to resource allocations from OSD to 

Components to portfolios to programs. The models can assist with optimizing portfolio effectiveness of 

capabilities while balancing short-term needs with long-term capabilities, especially for weapon and 

combat-oriented information systems and product lines. Each portfolio needs to develop its own set of 

critical questions on portfolio value that drive not a business case, but a missions/capability value case that 

informs strategy. 

OMB Circular A-11, Preparation, Submission, and Execution of the Budget, outlines direction for 

capital investment, budgeting, and management. Additional guidance is captured in the Capital 

Programming Guide (CPG) supplement to Circular A-11, which asks agencies to answer three critical 

questions: 

 Does the investment in a major capital asset support core/priority mission functions that need to 

be performed by the federal government? 

 Does the investment need to be undertaken by the requesting agency because no alternative 

private-sector or government source can better support the function? 

 Does the investment support work processes that have been simplified or otherwise redesigned 

to reduce cost, improve effectiveness, and make maximum use of commercial off-the-shelf 

(COTS) technology?29

The CPG concept of having critical questions should be tailored to DoD. The recommended DoD 

enterprise- and execution-tiered approach necessitates tailored questions for each level of resource 

allocation. CPG, Section I.5.8, Portfolio Management, notes, 

Capital assets should be compared against one another to create a prioritized portfolio of all major capital 

assets. ... While the benefits and costs of capital asset portfolios should be quantified in monetary terms 

when feasible, agencies also measure return on the basis of outputs and outcomes. ... Agencies should 

choose a portfolio of capital investment that maximize return to the taxpayer and the Government – at an 

acceptable level of risk. 

 

29 Office of Management and Budget, Capital Programming Guide, v3.0, Supplement to OMB Circular A-11: Planning, Budgeting and 

Acquisition of Capital Assets, 2017, accessed November 9, 2018, 

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/assets/a11_current_year/a11_2017/capital_programming_guide.pdf. 
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Portfolio management theory and standards are readily available from commercial sources and academic 

literature. The theory is not repeated here. Agencies are encouraged to focus on the practical application 

portfolio management theory. Most likely, the practical application will involve the tailoring of the 

principles to an agency’s unique circumstances. 

All of the items in a portfolio must support strategic plans, goals, objectives and priorities. The strategy 

and goals drive the selection and prioritization. The selection process should eliminate unnecessary and 

poorly planned projects. In addition, the risks associated with each item should be evaluated and responses 

should be developed. The risk management process should reduce threats to the agency objectives. This 

should result in a portfolio that is balanced so that the mix of items maximizes the agency’s ability to 

achieve strategic goals. 30

The U.S. Army PEO for Ground Combat Systems, which manages the portfolio of tanks and other 

ground-based fighting vehicles, provides an example of this type of portfolio strategic planning linked 

to prioritization across product lines. The PEO, having the challenge of budget reductions, developed a 

tailored portfolio-level model (CPAT), to determine the optimal investment strategy for ground combat 

modernization over the next 25–35 years.31 The model demonstrates the type of portfolio-level analytics 

that can be used. The model has been subsequently used in more than 40 studies applying operations 

research methods to optimally prioritize investments across acquisition and sustainment challenges. 

This type of capability value modeling—which is not just focused on efficiency, but also effectiveness 

given the constraints and assumptions for the portfolio—is becoming the norm within portfolio 

management best practices. A recent paper from Massachusetts Institute of Technology, Program and 

Portfolio Affordability Tradeoffs Under Uncertainty Using Epoch-Era Analysis, “introduces a method to 

conduct portfolio design for affordability by leveraging Epoch-Era Analysis [EEA] with aspects of 

Modern Portfolio Theory.”32 EEA “enables the conceptual design of systems that are resilient to 

potential change in context and needs (exogenous uncertainties) throughout the system lifecycle.”33 

Using Analytical Modeling of Strategy 

An approach for addressing missions/capability is applying mission engineering approaches to map 

system capabilities to mission needs at the capability portfolio level. Mission engineering—which 

combines the structure of systems engineering with the tactical insights of operational planning—can 

provide a basis for assessing portfolio contributions to the delivery of capabilities against assigned kill 

chains and threads, understanding the effects of investment decisions on operational priorities, 

assessing the fighting capability of existing and planned weapon systems, identifying capability gaps in 

light of existing and planned acquisitions, and providing a common mission picture to senior leaders. 

 

30 Ibid. 

31 Scott J. Davis et al., “Maximizing the US Army’s Future Contribution to Global Security Using the Capability Portfolio Analysis Tool 

(CPAT),” Informs Journal on Applied Analytics, 46, no. 1 (2016): 91-108, https://doi.org/10.1287/inte.2015.0824. 

32 Parker D. Vasik, Adam M. Ross, and Donna H. Rhodes, “Program and Portfolio Affordability Tradeoffs Under Uncertainty Using EpochEra Analysis,” INCOSE International Symposium, September 13, 2016. 

33 Ibid. 
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Mission engineering maps system capabilities to mission needs at the capability portfolio level.34

Mission engineering emphasizes data-driven, capability-based assessments to produce integrated 

warfighting capabilities that can be translated into specific programmatic guidance for programs and 

can visually identify gaps. 

Leveraging Data 

The transition to portfolio management will allow program-level data to be leveraged and leaner as 

programs are managed within a portfolio structure. When appropriate, PAEs and functional leaders 

can reduce program-level instruction (DoDI 5000.02) and statutory documentation requirements 

through the use of portfolio approaches. Portfolio-level documentation should not be additive, but 

instead enable program-level documentation and reporting to be consolidated as appropriate. 

A holistic system approach to data and documentation should evolve with the goal of improved 

transparency. As portfolio management matures, the Select Acquisition Report (SAR) and Defense 

Acquisition Executive Summary (DAES) should transition to portfolio level. 

Empowering Workforce 

Prior to the Packard Commission, material and/or systems commands, which could best be described 

at the time as functional matrix organizations, held responsibility for acquisition and sustainment. One 

of the major findings of the Packard Commission was that individuals in the functional organization 

(today, often referred to as competencies) had decision authority on matters that affected a program’s 

cost, performance, and/or schedule. Implementation of the Packard Commission’s recommendations 

was an attempt to remedy this situation by better unifying programmatic decisional authority. The 

Packard Commission, and the advent of integrated program teams in the 1990s, shifted the balance of 

power in the direction of PMs and PEOs. In the intervening years, the influence PEOs and PMs has 

declined, as evidenced by the current situation in which process too often eclipses the mission of 

product development and delivery. Recommendations 36 and 37 in this report work to restore line 

management authority and rebalance the emphasis of product over process, in particular by 

designating the SAE/PAE as the top of the chain of command responsible for managing the system 

from initiation to disposal. 

A prime reason processes have overpowered products has been the resistance of the functional 

competencies to colocate their personnel with program teams, especially within the contracting and 

comptroller competencies. To the maximum extent practicable, functional competency personnel 

should be colocated with PMs and PAEs. Functional competency personnel should support PMs and 

PAEs by doing the following: 

 Providing competent, qualified personnel. 

 Operating and sustaining efficient and effective infrastructure. 

 Establishing consistent policies and technical guidelines. 

 

34 “Mission Engineering Integration and Interoperability (I&I),” James D. Moreland, Naval Sea Systems Command, accessed August 2, 

2018, https://www.navsea.navy.mil/Home/Warfare-Centers/NSWC-Dahlgren/Dahlgren-Resources/Leading-Edge/I-I-LeadingEdge/Moreland/. 
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 Streamlining processes. 

 Incorporating advanced technology and operating and support lessons into design. 

Colocating competency personnel should include competencies charged with maintaining clearance 

certification (e.g., flight clearance and submarine safe) which must function as a check-and-balance to 

ensure safety and good functional practice. The purposeful tension between the PM’s and PAE’s 

directive authority, functional competencies, technical guidelines, and consistent policy charters should 

not impede progress. That tension is intended to further programmatic efficiency while maintaining 

standards and safety. When conflicts between the entities cannot be resolved, they must be 

expeditiously elevated to senior leadership for adjudication. 

Although colocation would be quite helpful, it is not the only approach to help facilitate portfolio 

management. To actively manage portfolio challenges, PAEs need a more empowered workforce than 

most current PEOs have. For PAEs to be agile, the workforce also needs to be agile within the 

organization. Thus, the individuals assigned to the PAE execution organization by the enterprise, 

whether they are program managers, contracting officers, financial managers, system engineers, or 

other functional members, should be empowered by their system command or parent organization 

when assigned to the PAE organization. Individuals should be assigned, to the maximum extent 

practical, as full-time employees to PAE organizations, allowing PAEs and their senior acquisition 

functional matrix leaders the necessary agility in balancing resource needs. The workforce members 

assigned full time to the PAE organization should be rated within the PAE organization by their 

respective senor matrix leaders, who are also assigned full time. Senior matrix leaders should be rated 

by the PAE or deputy PAE as appropriate. Missile Defense Agency (MDA) provides a current example. 

In addition to overseeing the programs within the MDA portfolio, the MDA director, unlike most 

PEOs, has a more active management role in the portfolio, with increased contracting, financial systems 

engineering, and other functional authorities. Although rated by the PAE, common sense checks and 

balances are required for certain functional experts with specific decision-making authority of their 

own, such as warranted contracting officers. Such functional experts should have a concurrent rater 

within their specific functional area to support their independent decision-making role. 

Conclusion 

Moving defense acquisition from a highly centralized, program-centric model with stovepipe-driven 

requirements, budget, and acquisition processes to a collaborative, decentralized, portfolio-centric 

framework entails nothing more than implementing management best practices. The move would 

yield timely, flexible, agile, cost-effective, and technologically innovative weapon systems acquisition 

and sustainment. Portfolio management is no longer in its infancy; there are standards and best 

practices that DoD can use while implementing the recommended multitiered capability portfolio 

framework. DoD could start with using critical questions to drive a long-term portfolio investment 

strategy that supports meeting capability needs, implementing analytical modeling of strategy to apply 

mission engineering approaches to map system capabilities to mission needs at the capability portfolio 

level, leveraging data that allow the MDAs (DAE, SAE, PAE, PM) and functional leaders to reduce 

program level instruction (DoDI 5000.02) and statutory documentation requirements, and empowering 

the workforce to make decisions. 
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Creating Critical Questions on Portfolio Value 

Portfolio managers need to devise critical questions on portfolio value that support development of 

capital-asset-focused strategies, roadmaps, and analytical models. The portfolio manager should ask 

critical question that cut across DSS to tease out strategies that drive an optimized portfolio. Each 

portfolio leader should establish a set of criteria that sets the key questions for determining portfolio 

capability value allocation decisions at each enterprise and execution portfolio tier. With more than 

50 current PEOs migrated to being PAEs, the execution portfolios will cover a broad set of defense 

systems, and each portfolio would have a unique set of criteria to help determine for the portfolio what 

value means, allowing for tailored approaches. 

Using Analytical Modeling of Strategy 

All portfolio levels, whether OSD ECP portfolios or Military Service and PAE execution portfolios, 

need to use models to support allocation recommendations and decisions. All DoD-level ECPs should 

develop a 20-year capital asset strategy, aligned and linked to the NDS, which addresses their assigned 

functional capabilities. The goal of these strategies is to inform the discussion (through critical 

questions) on how defense resources should be allocated at the enterprise level across the services and 

execution portfolios to optimize capability in accordance with the NDS. Each strategy should focus on 

and recommend potential paths for changes to current Military Service and Defense Agency allocations 

relative to missions and resources with a focus on which changes have the best potential for an 

optimized capability across the next 20 years. The strategies should be supported by operations 

research (OR) modeling that considers both current and future (out to 20 years) capacity/mission 

planning needs. 

Leveraging Data 

Current program-oriented documentation can be transitioned to include a portfolio view to assist 

management and communication of the portfolio strategy and roadmap. Portfolio leadership should 

leverage and update current program-centric data sets to support creation of portfolio data sets and 

information needed to identify and document portfolio capability value decisions and allocations to 

portfolios/programs. A lean approach should be taken to consolidate the current program-centric 

planning/resource/reporting documentation to a more holistic system approach for portfolio-centric 

documentation. The portfolio strategy, roadmap, and periodic assessment reporting should provide 

transparency to stakeholders. Documentations, as appropriate, would be approved by negation. As 

portfolio strategies are created and overall portfolio management reporting matures, the programoriented and DAES reporting would transition to a portfolio strategy annual and quarterly reporting. 

Empowering Workforce 

Workforce responsibility, authority, and accountability of the workforce should be fully aligned to the 

objectives of the PAE organizational mission. The operational chain of command runs from SAE to 

PAE (replaced PEO) to senior portfolio staff, including PMs and functional leaders. Senior functional 

leaders from the enterprise should be assigned full time to the portfolio organization and be rated in 

the portfolio organization on their contribution to successful achievement of the portfolio’s objectives. 

Colocating competency personnel should include competencies charged with maintaining clearance 

certification (e.g., flight clearance and submarine safe), which must function as a check-and-balance 

system to ensure safety and good functional practice. Tension will occur between PM’s and PAE’s 
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directive authority and functional competencies. That tension is to further programmatic efficiency 

while maintaining standards and safety but needs to be elevated if it is affecting execution. The senior 

functional leaders within the PAE organization should also rate the full-time functional workforce 

assigned to the PAE as appropriate. 

Implementation 

Legislative Branch 

 There are no statutory changes required for this recommendation. 

Executive Branch 

 Revise DoDD 5000.01, The Defense Acquisition System, as The Defense Capability Acquisitions 

and Sustainment Framework (a recommended draft is attached in the Implementation Details 

for this section) and incorporate applicable Section 809 Panel recommendations including the 

following 

 Implement best practices for portfolio management. 

 Direct development of an implementing DoDI for the Defense Capability Acquisition and 

Sustainment Framework, which should include the following among other best practices: 

 Establish key questions for determining portfolio capability value relative to resources 

efficiency and effectiveness. 

 Use a combination of models to support resource allocation and capability delivery 

effectiveness decisions at each portfolio tier (PAE, Service, OSD). 

 Leverage and update current program-centric data set to support the creation of portfolio 

sets of data and information to document portfolio capability value and resource allocations 

to portfolios/programs. Aggressively lean documentation requirements. Address required 

reporting transition from program to portfolio as portfolio management matures. 

 Fully align responsibility, authority, and accountability of the workforce to the objectives of 

the PAE organizational mission. Delegate functional authority to individuals assigned to the 

PAE execution organization by the enterprise to execute the PAE organization’s objectives. 

Rate these individual within the PAE organization on their contributions to the success of 

those objectives. Plan for tension between program and functional leadership that will 

positively affect outcomes so leaders learn to work together to achieve the PAE 

organizational mission objectives. 

Note: Draft regulatory changes can be found in the Implementation Details subsection at the end of 

Section 2. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 
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Recommendation 39: Leverage a portfolio structure for requirements. 

Problem 

DoD’s requirements system is under-resourced and lacks the speed, agility, and innovative approaches 

needed to effectively exploit leading technologies for military advantage. DoD’s requirements 

processes, including implementation of JCIDS policies, contribute to lengthy development timelines, 

limited flexibility, and stove-piped systems. Although this process is important for CCMDs to provide 

joint warfighting priorities, the lengthy series of system-centric analyses, requirements documents, and 

reviews can limit innovation and interoperability by prematurely defining and constraining 

requirements. 

Software is a driving force for most weapon system advancements, yet the requirements structure 

inhibits adoption of leading software development practices (e.g., Agile and DevOps). While offering 

some flexibility for software, programs are expected to define requirements at the start and obtain 

approvals from senior leaders. Agile and related methodologies dispel the myth that software 

programs must define requirements upfront, when the program has the least knowledge about user 

needs and the target solution. Commercial organizations develop software iteratively, with dynamic 

scope and requirements based on user feedback, interim performance, and shifting priorities. 

Recent DoD reform efforts have focused on streamlining coordination timelines for JCIDS requirements 

documents. These reforms fail to address the bigger issue of breaking down large, stove-piped 

programs from the start. DoD needs many small and midsized capabilities to complement and connect 

the major systems. 

Background 

JCIDS provides a critical and systematic process for incorporating CCMD inputs on capability gaps, 

operational requirements and funding priorities within constrained budgets. It has a portfolio structure 

based on functional capability areas, each with an FCB. JCS reviews ensure cross-Military Service 

issues are adequately addressed and limit duplicative requirements among the Military Services. JCS 

further validates requirements for critical areas to include communications, logistics, and cybersecurity. 

JCIDS also ensures nonmateriel aspects (e.g., doctrine, training, personnel) are aligned to maximize 

mission impact. 

As shown in Figure 2-10, DoD strategic guidance and CONOPSs for the operational mission area drive 

a capabilities-based assessment (CBA). CONOPs often reflect a culture that identifies traditional, 

Military Service-specific capabilities. When a CONOP outlines a to-be state, it often lacks sufficient 

evidence-based analysis. These issues can preordain a biased Military Service solution or a 

technologically infeasible solution. Initial analysis takes place during the CBA and leads to 

development of one or more ICDs. The ICD serves as a key entrance criterion to the acquisition process 

at the materiel development decision. 
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Figure 2-10. Interaction of JCIDS Documents and Early Acquisition Lifecycle 

Programs conduct an analysis of alternatives (AoA) and related analyses during the Materiel Solution 

Analysis (MSA) Phase to prepare for Milestone A, which, as outlined in DoDI 5000.02, is an 

“investment decision to pursue specific product or design concepts.” Even at this early stage, programs 

will already have made some crucial decisions about the nature of the solution.35 Many of these 

decisions are very important for ensuring joint warfighting success, but some may be unnecessarily 

restrictive. A draft Capability Development Document (CDD), with several mandatory and programunique KPPs, is required for Milestone A approval.36 KPPs can help constrain program costs and limit 

requirements creep in later phases, yet they can also restrict the solution trade space. Milestone A 

authorizes the program to advance to the Technology Maturation and Risk Reduction (TMRR) Phase: 

the point at which the procuring agency can engage industry and contract for competitive prototyping 

to reduce risk in the selected materiel solution. Typically, the Request for Proposal (RFP) for technology 

maturation or risk reduction either suggests or clearly identifies the preferred solution with detailed 

specifications and technical requirements. Because programs perceive urgency to complete the CDD 

and enter the development phase, the insights gained from risk reduction prototypes often come too 

late to effectively shape the CDD. These early commitments to a solution may serve to overly constrain 

innovative options. 

The JROC or the Military Services’ requirements council must approve the final CDD before a program 

can release the RFP for system development. A 2015 GAO report indicated that completing a CDD 

takes, on average, 24 months—the longest timeframe of all the program documentation the GAO 

reviewed.37 Lengthy AoAs, conducted in parallel with the CDD development, contribute to these 

timelines. The CDD sets the scope of a major program for a decade or longer of development, testing, 

and production. During this timeframe, changes occur constantly across operations, threats, priorities, 

budgets, technologies, and related systems; however, unless the Military Service wants to use the 

update process, the requirements remain fixed. Updates are reviewed and approved by a configuration 

steering board (CSB) chaired by the SAE, with membership consisting of executives from the relevant 

 

35 “Failures of Imagination: The Military’s Biggest Acquisition Challenge,” Jarrett Lane and Michelle Johnson, War on the Rocks, April 3, 

2018, accessed December 30, 2018, https://warontherocks.com/2018/04/failures-of-imagination-the-militarys-biggest-acquisitionchallenge/. 

36 “Key Performance Parameters (KPPs),” DAU Acquipedia, accessed December 30, 2018, 

https://www.dau.mil/acquipedia/pages/articledetails.aspx#!346. 

37 GAO, Acquisition Reform: DOD Should Streamline Its Decision-Making Process for Weapon Systems to Reduce Inefficiencies, 

GAO-15-192, February 2015, accessed December 30, 2018, https://www.gao.gov/assets/670/668629.pdf. 
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Military Service, OSD, and JCS. Often, the lack of knowledge about requirements processes hinders and 

lengthens each step’s completion. 

Realizing that subsequent increments or programs may follow many years later, operational sponsors 

are incentivized to include most known requirements in the current CDD. This practice compounds 

risk by expanding the program scope, the number of critical technologies to mature, and variances in 

estimates. These compounded risks drive longer timelines and higher costs to achieve the target 

system’s initial operational capability (IOC). JCIDS does have fast track lanes for urgent operational 

needs (UONs) that affect an ongoing contingency operation and Joint emergent operational needs 

(JEONs) that affect an anticipated contingency operation. The CCMDs, the CJCS, and the VCJCS 

identify joint UONs and JEONs, while the Military Services may also identify UONs. The JCIDS 

manual outlines staffing timelines of 15 days for UONs and 31 days for JEONs, whereas the traditional 

deliberate planning timeline is 97 days. DoDI 5000.02 states these capabilities must be fielded in less 

than 2 years. 

During development, PMs may discover that the program has experienced major operational and 

threat changes, technology maturity or performance issues, budget changes, or other disruptive factors. 

ACAT I and IA programs must convene a CSB at least annually to review all requirements changes, 

significant technical configuration changes, and descoping options to reduce costs or respond to 

emerging threats. The CSB reviews and may recommend changes to the requirements authority. 

As highlighted in Figure 2-11, the JCIDS process of coordinating the major capability requirements 

documents is just one part of the broader DoD requirements processes. Strategic guidance (e.g., NSS 

and NDS) provides DoD an overarching framework of objectives and priorities to shape operations, 

requirements, and investments. The missions, planning, and operations function includes operational 

plans and CONOPS that articulate operational capabilities and how an organization plans to 

accomplish its missions. In force elements, the Military Services and Combat Support Agencies 

organize, train, and equip materiel and nonmateriel solutions to provide forces to the CCMDs. 

Although DoD’s requirements processes interface with the acquisition and budgeting processes, tighter 

alignment is critically needed for more efficient and effective solution deliveries. DoD needs to examine 

the requirements processes holistically, beyond JCIDS boards and documentation reviews (along with 

aligning with budget, acquisition, and sustainment) for greater speed, agility, and innovation for 

mission impact. 
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Figure 2-11. Requirements Process Interactions38 

Discussion

Problems with DoD’s Requirements Processes 

The lengthy analysis and documentation procedures involved in JCIDS are designed to set 

requirements for billion-dollar platforms that will operate for several decades. Three to 5 years may 

elapse from the time an operational commander initially identifies a capability need to when a CDD is 

approved. The only other pathway currently available is an express lane for meeting urgent or emerging 

operational needs. Military Services’ implementation of Middle Tier Acquisition outlined in Section 804 

of the 2016 NDAA includes the Service Chief approving requirements, which appears excessive for a 

rapid prototyping project. DoD needs many intermediate pathways to provide just enough analysis and 

requirements documentation for midsized systems, with lifespans under a decade, that can be 

iteratively upgraded by subsequent releases. This situation calls for a set of processes that can exploit 

mature, leading technologies for military capabilities today by establishing an architecture that can 

integrate emerging technologies tomorrow. For example, a fifth-generation fighter requires different 

rigor in documentation than a small, command-and-control IT solution. F-35 software upgrades (and 

fixes to critical safety or operational issues) require a different approach than the initial CDD for the 

program. A program that relies heavily on COTS solution requires a different approach than a new 

development program with maturing technologies. Acquiring IT as a service is different from tailoring 

a COTS solution or developing new software development. 

The Requirements System Inhibits Contemporary Software Development Practices 

As shown in Figure 2-12, the IT Box model in the JCIDS manual was designed to enable flexibility in 

requirements for software development costing more than $15 million. The four sides of the IT Box 

 

38 Source: Joint Capabilities Integration and Development System (JCIDS) Manual of Operations. 

Strategic Guidance

Threats/Conditions

Missions/Planning/Operations Capability Requirements

Force Elements (Readiness) DOTmLPF-P Acquisition (Materiel)

(Non-Materiel)

Resources/Investment

DAS Process

(including rapid acquisition)

JCIDS Process - urgent/emergent/deliberate

Portfolio Management

(includes capability and capacity)

Organize, Train, and Equip

PPBE Process

Authorization/Appropriations

Global Force Management

Exercises/Wargaming

Readiness Reporting

NSS/NDS/NMS, QDR, DPG, GEF, Etc.

OPLANs/CONPLANs/Scenarios

Concepts/CONOPs

JOPES/APEX Process
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represent a flag-level oversight requirements board, validated capabilities and initial measures of 

effectiveness, estimated software development and integration costs and estimated sustainment costs. 

JROC approves an information system variant of the ICD or CDD that defines these boundaries. 

Provided the program stays within the box, it does not require subsequent JROC approval or JCIDS 

documents. The program can iteratively define smaller requirements documents for approval by its 

flag-level requirements board. 

Although the IT Box originally required programs to generate a high-level IS-ICD for the JROC to 

approve, the JROC has since designated the IS-CDD as the guiding document. Per discussions with 

JCS/J8, IS-CDDs can average 40 pages and require 2.5 months of staffing by the JCS (in addition to 

Military Service-level staffing) to receive JROC approval. The JCS envisions that programs will 

generate IS-CDDs for each major incremental development, not for an entire major system. 

Figure 2-12. IT Box Primer 

Source: Adapted from DAU graphic. 

This approach is based on the fallacy that programs can effectively define the scope and requirements 

for a major software development effort upfront and bound the program by the estimated development 

and sustainment costs. By contrast, as noted previously, in leading software development practices—

such as Agile and DevOps—users, acquirers, developers, and other stakeholders iteratively define, 

prioritize, and change program scope and requirements. They begin with a hypothesis of the desired 

functionality and iteratively build, test, and demonstrate capabilities in close coordination with users. 

Users and engineers provide feedback on interim developments to shape future iterations. A growing 

number of DoD software programs are embracing this model, with some notable successes achieved by 
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programs such as the Air Force’s Air Operations Center Pathfinder program, which delivers higherquality, lower-risk, secure software on a weekly release schedule to warfighters.39

 

Leading commercial corporations and start-ups apply Agile practices to manage software requirements 

via dynamic, prioritized backlogs of user stories. User stories capture the functionality the end users 

expect the software to deliver, often with a clear definition of done that serves as the acceptance criterion. 

A product owner collaborates with the stakeholders to prioritize the user stories on the product 

backlogs—the set of features for which software must be developed (see Figure 2-13). The highest 

priority features determine the scope of the next time-boxed release backlog. The development team 

commits to design, develop, integrate, test, and demonstrate working software for each sprint backlog 

to users and testers. Based on software performance and user feedback, product owners may make 

changes to the release and program backlogs to shape user stories and priorities. 

Figure 2-13. Example of Agile Backlogs 

Conclusions 

Develop a Capstone Set of Requirements for Each Portfolio 

Instead of producing a large set of system-centric requirements documents, the Military Services and 

Defense Agencies should develop a set of capstone requirements and related materials for each 

execution portfolio. These items would guide the iterative delivery of an integrated suite of capabilities 

to maximize operational impact. 

The Military Service headquarters leadership, in collaboration with their respective Military Service 

Chiefs, operational commands, and JCS, should work to provide each execution portfolio with an 

integrated, capstone set of requirements and threat assessments (from the intelligence community). 

This approach would focus the JCS and Military Service Chiefs on the strategic operational 

 

39 “AOC Pathfinder is Saving USAF Big Money, and It Wants More of It,” Air Force Magazine, February 22, 2018, accessed December 30, 

2018, http://www.airforcemag.com/Features/Pages/2018/February%202018/AOC-Pathfinder-is-Saving-USAF-Big-Money-And-It-WantsMore-of-It.aspx. 
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requirements, while enabling portfolios to manage speed and agility of capability requirements for 

specific systems/programs at lower levels. 

The capstone documents would include: 

 Enduring Enterprise Requirements (EERs): Current and future operational requirements of the 

Military Services and CCMDs based on the relevant CONOPs. These would not be written at 

the system level or allocated to individual systems; ideally, they would be constrained to a few 

strategic themes to provide strategic direction. 

 Measures of Force Effectiveness (MOFEs): Specific measures of how a force mix (a system of 

systems consisting of elements such as sensors, weapons, and communications systems) 

performs against the EERs. MOFEs represent the culmination of the Measures of Effect and 

Measures of Performance currently captured in ICDs and CDDs. This would impel the PAE to 

iteratively deliver capabilities to maximize performance against MOFEs, focusing investment 

on the highest mission impact. 

 Mission Threads, Kill/Effects Chains: Representative vignettes that illustrate specific 

operational scenarios. The vignettes would expand upon the Mission Engineering work within 

OSD, JCS, and the Services to identify a series of effects chains and would focus investments to 

strengthen any weak links in the chain, holistic integration, and strategic outcomes. 

The capstone requirements provide the PAE direction for shaping prototypes and experiments, the 

trade space for program requirements, and resources to maximize mission impact. Ideally, capability 

requirement documents for programs would be iteratively developed and approved at lower levels 

(within the Military Services’ corporate structure) to focus on more detailed, specific needs. KPPs for 

MDAPs would still be validated by Military Service Chiefs and/or Service Headquarters Staff, and (if 

the program is of JCS interest), by the JROC. 

Empower PAEs with Flexibility to Shape and Shift Program Scope and Requirements 

Replicating the success of the Air Force Rapid Capabilities Office, the PAE should be empowered to 

shape program requirements below a KPP. The PAE would be responsible for iteratively delivering 

capabilities based on their capstone portfolio requirements, technological maturity, cost/budget, 

schedule, system performance, risks, threats, and other such considerations. PAEs would allocate 

capability requirements to different elements of the portfolio based on analytics to maximize MOFEs 

and mission impact. As programs progress, operations, threats, and priorities change. PAEs would 

shift requirements across programs/projects to maximize the effect of each investment in close 

coordination with operational commanders, empowered operational representatives within the 

portfolio, and other key stakeholders. This approach would not require CSBs with senior DoD officials 

or extensive documentation coordination across DoD. Instead, it would potentially enable programs to 

provide capabilities to operational commands years sooner at lower costs than if they waited to mature 

all technologies and develop and test all functionality to meet 100 percent of the requirements defined a 

decade earlier. 
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Assign Empowered Operational Representatives to Each Portfolio 

Tighter integration of the operational and acquisition communities is critical to delivering mission 

impactful capabilities. Requirements organizations and operational commands currently invest time in 

authoring system requirements documents and collaborate with program offices with varying levels of 

success. A better approach would be to embed empowered operational representatives within each 

portfolio. 

The empowered operational representatives would help shape the vision for key capability areas 

within the portfolio. They could provide insights on current operations and threats to help acquisition 

professionals and contractors shape capability developments. These representatives could provide 

rapid feedback on interim developments and connect programs with operational commanders and end 

users; assist in establishing portfolio priorities; and define, shape, and prioritize lower-level capability 

requirements. Requirements would be constrained by available portfolio budget and strategic 

direction. The operational representatives could also advise the PAE on shaping lower-level program 

requirements and senior leaders on strategic, long-term priorities, capability needs, and investments. 

These operational representatives would serve as key linchpins to shape a portfolio/mission area; 

therefore, portfolios should competitively staff these billets with experienced operators who have 

strengths in strategic planning, collaboration, and systems engineering. While the operational 

community faces resource constraints, embedding the right representatives to shape a portfolio’s 

acquisitions is a critical investment to ensure timely delivery of capabilities that maximize mission 

impact. 

As Congress has authorized new acquisition pathways and greater flexibilities, DoD has a prime 

opportunity to develop a tighter collaborative relationship between technologists and warfighters to 

iterate and identify innovative new means and ways to shape the environment. It is important not to 

constrict the opportunity space by biasing capability development through the lens of yesterday’s and 

today’s operations. In some cases, where an operational community is fixed on a known means and 

ways, there will be value to let the CONOPS drive requirements and solutions. In other cases, however, 

CONOPS should result from a deeper, objective understanding of technologies and their military 

applications, which would enable innovation achievement in the means and ways. 

Maximize Use of Prototyping, Experimentation, and Minimum Viable Products 

Execution portfolios should maximize use of prototyping, experimentation, demonstrations, and 

minimum viable products (MVPs) independent of specific programs as well as in the early stages of a 

given program’s acquisition lifecycle. Congress and DoD, over the last few years, established a series of 

initiatives, funds, organizations, and pathways to increase use of these practices. DoD has begun 

implementing middle-tier acquisition via rapid acquisition and rapid fielding pathways per Section 804 

of the FY 2016 NDAA. These pathways can prototype innovative technologies, demonstrate them in an 

operational environment, and produce mature capabilities without having to go through JCIDS and 

DoDD 5000 acquisition processes. A prototype or MVP in the hands of operators and engineers would 

accelerate learning and design of solutions beyond a team conducting a CBA or AoA. Portfolios should 

use the multiple prototyping pathways to the maximum extent before establishing a formal program or 

follow-on increment to shape scope and requirements. Iterative prototypes and MVPs would improve 

opportunities to exploit leading technologies and the chances of delivering high-value capabilities to 
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warfighters. Prototypes provide valuable inputs to mission engineering efforts by demonstrating how 

strengthening individual elements of a mission thread generate holistic impact. 

As highlighted in Figure 2-14, each portfolio should collaborate with a robust R&D network, including 

the Defense Advanced Research Projects Agency, government laboratories, federally funded research 

and development centers, university affiliated research centers, and industry. Industry R&D can come 

from a variety of sources that include the Small Business Innovation Research program, Other 

Transaction Authority Consortia, and DoD-industry liaison programs such as DIU, SOFWERX, 

AFWERX, partnership intermediary agreements, technology investment agreements, grants, and 

cooperative agreements. Each portfolio’s network could collaborate and compete on research to exploit 

leading technologies for military advantage. This network should focus on ensuring a robust pipeline 

of innovative solutions to shape the scope of new programs and modernize existing systems. Each 

portfolio could establish an S&T/R&D director to coordinate research activities and investments with 

the portfolio’s network, Military Service leadership, and the USD(R&E). The directors would develop 

an S&T/R&D strategy and roadmap to align research with portfolio priority needs and opportunities. 

They could shape R&D investments as a diverse portfolio of many seedling efforts with stage funding 

from multiple DoD sources, technology agreements, and industry R&D funds. The S&T/R&D strategy 

should include technology push opportunities to apply leading technologies to military needs. The 

portfolio S&T/R&D director would be responsible for ensuring the most promising S&T/R&D projects 

cross the valley of death to be integrated into programs of record and fielded. This effort would include 

use of transition confidence levels to proactively connect, shape, plan, and fund the technology 

transitions.40

Figure 2-14. Interplay of Portfolio R&D, Requirements, and Analysis 

 

40 Anthony Davis and Tom Ballenger, “Bridging the ‘Valley of Death’,” Defense AT&L Magazine, January–February 2017, 13-17, accessed 

December 30, 2018, https://www.dau.mil/library/defense-atl/DATLFiles/Jan-Feb2017/Davis_Ballenger2.pdf. 
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Develop Portfolio Analysis Engines and Model-Based Enterprise Architectures 

Portfolios could also develop analysis engines for continual integrated analysis of capabilities, 

requirements, threats, cost, schedule, performance, risks, and other factors. Instead of a linear, serial, 

program-centric model of CBAs and AoAs, a portfolio team (with staff augmentation from operational, 

acquisition, and sustainment commands) could expand that analysis across a suite of capabilities. 

As captured in Recommendation 36 of this report, each portfolio should have an enterprise architecture 

lead/group that uses model-based engineering. These enterprise models, with related portfolio 

analysis, would help shape portfolio priorities, capability scope, and requirements, which would help 

ensure capabilities are designed and developed to maximize interoperability within and across 

portfolios. Enterprise architects would work with their peers in other execution portfolios, Military 

Service headquarters, and ECPs. 

Tight integration with cost analysts, systems engineers, users, and financial managers helps to assess 

the cost-performance trade space to scope affordable solutions. Prior to the 1996 DoDI 5000.2-R 

establishing AoAs, DoD conducted cost and operational effectiveness analyses (COEAs).41 The COEAs 

emphasized quantitative cost analysis in program formulation. Although the current policies dictate 

program affordability targets and caps, and cost is part of AoAs, more comprehensive cost analysis 

could be used to shape program scope and requirements. Adopting more portfolio management 

practices as outlined in this report, along with revisiting some of the COEA practices, would help 

ensure programs are bounded by realistic affordability constraints, based on available portfolio 

budgets. 

Manage IT Requirements Using Dynamic Portfolio Backlogs 

A software requirements model should be timely, iterative, dynamic, and user-centric. Execution 

portfolios should manage their capability requirements via a series of dynamic backlogs rather than 

large static documents. As mentioned earlier, a dynamic backlog is a prioritized list of required 

functions written from an operational user’s perspective but can also include technical requirements 

such as cybersecurity. The highest priority items on the backlog drive the next capability development 

or research (if greater technology maturity is needed). The requirements to shape a new capability 

development could be iteratively captured and approved via a tailored document, depending on the 

size, scope, cost, and risk. Managing requirements via backlogs is easier for software and IT given their 

dynamic and severable traits, but portfolios could also employ this approach beyond IT programs with 

smaller, iterative developments. 

The portfolio’s operational representative should be empowered to dynamically reprioritize, add or 

delete, and shape capability requirements based on operational needs, threats, technical performance, 

systems engineering, security, feedback from earlier releases, and other factors. These representatives 

would actively collaborate with operational commanders, end users, organizations providing threat 

assessments, and enterprise architects to curate the portfolio backlog. During portfolio reviews with 

Military Service leadership and operational commands, PAEs and their operational representatives 

 

41 Defense Acquisition Management Documentation and Reports, DOD 5000.2-M, February 1991, Part 8: Cost and Operational 

Effectiveness Analysis, accessed December 30, 2018, http://www.whs.mil/library/mildoc/DOD%205000.2-

M,%20February%201991%20Part%201.pdf. 
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could present the requirements backlog to ensure alignment with Military Service and CCMD 

operational priorities and outcomes. 

Each program or increment could also manage its requirements via dynamic backlogs. As interim 

developments are demonstrated or fielded, user feedback and system performance might generate new 

capability requirements or shift priorities for the backlog. The goal should be to ensure that each 

successive iteration addresses the users’ highest priority needs and strengthens force effectiveness. 

Consider Breaking Large Programs Down into Smaller Efforts to Iteratively Deliver Capabilities 

As DoD establishes execution portfolios or adopts related practices within the portfolios, PAEs should 

consider opportunities to decompose large programs currently in the planning and development 

phases into multiple smaller efforts. Each program would need to balance the pros and cons of 

restructuring to include timing and system-of-systems integration, which may require revisiting the 

CDD and acquisition strategy structure of programs in development. The VCJCS should update the 

JCIDS manual to enable a more iterative structure in CDDs in future programs by adopting the 

proposed CDD annex approach in the new JCIDS manual and effectively implementing it. 

This approach would enable PAEs to comply with the direction for rapid, iterative development in the 

NDS, DoDD 5000.01, and FAR Part 39. For example, instead of spending a decade to deliver all the 

functionality required in a CDD, the program could be structured to deliver functionality years sooner 

and iteratively deliver capabilities and new technologies via future releases, manage common 

subsystems (e.g., communications or sensors) via a single group within the portfolio, and integrate 

across platforms. If a technology or performance parameter proves more difficult to implement than 

planned, the functionality could be deferred to a subsequent release to allow mature capabilities to be 

fielded near-term. 

Implementation 

Legislative Branch 

 Include language in the next NDAA authorizing Military Services and Defense Agencies to 

pilot a portfolio requirements approach within one or more of their current PEOs or via the 

proposed execution portfolio structure. 

Executive Branch 

 Charter teams to develop a set of capstone requirements for each execution portfolio. These 

capstone requirements should include EERs, MOFEs, and mission threads/effect chains/mission 

engineering. They should provide an umbrella set of requirements to shape capability research, 

planning, and developments. 

 Update the JCIDS manual, CJCS Instruction (CJCSI) 5123.01, and DoDI 5000.02 to empower 

PAEs to shape and defer lower-level requirements, below a KPP, for programs in development. 

 Determine a reasonable level of delegated authority based on the size of the program, changes, 

risks, and other factors. The PAE should be empowered to make changes to approve 

requirements on ACAT II–IV programs and lower-level requirements for ACAT I programs, in 
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collaboration with key stakeholders. Major changes (e.g., KPPs for ACAT I programs) will 

require senior approval via the CSBs and/or related processes as defined in current acquisition 

and requirements policies. 

 Assign one or more operational representatives to each execution portfolio. These 

representatives would report directly to the PAE and may have dual reporting to an operational 

command or headquarters staff. 

 Update DoDI 5000.02 to prioritize prototyping, experimentation, and delivery of MVPs before 

the start of a program and in the early phases of the acquisition lifecycle. PAEs should be 

empowered to work with the R&D community to rapidly fund prototyping efforts to shape the 

scope and requirements of new programs, upgrades to existing programs, projects to improve 

interoperability between systems, or initiatives to improve the readiness of fielded systems. 

 Charter a team to iterate on the IT Box model or develop a new approach for meeting software 

requirements. The team lead and team members must have experience with or a deep 

understanding of Agile development practices. The chosen approach should enable adoption of 

software development practices to include Agile and DevOps through use of dynamic, 

prioritized backlogs managed by product owners rather than large, static documents. Authorize 

iterative release approvals at the lowest level commensurate with program scope, cost, and risk. 

 Outline multiple requirements pathways for DoD to follow. The pathways may include Middle 

Tier Acquisition rapid prototyping and rapid fielding; technology insertion and iterative 

upgrades to existing systems; software intensive systems; business systems; commercial 

solutions with little to no development; formalizing a government R&D program; IT services, 

cyber acquisition, and limited lifespan capabilities with little to no sustainment needs. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 2. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

Recommendation 40: Professionalize the requirements management workforce. 

Problem 

DoD’s RM workforce is responsible for executing JCIDS and component requirements development 

and management processes. The RM workforce is not a professional career like the professional career 

fields that enable the PPBE system and DAS. 

Capability requirements executives have expressed concern over the lack of an identified, trained, 

experienced, managed, and resourced RM workforce. Acquisition professionals receive extensive 

training and follow different, professional growth and career development paths providing years of 

experience in each successive job role. They often require a decade of experience to become proficient 

in their fields. RM organizations frequently have military operators who take a few Defense 
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Acquisition University (DAU) and Military Service-unique training classes with little to no prior 

experience in the field. Operators typically serve in requirements jobs on short assignments of 

18-24 months with little to no prospect of returning to RM jobs in the future. 

DoD has taken steps in compliance with statute to develop and provide professional training to the RM 

workforce by DAU and individual components. DoD has not provided the structure to motivate 

recruitment, growth, and retention of RM professionals as key enablers to effectively identify the 

capabilities needed for operational success. 

The short, one-time assignments and lack of successive job roles to provide professional growth and 

experience prevent incumbents from gaining the proficiency necessary to understand the complex 

environment and effectively capture and shape system requirements. Further exacerbating the 

challenge, Military Services have been left to develop their own unique definitions of RM job roles, 

certification standards, personnel identification, and personnel management as RM personnel. 

The RM workforce lacks a career path with roles and responsibilities and progressive experience. Each 

Military Service has unique RM definitions and lacks rigor in managing the manpower and career path 

standards. Undermanning and a dearth of RM professional skills and experience exacerbate the 

problems. RM requires a professional workforce capable of doing more than developing and staffing 

program requirements documents to assess the strategic and portfolio perspectives. More can be done 

to align the strategic guidance (e.g., NDS), CCMD priorities, capability gaps, threats, mission 

engineering, and capability roadmaps. 

Background 

As of June 2017, there were 3,988 RM billets across DoD. The JCS and CCMDs accounted for 16 percent, 

and the remaining 84 percent were in the Military Services and Defense Agencies (see Figure 2-15). In 

the FY 2007 NDAA, Congress directed the USD(AT&L), in consultation with DAU, to develop a 

training program for DoD personnel responsible for generating requirements. USD(AT&L)—working 

with Joint Staff J-8 and codified in the JCIDS manual—established and mandated the Requirements 

Management Certification Training framework comprising four different groups of RM personnel 

requiring completion of five courses for certification. These groups include requirements originators 

and support, writers and developers, core expertise, and senior-level validators and prioritizers. DAU 

has the authority and responsibility to develop and provide training. Departments and agencies have 

the authority and responsibility to identify personnel who need training, send personnel to training, 

and certify RM personnel. As of June 2017, 66 percent of the billets were filled by trained personnel, 

21 percent were filled by untrained personnel, and 13 percent of billets were unfilled.42 DAU provides 

the training and has worked with the requirements community to iteratively update the RM training 

curriculum provided by DAU and has provided development assistance to Military Service-unique 

training. In 2018, DAU began a major review and restructure of the RMCT curriculum to provide 

experiential learning and job support tools. These tools would be essential to rapidly develop timely 

and relevant capability requirements and better prepare RM personnel for the more rapid and agile 

emerging acquisition environment. 

 

42 J8 2017 Requirements Management Certification Team, Joint Staff Action Process Report to Functional IPT. 
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Figure 2-15. DoD RM Billets 

Discussion 

DoD RM cannot be done effectively by having warfighters serving in ad-hoc roles for a short tour 

before returning to operations. The RM community must have strong ties to the operational 

community. A warfighting operational perspective—preferably from top warfighting performers with 

recent operational experience—is essential to inform the front end of capability requirements 

development and management. Military Services should consider how top warfighters can play a more 

active role in RM. Military RM professionals with relevant operational experience, when coupled with 

their civilian RM counterparts who remain in their jobs longer, could form a highly skilled and 

experienced team as part of a common professional career path. 

Some executives believe the loss of systems engineering support for JCIDS damaged the RM process.43

Broad agreement exists regarding the importance of systems engineering analysis early in the process 

to develop requirements, CBA, and enterprise architectures. Early systems engineering would help 

ensure capability requirements are realistic given technology maturity, testability, affordability, and 

interoperability. Executives disagree as to how much systems engineering should be performed by the 

JCS, OSD, and Military Services. Although JCS and OSD benefit by having greater systems engineering 

and technical expertise from an enterprise requirements and architecture perspective, defining 

capability requirements and robust analysis should be done within the Military Services’ and Defense 

Agencies’ operational, R&D, and acquisition commands. 

Conclusions 

DoD requires a centralized definition of a RM profession and career for both military and civilians—

and their combination as a force multiplier. It could be modeled on those for the acquisition workforce 

(see Section 5)—featuring career paths and the associated training and experience with increasing 

responsibilities and a growth track of roles—to strengthen and expand a cadre of capable RM 

professionals. RM professionals should act as warfighter partners, and the PM should provide the 

connections between operations and acquisition. They understand the strategic guidance, OPLANs, 

 

43 Information gathered during Section 809 Panel Sustainment Workshops, February–March 2018. 
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and CONOPs to interpret the capability requirements and the business language for funding and 

resourcing the solutions. JSC/J8, Military Service requirements headquarters, and operational 

commands—with the advice of DAU—should collaboratively define a common DoD RM profession 

including: 

 Growth-Defined Job Roles: Job roles, based on tasks to be performed, should provide 

professional growth when coupled with defined job experience. DoD should define a common 

set of RM job roles for military and civilian members. 

 Experience-Defined Career Paths: Career paths, with the potential for upward mobility, should 

be defined and incentivized for growth within and across Military Services for the civilian 

workforce. 

 Professional Training and Job Support Tools: This is the most developed component of the 

career professional model across DoD. Professional training and job support tools should be 

based on tasks to be performed. 

 Standards: Professional training and experience standards are essential for each job role across 

a career. 

 Selection Criterial/Targeted Recruiting: To grow a cadre with operational warfighting 

experience and requirements process, resourcing process, and acquisition process experience, 

including systems engineering, S&T, or R&D experience section criteria and targeted recruiting 

are essential. 

 Incentivized Workforce: To grow and sustain an RM profession that is agile and focused on the 

delivery of timely and relevant capability to warfighters, the workforce must be incentivized. 

 Accountability: Accountability is essential to meet professional standards and ensure delivery 

of timely, relevant capabilities in partnership with the acquisition workforce and ultimately the 

warfighter. 

JCS/J8, Military Service requirements headquarters, and operational commands—with the support of 

DAU—should also examine military and civilian billets, opportunities for common job roles, 

development of military and civilian job performance duties leveraging skills and experience brought 

to the table by both communities, work experience opportunities, both military and civilian career 

progression paths, and the balance of military and civilian billets to provide relevant and timely 

capability. To increase continuity and effect, while reducing turnover, DoD should consider allocating 

more billets to civilian personnel (ideally with operational, systems engineering, and/or acquisition 

experience) who will remain in the organization longer than Military Service members. JCS/J8, Military 

Service requirements headquarters, operational commands, and DAU should mature the training and 

education by creating subsequent iterations of the RM curriculum and adding more just-in-time 

training. These stakeholders should also explore a facilitated approach similar to the Services 
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Acquisition Workshop (SAW) with an integrated team embarking on capabilities analysis and 

requirements for a major system. 44

Implementation 

Legislative Branch 

 There are no statutory changes required for this recommendation. 

Executive Branch 

 Develop a strategy for a more formalized RM profession. This strategy should include the RM 

billets; education, training, and certification; targeted recruiting; career paths; and engagements 

with the R&D community, industry, and innovation organizations across the defense 

community. 

 Allocate additional resources to RM to include extending military tours in RM positions and 

increasing the number of civilian billets. This ensures DoD is investing in the right capabilities 

and effectively laying the groundwork to develop and produce capabilities that have the 

greatest mission impact. 

Note: There are no Implementation Details for this recommendation. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

Recommendation 41: Establish a sustainment program baseline, implement key 

enablers of sustainment, elevate sustainment to equal standing with 

development and procurement, and improve the defense materiel enterprise 

focus on weapon system readiness. 

Problem 

Defense sustainment is a highly complex system of systems operating without fully coordinated 

requirements, under multiple commands and departments, receiving separate funding streams, often 

yielding disconnected decisions on total weapon system readiness, operating without sufficient data 

intelligence, with success graded on disconnected measures. The current state of readiness is driven by 

structure and strategy implications of decisions that focus on business concepts rather than the 

required outcome or customer measure of success or failure. Accountability is diffused to the point that 

no single authority is responsible for material readiness to meet operational requirements. 

 

44 A SAW is a facilitated workshop built around a specific acquisition and its team to mentors and guides them in developing their 

contract plans, research, requirements, request for proposal, source selection, and contractor assessments. 
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DSS suffers from shortcomings that inhibit its performance: 

 There is no single document that governs sustainment costs, schedule, and performance 

throughout the lifecycle of a program (weapon system). 

 Sustainment leadership expertise on SAE staffs is not given the same credence as acquisition 

and procurement. 

 Issues in cost estimation, contracting, color of money, intellectual property (IP) and data rights, 

and metrics and data analytics impede sound sustainment decisions and timely actions. 

 The Defense Materiel Enterprise (DME) is not sufficiently focused on weapon system readiness. 

Lack of Governance for Sustainment 

During development and production, the APB constrains a program’s cost, schedule, and technical 

performance in terms of objectives and thresholds, but the APB provides little governance over the 

sustainment phase of a program’s lifecycle. The APB is the governing document from program start 

(Milestone B) through full-rate production (FRP), yet this critical document pertains to less than onethird of the program’s lifecycle costs and an even smaller portion of its life.45 The PM reports program 

progress toward the thresholds in the APB to the MDA, the SAE, and Congress. Exceeding APB 

thresholds can cause a statutory Nunn–McCurdy breach and possible program cancellation. The APB, 

with its consequences for failure, has proven to be a strong motivator for the DAS. There is no 

equivalent governing document for programs in sustainment. Once fielded, a weapon system is 

supported by multiple individual sustainment organizations, each providing singular product support 

elements. Because there is no coordinated and constrained governance for program sustainment, 

weapon system readiness has become the unpredictable outcome of an unconstrained and unfocused 

defense sustainment system. As a result, PMs can find their programs affected by external budgetary 

and policy decisions with little opportunity to recover in a timely manner. 

By DoD policy (DoDI 5000.2), PMs are responsible for cost, schedule, and performance management of 

their programs throughout the lifecycle. Although PMs can appropriately manage development and 

procurement during acquisition, they do not have the authority or capability to manage weapon 

system sustainment that delivers readiness. Instead, readiness is controlled by the sustainment silos

providing the product support elements within the DoD sustainment system. 

Standing of Sustainment 

Sustainment does not stand on equal footing with development and procurement during the 

acquisition phase of a program. Responsibility and accountability for sustainment management do not 

converge on any single organization or individual focused on weapon system readiness. Sustainment 

costs are born out of design trades and decisions made during a program’s development and 

procurement. Sustainment funding has often been used as the PM’s management reserve (MR) to meet 

unplanned program issues during development and production, likely because deferment of product 

 

45 O&S costs are estimated to make up as much as 70 percent of the total lifecycle cost of DOD’s major weapon systems. S. Report 112-

26, Report to Accompany the National Defense Authorization Act for Fiscal Year 2012, June 22, 2011, 136. 
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support activities is believed to be recoverable later in the program. Delays in planned product support 

investments affect reliability and maintainability and substantially increase support costs and affect 

readiness. Requirements officials tend to focus more on traditional operational performance factors 

(i.e., speed, range, firepower) and less on sustainability (i.e., availability, reliability, maintainability, 

ownership costs). As a result, the latter often are subsumed by design trades and unforeseen cost 

increases during acquisition. 

Sustainment Activities Lack Modern Enablers 

Planning and investments for sustainment activities are further inhibited by issues with funding types 

and obligation rates, procurement restrictions, cost modeling, IP and data rights, and lack of 

knowledge sharing across the enterprise. Cost estimating tools for total lifecycle costs have not evolved 

as much as those used to calculate development and production costs. As a result, models used to 

determine lifecycle costs do not produce reliable calculations. Unlike commercial counterparts, military 

systems in general lack sufficient data to support use of data analytics. Commercial entities warehouse 

system performance data and constantly analyze it looking for trends that can help predict when 

preventive maintenance can be done to avoid costly, sometimes catastrophic repairs. This same data 

can be used to support effective decision making throughout the system’s lifecycle. 

Defense Materiel Enterprise Lacks Alignment 

Readiness shortfalls can be seen in every Military Service. GAO reports for several years have 

documented critical readiness issues. Factors such as 17 years of war and the effects of the Budget 

Control Act of 2011 (resulting in sequestration) have led to the readiness state decried by the Service 

Vice Chiefs in their recent testimony before Congress.46 

Sustainment issues were highlighted by USD(A&S) Ellen Lord when she said, “sustainment costs for 

the F-35 are unaffordable.”47

In implementing the Goldwater–Nichols Act of 1986, development and procurement were separated 

from sustainment within DoD. One of the principle intents of this legislation was to clearly reassert 

civilian control of the military. An unintended consequence, however, was a disenfranchisement of the 

sustainment community. 

Background 

DoD must be able to immediately counter multipronged, sustained threats, yet the current logistics and 

sustainment system lacks the agility needed to do so. For decades, product support and sustainment 

 

46 Statement of General Stephen W. Wilson, Vice Chief of Staff, U.S. Air Force, before the Senate Armed Services Subcommittee on 

Readiness and Management Support, February 14, 2018, accessed January 4, 2019, https://www.armedservices.senate.gov/imo/media/doc/Wilson_02-14-18.pdf. 

46 Statement of Admiral William F. Moran, Vice Chief of Naval Operations, U.S. Navy, before the Senate Armed Services Subcommittee on 

Readiness, accessed January 4, 2019, https://www.armed-services.senate.gov/imo/media/doc/Moran_02-14-18.pdf. 

46 Statement of General James C. McConville, Vice Chief of Staff, U.S. Army, before the Senate Armed Services Subcommittee on 

Readiness, accessed January 4, 2019, https://www.armed-services.senate.gov/imo/media/doc/McConville_02-14-18.pdf. 

46 Statement of General Glen M. Walters, Assistant Commandant, U.S. Marine Corps, before the Senate Armed Services Subcommittee on 

Readiness, accessed January 4, 2019, https://www.armed-services.senate.gov/imo/media/doc/Walters_02-14-18.pdf. 

47 “Pentagon ‘can't afford the sustainment costs‘ on F-35, Lord says,” Aaron Mehta, Defense News, accessed March 29, 2018, 

https://www.defensenews.com/air/2018/02/01/pentagon-cant-afford-the-sustainment-costs-on-f-35-lord-says/. 
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management have been secondary to development and procurement within the DAS. Military systems 

have remained in service far longer than originally planned. Maintaining required spares for 

postproduction systems has been challenging as the government and industry have placed higher 

priority on new acquisitions. This lack of attention to product support and sustainment management 

has led to degraded weapon system readiness, rising sustainment costs, and insufficient supply 

support, and in parallel created suboptimal conditions in maintenance training, maintenance 

publications, provisioning, and repair capability. 

DAS is focused on program development and procurement and is governed by the APB. Weapon 

systems sustainment is funded and managed by the operational side of DoD. Separation of sustainment 

from development and procurement yields an approach to acquisition that focuses on technical 

solutions for a program, at the expense of balanced weapon systems sustainment throughout the 

lifecycle. 

Existing regulations and policies establish reviews at each program milestone to ensure adherence to 

all aspects of defense acquisition. These reviews are supported by senior level staffs with expertise 

regarding the operational environment, requirements, and defense acquisition. Senior officials at levels 

equivalent to those for development and procurement—with the requisite expertise for product 

support management—are less represented. The system’s focus on development and procurement, 

with an attendant lack of appreciation, expertise, and accountability for weapon systems sustainment 

can preclude needed discussion on the supportability aspects of a system at these milestone reviews. 

Program funding flows from Congress to the Military Services through a variety of appropriations and 

is channeled not only to the program but also to siloed organizations that will ultimately support the 

product. This partitioning of program sustainment funding leads to an incomplete accounting of 

critical resources such as manpower, training, spares, engineering, depot repair, and support 

equipment. 

With each element of the sustainment organization devising, constructing, and implementing its own 

data and metrics, contradictory objectives can arise. The result is an incomplete set of metrics and an 

inability to use shared data visible to all stakeholders and to provide a reliable indication of 

sustainment health for weapon systems or the overall condition of the capability portfolio within which 

the platforms reside. 

The DME consists of the materiel systems and supply commands and the DoD industrial base that 

comprise product support and sustainment management for DoD. Membership in this enterprise is not 

officially designated but is understood to mean everything and everyone associated with developing, 

procuring, storing, distributing, repairing, and supporting DoD’s warfighting capability. It includes 

contracted support but, historically, industrial base assessments have not included the contractor 

element. This approach presents an incomplete picture of the DME’s capacity. 

Discussion 

Several key shortcomings exist regarding sustainment management: 

 There is a lack of alignment and governance of program sustainment cost, schedule, and 

performance over the entire lifecycle. 
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 The SAE staffs do not include sustainment professionals at an equivalent level of authority to 

the development and procurement senior staff and leadership. 

 Key enablers for modern sustainment are missing across the enterprise. 

Establish a Sustainment Program Baseline 

The PM’s focus during development and production is on meeting the APB’s cost, schedule, and 

performance thresholds. The effects of these shortfalls and trade-offs are not generally realized until 

years later, after the successful milestone decision and following the tenure of the PM who made the 

decision. The DAS focuses more on ensuring the program is meeting the requirements of the APB and 

less on the ability to sustain the system in the future. 

Warfighters receive weapon systems as a product of the DAS and depend on the sustainment system to 

provide the product support required for operational readiness of the weapon system. On average, 

approximately 72 percent of weapon systems lifecycle costs are in sustainment, yet there is no 

mechanism for coordinated governance of this critical operational program phase. The Section 809 

Panel researched major defense programs and found the APB to be an effective tool for guiding, 

governing, and constraining the development and production of major weapon systems. 

During design, alternatives are weighed for performance and affordability. The PM must balance these 

factors and make decisions that will affect supportability and sustainment costs, both of which are 

outside the APB constraints. Small design trade-offs rarely affect total lifecycle costs enough to cause a 

program cost breach. Programs typically do not fail a milestone or breach the APB because of 

underfunded or delayed product support. 

During development and procurement, PSMs are planning for and engaged in activities that will 

provide for the effective sustainment of the system after fielding. Critical product support milestones 

occur after the APB’s final milestone review: the FRP decision. Critical sustainment milestones such as 

the material support date (MSD) and depot stand-up require planning, coordination, and funding years 

in advance of fielding, but they fall victim to design trades and budget reallocations to meet 

performance needs. Accordingly, early funding for sustainment investments is at risk because it is used 

as a source to fund development cost growth. 

Despite efforts to increase visibility of design decisions affecting product support requirements, when 

technical or budgetary challenges arise during development and procurement, PMs have at times been 

forced to trade off programs’ future (outside the APB) to solve a current problem (inside the APB). The 

consequences of these deferrals and trade-offs are not realized until years later, after weapon systems 

are fielded and milestones completed. Decisions on program requirements, performance, and 

configurations made early in the acquisition process will largely determine a system’s Operating and 

Support (O&S) costs, and opportunities to reduce or avoid O&S costs diminish as a program advances 

through the lifecycle. 

KPPs and key system attributes (KSAs) for system lifecycle management are being included in program 

APBs; however, once a program has passed Operational Test and the FRP milestone decision, the APB 

is no longer a strong motivator for the PM or RM (A8/G8/N8). 
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PMs are responsible for the program’s development and procurement and have the authority, 

autonomy, tools, and funding to manage to the parameters specified in the program’s APB, which is 

approved by the resource manager, MDA, and the PM. DAS is program-focused with the following 

characteristics: 

 It is a highly complex system of systems with one primary governing program document: the 

APB. 

 There are clearly defined and accountable officials: the PM, the MDA, and the resource 

manager. 

 Funding streams are directed to the program per APB thresholds. 

 Programs are strongly managed, funded, and measured to specific outcomes: Operational Test 

and Evaluation and FRP. 

 Program success is measured by meeting APB thresholds and achieving milestone approval. 

 The organizations’ objectives, metrics, and funding are focused on program success. 

In post-production, the PM and PSM are responsible for sustainment, but do not have sufficient 

authority, requirement, or funding to successfully manage the independent product support elements 

amongst the sustainment silos. With rare exception, there is actually no one individual truly 

responsible or empowered to manage a program’s sustainment for operational readiness; no single 

official is held accountable for readiness shortcomings. Some of the challenges within the sustainment 

system include the following: 

 The system includes process-focused sustainment silos that are not program-focused. 

 It is a system that is not managed, funded, or measured by the outcome: program readiness. 

 There are multiple funding streams to independent organizations without regard for program 

readiness requirements. 

 Organization objectives, metrics, and funding are self-reflecting. 

 It is a highly complex system of systems consisting of disconnected sustainment silos. 

 There is no accountable official for programs’ readiness. 

The following are significant challenges in the acquisition and sustainment systems:48

 Product support is a low priority and often becomes the funding source for unplanned program 

shortfalls, because there are no consequences for the PM or the program under the APB. 

 

48 Information gathered during Section 809 Panel Sustainment Workshops, February–March 2018. 
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 Supportability KPPs and KSAs are not well used during weapon system design and are not 

measured or evaluated during the sustainment phase. 

 The sustainment system is a collection of independent and specialized organizations that lack 

governance and accountability for the weapon systems readiness it supports. 

 The acquisition system is program focused and governed by the APB. 

Program officeslack appreciation of the effects of delaying sustainment planning. Issues that were 

consistently expressed by subject matter experts (SMEs) include the following: 

 Resources for product support and sustainment planning were not allocated and controlled 

early in the development process. 

 Funding requirements for minimum capability for product support and maintenance were ill 

defined. 

 Warfighters were not sufficiently engaged to address product support and sustainment 

requirements. 

 Government and industry were not aligned regarding product support planning, incentives to 

improve reliability and maintainability, and sustainment. 

SPB would improve the current shortcomings outlined in both the acquisition and sustainment systems 

that are affecting both operational costs and readiness. The SPB would be the governing document for 

product support and sustainment over the entire program lifecycle. The SPB would have the same 

three stakeholders as the APB: the PM, the resource sponsor, and the MDA—facilitating a long-term 

commitment that will enhance readiness. 

The SPB in Development and Procurement 

The SPB would be generated during concept exploration and consider the key cost and readiness 

drivers that would influence trade-off considerations. During this early phase, sustainment goals could 

include annual operating costs, security, maintainability, transportability, mobility, availability, 

personnel, and the support and repair concepts. The APB would remain the key document during 

development and production. The importance of the SPB would increase over time. The relationship 

between SPB and APB is depicted notionally in Figure 2-16. 

The SPB would mature with the program and product development. Sustainment performance 

requirements would start out as estimates and be further refined through the course of a program. As 

the strategy, costs, and performance parameters of the program’s plan for sustainment evolve, the SPB 

would capture the critical parameters to govern the program’s sustainment strategy after FRP. The 

budget and funding for all product support requirements and lifecycle costs would be identified in the 

SPB to reflect the strategy, plans, and milestones outlined in the lifecycle sustainment plan (LCSP). The 

critical product support milestones from the LCSP would be reflected in the SPB. The APB and SPB 

would be reviewed and approved at program acquisition milestones. 
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Figure 2-16. Sustainment Program Baseline in the Acquisition Lifecycle 

The SPB During Sustainment and Disposal 

As the program support concept matures, the SPB would provide the PM and PSM with the authority 

to govern the product support requirements, funding, and performance of the program in the 

sustainment system. As shown in the diagram above, the PM would develop service-level agreements 

(SLAs) with the product support providers. SLAs would be binding agreements between the 

organizations outlining requirements, funding, and performance outcomes to achieve the thresholds in 

the SPB. SLAs should be updated annually with 5-year forecasts. 

After FRP, the SPB would be updated, reviewed, and approved biennially for the remainder of the 

program’s lifecycle by the PM, MDA, and resource sponsor at the sustainment program milestone. 

A breach to the SPB thresholds for cost, schedule, or performance would be reported to one level above 

the stakeholders within 30 days. 

The SPB would capitalize the value of early sustainment planning, devise budgets to support the 

necessary planning, and integrate the cost, performance, and accountability of a program throughout 

the lifecycle. 

Incorporating both the APB and SPB into program development and production provides the needed 

transparency, outcome-based results, and full accountability for the PM to manage the program across 

the entire lifecycle. This approach is applicable in the current PEO structure as well as the portfolio 

management construct. 
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Although creation of this document adds to the program office workload, the value it adds in 

establishing early sustainment performance goals and protecting sustainment funding offsets the 

additional effort. Because sustainment funds are often used as a source of MR, the SPB may also be 

viewed as limiting the PM’s flexibility to move funding to address emerging issues. The document 

would force a contract with the key program stakeholders that would prevent outside agencies from 

raiding program funding. By ensuring the stakeholder network is involved in funding allocation, the 

program would also benefit from added influence and support to replace reallocated sustainment 

funding should it be necessary to move those funds to address an emergent development or 

production need. 

Establishing and maintaining the SPB would improve governance and management of programs’ 

product support and sustainment by doing the following: 

 Developing sustainment performance requirements that influence design. 

 Balancing trade-offs between development, production, and sustainment. 

 Protecting requirements and funding that impact future readiness and sustainment costs 

 Empowering the PM to manage sustainment to the SPB cost, schedule, and performance 

thresholds through SLAs with product support providers. 

 Enabling and instituting governance and accountability of weapon system sustainment and 

readiness. 

Elevate Sustainment 

Better management of product support should start with mandating that the PSM be a direct report to 

the PM. Establishing a PSM position was intended to bring product support and sustainment 

experience and expertise to the upper management levels of the program office. Although the PSM 

roles and responsibilities are clearly defined, no specific resources are identified to support these 

efforts. Having the PSM as a direct report to the PM would signal to the entire program office the 

importance placed on sustainment management. 

Elevating sustainment would also require a larger and more experienced staff within the PAE 

organization. The deputy PAE for sustainment would lead a team of product support experts who 

would provide guidance for individual programs and oversight of the entire portfolio. They would be 

the first level advisors for the PAE making trade-off decisions to achieve portfolio objectives. 

At the SAE level, a deputy for sustainment would lead senior product support and sustainment experts 

who would be advocates for successful sustainment decisions throughout the acquisition process. The 

sustainment deputy would guide the Military Services’ strategy and governance of sustainment and 

also advise the SAE on sustainment. They would also provide inputs for both the PAE and ECP 

regarding sustainment. 
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Key Enablers for Modern Sustainment are Missing 

A number of key enablers are absent from the sustainment system: 

 There is no stable funding for sustainment planning and execution that is budgeted at the 

program level and then directly controlled by the PSM. 

 Contractual vehicles do not incentivize key partners to meet long-term sustainment goals. 

 IP and data rights are not appropriately addressed. 

 O&S cost modeling is inadequate. 

PMs have historically been forced to make design trades-offs, favoring operational requirements early 

in a program’s lifecycle and consuming resources that would otherwise have been used to cover 

sustainment needs. PMs favor technical requirements over sustainment planning in the early stages of 

a program. Technical issues are not clearly understood until design work can be completed and 

sustainment planning impacts will not be seen until years later. There are no sustainment requirements 

in either the APB or the acquisition strategy that must be fulfilled prior to each milestone decision. 

The PSM must compete for program funding to achieve appropriate levels of sustainment planning 

and performance. Funding is often provided only in the year of execution, further hampering the 

PSM’s ability to establish long-term strategies to improve sustainment performance or incentivize 

lifecycle cost reductions. 

Sustainment Funding 

Sustainment is often allocated Operations and Maintenance (O&M) funding that expires each year. 

Solving obsolescence issues, particularly for avionics parts, is constrained by real or perceived 

regulations or polices that govern the funding source. With rapid technology advances, the capability 

of replacement avionics, as well as other categories of components, usually exceeds that of the item it is 

replacing. Because replacement technology typically increases speed, throughput, or some other aspect 

of performance, it is perceived as adding functionality. This perception often drives procuring agencies 

to determine that R&D funds are required to counter the obsolescence, adding unnecessary time and 

complexity to the sustainment process. Without budgeted resources, identifying funding to correct 

obsolescence becomes exacerbated by short response time. 

Interpretation of the regulations and policies governing obsolescence has been incorrect.49 A research 

project initiated by DAU, in conjunction with Hacking 4 Defense (H4D), showed that procurement 

activities were using an interpretation fostered by an incorrect application of the Financial Accounting 

Regulation regarding capability improvements resulting from redesigns due to obsolescence issues. 

Interviews with more than 100 individuals throughout the acquisition community revealed that an 

incorrect interpretation had been circulated throughout DoD. DAU and H4D investigated the 

 

49 Information gathered during Section 809 Panel Sustainment Workshops, February–March 2018. 
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regulations and policies, finding them essentially silent on this matter, and recommended a new 

training element quickly disseminate the correct information and updates to the regulation. 

The variety of funding sources (commonly called color of money issues) and expiration periods applied 

create sustainment issues as well. An example of why the potential for confusion exists can be found in 

funding for spare parts. Spare parts may be considered provisioning, replenishment, depot-level repair, 

or obsolescence. Spares for provisioning may be purchased through a program office with procurement 

funds for initial sparing. Replenishment may constitute additional purchase of spares or depot-level 

repair may be executed to support replacement of worn or damaged parts. Obsolescence may result 

from failure in reliability or diminishing manufacturing sources. Each of these possibilities could 

require funding by a different appropriation, with each funding source governed by a different 

expiration period. 

Financial Management Regulations (FMRs) can be confusing, arcane, and subject to interpretation, as in 

the obsolescence example above. The result is delayed decision making and lack of agile support to 

warfighters. Asset visibility is also affected. Long-term contracting is impeded, which inhibits depot 

maintenance organizations (both organic and commercial) from developing well established 

relationships with suppliers. 

IP and Data Rights 

Program management has not addressed the IP issue in sustainment adequately.50 PMs and PSMs share 

responsibility for ensuring weapon systems receive appropriate and competitive component repair. To 

maintain competition throughout the lifecycle, data rights and IP—as applicable to both hardware and 

software—must be addressed up front. Obtaining IP and data rights has become a complex issue for 

most major programs, resulting in dissatisfaction within both the organic and commercial depot 

organizations. Data rights and IP should be made available when needed, where needed, and for the 

specific purpose needed while also protecting the IP and data rights of industry partners. 

Software Sustainment 

Organic software sustainment is determined by platform requirements. There is no organic software 

sustainment strategy today, and considering the rapidly evolving nature of software development and 

maintenance tools, the government needs to increase attention here. The complexity of acquiring data 

and data rights regarding commercial products, incorporated into either purpose-built or hybrid 

platforms, requires development of policy, regulations, and statutes. The government should leverage 

the strengths of both organic and commercial software organizations in this effort. 

Depot Maintenance 

Little knowledge sharing occurs among the Military Services and between organic depot organizations 

and commercial maintenance, repair and operations (MRO) facilities. Differences in execution of 

sustainment support among the Military Services do not promote active sharing of ideas, methods, and 

technologies. The degree of sharing is driven by personal relationships. Organic depots and 

 

50 Richard Van Atta et al., Department of Defense Access to Intellectual Property for Weapon Systems Sustainment, IDA Paper P-8266, 

May 2017, Institute for Defense Analysis (IDA), accessed May 30, 2018, 

https://www.ida.org//idamedia/Corporate/Files/Publications/IDA_Documents/SFRD/2017/P-8266.pdf. 
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commercial MRO facilities consider themselves competitors; consequently, knowledge sharing 

regarding repair methods, tooling concepts, and processes is rare. Successful programs find ways to 

overcome these obstacles, but responsiveness was forced by the program office rather than incentivized 

through appropriate contract vehicles. An example of this is the F-22 program for which specific 

expertise to support depot level repair at an organic depot is supported by manpower detailed by the 

original equipment manufacturer (OEM). 

Metrics and Data Analytics 

SMEs have identified several shortfalls in metrics:51

 Tools to enable model-based engineering for sustainment are needed. 

 Total lifecycle analysis tools are needed, such as better tools to model reliability and 

maintainability, determine optimum product support, forecast demand profile, and perform 

predictive manpower analysis. 

 Model-based engineering is used extensively during development. Modeling of sustainment to 

include such items as transportation, deployed repair capability, and manpower are seldom 

used. 

Reliability estimates are calculated during proposal development and are measured during technical 

maturation. Actual reliability seen in combat operations is often substantially different from the early 

estimates or even measurements taken in a laboratory environment. Maintainability is judged during 

technical evaluation through a maintenance demonstration. Results may not be representative of the 

final delivered product. Tools that allow modeling of reliability and maintainability characteristics 

would allow identification of the effects of early development decisions. For example, a model that 

included the required maintenance-free operation time following deployment would drive reliability 

and provide assessment of the time required to deliver deployed repair capability to a combat theater 

of operations. Predictive manpower analysis tools, applied early in the development phase, would 

provide lead time for training and documentation requirements to be established and appropriate 

planning, budgeting, and forecasting applied. 

Demand signals provided to repair activities (whether organic or commercial) drive investments in 

training, tooling, manpower, and spare parts availability. SMEs from both organic facilities and 

industry spoke about the demand signal quality, which can impede execution of depot-level repairable 

(DLR) actions.52 Tools providing visibility of demand signal to all stakeholders are not in place. Reports 

regarding metrics within the organic industrial base are replete with recommendations and suggestions 

for improvements. Although some recommendations and suggestions have been adopted, the current 

readiness state indicates that more can be done. 

Use of predictive analytic tools is in its infancy within DoD but widely used by industry. Data from 

each Military Service is controlled, stored, and manipulated internally. Each DME element has its own 

 

51 Information gathered during Section 809 Panel Sustainment Workshops, February–March 2018. 

52 Ibid. 
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information technology department, but there has not been a requirement for them to be interoperable 

or for the data to be collectively warehoused. Efforts to compile all the data, collectively analyze it, and 

make decisions at the DoD level requires numerous data calls, manual information transmission, and 

considerable time. 

O&S costs equate to 42 percent of the FY 2019 DoD budget request, more than double the investment in 

research and procurement. Whether funding is being applied correctly must often go unanswered for 

lack of effective data analytics. 

Improve Focus of Defense Materiel Enterprise on Weapon System Readiness 

The DME’s lack of focus regarding weapon system readiness is manifested in four key areas:53

 Product support provided by individual, internally focused organizations in the DME to 

weapon system readiness does not receive the attention or visibility needed. 

 PMs have little insight regarding decisions made by suppliers of the various product support 

elements and have little opportunity to influence these decisions or to assess the impacts in a 

timely manner. 

 Total industrial capacity and capability has not been assessed in many years. 

 Overall depot maintenance strategy is not aligned to the NDS. 

Product Support 

Product support organizations in DoD are focused on single elements such as manpower, training, 

systems engineering, mission software, depot repair, spares and consumables, or technical 

publications, as shown below (see Figure 2-17). Operating in sustainment silos, these organizations 

tend to make independent decisions based on anticipated outcomes beneficial to the organization 

without regard for requirements, budgets, funding levels, or readiness effects. The system lacks a 

controlling mechanism for the required output—weapon system readiness. When isolated mandates, 

such as military end strength, are issued, the down-stream effects of such decisions are felt throughout 

the defense sustainment system for years. Weapon system sustainment requires a system-of-systems 

approach to plan, manage, and control the interdependencies of the product support elements 

contributing to a program readiness. Figure 2-17 depicts the product support elements, each of which is 

funded differently, operates on metrics with little or no direct correlation to readiness, and is internally 

focused rather than outcome focused. 

 

53 Ibid. 
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Figure 2-17. Product Support Elements 

SMEs repeatedly described situations in which organizations within the integrated product support 

elements either executed or failed to execute decisions based solely on their own internal policies, 

direction, or even personal biases without regard for the effect on readiness.54 An example is the 

anecdotal information provided by one PSM who stated that a supply-chain element failed to initiate a 

contract for replacement spares for an item that was rendering a number of his platforms non-mission 

capable (NMC).55 When he investigated, he determined that a key contract was being withheld over a 

negotiation on allowable profit regarding a 1 percent difference in price for a piece-part worth less than 

$1,000. Further research found a number of platforms had been declared NMC awaiting resolution of a 

price difference measured in tens of dollars. This put weapon system readiness in jeopardy when a 

premium to a contractor or supplier could have quickly resolved the problem and met warfighter 

needs. (See the panel’s recommendation on value analysis in Recommendation 38.) 

Program Manager Insight Regarding Product Support 

One stakeholder held up the USAF model as a positive example of product support.56 This model 

depicted a feedback mechanism from the sustainment enterprise to the Program Management Office 

(PMO). The USAF model resulted from a reorganization that provides periodic program reviews by all 

levels of the acquisition system—from the SAE, PEO, PMO, Systems Commands, and warfighters. 

Other stakeholders indicated the USAF model should be replicated in the other Military Services.57

 

54 Ibid. 

55 Ibid. 

56 Ibid. 

57 Ibid. 
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A governance process that is inclusive of stakeholders, is transparent in intent and purpose, and allows 

for Military Service-level redistribution of funds to address emerging needs while ensuring program 

needs are considered would be a step toward better sustainment management. Failure to better manage 

and invest in product support has a two-fold effect: It increases future operations costs and reduces 

funds available to invest in new capabilities and recapitalization. 

Total Industrial Capacity and Capability 

With respect to maintenance, total industrial capacity of the United States has not been accurately 

assessed in many years. Depot maintenance capacity, to include both commercial and organic 

organizations, is not aligned to the NDS because there has been no requirement to do so. Organic depot 

maintenance organizations are generally aligned to the needs of the Military Service they support, 

except in rare cases in which Military Services have agreed to satisfy joint needs. Commercial depot 

maintenance organizations are profit motivated but have more flexibility to respond to changing 

requirements. Lack of a complete industrial capability and capacity assessment and determination of 

overall required capacity has resulted in duplication of capability in some areas and gaps in others. For 

example, each Military Service addresses the issue of diminishing manufacturing sources and material 

shortages (DMSMS). The Army and Air Force their own respective unique software tools. The Navy 

has distributed capability across five different organizations. 

Depot Maintenance Strategy 

10 U.S.C. § 2464 requires DoD to maintain core depot capabilities for key weapon systems sufficient to 

support expansion for wartime operations. 10 U.S.C. § 2466 places a 50 percent limitation on the funds 

made available to Military Services or Defense Agencies that can be used to contract for performance 

by nongovernment personnel, commonly known as the 50/50 rule. Up to 50 percent of the total depot 

maintenance budget is thus an entitlement for the government maintenance organizations. Throughout 

its history, 10 U.S.C. § 2466 has been changed several times to ensure a balance between organic depot 

funding and contracted performance to optimize efficiency of the overall repair network. 

Organic depot maintenance remains an important capability. During World War II, IP developed by 

one company was often handed over to another company to enable increased production rates. 

Modern weapons systems have become so complex that rapidly increasing productions rates in this 

manner would be nearly impossible for many reasons, including time. International conflicts are now 

more often a come as you are evolution. Organic depot maintenance has evolved from a manufacturing 

capability to MRO capability. Title 10 requires an organic depot capability to provide surge capacity 

but primarily for component repair to support already fielded equipment. 

Some older industrial capabilities are not available through industry or are sufficiently critical that a 

government source must be maintained. For example, the major producer of gun tubes for cannons, 

mortars, and tanks for the Army is Watervliet Arsenal. Similarly, the primary producer of arresting 

gear for use aboard Navy aircraft carriers is at Lakehurst, NJ. 

Conclusions 

DAS is focused on the development and production of weapon systems and governed by the APB. This 

system has governance and controls to manage the cost, schedule, and performance required. The 

sustainment of DoD’s weapon systems, which accounts for more than 70 percent of weapon system 
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lifecycle costs, lacks the required governance and accountability, and is a system of independently 

operated silos that compete for limited dollars. DoD’s sustainment system lacks the alignment of 

investments, enablers, data, metrics, and management to enable affordable and effective weapon 

system readiness. 

Implement a Sustainment Program Baseline 

Improving weapon system readiness will require implementing the alignment, governance, and 

visibility of the sustainment costs, requirements, and funding over the entire lifecycle, to enable the 

development, execution, and support of the system’s operational readiness, directly managed by the 

PM and the PSM as approved by the SPB. The PM must be aware of and able to directly influence 

decisions regarding the program by other elements of the Defense Materiel Enterprise. To address this 

issue, the following should occur: 

 Establish the PM as the single responsible authority for ensuring material readiness to the 

established requirements in the SPB. 

 Require the SPB for all program acquisition milestones and biannually after Milestone C. 

 Align funding, requirements and expectations for provider organizations to execute the 

sustainment strategy to improve, obtain, and monitor weapon system readiness through service 

provider agreements. 

Elevate Sustainment to an Equal Standing with Development and Procurement 

Changes in the existing organizational structures are needed throughout DAS to enable sustainment to 

gain the visibility and stature afforded to development and procurement. Such change will require 

strengthening the authority of sustainment officials from the SAE to the program office. 

The PSM needs to be a direct report to the PM and part of the PAE’s organization. Empowerment and 

appropriate incentives for the PM and the PSM can be accomplished by making changes that provide 

stable funding and having the PSM become a direct report to the PM. This action would highlight the 

importance of sustainment management to the entire program office. 

Equally important is having sufficient expertise and authority in the PAE and SAE organizations to 

ensure implications of program and enterprise decisions that will affect sustainment of a program 

going through decision reviews will be understood. To address this concern, the following should 

occur: 

 Establish sufficient expertise on the PAE staff to facilitate and govern product support and 

sustainment decisions across the portfolio. 

 Establish expertise on the SAE staffs with the necessary knowledge and sufficient authority to 

provide inputs for both portfolio- and enterprise-level decisions regarding sustainment within 

the Military Services and across DoD. 
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Key Enablers are Required to Improve Sustainment Management 

Enablers for sustainment management are needed to improve the information, modeling, and metrics 

used across the defense enterprise to manage this extremely complex and costly system. To address 

this concern, the following should occur: 

 Implement improvements in cost modeling for sustainment. Decisions made within the first 30 

percent of development and procurement determine 70 percent of the lifecycle cost. 

Establishing a SPB early and allowing the PSM to drive sustainment costs through reliability 

and maintainability improvements during design will create long-term benefits. 

 Prescribe and allow programs to budget for obsolescence. Tools for predicting obsolescence, 

particularly in electronic components, are readily available. Ensuring programs have properly 

estimated and budgeted for obsolescence management will enable proactive planning and 

response to this issue faced by all programs. 

 Promote knowledge sharing among organic depot maintenance activities and commercial MRO 

activities. 

 Clarify statutes, regulations, and policies regarding sustainment funding. Training related to 

such clarifications will be needed to improve standardization, promote flexibility in 

interpretation, and provide more agile sustainment response to warfighters. 

 Develop and use sustainment metrics and data analytics for cost estimating, modeling, and 

performance. 

Align the DME to Strategic Weapon System Readiness 

Current material readiness and sustainment costs are driven by the DME’s structure and strategy 

decisions without established responsibility and accountability for desired outcome tied to readiness 

requirements. Changes to both the structure and strategy should be focused on increasing agility and 

flexibility of the system to provide better warfighter support. To address this concern, the following 

should occur: 

 Develop an integrated national industrial-base strategy, encompassing both organic and 

commercial organizations, aligned with current NDS. 

 Conduct an end-to-end material readiness process assessment to provide alternatives to 

improve the effectiveness, efficiency, and affordability of the overall system. 

 Make organic depot determinations within the industrial base (organic and commercial), 

focused on warfighting requirements. 

 Develop a DoD vision for the industrial base regarding organic and commercial technology to 

take best advantage of all capabilities. 

 Develop a strategy for organic software engineering capability and requirements. 
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Implementation 

Legislative Branch 

 Direct DoD to implement an SPB to govern product support cost, schedule, and performance of 

the weapon system throughout the lifecycle. Require the development of an SPB—concurrent 

with the development of the APB—that is updated and approved at each program acquisition 

milestone and then biennially following FRP at the sustainment milestone reviews. 

 Direct DoD to update and strengthen lifecycle cost estimating methodologies to support 

development of the SPB. Obsolescence affects all programs; proactive planning and requiring 

programs to budget for obsolescence would improve readiness. 

 Direct DoD to propose specific changes to statutes to clarify sustainment funding that are 

needed to improve standardization, promote flexibility in interpretation, and provide more 

agile sustainment response to warfighters. Congress should also direct DoD to implement 

changes to update regulations and policies and conduct training related to the changes to 

statutes. 

 Direct DoD to conduct and report to the congressional defense committees, an assessment of the 

defense sustainment enterprise to include balance of leadership attention among acquisition 

and sustainment, organizational structures, national industrial base, and alignment of DME to 

weapon system readiness and support of the NDS. The assessment should include the 

following: end-to-end material readiness process assessment to provide alternatives to improve 

the effectiveness, efficiency, and affordability of the overall system. The industrial base strategy 

should do the following: 

 Encompass both organic and commercial organizations in the national industrial base. 

o Right size and composition of the industrial base regarding organic and commercial 

technology to take best advantage of all capabilities in view of the NDS. 

 Focus depot determinations within the industrial base (organic and commercial) on 

warfighting requirements. 

 Tie accountability for outcome to readiness requirements. 

 Maintain DME agility and flexibility for warfighter support. 

 Include other activities and/or entities as identified to provide a full and accurate 

assessment of the defense sustainment enterprise. 

Executive Branch 

 Elevate sustainment to an equal standing with development and procurement by adequately 

funding, manning, and overseeing sustainment in accordance with the recommendations of the 

panel. 

 Improve sustainment management through key enablers. 
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 Improve the data and information, modeling, and metrics across the defense sustainment 

enterprise to manage this extremely complex and costly capability. To address this concern, 

the following focus areas require attention: 

o Employ cost modeling for sustainment being mindful of the fact that decisions made 

within the first 30 percent of development and procurement determine 70 percent of the 

lifecycle cost. 

o Develop a strategy for organic software engineering capability and requirements. 

o Create long-term benefits by ensuring the PSM drives sustainment costs through 

reliability and maintainability improvements during design. 

o Establish an SPB early. 

o Share knowledge promptly among organic depot maintenance activities and commercial 

MRO activities. 

o Maintain sustainment metrics and data analytics for cost estimating, modeling, and 

performance. 

 Address the following in DoD and Military Service/Agency directives and instructions: 

 Policies and processes to implement enhanced sustainment management per statutory 

requirements. 

 SPB as the baseline requirements document for funding and staffing sustainment activities. 

 Sustainment billet structures across DoD appropriate to challenges of the sustainment 

enterprise. 

 Sufficient expertise on the PAE staff for product support and sustainment. 

 Management of programs to the thresholds in the SPB and development of service provider 

agreements with major stakeholders. 

 Empowerment of the PM, with direct input from the PSM, to manage the sustainment of the 

program from cradle to grave, through the SPB. 

 Situating the PSM as a direct report to the PM. 

 Empower the PSM to develop and execute the lifecycle sustainment plan to meet the cost, 

schedule, and performance requirements of the SPB. 

 Incorporate above Executive Implementation recommendations in revision to DoDD 5000.01, 

The Defense Acquisition System and operating instructions. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 2. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 
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Recommendation 42: Reduce budgetary uncertainty, increase funding 

flexibility, and enhance the ability to effectively execute sustainment plans 

and address emergent sustainment requirements. 

Problem 

Budgetary uncertainty and limited funding flexibility have hampered the ability to effectively execute 

sustainment plans and address emergent sustainment requirements. DoD sustainment suffers for the 

following reasons: 

 Sustainment is underemphasized in the lifecycle cost estimate (LCCE) during program 

planning. 

 Trades are made during early phases of development that could negatively affect the program 

in the sustainment phase. 

 Sustainment receives inadequate attention in the early acquisition phases. 

 The sustainment phase lacks adequate planning, programming, and budgeting. 

 Decisions are made by higher authority in response to emergent requirements. 

 Ambiguity in DoD financial regulations causes sustainment requirements to be budgeted in the 

wrong appropriation account. 

 Programs cannot be supported because funding in the correct appropriation is not available 

during execution years. 

 Sustainment requirements budgeted in an O&M appropriation are affected by the availability of 

funding when they are needed in execution year. 

Background 

In the defense acquisition community, several terms are used to refer to the costs associated with 

maintaining weapons systems. It is a common mistake that the acquisition community believes that 

O&S and the appropriation O&M are interchangeable, but they are not. There is also a misperception 

that all O&S activities are only funded with the O&M appropriation and that is not true either. 

O&M is a category of appropriations accounts enacted by Congress each year as part of the annual 

defense appropriations law. O&M funds some of O&S functions but not all of them. O&M 

appropriations also provides funding for some civilian employee salaries; military base operations to 

include utilities, security, and building maintenance and repairs; medical care; IT infrastructure; 

recruitment activities; training; and other needs. 

O&S refers to the category of costs that are used for program sustainment. O&S is not a standard part of 

appropriations law, but is referenced in law and DoD policy. DoD is explicitly required to collect data 
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on O&S costs, but there is no reference to operating and sustainment in 10 U.S.C. § 101, Definitions.58

The DoD D/CAPE defines O&S costs as those for “personnel, equipment, supplies, software, and 

services associated with operating, modifying, maintaining, supplying, and otherwise supporting a 

weapon system in the DoD inventory.”59 These costs can be funded with O&M, Research, 

Development, Testing, and Evaluation (RDT&E), or Procurement appropriations. 

Sustainment refers generically to the process of keeping a weapons system or other technology in good 

working condition. For many complex or technologically advanced systems, sustainment represents 

the largest single portion of the total cost over the life of the system. Again, these activities can be 

funded with O&M, RDT&E, or Procurement appropriations. 

Cost Categories 

The total cost of a DoD acquisition program varies depending on the definition of cost. The procurement 

cost of a program refers to the amount expended from the procurement appropriation account for 

prime mission equipment, support items, and initial spares. Program acquisition cost refers to the 

combined procurement cost; research, development, and testing cost; and military construction costs. 

Program acquisition cost can also include some O&M costs, referred to as acquisition O&M. The lifecycle 

cost consists of the program acquisition cost, operating and support costs, and disposal cost. The 

operating and support cost and disposal cost are generally funded from the O&M appropriation 

accounts. 

Former USD(AT&L) Frank Kendall includes lowering lifecycle cost among 10 principles for achieving 

better buying power in DoD. Kendall wrote that “controlling life-cycle cost is one of our jobs; staying 

on budget isn’t enough,” and warned against “poor decisions that result in short-term savings at the 

expense of high long-term costs.”60

Underemphasis on Lifecycle Cost 

With respect to the cost thresholds, these different definitions are important because they affect 

whether or not programs experience Nunn–McCurdy breaches.61 If a program’s per-unit procurement 

cost or program acquisition cost exceeds certain thresholds, the program faces termination.62

The fate of programs can depend on both procurement cost and program acquisition cost—but not 

lifecycle cost. Although deferring costs into the longer term may in some cases be the most effective 

way of managing initial investment costs and enabling the program to continue, by keeping the 

program within cost thresholds, that decision may push costs out of the developmental and production 

phases and into the sustainment and disposal phases of a program’s lifecycle. 

 

58 Guidance on Life-Cycle Management, 10 U.S.C. § 2337a. 

59 Office of the Secretary of Defense – Cost Assessment and Program Evaluation, Operating and Support Cost-Estimating Guide, 

March 2014, 2-3, accessed September 10, 2018, https://www.cape.osd.mil/files/OS_Guide_v9_March_2014.pdf. 

60 Frank Kendall, “Better Buying Power Principles: What Are They?”, Defense AT&L, January-February 2016, Principle 4, accessed 

November 6, 2018, http://www.dtic.mil/dtic/tr/fulltext/u2/1016057.pdf. 

61 Nunn–McCurdy breach refers to 10 U.S.C. §§ 2433 and 2433a, which specify that if a program’s unit costs exceed certain thresholds, 

the program in question must be terminated unless the Secretary of Defense certifies that it is essential to national security. 

62 Percentage growth thresholds are based on both cost definition and time period in which projections were made. 
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Literature on Lifecycle Cost 

Several organizations have published documents assessing the possibility of making total lifecycle 

costs—particularly sustainment costs—a greater factor in program decision making. MDAPs are 

already required to provide a full lifecycle cost analysis in their Selected Acquisition Reports to Congress, 

but this analysis does not factor into Nunn–McCurdy cost breaches.63

GAO last updated its Cost Estimating and Assessment Guide in 2009, so its conclusions may be somewhat 

outdated. The document notes that: 

“DOD starts more weapons programs than it can afford, creating competition for funding that 

encourages low-cost estimating and optimistic scheduling, overpromising, suppressing bad news, and for 

space programs, forsaking the opportunity to identify and assess potentially better alternatives. Programs 

focus on advocacy at the expense of realism and sound management.”64

A 2011 paper from the Software Engineering Institute decried the problems with accurately projecting 

the O&S costs of weapons systems. The paper noted that “the difficulty of accurate cost estimation is 

compounded by the fact that estimates are now prepared much earlier in the acquisition lifecycle, well 

before there is concrete technical information available.”65

A 2014 MIT paper by an Air Force program manager showed that historically, actual lifecycle cost 

estimates for MDAPs exceeded their initially projected lifecycle costs by 20 to 506 percent. The paper’s 

“Recommendations” section appeared to suggest incentives for analysts to adopt the rosiest-possible 

assumptions to justify low cost projections: “Department-wide assumptions should be set above the 

DoD Component level to ensure fairness in quantifying systemic cost risk for MDAPs.”66

In 2014, DoD’s CAPE office published a detailed analysis of the cost elements and estimation 

methodologies for program O&S costs. The analysis emphasized the difficulty of projecting O&S costs 

in their entirety, noting that for items such as indirect support and depot maintenance it was “difficult, 

if not impossible, to compare these costs to available funding.”67

Lifecycle Cost Data 

Past analyses suggest that for most major types of MDAP, O&S costs make up a large percentage of the 

lifecycle cost. According the 2014 CAPE analysis, space systems are the only exception (see 

Figure 2-18). 

 

63 Selected Acquisition Reports, 10 U.S.C. § 2432(c)(3). 

64 GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and Managing Capital Program Costs, GAO-09-3SP,

March 2009, 42, accessed June 29, 2017, http://www.gao.gov/assets/80/77175.pdf. 

65 Robert Ferguson et al., Quantifying Uncertainty in Early Lifecycle Cost Estimation (QUELCE), Software Engineering Institute, 

December 2011, accessed November 5, 2018, https://resources.sei.cmu.edu/asset_files/TechnicalReport/2011_005_001_15419.pdf. 

66 David Petrucci, Improved Affordability in DoD Acquisitions through Strategic Management of Systemic Cost Risk, Massachusetts 

Institute of Technology, February 2014, 90, accessed June 29, 2017, http://seari.mit.edu/documents/theses/SDM_PETRUCCI.pdf. 

67 Office of the Secretary of Defense – Cost Assessment and Program Evaluation, Operating and Support Cost-Estimating Guide, 

March 2014, accessed September 10, 2018, https://www.cape.osd.mil/files/OS_Guide_v9_March_2014.pdf. 
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Figure 2-18. Percentage of Program Lifecycle Cost Average for MDAP Categories68

For individual programs, O&S as a share of total costs can be even higher. According to an 

independent analysis prepared for the Marine Corps Deputy Commandant for Aviation, O&S 

accounted for roughly 80 percent of total H-1 helicopter upgrade program costs.69 The high O&S costs 

associated with major programs suggest that if Congress and DoD wish to apply useful metrics to 

program review, those metrics must incorporate sustainment in some way. 

Programs may also benefit from making the same stakeholders responsible for decisions and costs 

throughout each phase of a program’s lifecycle. If a program office is responsible for initial acquisition 

costs but not sustainment costs, the office may face disincentives to increase up-front investment as a 

way of reducing long-term costs. DoD programs do not generally have a single stakeholder responsible 

for managing all O&S costs. There is no single source of O&S funding; this authority is fragmented 

among multiple organizations and appropriation line items. 

Discussion 

DoD spends billions of dollars annually to operate and sustain weapon systems. With the amount of 

dollars at stake, DoD has placed more attention on controlling total lifecycle costs with initiatives 

aimed at ensuring that weapon systems are not only affordable but effective over the long term. These 

costs include, among other things, repair parts, maintenance, and personnel. They have historically 

accounted for about 70 percent of total weapon system costs.70

 

68 Ibid, 2-3. “Other” category consists of RDT&E and Military Construction funding. 

69 Joseph Dyer and Peter Williams, “Marine Light Attack Helicopter Independent Readiness Review,” April 12, 2017, provided to 

Section 809 Panel. 

70 O&S costs are estimated to make up as much as 70 percent of the total lifecycle cost of DoD’s major weapon systems. FY 2012 NDAA, 

Report 112-26 to accompany S. 1253, June 22, 2011. 

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Fixed-wing Aircraft

Rotary-wing Aircraft

Unmanned Aerial Vehicles

Space Systems

Ground Systems

Surface Ships

Submarines

Operating and Support Procurement Other
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Sustainment Programming, Planning and Budgeting 

At present, programs do not always have sufficient funding flexibility for sustainment. Estimating 

sustainment costs frequently, budgeting for sustainment within appropriations will help address 

recurring sustainment issues. Sustainment requires a combination of RDT&E, procurement, and O&M 

funding to successfully execute the full range of lifecycle sustainment actions. Stable funding is key to 

successful execution and having funding of the correct type in place at the right time requires program 

offices to forecast, program, and budget accurately for sustainment. 

Establishing an SPB, aligned with the APB, will enable the level of planning, programming, budgeting, 

and cost estimation necessary to enable DoD prioritization for funding. The sustainment cost estimate 

should be as definitive as possible, based on the information available at the time that it is made, and 

should be regularly refined and improved as more and better information becomes available. An SPB 

initiated during program development and matured and reviewed prior to each milestone decision 

would provide for the necessary forecast and oversight of sustainment funds, and also provide 

valuable insight into the effects on lifecycle costs of decisions made at the program, portfolio, and 

Military Service or operational employment level. Transparency of budget allocations would also allow 

program offices to establish long-term relationships with both commercial and organic depot facilities, 

enabling more efficient planning/execution of depot work and should lead to lower sustainment costs. 

These long-term relationships with suppliers will provide benefits to warfighters and the DoD. 

Unclear Guidance on Appropriation Funding 

Programming and budgeting for sustainment activities are further inhibited by issues with funding 

types, procurement restrictions and obligation expiration periods (commonly called color of money

issues). Uncertainty about funding rules can inhibit programs by not adequately projecting funding 

requirements. There are three types of sustainment activities: product improvements, technical refresh 

and DMSMS, which includes obsolescence that have resource implications that affect what type of 

appropriation is used, driven by a determination of whether the cost is an expense or an investment. 

The DoD FMR describes several conditional circumstances on whether or not a cost is an expense or an 

investment. To further complicate the resource decision, an expense can be funded with O&M or 

RDT&E appropriations and an investment can be funded with Procurement, MILCON or RDT&E 

appropriations. Expense/investment thresholds also affect this determination. As depicted in 

Figure 2-19, the resource decision criteria described in the FMR leads to much confusion which impacts 

proper programming, budgeting and execution of sustainment activities. 
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Figure 2-19. Complexity of Product Support Strategy Funding71 

Realizing the confusion depicted in the graphic above and the product improvement graphic below, 

the Section 809 Panel reached out to DAU to use the Hacking for Defense methodology with a team of 

students to “develop a way for product support managers and program managers to budget and plan 

for obsolescence of parts and components of a weapon system.”72 “Through their discovery interviews 

and hypothesis testing, the team reframed the problem to be: “There is no clear DoD guidance on 

obsolescence.”73 The team specifically found that program managers and financial managers are 

misinterpreting the FMR with regard to obsolescence. Figure 2-20 was presented by DAU and has been 

used as a guideline by resource managers to help clarify FMR product improvement appropriation 

selection criteria, but has been applied for obsolescence and tech refresh requirements, too. The 

research team found situations in which a required component had gone out of production and a 

replacement component was available but also happened to provide a capability enhancement. In such 

cases, program managers and financial managers were asserting that the capability enhancement 

required RDT&E funding to finance the replacement component. This assertion may be a 

misinterpretation of the FMR. The misinterpretation causes program managers and financial managers 

to perform unnecessary workarounds to obtain RDT&E funding that the program has not been 

appropriated and could cause delays in delivering capability to warfighters. These costs and delays 

 

71 Figure adapted from “Department of Defense Product Support Manager Guidebook,” release 2011, DAU, figure 12, accessed 

September 12, 2018, https://www.dau.mil/guidebooks/Shared%20Documents%20HTML/PSM%20Guidebook.aspx. 

72 David L. Gallop, PhD, Defense Acquisition University (DAU) Hacking for Defense/Leading Innovation (H4D/LI) Pilot-2 Info Paper, May 21, 

2018, provided to Section 809 Panel, September 20, 2018. David L. Gallop, PhD, “In Innovation Insurgency: Hacking for Defense at DAU,” 

Defense AT&L Magazine, May-June 2018, 2-7, accessed September 12, 2018, https://www.dau.mil/library/defense-atl/DATLFiles/MayJun2018/DATL%20MayJune2018b.pdf. 

73 David L. Gallop, PhD, Defense Acquisition University (DAU) Hacking for Defense/Leading Innovation (H4D/LI) Pilot-2 Info Paper, May 21, 

2018, provided to Section 809 Panel, September 20, 2018. 
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Portfolio Management Framework Volume 3 | Page 127 

could be avoided with clarifying language in the FMR.74 The team proposed that clarifying language be 

added to the FMR and job aides be developed for the PM and business communities. 

Figure 2-20. Current Product Improvement Funding Policy75

Funding for spare parts serves as another example of why confusion frequently arises. Spare parts may 

be funded differently based on whether they are considered provisioning spares, replenishment spares, 

depot level repairs, or obsolescence. The FMR states that initial spares (provisioning spares) and repair 

parts will be procured along with procurement of the end item and funding will be budgeted based on 

a first-year obligation rate of 92 percent. The O&M accounts will finance the purchase of depot-level 

reparables and consumable repair parts, primarily through the Defense Working Capital Fund, for 

maintenance of all Class IX equipment (excluding medical-peculiar repair parts). Each of these 

examples may be funded by a different appropriation type and each funding source may face a 

different year of expiration. 

The DoD FMR can often be confusing and subject to interpretation, as in the obsolescence and spares 

examples above. This confusion results in delayed decision making and lack of agile support to 

warfighters. The resource decision criteria require simplification, and solutions such as the one 

depicted in Figure 2-21 need to replace the product-improvement funding policy depicted in the 

graphic above. Three of the sustainment activities—product improvement, technical refresh, and 

DMSMS should follow one decision flow chart called product investment because ultimately all of 

these activities are an investment in the end item. 

 The RDT&E appropriation should be applied for the analytical nonrecurring cost to find a 

solution for obsolescence or product improvements. When there is an emergent, unexpected 

 

74 Ibid. 

75 Figure adapted from presentation by Dana Stewart, Color of Money: Funding Policies and Fiscal Law, May 20, 2015, Defense Acquisition 

University, 19, accessed September 12, 2018 http://ndiatvc.org/images/downloads/DAU_Training/dau_color_of_money.pdf. 
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Page 128 | Volume 3 Portfolio Management Framework 

obsolescence or DMS, the program office can pursue reprogramming or use of O&M (form, fit, 

function item replacement), whichever addresses the situation most appropriately. 

 The procurement appropriation should be applied for the recurring cost of the investment of 

the end item, such as scheduled tech refresh and modification kits. This concept still meets the 

original intent of the FMR that all costs are either an investment or an expense. 

Figure 2-21. Proposed Product Investment Decision Tree 

 

Most importantly, it is critical for PMs to recognize that the SPB is dynamic and forecast risk when 

establishing the SPB cost estimate and plan for RDT&E and procurement postproduction requirements. 

The investments (Procurement and RDT&E appropriations) are the costs that result in the acquisition 

of, or addition to, end items. These costs benefit future periods and generally are long term.76 The O&M 

appropriation is an expense, and expenses are the costs incurred to operate and maintain the 

organization and system. That is why an investment account and an expense account should be used 

for sustainment activities. Because investment accounts will be used for the three types of sustainment 

activities—product improvements, technical refresh, and DMSMS—these activities can be tied to 

budget line numbers (BLINs) and PEs. This connection offers more traceability and transparency of 

costs for these sustainment activities, as well as the total capital investment. Being able to trace 

program trades of funding for sustainment requirements can be further expanded by establishing 

separate budget projects and cost categories within the PEs and BLINs. Having this traceability also 

offers the cost estimating community historical data to improve on and address the sustainment cost 

estimating weakness described by CAPE. 

Sustainment Underfunded/Emergent Requirements Affect Resources Available 

Sustainment requirements can be underfunded for a variety of reasons. Too many categories of 

appropriations accounts, as just described, can lead to situations in which sustainment professionals 

are unsure which appropriation account to use to cover a given type of cost. Competing requirements 

among different stakeholders can also lead to chronic underfunding. During the year of execution, 

 

76 DoD Financial Management Regulation, Volume 2A, Chapter 1, Section 01021 - Funding Policies. 
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situations can occur as mishaps, material shortages, and emergent requirements such as operational 

contingencies that affect both needed and available resources. 

Acquisition program funding flows from Congress to the Military Services through a variety of 

appropriations and is channeled to organizations that will ultimately support the product. Examples of 

program funding include manpower, training, spares, engineering, depot repair, and support 

equipment. Sustainment funding has often served as the program manager’s bill payer to meet 

unplanned program issues during development and production. This results in inaccurate program 

and budget estimates for sustainment requirements leading to underfunding in the year of execution. 

The establishment of the SPB should help establish an improved cost estimate and give accountability 

from the PM through the PAE to report any budget variances to the baseline. 

Conclusions 

It is critical to establish financial enablers that reduce budgetary uncertainty, increase funding 

flexibility, enhance the ability to effectively execute sustainment plans, and address emergent 

sustainment requirements. 

DoD should establish an SPB in conjunction with the APB to monitor system requirements through 

acquisition and O&S. Currently, after IOC there are no formal milestones or events to measure system 

sustainment/readiness goals tied to the PEO/PM. Currently, sustainment trades are being made 

without clearly understanding or communicating the overall effect to system readiness and the lifecycle 

cost of the program. This issue can be mitigated with improved cost estimating methodologies and 

models for programming and budgeting sustainment funding. PMs should program for system 

sustainment risk and always establish an RDT&E line for postproduction analytical requirements and 

program for procurement to address possible obsolescence and product improvements. Doing so will 

allow PMs to establish long-term strategies to improve sustainment performance or incentivize 

lifecycle cost reductions. 

Planning and investments for sustainment activities are often complicated by complex and ambiguous 

guidance on funding types. DoD can remedy this problem by clarifying statutes, regulations, and 

policies regarding funding, and redefining appropriation criteria in the FMR to provide more 

flexibility. As described above, sustainment planning should be aligned to maximize use of RDT&E 

and procurement appropriations. O&M may be used for maintenance, repair, and operations. 

Once the program enters the execution year, the PEO (or under the proposed portfolio management 

structure PAE) and PMs need the financial agility to rapidly address emergent sustainment 

requirements. As described in Volume 3, Section 4, budget flexibility can be achieved by the following: 

 Increasing the Procurement and RDT&E BTR thresholds, which will permit leadership to more 

easily move funding as needed within appropriations accounts. 

 Delegating BTR authority to the lowest practical level (PEO/PM) with the most knowledge of 

the program. 
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Requiring programs to budget for the postproduction phases of their lifecycles will enable leadership 

to more accurately forecast required future resources via the SPB, reducing the degree to which 

expanded reprogramming authorities are needed. 

Moving some of the sustainment activities to the investment accounts versus annual funding allows 

PMs to negotiate long-term supplier agreements that can reap savings on contractor supported 

systems, or performance-based logistics contracts. Although, for those activities still funded by O&M, 

the PM needs the increased flexibility to fund those requirements affected by continuing resolutions 

and O&M appropriations accounts should be allowed a 1-year, 5 percent carryover authority. 

Extending the period of availability for sustainment funding with the carryover proposal, will reduce 

pressure to spend money for the sake of spending money driven by obligation end-period spending. In 

addition to addressing the effects of continuing resolutions, it could also eliminate the pressure driven 

by appropriation execution performance metrics. This carryover authority in the O&M appropriation 

accounts would give the sustainment community more time to acquire needed capabilities in years 

when funding is released late and permit sustainment acquisition professionals to smooth out the endperiod surges in contract spending that occur each year. 

As described, these recommended financial enablers should provide improved planning, 

programming, and execution of sustainment activities, which would improve the development, 

implementation, and tracking of the overall lifecycle cost of a program. 

Implementation 

Legislative Branch 

 Congressional changes to implement sustainment funding recommendations are included in 

the Section 809 Panel’s Volume 3, Recommendations 46 through 49. 

 Recommendations 46 through 48 includes a recommendation that FMR rules be modified to 

allow for more flexible reprogramming of funds at the portfolio level. These modifications 

would have to be approved by the congressional defense committees. This would allow for 

more efficient management of acquisition portfolios in general. 

 Recommendation 49 includes a recommendation that defense O&M appropriations 

accounts be granted a 1-year, 5 percent carryover authority. This would allow for a 

smoothing across time periods in the funding for many of DoD’s sustainment needs. 

Executive Branch 

 Clarify the definitions of appropriations account categories in the FMR to provide more 

flexibility for sustainment activities. In particular, clarify the distinction between expenses and 

investments. 

 Update FMR Volume 2A, Chapter 1, Section 010201(B)(1) to allow O&M appropriations to 

be used to purchase supplies, services, or solutions that are necessary to address these 
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expense needs. Expenses are the costs incurred to operate and maintain the organization 

and systems, such as services, supplies, and utilities. 

 Update FMR Volume 2A, Chapter 1, Section 010201(B)(2) to make the R&D investment cost 

category provide new and innovative technologies and allow Procurement appropriations 

and RDT&E appropriations to be used for purchasing supplies, services, or solutions 

necessary to address these nonrecurrent investment needs. Investments are the costs that 

result in the acquisition of, modification or addition to, end items. These costs benefit future 

periods and generally are of a long-term character such as real property and personal 

property. 

 Other Executive Branch changes to implement sustainment funding recommendations are 

included in the Section 809 Panel’s Volume 3 Recommendations 41 and 46 through 49. 

 Recommendation 41 includes a recommendation to establish a Sustainment Program 

Baseline (SPB) in conjunction with the APB to report system requirements through 

acquisition and O&S. APBs and SPBs would together constitute cost estimates for the total 

lifecycle cost of programs. This change would provide a more transparent and accurate 

assessment of the true costs of program sustainment. 

 Recommendations 46 through 48 include a recommendation that portfolio managers be 

given approval to make decisions on below-threshold reprogramming actions in cases for 

which a viable funding offset has been identified within the same portfolio. This flow down 

of decision authority should be accompanied by increased reprogramming thresholds and 

adjustment of the 20 percent rule for reprogramming within Procurement or RDT&E 

appropriations accounts, allowing for more efficient management of acquisition portfolios 

in general. 

 Recommendation 49 includes a recommendation that defense O&M appropriations 

accounts be granted a 1-year, 5 percent carryover authority, to be implemented by the DoD 

Comptroller and other comptroller authorities in DoD. This carryover authority would 

allow for a smoothing across time periods in the funding for many of DoD’s sustainment 

needs. 

Note: There are no Implementation Details for this recommendation. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 
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THIS PAGE INTENTIONALLY LEFT BLANK 
Section 2 

Portfolio Management Framework 

Implementation Details 

Section 809 Panel Revised DoDD 5000.01

1

Department of Defense

DIRECTIVE

NUMBER 5000.01

May 12, 2003

Incorporating Change 2, August 31, 2018

809 Incorporation of DoDD 7045.20

809 Incorporation of Recommendations

USD(A&S)

SUBJECT: The Defense Acquisition System Defense Capabilities Acquisition and Sustainment 

Framework (DCASF)

References: (a) DoD Directive 5000.01, “The Defense Acquisition System,” October 23,

2000 (hereby canceled)

(b) DoD Instruction 5000.2, “Operation of the Defense Acquisition System,”

May 12, 2003 Jan 7, 2015 (Change 3, Aug, 10, 2017)

(c) DoD Instruction 5025.01, “DoD Directives Program,” October 28, 2007

(d) Section 8066, Public Law 109-289, “Making appropriations for the

Department of Defense for the fiscal year ending September 30, 2007, and for

other purposes” (or successor provision)

(e) Title 10, United States Code, “Armed Forces”

(f) Deputy Secretary of Defense Memorandum, “Establishment of the Office of

the Under Secretary of Defense for Research and Engineering and the Office

of the Under Secretary of Defense for Acquisition and Sustainment,” July 13,

2018

(g) Section 2350a of title 10, United States Code, “Cooperative Research and

Development Projects: Allied Countries”

(h) Section 2751 of title 22, United States Code, “Need for international defense

cooperation and military export controls; Presidential waiver; report to

Congress; arms sales policy”

(i) Section 2531 of title 10, United States Code, “Defense memoranda of

understanding and related agreements”

(j) Federal Acquisition Regulation (FAR), current edition

(k) Section 2222, title 10, United States Code

(l) DoD Directive 8500.01E, “Information Assurance (IA),” October 24, 2002

(m) DoD Directive 4630.05, “Interoperability and Supportability of Information

Technology (IT) and National Security Systems (NSS),” May 5, 2004

(n) DoD Directive 2060.1, “Implementation of, and Compliance with, Arms

Control Agreements,” January 9, 2001

(o) DoDD 7045.14, “The Planning, Programming, Budgeting, and 

Execution Process (PPBE),” Jan 25, 2013
Section 809 Panel Revised DoDD 5000.01

2

(p) CJCI 5123.01H “Charter Joint Requirements Oversight Council (JROC) 

and Implementation of the Joint Capabilities Integration and 

Development System (JCIDS),” 31 Aug 2018

(q) DoDD 7045.20, “Capability Portfolio Management,” May 25, 2017 

(hereby canceled) 

(r) DoDI 5000.74, “Defense Acquisition of Services,” Jan 5, 2016 

(Change 2, Aug 31, 2018)

(s) DoDI 5000.75, “Business System Requirements and Acquisition,” Feb 

2, 2017

1. PURPOSE

This Directive:

1.1. Reissues reference (a) and authorizes publication of reference (b), (r), (s) along with 

appropriate amplifying policy regarding capability development and sustainment activities. Cancels 

reference (q) while incorporating its key components to provide a single directive with the 

management principles for the collaborative development and sustainment of all defense 

capabilities.

1.2. Along with reference (b), (o), (p), (r), (s), provides management principles and

mandatory policies and procedures for managing all acquisition programs the development and 

sustainment of defense capabilities using a multi-tiered portfolio management framework in 

order to advise senior leadership on capability investment pursuant to the authority vested in the 

Secretary of Defense by section 113 of title 10, United States Code (Reference (e)).

2. APPLICABILITY AND SCOPE

2.1. This Directive applies to the Office of the Secretary of Defense, the Military

Departments, the Office of the Chairman of the Joint Chiefs of Staff, the Combatant Commands,

the Office of the Inspector General of the Department of Defense, the Defense Agencies, the

DoD Field Activities, and all organizational entities within the Department of Defense (hereafter

collectively referred to as the “DoD Components”).

2.2. The policies in this Directive apply to all acquisition programs development and 

sustainment activities for defense capabilities.

3. DEFINITIONS.

See Glossary. [the Glossary contains definitions from prior DoDD 5000.01 and DoDD 

7045.20 with noted changes]

3.1. Capability is the ability complete a task or execute a course of action under specificed 

condition and level of performance. 
Section 809 Panel Revised DoDD 5000.01

3

3.2. The Defense Capabilities Acquisition and Sustainment Framework (DCASF) is the 

collaborative framework involving the interrelation of the JCIDS; Planning, Programming, 

Budgeting, and Execution (PPBE); and the Defense Acquisition System (DAS) to deliver joint 

warfighting capabilities.

3.3. Portfolio is long lasting collection of shorter duration capabilities including systems, 

products, programs, and services, that are grouped together to facilitate meeting strategic 

objectives. Components of the portfolio can be measured, ranked, and prioritized. Components 

do not have to be interdependent or related.

3.4. Portfolio Management is the centralized management of processes and methods for 

integrating, synchronizing, collaborating, and coordinating current and planned strategies of a 

portfolio based on balancing key characteristics.

3.5. An Execution Portfolio (EP) is a portfolio within a Service/Component/Agency 

organization that is managed as a grouping of systems, programs, products, and services to 

facilitate total system management and capability delivery in accordance with strategic 

objectives.

3.6. An Enterprise Capability Portfolio (ECP) is a grouping of capabilities as defined by 

the Deputy Secretary of Defense and JCS to enable a strategic view of DoD capabilities to 

inform resource allocation decisions.

3.7. An ECP Co-Leader is the civilian or military co-lead responsible for the execution of 

enterprise capability portfolios management with strategic planning for assigned capabilities. 

The ECP Co-leads shall collaborate with DoD Components across the DCASF to integrate, 

synchronize, and coordinate capability portfolio content to ensure alignment to strategic 

priorities and capability demand.

3.8. Portfolio Acquisition Executive (PAE) is the designated individual with overall 

responsibility for an assigned EP. The PAE shall collaborate with DoD Components across the 

DCASF to continuously monitor outcomes and implement improvements to achieve timely and 

affordable solutions for defense capabilities.

3.9. System Program Manager (SPM) is the designated individual with responsibility for 

and authority to accomplish TLCSM objectives for development, production, and sustainment 

of a system to meet the user's operational needs. The SPM shall be accountable for credible 

cost, schedule, and performance reporting to the Milestone Decision Authority (MDA)

3.10. System is the organization of hardware, software, material, facilities, personnel, data 

and services needed to perform designated functions with specified results (such as the 

gathering of specified data, its processing, and its delivery to users); or a combination of two or 

more interrelated pieces (or sets) of equipment arranged in a functional package to perform an 

operational function or to satisfy a requirement [as defined by 10 USC 2359b(k)].

4. POLICY
Section 809 Panel Revised DoDD 5000.01

4

4.1. The primary objective of the Defense Capabilities Acquisition and Sustainment 

Framework is the timely and affordable delivery of capabilities System exists to manage the

nation's investments in technologies, programs, and product support necessary to achieve the 

National Security Strategy and the National Defense Strategy while supporting the United 

States Armed Forces. To achieve that objective, the DoD must be continuously aware of the 

state of delivered and planned capabilities in order to manage the tension between operational 

needs (effectiveness) and resource availability (efficiency) The investment strategy of the 

Department of Defense shall be postured to support not only today's force, but also the next 

force, and future forces beyond that.

4.2. The primary objective of Defense acquisition is to acquire quality products that satisfy

user needs with measurable improvements to mission capability and operational support, in a

timely manner, and at a fair and reasonable price. The DCASF provides a common operating 

environment through which DoD develops and sustains capabilities though a TLCSM approach. 

Specifically, the ability to field and support highly capable joint forces depends on 

implementation of a multi-perspective portfolio framework and continuous positive 

collaboration among empowered stakeholders in the three components of the framework.

4.3. The DCASF is a multi-perspective, multi-tiered portfolio framework which

encompass the three distinct processes operating within the DoD and dictated by statute for

requirements, acquisition, and planning/programming/budgeting. Achieving required outcomes 

mandates collaborative decisions by appropriately authorized decision makers in following 

processes:

4.3.1. DAS, which includes acquisition approaches in accordance with DoDI 5000.02, 

5000.74, 5000.75, and USD(A&S) and USD (R&E) Policy Memoranda on alternative 

capability development approaches with an objective of acquiring and sustaining 

capabilities that satisfy user needs with measurable improvements to mission capability and 

operational support, in a timely manner (effectiveness), and at a fair and reasonable price 

(efficiency). See reference (b, r, s)

4.3.2. JCIDS, with an objective of identifying, assessing, validating, and prioritizing 

joint military capability requirements. See reference (p).

4.3.3 PPBE, with an objective of creating defense strategy and programs with 

balanced and optimized resource allocation for current and future capabilities. See 

reference (o).

4.4. The following policies shall govern the Defense Capability Acquisition and Sustainment 

Framework (DCASF) System:

4.4.1. Flexibility. The DCASF must be able to field and to support capabilities in view 

of anticipated needs but also to respond to evolving situations. ECP Co-leaders and PAEs shall 

continuously maintain accurate assessments of capabilities for which they are accountable 

while also planning to respond to evolving threats. There is no one best way to structure an EP

acquisition program to accomplish the objective of the DCASF efense Acquisition System.

MDAs and PMs shall tailor program strategies and oversight, including documentation of

program information, acquisition phases, the timing and scope of decision reviews, and

decision levels, to fit the particular conditions of that program, consistent with applicable laws

and regulations and the time- sensitivity of the capability need. DoD Components shall 

organize their EP structure to best fit their development and sustainment objectives. PAEs shall 
Section 809 Panel Revised DoDD 5000.01

5

be delegated decision authority in all three DCASF components to the maximum extent 

practicable to synchronize across the DCASF within applicable laws and regulations.

4.4.2. Responsiveness. ECP Co-Leaders and PAEs shall continuously seek to identify 

new and/or innovative technologies for integration into developing or fielded systems Advanced

technology shall be integrated into producible systems and deployed in the shortest time

practicable. Approved, time-phased capability needs, matched with available technology and

resources, enable evolutionary acquisition strategies. Evolutionary acquisition capabilities

strategies are the preferred approach to satisfying operational needs. Incremental development is 

the preferred process for executing such strategies. Requirements development and approval 

through the DoD Component and JCIDS process shall be aligned with the EP structure and 

reflected also in EP capability capstone document.

4.4.3. Innovation. Throughout the Department of Defense, all stakeholders 

acquisition professionals shall continuously develop and implement initiatives to streamline 

and improve the Defense Acquisition System. MDAs and PM ECP CoLeaders and PAEs

shall examine and, as appropriate, adopt innovative practices (including best commercial

practices and electronic business solutions) that reduce cycle time and cost, and encourage 

teamwork shall be adapted. ECP Co-Leaders and PAEs shall develop 20-year portfolio 

strategies which shall include strategies for continuous awareness of innovative technologies 

and business practices.

4.4.4. Discipline. ECP Co-Leaders and PAEs PMs shall manage programs portfolios and 

systems consistent with statute and the regulatory requirements specified in this Directive and in 

reference (b, r, s). Every ECP Co-Leader and PAE PM shall establish portfolio and systems

program goals which are outlined in their 20-year strategic plans. for the A minimum number 

of capability and acquisition and sustainment cost, schedule, and performance parameters that

describe the program system over its life cycle shall be documented. Approved program

baseline parameters shall serve as control objectives. PMs shall identify Deviations from

approved acquisition program portfolio and system baseline parameters and exit criteria shall be 

identified.

4.4.5. Streamlined and Effective Management. Responsibility for the acquisition of 

portfolio management of EPs and the individual systems within EPs shall be decentralized to the 

maximum extent practicable, with command by negation as the principle doctrine. The MDA

shall be designated and delegated provide a single individual with sufficient authority to 

accomplish MDA-approved program objectives for development, production, and sustainment. 

The MDA shall ensure accountability and maximize credibility in cost, schedule, and

performance reporting.

4.5. Additional policies that will be applied to the DCASF acquisition system are at enclosure 

1.

5. RESPONSIBILITIES

5.1. The USD(AT&L), the Assistant Secretary of Defense for Networks and Information

Integration/... Defense Acquisition System. DoD Chief Management Officer, Service 

Secretaries, Service Chiefs, Under Secretary of Defense for Policy (USD(P)), Chairman of the 

Joint Chiefs of Staff (CJCS), Under Secretary of Defense (Comptroller)/Chief Financial Officer 
Section 809 Panel Revised DoDD 5000.01

6

(USD(C)/CFO), USD(A&S), USD(R&E), DoD Chief Information Officer, CAPE Director, the 

Director of Operational Test and Evaluation, and Agency Directors are key officials of the

DCASF. Consistent with their respective authorities, they may jointly issue DoD Instructions,

DoD Publications, and one-time directive-type memoranda, consistent with DoD Instruction

5025.01 (reference (c)), that implement the policies contained in this Directive. 

5.2. Financial management requirements shall be addressed for all financial management

and mixed (financial and non-financial) information systems and shall be certified as being

compliant with the Financial Management Modernization Plan by the Under Secretary of

Defense (Comptroller) (USD(C)), section 8066, Pub. L. 109-289 (reference (d)).

5.3. USD (A&S). USD (R&E), USD (Comptroller), DoD CMO, and VCJCS in 

collaboration with the DoD Components, shall define and populate the ECPs. A collaborative 

environment shall be achieved to actively managing the tension between operational needs and 

resource availability (capital investments) by establishing ECP that will be co-lead by senior 

civilian and military leaders. The ECP Co-Leaders will work through the Deputy’s Mangement 

Action Group (DMAG) to advise the Deputy Secretary of Defense and other senior department 

leadership. 

5.4. The DoD Chief Mangement Officer and Head of the DoD Components shall: 

5.5.1 Ensure that their respective decision fora, processes, policies, and procedures support 

the multi-perspective portfolio framework and objective of one stop collaborative 

environment across the DCASF.

5.5.2 Ensure PAEs collaborate with ECP Co-Leaders by providing access to and visibility 

of EP information required to support analytic activities and adequately advise the DMAG 

in a timely manner.

5.5.3 Assess ECP Strategic Plans and recommendations as appropriate.

5.5.4 Individuals assigned to the EP organization shall be delegated functional authority by 

their functional leaders sufficient to execute the EP’s objectives and be rated within the EP 

organization on their contributions to the success of the EP. EP organization shall include 

empowered leaders from DCASF, including requirements and comptroller.

5.5. The Chairman of the Joint Chiefs of Staff (CJCS) shall provide advice and assessment

on military capability needs in accordance with sections 153, 163, and 181 of title 10 (reference

(e)). The CJCS shall present this advice and assessment through validated and approved

capabilities documents. The CJCS may engage the components and agencies to provide this

advice and assessment. Consistent with this Directive, and in coordination with the

USD(AT&L), the CJCS may establish procedures to carry out this responsibility. Additionally, 

the CJCS shall:

5.6.1 Recommend to the Deputy Secretary of Defense a Joint Staff or Combatant 

Command Flag or General officer to serve as the ECP military co-lead who will also be 
Section 809 Panel Revised DoDD 5000.01

7

FCB Chair.

5.6.2 Ensure that Joint Staff decision fora, processes, policies, and procedures support 

the multi-perspective portfolio framework. 

5.6.3 Develop and manage a process for SWarF participation in portfolio management 

that includes development and refinement of capability attributes to be used in shaping 

requirements.

5.6.4 Develop and manage a process for prioritizing JCAs annually to inform options 

for cross- capability portfolio trades.

 5.6.5 Assess execution of national strategy, Guidance for the Development of the Force 

(GDF) and ECP strategic plans; recommend changes through the Chairman’s Risk 

Assessment.

6. SUMMARY OF CHANGE 2. This change reassigns the office of primary responsibility for

this issuance to the Under Secretary of Defense for Acquisition and Sustainment in accordance

with the July 13, 2018 Deputy Secretary of Defense Memorandum (reference (f)).

7. EFFECTIVE DATE

This Directive is effective immediately.

(signed by)

Deputy Secretary of Defense 
Change 2 , 08/31/2018 8 ENCLOSURE 1

ENCLOSURE 1

ADDITIONAL POLICY

E1.1.1. Armaments Cooperation. PAEs PMs shall pursue international armaments 

cooperation to the maximum extent feasible, consistent with sound business practice and with 

the overall political, economic, technological, and national security goals of the United States. 

International agreements for international armaments cooperation programs shall complete the

interagency consultation and Congressional notification requirements contained in 10 U.S.C. 

2350a (reference (g)), section 2751 of the Arms Export Control Act (reference (h)), and 10 

U.S.C. 2531 (i).

E1.1.2. Collaboration. The DoD acquisition, capability needs, and financial communities,

and operational users shall maintain continuous and effective communications with each other by

using Integrated Product Teams (IPTs). Teaming among warfighters, users, developers,

acquirers, technologists, testers, budgeters, and sustainers shall begin during capability needs

definition. MDAs and PMs are responsible for making decisions are supportive of EP planning

and leading execution of their programs, and are accountable for results.

E1.1.3. Competition. Competition shall provide major incentives to industry and

Government organizations to innovate, reduce cost, and increase quality. All of the DoD

Components shall acquire systems, subsystems, equipment, supplies, and services in accordance

with the statutory requirements for competition. Acquisition managers shall take all necessary

actions to promote a competitive environment, including the consideration of alternative systems

to meet stated mission needs; structuring Science and Technology (S&T) investments and

acquisition strategies to ensure the availability of competitive suppliers throughout a program's

life, and for future programs; ensuring that prime contractors foster effective competition for

major and critical products and technologies; and ensuring that qualified international sources are

permitted to compete. If competition is not available, PMs shall consider alternatives that will

yield the benefits of competition.

E1.1.4. Cost and Affordability. All participants in the acquisition system shall recognize the

reality of fiscal constraints. They shall view cost as an independent variable, and the DoD

Components shall plan programs based on realistic projections of the dollars and manpower

likely to be available in future years. To the greatest extent possible, the MDAs shall identify the

total costs of ownership, and at a minimum, the major drivers of total ownership costs. The user

shall address affordability in establishing capability needs. Programming/budgeting (Budget 

Line item/Program element) shall be aligned to EP. 

E1.1.5. Cost Realism. Contractors shall be encouraged to submit cost proposals that are

realistic for the work to be performed. “Buy-ins” shall be discouraged because they may subvert

competition or lead to poor contract performance or cost overruns. Proposals shall be evaluated

for cost realism in accordance with the Federal Acquisition Regulation (reference (j)).

E1.1.6. Cost Sharing. The PM shall structure the acquisition in a way that neither imposes undue

risk on contractors, nor requires unusual contractor investment. Contractors shall not be

encouraged nor required to invest their profit dollars or independent research and development
Change 2 , 08/31/2018 9 ENCLOSURE 1

funds to subsidize defense research and development contracts, except in unusual situations

where there is a reasonable expectation of a potential commercial application. Contractors are

entitled to earn reasonable rewards on DoD contracts, including competitively awarded

contracts.

E1.1.7. Financial Management. The Defense Business Systems Management Committee

shall develop a Business Enterprise Architecture and a transition plan in accordance with section

2222, title 10, U.S.C. reference (k)) and shall approve any obligation of funds in excess of $1M

for a defense business system modernization.

E1.1.8. Independent Operational Test Agency (OTA). Each Military Department shall

establish an independent OTA reporting directly to the Service Chief to plan and conduct

operational tests, report results, and provide evaluations of effectiveness and suitability.

E1.1.9. Information Assurance. Acquisition managers shall address information assurance

requirements for all weapon systems; Command, Control, Communications, Computers,

Intelligence, Surveillance, and Reconnaissance systems; and information technology programs

that depend on external information sources or provide information to other DoD systems. DoD

policy for information assurance of information technology, including NSS, appears in DoD

Directive 8500.01E, reference (l).

E1.1.10. Information Superiority. Acquisition managers shall provide U.S. Forces with

systems and families of systems that are secure, reliable, interoperable, compatible with the

electromagnetic spectrum environment, and able to communicate across a universal information

technology infrastructure, including NSS, consisting of data, information, processes,

organizational interactions, skills, analytical expertise, other systems, networks, and information

exchange capabilities.

E1.1.11. Integrated Test and Evaluation. Test and evaluation shall be integrated throughout

the defense acquisition process. Test and evaluation shall be structured to provide essential

information to decision-makers, assess attainment of technical performance parameters, and

determine whether systems are operationally effective, suitable, survivable, and safe for intended

use. The conduct of test and evaluation, integrated with modeling and simulation, shall facilitate

learning, assess technology maturity and interoperability, facilitate integration into fielded

forces, and confirm performance against documented capability needs and adversary capabilities

as described in the system threat assessment.

E1.1.12. Intelligence Support. Intelligence and understanding threat capabilities are integral

to system development and acquisition decisions. PMs PAEs shall keep threat capabilities current

and validated in program portfolio documents throughout the total system approach acquisition 

process.

E1.1.13. Interoperability. Systems, units, and forces shall be able to provide and accept data,

information, materiel, and services to and from other systems, units, and forces and shall

effectively interoperate with other U.S. Forces and coalition partners. Joint concepts and

integrated architectures shall be used to characterize these interrelationships. DoD policy for the

information technology, including NSS, aspects of interoperability and supportability appears in

DoD Directive 4630.05, (reference (m)).
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E1.1.14. Knowledge-Based Acquisition. PMs shall provide knowledge about key aspects of

a system at key points in the total system approach acquisition process. PMs shall reduce 

technology risk, demonstrate technologies in a relevant environment, and identify technology

alternatives, prior to program initiation. They shall reduce integration risk and demonstrate 

product design prior to the design readiness review. They shall reduce manufacturing risk and

demonstrate producibility prior to full-rate production.

E1.1.15. Legal Compliance. The acquisition and procurement of DoD weapons and weapon

systems shall be consistent with all applicable domestic law and treaties and international

agreements (for arms control agreements, see DoD Directive 2060.1 (Reference (n), customary

international law, and the law of armed conflict (also known as the laws and customs of war).

An attorney authorized to conduct such legal reviews in the Department shall conduct the legal

review of the intended acquisition of weapons or weapons systems.

E1.1.16. Performance-Based Acquisition. To maximize competition, innovation, and

interoperability, and to enable greater flexibility in capitalizing on commercial technologies to

reduce costs, acquisition managers shall consider and use performance-based strategies for

acquiring and sustaining products and services whenever feasible. For products, this includes all

new procurements and major modifications and upgrades, as well as re-procurements of systems,

subsystems, and spares that are procured beyond the initial production contract award. When

using performance-based strategies, contract requirements shall be stated in performance terms,

limiting the use of military specifications and standards to Government-unique requirements

only. Acquisition managers shall base configuration management decisions on factors that best

support implementing performance-based strategies throughout the product life cycle.

E1.1.17. Performance-Based Logistics. PMs PAEs shall develop and implement

performance- based logistics strategies that optimize total system availability while 

minimizing cost and logistics footprint. Trade-off decisions involving cost, useful service, and

effectiveness shall consider corrosion prevention and mitigation. Sustainment strategies shall

include the best use of public and private sector capabilities through government/industry

partnering initiatives, in accordance with statutory requirements.

E1.1.18. Products, Services, and Technologies. The DoD Component(s) shall consider

multiple concepts and analyze possible alternative ways to satisfy the user need from 

capabilities within the ECP. System concepts shall be founded in an operational context, 

consistent with the National Military Security Strategy, Strategic Planning Guidance, Joint 

Programming Guidance, Joint Concepts, and joint integrated architectures. The DoD 

Components shall seek the most cost-effective solution over the system's life cycle. EPs shall 

have a set of criteria which are the key questions for determining portfolio capability value 

relates to resource efficiency and effectiveness of the EP life cycle. Models shall be used to 

support resource allocation and capability delivery effectiveness decisions across the EP. They

MDA shall require conduct market research and analysis to determine the availability,

suitability, operational supportability, interoperability, safety, and ease of integration of the

considered and selected procurement solutions. The DoD Components shall work with users

to define capability needs that facilitate the following, listed in descending order of preference:

E1.1.18.1. The procurement or modification of commercially available products,

services, and technologies, from domestic or international sources, or the development of dualuse technologies;
Change 2 , 08/31/2018 11 ENCLOSURE 1

E1.1.18.2. The additional production or modification of previously-developed U.S.

and/or Allied military systems or equipment;

E1.1.18.3. A cooperative development program with one or more Allied nations;

E1.1.18.4. A new, joint, DoD Component or Government Agency development program;

or

E1.1.18.5. A new DoD Component-unique development program.

E1.1.19. Professional Workforce. The Department of Defense shall maintain a fully

proficient requirement, financial mangement and acquisition, technology, and logistics workforce 

that is flexible and highly skilled across a range of management, technical, and business 

disciplines. To ensure this, the CJCS, USD (C), and USD(AT&SL) shall establish education,

training, and experience standards for each DCASF acquisition position based on the level of

complexity of duties carried out in that position. Career development models that continuously 

deepen and broaden the workforce member’s experience throughout their entire career require a 

competency model with technical and non-technical skills and associated proficiency standards 

for every career field.

E1.1.20. Program Information. Complete and current program information is essential to the

acquisition process. Consistent with the tables of required regulatory and statutory information

appearing in reference (b, r, s), decision authorities shall require PMs and other participants in the

defense acquisition process to present presentation of only the minimum information necessary to 

establish the program baseline, describe program plans, understand program status, and make 

informed decisions. The MDA shall “tailor-in” portfolio and program information. To the 

maximum extent possible, system and program information including consolidation within the 

EP strategic plan. IPTs shall facilitate the management and exchange of program information.

E1.1.21. Program Stability. The DoD Components shall develop realistic program

schedules, long-range investment plans, and affordability assessments, and shall strive to ensure

stable program funding. The MDA shall determine the appropriate point at which to fully fund

an acquisition program generally when a system concept and design have been selected, a SPM

has been assigned, capability needs have been approved, and system-level development is ready

to begin. Full funding shall be based on the cost of the most likely system alternative and fit 

within a resilient portfolio funding strategy.

E1.1.22. Research and Technology Protection. Acquisition managers shall identify classified

and controlled unclassified research and technology information requiring additional counter 

intelligence and security support early in the research and development, capability needs

generation, and acquisition processes.

E1.1.23. Safety. Safety shall be addressed throughout the acquisition process. Safety

considerations include human (includes human/system interfaces), toxic/hazardous materials and

substances, production/manufacturing, testing, facilities, logistical support, weapons, and

munitions/explosives. All systems containing energetics shall comply with insensitive munitions

criteria.

E1.1.24. Small Business Participation. Acquisition strategies shall be structured to facilitate

small business participation throughout a portfolio across the portfolio strategic planning period
Change 2 , 08/31/2018 12 ENCLOSURE 1

program’s life cycle through direct participation or, where such participation is not available,

through fostering teaming with small business concerns.

E1.1.25. Software Intensive Systems. Acquisition of software intensive systems shall use

process improvement and performance measures. Selection of sources shall include

consideration of product maturity and past performance.

E1.1.26. Streamlined Organizations. The Department of Defense shall use a streamlined

management structure in the acquisition system, characterized by short, clearly defined lines of

responsibility, authority, and accountability. In no case, shall there be more than two levels of

review between a PM and the MDA.

E1.1.27. Systems Engineering. Acquisition programs Systems shall be managed through the

application of a systems engineering approach that optimizes total system performance and

minimizes total ownership costs. A modular, open-systems approach shall be employed, where

feasible.

E1.1.28. Technology Development and Transition. The S&T program shall:

E1.1.28.1. Address user needs;

E1.1.28.2. Maintain a broad-based program spanning all Defense-relevant sciences and

technologies to anticipate future needs and those not being pursued by civil or commercial

communities;

E1.28.3. Preserve long-range research; and

E1.28.4. Enable rapid, successful transition from the S&T base to useful military

products.

E1.1.29. Total Systems Approach. The Portfolio Acquisition Executive (PAE) PM shall

be the single point of accountability for accomplishing program EP objectives for capability

mangement through total life-cycle systems management (TLCSM), including sustainment.

The PAE PM shall apply human systems integration to optimize total system performance

(hardware, software, and human), operational effectiveness, and suitability, survivability,

safety, and affordability. PMs PAE shall consider supportability, life cycle costs,

performance, and schedule comparable in making program decisions. Planning for Operation

and Support and the estimation of total ownership costs shall begin as early as possible.

Supportability, a key component of performance, shall be considered throughout the system life

cycle.

E1.1.30. Defense Business Systems. Defense Business Systems (DBS) requirements, 

resources, and acquisition shall be overseen by the DoD CMO, who will chair the Defense 

Business Council (DBC). A defense business enterprise architecture shall be developed to 

guide the integration of business processes in accordance to reference (k). DBS ECP will 

identify and advocate for enterprise (cross-Service) DBS solutions. The DBC will provide 

oversight of DBS component portfolios and adjudicate issues among the Component DBS 

portfolios. DBS component PAE(s) shall collaborate with the DBS ECP co-leaders by 

providing access to and visibility to EP information required to support analytic activities and 

adequately advise the CMO and DMAG in a timely manner. 
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GLOSSARY 

DEFINITIONS

The Defense Acquisition System is the management process by which the Department of 

Defense provides effective, affordable, and timely systems to the users.

An Acquisition Program is a directed, funded effort that provides a new, improved, or 

continuing materiel, weapon or information system, or service capability in response to an 

approved need.

An Acquisition and Sustainment Program is a directed, funded, total life cycle commitment

that provides a new, improved, or continuing material, weapon or information system, or 

service capability in response to an approved need. Each program shall be assigned to a 

System Program Manager (SPM).

The Defense Acquisition Executive (DAE) is the USD (A&S) who has the primary 

responsibility for supervising the Defense Acquisition System. The DAE takes precedence 

on all acquisition matters after the Secretary and the Deputy Secretary. The DAE shall 

collaborate with DoD Components across the DCASF to continuously monitor outcomes 

and implement improvements to achieve timely and affordable solutions for defense 

capabilities. 

The Milestone Decision Authority (MDA) is the designated individual with overall 

responsibility for a program. The MDA shall have the authority to approve entry of an 

acquisition program into the next phase of the acquisition process and shall be accountable for 

cost, schedule, and performance reporting to higher authority, including Congressional 

reporting.

The Service/Component Acquisition Executive (SAE/CAE) is the designated individual 

with overall responsibility for the collection of execution portfolios within that individual’s 

service or component. The SAE/CAE shall collaborate with DoD Components across the 

DCASF to continuously monitor outcomes and implement improvements to achieve timely 

and affordable solutions for defense capabilities.

Enterprise Capabilities Portfolio Strategic Plan. The ECP Co-lead’s long-range plan to 

synchronize, integrate, and coordinate efforts related to capability investments to meet

joint warfighter and supporting defense entity needs. These plans address portfolio scope,

portfolio objectives, dependencies with other portfolios, processes and plans, performance 

targets and metrics, and risk considerations.

Capabilities-based planning. A planning methodology that identifies and provides 

capabilities that the joint warfighter and supporting defense entities need to address a

range of challenges.

Capability attribute. A set of desired properties, qualities, or characteristics used to describe

a specific capability and subject to being measured or evaluated. Developed by the joint

warfighter to aid in the development of capability priorities, requirements, and solutions.
Change 2 , 08/31/2018 14 ENCLOSURE 1

JCAs. Collections of like DoD capabilities functionally grouped to support capability

analysis, strategy development, investment decision making, capability portfolio 

management, and capabilities-based force development and operational planning.

An ECP Co-leader is a designated individual with strategic planning for assigned 

capabilities. The ECP Co-lead shall collaborate with DoD Components across the DCDSS 

to integrate, synchronize, and coordinate capability portfolio content to ensure alignment to 

strategic priorities and capability demand.

SWarF. A forum, generally consisting of the Combatant Commands and the Military 

Services, to organize, analyze, prioritize, and build joint consensus from the warfighter’s

perspective on complex resource and capabilities needs issues. These forums are delegated

by the Chairman of the Joint Chiefs of Staff and are vested in the JROC.
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RECOMMENDED REPORT LANGUAGE

SEC. ___. IMPLEMENTATION OF RECOMMENDATIONS OF THE SECTION 809 PANEL 

RELATING TO PORTFOLIO MANAGEMENT.

This section would require the Secretary of Defense to implement, within 180 days after 

date of enactment, the recommendations of the acquisition advisory panel established under 

Section 809 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114-92). 

The Secretary also would be required to make any necessary revisions to directives, 

instructions, and policy documents necessary to implement the recommendations. A report on 

implementation, along with legislative recommendations, would be submitted to the 

congressional defense committees 180 days after date of enactment. 

The committee agrees with the assessment of the Section 809 Panel that transitioning 

defense acquisition from a program-centric model to a capability portfolio framework is critical 

to improving the defense acquisition process, enabling a more agile, flexible and decentralized 

organization. The committee, however, is aware that attempting to specify in statute the internal 

management relationships recommended by the panel would entail a level of detail relating to 

management structure within the Department not typically seen in statute, with the attendant 

risks both of inadvertent error and of inflexibility for the future. The committee expects the 

Department to fully consider the rationale and framework outlined in the Section 809 Panel 

report, dated January 15, 2019, when developing its proposals to implement the panel’s 

recommendations.
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The Section 809 Panel believes that its recommendations relating to a capability portfolio 

framework are critical to improving the defense acquisition process and that these 

recommendations should be required to be implemented as a matter of law. The panel believes 

that an implementation requirement with the force of law, with a statutory deadline, will be 

essential to driving the timely implementation of these recommendations within the Department 

of Defense. 

At the same time, the panel is aware that attempting to write into statute the internal 

management relationships recommended by the panel would entail a level of detail relating to 

management structure within the Department not typically seen in statute, with the attendant 

risks both of inadvertent error and of inflexibility for the future. 

The Panel notes that in section 868 of the NDAA for FY2019 (Public Law 115-232, 

enacted August 13, 2018), Congress required the Secretary of Defense to implement the 

recommendations of the final report of the Defense Science Board task force on the design and 

acquisition of software for defense systems. The panel believes that that is an appropriate model 

for Congress to use in directing implementation of these recommendations and is providing draft 

legislative language accordingly. 

——— 

(Based on Section 868 of the FY2019 NDAA, 

P. L. 115-232, enacted Aug 13, 2018) 

1 SEC. ___ . IMPLEMENTATION OF RECOMMENDATIONS OF THE SECTION 809 

2 PANEL RELATING TO PORTFOLIO MANAGEMENT. 

3 (a) IMPLEMENTATION REQUIRED.— 

4 (1) IN GENERAL.—Not later than the end of the 180-day period beginning on the 

5 date of the enactment of this Act, the Secretary of Defense shall, except as provided in 

6 subsection (c), implement the portfolio management recommendations made by the 

7 Section 809 Panel that are specified in paragraph (2). 

8 (2) COVERED RECOMMENDATIONS.—The recommendations referred to in 

9 paragraph (1) are the recommendations set forth in Volume 3 of the Report of the Section 

10 809 Panel, dated January 15, 2019, that are designated as follows: 
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1 (A) Subrecommendation A of Recommendation No. 36, relating to 

2 transitioning from a program-centric execution model to a portfolio execution 

3 model. 

4 (B) Subrecommendation A of Recommendation No. 37, relating to 

5 transitioning the current defense acquisition system to a defense capability 

6 acquisition and sustainment framework. 

7 (C) Subrecommendation B of Recommendation No. 37, relating to 

8 establishing Enterprise Capability Portfolios (ECPs) 

9 (b) IMPLEMENTATION.—

10 (1) SUBMISSION OF IMPLEMENTATION PLANS TO CONGRESSIONAL COMMITTEES.—

11 For each recommendation specified in subsection (a)(2) that the Secretary is 

12 implementing, or that the Secretary plans to implement, the Secretary shall submit to the 

13 congressional defense committees a report providing— 

14 (A) a summary of actions that have been taken to implement the 

15 recommendation; and 

16 (B) a schedule, with specific milestones, for completing the 

17 implementation of the recommendation. 

18 Each such report shall be submitted not later than 180 days after the date of the enactment 

19 of this Act. 

20 (2) REVISED DIRECTIVES.—Not later than 180 days after the date of the enactment 

21 of this Act, the Secretary shall issue such revisions to Department of Defense directives, 

22 instructions, and policy documents as necessary for the implementation of 

23 recommendations under this section. In preparing such revisions, the Secretary shall 
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1 consider the draft revisions to Department of Defense Directive 5000.01 provided by the 

2 Section 809 Panel as an enclosure to Volume 3 of the Report of the Panel. 

3 (3) STATUTORY REVISIONS.— Not later than 180 days after the date of the 

4 enactment of this Act, the Secretary shall submit to Congress a legislative proposal for 

5 any statutory changes that the Secretary determines to be required to fully implement the 

6 recommendations under this section. 

7 (c) EXCEPTIONS.— 

8 (1) DELAYED IMPLEMENTATION.—The Secretary of Defense may delay 

9 implementation of all or any portion of a recommendation specified in subsection (a) 

10 after the date specified in paragraph (1) of that subsection if before that date the Secretary 

11 submits to the congressional defense committees a report— 

12 (A) identifying the recommendation or portion of the recommendation for 

13 which implementation is to be delayed; 

14 (B) describing the delay in implementation; and 

15 (C) providing a specific justification for the delay. 

16 (2) NONIMPLEMENTATION.—The Secretary may opt not to implement a 

17 recommendation, or a portion of a recommendation, specified in subsection (a) if the 

18 Secretary submits to the congressional defense committees a report— 

19 (A) identifying the recommendation or portion of the recommendation that 

20 the Secretary has opted not to implement; and 

21 (B) providing — 

22 (i) the reasons for the decision not to implement the 

23 recommendation; and 
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1 (ii) a summary of the alternative actions the Secretary plans to take 

2 to address the purposes underlying the recommendation. 

3 (d) SECTION 809 PANEL.—In this section, the term “Section 809 Panel” means the panel 

4 established by the Secretary of Defense pursuant to section 809 of the National Defense 

5 Authorization Act for Fiscal Year 2016 (Public Law 114-92), as amended by section 863(d) of 

6 the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-328) and sections 

7 803(c) and 883 of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 

8 115-91). 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. REVIEW OF STRUCTURE OF BUDGET LINE ITEMS AND PROGRAM 

ELEMENTS FOR FUNDING OF DEFENSE ACQUISITION PROGRAMS.

This section would require the Secretary of Defense to conduct a comprehensive review 

of the existing budget line item and program element structure for Department of Defense 

acquisition programs. Under this section, the objective of the review would be to (a) address 

cases in which programs or systems have been subdivided into multiple line items or program 

elements, making them more difficult to manage and (b) identify cases in which multiple

programs or systems intended to provide a common capability could be combined into a single

line item or program element. A report of the review, along with legislative recommendations, 

would be provided to the congressional defense committees one year after date of enactment. 

The committee notes that this review should facilitate implementation of other 

legislative recommendations in this title to create a portfolio management structure. The 

committee further notes that one of the biggest challenges to implementing a portfolio structure 

is the current allocation of program budgets, with most procurement programs being funded 

and managed through individual budget line items, or in some cases, program elements. 
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1 SEC. ___. REVIEW OF STRUCTURE OF BUDGET LINE ITEMS AND PROGRAM 

2 ELEMENTS FOR FUNDING OF DEFENSE ACQUISITION PROGRAMS. 

3 (a) REVIEW REQUIRED.—The Secretary of Defense shall conduct a comprehensive review 

4 of the budget line item and program element structure for acquisition programs within the budget 

5 of the Department of Defense, with the objective of— 

6 (1) identifying cases in which management of a program or system has been made 

7 more difficult due to the program or system having been subdivided into multiple budget 

8 line items or program elements; 

9 (2) identifying cases in which the budget line items or program elements for 

10 multiple programs or systems intended to provide a common capability could be 

11 combined into a single budget line item or a single program element; and 

12 (3) identifying steps that could be taken to address the cases identified under 

13 paragraphs (1) and (2). 

14 (b) REPORT.—Not later than one year after the date of the enactment of this Act, the 

15 Secretary of Defense shall submit to the congressional defense committees a report providing the 

16 results the review under subsection (a), together with the Secretary’s plan for any changes to be 

17 made within the Department of Defense resulting from the review and such recommendations for 

18 legislative action as the Secretary considers appropriate as a result of the review. 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. PILOT PROGRAM FOR IMPROVED FINANCIAL FLEXIBILITY WITHIN 

PORTFOLIO MANAGEMENT OF PROGRAMS.

This section would authorize the Secretary of Defense to carry out a pilot program under 

which one execution portfolio in each military department would be managed under a single 

budget line item (with respect to procurement funding) and a single program element (with 

respect to research, development, test, and evaluation funding) for all programs and activities 

of that military department included in that portfolio. Each pilot program would be designated 

180 days after date of enactment. A report on results of the pilot program would be submitted 

to the congressional defense committees five years after the start of the program. 

The committee notes, that as outlined in this section, the intent of the pilot program 

would be to provide the portfolio manager with flexibility to move money in response to 

changes in technology and other program developments.
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1 SEC. ___. PILOT PROGRAM FOR IMPROVED FINANCIAL FLEXIBILITY WITHIN 

2 PORTFOLIO MANAGEMENT OF PROGRAMS. 

3 (a) IN GENERAL.—In order to examine the advantages and disadvantages of providing 

4 financial flexibility within the portfolio management of programs, the Secretary of Defense shall 

5 carry out a pilot program under which one execution portfolio in each military department shall 

6 be managed under a single budget line item (with respect to procurement funding) and a single 

7 program element (with respect to research, development, test, and evaluation funding) for all 

8 programs and activities of that military department included in that portfolio. 

9 (b) PORTFOLIO DESIGNATION.—The Secretary shall designate the portfolio for each 

10 military department to be in the pilot program under subsection (a) not later than 180 days after 

11 the date of the enactment of this Act. 

12 (c) BUDGET.—In each budget submitted by the President to Congress under section 1105 

13 of title 31, United States Code, during the duration of the pilot program under this section,,

14 amounts requested for procurement, and for research, development, test, and evaluation, for all 

15 programs and activities included in the execution portfolio of a military department designated 

16 under subsection (b) shall be set forth as a single amount, separately from other amounts 

17 requested for procurement, and for research, development, test, and evaluation, respectively, for 

18 that military department. 

19 (d) ASSESSMENT AND REPORT.—The Secretary of Defense shall assess the pilot program 

20 on an ongoing basis. Not later than 60 days after the end of the fifth fiscal year that begins after 

21 the pilot program is implemented under this section, the Secretary shall submit to the 

22 congressional defense committees a report providing the Secretary’s findings and conclusions 

23 resulting from the pilot program, together with the Secretary’s plan for any changes to be made 
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1 within the Department of Defense resulting from those findings and conclusions and such 

2 recommendations for legislative action as the Secretary determines to be needed as a result of 

3 those findings and conclusions. 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. FUNDING FOR ENTERPRISE CAPABILITY PORTFOLIOS.

This section would amend Section 804 of the National Defense Authorization Act for 

Fiscal Year 2016 (Public Law 114-92; 10 U.S.C. 2302 note) to add a new subsection to improve 

funding flexibility for the new enterprise capability portfolio structure. 

The committee is aware that currently the Department of Defense’s separate 

requirements, budget, and acquisition decision-making processes do not enable an enterprisewide view of existing and planned capabilities across the military services and defense agencies

to support timely and informed resource allocation decisions, and ensure delivery of integrated 

and innovative solutions to meet strategic objectives. The committee notes that establishing

enterprise capability portfolios would address that concern. The committee further notes that 

allocating to the enterprise capability portfolio manager a portion of the defense-wide funding

for rapid-response and prototyping, administered by the Under Secretary of Defense (Research 

and Engineering), would provide “seed” funding for innovative and agile capability initiatives 

or solutions that would address strategic priorities. The committee expects that the funding 

made available to the enterprise capability portfolio leadership by the Under Secretary would 

focus attention on specific innovative technologies and provide a source of funding to the 

military services and defense agencies to respond to priority opportunities when funding is 

otherwise unavailable.
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1 SEC. ___. FUNDING FOR ENTERPRISE CAPABILITY PORTFOLIOS. 

2 Section 804 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 

3 114-92; 10 U.S.C. 2302 note) is amended by adding at the end the following new subsection: 

4 “(e) ENTERPRISE CAPABILITY PORTFOLIO INITIATIVES.—Amounts available in the Fund 

5 may be provided by the Under Secretary of Defense for Research and Engineering to an 

6 enterprise capability portfolio manager for distribution to a defense component portfolio 

7 included within that enterprise portfolio in order to support imminent demonstration and 

8 prototyping of innovative and agile capability initiatives received by that component portfolio 

9 that are applicable to capabilities in that portfolio and which support key portfolio priorities, 

10 consistent with strategic plans.’’. 
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RECOMMENDED REPORT LANGUAGE

SEC.___. PROTOTYPE PORTFOLIO REQUIREMENTS.

This section would authorize each of the military departments and defense agencies to 

establish a pilot program focused on a portfolio requirements approach for one or more of the 

acquisition portfolios for which that official has responsibility. The committee notes that such an 

approach should enable greater speed, agility, and innovation in fielding military capabilities.
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1 SEC.___. PROTOTYPE PORTFOLIO REQUIREMENTS. 

2 (a) IN GENERAL.—The Secretary of each military department and the Director of one 

3 more Defense Agencies designated by the Secretary of Defense for purposes of this section shall 

4 establish a pilot program for a portfolio requirements approach for one or more of the acquisition 

5 portfolios for which that official has responsibility to enable greater speed, agility, and 

6 innovation in fielding military capabilities. Each such pilot program shall be established in 

7 consultation with the Vice Chairman of the Joint Chiefs of Staff with respect to matters for 

8 which the Vice Chairman has responsibility. 

9 (b) ELEMENTS.—Under the portfolio requirements pilot program for an acquisition 

10 portfolio, the Secretary of the military department or Director of the Defense Agency 

11 establishing the pilot program shall— 

12 (1) develop a capstone set of requirements for the acquisition portfolio in 

13 accordance with subsection (c); 

14 (2) authorize the Program Executive Officer (or Portfolio Acquisition Executive 

15 or similar portfolio manager) for the portfolio to changing the scope and requirements for 

16 programs within the portfolio, subject to subsection (d); 

17 (3) assign representatives of operational forces (to the acquisition portfolio and 

18 authorize them to perform the functions specified in subsection (e); 

19 (4) maximize the use of prototyping, experimentation, and minimum viable 

20 products to shape capability scope and requirements; 

21 (5) develop a network of government, industry, and academia research and 

22 development organizations to align science and technology and research to portfolio 

23 capability areas; 
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1 (6) manage information technology requirements using dynamic portfolio 

2 backlogs (prioritized lists of user needs) rather than large static requirements documents; 

3 and 

4 (7) iteratively define, prioritize, and refine requirements at the portfolio, program, 

5 and iteration levels based on user input and previous deliveries. 

6 (c) CAPSTONE SET OF REQUIREMENTS.—The capstone set of requirements for an 

7 acquisition portfolio developed under subsection (b)(1)— 

8 (1) shall be designed so as to— 

9 (A) guide the iterative delivery of an integrated suite of capabilities to 

10 maximize operational impact; 

11 (B) provide enduring themes based on strategic needs and relevant 

12 concepts of operation, not system specific; and 

13 (C) include measures of force effectiveness for a force mix of capabilities 

14 to be measured against; and 

15 (2) may include kill chains, effects chains, vignettes of operational scenarios, and 

16 related mission engineering initiatives across the Department of Defense. 

17 (d) AUTHORITY TO REVISE PROGRAMS WITHIN A PORTFOLIO.—The authority under 

18 subsection (b)(2)— 

19 (1) shall be carried out in consultation with operational commands and key 

20 stakeholders; and 

21 (2) does not include authority to change key performance parameters for a major 

22 defense acquisition program. 
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1 (e) FUNCTIONS OF OPERATIONAL REPRESENTATIVES.—An operational representative 

2 assigned to an acquisition portfolio under subsection (b)(3) shall be provided authority to— 

3 (1) shape the vision and priorities for key capability areas; 

4 (2) provide the acquisition community and developers insights into operations; 

5 (3) provide feedback on interim developments; 

6 (4) foster collaboration among the acquisition community, developers, and users 

7 of the capability to be fielded; and 

8 (5) provide advice to the Program Executive Officer (or Portfolio Acquisition 

9 Executive or similar portfolio manager). 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. SUSTAINMENT PROGRAM BASELINE.

This section would amend Chapter 137, title 10, United States Code, by inserting a new 

section 2336 to establish a sustainment program baseline (SBP) for each program or system that 

requires an acquisition strategy pursuant to section 2431a, title 10, United States Code. The 

baseline would be used within the Department of Defense to govern product support cost, 

schedule, and performance of the covered program throughout the life-cycle of the program. 

The SPB for a covered program would be developed concurrently with the development of the 

Acquisition Program Baseline for the program.

The committee notes that, on average, approximately 72 percent of weapon systems 

lifecycle costs are in sustainment, yet there is no mechanism for coordinated governance of this 

critical operational program phase. The committee expects that the SPB would improve the 

current shortcomings in both the acquisition and sustainment systems that are affecting both 

operational costs and readiness. The committee further notes that under this section the 

program manager would develop and coordinate the SPB with empowered representatives of 

the chief of the service and service comptroller before submission to the milestone decision 

authority for approval which would facilitate a long-term commitment that will enhance 

readiness.
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1 SEC. ___. SUSTAINMENT PROGRAM BASELINE. 

2 (a) IN GENERAL.—Chapter 137 of title 10, United States Code, is amended by inserting 

3 after section 2335 the following new section: 

4 “§2336. Sustainment program baseline 

5 “(a) SUSTAINMENT PROGRAM BASELINE REQUIRED.— 

6 “(1) REQUIREMENT.—There shall be a sustainment program baseline (in this 

7 section referred to as an ‘SPB’) for each program or system for which an acquisition 

8 strategy is required by section 2431a of this title (in this section referred to as a ‘covered 

9 program’). The SPB shall be the baseline requirements document for funding and staffing 

10 sustainment activities in the Department for programs and systems for which a SPB is 

11 required. 

12 “(2) PURPOSE.—The SPB for a covered program shall be used within the 

13 Department of Defense to govern product support cost, schedule, and performance of the 

14 covered program throughout the life-cycle of the program. 

15 “(3) APPLICABILITY.—The SPB for a covered program shall commence when the 

16 covered program receives Milestone B approval. However, in the case of a covered 

17 program that receives Milestone B approval during the two-year period beginning on the 

18 date of the enactment of this section, or that received Milestone B approval before such 

19 date, the SPB for the covered program shall be implemented not later than the end of 

20 such two-year period. 

21 “(b) DEVELOPMENT.—The SPB for a covered program shall be developed concurrently 

22 with the development of the Acquisition Program Baseline for the program. 
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1 “(c) PROGRAM SUSTAINMENT USING SPB.—For each covered program, the program 

2 manager for the program shall develop, manage, and execute the sustainment of the program 

3 throughout its life-cycle through the SPB. The program manager shall carry out such 

4 development, management, and execution with direct input from the product support manager 

5 for the program. 

6 “(d) PERIODIC REVIEW AND REVISION.— 

7 “(1) MDA.—The milestone decision authority for a covered program shall review 

8 and revise, as appropriate, the SPB for the program at each of the following times: 

9 “(A) Milestone B approval. 

10 “(B) Each subsequent milestone. 

11 “(C) Review of any decision to enter into full-rate production. 

12 “(D) Any other time considered relevant by the milestone decision 

13 authority, but not less often than once every five years. 

14 “(2) SERVICE CHIEF.—The service chief of the branch of the armed forces with 

15 principal authority for a covered program shall conduct a review of the SPB for that 

16 program not less often than once every five years. 

17 “(e) SERVICE CHIEF ROLE IN REQUIREMENTS AND FUNDING.— 

18 “(1) Requirements.—The service chief of the branch of the armed forces with 

19 principal authority for a covered program shall coordinate with the program manager for 

20 the program with respect to requirements specified in the SPB for the program. 

21 “(2) FUNDING.—That service chief shall ensure that, unless otherwise directed, 

22 the programming and budgeting plans for the program include funding for the program in 

23 accordance with the SPB and, in a case in which funding is not included in the 
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1 programming and budgeting plans for the program in accordance with the SPB, shall 

2 provide to the milestone decision authority for the program a report documenting the 

3 reasons why funding was not so provided. 

4 “(f) MANAGEMENT.—The program manager for a covered program shall be responsible 

5 for managing the program in accordance with the SPB for the program. In carrying out that 

6 responsibility, the program manager shall develop service-level agreements with major 

7 stakeholders. 

8 “(g) DEFINITIONS.—In this section: 

9 “(1) The term ‘Milestone B approval’ has the meaning provided that term in 

10 section 2366(e)(7) of this title. 

11 “(2) The term ‘milestone decision authority’, with respect to a covered program, 

12 means the official within the Department of Defense designated with the overall 

13 responsibility and authority for acquisition decisions for the program, including authority 

14 to approve entry of the program into the next phase of the acquisition process. 

15 “(3) The term ‘service chief’ means the Chief of Staff of the Army, the Chief of 

16 Naval Operations, the Chief of Staff of the Air Force, or the Commandant of the Marine 

17 Corps.”. 

18 (b) CLERICAL AMENDMENT.—The table of sections at the beginning of such chapter is 

19 amended by inserting after the item relating to section 2335 the following new item: 

“2336. Sustainment program baseline.”. 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. ASSESSMENT OF DEFENSE SUSTAINMENT ENTERPRISE.

This section would direct the Secretary of Defense to conduct a comprehensive 

assessment of the defense sustainment enterprise, including the national industrial base, and 

identify alternatives to improve the effectiveness, efficiency, and affordability of the overall 

defense sustainment enterprise. An interim report on the plan to carry out the assessment 

would be provided to the congressional defense committees six months after date of enactment; 

a final report providing the Secretary’s findings and conclusions, along with legislative 

recommendations, would be provided to the congressional defense committees two years after 

date of enactment. 

The committee notes that sustainment currently lacks equal footing with development 

and procurement during the acquisition phase of a program. The committee further notes that 

while the Department of Defense must be able to immediately counter multipronged, 

prolonged threats, the current logistics and sustainment system lacks the agility needed to do 

so. The committee agrees with the acquisition advisory panel, established under section 809 of 

the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114-92), which 

highlighted in its final report, dated January 15, 2019, a number of concerns related to lack of 

product support and sustainment management which has led to degraded weapon system 

readiness, rising sustainment costs, and insufficient supply support. The panel made a number 

of recommendations, including this section, related to sustainment. 
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1 SEC. ___. ASSESSMENT OF DEFENSE SUSTAINMENT ENTERPRISE. 

2 (a) ASSESSMENT REQUIRED.—The Secretary of Defense shall conduct a comprehensive 

3 assessment of defense sustainment enterprise to identify the capability of that enterprise to 

4 support the National Defense Strategy and alternatives to improve the effectiveness, efficiency, 

5 and affordability of the overall defense sustainment enterprise. 

6 (b) MATTERS TO BE INCLUDED.—As part of the assessment under subsection (a), the 

7 Secretary shall consider the following: 

8 (1) The appropriate balance of leadership attention to acquisition and sustainment. 

9 (2) Organizational structures. 

10 (3) The national industrial base (including both organizations organic to the 

11 Department of Defense and commercial organizations), including— 

12 (A) the right size and composition of the industrial base regarding organic 

13 and commercial technology to take best advantage of all capabilities in view of 

14 the National Defense Strategy; and 

15 (B) depot determinations within the industrial base (organic and 

16 commercial), focused on warfighting requirements. 

17 (4) Accountability of the Defense Materiel Enterprise for outcome tied to 

18 readiness requirements. 

19 (5) Such other matters as are needed to provide a full and accurate assessment of 

20 the defense sustainment enterprise. 

21 (c) REPORTS.— 

22 (1) INTERIM REPORT.—Not later than six months after the date of the enactment of 

23 this Act, the Secretary of Defense shall submit to the congressional defense committees a 
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1 report providing the Secretary’s plan for carrying out the assessment required by this 

2 section, including identification of the official or officials within the Department of 

3 Defense with principal responsibility for conducting the assessment. 

4 (2) FINAL REPORT.—Not later than two years after the date of the enactment of 

5 this Act, the Secretary of Defense shall submit to the congressional defense committees a 

6 report providing the Secretary’s findings and conclusions resulting from the assessment 

7 under this section, together with— 

8 (A) the Secretary’s plan for any changes to be made within the 

9 Department of Defense resulting from those findings and conclusions; and 

10 (B) such recommendations for legislative action relating to the defense 

11 sustainment enterprise as the Secretary determines to be needed as a result of 

12 those findings and conclusions. 
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RECOMMENDED REGULATORY REVISIONS

DoD 7000.14-4 Financial Management Regulation

Volume 2a, Chapter 1

0102 FUNDING POLICIES

010201. Criteria for Determining Expense and Investment Costs.

A. No Change.

B. Basic Distinctions Between Expense and Investment Costs. The criteria for cost definitions 

consider the intrinsic or innate qualities of the item such as durability in the case of an 

investment cost or consumability in the case of an operating cost and the conditional 

circumstances under which an item is used or the way it is managed. In all cases where the 

definitions appear to conflict, the conditional circumstances will prevail. The following 

guidance is provided to determine whether a cost is either an expense or an investment. All 

costs are classified as either an expense or an investment.

1. Expenses are the costs incurred to operate and maintain the organization and systems, 

such as personal services, supplies, and utilities. Operation and Maintenance appropriations may be 

used to purchase supplies, services, or solutions that are necessary to address these expense needs.

2. Investments are the costs that result in the acquisition of, modification or an addition to, 

end items. Research and development efforts are a category of investment costs that can provide new and 

innovative technologies. These costs benefit future periods and generally are of a long-term 

character such as real property and personal property. Procurement appropriations and Research, 

Development, Test, and Evaluation appropriations may be used to purchase supplies, services, or 

solutions that are necessary to address these nonrecurrent investment needs.

C. Policy for Expense and Investment Costs

1. DoD policy requires cost definition criteria that can be used in determining the 

content of the programs and activities that comprise the Defense budget. The primary reasons 

for these distinctions are to allow for more informed resource allocation decisions and to 

establish criteria for determining which costs are appropriate to the various defense 

appropriations.

2. The cost definition criteria contained in this policy are only applicable to the 

determination of the appropriation to be used for budgeting and execution. Cost definitions for 

accounting purposes are contained in Volume 1.

3. Costs budgeted in the Operation and Maintenance (O&M) and Military Personnel 

appropriations are considered expenses. Costs budgeted in the Procurement, Research, 
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Development, Test and Evaluation (RDT&E), and Military Construction appropriations are 

considered investments. Costs budgeted in the Research, Development, Test and Evaluation 

(RDT&E), Base Realignment and Closure (BRAC), and Family Housing appropriations include 

both expenses and investments. Definitions for costs within the Defense Working Capital Funds 

are provided in Chapter 9 and in Section 010214.

4. Items procured from the Defense Working Capital Funds will be treated as expenses 

in all cases except when intended for use in weapon system outfitting, government furnished 

material (GFM) on new procurement contracts, or for installation as part of a weapon system 

modification, major reactivation, or major service life extension.

D. Procedures for Determining Expenses versus Investments. The following criteria will be used 

to distinguish those types of costs to be classified as expenses from those to be classified as 

investments for budgeting purposes:

1. Expenses. Expenses are costs of resources consumed in operating and maintaining the 

Department of Defense. When costs generally considered as expenses are included in the 

production or construction of an investment item, they shall be classified as investment costs. 

Military personnel costs are an exception to this rule. The following guidelines shall be used to 

determine expense costs: 

a. Labor of civilian, military, or contractor personnel. 

b. Rental charges for equipment and facilities. 

c. Food, clothing, and fuel. 

d. Supplies and materials designated for supply management of the Defense 

Working Capital Funds. 

e. Maintenance, repair, overhaul, rework of equipment. 

f. Assemblies, spares and repair parts, and other items of equipment that are not 

designated for centralized item management and asset control and which have a system 

unit cost less than the currently approved dollar threshold of $250,000 for expense and 

investment determinations. This criterion is applied on the basis of the unit cost of a 

complete system rather than on individual items of equipment or components that, 

when aggregated, become a system. The concept of a system must be considered in 

evaluating the procurement of an individual end item. A system is comprised of a 

number of components that are part of and function within the context of a whole to 

satisfy a documented requirement. In this case, system unit cost applies to the aggregate 

cost of all components being acquired as a new system.

g. Cost of incidental material and items that are not known until the end item is 

being modified are conditional requirements and are considered expenses because the 

material is needed to sustain or repair the end item. 
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h. Engineering efforts to determine what a modification will ultimately be or to 

determine how to satisfy a deficiency are may be investments or expenses. The nonrecurring cost to determine a solution can be an investment funded with RDT&E.

i. Facilities sustainment, O&M-funded restoration and modernization projects. 

Planning and design costs are excluded from the cost determination for purposes of 

determining compliance with the amounts established in 10 U.S.C. 2805 for minor 

construction projects; however, design costs are not excluded from capitalization. 

2. Investments. Investments are costs to acquire capital assets such as real property and 

equipment. The following criteria shall be used to determine those costs to be classified 

as investments: 

a. All items of equipment, including assemblies, ammunition and explosives, 

modification kits (the components of which are known at the outset of the modification), 

spares and repair parts not managed by the Defense Working Capital Funds, that are 

subject to centralized item management and asset control. 

b. All equipment items that are not subject to centralized item management and 

asset control and have a system unit cost equal to or greater than the currently approved 

expense and investment dollar threshold of $250,000 (for working capital funds 

investment criteria see Volume 2B Chapter 9 section 090103C). The validated 

requirement may not be fragmented or acquired in a piecemeal fashion in order to 

circumvent the expense and investment criteria policy.

c. Construction, including the cost of land and rights therein (other than 

leasehold). Construction includes real property equipment installed and made an 

integral part of such facilities, related site preparation, and other land improvements. 

(See paragraph F below for special guidance concerning real property facilities.) 

d. The costs of modification kits, assemblies, equipment, and material for 

modernization programs, ship conversions, major reactivations, major remanufacture 

programs, major service life extension programs, and the labor associated with 

incorporating these efforts into or as part of the end item are considered investments. All 

items included in the modification kit are considered investment even though some of 

the individual items may otherwise be considered as an expense. Components that were 

not part of the modification content at the outset and which are subsequently needed for 

repair are may be considered expenses. The cost of labor for the installation of 

modification kits and assemblies is an investment.

e. Supply management items of the Defense Working Capital Funds designated 

for weapon system outfitting, government-furnished material on new procurement 

contracts, or for installation as part of a weapon system modification or modernization, 

major reactivation or major service life extension.
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f. Also considered as investments are support elements such as data, factory 

training, support equipment and interim contractor support (ICS), which are required to 

support the procurement of a new weapon system or modification.

3. Conditional Cases. The following are conditional cases that take precedence over the 

criteria contained in paragraphs 1 and 2 above:

a. A major service-life extension program, financed in procurement, extends the 

life of a weapon system beyond its designed service life through large-scale redesign or 

other alteration of the weapon system. 

b. Depot and field level maintenance is the routine, recurring effort conducted to 

sustain the operational availability of an end item. Depot and field level maintenance 

includes refurbishment and overhaul of end items, removal and replacement of 

secondary items and components, as well as repair and remanufacturing of reparable 

components. The maintenance effort may be performed by a depot maintenance activity 

in the Defense Working Capital Fund, by a direct funded DoD activity, by another 

government agency, or by a contractor. 

c. Maintenance, repair, overhaul, and rework of equipment are funded in the 

operation and maintenance appropriations. However, maintenance of equipment used 

exclusively for research, development, test, and evaluation efforts will be funded by the 

RDT&E appropriations. Continuous technology refreshment is the intentional, 

incremental insertion of newer technology to improve reliability, improve 

maintainability, reduce cost, and/or add minor performance enhancement, typically in 

conjunction with depot or field level maintenance. The insertion of such technology into 

end items as part of maintenance is may be funded by the operation and maintenance

procurement appropriations. However, technology refreshment that significantly changes 

the performance envelope of the end item is considered a modification and, therefore, an 

investment (See section on “Product Improvement” 010212 C. 7.) All non-recurring 

engineering effort may be an investment funded with RDTE appropriation. This definition 

applies equally to technology insertion by commercial firms as part of contractor 

logistics support, prime vendor, and similar arrangements and to technology insertion 

that is performed internally by the Department.

e. Initial outfitting of an end item of investment equipment, such as a ship or 

aircraft, with the furnishings, fixtures, and equipment necessary to make it complete and 

ready to operate is a part of the initial investment cost. Material procured through the 

Defense Working Capital Funds for initial outfitting will be financed by procurement 

appropriations when drawn from the supply system. This concept includes changes to 

the allowance lists of ships, vehicles, and other equipment. Changes to allowance lists 

will be budgeted as investment costs. Procurement appropriations are not required to 

satisfy initial outfitting requirements if assets are available for issue through 
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reuse/redistribution programs, such as the Navy's Consumable Asset Reutilization 

Program.

F. Expense/Investment Cost Determination

Expense/Investment Cost Determination

Is the item a If Then If Then If Then

Centrally 

Managed/Asset 

Controlled 

Item?

Yes Is the item 

purchased 

from DWCF?

Yes Is the item part of 

a full funding 

effort? *

Yes Classify as

Investment

No Classify as

Expense

No Classify as

Investment

No Is the unit cost 

more than

$250,000?

Yes Classify as

Investment

No Classify as

Expense

* When intended for use in weapon system outfitting, government furnished material on new

procurement contracts or for installation as part of a weapon as part of a weapon 

system modification, major reactivation or major service life extension.

010202. Full Funding of Procurement Programs (No Change)

010203. Multiyear Procurement (No Change)

010204. Buy-to-Budget for Acquisition of End Items (No Change)

010205. Transportation (No Change)

010206. Engineering Change Orders (No Change)

010207. Factory Training (No Change)

010208. Interim Contractor Support 

Interim contractor support (ICS) is the maintenance and support of a new weapon system 

provided by a commercial vendor pending transition to organic support. Because ICS is a major 

component of the initial logistics support of a newly fielded system and integral to program 

acquisition, ICS funding requirements should be budgeted in the Procurement appropriations. 

However, ICS is intended to provide support for the brief period between initial item 

deployment and the permanent organic support. All acquisition strategies should attempt to 

minimize ICS requirements and duration. ICS will only be funded in Procurement 

appropriations until the organic support date specified in the acquisition program baseline is 
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achieved. Continued funding of ICS after the baseline support transition date will be approved 

on an exception basis. 

010209. Commercial Off-the-Shelf (COTS) and Non-Developmental Item (NDI) Procurement 

A. Items purchased directly from a commercial source that can be utilized without 

alteration or modification are classified as COTS or NDI. All COTS and NDIs, including 

the first article and associated first article acceptance testing should may be funded in the 

Procurement or O&M appropriations, as determined by the Expense and Investment 

criteria. If an end item requires design and development in order to accept the COTS or 

NDI, or if Operational Test & Evaluation (OT&E) is required to determine military 

suitability and effectiveness; or if Live Fire Test & Evaluation (LFT&E) is required to 

determine whether the COT/NDI possesses survivability and lethality characteristics 

needed by operational forces, then the entire effort is not COTS or NDI, and funding for 

that effort should be budgeted in RDT&E. If a COTS or NDI is required for RDT&E test 

purposes, the cost is funded in RDT&E. RDT&E appropriations may be applied for the 

analytical nonrecurring cost to find a solution for obsolescence or product improvements.

B. Where there is an emergent unexpected obsolescence or DMS, the program office may pursue 

reprogramming or use O&M (Form, Fit, Function Item Replacement), whichever addresses the 

situation most appropriately.

010210. Spares and Repair Parts

A. This Section provides instructions applicable to funding requests for spares and repair parts 

procured with direct appropriations in the Procurement Title.

1. Initial Spares and Repair Parts. Initial spares and repair parts will include those 

repairable components, assemblies, and subassemblies required as initial stockage at all levels 

including the pipeline to permit fielding of new end items. Whole spare engines will be 

classified as initial spares through the life of system. Funding will be budgeted based on a first 

year obligation rate of 92 percent.

2. War Reserve Spares and Repair Parts. War reserve material (WRM) spares and repair 

parts for initial stockage will be budgeted in replenishment except for whole spare engines in 

accordance with the above definitions. See Section 010215, Defense Working Capital Funds -

War Reserve Materiel, for additional budgeting WRM policies.

B. The Operation and Maintenance (O&M) accounts will finance the purchase of depot level 

reparables (DLRs) and consumable repair parts, primarily through the Defense Working Capital 

Fund (DWCF), for maintenance of all Class IX equipment (excluding medical peculiar repair 

parts).

C. Spares budgeting can be aggregated by weapon system except for Selected Acquisition 

Report (SAR) systems.
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010211. Direct and Reimbursable Budget Plans. (No Change)

010212. Budgeting for Information Technology and Automated Information Systems

A. Information Technology and Automated Information Systems that are not embedded in 

weapons systems and/or major end item procurements are budgeted according to the 

investment and expense criteria (see 010201) and the appropriation or fund’s purpose.

B. The correct appropriation for budgeting an IT effort is dependent on the activity and the 

underlying tasks that make up the IT effort. IT software development, provided there is no change in 

the congressionally approved purpose of the appropriation, may be properly budgeted in (and 

subsequently funded through) RDT&E, Procurement, or O&M. RDT&E activities and Working 

Capital Fund activities follow unique procedures as noted in the following paragraphs. All 

other activities budget for IT efforts based solely on the underlying purpose for the IT effort.

1. An IT effort may require funding for more than one appropriation. The underlying 

purpose for each discrete task within an IT effort determines the correct appropriation for 

budgeting of that task. An effort An IT software development effort that is so broadly defined that 

it contains separate tasks appropriate to budgeting in different appropriations should be 

separated into discrete tasks, each of which is budgeted in the correct appropriation. may be 

properly budgeted in (and subsequently funded through) RDT&E, Procurement, or O&M.

2. The following guidelines are provided to help determine which appropriation to use:

3. RDT&E appropriations: Development, test and evaluation requirements, including 

designing prototypes and processes, should be budgeted in the RDT&E appropriations. The 

RDT&E funds should be used to develop major upgrades increasing the performance envelope 

of existing systems, purchase test articles, and conduct developmental testing and/or initial 

operational test and evaluation prior to system acceptance. In general, all developmental 

activities involved in bringing a program to its objective system are to be budgeted in RDT&E.

a. Reaching the objective system, as defined in the requirements documents, is a 

critical determinate. Some software programs, particularly those following a spiral or 

incremental development pattern, may be approved for initial fielding even though the 

early capability is below the objective system requirements. The follow-on development 

and test activities required to reach the objective system performance will be budgeted 

in RDT&E.

b. Commercial-off-the-shelf (COTS) systems that require engineering design, 

integration, test, and evaluation to achieve the objective performance will be budgeted 

in RDT&E.

c. The acquisition, operation and maintenance of IT systems that are used

exclusively to support RDT&E activities will be budgeted and funded within an RDT&E 

appropriation.
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4. Procurement appropriations: Acquiring and deploying a complete system with a cost 

of $250,000 or more is an investment and should may be budgeted in a Procurement 

appropriation. Complete system cost is the aggregate cost of all components (e.g., equipment, 

integration, engineering support and software) that are part of, and function together, as a 

system to meet an approved documented requirement. For modification efforts, only the cost of 

the upgrade (e.g., new software, hardware, and technical assistance) is counted towards the 

investment threshold. The total cumulative cost of the system is not considered when deciding 

what appropriation to use to fund modernization.

a. Procurement of fully developed and tested modification kits and associated 

installation, including technical assistance is financed from Procurement appropriations. 

Equipment purchased after successful system testing and a favorable fielding decisions 

is funded with procurement dollars.

b. Proprietary software carries a copyright from the vendor that prohibits 

duplication or modification. Essentially, the purchaser is buying a license from the 

vendor to use the software on a particular system. Proprietary software, depending on 

acquisition details, may be is an investment, subject to the expense-investment criteria, 

unless it is financed on an "annual fee" basis. In the latter case, it is an expense item 

properly financed in RDT&E, Procurement, or O&M.

5. O&M appropriations: Expenses incurred in continuing operations and current services are 

budgeted in the O&M appropriations. Modernization costs under $250,000 are considered 

expenses, as are one-time projects such as developing planning documents and studies.

a. Software releases categorized as iterations on the basic release and not involving 

significant performance improvements or extensive testing are considered a maintenance effort. 

Minor improvements in software functionality which are accomplished during routine 

maintenance may also be O&M funded.

b. Items purchased from a commercial source that can be used without modification 

(e.g., COTS and nondevelopmental items) will be funded in either the Procurement or O&M

appropriations, as determined by the expense and investment criterion.

6. The IT systems developed and acquired through the Defense Working Capital fund will be 

reflected in the Capital Budget if the system is $100,000 or more. Systems costing less than 

$100,000 are may be funded through the Operating Budget.

7. Capitalization of Software Cost. For accounting purposes, the total cost of software should be 

capitalized when the total cost of the system exceeds the Department’s capitalization threshold 

amount, which is currently $100,000. Capitalization of software is not dependent on the 

appropriation used to fund its purchase or development. Further information on capitalization 

may be found in the DoD FMR, Volume 4, Chapter 6, paragraph 060210.
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010213. Research, Development, Test and Evaluation (RDT&E) - Definitions and Criteria

A. Definitions. The term "research and development (R&D)" is intended broadly to include the 

work performed by a government agency or by private individuals or organizations under a 

contractual or grant arrangement with the government. It includes R&D in all fields, including 

the physical sciences, engineering, etc.

1. Research is systematic study directed toward fuller scientific knowledge or 

understanding of the subject studied.

2. Development is systematic use of the knowledge and understanding gained from 

research, for the production of useful materials, devices, systems, or methods, including the 

design and development of prototypes, modifications and processes.

B. General Criteria. When, after consideration of the following criteria, there is doubt as to the 

proper assignment of costs between appropriations, the issue should be resolved in favor of 

using RDT&E funding. In general, the types of costs to be financed by RDT&E and related 

appropriations are:

1. RDT&E Appropriations

a. RDT&E will finance research, development, test and evaluation efforts 

performed by contractors and government installations, including procurement of end 

items, weapons, equipment, components, materials and services required for 

development of equipment, material, or computer application software; its Development 

Test and Evaluation (DT&E); and its Operational Test and Evaluation (OT&E) as 

provided for in paragraph C.5. (Test Articles and Test Support) below.

b. The operation of R&D installations and activities engaged in the conduct of 

R&D programs, including direct and indirect efforts, expense and investment costs.

c. The acquisition or construction of industrial facilities costing less than $750,000 

at government owned, government operated (GOGO) facilities under the criteria of DoD 

Directive 4275.5 as provided for under 10 U.S.C. 2805 (unspecified minor construction). 

Use of RDT&E funds for acquisition and construction at contractor owned or contractor 

operated government facilities is authorized under 10 U.S.C. 2353, Contracts; 

Acquisition, Construction, or Furnishings of Test Facilities and Equipment.

2. Related Appropriations

a. All construction at R&D installations and activities other than that covered 

above will be funded in the Military Construction appropriations.

b. Equipment and material approved for production and intended for 

operational use or inventory upon delivery will be funded in the Procurement 

appropriations. Product improvement within the current performance envelope on 
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systems in production, will may be funded in the Procurement appropriations as long as 

no development or operational tests by an independent operational test agency are 

required.

c. Family housing construction, operation and maintenance at R&D installations 

and activities will be funded in the Family Housing appropriations.

d. Expenses of Headquarters R&D management, organizational management 

analyses, test and evaluation for system sustainment personnel and command support, 

and product improvement within the current performance envelope for systems out of 

production will be funded in the Operation and Maintenance (O&M)

C. Specific Determinations. Additional details on the determination of proper funding for 

specific items or efforts are provided in the following paragraphs.

1. Organizational Funding Criteria (No Change)

2. Facilities Construction and Modification (No Change)

3. Equipment (No Change)

4. Establishment of Pilot Line and Tooling Requirements (No Change)

5. Test Articles and Test Support

a. (1) (2) (3) (No Change)

b. Conduct of testing that is not associated with RDT&E, or testing conducted 

after fielding or acceptance for operational use, such as the examples noted below, will 

be financed in the Procurement or O&M appropriations, as appropriate.

(1) Acceptance, quality control and surveillance testing of articles 

obtained for other than RDT&E purposes.

(2) Routine testing in connection with logistic support.

(3) Testing related to the operation and maintenance of equipment and 

material acquired for use under appropriations other than RDT&E.

(4) Testing required to prove the capability of facilities to produce items 

which have been approved for production will be funded by procurement as 

part of the initial acquisition cost.

c. The acquisition of commercial or nondevelopmental items for testing and 

operational evaluation that do not require RDT&E engineering, design or integration 

effort will be financed by O&M or Procurement appropriations (as determined by the 

Expense and Investment criteria). O&M appropriations will finance personnel and 

command support costs for test and evaluation of commercial and nondevelopmental 
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items by field units for doctrine, operational, or organizational purposes. If the 

commercially available item is modified and requires testing prior to approval for 

service use or inventory it is to be funded in RDT&E as are all developmental items.

d. Articles (including end items, weapons, equipment, major test vehicles such as 

ballistic missile boosters or upper stages, components and materials) of types regularly 

procured to meet established general requirements such as operational training, 

operational use, or inventory which are assigned or allocated on a priority basis for use 

in support of approved R&D programs and which are not consumed in testing, may be 

financed by Procurement appropriations using the expense and investment criteria. In 

addition, excess items or O&M that can be made available on a priority basis from 

existing inventory will be reassigned for use in R&D test and evaluation programs 

without reimbursement. However, all items, expected to be consumed in R&D test and 

evaluation will be financed by RDT&E appropriations.

e. Consumable rounds of ammunition or rounds of similar tactical missiles 

otherwise procured in quantity for inventory under existing procedures, may be issued 

on a priority basis for use in R&D testing without reimbursement.

f. The acquisition of test articles will may be financed by O&M or Procurement 

appropriations (as determined by the Expense and Investment criteria), and personnel 

and command support costs will be financed by O&M appropriations for all test and 

evaluation (T&E) subsequent to acceptance for operational use and T&E to demonstrate 

the operational employment or develop operational tactics (i.e., subsequent to RDT&E 

efforts).

6. Modification and Refurbishment of Test Articles

a. Costs associated with modifying or reconfiguring an existing item for R&D test 

purposes will be funded in RDT&E. When an item that has been diverted from another 

use is not consumed in R&D testing, any costs necessary to return the item to serviceable 

condition or to its pre-existent configuration will be financed in RDT&E.

b. If an article initially acquired with RDT&E funds as part of an RDT&E test 

effort is still available at the completion of the test program, it may be reassigned for 

operational use or inventory. The cost to modify such an article for operational use 

would be borne by the Procurement and O&M appropriations, as appropriate.

7. Product Improvement

a. "Product improvement" of major end items and major components of major 

end items currently in production or in the operational inventory, is subject to the 

following:
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(1) Redesign of an item to increase the current performance envelope, including 

related development, test and evaluation effort, will be financed in RDT&E. RDT&E 

appropriations may be applied for the analytical nonrecurring cost to find a solution for 

obsolescence or product improvements and conduct testing of solution. 

(2) The procurement appropriation may be applied for the recurring cost of the 

investment of the end item, such as scheduled tech refresh and modification kits.

(3) Where there is an emergent unexpected obsolescence or DMS, the program office may 

pursue reprogramming or use O&M (Form, Fit, Function Item Replacement), as appropriate.

(2) Engineering services or related manufacturing efforts applied to an 

item currently in production to extend its useful military life within the current 

performance envelope should be funded by Procurement appropriations as long 

as no developmental testing (DT) or operational test and evaluation (OT&E) by 

an independent operational test agency is required. If DT or OT&E by an 

independent operational test agency is required, RDT&E finances the 

improvement. The phrase "an item currently in production" implies that the item 

has end item procurement funding in the year the product improvement effort is 

to take place.

(3) Engineering services or related manufacturing efforts applied to an 

out-of-production, but still operational item to extend its useful military life 

within the current performance envelope should be financed by O&M 

appropriations as long as no developmental testing (DT) or operational test and 

evaluation (OT&E) by an independent operational test agency is required. If DT 

or OT&E is required by an independent operational test agency, RDT&E finances 

the improvement.

(4) In both cases (2) and (3) above, the determination that the 

improvement is “within the current performance envelope” and that “no 

development testing (DT) or operational test and evaluation (OT&E) by an 

independent operational test and evaluation agency is required” should be 

determined after formal coordination with the Director, Operational Test and 

Evaluation.

b. While existing off-the-shelf equipment may be procured with Procurement 

funds, items that require engineering design, integration, test, or evaluation effort shall 

be procured with RDT&E funds in sufficient numbers to support such effort. may apply 

RDT&E for the analytical nonrecurring cost to find a solution and procurement funds to procure 

the item. Where there is an emergent unexpected obsolescence or DMS, the program office may 
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pursue reprogramming or use O&M (Form, Fit, Function Item Replacement), whichever 

addresses situation most appropriately.

c. Costs of fully developed and tested modification kits and associated 

installation costs should be financed from Procurement appropriations. If DT or OT&E 

by an independent operational test agency is required, RDT&E finances the RDT&E 

effort and the kits required for RDT&E testing. Procurement funds would then be used 

to procure the follow-on kits.

d. Aircraft engine component improvement costs are budgeted in the RDT&E 

appropriations to provide for continuing improvements in the aircraft engines in the 

areas of reliability, maintainability, durability, correction of Service-revealed 

deficiencies, safety of flight, time-between-overhaul, etc. "Component Improvement" is 

established at the point in time when:

(1) There has been a Government acceptance of the first procurement 

funded engine, and

(2) The engine has successfully completed stringent qualification or 

verification testing to demonstrate initial production suitability subject to:

(a) Compliance with contractual specifications, performance guarantees 

and military specifications, as applicable to individual Service requirements;

(b) Completion of endurance testing representative of the anticipated 

Service use to include completion of specified post test inspections, certification, 

and penalty runs;

(c) Demonstration of prescribed performance capability; and

(d) Accomplishment of prescribed durability, reliability, and 

environmental testing.

8. Ships and Ship-type Vehicles (No Change)

9. Space Systems (No Change)

10. Training Devices. A training device is composed of components and software that 

have been designed or modified to demonstrate or illustrate a concept or simulate an 

operational circumstance or environment. The initial or prototype training device and all its 

support costs through service acceptance for operational use will be funded in RDT&E. RDT&E 

will not fund beyond the initial system unless more than one full system is required to 

demonstrate the training device performance. The initial or prototype training device that 

employs new or off-the-shelf computers and system components, but has training system 

unique software and interface components, will be developed and procured with RDT&E 

funds. Typically, these training devices have small quantity requirements and the initial or 
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prototype device is used for operational training. Modifications or updates to existing training 

devices will normally be funded in the applicable Procurement or O&M appropriation, subject 

to the expense and investment criteria. Any necessary development effort or nonrecurring 

engineering to determine and test the solution for these modifications or updates will be funded in 

RDT&E.

11. Joint Test and Evaluation (No Change)

12. Manufacturing Technology (No Change)

13. Development Efforts Related to Future Leased Services (No Change)

14. Subsystem Integration into Weapon Systems (No Change)

15. Engineering change orders (No Change)

010214 – 010226 (No Change)

0103-0110 (No Change)
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RECOMMENDED REGULATORY CHANGES

FAR -- Part 39 

Acquisition of Information Technology

39.001 -- Applicability.

This part applies to the acquisition of information technology by or for the use of agencies except 

for acquisitions of information technology for national security systems. However, acquisitions 

of information technology for national security systems shall be conducted in accordance with 40 

U.S.C. 11302 with regard to requirements for performance and results-based management; the 

role of the agency Chief Information Officer in acquisitions; and accountability. These 

requirements are addressed in OMB Circular No. A-130. This part does not apply to the 

acquisition of cloud services or similar consumption-based solutions (see subpart 37.1). 

FAR -- Part 37 

Service Contracting

37.101 -- Definitions.

As used in this part— 

“Adjusted hourly rate (including uncompensated overtime” is the rate that results from 

multiplying the hourly rate for a 40-hour work week by 40, and then dividing by the proposed 

hours per week which includes uncompensated overtime hours over and above the standard 40-

hour work week. For example, 45 hours proposed on a 40-hour work week basis at $20 per hour 

would be converted to an uncompensated overtime rate of $17.78 per hour ($20.00 x 40/45 = 

$17.78). 

“Child care services” means child protective services (including the investigation of child abuse 

and neglect reports), social services, health and mental health care, child (day) care, education 

(whether or not directly involved in teaching), foster care, residential care, recreational or 

rehabilitative programs, and detention, correctional, or treatment services.

“Consumption-based solution” means any combination of hardware/equipment, software, and 

labor/services that together provide a capability that is metered and billed based on actual 

usage and predetermined pricing per resource unit, and includes the ability to rapidly scale 

capacity up or down. 

“Nonpersonal services contract” means a contract under which the personnel rendering the 

services are not subject, either by the contract’s terms or by the manner of its administration, to 

the supervision and control usually prevailing in relationships between the Government and its 

employees.
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“Service contract” means a contract that directly engages the time and effort of a contractor 

whose primary purpose is to perform an identifiable task rather than to furnish an end item of 

supply. A service contract may be either a nonpersonal or personal contract. It can also cover 

services performed by either professional or nonprofessional personnel whether on an individual 

or organizational basis. Some of the areas in which service contracts are found include the 

following: 

(1) Maintenance, overhaul, repair, servicing, rehabilitation, salvage, modernization, or 

modification of supplies, systems, or equipment. 

(2) Routine recurring maintenance of real property. 

(3) Housekeeping and base services.

(4) Advisory and assistance services.

(5) Operation of Government-owned equipment, real property, and systems. 

(6) Communications services. 

(7) Architect-Engineering (see Subpart 36.6).

(8) Transportation and related services (see Part 47).

(9) Research and development (see Part 35).

“Uncompensated overtime” means the hours worked without additional compensation in excess 

of an average of 40 hours per week by direct charge employees who are exempt from the Fair 

Labor Standards Act. Compensated personal absences such as holidays, vacations, and sick leave 

shall be included in the normal work week for purposes of computing uncompensated overtime 

hours. 

37.102 -- Policy. 

(a) Performance-based acquisition (see subpart 37.6) is the preferred method for acquiring 

services (Public Law 106-398, section 821). When acquiring services, including those acquired 

under supply contracts or orders, agencies must--

(1) Use performance based acquisition methods to the maximum extent practicable, 

except for— 

(i) Architect-engineer services acquired in accordance with 40 U.S.C. 1101 et seq.

(see part 36);

(ii) Construction (see part 36); 
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(iii) Utility services (see part 41); or

(iv) Services that are incidental to supply purchases. 

(2) Use the following order of precedence (Public Law 106-398, section 821(a)); 

(i) A firm-fixed price performance-based contract or task order. 

(ii) A performance-based contract or task order that is not firm-fixed price.

(iii) A contract or task order that is not performance-based.

(b) Agencies shall generally rely on the private sector for commercial services (see OMB 

Circular No. A-76, Performance of Commercial Activities and Subpart 7.3).

(c) Agencies shall not award a contract for the performance of an inherently governmental 

function (see Subpart 7.5).

(d) Non-personal service contracts are proper under general contracting authority. 

(e) Agency program officials are responsible for accurately describing the need to be filled, or 

problem to be resolved, through service contracting in a manner that ensures full understanding 

and responsive performance by contractors and, in so doing, should obtain assistance from 

contracting officials, as needed. To the maximum extent practicable, the program officials shall 

describe the need to be filled using performance-based acquisition methods. 

(f) Agencies shall establish effective management practices in accordance with Office of Federal 

Procurement Policy (OFPP) Policy Letter 93-1, Management Oversight of Service Contracting, 

to prevent fraud, waste, and abuse in service contracting. 

(g) Services are to be obtained in the most cost-effective manner, without barriers to full and 

open competition, and free of any potential conflicts of interest. 

(h) Agencies shall ensure that sufficiently trained and experienced officials are available within 

the agency to manage and oversee the contract administration function. 

(i) Agencies shall ensure that service contracts that require the delivery, use, or furnishing of 

products are consistent with part 23. 

(j) Consumption-based solutions. 

(1) Federal and agency-specific regulations, policies, and guidance regarding service 

contracts are not applicable to contracts for consumption-based solutions or hybrid 

contracts when the primary purpose is to procure consumption-based solutions. 
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(2) New (including improved) related services or features may be added to contracts for 

consumption-based solutions at the discretion of the contracting officer without 

conducting a new competition, provided there is no change to the performance period 

and the amount of these new services or features does not exceed 25 percent of the 

original contract ceiling.

37.110 -- Solicitation Provisions and Contract Clauses. 

(a) The contracting officer shall insert the provision at 52.237-1, Site Visit, in solicitations for 

services to be performed on Government installations, unless the solicitation is for construction. 

(b) The contracting officer shall insert the clause at 52.237-2, Protection of Government 

Buildings, Equipment, and Vegetation, in solicitations and contracts for services to be performed 

on Government installations, unless a construction contract is contemplated. 

(c) The contracting officer may insert the clause at 52.237-3, Continuity of Services, in 

solicitations and contracts for services, when --

(1) The services under the contract are considered vital to the Government and must be 

continued without interruption and when, upon contract expiration, a successor, either the 

Government or another contractor, may continue them; and 

(2) The Government anticipates difficulties during the transition from one contractor to 

another or to the Government. Examples of instances where use of the clause may be 

appropriate are services in remote locations or services requiring personnel with special 

security clearances.

(d) See 9.508 regarding the use of an appropriate provision and clause concerning the subject of 

conflict-of-interest, which may at times be significant in solicitations and contracts for services.

(e) The contracting officer shall also insert in solicitations and contracts for services the 

provisions and clauses prescribed elsewhere in 48 CFR Chapter 1, as appropriate for each 

acquisition, depending on the conditions that are applicable. 

(f) The contracting officer shall insert the clause at 52.237-TBD1, Reporting on ConsumptionBased Solutions, and the clause at 52.237-TBD2, Prices and New Services for ConsumptionBased Solutions, in solicitations and contracts for consumption-based solutions unless an 

individual deviation is approved. 

 52.237-TBD1 – Monitoring and Using Consumption-Based Solutions. 

(a)The Contractor shall measure/meter consumption of awarded line items and their 

associated price, and provide reports of such consumption to the Contracting Officer no less 

than monthly. More frequent reporting, up to and including real-time consumption 

information, is preferred when available through an online user console or similar capability. 
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The Contractor shall notify the Contracting Officer when consumption reaches 75 percent 

and 90 percent of the contract funded amount. 

(b) The Government will not be obligated to pay the Contractor any amount in excess of the 

contract funded amount, and the Contractor shall not be obligated to continue performance if 

to do so would exceed the contract funded amount. 

52.237-TBD2 – Prices and New Services for Consumption-Based Solutions.

(a) If during contract performance the Contractor lowers prices in its publicly-available 

commercial catalog for any awarded services or features, Contractor shall within 45 calendar 

days notify the Contracting Officer and begin using the lower price(s) on this contract or 

order, taking into account any discounts, premiums, or fees consistent with the terms and 

conditions of the contract, unless specifically negotiated otherwise. The Contractor may offer 

new or additional discounts at any time.

(b) When new (including improved) services or features are made publicly available to the 

commercial marketplace and those services are not already included in this contract or order, 

the Contractor must notify the Contracting Officer within 30 calendar days. At its discretion, 

the Contractor may also seek to incorporate new services into the contract or order in advance 

of availability to the commercial marketplace. The Contracting Officer must approve 

incorporation of any new services or features into the contract or order. Any discounts, 

premiums, or fees shall equally apply to new services or features, unless specifically negotiated 

otherwise. The price incorporated into the contract or order for new services or features shall 

not be higher than the price that is publicly-available in the commercial marketplace, plus any 

applicable discounts, premiums or fees.

(End of Clause)

FAR -- Part 16 

Types of Contracts

Subpart 16.2 -- Fixed-Price Contracts

16.201 -- General.

(a) Fixed-price types of contracts provide for a firm price or, in appropriate cases, an adjustable 

price. Fixed-price contracts providing for an adjustable price may include a ceiling price, a target 

price (including target cost), or both. Unless otherwise specified in the contract, the ceiling price 

or target price is subject to adjustment only by operation of contract clauses providing for 

equitable adjustment or other revision of the contract price under stated circumstances. The 

contracting officer shall use firm-fixed-price, or fixed-price with economic price adjustment, or 

fixed-price resource units contracts when acquiring commercial items, except as provided in 

12.207(b).
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(b) Time-and-materials contracts and labor-hour contracts are not fixed-price contracts.

16.208 -- Fixed-Price Resource Units Contracts.

(a) Description. A fixed-price resource units contract establishes a fixed price per unit of 

measure. Unless otherwise specified in the contract, the unit prices are subject to downward 

adjustment only, with such adjustments based on changes to the contractor’s commercial 

catalog pricing (see 52.237-TBD2). The contracting officer shall use fixed-price resource units 

contracts when acquiring consumption-based solutions (see Subpart 37.1). 

 (b) Application. 

(1) A fixed-price resource units contract is suitable for use when acquiring 

consumption-based solutions, and may be combined with other contract types under 

appropriate circumstances as determined by the contracting officer. 

(2) A contract ceiling amount is established at contract award based on the government 

estimate of the services to be consumed (including all options) and the unit prices 

awarded. Consumption of individual resource line items is metered, totaled, and 

invoiced monthly unless otherwise specified in the contract. The contracting officer 

may increase the contract ceiling by up to 25 percent based on actual consumption 

trends or the addition of new services provided funding is available. 

(3) The contract may be incrementally funded, and consumption shall be closely 

monitored to ensure the funded amount is not exceeded (see 52.237-TBD1). 

(c) Limitations. None.

FAR -- Part 12 

Acquisition of Commercial Items

Subpart 12.2 -- Special Requirements for the Acquisition of Commercial Items 

12.207 -- Contract Type.

(a) Except as provided in paragraph (b) of this section, agencies shall use firm-fixed-price

contracts, or fixed-price contracts with economic price adjustment, or fixed-price resource units 

contracts for the acquisition of commercial items.

... 

(d) The contract types authorized by this subpart may be used in conjunction with an award fee 

and performance or delivery incentives when the award fee or incentive is based solely on 

factors other than cost (see 16.202-1 and 16.203-1).
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(e) Use of any contract type other than those authorized by this subpart to acquire commercial 

items is prohibited.
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DoD should revise its acquisition processes to more closely align with 

commercial IT markets and optimize its procedures to readily obtain the 

spectrum of IT services, products, and solutions needed for its mission. 

RECOMMENDATIONS

Rec. 43: Revise acquisition regulations to enable more flexible and effective 

procurement of consumption-based solutions. 

Rec. 44: Exempt DoD from Clinger–Cohen Act Provisions in Title 40.

Rec. 45: Create a pilot program for contracting directly with information technology 

consultants through an online talent marketplace.

 
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INTRODUCTION 

Information technology (IT) products, services, and solutions in DoD are a nearly insular ecosystem, 

largely segregated from commercial IT markets. In 2017, the largest providers of IT, systems 

integration, and related professional services to DoD were traditional defense companies—for example, 

Leidos, Lockheed Martin, and Northrup Grumman—and not prominent commercial IT companies.1

Those IT companies with large federal government contracts such as Hewlett Packard Enterprise (now 

DXC Technology), IBM, and Dell have segregated their government work into divisions or business 

units explicitly focused on the federal IT space.2 Due to the limited interaction between commercial and 

DoD IT markets, the two now operate at substantially different paces of technological advancement. 

Because the commercial IT market has outpaced the DoD market for decades, DoD regularly acquires 

outdated and inferior technology, often at higher prices and slower rates. DoD’s slower acquisition 

pace has a direct effect on warfighting capability. In a defense era defined by technological edge, 

warfighters and their support commands are often operating with less functionality. 

This market segregation is caused by the vastly different ways in which DoD and the wider federal 

government acquire IT. Rather than operating in the commercial market of readily available options, 

DoD often creates detailed, intricate requirements for its IT systems and services. The process of 

requirements development alone is lengthy and is coupled with a litany of other complicated, 

burdensome processes and procedures associated with IT contracts. DoD must account for a series of 

unique concerns not associated with commercial practices—supply chain sourcing restrictions, 

socioeconomic principles, export controls, and competition rules are only a few. DoD IT has long been 

accused of being obsolete on delivery, a problem not encountered with such prevalence in the 

commercial market.3 Through its complicated requirements and its burdensome processes, DoD IT 

acquisition also creates numerous barriers to entry for vendors. In comments regarding its recent 

decision to drop out of the Joint Enterprise Defense Infrastructure (JEDI) competition, Google stated 

that “there were portions of the contract that were out of scope with our current government 

certifications.”4 This is only one example of a capable vendor opting out of the defense IT market due to 

specialized government requirements. 

Much of the IT market segregation is self-inflicted by DoD, and other aspects are imposed by federal 

requirements. DoD remains bound by the rules of federal acquisition, but it can revise its processes to 

more closely align with commercial IT markets. For example, rather than developing defense-unique 

technical requirements by default, DoD could more frequently accept an 80 percent solution provided 

by readily available commercial IT with little or no customization. DoD could also consider approaches 

that are more outcome-based, less process-driven, and informed by IT expertise in the commercial 

 

1

 “2017 Top 100,” Washington Technology, accessed November 6, 2018, https://washingtontechnology.com/toplists/top-100-

lists/2017.aspx. 

2

 “Top 25 Enterprise IT Providers to Government,” FedScoop, August 30, 2017, accessed November 6, 2018, 

https://www.fedscoop.com/federal-it-top-25/federal-it-top-25-full-list/. 

3

 “You’re Sinking My IT Ship: Why Continually Treating IT Like a Battleship is a Problem,” Matt Micene, Technically Speaking, October 11, 

2012, accessed November 6, 2018, http://www.dlt.com/blog/2012/10/11/youre-sinking-ship-continually-treating-battleship-problem/. 

4

 “Google will not bid for the Pentagon’s $10B cloud computing contract, citing its ‘AI Principles’,” Catherine Shu, TechCrunch, October 8, 

2018, accessed November 6, 2018, https://techcrunch.com/2018/10/08/google-will-not-bid-for-the-pentagons-10b-cloud-computingcontract-citing-its-ai-principles/. 
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market. DoD must acknowledge that its acquisition system suffers from too many processes and 

procedures that are obsolete, redundant, or unnecessary. It is especially vital that IT acquisitions move 

quickly enough to keep pace with commercial innovation. A complete merging of the DoD and 

commercial IT markets is probably unrealistic; however, increased flow between the two is a 

reasonable and necessary goal. 

The recommendations in this section offer strategies for transforming DoD’s IT acquisition from both 

the top down and bottom up. Strategic revisions to how DoD understands and acquires IT are 

integrated with smaller-scale changes that restore efficiency to routine processes that have become 

bogged down by layers of bureaucracy. Recommendation 43 resolves a fundamental tension between 

the 21st century marketplace and an acquisition system that forces IT and other purchases into one of 

two outdated categories of transaction: supplies or services. This recommendation proposes 

definitions, processes, contract types, and funding approaches that align with the new category of 

consumption-based solutions, acknowledging that modern capabilities are increasingly a combination of 

supplies and services that are sold on a consumption basis (e.g., cloud services, everything as a service 

[XaaS]). 

Recommendation 44 addresses reducing the layers of documentation and approvals that make IT 

acquisition a slow, frustrating, and often inefficient process. Exempting DoD from the Clinger–Cohen 

Act (CCA) provisions removes an outdated process that adds little value to the enterprise, and it 

provides DoD the opportunity to simplify and update its practices. This recommendation has even 

greater effect when combined with other panel recommendations detailed in Section 7 that simplify 

contracting processes for all acquisitions. 

A third recommendation encourages both DoD and the federal government at large to better use 

IT expertise from the commercial sector. Recommendation 45 details a pilot program that would allow 

the federal government to contract directly with independent IT consultants through an expedited 

process better aligned with commercial best practices. This new authority would improve the speed, 

cost, and quality of resources that support highly complex IT solutions. 

None of these actions alone will solve the challenges associated with the above-described IT market 

segregation; however, together they offer a series of changes that can better align DoD and commercial 

practices. They also reflect the sentiment expressed by Congress in the Conference Report to the 

FY 2019 NDAA: 

The conferees agree with the report’s emphasis on shifting the Department of Defense’s treatment of 

software as solely a development activity to understanding that it is enduring and that, therefore, 

traditional models of hardware sustainment are not suited to the treatment of software in the acquisition 

process. ...[T]he conferees also encourage the Department to continue to engage the private sector for 

their best practices and views regarding sustainable software acquisition approaches.5

 

5

 Conference report to accompany the FY 2019 NDAA (H. Rept. 115-874), July 25, 2018, 912, accessed November 6, 2018, 

https://www.gpo.gov/fdsys/pkg/CRPT-115hrpt874/pdf/CRPT-115hrpt874.pdf 
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By ridding itself of outdated acquisition practices and optimizing useful tools and procedures, DoD 

need not suffer the consequences of substandard IT found in its ecosystem. 

RECOMMENDATIONS 

Recommendation 43: Revise acquisition regulations to enable more flexible and 

effective procurement of consumption-based solutions. 

Problem 

The FAR unrealistically categorizes all purchases as either supplies or services. This distinction, 

established decades ago, is too rigid to effectively procure modern technology solutions with evolving 

delivery models. Solutions include hardware, software, and labor/services that together provide a 

seamless capability. Acquisition professionals struggle to determine whether certain solutions should 

be procured as a supply or a service, often leading to contracts that are neither optimized nor 

appropriate for the solution being acquired. 

The problem is more pronounced for solutions sold on a consumption basis, such as cloud services. 

Consumption pricing is common in the commercial IT market and for consumer technology such as 

mobile phones, for which customers are billed strictly for usage or billed a fixed amount plus overage 

charges. This payment model is difficult to execute with existing FAR contract types and government 

fiscal rules. DoD needs laws, regulations, and policies that enable effective IT solution procurement 

today and remain flexible enough to adapt to dynamically evolving future solutions. 

Cloud computing and IT solutions are the current acquisition challenges discussed in detail herein, but 

the specific recommendations to address these challenges are broadly applicable to other consumptionbased solutions in the marketplace. 

Background 

For decades, DoD and the federal government have acknowledged the need to reform and modernize 

the IT acquisition process, but large-scale reform has proven challenging. The FY 2010 NDAA required 

the Secretary of Defense to “develop and implement a new acquisition process for information 

technology systems...and Report to Congress...on the new acquisition process developed.”6 DoD 

submitted the required report to Congress in November 2010, titled A New Approach for Delivering 

Information Technology Capabilities in the Department of Defense; however, many of the reforms described 

in the report were not fully implemented or not implemented at all. The failure to reform IT acquisition 

processes creates a compounding effect as technology continues to evolve rapidly and DoD struggles to 

acquire the technologies that power modern solutions. 

Cloud services have become the basic underpinning of most new IT systems, but the transition to cloud 

computing has been more of an evolution than a revolution. Beginning around 2006, back-end IT 

infrastructure became commoditized as a shared resource, and over time that model gravitated to the 

applications employed by end users.7 Cloud-based end-user applications are known as software as a 

 

6

 Section 804(b) of FY 2010 NDAA, Pub. L. No. 111–84, 123 Stat. 2402 (2009). 

7

 “Business Report: Who Coined ‘Cloud Computing’,” Antonio Regalado, MIT Technology Review, October 31, 2011, accessed October 25, 

2018, https://www.technologyreview.com/s/425970/who-coined-cloud-computing/. 
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service (SaaS), wherein the end user pays a fee to use the system and has no responsibility—or even 

knowledge of—the underlying IT that makes the system work. Other cloud offerings provide readymade IT infrastructure, essentially building blocks on which developers can quickly install or build 

their own applications. According to cloud procurement expert Michael Garland, “The advent of cloud 

computing has done for software developers what the medieval inn did for early European travelers—

it has relieved them of the obligation to pack and drag along all their own stuff.”8

The National Institute for Standards and Technology has published several foundational papers on 

cloud computing, including one that provides the following authoritative definition:9

Cloud computing is a model for enabling ubiquitous, convenient, on-demand network access to a shared 

pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that 

can be rapidly provisioned and released with minimal management effort or service provider interaction. 

This cloud model is composed of five essential characteristics, three service models, and four deployment 

models. 

The government was slower to adopt cloud computing than commercial industry, but eventually 

produced a substantial body of policy and guidance, starting in February 2011 when then-U.S. Federal 

Chief Information Officer Vivek Kundra published the Federal Cloud Computing Strategy, commonly 

known as the Cloud First policy:10 

This policy is intended to accelerate the pace at which the government will realize the value of cloud 

computing by requiring agencies to evaluate safe, secure cloud computing options before making any new 

investments. 

In December 2011, Office of Management and Budget (OMB) expanded its Cloud First policy by 

releasing a memo addressing the security authorization process for cloud computing services. The 

policy requires all federal agencies to use the Federal Risk and Authorization Management Program 

(FedRAMP) for cloud services procurement. According to its homepage, “FedRAMP facilitates the shift 

from insecure, tethered, tedious IT to secure, mobile, nimble, and quick IT.”11 FedRAMP identifies 

security requirements as a baseline for vetting cloud services and requires cloud service providers 

(CSPs) to comply with those requirements, including routing network traffic through a trusted internet 

connection. FedRAMP also provides a series of documents, templates, and training to be leveraged by 

agencies and CSPs. Key documents include the Security Assessment Framework (SAF), Security 

Controls (low, moderate, and high), and CSP Authorization Playbook.12 

 

8

 “It’s time to fix our cloud procurement problems,” Michael Garland, FCW, accessed October 25, 2018, 

https://fcw.com/articles/2018/06/04/comment-garland-clould-procurement.aspx. 

9

 National Institute of Standards and Technology, The NIST Definition of Cloud Computing, NIST SP 800-145, September 2011, accessed 

October 25, 2018, https://nvlpubs.nist.gov/nistpubs/legacy/sp/nistspecialpublication800-145.pdf. Note: Definition truncated for brevity. 

10 Vivek Kundra, Federal Cloud Computing Strategy, February 2011, accessed October 25, 2018, 

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/assets/egov_docs/vivek-kundra-federal-cloud-computing-strategy02142011.pdf. 

11 FedRamp,” GSA, accessed October 25, 2018, https://www.fedramp.gov/. 

12 FedRamp: Documents,” GSA, accessed October 25, 2018, https://www.fedramp.gov/documents/. 
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FedRAMP has made two major revisions to its Control Specific Contract Clauses, one in June 2014 and 

one in December 2017.13 FedRAMP provides a thorough security vetting process, but it does not 

include a full set of contract terms and conditions. The program provides only provisional approval—

agencies must make the final authorization determination and may have additional requirements 

beyond the FedRAMP baseline. 

Currently, OMB is making the first major update to its Cloud First policy in more than 7 years.14 The 

new strategy, preliminarily coined Cloud Smart, is intended to address lessons learned from the past 

few years of government experience attempting to migrate to the cloud. Principally, Cloud Smart 

means using a more deliberate and analytical process to determine what IT should migrate to cloud 

services, rather than blindly assuming cost savings or other benefits will be realized by migrating 

everything.

Other guidance and resources have been published in support of the Cloud First policy, including the 

following: 

 Best Practices for Acquiring IT as a Service, Chief Information Officer (CIO) Council and Chief 

Acquisition Officers Council, 2012. 

 Best Business Practices for USG Cloud Adoption, General Services Administration (GSA) 

Federal Acquisition Service, 2016. 

 Cloud Computing Security Requirements Guide, Defense Information Systems Agency, 2017.15

 Cloud Acquisition Professional’s Cloud Adoption Survival Tips, Lessons, and Experiences 

(CASTLE) Guide, Interagency Cloud Center of Excellence (CCoE), 2017.16

DoD addressed cloud services acquisition in Enclosure 7 of DoDI 5000.74, Defense Acquisition of 

Services, although little information is provided other than compliance directives:17 

PMs [program managers} or FSMs [functional services managers] must implement any cloud computing 

services in accordance with DISA-provided Cloud Computing Security Requirements Guide (SRG). 

Prior to contract award, all commercially provided cloud services must have a DoD Provisional 

Authorization granted by DISA. Prior to operational use, all cloud services must have an Authority to 

Operate granted by the PM/FSM’s Authorizing Official. 

 

13 National Institute of Standards and Technology, Security and Privacy Controls for Federal Information Systems Organizations, NIST 

SP 800-53, Rev. 4, April 2013, accessed October 25, 2018, https://nvlpubs.nist.gov/nistpubs/specialpublications/nist.sp.800-53r4.pdf. 

14 “OMB Drafts ‘Cloud Smart’ Strategy,” Sara Friedman, CGN, June 13, 2018, accessed October 25, 2018, 

https://gcn.com/articles/2018/06/13/cloud-smart-strategy.aspx. 

15 “Cloud Computer Security Requirements Guide (CC SRG),” Information Assurance Support Environment (IASE), accessed October 25, 

2018, https://iase.disa.mil/cloud_security/Pages/index.aspx. 

16 “Here’s a Cloud Guide Written by Feds for Feds. Will the White House Listen,” Frank Konkel, Nextgov, August 24, 2017, accessed 

October 25, 2018, https://www.nextgov.com/it-modernization/2017/08/heres-cloud-guide-written-feds-feds-will-white-houselisten/140478/. 

17 Defense Acquisition of Services, DoDI 5000.74 (2017). 
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Commercial cloud services hosting controlled unclassified information or non-publicly releasable 

information outside of the Department’s security boundary must be connected to the Department of 

Defense Information Network (DODIN) through a Cloud Access Point that has been approved by the 

Information Security Risk Management Committee and the DoD CIO, in accordance with connection 

approvals in the Chairman of the Joint Chiefs of Staff Instruction 6211.02D (Reference (ah)). 

Despite all the cloud policy and guidance, acquisition professionals are still constrained by laws and 

regulations conceived before cloud services existed. These laws and regulations are out of step with 

current delivery models offered by commercial industry—DoD is not buying what companies are 

selling. An early and prominent example of the government buying cloud services demonstrates that 

although the technology innovation is present, the associated contracting processes can reduce the 

velocity of access to these services, and as a result reduce the value derived.18

Case Study:

Commercial Cloud Services Contract 

In 2013, the Central Intelligence Agency awarded a contract to Amazon Web Services (AWS) known as 

Commercial Cloud Services (C2S). With a 10-year period of performance and a potential value of $600 million, 

this purchase was the largest cloud services contract awarded by the federal government at the time. C2S was 

considered a groundbreaking initiative to serve all 17 agencies that make up the intelligence community (IC) 

with a private cloud at the Top Secret level built on government property. The contractor, AWS, owns and 

maintains the computer hardware and manages cloud services operations. 

C2S includes essential technical cloud characteristics like instantaneous scalability that were once thought 

impossible in government. This approach enables capabilities like provisioning a server in minutes instead of 

months, providing obvious operational benefits. The C2S private cloud also includes a marketplace that allows 

the IC to access commercial innovation through new applications and services added by AWS. 

Although the technology capabilities of C2S are state-of-the-art, the contracting and business processes that 

govern these capabilities are an inhibitor to speed and agility. C2S has the ability to provision a server in 

minutes; however, the process for getting authorization to turn on that server can take months. This process 

may include developing and awarding a technical task order, securing funding, and navigating layers of 

approvals. To take full advantage of consumption-based solutions like C2S, the government needs to update 

its contracting and business processes to be as agile and flexible as the technology itself. Until those changes 

to the acquisition process are made, realizing the full potential of this new generation of technology solutions 

will remain a challenge. 

Some have expressed concern that if cloud services are used by the government in the same manner as 

the commercial sector that an overzealous user could rapidly consume a disproportionate share of 

resources or even exceed an entire contract’s available funding in a matter of hours or days. Although 

this risk does exist, it is extremely unlikely to be realized given the management and monitoring tools 

 

18 Analytic Technology Industry Roundtable, interview with Section 809 Panel, September 18, 2018. 
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inherent in modern cloud solutions. AWS, for example, includes a suite of tools for customers to 

manage services with features like service limits by user account, usage and cost reports with 

forecasting, and configurable alerts. Tools like these will allow the government to take advantage of the 

rapid scalability of modern cloud services while minimizing the risk of unauthorized or unexpected 

overuse. 

Recent IT acquisition legislation has not directly addressed effective IT solutions procurement. The 

Federal Information Technology Acquisition Reform Act (FITARA) strengthens CIO authority, adds 

more oversight and reporting requirements to IT acquisition, and mandates data center consolidation, 

but it does not provide any new authorities or tools to improve cloud procurement to support these 

goals.19

Today the government has challenges with cloud procurement, but the market is constantly evolving. 

More things will be sold as a service in the future. XaaS could really mean everything in the context of 

the Internet of things (IoT). Consumption-based solutions are appearing in many industry sectors, from 

last mile transportation (e.g., bike shares and electric scooters) to agriculture (e.g., tractor-as-a-service 

for farmers in developing countries).20 Most smart phone users are familiar with software updates that 

provide bug fixes or new features. A more extreme example of technology innovation enabled by the 

IoT is the ability to deliver physical performance improvements to vehicles through over-the-air 

software updates. In May of 2018 Tesla Motors substantially reduced the braking distance of its 

Model 3 sedan through a software update.21 In the not-so-distant future, cloud computing and the IoT 

will enable consumption-based solution offerings and delivery models that are hard to imagine today.

Discussion 

The following sections discuss some of the specific challenges faced by acquisition professionals when 

attempting to effectively acquire modern IT solutions using the existing statutory and regulatory 

framework. 

Supply or Service? 

The fundamental decision as to whether a solution is procured as a supply or service has significant 

implications and frequently causes consternation for contracting officers. A common example is 

software licenses. Years ago, software was delivered on physical media like a compact disc (CD) and 

was sold for a fixed price per copy. Paying for the software up front, as a supply, made sense. 

Sometimes an upgrade CD was available a year or two later at a price less than the original license—

still a supply. As physical media became less common, and software delivery moved to subscription 

models, including the more dynamic SaaS, that supply or service decision has become much more 

complicated. Some contracting professionals still prefer to buy software as a supply, if for no other 

 

19 Sections 831–837 of FY 2015 NDAA, Pub. L. No. 113-291 (2014). 

20 “Meet A Tractor That Can Plow Fields And Talk To The Cloud,” Joy Diaz, NPR, March 29, 2016, accessed September 24, 2018, 

https://www.npr.org/sections/goatsandsoda/2016/03/29/472129577/meet-a-tractor-that-can-plow-fields-and-talk-to-the-cloud. 

21 In May 2018 Consumer Reports evaluated, but did not recommend, the Tesla Model 3 due to long braking distances. Less than two 

weeks later Tesla pushed out an over-the-air software update that tweaked the calibration of the Model 3’s antilock braking algorithm. 

The software update cut the vehicle’s 60 mph stopping distance by 19 feet, which ultimately earned it Consumer Report’s 

recommendation. “TESLA’S Quick Fix for Its Braking System Came from the Ether,” WIRED, May 30, 2018, accessed October 25, 2018, 

https://www.wired.com/story/tesla-model3-braking-software-update-consumer-reports/ 
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reason than the acquisition rules are much simpler. Others argue that SaaS should be procured as a 

service. After all, it is called software as a service, and the government is not getting a tangible product, 

but rather use of a system developed and maintained by a vendor. 

Contracts for services are governed by more complicated rules and procedures in FAR Part 37 and 

DoDI 5000.74. In addition to the extra rules associated with service contracting, these contracts 

frequently enter contentious territory on issues such as personal services, evaluation and selection 

methods, contract-type decisions, and payment arrangements. In some cases, SaaS vendors require 

upfront payment for license subscriptions.22 The popular SaaS vendor Salesforce runs a true cloud 

multitenant solution but uses a traditional pay-up-front annual user-based licensing model. Other 

vendors offer true consumption-based services with payment in arrears. Contracting officers need 

guidance on which analysis to impose, regardless of how vendors label their offerings. 

In today’s environment, consumption-based services are often purchased as other direct costs (ODCs) 

incidental to a services contract. This is the approach used by the Air Force’s Common Computing 

Environment (CCE) program that is migrating thousands of applications to the cloud.23 Using ODCs is 

a symptom of current procurement constraints rather than a desirable or innovative strategy. 

Current Guidance 

FedRAMP established and maintains a sophisticated set of rules and resources to assist agencies with 

cloud procurement, but the program focuses almost exclusively on security.24 It does not address the 

lack of contracting guidance, rules, and tools for acquiring cloud services. Although FedRAMP has an 

important role to play, security alone does not make a good cloud contract. The government needs to 

be a smart buyer of cloud and other consumption-based services, and it simply does not have all the 

right tools. 

In some cases, current cloud acquisition guidance recommends questionable applications of existing 

contract types. For example, GSA’s Best Business Practices for USG Cloud Adoption recommends use of 

the contract type fixed price with economic price adjustment. But economic price adjustment is meant to 

address changes to established prices or underlying cost structure, not variation in consumption of the 

service. This attempt to use existing approaches to solve evolving problems is a stark illustration that 

the tools currently available in the FAR do not effectively address consumption-based services. 

There are, however, examples of innovative contract types implemented for specific purposes. The 

Defense Logistics Agency uses energy savings performance contracts (ESPCs), a contract type through 

which an energy services contractor designs, finances, acquires, installs, and maintains energy-saving 

equipment and systems for a federal agency. ESPCs allow federal agencies to procure energy savings 

 

22 While software subscriptions are commonplace in 2018, references to the word “subscription” in FAR Part 13 refers to “...newspapers, 

magazines, periodicals, or other publications...” and in FAR Part 31 “Subscriptions to trade, business, professional, or other technical 

periodicals.” 

23 USAF CCE representatives, interview with Section 809 Panel, August–September 2018. 

24 “Documents,” FedRAMP, accessed October 25, 2018, https://www.fedramp.gov/documents/. 
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and facility improvements with no upfront capital costs or special appropriations from Congress. 25

DoD needs a similarly innovative contract type to address the unique aspects of cloud services and 

other consumption-based solutions, with flexibility for procuring future solutions that may have 

different characteristics. 

Another challenge with current FAR contracting rules is scope. The scope of services is established at 

the time a contract or order is competed and awarded. Any new scope not explicitly included in the 

contract must be part of a new competition. For cloud services, vendors’ service offerings can change 

daily, and these scope rules put the government in a difficult position.26 Contracts can take months or 

even years to award with defined scope. If the vendor then comes out with a desirable new service, 

current laws and regulations require the agency to start over and compete the new service. Such 

competition is undesirable because groups of services are best provided by a single vendor. Using 

multiple providers could create problems with integration, coordination, and compatibility. Exceptions 

are allowed under current rules, but DoD’s acquisition of new, commercial IT solutions should not be 

defined by exceptions that involve multiple approvals. 

Fiscal Issues 

Funding is one of the key challenges to implementing consumption-based services, as GAO identified 

within a year of OMB’s Cloud First strategy:27 

Procuring services on a consumption (on-demand) basis: Because of the on-demand, scalable nature of 

cloud services, it can be difficult to define specific quantities and costs. These uncertainties make 

contracting and budgeting difficult due to the fluctuating costs associated with scalable and incremental 

cloud service procurements. For example, HHS officials explained that it is difficult to budget for a service 

that could consume several months of budget in a few days of heavy use. 

Budgeting rules and appropriation law have created IT acquisition challenges in DoD for almost as 

long as the term IT has existed. Numerous studies and reports argue that DoD needs more fiscal 

flexibility to effectively acquire high quality IT.28 Colorless money (a theoretical general purpose 

appropriation without periodicity constraints) and working capital funds (an alternative to annual 

appropriations) are usually the preferred remedy, although only the latter has received any traction.29

 

25 DoD Inspector General, Defense Logistics Agency Award and Administration of Energy Savings Performance Contracts, Report No. 

DODIG-2018-135, July 6, 2018, accessed October 25, 2018, https://media.defense.gov/2018/Jul/10/2001940709/-1/-1/1/DODIG-2018-

135.PDF. 

26 The constantly evolving service offerings of cloud providers are part of their value proposition. In 2017 alone, AWS added several 

hundred new services that became instantly available to their customers. 

27 GAO, Information Technology Reform: Progress Made but Future Cloud Computing Efforts Should be Better Planned, GAO-12-756, July 

2012, accessed October 25, 2018, https://www.gao.gov/assets/600/592249.pdf. 

28 See Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations, Volume 1 of 3 (2018). Also 

see Su Chang and Pete Modigliani, “Addressing the Barriers to Agile Development in DoD,” MITRE Corporation, May 2015 (page 18 

includes discussion of the need for software programs to sometimes respond “rapidly to changes in ops, technology, and budgets”), 

accessed September 24, 2018, http://www.dtic.mil/dtic/tr/fulltext/u2/a625456.pdf. 

29 DoD working capital funds (WCFs) are defined under 10 U.S.C. § 2208(a) as budget tools intended to “control and account more 

effectively for the cost of programs and work performed in the Department of Defense.” Rather than annual appropriations, WCFs rely on 

a model akin to a commercial company, effectively selling their goods and services to customers (other parts of DoD). Unlike a 

commercial company, a WCF is not intended to make a profit, but rather achieve zero net income in the long term. “Hurd dishes on 
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When it comes to consumption-based solutions, the fiscal limitations are especially challenging. Not 

knowing in advance how much of a service will be used means the amount obligated on a contract is at 

best an estimate based on a set of assumptions, and at worst simply a guess. The ramifications can be 

substantial. If the estimate is high, funding must be de-obligated, putting the next year’s budgets at risk 

in the government’s use it or lose it culture. If the estimate is too low, the contracting officer risks an 

Anti-deficiency Act violation, punishable by suspension without pay, removal from office, fines, and 

even imprisonment.30 The department should not ask its acquisition workforce to gamble on these 

kinds of stakes. The CASTLE Guide summarized this conundrum: “The current mechanisms of Federal 

funds systems works directly against the intended business advantages of cloud computing.”31

DoD and other agencies need a funding system that works for consumption-based solutions without 

the stress and contortions present in the current system. In consumer technology and commercial 

industry, these solutions are billed and paid for in arrears based on actual usage. That exact model may 

not be feasible, but the government needs to find something closer than it has today. The carryover 

authority provided by Congress to the Defense Health Agency (DHA) for drug and medical services 

indefinite-quantity contracts is a model worth considering. DHA has this authority because precise 

obligations for these services cannot be predicted due to varying patient and facility needs.32

Not All Government IT is Suitable for the Cloud 

With all the policy, leadership attention, and press around getting to the cloud, a one-size-fits-all attitude 

that everything should be moved to the cloud has taken shape. Unfortunately, this is much like what 

happens during household moves. Only about a quarter of the contents of the boxes in the basement 

should be moved. Half of the remaining items are probably trash, and the other quarter could be 

donated for use by someone else. But that is not what happens. In the absence of time to purge 

thoughtfully, everything is moved. The government is doing this with cloud migration—moving the 

junk into the shiny new house. There will be no cost savings, and there may even be cost increases. 

Because the cloud services provider does not use the outdated servers those applications run on, that 

will cost extra. This situation is an example of the technical debt so often discussed at conferences and in 

press articles.33

The lift and shift attitude is reinforced by FITARA, which not only measures data center consolidation 

progress but gives agencies a report card complete with a letter grade. Very few agencies receive an A. 

Though well intended, this mandate could actually be causing agencies to migrate decades-old legacy 

systems that have no business being used today, much less being migrated to the cloud. OMB’s new 

 

MGT’s future,” Chase Gunter, FCW, December 20, 2017, accessed October 25, 2018, https://fcw.com/articles/2017/12/20/hurd-mgtfuture-gunter.aspx. 

30 “Antideficiency Act Resources,” GAO: Bid Protests, Appropriations Law & Other Legal Work, accessed October 25, 2018, 

https://www.gao.gov/legal/appropriations-law-decisions/resources. 

31 Cloud Center of Excellence (CCOE), Acquisition Professional’s C.A.S.T.L.E. Guide: Cloud Adoption Survival, Tips, Lessons Learned, and 

Experiences Guide, 3, accessed October 25, 2018, https://www.nextgov.com/media/gbc/docs/pdfs_edit/castle_guide.docx. 

32 In recent years’ defense appropriations, Congress has approved a small, 1-year, carryover authority for O&M spending by the Defense 

Health Program (DHP). 

33 “Huge bill coming due for out-of-date technology,” Jason Miller, Federal News Network, May 25, 2015, accessed October 25, 2018, 

https://federalnewsradio.com/omb/2016/05/huge-bill-coming-due-date-technology/. “Deutsche Bank digging out of technical debt, 

while moving to the cloud,” Clint Boulton, CIO, November 11, 2015, accessed October 25, 2018, 

https://www.cio.com/article/3004538/cio-role/deutsche-bank-digging-out-of-technical-debt-while-moving-to-cloud.html. 
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Cloud Smart policy aims to address this issue. There is no one-size-fits-all approach to cloud migration. 

In some cases, it may make more sense to shut down an application or subsume it than to migrate. 

Agencies need to establish a process and a model to analyze their applications and determine the most 

appropriate disposition, a process commonly known as application rationalization. Much like the 

important business process reengineering (BPR) step in systems modernization projects, application 

rationalization is often abbreviated or skipped altogether in cloud migration efforts. 

A true consumption model allows customers to know what IT they have acquired and what they are 

actually using. The government lacks accurate accounting of its IT, partly due to an acquisition process 

incentivized more to estimate future usage than measure actual consumption by end users.34 In the 

current model, unused software licenses sit on the shelf, either physically or virtually, wasting millions 

of dollars. The consumption model, by contrast, provides the capability to quickly turn off resources 

that are not being used. Events like usage spikes can be identified and corrected quickly as opposed to 

the traditional software licensing model for which these issues are not discovered until months or years 

later when a multimillion dollar bill comes due after a license audit. 

Innovation and Skills Shift: Tomorrow’s IT Will Not Look Like Today’s IT 

DoD tends to over-specify requirements, often basing them on capabilities from the past instead of 

imagining the future. This approach hinders DoD’s ability to exploit commercial innovation and results 

in customized solutions that sacrifice one of the key value propositions of cloud services—economies of 

scale leveraging a common solution across multiple customers. The fact that there is a separate 

Government Cloud makes clear the government is not fully leveraging commercial solutions, albeit 

security requirements are a large driver of this segregated cloud.35 Further complicating matters, DoD 

often prioritizes low price over value delivered. This practice is understandable, because price is purely 

quantitative, therefore easy to compare. But tapping into commercial innovation requires a deep 

understanding of what services are available and how they can be applied to solve a mission or 

business problem. This type of analysis relies on a specific skill set that is in short supply within the 

DoD acquisition workforce. 

IT, as it was understood in the past, has quickly become an invisible commodity. As cloud services and 

modern IT solutions become the rule instead of the exception, the skills needed to leverage these 

solutions will change dramatically. There will no longer be a need for droves of contractors at data 

centers monitoring server and storage status or installing patches. Those duties will be fulfilled in the 

background by the cloud services provider. Instead, the needed skills will be in designing, refining, 

and optimizing business processes to better support the mission. For example, future IT professionals 

will need the ability to quickly understand a new, instantly available machine learning capability and 

how it can be used to increase lethality or fine tune inventory levels. Those are not the skills of a 

traditional IT workforce. 

 

34 OMB Memorandum M-16-12, Category Management Policy 16-1: Improving the Acquisition and Management of Common Information 

Technology: Software Licensing, June 2, 2016, accessed October 25, 2018, 

https://obamawhitehouse.archives.gov/sites/default/files/omb/memoranda/2016/m-16-12_1.pdf. 

35 “You don’t have to build your tech from the ground up,” CLOUD.GOV, accessed October 25, 2018, https://cloud.gov/. 
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Organizations like the Defense Digital Service are helping programs better understand how to acquire 

and leverage modern digital services, but this effort happens in pockets of excellence and needs to be 

institutionalized.36

If DoD addresses change using an ideal approach, a knowledge-based workforce will rapidly innovate 

using an ever-changing set of solution offerings from numerous innovative vendors. One of the ways 

this goal can be accomplished is by establishing a center of excellence (CoE) to transform the way the 

organization develops applications and exploit the constant innovation in the cloud. GSA established 

one such Cloud Adoption COE to assist the Department of Agriculture (USDA) with developing the 

foundation of a Commercial Cloud Platform Services organization to be the “pathway to cloud 

services” for the agency. GSA cites early successes of the effort as planning for migration to the cloud 

by “balancing tactical ‘lift and shift’ imperatives with more strategic ‘fix and shift’ possibilities.”37

Acquiring Modern Solutions 

Although the government has many challenges in procuring and properly employing cloud services to 

realize value, these consumption-based services are merely the proverbial canary in the coal mine. With 

enablers like quantum computing and machine learning, technology innovation will inevitably 

continue at an increasing rate, and DoD must be ready to effectively acquire the resultant solutions or 

risk being outmatched by near-peer adversaries that do not struggle with archaic acquisition 

constraints.38

DoD must improve cloud acquisition, yet these types of technology infrastructure are rarely bought on 

a stand-alone basis. Most modern solutions are hybrids that combine cloud or other hardware and 

software components with high-skill professional services. These skills may be required to refactor and 

migrate a legacy application, or to solve a warfighting or business problem using technology 

innovations and design services. The implications of these hybrid solutions are two-fold: acquisition 

rules must effectively accommodate a novel and evolving type of procurement, and acquisition 

professionals must deeply understand the solutions market and capabilities to be a smart buyer. 

As shown in Figure 3-1 below, DoD already spends nearly $10 billion annually on services that could 

potentially be purchased on a consumption basis, so the need to improve the buying process is long 

overdue.39 Additionally, increased year-over-year spending on cloud and related services is a given. 

 

36 “News & Events: DOD CIO, DISA assist ‘fourth estate’ with cloud migrations,” Defense Information Systems Agency, accessed 

September 24, 2018, https://www.disa.mil/NewsandEvents/2018/fourth-estate-cloud-migrations. 

37 “Cloud Adoption,” GSA, IT Modernization Centers of Excellence, accessed October 25, 2018, https://coe.gsa.gov/coe/cloudadoption.html. 

38 “What is quantum computing? A machine learning supercharger businesses can’t ignore,” Clint Boulton, CIO, February 7, 2018, 

accessed September 24, 2018, https://www.cio.com/article/3253886/emerging-technology/what-is-quantum-computing-a-machinelearning-supercharger-businesses-cant-ignore.html. 

39 Data from Federal Procurement Data System, extracted September 25, 2018. Calculations are based on Product Service Codes (PSC)s. 

Some of the transactions included in the totals may be inappropriate for consumption-based pricing models; this list represents a rough 

estimate of transactions that might be suitable. In addition to these categories, the PSC structure contains many other types of IT services 

that would likely be unsuitable for consumption-based pricing (such as data entry, programming, and help desk support). 
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According to a recent survey, 82 percent of public-sector cloud adopters were anticipated to increase 

spending on cloud computing.40

Figure 3-1. FY 2017 DoD Contract Obligations that Could Potentially Be Priced 

Using Consumption-Based Models 

Conclusions 

The government will be unable to effectively acquire modern consumption-based solutions until it 

implements a new set of procurement rules that address the unique attributes of these solutions and 

provide flexibility to effectively buy future solutions that do not fit into existing categories. 

Additionally, acquisition professionals must receive appropriate training and conduct ongoing market 

research to be effective buyers of these solutions. The challenges with the current system and some of 

the ways these challenges can be addressed are summarized as follows: 

 The current supplies and services model should be updated to provide more flexible purchasing 

categories that address current and anticipated delivery models, including consumption-based 

solutions. Traditional services acquisition rules should not apply to consumption-based 

solutions or to any hybrid contract whose primary purpose is to implement solutions 

 

40 “Is on-premises being killed by the cloud? Not necessarily,” Eric Houvenaghel, GCN, May 17, 2017, accessed October 25, 2018, 

https://gcn.com/articles/2017/05/17/on-premises-vs-cloud.aspx. 
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(i.e., a contract that includes a combination of consumption-based services, SaaS, infrastructure 

as a service, platform as a service, and/or professional services). 

 The government needs a new contract type to accommodate the uniqueness of consumptionbased solutions. Conventional acquisition policy assumes locking in a firm fixed price is low 

risk for the government, when in fact for consumption-based solutions it can result in paying 

for services not delivered or paying more than the current market rate due to declining prices. 

Additionally, the requirement to fully fund (obligate funds) upfront for firm-fixed-price 

contracts is not well suited for services whose ultimate price will be determined by usage and 

therefore not be known in advance. The optimal contract type for consumption-based solutions 

will function more like a time-and-material than a firm-fixed-price contract, and will 

automatically capture price reductions in contractors’ commercial pricing. It is also essential 

that this new contract type be permitted for use on contracts for commercial items (i.e., FAR 

Part 12) as most consumption-based solutions are commercial offerings. 

 Explicit authority should allow for consumption of newly released services not available at the 

time of initial contract award. Recent work-arounds to address this challenge include a contractspecific clause in the JEDI RFP and GSA’s order-level materials rule that permits up to 

33.33 percent of the value of an order to be used for supplies or services not known at the time 

of award.41

 Congress should provide funding flexibility, so acquisition professionals can confidently 

procure consumption-based solutions without fear of running afoul of the Anti-deficiency Act 

or Impoundment Act. This type of funding flexibility would improve acquisition beyond just 

IT. 

 DoD should develop and provide ongoing training, including a specialized certification, to 

acquisition professionals purchasing IT solutions. This training should be refreshed at least 

annually to keep pace with new technologies, solution offerings, and delivery models. Training 

could be modeled after the Digital IT Acquisition Program (DITAP), which is part of the Federal 

Acquisition Certification in Contracting Core-Plus Specialization in Digital Services 

(FAC-C-DS).42

 

41 Special Ordering Procedures for the Acquisition of Order-Level Materials, 48 CFR 552.238-82(d)(4). See also, “General Services 

Administration Acquisition Regulation (GSAR); Federal Supply Schedule, Order-Level Materials; Technical Amendment,” NARA Federal 

Register, accessed October 30, 2018, https://www.federalregister.gov/documents/2018/08/16/2018-17639/general-servicesadministration-acquisition-regulation-gsar-federal-supply-schedule-order-level. 

42 OMB OFPP Memorandum, Establishment of Federal Acquisition Certification in Contracting Core-Plus Specialization in Digital Services 

(FAC-C-DS), May 18, 2018, accessed October 25, 2018, https://www.whitehouse.gov/wpcontent/uploads/2018/05/fac_c_digital_services_05_12_18.pdf. 
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Implementation 

Legislative Branch 

 Revise appropriation law and budgeting rules to address the unique aspects of buying 

consumption-based solutions. Recommendation 49 provides the flexibility necessary for these 

changes. 

Executive Branch 

 Create a new subcategory of services called consumption-based solutions in FAR Part 37, Service 

Contracting, and add a reference (pointer) in FAR Part 39, Acquisition of Information 

Technology.43 Agency-specific regulations, policies, and guidance regarding service contracting 

are not applicable to contracts for consumption-based solutions or hybrid contracts when the 

primary purpose is to procure consumption-based solutions.

 The following is the definition of consumption-based solutions: Any combination of 

hardware/equipment, software, and labor/services that together provide a seamless 

capability that is metered and billed based on actual usage and predetermined pricing per 

resource unit, and includes the ability to rapidly scale capacity up or down. 

 Consumption-based solutions must be measurable/meterable on a frequent interval 

customary for the type of solution (e.g., hourly, daily, weekly). The contractor is required to 

notify the government when consumption reaches 75 percent and 90 percent of the contract 

funded amount. 

 New services or features can be added to contracts for consumption-based solutions at the 

discretion of the contracting officer without conducting a new competition, provided the 

amount of these new services or features does not exceed 25 percent of the total contract 

value. 

 Update the Product Service Code (PSC) data architecture to accommodate consumption-based 

solutions as a new data type. 

 Add a new contract type called fixed-price resource units to FAR Subpart 16.2. The fixed-price 

resource units contract type: 

 Establishes a fixed price per unit of measure (e.g., one hour of computing resource as shown 

in Table 3-1 below). 

 Sets a ceiling for the overall contract value against which consumption of individual 

resource line items will be charged. 

 Is the preferred contract type for consumption-based solutions, and when used for those 

procurements should not require special approvals. 

 Can be incrementally funded. 

 

43 The term consumption-based solutions was chosen in favor of consumption-based services because lessons learned from utility services 

contracting indicated that including the word “services” would cause confusion and result in attempts to improperly apply all Service 

Contracting (i.e., FAR Part 37) rules to the new purchasing category. 
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 Sets a maximum unit price for each resource unit and captures price reductions when 

commercial catalog prices are reduced. 

 Is permitted for use under commercial item/service acquisition in FAR Part 12: Acquisition 

of Commercial Items. 

Table 3-1. Resource Unit Examples 

Resource Unit Unit of Measure Quantity Unit 

Price 

Extended 

Amount 

Compute (virtualized server) Hours E X A M P L E 

Aerial Drone Surveillance Minutes E X A M P L E 

Travel Booking Trips E X A M P L E 

 Develop IT solutions training and a corresponding certification/designation for DoD acquisition 

professionals based on the existing DITAP, which is part of the FAC-C Core-Plus specialization 

in digital services. 

 Refresh training content and individual certifications at least annually. 

 Include instruction on how to conduct cost/price analysis for consumption-based solutions. 

 This training curriculum is for commercial IT solutions and does not apply to weapon 

systems acquisition. 

Note: Draft regulatory text can be found in the Implementation Details subsection at the end of Section 3. 

Implications for Other Agencies 

 Recommendations are for governmentwide changes that would benefit both DoD and federal 

civilian agencies. 

Recommendation 44: Exempt DoD from Clinger–Cohen Act Provisions in 

Title 40. 

Problem 

Two decades after its implementation, the Clinger–Cohen Act of 1996 (CCA) has made significant 

progress in instilling an enterprise view of IT acquisition among federal agencies, but other goals have 

proven harder to achieve. Many agencies continue to lag in prioritizing commercial technology and 

best practices over government-unique processes, a key mandate of CCA. Additionally, newer laws 

such as FITARA strengthen CCA provisions, including the use of modular contracting and the agency 

CIO role created—but not sufficiently empowered—by CCA. 

Within DoD, the CCA compliance process is not only outdated but also a time-consuming burden for 

programs that are layered on top of DoD’s robust resources, requirements, and acquisition system. This 
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multilayered process renders many CCA requirements redundant with other laws, regulations, and 

policies. DoD’s checklist-oriented compliance process occurs at major milestones rather than 

throughout the development process. DoD’s current compliance with CCA provides limited strategic 

value for CIOs and programs, and it has become more of a hurdle than an enabler in efforts to 

streamline and modernize IT acquisition. 

Background 

CCA is a group of legal provisions intended to provide enterprisewide oversight and discipline for IT 

acquisition across all federal agencies. CCA is mainly codified under Subtitle III of Title 40, Information 

Technology Management.44 DoDI 5000.02, which lays out the process for defense acquisition, contains a 

list of 11 specific requirements program offices must meet to be considered compliant with CCA.45 This 

list has been incorporated into other tailored guidance for the acquisition of services and defense 

business systems, DoDI 5000.74 and DoDI 5000.75, respectively. 

CCA History 

CCA was enacted as part of the FY 1996 NDAA.46 It comprised two bills that were added to the 

NDAA—the Federal Acquisition Reform Act and the Information Technology Management Reform 

Act (ITMRA). Together they are known collectively as CCA, although most provisions relating to IT 

come from the ITMRA portion, and DoD’s implementation of CCA explicitly identifies compliance 

only with ITMRA.47 In 2002, the IT provisions of CCA were codified under Title 40 of U.S. Code.48

CCA repealed the Automatic Data Processing Act of 1965, informally known as the Brooks Act, and 

instituted updated guidance for management and acquisition of federal IT. In 1994, then-Senator 

William S. Cohen released his investigative report Computer Chaos: Billions Wasted Buying Federal 

Computer Systems.

49 The report’s analysis of existing federal information systems found that many 

agencies were undertaking IT initiatives that were not related to their mission or sufficiently integrated 

with existing IT, much of which was archaic and difficult to maintain or modernize. Additionally, GSA 

offices charged with overseeing and preapproving all federal IT procurement were overworked and 

understaffed, leading to delays. Cohen’s report provided support for and directly led to the reforms of 

CCA. 

CCA revisited the acquisition of federal IT in a systemic way, and it set out new best practices from the 

private sector meant to create efficiencies. CCA was intended to improve slow and uncoordinated 

acquisition of computers and software on the federal level, shift oversight from GSA to federal agencies 

and OMB, and shift IT purchases to being viewed as strategic investments rather than isolated 

expenses. For the first time in law, CCA established CIOs in government agencies, detailing their roles 

and responsibilities. CIOs were meant to oversee all major IT investments in coordination with their 

agency heads, linking capital planning, budget formulation, and execution. CCA also encouraged 

 

44 As of mid-2018, 40 U.S.C. § 11101 through 40 U.S.C. § 11704. 

45 Operation of the Defense Acquisition System, DoDI 5000.02, Enclosure 1, Table 10, 76 (2017). 

46 FY 1996, Pub. L. No. 104-106 (1996). Codified in law as Information Technology Management, 40 U.S.C. Subtitle III. 

47 Implementation of Subdivision E of the Clinger–Cohen Act of 1996 (Public Law 104-106), DOD Memorandum (1997). 

48 Codifying Title 40, United States Code—Public Buildings, Property, and Works, Pub. L. No. 107-217 (2002). 

49 William S. Cohen, Computer Chaos: Billions Wasted Buying Federal Computer Systems, U.S. Government Printing Office, 1994. 
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incremental acquisition and modular contracting, and it required agencies to use commercial solutions 

rather than develop unique software or business processes.50

CCA in DoD 

As implemented in DoD, CCA created three strategic planning steps for IT: make sure the IT 

investment directly supports the agency’s mission; procure commercial technology if available; and if 

DoD-specific IT must be developed, conduct BPR first to ensure processes are modernized alongside 

technology.51

CCA was originally created to solve problems with both civilian agencies and DoD. Civilian agencies 

continue to have less sophisticated acquisition processes than DoD, and some of them struggle with 

effective oversight of IT acquisition.52 DoD’s acquisition structure provides substantial oversight for all 

acquisitions at an enterprise level, as detailed in DoDD 5000.01, The Defense Acquisition System, and 

DoDI 5000.02, Operation of the Defense Acquisition System. DoD has an additional acquisition process 

for IT, originally detailed in the DoDI 5000.02 as Enclosure 11, Requirements Applicable to All 

Programs Containing Information Technology and Enclosure 12, Defense Business Systems. Guidance 

for CCA compliance is also found in DoDI 5000.74, which contains the same 11-item compliance list as 

DoDI 5000.02 and DoDI 5000.75. This list integrates CCA compliance with other processes rather than 

as a separate checklist.53

DoDI 5000.02’s Enclosure 11 clarifies the additional steps to demonstrate CCA compliance, which 

apply to all IT programs of any size, including National Security Systems (NSSs). The Milestone 

Decision Authority (MDA) may not issue a milestone approval until the following transpires: 

(1) The sponsoring DoD Component or program manager has satisfied the applicable acquisition phasespecific requirements of the CCA as shown in Table 9 in Enclosure 1 of this instruction; and (2) The 

Program Manager has reported CCA compliance to the MDA and the DoD Component Chief 

Information Officer (CIO), or their designee.54

Below is the 11-item CCA checklist from DoDI 5000.02 and DoDI 5000.74: 

 Make a determination that the acquisition supports core, priority functions of the DoD. 

 Establish outcome-based performance measures linked to strategic goals. 

 

50 These requirements can also be found in 10 U.S.C. § 2222. 

51 Secretary of Defense, DoD Memorandum, Implementation of Subdivision E of the Clinger–Cohen Act of 1996 (Public Law 104-106),

1997, accessed October 22, 2018, https://www.acq.osd.mil/dpap/Docs/clinger.pdf. 

52 The IRS, for instance, was cited by the Treasury Inspector General for lacking a cloud migration strategy despite a 2010 cloud-first 

mandate from the federal CIO. In 2015, the IRS developed Form 990 using cloud services without crafting an agreement that adheres to 

FedRAMP-approved best practices. DoD, by contrast, has created its own cloud provider, the Defense Information Systems Agency (DISA). 

Treasury Inspector General for Tax Administration, The Internal Revenue Service Does Not Have a Cloud Strategy and Did Not Adhere to 

Federal Policy When Deploying a Cloud Service, August 7, 2017, accessed June 15, 2018, 

https://www.treasury.gov/tigta/auditreports/2017reports/201720032fr.pdf. 

53 Defense Acquisition of Services, DoDI 5000.74, Enclosure 7, Table 2: CCA Compliance, 31 (2017). 

54 Operation of the Defense Acquisition System, DoDI 5000.02, Enclosure 11, 140–141 (2017). 
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 Redesign the processes that the system supports to reduce costs, improve effectiveness, and 

maximize use of commercial off-the-shelf (COTS) technology. 

 Determine that no private-sector or government source can better support the function. 

 Conduct an analysis of alternatives. 

 Conduct an economic analysis that includes a calculation of the return on investment; or for 

non-automated-information-systems programs, conduct a lifecycle cost estimate. 

 Develop clearly established measures and accountability for program progress. 

 Ensure that the acquisition is consistent with the DoD Information Enterprise policies and 

architecture, to include relevant standards. 

 Ensure that the program has a cybersecurity strategy that is consistent with DoD policies, 

standards and architectures, to include relevant standards. 

 Ensure, to the maximum extent practicable, (a) modular contracting has been used, and (b) the 

program is being implemented in phased, successive increments, each of which meets part of 

the mission need and delivers measurable benefit, independent of future increment. 

 Register mission-critical and mission-essential systems with the DoD CIO (Implemented as the 

DoD Information Technology Portfolio Repository (DITPR)). 

These eleven items correspond to the original language in CCA as codified in Titles 10, 40, and 41. 

Table C-1 (in Appendix C) details this crosswalk between DoD policy and statute. DoD policy 

implements this statutory requirement as a documentation checklist, described in more detail below. 

CCA Compliance Process 

As executed, DoD’s process of CCA compliance has four main steps, the first three involving multiple 

layers of review before approval is granted: 

 The PM compiles documentation to demonstrate CCA compliance with the 11 criteria at key 

milestones. 

 This documentation is reviewed by the program executive officer (PEO). 

 Following this review, the documentation goes to the Component CIO. (The Air Force has 

modified this process to reverse steps 2 and 3, so PEO review occurs after CIO approval.) 

 PMs or Component CIOs enter information in DITPR, which is used to satisfy required 

reporting of enterprisewide compliance and coordination to the Secretary of Defense and 

Congress. CIOs also write a memorandum demonstrating program compliance. 

This process is completed using documents that are also reviewed and approved within the traditional 

acquisition review chain, going up to the component acquisition executive and defense acquisition 
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executive, based on the program’s acquisition category level. The same documents are repurposed for 

the CCA compliance process, which brings them to the CIO’s attention with the goal of having a single 

point of oversight for all DoD IT acquisitions. DoDI 5000.02, Enclosure 1, Table 10: CCA Compliance, 

lists the acquisition documents that can provide evidence of CCA compliance. Element 3, for instance, 

can be satisfied by information found in the initial capabilities document (ICD), information systems 

ICD, concept of operations, analysis of alternatives, or BPR.55 

In February 2017, DoDI 5000.75, Business Systems Requirements and Acquisition, created new 

guidance that replaced Enclosure 12 of DoDI 5000.02. This guidance was intended to streamline the 

acquisition process for defense business systems (DBSs) and make it more compatible with flexible and 

iterative development approaches. This new instruction explicitly states that CCA compliance should 

not require separate documentation and can be satisfied by existing documentation and reviews, a 

streamlined practice that was already common in the Air Force. It replaces milestones with authority to 

proceed decision points, encouraging oversight of DBSs on an ongoing basis instead of only at 

predetermined points in the lifecycle. 

DBSs guidance states that “decision authorities will prevent tailored procedures from including 

separate reviews and approvals by other organizations when confirmation through direct collaboration 

is sufficient.”56 This revision to the DBS acquisition process reflects the need for fewer formal review 

processes and more teamwork; it also shows the extent to which CCA compliance has become 

embedded in DoD practices, particularly those governing DBSs. As more IT programs begin using 

Agile development and acquisition processes, DoD process requirements will need to evolve from 

checklists to ongoing collaboration. 

Discussion 

CIOs Lack Authority to Fully Implement CCA-Directed Oversight 

The positive intent of CCA has not consistently translated into action. CCA was meant to empower 

agency CIOs, yet multiple evaluations of federal agencies show that CIOs did not receive enough 

authority over strategic and budget decision making, were dividing their attention among multiple 

leadership roles in their organization, or did not report directly to the head of their agency—necessary 

conditions for effectiveness.57 In 2015, the FITARA gave new legal mandate and authority for 

empowering CIOs. 

FITARA was passed as part of the FY 2015 NDAA and was arguably the most significant legislative 

initiative on federal IT acquisition since CCA.58 FITARA attempted to address some of the CIO issues 

 

55 Ibid, Enclosure 1, Table 10, 76. 

56 Business Systems Requirements and Acquisition, DoDI 5000.75 (2017). 

57 See for instance “Information Technology: Opportunities for Improving Acquisitions and Operations,” U.S. Government Accountability 

Office, April 2017, https://www.gao.gov/assets/690/684047.pdf. Also see Information Technology: Improved Implementation of Reform 

Law Is Critical to Better Manage Acquisitions and Operations, GAO-17-263T, December 6, 2016, 13, accessed October 23, 2018, 

https://www.gao.gov/assets/690/681420.pdf. 

58 FY 2015 NDAA, Pub. L. No. 113-291, div. A, title VIII, subtitle D, 128 Stat. 3292, 3438-3450 (2014). Other IT legislation includes Title III of 

the E-Government Act (Pub. L. No. 107-347) and the Federal Information Security Management Act of 2002 (FISMA, updated in 2014 as 

the Federal Information Security Modernization Act under Pub. L. No. 113-283). FISMA requires agencies to demonstrate security of 

information and information systems, but does not take such a systemic approach to the management and acquisition of IT. 
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by bolstering OMB’s oversight role, establishing in law the Federal IT Dashboard, and reinforcing the 

authority of agency CIOs.59 FITARA was also meant to reinforce the mandate to engage in modular 

contracting and adopt more commercial technology, requiring CIOs to “certify that information 

technology investments are adequately implementing incremental development.”60 In FY 2016, federal 

agencies reported that 64 percent of active software development projects were slated to deliver usable 

functionality every 6 months.61 Within DoD, only 8 percent of projects—4 out of 51 projects—were 

planning delivery of releases every 6 months.62 The cultural preference for big programs has not been 

alleviated by statutory requirements for modular contracting and incremental development. 

The role of agency CIOs is outlined in 40 U.S.C. § 11315, which states that a CIO has the following 

responsibilities and duties: 

 Providing advice and assistance on IT acquisition to the agency head. 

 Ensuring a sound, secure, and integrated IT architecture. 

 Promoting effective and efficient design and operation of IT management processes. 

 Monitoring and evaluating IT program performance and providing advice on whether to end 

programs. 

 Annually engaging in strategic planning and performance evaluation processes. 

Missing from this list is budget authority for IT investments. Several IT experts said that because CIOs 

do not have access to substantial amounts of funding, they need to have a role in the acquisition 

process to ensure strategic spending within funded entities.63 That role is ensured with the CCA 

compliance process, for which CIOs conduct cost analysis on a program-by-program basis. Some 

component CIOs have more opportunities for influence over Military Service priorities and spending 

decisions, as the Air Force CIO does on the AF Corporate Board. On an enterprise level, one expert 

shared that the DoD CIO had seen some success in promoting collective pricing arrangements across 

DoD components, lowering overall vendor costs.64 He conceded, however, that CCA should be 

“revamped a little.”65 Current means for enabling CIOs have led to modest success, but CIO authority 

falls short of the original intent of CCA. 

 

59 “How the Clinger–Cohen Act Continues to Ripple Through Federal IT Today,” Wylie Wong, FedTech Magazine, February 10, 2016, 

accessed October 23, 2018, http://www.fedtechmagazine.com/article/2016/02/how-clinger-cohen-act-continues-ripple-through-federalit-today 

60 Resources, Planning, and Portfolio Management, 40 U.S.C. § 11319(b)(1)(B)(ii). 

61 GAO, Information Technology: Improved Implementation of Reform Law Is Critical to Better Manage Acquisitions and Operations, 

GAO-17-263T, December 6, 2016, 13, accessed October 23, 2018, https://www.gao.gov/assets/690/681420.pdf. 

62 Ibid, 15-16. GAO notes a disparity between agencies’ reporting of projects on the IT Dashboard and to GAO. For DoD, the numbers 

reported to GAO demonstrated that 8% of projects planned delivery every 6 months. The data on the IT Dashboard showed 63% of 

projects planned delivery every 6 months. 

63 DoD CIO officials and Deputy Assistant Secretary of Defense, Command, Control, Communications, Cyber, and Business Systems (DASD 

(C3CB)), discussions with Section 809 Panel, February–March 2018. 

64 DoD CIO official, discussion with Section 809 Panel, March 2018. 

65 Ibid. 
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CIO turnover at agencies has been high. As a 2004 GAO report pointed out, in the 8 years following 

CCA enactment, the average tenure of federal CIOs was 2 years. This trend has continued and 

intensified. Agency CIOs and IT executives generally agree that they need 3 to 5 years to become 

effective.66 DoD has had 14 different CIOs between 1996 and 2018, nine of whom were in an acting 

capacity for all or part of their tenure. During this period, the average tenure for the DoD CIO was 

24 months. With the change in presidential administrations in 2017, seven federal agency CIOs handed 

over their responsibilities within the span of a few months, renewing concerns about consistency in 

federal IT leadership.67

The CIO Council, established in 2002, provides support and guidance for agency CIOs. In 2008 and 

2012, the CIO Council issued versions of the CCA Core Competencies, a training document based on 

CCA to educate CIOs on IT acquisition and management strategies. This document notes that no one 

individual can accomplish all the goals, emphasizing the importance of training the entire 

IT acquisition workforce. The 2012 version added nine competencies, including guidance on cloud 

computing and social media, two fundamental pieces of modern computing that did not exist in 1996. 

The guidance on acquisition acknowledges, “Acquisition needs to move from what [has] been a 

singular focus on process to one that considers both process and objectives.”68 

OMB has issued similar guidance, such as OMB Circular A–130, Management of Federal Information 

Resources, the primary policy document for federal IT management. Circular A–130 establishes policy 

implementing CCA and other IT laws, both predating and postdating CCA. The most recent revision 

was published in July 2016 and reflects changes from FITARA. 

DoD CIO and CMO Offices are Reorganizing More Effectively 

Recent DoD leadership changes created new processes intended to achieve goals similar to those 

envisioned by CCA and changed the nature of the CIO to refocus more strategically on IT issues rather 

than business management. The FY 2017 NDAA established the office of chief management officer 

(CMO) and elevated the position to third-highest ranking official in DoD.69 The FY 2018 NDAA 

expanded the CMO role, shifting existing authorities over business systems from CIO to CMO.70 These 

changes reflected a congressional perception of the CMO as better suited to oversee certain IT 

investments, encompassing not only the acquisition process but also BPR.71

 

66 GAO, Federal Chief Information Officers: Responsibilities, Reporting Relationships, Tenure, and Challenges, GAO-04-823, July 2004, 4 

and 47, accessed October 23, 2018, https://www.gao.gov/new.items/d04823.pdf. 

67 “GAO Chief: CIO Departures Are ‘An Area of Concern,’” Carten Cordell, Scoop News Group, August 23, 2017, accessed October 23, 

2018, https://www.fedscoop.com/gaos-dodaro-says-cio-departures-area-concern/. 

68 CIO Council, 2012 Clinger–Cohen Core Competencies and Learning Objectives, https://s3.amazonaws.com/sitesusa/wpcontent/uploads/sites/1151/2016/10/2012-Learning-Objectives-Final.pdf. 

69 Section 901 of FY 2017 NDAA, Pub. L. No. 114-328 (2016). 

70 Section 910 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

71 As the SASC Report on the FY 2018 NDAA explains, “Decisions related to business systems could be more effectively handed [sic] by the 

entity coordinating business management and reform across the Department. Therefore, the committee recommends the shifting of 

several major Chief Information Officer functions to the Chief Management Officer organization, and consolidation of the rest in a Chief 

Information Warfare Officer.” (page 210) The report also notes, “The committee’s intent is not for the addition of large internal 

bureaucracy to manage these new responsibilities, and expects the Chief Management Officer to instead gather those personnel 

currently fulfilling these roles within the Office of the Secretary of Defense and the Chief Information Officer organization.” 
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Ultimately, a DoD CMO with broader authority, including budget allocation and reprogramming 

authority, may be more successful at overseeing business processes and enforcing incremental 

development. DoD’s report to Congress on the CMO reorganization clarified that both team leaders 

and reform leaders will complete initial BPR assessments across eight lines of business operations 

including human resources, health care, financial management, and other functional areas.72 The CCA 

requirement for BPR will be fulfilled by this process, making the legal provision redundant. 

Additionally, the FY 2018 NDAA gives the CMO the duty of “serving as the principal advisor to the 

Secretary and the Deputy Secretary on establishing policies for, and directing, all enterprise business 

operations of the Department, including planning and processes, business transformation, performance 

measurement and management, and business information technology management and improvement 

activities and programs, including the allocation of resources for enterprise business operations and 

unifying business management efforts across the Department.”73 Maintaining and reinforcing this 

budget authority is necessary for empowering the CMO and ensuring effective IT management and 

BPR. 

Other recent changes underline that the CIO role is in transition. The Navy announced in March 2018 

that it would consolidate the functions of CIO and CMO under a single office. A Navy memo stated 

that the consolidation would “contribute to a leaner, more focused approach to business 

transformation and will help facilitate greater cross-enterprise collaboration on critical issues that 

require an enterprise approach.”74 Then-HASC Chairman Mac Thornberry’s initial version of the 

FY 2019 NDAA would have eliminated all but five of the CIOs in DoD.75 The final, amended version of 

the bill did not contain this language.76

The CIO role is evolving as technology evolves, with additional demands creating new responsibilities, 

positions, and structures that do not fit neatly into CCA’s concept of a single CIO. Many people 

familiar with CCA compliance believe planning for cybersecurity to be among the most important 

elements of CCA. Responsibility for DoD’s cybersecurity strategy rests with the Deputy CIO for Cyber 

Security, and component CIO offices similarly have individuals in the role of chief information security 

officer (CISO). In July 2018, DoD hired its first chief data officer (CDO), a position already created in the 

Air Force and Army. The rise of the CISO, CMO, and now CDO reveals the complexity of the CIO 

office along with a need for flexibility and collaborative accountability. 

 

See Senate Armed Services Committee Report to Accompany S.1519 – National Defense Authorization Act for Fiscal Year 2018, July 10, 

2017, accessed June 18, 2018, https://www.congress.gov/115/crpt/srpt125/CRPT-115srpt125.pdf. 

72 Office of the Secretary of Defense, Report to Congress Restructuring the Department of Defense Acquisition, Technology and Logistics 

Organization and Chief Management Officer Organization (“Section 901 Report”), August 2017, accessed June 18, 2018, 

https://www.defense.gov/Portals/1/Documents/pubs/Section-901-FY-2017-NDAA-Report.pdf. 

73 Section 910 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). Codified at 10 U.S.C. § 132a. 

74 Under Secretary of the Navy Thomas B. Modly, “Restructure of Secretariat Functions,” March 16, 2018, accessed June 18, 2018, 

http://www.navy.mil/undersec/docs/Secy_reorg_memo.pdf. 

75 See Section 917 of HASC Chairman’s Mark of H.R. 5515, “FY19 National Defense Authorization Bill,” accessed June 18, 2018, 

https://armedservices.house.gov/sites/republicans.armedservices.house.gov/files/wysiwyg_uploaded/FY19%20NDAA%20Chairman%27s

%20Mark%20Final.pdf. 

76 H.R. 5515 (“National Defense Authorization Act for Fiscal Year 2019”), accessed June 18, 2018, https://www.congress.gov/bill/115thcongress/house-bill/5515/text. 
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Document-based Compliance Is Slow and Adds Little Value 

CCA compliance is completed using a series of standardized document approvals that take months to 

complete and rarely improve acquisition outcomes.77 Instead of having an ongoing relationship with 

programs, CIO offices are often only asked to provide feedback to programs when they are facing 

urgent demands and impending milestone deadlines. Feedback at these points is typically 

administrative rather than substantive in nature. Numerous respondents shared this view of CCA 

compliance, voiced in conversations with the Military Services and Defense Agencies and from both 

the program and CIO perspective. 

A representative from the Army’s PEO enterprise information system office confirmed that he had 

never seen a CCA documentation package rejected for not being compliant.78 The Army representative 

stated that the tool used to verify CCA documentation “is basically checking the box that the program 

is compliant.”79 A Military Service’s CIO office CCA administrator stated that he would welcome the 

opportunity to be more involved with programs as they are developing their program strategy 

(specifically by working with integrated product teams), but described this approach as a luxury he did 

not have.80

CCA compliance is confirmed at major milestones, after full requirements have been developed.81 It 

does not guarantee systems are initially designed for interoperability, information assurance, or risk 

management framework compliance, contrary to evidence-based practices. One official stated, 

Doing the checklist, submitting it for review, and signing off on the checklist became a separate activity, 

almost an end unto itself. The engagement between program and CIO oversight started to be all about the 

checklist: when will the complete package be submitted, how long will it take to review, what more 

information do you need. The actual exchange flow waited for the run-up to the milestone, while other 

program efforts continued moving forward.82

The revised process in DoDI 5000.75 is intended to address some of this situation, so that “program and 

oversight...interact more frequently as the program progresses, through either direct engagement 

upfront or preplanned technical and management assessments.” DoDI 5000.75 governs only DBSs, 

however, which represent a fraction of DoD IT investments. 

In a 2015 GAO survey of documentation requirements for 24 major weapon system programs, 

respondents consistently ranked CCA compliance as a low-value process and added commentary that 

 

77 Program managers; DoD component CIOs; Deputy Assistant Secretary of Defense, Command, Control, Communications, Cyber, and 

Business Systems (DASD (C3CB)); and Navy Program Executive Officer of Enterprise Information Systems (PEO EIS), interviews with 

Section 809 panel, 2017 and 2018. 

78 Representative from Army’s PEO EIS office, email with Section 809 Panel, August 16, 2017. 

79 Ibid. 

80 Military Service’s CIO’s office CCA administrator, interview with Section 809 Panel, September 2017. 

81According to 2008 DoD guidance, the CIO is required to “certify, prior to each milestone A, B, or full rate production approval (or their 

equivalent), that a Major Automated Information System (MAIS) is being developed in accordance with the Clinger–Cohen Act (CCA) of 

1996. It also requires the DoD CIO to submit timely notification of such certifications to the congressional defense committees.” (DoD 

Deputy Chief Information Officer Memorandum: Clinger–Cohen Act (CCA) Compliance Certification of Major Automated Systems (MAIS) 

for Fiscal Year (FY) 2008, March 13, 2008). 

82 DoD office of Deputy Assistant Secretary of Defense for Command, Control, and Communication, Cyber, and Business Systems (DASD 

C3CB), email to Section 809 Panel, August 7, 2017. 
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CCA is out of date with current acquisition practices. This study also showed that it took on average 

10 months to process CCA documentation, about 6 months to complete and another 4 months for 

review.83

Guidance in DoD components confirms this slow turnaround. The Air Force’s compliance guide, for 

instance, stipulates, “The Program Manager should submit the CCA compliance documentation for 

CCA elements 6, 8, 9, and 11 to SAF/CIO A6XA at least four months before the milestone review or 

contract award is scheduled to allow sufficient time for review and revisions.”84 In December 2016, the 

Air Force conducted a Rapid Improvement Event to streamline the CCA process. People involved in 

that study explained that CCA compliance was seen as a chokepoint in the acquisition process. One 

program took 525 days to produce and coordinate CCA documents. Legacy programs and new starts 

commonly take 13 months to coordinate approvals, delays added on top of the time required to create 

documents.85 One Air Force enterprise architect reported that CCA compliance has nothing to do with 

the program’s execution, adding that the Air Force Research Laboratories have an office just for 

compliance. As a result of this study, the Air Force delegated approval authority to the PM for eight of 

the 11 elements. The Air Force CIO retains approval for elements 8, 9, and 11. 

DISA Defense Information Technology Contracting Organization reported that it takes 6 to 8 weeks to 

process CCA compliance documentation. The people processing the approvals often lack the 

background to provide guidance, so it becomes a paperwork exercise instead of strategic planning.86

The Army CIO office reported that CCA packages spend additional time going through legal review 

with the Army Office of General Counsel.87 Some of this time comes from mapping existing program 

documents to the CCA compliance checklist tool. One individual involved in this compliance exercise 

suggested that documents are simply too long to be useful, giving the example of mining a 150-page 

acquisition strategy for evidence of compliance. He observed that briefings can produce better feedback 

for programs than documents, and can do so more efficiently. The same CIO office said that the CIO 

review of these documents does not affect other enterprise decisions or strategies. 

The 2016 revision of OMB Circular A–130 acknowledges the checklist mentality problem in federal 

IT acquisition. The circular emphasizes three strategic priorities: real-time knowledge of the 

environment, proactive risk management, and shared responsibility for privacy and security of 

information. The authors of the circular explain that “we must move away from periodic, compliancedriven assessment exercises [....] Throughout the circular, we make clear the shift away from check-list 

exercises and toward the ongoing monitoring, assessment, and evaluation of Federal information 

resources.”88 The need for continuous monitoring of federal and DoD IT suggests the processes put in 

place by CCA, despite good intentions, are no longer relevant. 

 

83 GAO, DOD Should Streamline Its Decision-Making Process for Weapon Systems to Reduce Inefficiencies, GAO-15-192, February 2015, 

accessed July 2, 2018, http://www.gao.gov/assets/670/668629.pdf. 

84 Clinger–Cohen Act (CCA) Compliance, AFMAN 17-1402, 7-8 (2018). 

85 Interview with Section 809 Panel, February 2, 2018. 

86 DISA Defense Information Technology Contracting Organization (DITCO), interview with Section 809 Panel, February 14, 2018. 

87 Army CIO office, interview with Section 809 Panel, February 2018. 

88 “Managing Federal Information as a Strategic Resource,” Office of Management and Budget, July 27, 2016, accessed October 23, 2018, 

https://obamawhitehouse.archives.gov/blog/2016/07/26/managing-federal-information-strategic-resource 
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CCA Overlaps with Other IT Legislation, Regulations, and Policy 

Overlap exists between CCA compliance and other laws, regulations, and policy. These other 

requirements arguably meet the same needs that CCA was intended to fulfill. Table C-2 (in 

Appendix C) details these many redundancies, which include overlap with the planning, 

programming, budgeting, and execution process; statutes such as 10 U.S.C. § 2222, Information 

Technology: Additional Responsibilities of Chief Information Officers, and 10 U.S.C. § 2223a, 

Information Technology Acquisition Planning and Oversight Requirements, as well as other DoD 

policies. As discussed above, CCA compliance is additive to traditional acquisition processes, which 

require programs to demonstrate similar strategic planning in such documents as the Acquisition 

Strategy and Economic Analysis. 

Newer federal laws governing IT acquisition better reflect the current acquisition and technology 

environment. The Federal Information Security Management Act (FISMA) of 2002 was enacted as part 

of the 2002 E-Government Act and was amended in 2014 by the Federal Information Security 

Modernization Act to address evolving security concerns.89 FISMA added several new cybersecurity 

provisions to Title 44 of U.S. Code and amended CCA provisions to clarify requirements for 

information security.90 Other changes included less overall reporting and more use of continuous 

monitoring in systems.91

In many ways, FITARA has created a more modern process for achieving transparency and oversight. 

As mentioned above, FITARA bolstered much of CCA that had not been fully implemented and 

codified much of the guidance that OMB had issued in the preceding decade. FITARA led to the 

IT Dashboard, a publicly available tool showing agencies’ spending on IT and their performance on the 

biannual FITARA scorecard, which originally assessed agencies on five metrics.92 These scorecard 

metrics have been updated to reflect changes in technology and federal IT laws, with 2018 bringing two 

new metrics for cybersecurity and agency implementation of the Modernizing Government Technology 

(MGT) Act.93 Because the scorecard is a living document, there is speculation that older metrics will 

drop off the scorecard once desired progress has been achieved, and more relevant metrics will be 

added.94 

DoD remains only partially compliant with FITARA, despite FITARA’s successes in improving CIO 

authority and other features of federal IT management. Originally, the only aspect of FITARA that 

created new mandates for DoD was the requirement for annual reporting about data center 

 

89 See Title III of E-Government Act of 2002, Pub. L. No. 107-347 (2002). Federal Information Security Modernization Act of 2014, Pub. L. 

No. 113-283 (2014). 

90 See 44 U.S.C. §§ 3551–3559. 

91 “Risk Management: FISMA Background,” National Institute of Standards and Technology, Computer Security Resource Center, accessed 

October 23, 2018, https://csrc.nist.gov/Projects/Risk-Management/Detailed-Overview. 

92 The original metrics were Agency CIO authority enhancements, Transparency and risk management, Portfolio review, Data center 

optimization initiative, whether CIO’s boss is Secretary or Deputy Secretary, and CIO Status. In 2017, the Scorecard changed to include 

metrics on software licenses and whether CIOs were acting or permanent. See www.itdashboard.gov and “A Look Back: How the FITARA 

Scorecards Have Evolved,” MeriTalk, accessed September 6, 2018, https://www.meritalk.com/articles/a-look-back-how-the-fitarascorecards-have-evolved/. 

93 Oversight and Government Reform, OGR Biannual Scorecard – May 2018 (May 2018 FITARA Scorecard), accessed September 6, 2018, 

https://oversight.house.gov/wp-content/uploads/2018/05/OGR-Scorecard-6.0-v2.pdf. 

94 “Agencies Could Be Graded on More than FITARA under New Scorecard,” Aaron Boyd, NextGov.com, accessed September 6, 2018, 

https://www.nextgov.com/cio-briefing/2018/03/agencies-could-be-graded-more-fitara-under-new-scorecard/146694/. 
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consolidation.95 The scorecard now assesses DoD, fully or partially, on all metrics except for 

cybersecurity, and the agency has consistently earned Ds and Fs. DoD has been called to testify about 

its persistent poor performance on the scorecard, with lawmakers seeing opportunity to use this tool to 

improve DoD’s IT management and reporting.96 

As IT acquisition continues to rapidly evolve, effective legislation and guidance will look more like 

FITARA, FISMA, or the MGT Act, all of which provide increased flexibility and more effective 

oversight. Much of this legislation owes it effectiveness to the precedent set by CCA, but future 

innovation will not come from processes defined by an existing law that is more than 2 decades old. 

DoD, in particular, has an acquisition system already robust enough to ensure strategic planning, but, 

also bureaucratic enough to need help evolving its IT acquisition practices, so it can more readily 

innovate. 

Conclusions 

In 1996, CCA instilled discipline in federal IT acquisition, but it has outlived its usefulness. The realworld effect of CCA compliance has been to add complexity and checklist-based documentation 

requirements atop DoD’s existing acquisition bureaucracy, creating a slow and frustrating process for 

programs that provides limited value to CIOs. 

DoD’s IT acquisition can be made more efficient by reducing redundancies and checklist requirements. 

CCA requires many of these redundant and low value-added provisions from which DoD should be 

exempted. Several initiatives recognize the burden of CCA compliance and propose solutions to 

mitigate it, including the revised guidance for business systems in DoDI 5000.75 and the Air Force’s 

streamlined process for CCA compliance. 

Exempting DoD from CCA is one step in streamlining IT acquisition, but not the final step. DoD must 

continue to shift toward more strategic, collaborative processes that restore accountability to the 

appropriate individuals. It is imperative that DoD continue to follow many of the best practices 

mandated by CCA and enforced by newer laws, including continuous assurance of cybersecurity, BPR, 

and the adoption of commercial technology and processes. Congress should not repeal CCA provisions 

altogether, because they may remain useful for civilian agencies. 

Congress should exempt DoD from the CCA provisions in Title 40 and instruct DoD to replace the 

11 CCA checklist requirements in the DoDI 5000.02 and other acquisition policy documents with a 

truly strategic, outcome-oriented IT acquisition process that empowers the lower-level workforce, 

shortens delivery schedules, and avoids paperwork for its own sake. Once Congress has approved the 

exemption of DoD from CCA provisions, DoD and OMB should modify existing policy and guidance 

documents to reflect these changes. 

 

95 DoD, “Plan for Implementing the Federal Information Technology Acquisition Reform Act (FITARA),” October 15, 2015, Enclosure 1, 

accessed June 18, 2018, https://www.defense.gov/Portals/1/Documents/DoD_FITARA_Implementation_Plan_Oct15.pdf. 

96 “Hearing: The Federal Information Technology Acquisition Reform Act (FITARA) Scorecard 6.0,” Oversight and Government Reform, 

accessed September 6, 2018, https://oversight.house.gov/hearing/the-federal-information-technology-acquisition-reform-act-fitarascorecard-6-0/. 
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Implementation 

Legislative Branch 

 Exempt DoD from 40 U.S.C. Subtitle III (Clinger–Cohen Act). 

 Delete 10 U.S.C. § 2224 note (Strategy on Computer Software Assurance), which has become 

obsolete.97

 Direct DoD, in the legislative history of this exemption, to eliminate all 11 of its CCA-related 

CIO document approval requirements. These include the document approval requirements 

with language derived from 40 U.S.C. Subtitle III, 41 U.S.C. § 2308, which requires that the FAR 

support modular contracting, and 10 U.S.C. § 2224 note. 

 Direct DoD leadership to acquire IT strategically by empowering the lower-level workforce, 

shortening delivery schedules, and avoiding paperwork for its own sake. 

Executive Branch 

 Revise DoDI 5000.02 to eliminate the checklist requirement under Table 10 of Enclosure 1, CCA 

Compliance. The checklist should be replaced with guidance established by the CMO and other 

officials as empowered by the Secretary of Defense.98

 Revise DoDI 5000.02 to eliminate the CCA requirements under Section 3 of Enclosure II, 

Requirements Applicable to all Programs Containing Information Technology. 

 Revise DoDI 5000.74 to eliminate Section 2 and Table 2 of Enclosure 7, Acquisition 

Considerations for IT within Services.99

 Revise DoDI 5000.75 to delete references to CCA, including in Table 4: Statutory Requirements 

of Appendix 4A: Supporting Information.100

 Revise Section 9 of Circular A-130, Managing Information as a Strategic Resource to exempt 

DoD from the CCA provisions in Title 40.101

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 3. 

 

97 This note section of Title 10 required DoD to develop by the end of FY 2011 a “strategy for assuring the security of software and 

software-based applications.” As the deadline expired years ago, the section is no longer relevant. See Section 932 of FY 2011 NDAA, 

Pub. L. No. 111-383 (2011). 

98 Operation of the Defense Acquisition System, DoDI 5000.02 (2017). 

99 Defense Acquisition Services, DoDI 5000.74 (2017), Enclosure 7: Acquisition Considerations for IT within Services. 

100 Business Systems Requirements and Acquisition, DoDI 5000.75 (2017), Appendix 4A: Supporting Information. 

101 OMB Circular No. A-130, Managing Information as a Strategic Resource, updated July 28, 2016, Section 9, 26, accessed June 20, 2018, 

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A130/a130revised.pdf. 
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Implications for Other Agencies 

 Other federal agencies may not have the sophisticated IT acquisition oversight processes that 

exist in DoD. For this reason, repealing Subtitle III of Title 40 entirely might disrupt civilian 

agencies’ IT acquisitions. Exempting DoD, however, would not have implications for other 

agencies. 

Recommendation 45: Create a pilot program for contracting directly with 

information technology consultants through an online talent marketplace. 

Problem 

Work in the IT discipline often requires unique expertise of state-of-the-art technologies best provided 

by independent consultants. These outside experts can bring a specialized skill or new perspective at 

key decision points in long-term programs or efforts. Being able to quickly and easily use such 

consulting services to supplement existing IT support ensures government programs can succeed in 

today’s rapidly evolving IT landscape. This real-time flexibility is hard to achieve within the limitations 

of federal hiring and contracting practices. IT professionals do not always want to become full-time 

employees or navigate the complexities of becoming a prime government contractor or subcontractor. 

Instead, such highly qualified professionals choose to work as independent contractors in the gig or

freelance economy, often finding work through online talent marketplaces. The federal government 

needs to acquire IT experts more in line with commercial best practices, improving the speed, cost, and 

quality of resources that support complex IT solutions. 

Background 

Today’s workforce is modular and flexible, characterized by the concept of the gig economy, a term that 

describes the popularity of freelance work for both employees and employers. This kind of work has 

become more prominent with the rise of companies like Uber as well as other technology-enabled 

platforms that match workers with short-term or intermittent jobs. In the gig economy, employers can 

use the unique skill sets of independent contractors for specialized projects or limited periods without 

taking on the liability and expense of full-time employees. Approximately 10 percent of workers count 

their primary job as contingent or an alternative employment arrangement, with more people 

supplementing traditional jobs with freelance work.102 In total, freelance workers contribute 

approximately $1.4 trillion annually to the American economy.103 These freelance working relationships 

will increase dramatically in the next decade, largely fueled by online talent marketplaces. By 2027, 

most of the American workforce is predicted to be freelance workers.104 

IT professionals commonly work as independent consultants to provide short-term assistance. SAP, 

one of the largest business software companies in the world, trains and certifies numerous 

 

102 “Contingent and Alternative Employment Arrangements News Release,” Bureau of Labor Statistics, June 7, 2018, accessed July 6, 

2018, https://www.bls.gov/news.release/conemp.htm. 

103 “Upwork Press Release,” Upwork, accessed October 19, 2018, https://www.upwork.com/press/2017/10/17/freelancing-in-america2017/. 

104 Ibid. 
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IT companies and independent consultants to provide services to support SAP clients. Hundreds of 

companies provide consultants certified in SAP skill sets as needed to support implementation and 

integration of SAP systems. “Nearly three-fourths of all SAP-related jobs last somewhere between four 

and 12 months, with the greater percentage of those falling in the four- to six-month range.”105 Often, 

these temporary positions fill a growing IT knowledge gap. The 2017 Global Knowledge Salary Report 

indicated that more than two-thirds of IT decision-makers recognize “a gap between their team’s skill 

levels and the knowledge required to achieve organizational objectives.”106 

The most in-demand skills sets for both the private and public sector are cloud computing, 

cybersecurity, and networking. An estimated 285,000 open cybersecurity positions exist in the federal 

government, with a global projected shortage of 1.8 million by 2022.107 Tyson Meadors, director of 

cybersecurity policy at the National Security Council, notes that individuals with these skills move 

frequently between jobs in the public and private sectors, adding that the government needs to make 

sure “we have the ability to allow people to go and come from federal service over the course of their 

careers.”108 

In the private sector, business structures are transforming to reflect the modularity and flexibility of the 

digital, on-demand workforce enabled by online talent marketplaces. The government is lagging 

behind this trend. Accenture’s Workforce Marketplace report predicts that by 2022, organizations that 

resist these technological changes and cling to old bureaucratic business models “will experience rapid 

deterioration of market power.”109 The government must be more intentional about following 

commercial innovations in managing its workforce, beginning with IT specialists. The bureaucratic 

government model no longer fits the way people want and need to work in the digital information 

economy. 

Discussion 

PMs Struggle to Use IT Consultants Strategically 

The ability to rapidly obtain specialized IT support is particularly critical as the federal government 

acquires state-of-the-art IT and modernizes its complex web of legacy systems. As IT solution 

complexity grows, programs will continue to need immediate IT consultant services to provide 

independent, objective advice and recommendations. These consultants bring specialized expertise and 

commercial best practices that maximize the business value of IT systems. The specialized skill sets 

 

105 Americas’ SAP Users’ Group (ASUG), Seeking Short-Term SAP Superheroes: The Predicament of the SAP Gig Economy, 2018, 3, accessed 

October 19, 2018, https://blog.asug.com/hubfs/Talent%20Hub/2018_GIG_WP_v5.pdf. 

106 Global Knowledge Training, 2017 IT Skills and Salary Report: A Comprehensive Study from Global Knowledge, 6, accessed October 19, 

2018, https://mindhubpro.pearsonvue.com/v/vspfiles/documents/2017_Global_Knowledge_SalaryReport.pdf. 

107 “Retrained agency employees can be a key source of cybersecurity talent, NSC official says,” March 8, 2018, Scoop News Group, 

accessed October 19, 2018, https://www.fedscoop.com/agencies-can-retrain-employees-get-cyber-talent/. Center for Cyber Safety and 

Education, 2017 Global Information Security Workforce Study: Benchmarking Workforce Capacity and Response to Cyber Risk, accessed 

October 19, 2018, https://iamcybersafe.org/wp-content/uploads/2017/07/N-America-GISWS-Report.pdf. 

108 “Retrained agency employees can be a key source of cybersecurity talent, NSC official says,” March 8, 2018, Scoop News Group, 

accessed October 19, 2018, https://www.fedscoop.com/agencies-can-retrain-employees-get-cyber-talent/. 

109 Accenture, Workforce Marketplace: Invent Your Future, 2017, 13, accessed October 19, 2018, 

https://www.accenture.com/t20180803T070620Z__w__/us-en/_acnmedia/Accenture/next-gen-4/tech-vision-2017/pdf/AccentureTV17-Trend-3.pdfla=en?la=en. 
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needed by the government will become harder to predict and procure as technology continues to 

evolve. 

PMs use consultants for both strategic and tactical guidance, which overlap to varying degrees. 

Strategic consultants provide guidance at key decision points for issues related to cloud computing, 

systems analysis, and architecture. Tactical consultants provide technical expertise in areas such as 

cybersecurity, network management, design and integration, programming, and data conversion. 

Specialized IT consultants command a high hourly rate in both the commercial marketplace and on 

government contracts. Typical rates on government contracts range from approximately $200 to 

$400 per hour for job titles including systems architect, BPR specialist, database specialist, informatic 

specialist, and subject matter expert (SME). One contractor rate sheet showed a level-one systems 

architect billing at approximately $200 per hour, a level-three BPR specialist at $222 per hour, and a 

level-three SME at nearly $400 per hour.110 Many of these specialists remain permanently on contract; 

others are brought in for short consulting projects. In the commercial marketplace, such specialists earn 

similar wages. These unique skill sets justify high wages and empower consultants to accept only those 

working conditions that suit them. 

Faced with an immediate need for new expertise on specific information systems or technological 

capabilities, a PM managing a multibillion-dollar budget may lack direct access to the global 

marketplace of individual IT consultants and struggle to get help from the most qualified individuals. 

An example from the Army illustrates this challenge. The PM for a defense business system spent 

months troubleshooting an issue with slow logons that was affecting user productivity, but was unable 

to resolve it by working with the OEM and system integrator. Program staff tried to debug the problem 

via satellite, creating additional delays. The PM determined the problem needed to be solved by a 

system architect with expertise in large-scale computing and was aware of an independent consultant 

with decades of experience in related work. Ultimately, there was no mutually agreeable way to use 

this person’s expertise either as a prime or subcontractor. He did not meet the requirements under the 

existing Systems Engineering and Technical Assistance (SETA) effort because his rate was too high, and 

he did not meet educational requirements for the labor description categories in the SETA contract. The 

expert was also unwilling to become a prime contractor due to the amount of paperwork and time 

required, a known barrier to entry for small businesses seeking to work directly with the federal 

government.111 Five years later, performance problems continue to linger. 

In such situations, government PMs have limited strategies for obtaining the right IT expertise. Several 

acquisition routes are available when the government needs to use IT consulting services. Many of 

these acquisition strategies are sufficient for maintaining a static IT workforce dedicated to a program, 

but none of them are ideal for short-term situations in which an outside expert is needed quickly to 

provide strategic problem-solving support informed by best commercial practices. 

 

110 See, for example, Deloitte’s contractor-site hourly rates for the federal government, accessed October 19, 2018, 

https://www2.deloitte.com/content/dam/Deloitte/us/Documents/public-sector/us-fed-contractor-site-hourly-rates-10172014.pdf. 

111 Representative from Global Combat Support System – Army (GCSS-Army), discussion with Section 809 Panel, May 2018. 
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IT Procurement Volume 3 | Page 165 

Full-time Employees 

Programs may hire government employees who are permanently attached to an organization. These 

employees are hired by policies that are increasingly acknowledged as outdated, limited by the general 

service (GS) categorization and pay schema. It commonly takes up to 6 months to hire employees in 

this way and includes numerous certifications and accommodation of various hiring policies. 

Recent and pending changes to direct hire authority acknowledge the need for expedited hiring 

processes. FAR 37.112, Government Use of Private Sector Temporaries, has been used to acquire shortterm help, but the authority remains limited. It allows for “contracts with temporary help service firms 

for the brief or intermittent use of the skills of private sector temporaries.” The authority for this 

temporary hiring comes from 5 CFR 300, Subpart E, which clarifies the temporary help must meet a 

critical need that is defined as “a sudden or unexpected occurrence” with the stipulation that “a 

recurring, cyclical peak workload, by itself, is not a critical need.” 

This type of authority is not enough to meet the demands of today’s IT projects. The civil service needs 

better and faster access to science, technology, engineering, and math employees, as acknowledged in 

2018 by then OPM Director Jeff Pon. Referring to changes recommended in the President’s 

Management Agenda (PMA), he admitted, “The whole philosophy of having a job for life is a thing of 

the past.”112 Efforts to overhaul the federal workforce proposed in the PMA and the FY 2019 President’s 

Budget are an attempt to fix the problem by retraining existing employees for IT positions and using 

more flexible hiring policies.113 The FY 2019 NDAA provides DoD with direct hire authority for highdemand personnel, including for any position involved with cybersecurity.114

 

Additional problems hiring federal employees come from an outdated pay scale that lags behind 

market rates. The maximum pay rate is GS-15 step 10, which is approximately $165,000 with locality 

adjustment for the National Capital Region, translating to about $80/hour. For IT specialists, this pay 

scale is too low to compete with the commercial marketplace, and the lengthy bureaucratic hiring 

process is unappealing. In one case, Army Cyber Command sought to hire a midlevel specialist who 

was working for a large software firm. To create a reasonably attractive offer, the agency needed to add 

substantial recruitment bonuses and benefits to the top of the federal pay scale, and even then, the 

individual had to take a pay cut of more than $60,000 a year—which he reluctantly did to serve the 

government.115 

Existing Contracts 

PMs traditionally rely on expert consultants provided by the OEM such as SAP or consultants on 

existing SETA contracts. In such cases, the consultants’ high labor costs are budgeted into the life of the 

contract. The PM will keep these resources on board so they are available when needed, although they 

often have extended periods of downtime when their skills are not called for. This OEM/SETA 

approach is costly. The government ultimately pays a high ongoing cost for these consultants without 

 

112 “Trump’s management agenda ties together IT, data and workforce overhaul,” Scoop News Group, March 20, 2018, accessed 

October 19, 2018, https://www.fedscoop.com/presidents-management-agenda-ties-together-data-workforce-overhaul/ 

113 The White House, Analytical Perspectives, Budget of the United States Government, Fiscal Year 2018: 7. Strengthening the Federal 

Workforce, accessed October 19, 2018, https://www.whitehouse.gov/wp-content/uploads/2018/02/ap_7_strengthening-fy2019.pdf 

114 Section 1101 of FY 2019 NDAA, Pub. L. No. 115-232 (2018). 

115 Representatives from Army Cyber Command, discussions with Section 809 Panel, August 2018. 
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obtaining sufficient value out of that resource. Worse, consultants’ skills can atrophy or become 

suboptimal when they are not working within their niche or continuing to hone their knowledge and 

skills. The federal government does not keep pace with technological innovation in the private sector, 

one of many reasons to encourage easy movement between the two worlds. 

For example, a consultant experienced with international military systems in disconnected 

environments was flown from Israel to Washington, D.C., once a month during a business system’s 

development. His high wages were made even more costly with these additional travel costs, and he 

remained on the contract for more than 5 years. Because he was consulted only intermittently for 

problems related to disconnected operations, he was frequently available and assigned to simpler tasks 

for which he was overpaid. The program could have saved money by using and paying for this expert 

on an as-needed basis, meeting lower-level needs with other workers more suited to those tasks. The 

program was motivated to keep him on contract to avoid the time-consuming process of getting a new 

consultant on contract when the intermittent problems arose. 

Using an existing SETA support contractor to bring in a technical expert involves many steps that take 

months to complete. The SETA contractor must find an adequate resource, negotiate a subcontracting 

agreement or employment agreement, provide a proposal, and negotiate an appropriate labor category 

and rate with the government. The process is also burdensome for independent consultants who 

become subcontractors. Discussions with several independent contractors revealed the following 

common steps: 

 Complete a nondisclosure agreement and a teaming agreement with proposed rate structure. 

(2–3 days). 

 Review and sign a subcontract agreement and statement of work that range from 25 to 

100 pages (taking 3–6 weeks) and include the following: 

 Terms & Conditions 

 Numerous FAR/DFARS clauses 

 Certificate of insurance (one onerous requirement noted was liability insurance of 

$3 million) 

 Pricing templates 

 Representations & Certifications 

 Certification of no conflict of interest 

 Certification of good standing 

 Business size certification 

 Federal Funding Accountability and Transparency Act certification 

 W9 Request for taxpayer identification number and certification 

 Final negotiation of rates 

 Signed subcontracting agreement 

 Registration in the System for Award Management (SAM) and if applicable in prime’s invoicing 

systems (5 days). 
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This process is time-consuming and adds cost to the government. Some consultants use an attorney to 

review the subcontracting agreement, resulting in additional costs and time.116 A subcontract 

administrator at a large prime contractor indicated the company’s standard for obtaining signed 

subcontract agreements is 21 days from receipt of the purchase request; however, these timeframes can 

balloon by a few months.117 All consultants stated they were at a disadvantage when negotiating their 

rate with prime contractors. 

Creating a Blanket Purchase Agreement 

Some federal agencies have devised creative strategies to buy independent consultants without 

excessively bureaucratic hiring procedures. GSA used the flexibility afforded by FAR 37.112 to 

establish a Blanket Purchase Agreement (BPA) with an 8(a) Business Development Program company 

to provide agency components the ability to quickly respond to brief or intermittent IT work 

requirements. Examples of hiring arrangements using this BPA include full-time personnel employed 

by the 8(a) and employees hired by the 8(a) as independent contractors. In an interview with the panel, 

a GSA official explained, “this BPA has become incredibly popular for short engagements,” giving the 

example of using developers when “we just need a person or two, not an organization, to come in and 

work a specific project for a short time.”118 

Direct Contracting with Independent Consultants 

Occasionally, the government contracts with independent consultants directly. In these cases, 

individuals must be registered in SAM and accept a prime contract with the government, engaging 

with a contracting process that includes requirements development, market research, competition, and 

negotiations. Even under simplified acquisition procedures, awarding such a contract would take at 

least 30–60 days to complete. 

Simplified acquisition procedures are not the effective, expedited procurement solution for 

independent contractors they may appear to be. As the Section 809 Panel’s Volume 1 Report and 

Volume 2 Report discuss, such simplified procedures are far from simple, burdened by complex and 

often conflicting guidance in multiple sections of the FAR.119 Simplified acquisitions can end up looking 

more like a last resort than a preferred method. In theory, independent contractors can be acquired by 

using simplified acquisition procedures and staying below the simplified acquisition threshold of 

$250,000, assuming contracts are shorter than 7 months. Contracts could also be awarded using 

simplified procedures for certain commercial items under $7 million. In both cases, however, it is rare 

to find consultants acquired in this way, and the procedures remain more bureaucratic than simple. 

Even simplified contracting with consultants involves months of bureaucratic processes that can 

discourage both contractors and programs in need of help. As discussed in the Volume 1 Report, 

 

116 Army Enterprise Systems Integration Hub and Logistics Modernization Program, discussion with Section 809 Panel, August 2018. 

117 Former CACI subcontract administrator, discussion with Section 809 Panel, February 2018. 

118 GSA contracting officer, discussion with Section 809 Panel, July 2018. 

119 See Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3 (2018), 

Section 1: Commercial Buying, and Volume 2 of 3 (2018), Section 3: Simplified Commercial Source Selection. 
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purchase of commercial items has actually decreased since the implementation of FAR Part 12 in 1995, 

with recent numbers showing a 29 percent decline from FY 2012 to FY 2017.120

To expedite contracting and bypass government bureaucracy, one solution is the new concept of 

microconsulting, for which a consultant contracts with the government (or private organizations) for a 

short period of time. When used within the government, microconsulting contracts stay below the FAR 

micro-purchase threshold. This solution treats independent contractors like the commercial service 

they are, without burdening the acquisition with unnecessary contract clauses or conditions. 

Skylight, founded in 2017, offers microconsulting services to the government. The coleader (and former 

cofounder of 18F, the innovation arm of GSA) explains it this way: “Not every problem requires a fullblown consulting engagement. Often times, a short burst of work on a specific topic is all that's needed 

to help propel government managers and teams forward.” This approach is a means to, for example, 

“obtain quick advice on the suitability and trade-offs of using a particular architectural pattern, 

delivery practice, or technology from digital experts.”121 Purchases under the micro-purchase threshold 

would limit a PM from receiving a complete consulting engagement, corresponding to less than one 

week at the $10,000 threshold. This creative solution is appealing to PMs desperate for help, but its 

limits create the potential for workarounds and abuses where PMs buy many of these small 

engagements to stay under the threshold. 

The legal community has established a process to acquire expert witnesses and consultants on short 

notice, but even these simplified documentation processes can take several weeks to months to 

complete. Acquiring these experts follows a simplified procedure, provided the procurement remains 

below the simplified acquisition threshold.122 Although this process has a statutory exception to the 

Contracting in Competition Act (CICA), it still requires as a minimum a resume, funding documents, 

and a justification and approval document.123 

A New Approach: Online Talent Marketplaces 

Innovation in the commercial marketplace has combined the gig economy with e-commerce portals, 

creating numerous online talent marketplaces that match employers with employees or independent 

contractors who meet company needs. One of the largest talent marketplace companies, Indeed, has 

more than 200 million unique visitors per month.124 Others include Upwork, Government Freelance 

Exchange (GovFlex), Freelancer, Gigster, ShortList, and PwC. 

GovFlex, launched in 2016, is attempting to make this innovative workforce model available to the 

federal government. Designed to match independent contractors with federal agencies needing to 

access specific expertise quickly, GovFlex operates as an intermediary, profiting by assuming some of 

the bureaucratic burdens, terms, and conditions imposed on individuals and small businesses working 

 

120 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3 (2018), 17. 

121 Chris Cairns, Skylight Digital, interview with Section 809 Panel, May 7, 2018. 

122 Procurement Notice, 41 U.S.C. § 1708(b)(1)(G). 

123 Industrial mobilization; engineering, developmental, or research capability; or expert services, FAR 6.302-3(a)(2)(iii). The Army Lawyer: 

JAG Corps Professional Bulletin, 27-50-16-07, July 2016. 

124 “About Indeed,” Indeed, accessed October 19, 2018, https://www.indeed.com/about. 
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IT Procurement Volume 3 | Page 169 

with larger organizations. Currently operating only in the private sector, GovFlex leaders acknowledge 

the company has hit limitations bringing this marketplace to the government, including the current 

micro-purchase threshold. The company’s latest move has been to bid on a contract with a government 

agency to create a virtual business center linking 30,000 companies and 50,000 consultants. GovFlex 

leaders are in discussion with GSA about providing similar services. The GovFlex talent marketplace 

connects with high-demand experts and shows details such as their skills and resume, past 

performance ratings, hourly rates, availability, and security clearance access. Similar to commercial 

talent marketplaces, consultants compete for work, and search algorithms match employer 

requirements to consultants nationwide. 

These marketplaces provide solutions for employers to contract for the best talent faster and at lower 

cost. GovFlex provided a case study to illustrate. In 2016, Xerox solicited quotes from five Washington 

D.C., consulting firms. On average, the firms took 3 weeks to respond with quotes that included 

additional fees ranging from 40 to 100 percent. Xerox posted the same project on GovFlex and received 

quotes within 1 hour, saving $84,000 by going directly to the IT consultants.125 Other companies show 

similar benefits. In a pilot program, Procter & Gamble delivered products faster and at lower cost 

60 percent of the time by using a freelance talent management system instead of conventional 

methods.126 

Congress continues to recognize the importance of aligning government buying to commercial 

practices and technology, most recently by promoting use of e-commerce portals. Section 846 of the 

FY 2018 NDAA directed GSA to “establish a program to procure commercial products through 

commercial e-commerce portals for purposes of enhancing competition, expediting procurement, 

enabling market research, and ensuring reasonable pricing of commercial products.”127 This initiative 

will deliver greater access to commercial innovation, increase opportunities to leverage commercial 

practices, and provide built-in competition of readily available supplies and services in the open 

marketplace. Based on similar technology, online talent marketplaces provide similar advantages for 

acquisition of commercial services. 

Acquiring Independent Consultants as a Pilot of Readily Available Services 

The Section 809 Panel has recommended new processes that will expedite procurement of readily 

available products and services (see Section 1), which if adopted, will subsume the existing commercial 

buying structure. The conceptual models for readily available acquisitions will encourage improved 

collaboration with industry to identify solutions and better leveraging of the dynamic market in which 

the government functions. Readily available services require no customization and include short-term 

expert consulting services. Some acquisitions will fall in the category of readily available services with 

customization that are consistent with existing private-sector practices. Services are considered 

customized when a performance work statement, statement of objectives, or other form of government-

 

125 GovFLEX, “The Government Freelance Exchange White Paper,” July 24, 2018. 

126 “On-Demand Talent vs. Legacy Labor Models: Key Stats,” Greg Andrade, SpareHire Blog, January 11, 2018, accessed October 30, 2018, 

https://www.sparehire.com/blog/on-demand-talent-vs-legacy-labor-models-key-stats/. 

127 Section 846 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). Codified at 41 U.S.C. 1901 note. 
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specific direction is necessary to describe the required services. Both of these approaches expedite and 

modernize the process of contracting with IT consultants. 

Because it will take time for the readily available concept to be implemented, a pilot program for direct 

contracting with independent consultants using an online talent marketplace as a facilitator could help 

bridge the gap. The results of this pilot would illustrate the potential of the readily available concept 

and can inform its development. It also provides an additional tool for accessing the growing 

community of experts who prefer to offer their services on an ad-hoc basis. As a pilot of the readily 

available concept, this new authority helps begin transforming government processes to more closely 

resemble the efficiency and innovation of commercial best practices. 

Conclusions 

DoD should pilot an expedited contracting authority for IT consultants facilitated by an online talent 

marketplace tool with a qualified independent consultant list. This process would allow the federal 

government to contract quickly with experts in commercial IT, not experts in government-unique 

contracts. The talent marketplace concept follows both industry best practices and the Section 809 

Panel’s concept for acquiring products, services, and solutions that are readily available or readily 

available with customization.

128 DoD could use these two methods for contracting directly with 

independent consultants. 

Consultant services could be purchased with a government purchase card (GPC) as the transaction 

method for ordering online via the Talent Marketplace, with no additional FAR-based contract 

necessary. Using a GPC as the procurement transaction method would align with commercial 

practices, replace the paper-based contracting process, and reduce procurement lead times. This new 

authority should be detailed with changes to current GPC guidance in FAR Part 13. 

Alternatively, consultants could be purchased with a radically simplified contract that can be 

completed in less than 2 weeks. This authority should lie within the existing FAR Part 12 commercial 

framework, with the intent that it would model a simplified strategy for obtaining needed services 

from independent IT consultants. To highlight this approach as an innovative tool, the pilot program 

should have its own subpart of FAR Part 12, using the current authority of simplified procedures for 

certain commercial items falling under the threshold of $7 million.129 Contracts would be limited to less 

than 12 months. This talent marketplace tool would leverage the best practices of commercial industry 

and presents an opportunity for DoD to gain access to the gig economy. By eliminating unnecessary 

intermediaries and bureaucracy, DoD would be able to access the right talent faster and at lower cost. 

 

128 Services are considered customized when a performance work statement, statement of objectives, or other form of government 

specific direction about how to perform the services is necessary to identify the services to be performed. 

129 Currently this authority exists in FAR 13.5, but Section 809 Panel recommendations in Volume 2 will consolidate all commercial buying 

policy into FAR Part 12. See Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3 (2018),

Section 3: Simplified Commercial Source Selection. 
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IT Procurement Volume 3 | Page 171 

Implementation 

Legislative Branch 

 Authorize a 2-year, governmentwide pilot program for contracting directly with IT consultants 

via an online talent marketplace. Direct GSA and OMB to implement the pilot and report back 

to Congress on results. 

Executive Branch 

Based on the results of the pilot, implement the following regulatory changes to permanently authorize 

the program. 

 Change FAR/DFARS Part 13 to authorize the GPC as the purchasing and payment instrument 

for this pilot at the service level, in accordance with agency procedures and at the discretion of 

the Head of Contracting Activity (as identified in DFARS PGI 202.101). 

 Create a new section FAR 12.7, Independent IT Consultant Services, that provides authority and 

guidance for contracting with IT consultants via the online talent marketplace. This change 

places it in the logical part of the FAR that primarily focuses on procurements of commercial 

products and services. 

 Contracts: Should take no longer than 2 weeks from solicitation to award and will follow 

these criteria: 

o Qualification process for independent consultants: Prequalify independent 

IT consultants based on professional qualifications, pricing, simplified past performance 

references on contracts of similar work, and National Agency Check with Inquiries 

(NACI) background check. Consultants must be the sole employee of their companies 

and will receive facilitated SAM registration as part of the onboarding process in the 

talent marketplace. 

o Combined Public Announcement/Synopsis: Agencies shall publicly post on Federal 

Business Opportunities (FedBizOpps) through an open continuous announcement the 

types of services desired and the process to become prequalified to perform IT Services 

categories in the online talent marketplace. FAR Part 12 contracts will be selected based 

on demonstrated competence and qualifications of prequalified consultants to perform 

the services at fair and reasonable prices. This combined open continuous 

announcement/synopsis will satisfy the synopsis requirements of FAR Subpart 5.207. 

Competition is established through market-based competition. 

o Solicitations: The contracting officer shall use a request for quote and to the maximum 

extent practicable include only those clauses: 

‒ Required to implement provisions of law or executive orders of commercial items, 

e.g., FAR 52.212-5. 

‒ Determined to be consistent with customary commercial practice, e.g., FAR 52.212-4. 
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o Response Requirements: Requirements are posted to the talent marketplace and 

independent consultant(s) express interest, to include as applicable professional 

qualifications, pricing, and past performance references. To the greatest extent possible 

the services will be procured as readily available. If a primary weapons system Quality 

Assurance Surveillance Plan, or security clearance is required, the services will be 

considered readily available with customization and response time will be adjusted as 

appropriate. 

o Basis of Award/Selection: Use FAR 12.602 and abbreviated criteria to evaluate factors 

including technical, price, and past performance. Technical capability may be evaluated 

by how well the consultant’s resume meets the proposed government requirement 

instead of predetermined subfactors. A technical evaluation may include examination of 

professional qualifications necessary for performance. Simplified past performance 

evaluation may be made on any reasonable basis, such as references or quality of work 

as assessed by the talent marketplace’s online rating system of consultant job 

performance. Price reasonableness is based on multiple offers. Contracting officer will 

select the offer that is most advantageous to the government and briefly document the 

rationale for award. 

o Award: Contracting Officer awards a two-page contract on a Standard Form 1449 

contract that uses Block 27 to incorporate FAR 52.212-4, Contract Terms and Conditions 

Commercial Items. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 3. 

Implications for Other Agencies 

 The recommended changes to the FAR would apply to DoD and civilian agencies that use the 

FAR. Both DoD and civilian agencies will benefit from these recommendations. 
Section 3 

IT Procurement 

Implementation Details 

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IT Procurement Rec. 44 | Page 1

RECOMMENDED REPORT LANGUAGE

SEC. ___. EXEMPTION OF DEPARTMENT OF DEFENSE FROM CLINGER-COHEN ACT. 

The section would exempt the Department of Defense from the Clinger-Cohen Act. The 

committee notes that at the time of its enactment in 1996, the Clinger-Cohen Act instilled 

discipline in information technology acquisitions within the federal agencies, including the 

Defense Department. In recent years, however, the real-world effect of Clinger-Cohen Act

compliance has been to add complexity and checklist-based documentation requirements atop 

the existing acquisition bureaucracy. This has created a slow and frustrating process that 

provides limited value to the Department or its Chief Information Officers in executing a 

disciplined method for IT acquisition.

In the committee’s view, exempting the Department of Defense from the Clinger-Cohen 

Act is a necessary condition for streamlining information technology acquisition. The committee 

notes that such streamlining should also include a continuing shift by the Department away 

from checklists and toward a more strategic, collaborative process that places both authority 

and accountability in the hands of appropriate individuals. This collaborative process should 

empower the workforce at all levels, shorten delivery schedules, and avoid paperwork for its 

own sake.

The committee emphasizes that the Department should continue to follow the best 

practices laid out under the Clinger-Cohen Act and subsequent laws. These best practices

include continuous assurance of cybersecurity, business process reengineering, and the 

adoption of commercial technology and processes.

The committee does not recommend repealing the Clinger-Cohen Act since it may 

remain a useful tool for civilian agencies.
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1 SEC. ___. EXEMPTION OF DEPARTMENT OF DEFENSE FROM CLINGER-COHEN 

2 ACT. 

3 (a) EXEMPTION.—Paragraph (2) of section 11101 of title 40, United States Code, is 

4 amended by inserting before the period at the end the following: “, but does not include the 

5 Department of Defense or a military department”. 

6 (b) REPEAL OF OBSOLETE PROVISION.—Section 932 of the Ike Skelton National Defense 

7 Authorization Act for Fiscal Year 2011 (Public Law 111-383; 10 U.S.C. 2224 note), relating to a 

8 strategy on computer software assurance, is repealed. 

—————— 

Title 40—PUBLIC BUILDINGS, PROPERTY, AND WORKS 

SUBTITLE III—INFORMATION TECHNOLOGY MANAGEMENT 

[NOTE: Subtitle III is popularly known as the Clinger-Cohen Act] 

CHAPTER 111—GENERAL 

Sec. 

11101. Definitions. 

11102. Sense of Congress. 

11103. Applicability to national security systems. 

 

§11101. Definitions 

 In this subtitle, the following definitions apply: 

(1) COMMERCIAL ITEM.—The term "commercial item" has the meaning given that 

term in section 103 of title 41. 

(2) EXECUTIVE AGENCY.—The term "executive agency" has the meaning given 

that term in section 133 of title 41, but does not include the Department of Defense or a 

military department. 

(3) INFORMATION RESOURCES.—The term "information resources" has the 

meaning given that term in section 3502 of title 44. 

(4) INFORMATION RESOURCES MANAGEMENT.—The term "information resources 

management" has the meaning given that term in section 3502 of title 44. 

(5) INFORMATION SYSTEM.—The term "information system" has the meaning 

given that term in section 3502 of title 44. 

(6) INFORMATION TECHNOLOGY.—The term "information technology"— 

(A) with respect to an executive agency means any equipment or 

interconnected system or subsystem of equipment, used in the automatic 

acquisition, storage, analysis, evaluation, manipulation, management, movement, 
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control, display, switching, interchange, transmission, or reception of data or 

information by the executive agency, if the equipment is used by the executive 

agency directly or is used by a contractor under a contract with the executive 

agency that requires the use— 

(i) of that equipment; or 

(ii) of that equipment to a significant extent in the performance of a 

service or the furnishing of a product; 

(B) includes computers, ancillary equipment (including imaging 

peripherals, input, output, and storage devices necessary for security and 

surveillance), peripheral equipment designed to be controlled by the central 

processing unit of a computer, software, firmware and similar procedures, 

services (including support services), and related resources; but 

(C) does not include any equipment acquired by a federal contractor 

incidental to a federal contract. 

***** 

------------ 

Section 932 of the Ike Skelton National Defense Authorization Act 

for Fiscal Year 2011 

(Public Law 111-383; 10 U.S.C. 2224 note) 

SEC. 932. STRATEGY ON COMPUTER SOFTWARE ASSURANCE. 

(a) STRATEGY REQUIRED.—The Secretary of Defense shall develop and implement, by 

not later than October 1, 2011, a strategy for assuring the security of software and softwarebased applications for all covered systems. 

(b) COVERED SYSTEMS.—For purposes of this section, a covered system is any critical 

information system or weapon system of the Department of Defense, including the following: 

(1) A major system, as that term is defined in section 2302(5) of title 10, United 

States Code. 

(2) A national security system, as that term is defined in [former] section 

3542(b)(2) of title 44, United States Code [see now 44 U.S.C. 3552(b)(6)]. 

(3) Any Department of Defense information system categorized as Mission 

Assurance Category I. 

(4) Any Department of Defense information system categorized as Mission 

Assurance Category II in accordance with Department of Defense Directive 8500.01E. 

(c) ELEMENTS.—The strategy required by subsection (a) shall include the following: 

(1) Policy and regulations on the following: 

(A) Software assurance generally. 

(B) Contract requirements for software assurance for covered systems in 

development and production. 

(C) Inclusion of software assurance in milestone reviews and milestone 

approvals. 
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(D) Rigorous test and evaluation of software assurance in development, 

acceptance, and operational tests. 

(E) Certification and accreditation requirements for software assurance for 

new systems and for updates for legacy systems, including mechanisms to 

monitor and enforce reciprocity of certification and accreditation processes 

among the military departments and Defense Agencies. 

(F) Remediation in legacy systems of critical software assurance 

deficiencies that are defined as critical in accordance with the Application 

Security Technical Implementation Guide of the Defense Information Systems 

Agency. 

(2) Allocation of adequate facilities and other resources for test and evaluation 

and certification and accreditation of software to meet applicable requirements for 

research and development, systems acquisition, and operations. 

(3) Mechanisms for protection against compromise of information systems 

through the supply chain or cyber attack by acquiring and improving automated tools 

for— 

(A) assuring the security of software and software applications during 

software development; 

(B) detecting vulnerabilities during testing of software; and 

(C) detecting intrusions during real-time monitoring of software 

applications. 

(4) Mechanisms providing the Department of Defense with the capabilities— 

(A) to monitor systems and applications in order to detect and defeat 

attempts to penetrate or disable such systems and applications; and 

(B) to ensure that such monitoring capabilities are integrated into the 

Department of Defense system of cyber defense-in-depth capabilities. 

(5) An update to Committee for National Security Systems Instruction No. 4009, 

entitled 'National Information Assurance Glossary', to include a standard definition for 

software security assurance. 

(6) Either— 

(A) mechanisms to ensure that vulnerable Mission Assurance Category III 

information systems, if penetrated, cannot be used as a foundation for penetration 

of protected covered systems, and means for assessing the effectiveness of such 

mechanisms; or 

(B) plans to address critical vulnerabilities in Mission Assurance Category 

III information systems to prevent their use for intrusions of Mission Assurance 

Category I systems and Mission Assurance Category II systems. 

(7) A funding mechanism for remediation of critical software assurance 

vulnerabilities in legacy systems. 

(d) REPORT.—Not later than October 1, 2011, the Secretary of Defense shall submit to 

the congressional defense committees [Committees on Armed Services and Appropriations of 

the Senate and the House of Representatives] a report on the strategy required by subsection (a). 

The report shall include the following: 

(1) A description of the current status of the strategy required by subsection (a) 

and of the 
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implementation of the strategy, including a description of the role of the strategy 

in the risk management by the Department regarding the supply chain and in operational 

planning for cyber security. 

(2) A description of the risks, if any, that the Department will accept in the 

strategy due to limitations on funds or other applicable constraints. 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. PILOT PROGRAM FOR AUTHORITY TO CONTRACT DIRECTLY WITH 

INFORMATION TECHNOLOGY CONSULTANTS.

This section would provide authority to implement a pilot program under which 

designated agencies may contract directly with independent information technology 

consultants in an expedited manner. This authority may be exercised either using the expedited 

contracting processes under the Simplified Procedures for Certain Commercial Items 

designated at section 3305 of title 41, United States Code, or section 2304(g) of title 10, United 

States Code, or by using the government purchase card as the purchasing and payment 

instrument. This section includes a provision that directs the establishment of an online talent 

marketplace to facilitate the process of identifying and contracting with independent 

information technology consultants.

The committee notes that work in the specialized discipline of information technology 

often requires unique expertise with state-of-the-art technologies best provided by independent 

consultants. These consultants are outside experts able to bring a fresh – often commercial –

perspective to government programs or efforts. Many of these highly qualified professionals 

choose to work as independent contractors in the gig or freelance economy, often finding work 

through online talent marketplaces. The committee also notes the current government model no 

longer fits the way people work in the digital information economy, and that the government 

needs an alternative to its contracting practices for this digital market.
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1 SEC. ___. PILOT PROGRAM FOR AUTHORITY TO CONTRACT DIRECTLY WITH 

2 INFORMATION TECHNOLOGY CONSULTANTS. 

3 (a) PILOT PROGRAM.— 

4 (1) AUTHORITY.—The Director of the Office of Management and Budget shall 

5 implement a pilot program under which agencies designated under paragraph (3) may use 

6 expedited contracting authority in accordance with this section for contracting directly 

7 with independent information technology consultants. The objective of the pilot program 

8 shall be to enable Government-wide use of such expedited contracting authority. 

9 (2) ONLINE TALENT MARKETPLACE.—To support the pilot program, the 

10 Administrator of the General Services Administration shall establish an online talent 

11 marketplace for use by agencies participating in the pilot program to contract directly 

12 with independent information technology consultants. 

13 (3) DESIGNATED AGENCIES.—The Director shall designate which executive 

14 agencies are authorized to participate in the pilot program under this section. One of the 

15 agencies designated shall be the Department of Defense. Such designations shall be made 

16 not later than 60 days after the date of the enactment of this Act. 

17 (b) DURATION.— 

18 (1) EXPIRATION.—Except as provided in paragraph (2), the pilot program shall 

19 terminate three years after the date of the enactment of this Act. 

20 (2) AUTHORITY FOR PERMANENCE.—The authorities under the pilot program 

21 under this section shall not terminate if, before the end of the period applicable under 

22 paragraph (1), the Director determines, based upon the experience under the pilot 

23 program, that those authorities should remain in effect. 
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1 (c) IMPLEMENTATION OF ONLINE TALENT MARKETPLACE.—The Administrator shall 

2 complete the implementation of the online talent marketplace and ensure it is available for use by 

3 the designated agencies under the pilot program within one year of the date of the enactment of 

4 this Act. 

5 (d) METRICS.—The Director, in consultation with the Administrator and the designated 

6 agencies, shall establish and track metrics to be used to evaluate the effectiveness of the pilot 

7 program. 

8 (e) ELEMENTS.—Under the pilot program, a designated agency — 

9 (1) may use the online talent marketplace to identify and select pre-qualified 

10 independent information technology consultants; and 

11 (2) may acquire the services of independent information technology consultants 

12 using either— 

13 (A) an expedited contracting process, described in Subpart 12.7 of the 

14 Federal Acquisition Regulation, using the authority of Simplified Procedures for 

15 Certain Commercial Items for purchases designated at section 3305 of title 41, 

16 United States Code, or section 2304(g) of title 10, United States Code, as 

17 applicable to the agency implementing the program; or 

18 (B) the Government Purchase Card as the purchasing and payment 

19 instrument. 

20 (f) REPORTING REQUIREMENTS.—The Director shall submit to the appropriate 

21 congressional committees the following reports: 
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1 (1) INITIAL REPORT.—Not later than 180 days after the date of the enactment of 

2 this Act, the Director in consultation with the Administrator shall submit a report 

3 providing— 

4 (A) a comprehensive description of the pilot program; 

5 (B) the metrics to be used to assess the effectiveness of the pilot program; 

6 and 

7 (C) such other matters relating to the pilot program as the Director 

8 considers appropriate. 

9 (2) FINAL REPORT.—Not later than three years after enactment of this Act, the 

10 Director in consultation with the Administrator shall submit a report that includes the 

11 following: 

12 (A) An updated comprehensive description of the pilot program. 

13 (B) An assessment of the pilot program using the metrics established 

14 pursuant to subsection (d). 

15 (C) The Director’s final assessment of whether program should continue. 

16 (D) Recommendations for any changes to, or exemptions from, laws 

17 necessary to improve the expedited contracting authority under the pilot program. 

18 (g) DEFINITION.—In this section, the term “appropriate congressional committees” 

19 means the following: 

20 (1) The Committees on Armed Services of the Senate and House of 

21 Representatives. 
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1 (2) The Committee on Homeland Security and Governmental Affairs of the 

2 Senate and the Committee on Oversight and Government Reform of the House of 

3 Representatives. 

4 (3) The Committee on Small Business and Entrepreneurship of the Senate and the 

5 Committee on Small Business of the House of Representatives. 
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RECOMMENDED REGULATORY REVISIONS

1.603 Selection, appointment, and termination of appointment for contracting officers.

1.603-1 General.

41 U.S.C. 1702(b)(3)(G) requires agency heads to establish and maintain a procurement career 

management program and a system for the selection, appointment, and termination of 

appointment of contracting officers. Agency heads or their designees may select and appoint 

contracting officers and terminate their appointments. These selections and appointments shall 

be consistent with Office of Federal Procurement Policy’s (OFPP) standards for skill-based 

training in performing contracting and purchasing duties as published in OFPP Policy Letter 

No. 05-01, Developing and Managing the Acquisition Workforce, April 15, 2005. 

1.603-2 Selection.

In selecting contracting officers, the appointing official shall consider the complexity and 

dollar value of the acquisitions to be assigned and the candidate’s experience, training, 

education, business acumen, judgment, character, and reputation. Examples of selection criteria 

include—

(a) Experience in Government contracting and administration, commercial purchasing, or 

related fields;

(b) Education or special training in business administration, law, accounting, engineering, or 

related fields;

(c) Knowledge of acquisition policies and procedures, including this and other applicable 

regulations;

(d) Specialized knowledge in the particular assigned field of contracting; and

(e) Satisfactory completion of acquisition training courses.

1.603-3 Appointment.

(a) Contracting officers shall be appointed in writing on an SF 1402, Certificate of 

Appointment, which shall state any limitations on the scope of authority to be exercised, other 

than limitations contained in applicable law or regulation. Appointing officials shall maintain 

files containing copies of all appointments that have not been terminated. 

(b) Agency heads are encouraged to delegate authority for micro-purchase and simplified 

procedures described at FAR Subpart 12.7 to individuals who are employees of an executive 

agency or members of the Armed Forces of the United States who will be using the supplies or 

services being purchased. Individuals delegated this authority are not required to be appointed 

on an SF 1402, but shall be appointed in writing in accordance with agency procedures. 
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Subpart 12.7—Pilot Program for Contracting Directly with Independent Information 

Technology (IT) Consultants Though General Services Administration’s (GSA) Online 

Talent Marketplace

12.701 – General

This subpart provides a pilot program for an expedited contracting authority for independent 

IT consultants facilitated by GSA’s online talent marketplace of qualified independent IT 

consultants. An Independent Consultant is a self-employed independent contractor.

(a) This subpart authorizes, as a pilot program, use of simplified procedures for the acquisition 

of commercial services in amounts greater than the simplified acquisition threshold but not 

exceeding $750,000 including options, if the services sought are for direct contracting with an 

independent IT consultant using the GSA online talent marketplace. The purpose of this pilot 

program is to allow the federal government to award through a talent marketplace independent 

IT consultants in a simplified manner that maximizes efficiency and economy and minimizes 

burden and administrative costs for both the Government and industry. 

(b) The policies and procedures in this subpart include the authority provided by Section 4202, 

P.L. 104-106 for acquiring certain commercial products or services exceeding the simplified 

acquisition threshold using the simplified acquisition procedures contained in FAR Subpart 13.5

(c) The period of performance for an independent IT consultant contract shall not exceed 12 

months. 

(d) For the period of this pilot, contracting activities must employ the simplified procedures 

authorized by this pilot program to the maximum extent practicable.

12.702 – Taking advantage of the independent IT consultant talent marketplace

(a) Work in the specialized discipline of IT services often requires unique expertise of state-ofthe-art technologies best provided by independent consultants, outside experts able to bring a 

fresh perspective to programs or efforts. 

(b) GSA will establish an IT Consultant Talent Marketplace with pre-qualified independent IT 

consultants to procure commercial services through an e-commerce portals for purposes of 

enhancing competition, expediting procurement, enabling market research, and ensuring 

reasonable pricing of commercial IT services. Independent IT consultants have been prequalified based on professional qualifications, pricing, simplified past performance references 

on contracts of similar work, and National Agency Check with Inquiries (NACI) background 

check. Consultants must be the sole employee of their companies to be included in the talent 

marketplace. 
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(c) To simplify purchases and avoid unnecessary costs and administrative burdens for agencies 

and contractors, contracting officers shall use the procedures in this subpart to acquire 

commercial IT consultant services. This subpart includes the authority to use simplified 

acquisition procedures (Part 13.5)..

(d) Independent IT Consultant services may be purchased with a government purchase card 

(GPC) as the transaction method for ordering online via the Talent Marketplace, with no 

additional FAR-based contract necessary. Using a GPC as the procurement transaction method 

would align with commercial practices, replace the paper-based contracting process, and reduce 

procurement lead times. 

(e) Alternatively, independent IT consultants may be purchased with a simplified contract with 

the key flexibilities summarized below. Requirements for market research and competition are 

satisfied by the nature of the online talent marketplace; no additional documentation to that 

effect is required.

(1) Combined Public Announcement/Synopsis: Agencies shall publicly post on Federal 

Business Opportunities (FedBizOpps) through an open continuous announcement the 

types of services desired and the process to become pre-qualified to perform 

independent IT Services categories in the online talent marketplace. This combined open 

continuous announcement/synopsis will satisfy the synopsis requirements of FAR 

Subpart 5.2—Synopses of Proposed Contract Actions.

(2) Solicitations: The contracting officer may use a Request for Quote (RFQ) posted on 

the Talent Marketplace and to the maximum extent practicable include only those 

clauses that are:

 Required to implement provisions of law or executive orders of commercial 

items, e.g., FAR 52.212-5.

 Determined to be consistent with customary commercial practice, e.g., FAR 

52.212-4.

(3) Response Requirements: Requirements are posted to the talent marketplace and 

independent consultant(s) express interest, to include as applicable professional 

qualifications, pricing, and past performance references.

 Basis of Award/Selection: Use FAR 12.602 and abbreviated criteria to 

evaluate factors including technical, price, and past performance. Technical 

capability may be evaluated by how well the consultant’s resume meets the 

proposed government requirement instead of predetermined subfactors. A 

technical evaluation may include examination of professional qualifications 

necessary for performance. Simplified past performance evaluation may be 

made on any reasonable basis, such as references or quality of work as 

assessed by the talent marketplace’s online rating system of consultant job 
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performance. Price reasonableness is based on multiple offers. Contracting 

officer will select the offer that is most advantageous to the government and 

briefly document the rationale for award.

 Award: Contracting Officer awards a two-page contract on a Standard Form 

(SF) 1449 contract that uses Block 27 to incorporate FAR 52.212-4, “Contract 

Terms and Conditions -- Commercial Items.” 

Subpart 13.3 -- Simplified Acquisition Methods

13.301 -- Governmentwide Commercial Purchase Card.

(a) Except as provided in 32.1108(b)(2), the Governmentwide commercial purchase card is 

authorized for use in making and/or paying for purchases of supplies, services, or construction. 

The Governmentwide commercial purchase card may be used by contracting officers and other 

individuals designated in accordance with 1.603-3. The card may be used only for purchases 

that are otherwise authorized by law or regulation.

(b) Agencies using the Governmentwide commercial purchase card shall establish procedures 

for use and control of the card that comply with the Treasury Financial Manual for Guidance of 

Departments and Agencies (TFM 4-4500) and that are consistent with the terms and conditions 

of the current GSA credit card contract. Agency procedures should not limit the use of the 

Governmentwide commercial purchase card to micro-purchases. Agency procedures should 

encourage use of the card in greater dollar amounts by contracting officers to place orders and 

to pay for purchases against contracts established under Part 8 procedures, when authorized; 

and to place orders and/or make payment under other contractual instruments, when agreed to 

by the contractor. See 32.1110(d) for instructions for use of the appropriate clause when 

payment under a written contract will be made through use of the card.

(c) The Governmentwide commercial purchase card may be used to --

(1) Make micro-purchases;

(2) Place a task or delivery order (if authorized in the basic contract, basic ordering 

agreement, or blanket purchase agreement); or

(3) Make payments, when the contractor agrees to accept payment by the card (but see 

32.1108(b)(2)

(4) Make purchases and payments for the pilot program for contracting directly with 

independent information technology (IT) consultants though GSA’s online talent 

marketplace (see FAR Subpart 12.7)
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32.1108 – Payment by Governmentwide Commercial Purchase Card.

A Governmentwide commercial purchase card charge authorizes the third party (e.g., financial 

institution) that issued the purchase card to make immediate payment to the contractor. The 

Government reimburses the third party at a later date for the third party's payment to the 

contractor.

(a) The clause at 52.232-36, Payment by Third Party, governs when a contractor submits a 

charge against the purchase card for contract payment. The clause provides that the contractor 

shall make such payment requests by a charge to a Government account with the third party at 

the time the payment clause(s) of the contract authorizes the contractor to submit a request for 

payment, and for the amount due in accordance with the terms of the contract. To the extent 

that such a payment would otherwise be approved, the charge against the purchase card should 

not be disputed when the charge is reported to the Government by the third party. To the extent 

that such payment would otherwise not have been approved, an authorized individual (see 

1.603-3) shall take action to remove the charge, such as by disputing the charge with the third 

party or by requesting that the contractor credit the charge back to the Government under the 

contract.

(b) 

(1) Written contracts to be paid by purchase card should include the clause at 52.232-36, 

Payment by Third Party, as prescribed by 32.1110(d). However, payment by a purchase 

card also may be made under a contract that does not contain the clause to the extent the 

contractor agrees to accept that method of payment.

(2)

(i) When it is contemplated that the Governmentwide commercial purchase card 

will be used as the method of payment, and the contract or order is above the 

micro-purchase threshold, contracting officers or individual designated in 

accordance with FAR 1.603-3(b) are required to verify (by looking in the System 

for Award Management (SAM)) whether the contractor has any delinquent debt 

subject to collection under the Treasury Offset Program (TOP) at contract award 

and order placement. Information on TOP is available at 

http://fms.treas.gov/debt/index.html .

(ii) The contracting officer or individual designated in accordance with FAR 

1.603-3(b) shall not authorize the Governmentwide commercial purchase card as 

a method of payment during any period the SAM indicates that the contractor 

has delinquent debt subject to collection under the TOP. In such cases, payments 

under the contract shall be made in accordance with the clause at 52.232-33, 
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Payment by Electronic Funds Transfer— System for Award Management, or 

52.232-34, Payment by Electronic Funds Transfer—Other Than System for Award 

Management, as appropriate (see FAR 32.1110(d)).

(iii) Contracting officers or individual designated in accordance with FAR 1.603-

3(b) shall not use the presence of the SAM debt flag indicator to exclude a 

contractor from receipt of the contract award or issuance or placement of an 

order.

(iv) The contracting officer or individual designated in accordance with FAR 

1.603-3(b) may take steps to authorize payment by Governmentwide commercial 

purchase card when a contractor alerts the contracting officer that the SAM debt 

flag indicator has been changed to no longer show a delinquent debt.

(c) The clause at 52.232-36, Payment by Third Party, requires that the contract--

(1) Identify the third party and the particular purchase card to be used; and

(2) Not include the purchase card account number. The purchase card account number 

should be provided separately to the contractor.

32.1110 Solicitation provision and contract clauses.

(a) The contracting officer shall insert the clause at—

(1) 52.232-33, Payment by Electronic Funds Transfer—System for Award Management, in 

solicitations and contracts that include the provision at 52.204-7 or an agency clause that 

requires a contractor to be registered in the System for Award Management (SAM) database 

and maintain registration until final payment, unless—

(i) Payment will be made through a third party arrangement (see 13.301 and paragraph 

(d) of this section); or 

(ii) An exception listed in 32.1103(a) through (i) applies. 

(2)(i) 52.232-34, Payment by Electronic Funds Transfer-Other than System for Award 

Management, in solicitations and contracts that require EFT as the method for payment but do 

not include the provision at 52.204-7, System for Award Management, or a similar agency 

clause that requires the contractor to be registered in the SAM database. 

(ii)(A) If permitted by agency procedures, the contracting officer may insert in 

paragraph (b)(1) of the clause, a particular time after award, such as a fixed number of days, or 

event such as the submission of the first request for payment.
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(B) If no agency procedures are prescribed, the time period inserted in paragraph 

(b)(1) of the clause shall be “no later than 15 days prior to submission of the first request for 

payment.”

(b) If the head of the agency has authorized, in accordance with 32.1106, to use a nondomestic 

EFT mechanism, the contracting officer shall insert in solicitations and contracts a clause 

substantially the same as 52.232-33 or 52.232-34 that clearly addresses the nondomestic EFT 

mechanism. 

(c) If EFT information is to be submitted to other than the payment office in accordance with 

agency procedures, the contracting officer shall insert in solicitations and contracts the clause at 

52.232-35, Designation of Office for Government Receipt of Electronic Funds Transfer 

Information, or a clause substantially the same as 52.232-35 that clearly informs the contractor 

where to send the EFT information. 

(d) If payment under a written contract will be made by a charge to a Government account 

with a third party such as a Governmentwide commercial purchase card, then the contracting 

officer shall insert the clause at 52.232-36, Payment by Third Party, in solicitations and contracts. 

Payment by a purchase card may also be made under a contract that does not contain the clause 

at 52.232-36, to the extent the contractor agrees to accept that method of payment. When the 

clause at 52.232-36 is included in a solicitation or contract, the contracting officer shall also 

insert the clause at 52.232-33, Payment by Electronic Funds Transfer—System for Award 

Management, or 52.232-34, Payment by Electronic Funds Transfer—Other Than System for 

Award Management, as appropriate.

(e) If the contract or agreement provides for the use of delivery orders, and provides that the 

ordering office designate the method of payment for individual orders, the contracting officer 

shall insert, in the solicitation and contract or agreement, the clause at 52.232-37, Multiple 

Payment Arrangements, and, to the extent they are applicable, the clauses at—

(1) 52.232-33, Payment by Electronic Funds Transfer—System for Award Management; 

(2) 52.232-34, Payment by Electronic Funds Transfer—Other than System for Award 

Management; and 

(3) 52.232-36, Payment by Third Party. 

(f) If more than one disbursing office will make payment under a contract or agreement, the 

contracting officer, or ordering office (if the contract provides for choices between EFT clauses 

on individual orders or classes of orders), shall include or identify the EFT clause appropriate 

for each office and shall identify the applicability by disbursing office and line item.

(g) If the solicitation contains the clause at 52.232-34, Payment by Electronic Funds Transfer—

Other than System for Award Management, and an offeror is required to submit EFT 

information prior to award—
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(1) The contracting officer shall insert in the solicitation the provision at 52.232-38, 

Submission of Electronic Funds Transfer Information with Offer, or a provision substantially 

the same; and 

(2) For sealed bid solicitations, the contracting officer shall amend 52.232-38 to ensure that 

a bidder’s EFT information—

(i) Is not a part of the bid to be opened at the public opening; and

(ii) May not be released to members of the general public who request a copy of the bid.
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Section 4 

Budget 

DoD requires additional flexibilities with appropriated funds to allow 

application of agile management principles to the acquisition cycle and 

to meet warfighter missions more effectively. 

RECOMMENDATIONS

Rec. 46: Empower the acquisition community by delegating below threshold 

reprogramming decision authority to portfolio acquisition executives. 

Rec. 47: Restore reprogramming dollar thresholds to match their previous levels relative 

to inflation and the DoD budget.

Rec. 48: Increase to 50 percent the lesser of 20 percent restriction that creates artificially 

low reprogramming thresholds for smaller programs.

Recommendations continued on following page.
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Page 174 | Volume 3 Budget 

RECOMMENDATIONS

Rec. 49: Provide increased flexibility to the time periods within which contract 

obligations are permitted to occur.

Rec. 50: Enact regular appropriations bills on time.

Rec. 51: Mitigate the negative effect of continuing resolutions by allowing congressional 

regular appropriations to remain available for a standardized duration from date of 

enactment.

Rec. 52: Permit the initiation of all new starts, provided Congress has appropriated 

sufficient funding.

Rec. 53: Permit the initiation of all production rate increases, provided Congress has 

appropriated sufficient funding.

Rec. 54: Permit the initiation of multiyear procurements under a CR.

Rec. 55: Raise the Prompt Payment Act threshold.

Rec. 56: Use authority in Section 1077 of the FY 2018 NDAA to establish a revolving 

fund for information technology modernization projects and explore the feasibility of 

using revolving funds for other money-saving investments.

Rec. 57: Modify fiscal law to extend the duration of when funds cancel from 5 years to 

8 years in expired status to align program acquisitions with funding periods and prevent 

putting current funds at risk and to support meeting appropriation intent.

Rec. 58: Address the issue of over-age contracts through (a) establishing an end-to-end, 

integrated, streamlined process, (b) codifying DCMA’s Quick Close Out class deviation 

in the DFARS, and (c) extending DCMA’s Low Risk Quick Close Out initiative by 

2 years. 

 
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INTRODUCTION 

The annual passing of the NDAA inevitably elicits numerous headlines. When the FY 2019 NDAA was 

signed on September 28, 2018, it was praised for “funding our military in full and on time.”1 For 

FY 2019, full funding resulted in a defense budget of $674 billion. On time allowed DoD to begin FY 2019 

with an enacted NDAA rather than operating under a continuing resolution. The FY 2019 defense 

budget includes increases to service member pay, an increase in military end strength forces, and the 

requested funds for materiel procurement.2 

These top-level defense budget topics are accessible to lawmakers and the public. They also often belie 

the incredibly complex task of managing the defense budget. Within the defense acquisition sphere, the 

budget falls within the Planning, Programming, Budgeting, and Execution (PPBE) leg of the acquisition 

system. Like the other legs of the defense acquisition system, PPBE’s processes and procedures must be 

scrutinized and reformed from time to time. In fact, the 2018 National Defense Strategy delineates 

reform as top-three most-important line of effort in maintaining “decisive and sustained U.S. military 

advantages.”3 In its FY 2019 budget request to Congress, DoD echoed the imperative to better manage 

its resources to better execute the National Defense Strategy: 

The Department’s management structure and processes are not written in stone; they are a means to an 

end– empowering the warfighter with the knowledge, equipment and support systems to fight and win.4

This section contains recommendations intended to reduce inefficiency and dysfunction in the defense 

acquisition system’s funding process. These recommendations support the core objective of allocating 

acquisition resources more effectively. Overarching goals of these recommendations include 

empowering portfolio managers to reallocate resources between programs as needed; flowing down 

decision authority to the lowest possible levels; eliminating or mitigating some of the perverse 

incentives that exist in fiscal law; and mitigating the harmful effects of late funding on DoD acquisition 

programs. 

Nothing in these recommendation is intended to reduce the ability of congressional committees to 

perform their constitutional oversight functions. The extension of the time between expiration of funds 

and their cancellation is specifically limited both in terms of length of time and quantum. The 

acquisition of goods and services is inextricably tied to both budgeting of funds by the Executive 

Branch and Congress’s appropriation of those funds. Delivering warfighter capability is dependent on 

integration of the budgeting process and the authorization and appropriation of funds. The Section 809 

Panel is aware that some may look at these proposals as a masked attempt at recreating the M accounts 

of yesteryear, but nothing could be further from the truth. Rather, these proposals recognize that the 

availability of new-start funding from fiscal year to fiscal year is not reliable. Current rules limit the 

 

1

 Rep. Mac Thornberry, as quoted in “Trump Signs Defense Spending Plan, With One More Swipe at Democrats,” Leo Shane III, Military 

Times, September 28, 2018, accessed November 7, 2018, https://www.militarytimes.com/news/your-military/2018/09/28/trump-signsspending-plan-avoiding-shutdown/. 

2

 Ibid. 

3

 DoD, Summary of the 2018 National Defense Strategy, 4, accessed November 7, 2018, 

https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf. 

4

 OUSD (Comptroller), Defense Budget Overview: U.S. DoD FY 2019 Budget Request, February 2018, 2-7, accessed November 7, 2018, 

https://dod.defense.gov/Portals/1/Documents/pubs/FY2019-Budget-Request-Overview-Book.pdf. 
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flexibility of DoD’s acquisition workforce in dealing with the realities of the marketplace such that 

near-peer competitors and nonstate actors have a decided innovation advantage. In a very real sense 

the U.S. Military Services must move to a war footing to maintain technological dominance—

competitors already have. 

This section does not include specific reforms to the planning, programming, or budget formulation 

processes. Other recommendations in this volume, however, address these issues indirectly. For 

example, Recommendations 36 and 37 on portfolio management represent a move toward empowering 

officials to exercise authority over not only program management and contracting, but also 

requirements development and budgeting. When the same people exercise authority over both 

budgeting and program management, it will allow for a more realistic assessment of future program 

costs. In turn, this change will lead to a more accurate budget formulation process. 

During its research, the Section 809 Panel has consulted with cost estimating experts from the Institute 

for Defense Analyses (IDA) and other organizations. Although these consultations have not resulted in 

a formal recommendation, cost estimating process improvement represents an avenue for future 

research and further improvement of the defense acquisition budgeting process. These research efforts 

should continue. 

The remainder of this section addresses a number of recommendations associated with managing the 

defense budget. Recommendations 46 through 48 address flowing down reprogramming decision 

authority to the lowest possible levels. This section also addresses increasing reprogramming 

thresholds to allow for a broader trade space within portfolios. The current process by which DoD 

moves funding from one program to another is too time-consuming and complicated. It involves too 

many levels of approval, and it does not allow for delegation of decision authority to the mid- and 

lower-levels of the acquisition system. These lower levels of authority may, in many cases, be where 

people best understand the tradeoffs being made. 

Several types of annual and intrayear deadlines are applied to different tiers of defense acquisition 

spending. These include congressional appropriations account deadlines, DoD Comptroller obligation 

rate targets, military department obligation rate targets, and working-level targets. These constraints 

can lead to several negative outcomes, which are described in detail in the discussion of 

Recommendation 49, which moderately increases flexibility of the time within which short-termfunded contract obligations are permitted to occur. 

The stopgap defense funding provided by continuing resolutions is a poor substitute for regular 

Congressional appropriations. Short-term funding reduces stability and undermines DoD’s ability to 

budget and execute its strategic missions. If enacted, Recommendation 50 would require Congress to 

enact regular defense appropriations on time each year. Congress’s enactment of on-time defense 

appropriations in FY 2019 was a welcome reversal of a chronic problem. If this recent improvement 

does not prove to be a lasting trend, however, Recommendations 51 through 54 offer other measures 

which may provide enough flexibility for DoD to effectively fund its required missions, to include 

allowing for acquisition program changes even while DoD is temporarily funded and allowing a full 

period of obligation authority regardless of appropriations law enactment date. As laid out in this 

report, some of the technical details for these recommendations may raise concerns about data 
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management and auditability. These recommendations may be improved through further consultation 

with DoD and military department comptrollers. 

The Prompt Payment Act requires payment of interest penalties to contract vendors for any amount 

more than $1. This threshold has been unchanged since the 1980s, and the costs of administrative 

processes often exceed the payment amounts. Recommendation 55 increases the threshold to $15. 

Federal agencies and contractors have expressed frustration at government failures to fund projects 

that promise to make agencies more efficient or more effective in the long term. These projects may 

include facility improvements, IT system upgrades, and energy efficiency improvements. In some 

cases, private contractors offer to finance such projects on behalf of federal agencies, only to be told that 

this is impossible due to budgetary scoring rules laid out in Office of Management and Budget (OMB) 

Circular A-11. Recommendation 56 establishes a revolving fund under the IT modernization provisions 

enacted as part of the FY 2018 NDAA. The new fund should be used as a pilot program to gauge the 

feasibility of loosening financing rules for projects such as aircraft re-engining. DoD should conduct 

studies on public–private funding in other countries and at state and local levels, and the exceptions 

that have been granted to OMB scoring rules to determine what would need to be done to increase 

opportunities for equipment recapitalization. 

In the 1990s, Congress enacted a 5-year time limit on disbursement of funding once obligated on a 

contract. At that time, neither Congress nor DoD recognized how difficult it would be to close out 

contracts within the required 5-year period. Because of close-out delays, vendors must in some cases be 

paid out of appropriations from different fiscal years, undermining the original congressionallyintended purpose of the funding. Recommendation 57 lengthens that 5-year deadline to 8 years, to 

ensure that funds can be used for the original congressional intent. Recommendation 58 addresses the 

issue of over-age contracts. 

RECOMMENDATIONS 46 THROUGH 48 SHARE THE COMMON THEME: 

REPROGRAMMING 

Recommendation 46: Empower the acquisition community by delegating below 

threshold reprogramming decision authority to portfolio acquisition executives. 

Problem 

The current reprogramming process in DoD is too time-consuming and complicated. It involves too 

many levels of approval, and it does not allow for delegation of decision authority to the mid- and 

lower-levels of the acquisition system. These lower levels of authority may, in some cases, be where 

people best understand the tradeoffs being made. 

Background 

Reprogramming is the act of reallocating congressionally appropriated funds for a purpose other than 

that originally intended. It is considered a vital part of DoD’s ability to maintain enough flexibility to 

counter rapidly changing threats. 
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DoD uses reprogramming to increase or decrease a program’s funding after an appropriation from 

Congress is enacted into law. Reprogramming offers the advantage of not requiring new 

appropriations from Congress. Reprogramming is budget neutral: The requests for increases for 

higher-priority programs are matched with equivalent decreases in lower-priority programs. 

Role of Congress 

Congress explicitly acknowledges the importance of reprogramming in giving the military the ability 

to respond to unpredictability in the battlefield. Each year when it enacts defense appropriations laws, 

Congress approves a multibillion-dollar general transfer authority (GTA) permitting DoD to move 

funds across appropriations accounts and their subdivisions. GTA provisions typically include 

requirements that transfers must be considered “necessary in the national interest” and “based on 

unforeseen military requirements.”5

The congressional defense committees agree to thresholds for each appropriations account, below 

which DoD may, in some cases, reprogram funding without seeking prior congressional approval. On 

the basis of these thresholds, reprogramming actions may be divided into below-threshold reprogramming

(BTR) and above-threshold reprogramming (ATR). 

At the beginning of each fiscal year, the DoD Comptroller is responsible for compiling a comprehensive 

statement of the base amounts on which the coming fiscal year’s reprogramming actions are based. 

This annual statement goes into detail at the level of individual budget line items.6

If a reprogramming action exceeds BTR thresholds, initiates a new start or termination, or affects a 

program Congress has designated as an item of special interest, it may not use BTRs. In these cases, 

DoD must submit a prior approval (PA) request or a Congressional Notification Letter request to the 

four congressional defense committees.7 Internal reprogramming (IR) may be used in cases where 

reprogramming actions are “required to execute funds properly in accordance with congressional 

intent,” are deemed “necessary in the national interest,” represent the same “purpose for which the 

funds were originally appropriated,” and have not been previously rejected by one of the congressional 

defense committees.8

Because IRs do not require PA from as many stakeholders, they are considered by many to be more 

efficient than PAs.9 DoD engages in relatively few IR actions each year because IRs must be used for the 

same purpose as originally appropriated, which is highly dependent on regulatory definitions of what 

constitutes a given budget line item’s purpose. For example, DoD’s FY 2018 reprogramming 

documentation showed 24 internal reprogrammings. Some of these consisted of multiple actions, but 

most addressed individual subcategories of DoD spending. By contrast, DoD engages in hundreds of 

 

5

 See, for example, Section 8005 of Division C, Consolidated Appropriations Act, 2018, Pub. L. No. 115-141 (2018). 

6

 “Budget Execution: DD 1414 Base for Reprogramming Actions,” Under Secretary of Defense (Comptroller), accessed November 2, 2018, 

https://comptroller.defense.gov/Budget-Execution/. 

7

 See language in DD 1415-1 request forms for “Implemented Reprogramming Actions” in FY 2018, Under Secretary of Defense 

(Comptroller) website, accessed August 6, 2018, https://comptroller.defense.gov/Budget-Execution/ReprogrammingFY2018. 

8

 This list of conditions represents the standard language in FY 2018 DD 1415-3 internal reprogramming notification forms. See, for 

example, DoD Comptroller, May 2018 Internal Reprogramming Request, accessed August 6, 2018, 

https://comptroller.defense.gov/Portals/45/Documents/execution/reprogramming/fy2018/ir1415s/18-13_IR_May_2018_Request.pdf. 

9

 Former DoD Comptroller and former congressional staffers, discussions with Section 809 Panel, September 2018. 
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BTR reprogrammings each year. 10 Anecdotally, part of the reason for this pattern is the long wait time 

to gain approval for PAs and IRs at the congressional and Office of the Secretary of Defense (OSD) 

levels, respectively. 

Types of Reprogramming Used in Defense Acquisition11

 Prior Approvals (PAs) are reprogramming actions that meet one of several conditions. PAs are required for 

reprogramming actions in cases for which procurement quantities are increased, new starts are initiated, programs 

are terminated, congressional special interest items are affected, GTA may be used, or BTR thresholds are exceeded. 

PAs for specific requirements are submitted monthly. A large-scale omnibus PA reprogramming action is submitted 

prior to June 30 of each year.12 PAs must be preapproved by the DoD Comptroller, OMB, and all four congressional 

defense committees. 

 Internal Reprogrammings (IRs) are reprogramming actions that do not change the congressional intent of a budget 

line item. They may in some cases, however, move funding across appropriations accounts and therefore require the 

use of GTA. IRs must be preapproved by DoD, but only require notification (not PA) of the congressional committees. 

 Below Threshold Reprogramming (BTR) are reprogramming actions that fall below an account-specific amount and 

do not move funds across appropriations accounts. They may not be used in cases where congressional intent would 

be altered, congressional special interest items would be affected, or line items would be terminated or initiated as 

new starts. BTRs may be approved at the Military Service level. Congress is notified of all BTRs on a quarterly basis.13

 Congressional Notification Letters are reprogramming actions that would not rise above BTR thresholds or move 

funds across appropriations accounts, but would result in the new start or termination of a line item. They are 

submitted by Defense Agencies in coordination with the DoD Comptroller, and they must be preapproved by all four 

congressional defense committees. 

 Letter Transfer (LTRs) are used to process funding transfers that are specifically authorized in legislation. Commonly 

used types of letter transfer authorities include Environmental Restoration, Drug Interdiction, and Defense Working 

Capital Funds. 

 Above Threshold Reprogramming (ATR) is not an official category of reprogramming as defined by the DoD 

Comptroller. It is, however, a widely used term within the defense acquisition community. The term ATR is 

commonly used as a catch-all description for reprogramming actions other than BTRs that may not be approved by 

any authority below the DoD Comptroller. PAs and IRs, for instance, are generally considered subcategories of ATRs. 

BTRs may occur when funding does not move from one appropriations account to another. BTRs may 

be approved at the Military Service level, but the congressional committees must be notified. At the 

end of each annual quarter, the Military Services and OSD provide detailed reports to Congress of all 

BTR actions. These reports are made available through a website hosted by the DoD Comptroller. 

Because of the relatively streamlined process allowing for approval at the Military Service level, 

acquisition and financial management personnel are able to complete BTR actions on a much shorter 

 

10 “Budget Execution: Implemented Reprogramming Actions, FY 2018,” Under Secretary of Defense (Comptroller), accessed 

September 14, 2018, https://comptroller.defense.gov/Budget-Execution/ReprogrammingFY2018. 

11 Information summarized from DoD Comptroller, “Budget Execution Flexibility Tutorial,” 

https://comptroller.defense.gov/Portals/45/Documents/execution/Budget_Execution_Tutorial.pptx, accessed August 21, 2018. 

12 See Reprogramming Actions Requiring Congressional Approval, FMR Volume 3, Chapter 6, Section 060401. 

13 See “Budget Execution: 1416 Quarterly Reports,” Under Secretary of Defense (Comptroller), accessed August 21, 2018, 

https://comptroller.defense.gov/Budget-Execution/1416QrtlyRptsfy2018. 
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timeframe.14 For example, in the third quarter of FY 2018, the Air Force reported 128 BTR actions in its 

unclassified Research, Development, Test and Evaluation (RDT&E) accounts alone. 

The congressional defense committees set the dollar thresholds that define whether a given 

reprogramming action is a BTR or ATR. These thresholds vary according to the type of appropriation. 

The four major types of appropriation for reprogramming are Procurement, RDT&E, Operations and 

Maintenance (O&M), and Military Personnel. Although all reprogrammings are reported to Congress, 

PA reprogramming actions require explicit, unanimous approval from the four congressional defense 

committees before the funds can be reprogrammed. In practice, the reprogramming requests are 

approved by the chair and ranking members of each defense committee raising the number of 

affirmative responses required for approval to eight. Individual members of their committees are 

generally notified of a reprogramming and can raise objections to the chair or ranking member. 

Discussion 

The pace of reprogramming has become so slow that it routinely is not completed until late in the fiscal 

year. The slowness is due, in part, to the lack of a single, unified chain of control through which ATR 

requests may be approved. Individual ATRs can require approval from many different functional 

communities including comptrollers, fiscal lawyers, the formal acquisition system chain of command, 

and other offices. PA reprogrammings must also receive approval from all four of the congressional 

defense committees. Within the defense acquisition community, the need to seek approval from 

multiple entities at the top of the hierarchy is commonly referred to as the mother may I approval 

process.15

Complex Networks of Stakeholders 

Many different stakeholders may need to provide approvals to successfully navigate an ATR request. 

These stakeholders may include the following: 

 Program manager (PM) 

 Military Service comptroller appropriation manager 

 Military Service budget manager 

 Military Service budget director 

 Military Service comptroller 

 Military Service vice chief of staff 

 Military Service secretary 

 DoD Directorate for Freedom of Information and Security Review 

 DoD Comptroller budget directorates 

 DoD Comptroller 

 Deputy Secretary of Defense 

 Office of Management and Budget16

 

14 Based on Section 809 Panel staff analysis of “Budget Execution: 1416 Quarterly Reports,” Under Secretary of Defense (Comptroller), 

accessed September 14, 2018, https://comptroller.defense.gov/Budget-Execution/1416QrtlyRptsfy2018. 

15 DoD personnel, interviews with Section 809 Panel, throughout 2017. 

16 Pentagon staff, interviews with Section 809 Panel, and panel research, 2017. 
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Once required signatures have been obtained, a PA reprogramming request must navigate all four 

congressional defense committees. Even if three committees provide a same-day response to proceed 

with the reprogramming, timing of the approval will depend solely on response time for the fourth 

committee. 

Budget Process Impediments to Solving Engineering Problems 

Under the current budget process, the Military Services generally begin compiling weapon system 

budgets more than 2 years in advance of funding availability. For example, the FY 2017 budget was 

formulated at the Military Service level throughout early 2015. In July 2015, detailed proposals were 

submitted to the OSD level and between July and November a cycle of review processes occurred. In 

September 2015 the Budget Estimate Submissions were presented to OSD. In November 2015, program 

decision memoranda were presented to OSD. The budget was finalized in December 2015 and 

presented from OMB to Congress as part of the President’s budget request in February 2016. The 

appropriations committees in both the House and Senate voted to approve funding by the end of 

May 2016. Congress enacted the regular defense appropriations bill in May 2017 as part of the omnibus 

funding bill.17

Between the budget compilation and appropriations enactment, a weapon system may encounter 

technical difficulty that requires additional engineering development or possibly additional test and 

evaluation periods. A common-sense solution to such a scenario would be delaying procurement and 

increasing development and testing to ensure technical maturity of the weapon system. Such a solution 

could also potentially avoid costly rework later in the program’s lifecycle. Current rules on 

reprogramming, however, make this prospect unnecessarily difficult. 

For the Military Service to move funding from production of a weapon system (Procurement funds) to 

development of a weapon system (RDT&E funds), it must obtain approval from the Undersecretary of 

Defense (Comptroller) and unanimous approval from the four congressional defense committees.18 The 

reprogramming process can take several months before approval or disapproval is known. Lengthy 

delays sharply reduce the efficacy of reprogramming. 

Reprogramming is intended as a source of much-needed funding flexibility due to the size and 

complexity of the defense budget. Since at least the 1980s, the process has been viewed as cumbersome 

by most of those involved.19

Prior Approval Process 

The PA reprogramming approval process reportedly takes about 75 days from the perspective of the 

DoD Comptroller. An average of about 75 days elapses from the point at which the DoD Comptroller 

begins compiling an ATR request to the point at which the request is approved by all four 

 

17 Internal DoD timeline from Brian Melton, POM Development, presentation at DAU, March 29, 2017, 17, accessed November 2, 2018, 

https://www.dau.mil/Lists/Events/Attachments/8/03-29-2017%20LnL-POM%20Development_B.%20Melton.pdf. Congressional timeline 

from “Appropriations for Fiscal Year 2017” committee approval records available at www.congress.gov. 

18 The four congressional defense committees are House Committee on Armed Services, Senate Committee on Armed Services, House 

Appropriations Committee (Defense Subcommittee), and Senate Appropriations Committee (Defense Subcommittee). 

19 GAO, Budget Reprogramming: Department of Defense Process for Reprogramming Funds, GAO/NSIAD-86-164BR, July 1986, 3, accessed 

June 30, 2017, http://www.gao.gov/assets/80/75702.pdf. 
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congressional committees. From the perspective of a PM, the process may be much longer due to the 

additional tiers of control that exist between DoD and the Military Services, as well as within the 

Military Services.20 The current reprogramming process is illustrated as a process map shown in 

Figure 4-1. 

Figure 4-1. Current PA Reprogramming Process21

These 75 days do not include any of the decision-making processes that must occur before the request 

reaches the DoD Comptroller’s office. These processes occur at the levels of the Military Service, the 

program executive officer (PEO), and the PM— the offices that have the most real-time awareness of 

the proposed acquisitions in question. 

The initial process of developing a PA request within a Military Service can take a month or more. 

After all four committees have approved the request, funds are usually released at the PM level within 

a week or two. From a PM’s perspective, the total time required to complete an ATR reprogramming 

action “ranges from 4 to 6 months.”22

Case Study: 

Reprogramming Timeline from a PM’s Perspective23

In late 2017, the Army required a PA reprogramming of funds for the procurement of electronic support equipment. 

Army program personnel began working on the request in December 2017, and it was sent to the congressional 

committees at the end of January 2018. The fourth congressional committee approved the request at the end of 

March 2018, and funds were released at the PM level about a week later in early April. In total, the process took roughly 

4 months. One senior official involved in the approval described it as a fairly fast ATR.

 

20 Based on information from OSD Comptroller, provided to Section 809 Panel staff, March 2017. 

21 Based on Section 809 Panel interviews with DoD Comptroller officials and Panel staff analysis of DoD 7000.14-R Financial Management 

Regulation, Volume 3, Chapter 6: Reprogramming of DoD Appropriated Funds, updated September 2015. 

22 Military Service acquisition expert, emails to Section 809 Panel, September 2018. 

23 Army acquisition official, emails to Section 809 Panel, September 2018. 
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Nondefense Reprogramming 

Other federal agencies also reprogram funding; however, the procedures they use and the approval 

processes from their appropriations subcommittees differ substantially from those in DoD.24 The 

Government Accountability Office (GAO) describes DoD’s procedures for reprogramming as “detailed 

and sophisticated” compared to other federal agencies.25

Conclusions 

Reprogramming is intended as a way for DoD to adjust funding within fiscal years outside of the 

normal budget process. Decreased utility of reprogramming as a management and budgetary tool 

negatively affects the defense acquisition system. 

The simplest way to mitigate these problems is to flow more reprogramming authority down to the 

lower levels of the acquisition system. DoD should allow for more flexibility in its definitions of 

appropriations lifecycle categories. In other words, definitions should be clarified to encourage 

program offices to focus more on whether capabilities are being delivered, and less on coordinating the 

timing of the funding for a system’s lifecycle phases. 

Allowing portfolio managers to move funds across appropriations would add complexity to the 

reprogramming process and potentially require amendments to fiscal law. If portfolio managers were 

able to move funds from RDT&E accounts to Procurement accounts without PA, it would substantially 

reduce the congressional committees’ oversight and control capabilities. 

For these reasons, portfolio managers, or their relevant milestone decision authorities, should be given 

decision authority over BTR actions that occur within the same portfolio and appropriations account. 

Decision authority over BTRs crossing portfolio lines should be held by the relevant comptrollers. 

Modifying the approval processes for BTRs would allow for more timely decision making. Rules on 

BTR approval could be modified to allow Military Service PEOs to make trades within their portfolios, 

rather than waiting on the Military Service leadership for approval. This improvement could be 

accompanied by changes in the existing BTR thresholds, which would further flow down authority and 

allow PEOs to make decisions concerning a broader set of transactions. 

A graphical comparison of the current and proposed decision-making structure for the PA and BTR 

processes is presented in Figure 4-2 and Figure 4-3. 

 

24 GAO, Budget Reprogramming: Department of Defense Process for Reprogramming Funds, GAO/NSIAD-86-164BR, July 1986, 4 and 24, 

accessed June 30, 2017, http://www.gao.gov/assets/80/75702.pdf. 

25 GAO, Principles of Federal Appropriations Law: Chapter 2, The Legal Framework, Fourth Edition, 2016 Revision, GAO 16-464SP, 2-47, 

accessed August 8, 2017, http://www.gao.gov/assets/680/675709.pdf. 
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Figure 4-2. Current Decision Authority Flowchart for PA Reprogramming Actions 
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Figure 4-3. Current and Proposed Decision Authority Flowchart for BTR 

Placing BTR decision authority in the hands of portfolio managers would require a certain degree of 

trust on the part of OSD, the Military Services and Defense Agencies, and the congressional 

committees. Stakeholders would also need to show trust to modify Financial Management Regulation 

(FMR) definitions to allow for greater flexibility when determining which appropriation must be used 

to address a given requirement. To build this trust, portfolio managers would be required to comply 

with Service and Defense Agency comptroller instructions. 

Implementation 

Recommendations on reprogramming decision authority in this section refer to portfolio acquisition 

executives (PAEs). If the recommendations described in Section 2 are adopted, PAEs would be a new 

role in DoD with increased decision authority over requirements development, budgeting, and 

program execution. Should PAEs not be established within DoD, an alternative role in which to locate 

reprogramming decision authority would be the currently existing PEOs. 

Legislative Branch 

 Obtain concurrence from the congressional defense committees to modify the BTR process to 

allow for more timely decision making by placing decision authority in the hands of portfolio 

managers. This change would primarily fall within the jurisdiction of the appropriations 

committees. It would likely be implemented via the conference report joint explanatory 

statement of a regular defense appropriations law. 
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Executive Branch 

 Flow down BTR authority to portfolio executives. 

 Modify the FMR to allow for portfolio managers (the portfolio acquisition executive, should 

recommendations in Section 2 be adopted) to make decisions on approval of BTR actions, 

with the concurrence of the relevant Service comptroller and DoD Comptroller, for cases in 

which a viable funding offset has been identified within the same portfolio. 

 As is currently the case, continue to report all BTR actions to Congress quarterly via DoD 

Comptroller budget execution documentation. 

 Facilitate the ability of program and portfolio managers to obligate funding by clarifying 

appropriations account definitions in the FMR. 

 Issue clear guidance on FMR interpretation to maximize the extent to which program and 

portfolio managers can use available funding for approved requirements. Provide guidance 

on what types of funding they should request in advance of budget requests and what 

flexibilities are available to them. 

 Reduce the timetables involved in BTR requests. 

 In cases where a viable funding offset has been identified within the same portfolio, the 

process should take no longer than a few weeks from time of request to time of approval or 

rejection. 

Note: There are no Implementation Details for this recommendation. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

Recommendation 47: Restore reprogramming dollar thresholds to match their 

previous levels relative to inflation and the DoD budget. 

Problem 

The reprogramming flexibility available to DoD has eroded over the course of multiple decades. The 

current PA reprogramming dollar thresholds have kept pace with neither inflation nor the defense 

budget. 

Background 

The dollar thresholds below which DoD may engage in BTRs are set by the congressional defense 

committees. BTR thresholds have existed since at least the 1960s, and throughout recent decades they 

have been formally published in DoD’s Financial Management Regulation. 
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Current Reprogramming Thresholds 

As of FY 2019, reprogramming dollar thresholds for DoD appropriation accounts included the 

following:26

 Military personnel $10 million 

 O&M $15 million 

 Procurement $20 million 

 RDT&E $10 million 

DoD’s flexibility for reprogramming has eroded over time as the current reprogramming dollar 

threshold limits have not kept pace with inflation or with defense budget growth. 

Figure 4-4. Reprogramming Dollar Thresholds, Not Adjusted For Inflation 

Thresholds for FY 1963 and FY 1971 from versions of DoDI 7250.10 dated March 5, 1963 and April 1, 1971, provided by DoD 

Historical Office. Thresholds for FY 1982 from mid-1980s Air Force research.27 Thresholds for FY 2003 and FY 2018 from DoD 

Comptroller documentation.28

 

26 H.Rpt. 115-952, Conference Report to Accompany H.R. 6157 (see Reprogramming Guidance section of Joint Explanatory Statement), 

September 13, 2018, accessed September 21, 2018, https://www.congress.gov/115/crpt/hrpt952/CRPT-115hrpt952.pdf. 

27 William Alton Hill, Jr., Fiscal Law, Incremental Funding, and Conditional Contracts, January 22, 1985, 201, accessed October 2, 2018, 

http://www.dtic.mil/dtic/tr/fulltext/u2/a161081.pdf. 

28 For threshold changes in FY 2003, see DoD Comptroller Memorandum, Below Threshold Reprogramming Authority Policy,

May 15, 2003, accessed June 7, 2018, 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page 188 | Volume 3 Budget 

In purely inflation-adjusted terms, reprogramming dollar thresholds have historically been about 

double their current levels (see Figure 4-5). 

Figure 4-5. Reprogramming Dollar Thresholds in Inflation-Adjusted U.S. Dollars 

Figure is in adjusted 1983 U.S. Dollars. Thresholds for FY 1963 and FY 1971 from versions of DoDI 7250.10 dated March 5, 

1963 and April 1, 1971, provided by DoD Historical Office. Thresholds for FY 1982 from mid-1980s Air Force research.29

Thresholds for FY 2003 and FY 2018 from DoD Comptroller documentation. Adjustments based on Bureau of Labor Statistics 

CPI-W inflation data.30

As a percentage of total DoD outlays by account, reprogramming dollar thresholds are also much 

lower than they have been historically (see Figure 4-6). 

 

http://comptroller.defense.gov/Portals/45/Documents/execution/reprogramming/fy2003/policy_letter/BTR_Authority_Policy_Memo.pd

f. For threshold changes in FY 2018, see DoD Comptroller, Summary of Reprogramming Requirements Effective for FY 2018 Appropriation,

accessed June 7, 2018, 

http://comptroller.defense.gov/Portals/45/Documents/execution/reprogramming/Reprogramming_Overview.pdf. 

29 William Alton Hill, Jr., Fiscal Law, Incremental Funding, and Conditional Contracts, January 22, 1985, 201, accessed October 2, 2018, 

http://www.dtic.mil/dtic/tr/fulltext/u2/a161081.pdf. 

30 Inflation adjustments based on average of monthly rates for CPI-Urban Wage Earners and Clerical Workers (Series ID 

“CWUR0000SA0”). Data includes only the first four months of calendar year 2018. See “Databases, Tables & Calculators by Subject,” 

Bureau of Labor Statistics, accessed June 8, 2018, https://data.bls.gov. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Budget Volume 3 | Page 189 

Figure 4-6. Reprogramming Dollar Thresholds as Percentage of Individual Title Outlays 

Thresholds for FY 1963 and FY 1971 from versions of DoDI 7250.10 dated March 5, 1963 and April 1, 1971, provided by DoD 

Historical Office. Thresholds for FY 1982 from mid-1980s Air Force research.31 Thresholds for FY 2003 and FY 2018 from DoD 

Comptroller documentation. Percentages represent the ratio of reprogramming dollar threshold to total outlays associated 

with the indicated appropriation category.32

Discussion

Reprogramming limits have been adjusted several times, most recently in 2015; however, 

reprogramming dollar threshold limits have not kept up with inflation for the programmatic limits 

associated with the individual appropriation types. 

Reprogramming Thresholds 

Figure 4-6 illustrates that the Procurement and RDT&E reprogramming thresholds, adjusted by either 

inflation or outlay share, are roughly half their levels in the 1960s. O&M reprogramming thresholds are 

particularly low relative to the 1960s-era outlay ratios. By either of these measurements, the Congress 

of 1961 allowed DoD far greater reprogramming flexibility than the Congress of 2018. 

General Transfer Authority Threshold 

The GTA maximum is cumulative and set to a dollar amount specified in each annual appropriations 

bill. Individual reprogramming decisions count against this annual limit if they cross appropriations 

accounts and are not otherwise approved by Congress. 

 

31 William Alton Hill, Jr., Fiscal Law, Incremental Funding, and Conditional Contracts, January 22, 1985, 201, accessed October 2, 2018, 

http://www.dtic.mil/dtic/tr/fulltext/u2/a161081.pdf. 

32 Due to unavailability of FY 1961 data from OMB, FY 1962 outlay data is used in its place. FY 2018 outlays are OMB estimates. See Office 

of Management and Budget Historical Tables, “Table 3.2—Outlays by Function and Subfunction: 1962–2023,” accessed June 7, 2018, 

https://www.whitehouse.gov/omb/historical-tables. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page 190 | Volume 3 Budget 

 GTA for FY 2019: $4 Billion 

 GTA for FY 1986: $950 Million 

The intended GTA for FY 2019 was $4 billion, or around two-thirds of one percent of the total budget.33

In FY 1986, DoD’s annual budget was about $273 billion, and its corresponding limit was $950 million 

or around one-third of one percent of the budget.34

Although the defense budget has approximately doubled during the last 30 years, the GTA limit has 

increased more than fourfold. Viewed strictly from the overall transfer authority limit, it appears that 

Congress and the appropriations committees have granted DoD more flexibility over time, not less. 

Data from DoD Comptroller show in many years DoD does not use all of its transfer authority and has 

a residual amount that can be more than $2 billion dollars in some years.35

Due to special transfer authority and other tools for reprogramming given to DoD, the GTA limit does 

not appear to unduly constrict DoD. From 1981 to 1986, DoD requested and received the ability to 

reprogram an average of 2.7 percent of its annual funding each year.36 From 1999 to 2006, DoD’s annual 

reprogrammed funds as a percentage of the total budget reached a low of 4.2 percent and a high of 

5.4 percent.37 From 2007 to 2014, DoD requested and reprogrammed about 3.5 percent on average each 

year.38

Conclusions 

The best approach for improving flexibility in the Procurement and RDT&E appropriations accounts 

would be to adopt a standard based on previously granted congressional authority. In the 1960s and 

1980s, thresholds were substantially higher relative to purchasing power share of budget outlays. By 

raising these thresholds, the defense committees can better align with the original intent of the 

reprogramming process. Raising thresholds will decrease delays during critical phases of the program 

management and contracting process. Increased thresholds will also allow congressional staff to focus 

their attention on the largest or most critical programs, flowing down oversight over small programs to 

DoD. 

 

33 See Section 8005 of Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and 

Continuing Appropriations Act, 2019, Pub. L. No. 115-245 (2018). 

34 Outlay data from Office of Management and Budget, “Table 3.2—Outlays by Function and Subfunction: 1962–2023,” accessed June 11, 

2018, https://www.whitehouse.gov/omb/historical-tables. For general transfer authority see Section 8020 of Department of Defense 

Appropriations Act, Pub. L. No. 99-190 (1985). 

35 OSD Comptroller, “Budget Execution Flexibility Tutorial,” accessed November 16, 2018, 

https://comptroller.defense.gov/Portals/45/Documents/execution/Budget_Execution_Tutorial.pptx. See GTA residuals on page 13, chart 

labeled “GTA Authority vs. Use By Year” (residuals in FY 2008, FY 2009, and FY 2014 all reached or exceeded $2 billion). 

36 GAO, Budget Reprogramming: Department of Defense Process for Reprogramming Funds, GAO/NSIAD-86-164BR, July 1986, 2, accessed 

June 30, 2017, http://www.gao.gov/assets/80/75702.pdf. 

37 Chad Roum, “The Nature of DoD Reprogramming,” Naval Postgraduate School, June 2007, 40, accessed November 16, 2018, 

http://www.dtic.mil/dtic/tr/fulltext/u2/a473540.pdf. 

38 OSD Comptroller, “Budget Execution Flexibility Tutorial,” accessed November 16, 2018, 

https://comptroller.defense.gov/Portals/45/Documents/execution/Budget_Execution_Tutorial.pptx. Also see Office of Management and 

Budget, “Table 5.2 – Budget Authority by Agency: 1976 – 2023,” accessed November 16, 2018, https://www.whitehouse.gov/wpcontent/uploads/2018/02/hist05z2-fy2019.xlsx. Figure of 3.5 percent based on average PA and Internal reprogramming dollar values in 

chart “Dollar Value of Implemented Reprogramming Actions Per Year” on page 6 of OSD Comptroller document and average annual 

budget authority in line item “Department of Defense—Military Programs” of OSD document. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Budget Volume 3 | Page 191 

In most discussions with DoD acquisition personnel, reprogramming complaints were related to the 

perceived low thresholds for BTR thresholds for Procurement and RDT&E. DoD personnel did not 

express the same level of frustration at either the individual BTR threshold for O&M or the broader 

thresholds applied to GTA in appropriations laws. 

In the FY 2018 appropriations bill, Congress reduced the GTA from $4.5 billion to $4.25 billion.39 In 

FY 2019, Congress further reduced the GTA to $4 billion.40 Congress may wish to increase the GTA in 

future appropriations bills to provide the same level of overall flexibility as previously granted. 

Implementation 

There are several ways in which reprogramming dollar thresholds could be recalculated to align with 

the amounts established in the 1960s or 1980s. The new thresholds that would result from various 

methods are shown in Table 4-1 below. 

Table 4-1. Reprogramming Dollar Thresholds, if Reset to 1963 or 1982 Equivalents41

Appropriation Category O&M Procurement RDT&E 

Current Threshold (million U.S. Dollars) $15 $20 $10 

Threshold in FY 1963 (million U.S. Dollars) 

Threshold in FY 1982 (million U.S. Dollars) 

FY 1963 adjustment 

FY 1982 adjustment 

FY 1963 threshold-to-outlay ratio 

FY 1982 threshold-to-outlay ratio 

FY 2018 estimated outlays (billion U.S. Dollars) 

$5 

$10 

12.4% 

37.6% 

0.00042 

0.00017 

$255.9 

$5 

$10 

12.4% 

37.6% 

0.00030 

0.00023 

$107.4 

$2 

$4 

12.4% 

37.6% 

0.00031 

0.00023 

$72.8 

New thresholds shown in million U.S. Dollars, if:

Inflation-adjusted to FY 1963 

Inflation-adjusted to FY 1982 

$40.4 

$26.6 

$40.4 

$26.6 

$16.2 

$10.6 

Outlay-adjusted to FY 1963 

Outlay-adjusted to FY 1982 

$107.7 

$42.9 

$32.3 

$24.8 

$22.8 

$16.4 

Congressional committees should revise their reprogramming guidance to permit DoD to modify the 

Financial Management Regulation to raise BTR thresholds to previous levels, as measured by inflation 

adjustment and the ratio of dollar thresholds to account outlays. These adjustments support increases 

of $20 million to the Procurement threshold and $10 million to the RDT&E threshold. 

 

39 See Section 8005 of Consolidated Appropriations Act, 2018, Pub. L. No. 115-141 (2018). 

40 Division A, Section 8005 of Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and 

Continuing Appropriations Act, 2019, Pub. L. No. 115-245 (2018). 

41 Calculations based on Section 809 Panel staff analysis of Comptroller documents, OMB outlay information, BLS inflation data, and 

original research. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page 192 | Volume 3 Budget 

Legislative Branch 

 Adjust portfolio-level Procurement and RDT&E reprogramming thresholds to match earlier 

shares of appropriations account category outlays: 

 Current Procurement Reprogramming: $20 million 

 Proposed Procurement Reprogramming: $40 million (+$20 million) 

 Current RDT&E Reprogramming: $10 million 

 Proposed RDT&E Reprogramming: $20 million (+$10 million) 

 This change would primarily fall within the jurisdiction of the appropriations committees. It 

would likely be implemented via the reprogramming guidance explanatory language 

accompanying the conference report of a regular defense appropriations law. 

Executive Branch 

 Amend the reprogramming dollar limits to the proposed levels in Volume 3, Chapter 6 of the 

FMR. 

Note: There are no Implementation Details for this recommendation. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

Recommendation 48: Increase to 50 percent the lesser of 20 percent restriction 

that creates artificially low reprogramming thresholds for smaller programs. 

Problem 

The large number of budget line items in budget documentation means that many have only a few 

million dollars in annually allotted funding. These low dollar amounts, combined with language 

currently in the FMR, mean that reprogramming thresholds for smaller programs are artificially low. 

These low thresholds reduce flexibility and limit the ability of smaller programs to respond to needs as 

they arise. 

Background 

When determining the threshold applicable to a potential reprogramming action, DoD must abide by 

percentage limitations in addition to dollar thresholds. Regardless of the dollar amount, 

reprogramming requests moving more than 20 percent of a line item within the RDT&E or 

Procurement accounts must receive the same approval from Congress.42 This approach is sometimes 

colloquially referred to as the lesser of 20 percent rule. 

 

42 Department of Defense, Financial Management Regulation, Volume 3: “Budget Execution – Availability and Use of Budgetary 

Resources, Chapter 6: Reprogramming of DOD Appropriated Funds,” 6-9, accessed June 30, 2017, 

http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_03.pdf. 
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Volume 3 of 3 | January 2019 

Budget Volume 3 | Page 193 

If a line-item dollar total falls below five times the relevant BTR threshold ($100 million for 

Procurement or $50 million for RDT&E), it is effectively limited by the lesser of 20 percent rule rather 

than the normal dollar thresholds. DoD has hundreds of research and development (R&D) programs 

and procurement programs that are limited by the lesser of 20 percent rule and not by the dollar amount 

threshold. 

Financial Management Regulation 

The FMR states the following requirement for congressional approval of a reprogramming for 

procurement or RDT&E: 

A cumulative increase of [$20 million for Procurement / /$10 million for RDT&E] or more or 20 percent 

of the program base amount ....whichever is less.43

The percentage limits and whichever is less clause were added following the enactment of the FY 2005 

defense appropriations act and its accompanying conference report explanatory statement.44

Discussion

The standard reprogramming thresholds do not, in fact, apply to the majority of line items in DoD’s 

acquisition budget. Line items with smaller dollar values are bounded not by the threshold dollar 

limits, but rather by an FMR restriction on moving more than 20 percent of funds into or out of a 

budget line item without PA. 

There are about 2,000 funded line items split about evenly between DoD’s RDT&E and Procurement 

accounts. About 60 percent of the RDT&E line items are for less than $50 million, and about 70 percent 

of Procurement line items are for less than $100 million (see Table 4-2).45 Providing relief in this area by 

increasing or removing the percentage cap would greatly assist DoD in flexibly managing its budget 

during the fiscal year. 

Table 4-2. Number of FY 2019 Budget Request Line Items that Would Face 

Artificially Low BTR Thresholds Due to the Lesser of 20 Percent Rule46

RDT&E ($10M threshold) Procurement ($20M threshold) 

Positively funded line items 920 920 

Line items below five times the relevant BTR threshold 576 655 

Percentage of line items for which lesser of 20 percent

rule determines BTR thresholds 63% 71% 

 

43 Ibid. 

44 Department of Defense Appropriations Act, 2005, Pub. L. No. 108-287 (2004). Also see conference report joint explanatory statement 

for H.R. 4613 in the 108th Congress (Report 108-622), 68. 

45 20 percent of $50 million is the $10 million BTR threshold for RDT&E; therefore the majority of RDT&E line items are governed by the 

20 percent threshold and not the $10 million dollar threshold. The same is true of Procurement line items with respect to the $20 million 

BTR threshold. Based on Section 809 Panel analysis of FY 2019 budget request R-1 data. 

46 Based on Section 809 Panel analysis of R-1 and P-1 displays in FY 2019 DoD Budget Request from DoD Comptroller website, accessed 

August 3, 2018, https://comptroller.defense.gov/Budget-Materials. 
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Congressional Reaction Against Certain Funding Reductions 

According to the GAO, in 2003 DoD used the BTR process to reduce funding in hundreds of RDT&E 

programs to pay for higher priority funding needs.47 DoD submitted reprogramming reports to 

Congress months after they would have been useful to the congressional defense committees. 

This spotty reporting of funding increases occurred in the early years of the conflicts in Iraq and 

Afghanistan. The top two programs for which the Air Force used BTRs to increase funding in FY 2003 

were airlift squadrons and aerial refueling. The top program for which the Army used BTRs to increase 

funding was combat vehicle and automotive advanced technology.48

GAO also found that reports to Congress could not be supported by the military services’ financial 

systems. In 2003 more than 30 percent of the BTR actions sent to Congress either differed or were 

otherwise not supported by Army financial systems.49

As of 2018, the need to reallocate large amounts of funding to specific operational needs such as airlift 

squadrons, aerial refueling, and armored vehicles has become less urgent. DoD has also adopted new 

financial systems and is improving internal controls as it works toward financial statement auditability. 

The BTR reports to Congress are now submitted each fiscal quarter in a timely manner and in uniform 

spreadsheet formats. The problems that led to the lesser of 20 percent rule have been addressed through 

improved business systems and internal controls. 

Conclusions 

The lesser of 20 percent rule materialized as a reaction against DoD’s funding of large-dollar line items 

by reducing funds in many small-dollar line items. These reprogramming practices occurred in the 

early stages of the Iraq and Afghanistan conflicts, and the circumstances that led to them no longer 

exist. The lesser of 20 percent rule may have been a necessary control when initially added to DoD 

regulations. The low percentage threshold, however, is no longer necessary to allow for congressional 

committees to exercise proper oversight over small-dollar defense acquisition programs. 

The defense committees and DoD should reach an agreement to allow BTRs of up to 50 percent of 

budget line item totals. Doing this would have the effect of loosening the current 20 percent constraint 

on smaller programs, which leads to artificially low dollar thresholds. 

BTRs within appropriations accounts and within portfolios would be within the jurisdiction of 

portfolio managers. BTRs within appropriations accounts but crossing portfolios would be in the 

jurisdiction of the Military Services. These BTRs would in all cases require notification of resource 

sponsors, military departments, the DoD Comptroller, and Congress.50

 

47 GAO, Defense Acquisitions: Better Information Could Improve Visibility over Adjustments to DOD’s Research and Development Funds, 

GAO-04-944, September 2004, accessed August 29, 2017, http://www.gao.gov/assets/250/244205.pdf. 

48 Ibid, 37-38. 

49 Ibid, 11. 

50 This requirement is already being met via the quarterly publication of departmentwide BTR data on the DoD Comptroller website. 
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Volume 3 of 3 | January 2019 

Budget Volume 3 | Page 195 

Implementation 

Legislative Branch 

 Increase the percentage thresholds associated with the acquisition appropriations account 

categories in the reprogramming section of the FMR. This action would allow for more flexible 

movement of funds into or out of small dollar RDT&E and Procurement programs. This change 

would primarily fall within the jurisdiction of the appropriations committees. It would likely be 

implemented via the conference report joint explanatory statement of a regular defense 

appropriations law. 

Executive Branch 

 After negotiation with the congressional defense committees, the DoD Comptroller should raise 

the thresholds associated with the “whichever is less” clauses within the Procurement and 

RDT&E limitations on reprogramming in the FMR. 

 Increase 20 percent to 50 percent in the RDT&E and Procurement clauses of Volume 3, 

Chapter 6 of the FMR. This action would increase the amount of reprogramming flexibility 

for small-dollar programs, but not permit DoD to zero out budget line items. 

Note: There are no Implementation Details for this recommendation. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

RECOMMENDATION 49 IS A STAND-ALONE RECOMMENDATION ABOUT 

BUDGET PERIODICITY 

Recommendation 49: Provide increased flexibility to the time periods within 

which contract obligations are permitted to occur. 

Problem 

End-year contract obligation surges, spurred by a use-it-or-lose-it mentality, can lead to lower-quality 

requirements and contracts, inefficient allocation of resources, degraded negotiating leverage and 

pricing power, and a negative effect on workforce morale. 

Background 

DoD acquisition, like other forms of government spending, is funded through the congressional 

appropriations process. Each appropriation account has a specific periodicity, or block of time within 

which DoD has the budget authority to obligate funds to buy products and services. 

A key performance metric for DoD’s budget execution is its obligation of appropriations within given 

time periods (obligation rate). The obligation rate measure drives tactical and strategic spending 

decisions throughout the fiscal year. Throughout the acquisition community there is a strong cultural 
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Volume 3 of 3 | January 2019 

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belief that if funds are not obligated, they will be reallocated to other projects or reduced in future 

appropriations. 

Because of these beliefs, which may in many cases be justified, an obligation surge occurs at the end of 

each fiscal year. This rush to spend, spurred by a use it or lose-it mentality, can lead to lower-quality 

requirements and contracts, inefficient resource allocation, degraded negotiating leverage and pricing 

power, and a negative effect on workforce morale. 

Figure 4-7. Weekly Obligations on Contracts under O&M Appropriations Account, FY 201751 

End-period defense contract spending is concentrated largely in the O&M appropriations accounts. 

Although other acquisition-focused appropriations accounts have multiyear obligation authority, O&M 

funding must be obligated within the span of a single year. 

If Congress and other decision makers chose to address end-year obligation surges by mandating their 

reduction (for instance, by imposing a monthly percentage cap on DoD contract obligations, essentially 

a much more rigorous version of the 80/20 rule) it would likely eliminate the distorted annual spending 

patterns seen in acquisition data. It would, however, represent an additional incentive for acquisition 

personnel to prioritize timing over procurement quality. In this way, such an approach might simply 

address symptoms rather than problems. 

 

51 Analysis of FPDS data based on Treasury Account Symbol (TAS) codes, June 8, 2018. See Department of the Treasury, Federal Account 

Symbols and Titles (FAST) Book, March 2018, accessed June 8, 2018, https://www.fiscal.treasury.gov/fsreports/ref/fastBook/fastbookmarch-2018.pdf. To ensure comparability of data, each weekly period contains the same days of the week (counted backwards from 

September 30). The extra day at the beginning of FY 2017 is included in the first week. 
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Budget Volume 3 | Page 197 

Greater flexibility of DoD’s acquisition budget authority across time periods would likely increase the 

efficiency and effectiveness of contract spending within those time periods. Such changes would also 

preserve Congress’s ability to determine the total, long-term dollar amount spent on individual DoD 

components, appropriation titles, or programs. 

A full expansion of O&M obligation authority to multiple years would limit Congress’s ability to 

control how much is spent from one period of time to the next. Many in Congress clearly view this 

ability as a core aspect of the oversight process. 

A more feasible and low-risk approach would be to permit the obligation of up to 5 percent of O&M 

funding for 1 year beyond what would normally be the end of its fiscal year availability. This change 

would allow for a smoothing effect across fiscal years, mitigating the perceived urgency to spend all 

available funds by end-year. 

By law, DoD has set periods of time within which it is required to obligate and disburse appropriated 

funds. These periods of time are referred to as budget periodicity. Overexecution and underexecution are 

terms used to describe whether a program obligates and disburses money within set timeframes. These 

metrics are commonly used as short-term proxies for program success. 

Multiple levels of periodicity constraints are applied to DoD spending. The highest-level constraints are 

those imposed by Congress on a fiscal-year basis. OMB may impose its own periodicity constraints on 

an annual or quarterly basis. Below this level, DoD and military departments conduct internal reviews 

of whether funds are on track to be fully executed by the end of the year. PEOs and PMs often selfimpose monthly and weekly deadlines to obligate or expend funds. 

At any point in the budget and acquisition process, failure to ensure obligation or expenditure at target 

rates may lead to reductions of future funding. The reduction of future funding as a consequence of 

failure to obligate current funding serves as a powerful perverse incentive for acquisition personnel to 

spend money regardless of the return on their investment.52 This incentive may lead to several negative 

outcomes: 

 Lower-quality contracts may result directly from end-period surges. Because of the high 

workload associated with surges in obligations or disbursements, contract reviews may be less 

detailed and reviewers may be less likely to detect problems. 

 Inefficient allocation of human capital may occur when acquisition professionals are focused 

more on timing of spending and less on value and return on investment. 

 

52 A 2012 memo by the Under Secretary of Defense (Comptroller) and the Under Secretary of Defense for Acquisition, Technology, and 

Logistics noted that “the threat that funding will be taken away or that future budgets can be reduced unless funds are obligated on 

schedule is a strong and perverse motivator.” The memo added that DoD risked “creating incentives to enter into quick but poor business 

deals or to expend funds primarily to avoid reductions in future budget years.” See Robert Hale and Frank Kendall, “Department of 

Defense Management of Unobligated Funds; Obligation Rate Tenets,” September 10, 2012, accessed November 16, 2018, 

https://www.acq.osd.mil/fo/docs/OSD%20Memo_DoD%20Mgt%20of%20Unobligated%20Funds_Obligation%20Rate%20Tenets_10Sep1

2.pdf. 
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 Unnecessary purchases may occur if acquisition authorities are motivated to obligate excess 

money purely to avoid future funding reductions. 

 Loss of negotiating power and loss of pricing power may occur when potential vendors know 

exactly how much money is available to a program office and the precise deadlines by which 

each portion of that money must be spent. The resulting decrease to return on investment may 

constitute an inefficient use of taxpayer resources. 

 Lower employee morale can result from a chaotic end-year workload.53

 Auditing may be more complex and difficult due to the need to track time periods as well as 

appropriation accounts and budget line items. 

Defense Acquisition Budget Terms

Allocation is funding made available by DoD component-level authorities to lower-level authorities. 

Allotment is funding made available by lower-level DoD authorities to the operating level. 

Apportionment is the distribution of funding from the Office of Management and Budget to DoD.

Appropriations are enacted each year by Congress and provide the legal authority for DoD to spend money.

Budget execution is the process of incurring the funding liabilities needed to move a program forward.

Budget periodicity is the phenomenon of funding accounts being locked to specific spans of time as mandated in annual 

appropriations laws.

Color of money is a colloquial phrase that can refer to the periodicity requirements, appropriation account, and/or 

program and purpose of a specific budget line item. 

Continuing resolutions (CRs) are stopgap appropriation laws enacted to provide temporary government funding for part 

of the fiscal year. 

The 80/20 rule is included in annual appropriations bills and generally requires that at least 80 percent of single-year 

funds be obligated by the end of July.

Obligations are legal commitments to spend money by a U.S. government representative (in DoD acquisition, a 

contracting officer). Under 31 U.S.C. § 1502, U.S. government appropriation periodicity is defined according to the date 

on which money is obligated. 

Regular appropriations fund DoD for the entire fiscal year and are enacted each year through a standardized committee 

process.

 

53 Army contracting officers, discussions with Section 809 Panel, September 2017. 
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Volume 3 of 3 | January 2019 

Budget Volume 3 | Page 199 

Fiscal Law Basics

Anti-Deficiency Act: 31 U.S.C. § 1341 and § 1517: This law prohibits government employees from making or authorizing 

expenditures and obligations in excess of congressional appropriations or OMB apportionments. 

Bona Fide Needs Rule: 31 U.S.C. § 1502(a): Under this section of U.S. Code, obligation authority limited to a specific time 

period is only available to “complete contracts properly made within that period of availability.” 

Impoundment Control Act: 2 U.S.C. § 682, §683, and § 684: This law requires government employees to obligate funding 

that has been appropriated by Congress. To defer budget authority, the president must notify Congress and deferrals 

“may not be proposed for any period of time extending beyond the end of the fiscal year” in which notification occurs. 

Misappropriation Act: 31 U.S.C. § 1301: This law requires that money only be used for the purposes specified in 

congressional appropriations. 

Multiyear Appropriations: 10 U.S.C. § 2306b and § 2306c: This section of U.S. Code provides the legal basis to obligate 

appropriated money in future years. Depending on the appropriation account, DoD may obligate funding over the course 

of 1, 2, 3, or 5 years (color of money). 

Appropriations Law Background 

In the annual U.S. federal budget system, Congress appropriates money for agency use within the daterange of a specific fiscal year. This money is not to be used beyond that timespan, or it may lead to an 

antideficiency violation.54 Statutory constraints on budget periodicity apply to the dates at which funds 

are obligated (as opposed to disbursed).55

Defense acquisition appropriations can be either single-year or multiyear. Single-year appropriations 

are typically used for low-risk projects such as service contracting under O&M budget authority. 

Multiyear appropriations constitute a longer-term form of budget periodicity, in which appropriated 

dollars may in some cases be used by DoD within a span of multiple years. A shorter-term form of 

budget periodicity in defense appropriation law is the 80/20 rule for O&M appropriations. Agency 

processes in both OMB and DoD constitute short-term, nonstatutory forms of budget periodicity. 

The main form of periodicity in DoD budgeting is Congress’s appropriation of funds for use within a 

specific fiscal year or specific span of several fiscal years. Annual appropriations and other forms of 

budget periodicity are relevant to defense acquisition because some observers suggest that periodicity 

leads to inefficient, low-quality contract outcomes. 

Congress imposes time limits on obligation and expenditure of funds for several reasons. These time 

limits allow for a regular, standardized oversight process to occur by default each year. They also 

address the concern that if funds do not automatically expire, they will accumulate into large 

unobligated balances that could be used for purposes unapproved by Congress. This concern appeared 

 

54 31 U.S.C. § 1341 lays out timing restrictions on the obligation of funds. 31 U.S.C. § 1350 imposes a criminal penalty of up to two years’ 

imprisonment on government employees who obligate unappropriated funds. 

55 Balances Available, 31 U.S.C. § 1502. 
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to be implicit in some congressional discourse during the 1980s and 1990s, referring to the flexible 

budgeting authorities DoD held at the time as slush funds.56

Periodicity in Congressional Appropriations 

DoD is permitted to enter into contract obligations “for the purchase of property or services for more 

than one, but not more than five, program years.”57 These varying lengths of funding availability, 

combined with the specific budget account to which they refer, are informally known as colors of 

money. Colors of money are written into the individual title authorities in annual defense 

appropriation laws. In some cases, special color of money provisions are written into individual 

appropriation law titles and subtitles. 

After these periods of obligation authority have elapsed, there are 5 years in which money may be 

expended on existing obligations before it is canceled (see Figure 4-8). 

Figure 4-8. Multiyear Appropriation Examples from FY 201858

Partly in an attempt to mitigate the end-period obligation surges that may be incentivized by a periodbased budgeting cycle, Congress regularly incorporates the 80/20 rule into defense appropriation bills.59

The 80/20 rule specifies that for single-year appropriation accounts (i.e., Military Personnel and 

 

56 See, for example, Representative John Dingell’s comment quoted by Ralph Vartabedian, “Fight Brews Over $43 Billion in Unspent 

Defense Funds,” Los Angeles Times, March 9, 1990, accessed April 28, 2017, http://articles.latimes.com/1990-03-09/news/mn2171_1_pentagon-funds. The carry-over accounts in question were eliminated by the 1991 defense authorization (Pub. L. No. 101-510). 

57 Federal Acquisition Streamlining Act, Pub. L. No. 103-355, Sec. 1022 (1994). Also see 10 U.S.C. §§ 2306b and 2306c. 

58 Division C of Consolidated Appropriations Act, 2018, Pub. L. No. 115-141 (2018). DHA refers to Defense Health Agency. 

Counterterrorism, Iraq, and Afghanistan training O&M appropriation is from FY 2018 defense appropriation Title IX: Overseas 

Contingency Operations/Global War on Terrorism, Operation and Maintenance accounts. For duration of obligation authority for prior 

year shipbuilding cost increases, see Section 8072 of Title VIII: General Provisions. The Military Construction title is not present in the 

Department of Defense Appropriation Act, but rather in the Military Construction and Veterans Affairs, and Related Agencies 

Appropriations Act (see Division J in FY 2018 omnibus appropriation). 

59 For the 80/20 Rule as it appeared in the FY 2017 omnibus appropriation, see the Consolidated Appropriations Act, 2017, Pub. L. 

No. 115-31, Division C, Title VIII, Section 8004 (2017). “No more than 20 percent of the appropriations in this Act which are limited for 

obligation during the current fiscal year shall be obligated during the last 2 months of the fiscal year: Provided, That this section shall not 

apply to obligations for support of active duty training of reserve components or summer camp training of the Reserve Officers’ Training 

Corps.” 
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Operation and Maintenance), no more than 20 percent of appropriated funds may be obligated in the 

last 2 months of the fiscal year. 

In the FY 2018 defense appropriations bill, the 80/20 ratio was changed to 75/25 (in other words, DoD 

was permitted to obligate up to 25 percent of single-year funds in August and September).60 The House 

Appropriations Committee noted that the adoption of this 75/25 rule was intended to “apply to fiscal 

year 2018 only” and was “necessary due to the delay of the final passage of this year’s appropriation 

bill, combined with the large funding increase made possible by the Bipartisan Budget Act of 2018.”61

Periodicity in OMB 

Apportionment is the process by which OMB grants agencies the approval to use appropriated funds. 

Apportionments are governed by OMB Circular A-11 and are legally binding.62 They can limit the 

dollar obligations that DoD is permitted to incur for specified time periods, programs, and activities.63

The reason apportionment was originally established, according to one scholar of federal and defense 

budget issues, was that “agencies demonstrated an inability to live within their means if given their 

entire budget up front, causing Congress to bail them out with deficiency appropriations.”64

In defense acquisition, apportionments are approved on a quarterly basis. Contracting authorities are 

constrained in their ability to allocate funding between one quarter and another.65 In this way, 

apportionment resembles a smaller-scale version of appropriation-level periodicity, constraining DoD’s 

ability to move resources between quarters in addition to years. 

DoD Comptroller Periodicity 

The DoD acquisition community broadly believes that if a program’s funding is not obligated within 

the first year of appropriation, program funding will be cut in subsequent budget or reprogramming 

requests to Congress, a phenomenon known informally as a budget sweep, or more formally as rephasing. 

Although the phenomenon is widely and commonly discussed in defense acquisition circles, there does 

not appear to be an official policy to this effect in any DoD instructions or directives. Midyear and endyear reviews identify inadequately funded current-year needs, which drive this phenomenon. 

The DoD Comptroller’s office states that DoD rephases future budgets based on prior-year budget 

execution to “reduce or eliminate the excessive accumulation of unspent funds and... reduce the 

carryover of funds from one fiscal year to another.”66 A statement from the Comptroller’s office 

suggests that much of this rephasing is done to comply with implicit congressional demands: 

 

60 See Section 8004 of Division C of the Consolidated Appropriations Act, 2018, Pub. L. No. 115-141 (2018). 

61 Congressional Record Vol. 164, No. 50, Book II, Explanatory Statement for Pub. L. No. 115-141, Operation and Maintenance Flexibility, 

March 22, 2018, 113, accessed June 8, 2018, https://www.congress.gov/crec/2018/03/22/CREC-2018-03-22-bk2.pdf. 

62 Prohibited Obligations and Expenditures, 31 U.S.C. § 1517. 

63 OMB Circular A-11, Part 4, Section 120.1, updated 2016, accessed April 27, 2017, 

https://obamawhitehouse.archives.gov/omb/circulars_a11_current_year_a11_toc. 

64 Naval Postgraduate School budget professor, emails with Section 809 Panel, September 2017. 

65 DoD Financial Management Regulation, Volume 3, Chapter 2, Section 020102, updated February 2009, accessed April 26, 2017, 

http://comptroller.defense.gov/Portals/45/documents/fmr/archive/03arch/03_02_Feb09.pdf. 

66 DoD Comptroller staff, emails with Section 809 Panel staff, March 2017. 
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The proper phasing of resources ensures the prudent request and execution of funds. Without this fiscal 

discipline, programs could accumulate large unobligated cash balances, leading to unfavorable 

congressional scrutiny... Note that the congressional appropriation committees use identical execution 

performance metrics annually when they review the Department’s funding request. If the Department 

does not adjust the budget request for actual execution, the congressional appropriation committees will 

do so, realigning those low executing programs funds toward other programs that are the priorities of the 

Chairman (which may not be the same as those of the Secretary of Defense).67

Military Service Periodicity 

The DoD Comptroller provides rule-of-thumb goals for obligation of certain types of funding by 

certain points in time.68 Military Services have also historically provided obligation and expenditure 

goals according to which their constituent elements are expected to spend money.69

These goals are not legally binding and acquisition budget experts state that they are guidelines, not 

required policy.70 Comptroller personnel state that obligation and expenditure goals are intended “to 

identify programs that need to be discussed by acquisition and financial personnel” (in other words, to 

serve as an advance warning to leadership if something is wrong with a program).71 These goals may, 

however, be perceived by acquisition managers as expectations which, if unmet, may result in future 

funding cuts. 

To mitigate this perceived likelihood of future cuts (via congressional appropriations, DoD budget 

requests, or Comptroller rephasing) PMs may feel great pressure to obligate currently-available 

funding within fixed periods of time. Despite the fact that spending targets are not legally binding, 

Military Services may feel compelled to apply targets at least as high as the DoD Comptroller to ensure 

the DoD Comptroller targets are met at the service level. 

DoD and military department memoranda bear out this hypothesis. As of the late 2000s, DoD 

suggested that 90 percent of RDT&E money should be obligated in the first year of appropriation. As of 

2003, an Army memo used 95 percent as its first-year obligation goal, clarifying that 

Target obligation and disbursement rates are not directive in nature; however, they will be used as a 

performance indicator to potentially reallocate funding during the year of execution.72

At the lower levels of the acquisition system, some DoD program offices reportedly conduct reviews to 

ensure full obligation of funds on a weekly or even daily basis.73

 

67 DoD Comptroller staff, emails with Section 809 Panel staff, March 2017. 

68 “OUSDC Rule-of-Thumb Acquisition Obligation and Expenditure Rates,” as of May 2017, Defense Acquisition University, accessed 

November 16, 2018, https://www.dau.mil/tools/Lists/DAUTools/Attachments/292/OSD%20(C)%20Color%20Rule-ofThumb%20Acq%20Obligation%20and%20Expenditure%20Rates.pdf. 

69 DoD Comptroller memorandum, “Budget Execution Measures,” obtained from Defense Acquisition University, October 7, 1996. 

70 DAU professor of financial management, conversation with Section 809 Panel, September 2017. 

71 Former DoD Comptroller official, discussion with Section 809 Panel, September 2017. 

72 Department of the Army, Office of the Assistant Secretary (Financial Management and Comptroller), “Obligation/Disbursement Rates 

for Execution of FY02/03 RDTE Funds,” January 17, 2003. 

73 DoD PMs and contracting officers, conversations with Section 809 Panel, May to July 2017. 
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Table 4-3. Comparison of Spending Targets, DoD and Department of the Army74

Spending Target and Timeframe 

Obligation Rate Expenditure Rate 

DoD Army DoD Army 

RDT&E, by end of Y1 Q2 45% 56% 28% 22% 

RDT&E, by end of Y1 Q4 90% 95% 55% 56% 

RDT&E, by end of Y2 Q2 95% 97% 73% 84% 

RDT&E, by end of Y2 Q2 100% 100% 90% 91% 

Discussion

End-year federal government contract spending surges have been of concern to Congress for many 

decades. In 1980, GAO stated that such surges “contribute to increased overtime costs, reduced staff 

morale, and poorer quality contracts and grants.”75 In 2015 and 2017, Congress investigated the 

phenomenon of wasteful spending at the end of the fiscal year.76

There is almost certainly a causal link between budget periodicity and distortions in contract spending 

across the fiscal year cycle. Publicly available federal contracting data show a strong and clear 

correlation between surges in contract spending and the dates that mark the expiration of funding or 

internal budget reviews. 

Senior government officials and independent observers have also suggested that the resulting end-year 

concentration of contract obligations can in some cases lead to lower-quality contracts, inefficient 

allocation of human resources, purchase of unnecessary items, poorer bargaining position for federal 

agencies, lower morale among acquisition employees, and greater difficulty in performing audits. 

These problems are exacerbated by the many layers of command that exist between appropriations and 

the obligations. Each layer may feel compelled to hold a certain amount of funding to address any 

unanticipated problems late in the fiscal year. A budgeting expert wrote the following: 

If one assumes four layers in the chain of command and each layer holds back 3%, that means the lowest 

layer only received 88.5% of the funding and the remaining 11.5% will come cascading down late in the 

year. In some cases, that last unit—an installation, squadron, or program office may see 10%-15% of its 

annual budget authority appear in the last few weeks of the year.77

 

74 “OUSDC Rule-of-Thumb Acquisition Obligation and Expenditure Rates,” obtained from Defense Acquisition University, December 2009. 

Department of the Army, Office of the Assistant Secretary (Financial Management and Comptroller), “Obligation/Disbursement Rates for 

Execution of FY02/03 RDTE Funds,” January 17, 2003. 

75 GAO, Federal End-Year Spending: Symptom of a Larger Problem, October 23, 1980, 8, accessed May 26, 2017, 

https://www.gao.gov/assets/140/130983.pdf. 

76 “Prudent Planning or Wasteful Binge? A Look at End of the Year Spending,” Senate Homeland Security and Government Affairs 

Committee, September 30, 2015, accessed September 27, 2017, https://www.hsgac.senate.gov/hearings/prudent-planning-or-wastefulbinge-a-look-at-end-of-the-year-spending. 

77 Philip J. Candreva, National Defense Budgeting and Financial Management: Policy and Practice (Charlotte, NC: Information Age 

Publishing, 2017), 315. 
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One weapons system acquisition professional said that budget periodicity could cause unnecessary 

increases to cost and schedule of major acquisition programs, noting that “the time restrictions 

imposed by not only the appropriation, but also artificially by the Comptroller’s obligation and 

expenditure benchmarks, often force PMs into suboptimal spending decisions.”78 The individual added 

that the “truly perverse incentive” created by the threat of budget cuts is “exacerbated in larger 

programs, in which the details of program evolution are more likely to change and the cost impact is 

magnified.”79

The effect of periodicity at the working level is allegedly that “current policies... effectively punish 

programs that reduce cost below the budgeted expenditures.”80

Figure 4-9. Weekly DoD Contract Obligations over the Course of FY 201781

Figure 4-9 shows DoD’s weekly contract obligations throughout the fiscal year. In addition to the large 

peak in contract obligations in the final weeks of September (see rightmost bars of chart), there are 

smaller peaks visible throughout the fiscal year. Obligation surges occur at the end of December, 

March, and June. These periods are the end-points of the quarterly blocks within which OMB 

apportions DoD contract dollars under Circular A–11. 

 

78 Naval Air Systems Command personnel, communications with Section 809 Panel, September 2017. 

79 Ibid. 

80 Ibid. 

81 Contract obligation data from FPDS, https://www.fpds.gov, accessed June 8, 2018. To ensure comparability of data, each weekly period 

contains the same days of the week (counted backwards from September 30). The extra day at the beginning of FY 2017 is included in the 

first week. 
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A small surge in obligations is also visible in the 43rd week of the fiscal year (at the end of July). This 

observation overlaps with the deadline imposed under the 80/20 rule, which mandates that at least 

80 percent of certain types of obligation occur between the months of October and July. Correlation is 

not causation, but there is clearly an overlap between surges in DoD contract spending and the endpoints of important budgeting periods. 

Although this overlap is not conclusive proof, it provides strong evidence that the end-year use it or lose 

it rush to obligate funding is quite real and is driven by the annual periodicity of the U.S. federal 

budget. 

Periodicity-based budgeting practices within Congress, OMB, and DoD appear to be the core cause of 

end-period obligation surges. Looking in more detail at DoD’s contract obligations over the course of 

the fiscal year can elucidate areas of contracting on which periodicity-based budgets have the greatest 

effect. 

Appropriation Accounts 

DoD’s end-year obligation surges are concentrated in the O&M appropriations account. Other 

accounts, such as RDT&E, show larger obligation concentrations at midyear. This pattern suggests that 

during midyear reviews of multi-year appropriation accounts, investment funding is seen as a 

potential source of money for inadequately funded needs. This phenomenon may drive annual 

patterns more directly than the periods of appropriation themselves. These periods of appropriation, 

however, may in turn drive DoD’s adherence to midyear obligation targets. 

Figure 4-10. Weekly Obligations on Contracts under O&M Appropriations Account, FY 201782

 

82 Analysis of FPDS data based on Treasury Account Symbol (TAS) codes, June 8, 2018. See Department of the Treasury, Federal Account 

Symbols and Titles (FAST) Book, March 2018, accessed June 8, 2018, https://www.fiscal.treasury.gov/fsreports/ref/fastBook/fastbook-
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Figure 4-11. Weekly Obligations on Contracts under RDT&E Appropriations Account, FY 201783

Military Departments 

All DoD service components experience substantial surges in obligation rates during the midyear and 

end-year months. Not all components, however, experience peaks of the same amplitude. 

The Department of the Army, for instance, obligated more than 20 percent of its reported FY 2017 

contract obligations in September of that year. The Army’s end-year peak exceeded the peaks for the 

Air Force, Navy, or other DoD components by about 10 percentage points.84

In FY 2017, Army contract obligations in September were more than 2.5 times the Army’s average 

monthly obligations during that year. For the other two Military Services, the analogous metric was 

only about 1.6 times average monthly obligations.85 This observation could suggest the Army is 

particularly prone to the expectation of budget cuts as a consequence of unobligated end-year balances. 

 

march-2018.pdf. To ensure comparability of data, each weekly period contains the same days of the week (counted backwards from 

September 30). The extra day at the beginning of FY 2017 is included in the first week. 

83 Analysis of FPDS data based on Treasury Account Symbol (TAS) codes, June 8, 2018. See Department of the Treasury, Federal Account 

Symbols and Titles (FAST) Book, March 2018, accessed June 8, 2018, https://www.fiscal.treasury.gov/fsreports/ref/fastBook/fastbookmarch-2018.pdf.To ensure comparability of data, each weekly period contains the same days of the week (counted backwards from 

September 30). The extra day at the beginning of FY 2017 is included in the first week. 

84 According to FPDS data extracted June 8, 2018, the Army obligated $17.2 billion in September 2017 out of $78.3 billion for the entire 

fiscal year. The Air Force obligated $8.0 billion in September out of $60.8 billion for the entire year. The Navy obligated $15.1 billion out 

of $109.5 billion for the full year. Other defense agencies combined obligated $8.4 billion in September out of $71.9 billion for the year. 

85 According to FPDS data extracted June 8, 2018, the Army’s September obligations were 2.6 times higher than average monthly 

obligations of $6.5 billion. The Air Force’s September obligations were 1.6 times higher than the monthly average of $5.1 billion. The 

Navy’s September obligations were 1.7 times higher than the monthly average of $9.1 billion. 
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This interpretation is supported by analyses from Army leadership. In April 2016, the Acting Secretary 

of the Army issued a memo stating, “we often focus on budget execution independent of outcomes,” an 

approach that “leads to bad business practices... ‘use or lose’ fund execution, and harvesting savings 

from commands who find new and innovative ways to operate.”86 Lt. Gen. Tom Spoehr, director of the 

Army’s Business Transformation Office, has emphasized the importance of ensuring that “a unit’s 

budget will not be decremented for the sole reason that they failed to expend their money.”87 A 2017 

GAO report cited a recent Deputy Assistant Secretary of the Army for Procurement claiming “if the 

Army does not obligate all of its appropriations before they expire because it could appear that the 

Army was appropriated more funding than it needed,” a perspective that “increases the risk that 

contractors will not provide the government goods and services in an efficient or effective manner.”88

For the Air Force and Navy, September obligation surges in FY 2017 were lower than for the Army. 

Substantially higher obligation surges were observed for the Navy, however, in the final month of the 

second quarter (at the end of March 2017).89 Policies implemented at levels below DoD may push back 

the dates at which end-period surges occur. These surges may not be problems in themselves, but 

rather indicators of the incentives produced by tiered periodicity requirements embedded in the 

acquisition funding system. 

Products and Services 

If contract obligations were distributed with perfect evenness throughout the fiscal year, about 

2 percent of all product and service contract obligations would occur each week.90 DoD-reported 

contract obligation data, however, show that some products have much higher obligations in the final 

week of September.91

For DoD IT equipment contracts, about 14 percent of obligations occur in the final week of the fiscal 

year.92 For the category training aids and devices, which include certain types of computers, about 

23 percent of obligations occurred in the final week.93 Communications equipment contract obligations 

 

86 Secretary of the Army memorandum, U.S. Army Directive 2016-16 (Changing Management Behavior: Every Dollar Counts), April 15, 

2016, accessed May 30, 2017, https://www.army.mil/e2/c/downloads/431118.pdf. 

87 “End-of-year ‘use it or lose it’ budget mindset to get tossed,” David Vergun, U.S. Army, April 18, 2016, accessed May 30, 2017, 

https://www.army.mil/article/166098. 

88 GAO, Army Contracting: Leadership Lacks Information Needed to Evaluate and Improve Operations, GAO-17-457, June 2017, 10, 

accessed November 15, 2017, http://www.gao.gov/assets/690/685425.pdf. 

89 According to FPDS data extracted June 8, 2018, the Navy obligated $13.2 billion in March 2017, about $4 billion higher than the 

average monthly obligation rate. 

90 Perfectly even weekly percentage distribution of obligations across a non-leap fiscal year = 1 / (365 / 7) = 0.0192. 

91 Product and Service Codes (PSCs), the main U.S. government-administered system for categorizing goods and services purchased under 

federal contracts, are reported in FPDS at the four-digit level. They are produced by GSA and DLA. For the purposes of this paper, “major 

categories” are defined as those two-digit product PSCs (or 1-digit service PSCs) with more than $1 billion in total DoD obligations for 

FY2016. See a machine-readable list of PSCs at “PSC Manual,” Acquisition.gov, accessed May 31, 2017, 

https://www.acquisition.gov/PSC_Manual. 

92 Analysis of FY 2017 FPDS data using PSC group 70 (“automated data processing equipment, software, supplies, and equipment”), 

accessed June 11, 2018. For contract awards in this category, roughly $900 million was obligated in the last week of September 2017, 

compared to $7.0 billion for the full fiscal year. 

93 Analysis of FY 2017 FPDS data using PSC group 69 (training aids and devices), accessed June 11, 2018. For contract awards in this 

category, roughly $350 million was obligated in the last week of September 2017, compared to $1.5 billion for the full fiscal year. 
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are also highly concentrated at end-year.94 All of these categories contain at least some IT products, 

suggesting that IT acquisition may be particularly prone to end-year spending surges. 

Service-coded PSCs also show a pattern of IT services being concentrated at end-year. More than 

7 percent of IT service contract dollars were obligated in the final week of September.95

The most extreme examples of end-year spending concentration, however, are in service contracts 

related to construction and building maintenance.96 For maintenance, repair, and alteration of 

buildings, roughly one-quarter of contract dollars were obligated in the final week of the fiscal year 

(more than a dozen times what would be expected with even distribution).97

Information Technology 

The end-year surges in DoD IT contracting may have a variety of immediate causes, some unrelated to 

budgeting. For example, acquisition personnel may in some cases be unable to award large IT service 

contracts until the end of the fiscal year, due to the need to clear a variety of slow-functioning approval 

hurdles.98

In other cases, contracting personnel may find themselves with extra money at year end and obligate 

money to IT support services to avoid expiration of funds. Regular inventory turnover, relatively high 

per-unit prices, and nonperishability in storage may make IT hardware an attractive commodity for an 

acquisition professional seeking to expend funds in the short term on products that will be useful in the 

medium or long term. 

One DoD IT acquisition professional suggested that allocation of funding to IT may be “artificially 

suppressed in favor of core mission requirements.”99 In other words, non-IT needs receive priority over 

IT needs, and funding is only provided to IT offices at the end of the year once other stakeholders “let 

the chance to spend money go by.”100

 

94 Analysis of FY 2017 FPDS data using PSC group 58 (communication, detection, coherent radiation equipment), accessed June 11, 2018. 

For contract awards in this category, roughly $1.4 billion was obligated in the last week of September 2017, compared to $12.3 billion for 

the full fiscal year. 

95 Analysis of FY 2017 FPDS data using PSC group D (IT services), accessed June 11, 2018. For contract awards in this category, roughly 

$900 million was obligated in the last week of September 2017, compared to $13.4 billion for the full fiscal year. 

96 Analysis of FY 2017 FPDS data using PSC groups Y and Z (building construction and building maintenance), accessed June 11, 2018. For 

contract awards in these categories, roughly $4.5 billion was obligated in the last week of September 2017, compared to $19.6 billion for 

the full fiscal year. 

97 Analysis of FY 2017 FPDS data using PSC group Z (building maintenance), accessed June 11, 2018. For contract awards in this category, 

roughly $2.4 billion was obligated in the last week of September 2017, compared to $9.6 billion for the full fiscal year. 

98 Army software IT program staff, communications with Section 809 Panel, May-July 2017. 

99 Acquisition expert in Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L), emails with 

Section 809 Panel, September 2017. The individual specified that Army defense business systems operating in sustainment may be 

particularly susceptible to this scenario. 

100 AT&L expert, emails with Section 809 Panel, September 2017. 
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A 2013 study measured the correlation between U.S. federal government IT project quality and timing 

of obligations. The analysis found that there was a statistically significant negative correlation between 

quality of IT projects and spending at the end of the fiscal year.101

Building Construction and Maintenance 

For building construction and maintenance, end-year surges are among the highest of any major 

product or service procured by DoD. More than one-third of contract spending has been obligated in 

September of recent fiscal years, and about one-fifth in the final week.102

At the installation level, there is generally a long wait list for contracted building construction and 

maintenance work. Many facilities are in need of repair and some contracting professionals keep an 

informal list of projects listed by priority. Funding is often held until the end of the fiscal year and then 

released in large quantities once resource managers are certain it will no longer be needed to meet 

unforeseen emergencies. With this large end-year release of funds, contracting officers set about 

contracting for as much work as they can afford on their list.103

One side effect of this end-year construction surge is that contracting personnel must prepare a large 

number of solicitations and other documents to deploy as soon as funding is released. Because there is 

uncertainty about how much funding will be released, there is some guesswork involved in 

determining which projects to prepare for. This situation can lead to problems with contract quality. 

One contracting officer, speaking at the end of the fiscal year, acknowledged that “this time of year, 

instead of doing the A-plus contracting, we’re doing the C contracting.”104

Other Factors in End-Period Surges 

All major types of DoD contracts show higher rates of obligation at end-year than in the rest of the 

year. Not all contract types, however, show the same degree of disparity. In FY 2017, 7.4 percent of all 

DoD contract dollars were obligated in the final week of September. By contrast, 9.8 percent of DoD’s 

firm fixed-price contract obligations occurred in the final week.105

Fixed-price contracts allow for the obligation of a specific and fixed quantity of funds with a high 

degree of certainty. They may be highly useful to contracting officers who seek to obligate a set amount 

of money on a short timeframe to ensure full obligation by the end of a specific period. 

Obligations on contracts awarded under small business or other socioeconomic policies also appear to 

be particularly concentrated at the end of the fiscal year. 

 

101 Jeffrey B. Liebman and Neale Mahoney, Do Expiring Budgets Lead to Wasteful Spending? Evidence from Federal Procurement, National 

Bureau of Economic Research, September 2013, accessed April 26, 2017, http://www.nber.org/papers/w19481.pdf. 

102 Analysis of FPDS data extracted June 11, 2018. 

103 Installation contracting officials, conversation with Section 809 Panel, September 2017. 

104 Ibid. 

105 Analysis of FPDS data extracted June 11, 2018. 
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Figure 4-12. FY 2017 Weekly DoD Contract Obligations, as Percentage of Fiscal Year Total106

Summary Findings 

A broad array of factors appears to affect, either directly or indirectly, DoD’s pattern of contract 

obligations over the course of the fiscal year. 

 These factors include the contracting component. The Department of the Army, for instance, 

shows much steeper end-year obligation surges than the other military departments. Senior 

Army leaders have indicated that they perceive these surges as a problem and are taking 

measures to mitigate them. 

 Information technology contracts also show high end-year surges. There may be different root 

causes in different industries. With IT contracts, for example, hardware purchases may be 

delayed due to either short-term funding unavailability or due to the durability, 

interoperability, commercial availability, and continued utility of IT hardware years into the 

future.107

 With building construction and maintenance contracts, the large observed end-year surges may 

be more a product of inability to reprogram and long project wait lists. 

Possible Effects on Acquisition Efficiency 

DoD policymakers and independent observers have suggested that the incentives created by budget 

periodicity may diminish the efficiency of the defense acquisition process. By constraining DoD’s 

 

106 Analysis of FPDS data extracted June 11, 2018. To ensure each period contains the same days of the week, Week 1 omits the first day 

of the fiscal year. 

107 One IT acquisition expert, discussing reasons why resource managers might wait until the last minute to make funding available, 

stated “because business IT is a bottom feeder.” AT&L expert, emails with Section 809 Panel, September 2017. 
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ability to move money back and forth from one time-period category to another, the appropriation 

system may inhibit the flexibility of DoD contracting and program management. 

Inability to move money from one time period to another may also reduce the negotiating leverage of 

PMs and contracting officers. Companies may, in some cases, put forth an artificially high bid simply 

because they know that a particular office has a short-term deadline by which they must obligate 

funds. One contracting officer claimed “I think there’s a bit of inflation going on” with pricing of endyear awards.108

Another concern is that periodicity-based budgets may incentivize resource managers and acquisition 

professionals to hoard O&M money until the end of the fiscal year out of fear that they may be faced 

with a sudden and expensive emergency. Then as the end of the fiscal year nears, a rush to spend may 

include some projects that have been approved without sufficiently thorough review.109 Former DoD 

Comptroller Robert Hale has written that end-year spending “pays for lower-quality and lowerpriority projects.”110

According to a 2013 study, for recent U.S. government information technology (IT) contracting projects 

there was a statistically significant correlation between funding obligated at the very end of the fiscal 

year and comparatively low contract quality.111 A 2014 analysis suggested that rephasing could lead to 

“delayed delivery of needed capability, uncertainty introduced in planning for program execution, and 

a possible mismatch between the revised funding profile and the program’s needs in upcoming 

years.”112 A 2016 paper reiterated the “perceived pressure to spend resources at the end of the fiscal 

year to protect their budgets from cuts and... wasteful expenditures associated with that pressure.”113

End-year spending also may affect the quality of the acquisition workforce. One contracting 

professional spoke of “kids running through the hallways” on Saturdays during the end of the fiscal 

year because employees were working overtime through the weekends and there were no on-base 

daycare services available.114 High levels of employee stress are common and overtime compensation 

takes the form of additional vacation time, because no additional money is budgeted. In such an 

environment, recruitment and retention of high-quality workers proves challenging. 

 

108 Installation contracting officer, conversation with Section 809 Panel, September 2017. 

109 One (possibly exaggerated) story told by a Navy Reserve acquisition officer claims that a former special operator working in a 

contracting office was signing contracts late at night on September 30, when the office’s wall clock was about to reach midnight. The 

contracting officer allegedly took a Bowie knife from his office, stabbed it into the clock to prevent the minute hand from reaching the 

twelve, and returned to his desk to continue signing contracts. Regardless of the story’s veracity, it illustrates that the budget periodicitydriven “use it or lose it” narrative is so broadly accepted that it has become the subject of jokes among military personnel. 

110 See Robert Hale, “Why DoD’s Year-End Spending Needs to Change,” Breaking Defense, September 23, 2016, 

http://breakingdefense.com/2016/09/why-dods-year-end-spending-needs-to-change, accessed April 26, 2017. 

111 Jeffrey B. Liebman and Neale Mahoney, Do Expiring Budgets Lead to Wasteful Spending? Evidence from Federal Procurement, National 

Bureau of Economic Research, September 2013, accessed April 26, 2017, http://www.nber.org/papers/w19481.pdf. 

112 Kathleen M. Conley et al., Implications of DOD Funds Execution Policy for Acquisition Program Management, Institute for Defense 

Analyses, August 2014, accessed April 27, 2017, www.dtic.mil/get-tr-doc/pdf?AD=ADA613958. 

113 Jason Fichtner and Adam Michel, Curbing the Surge in Year-End Federal Government Spending: Reforming “Use It or Lose It” Rules – 

2016 Update, Mercatus Research, September 2016, 23, accessed September 11, 2017, https://www.mercatus.org/system/files/mercatusfichtner-year-end-spending-v1.pdf. 

114 Installation contracting officer, conversation with Section 809 Panel, September 2017. 
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Conclusions 

The preponderance of evidence suggests that (a) the incentives associated with budget periodicity lead 

directly to large surges in end-period contract obligations and (b) these surges lead to lower-quality or 

lower-efficiency contract outcomes. This situation raises concerns about the utility of budget 

periodicity as applied to DoD budgeting by Congress, OMB, and the DoD Comptroller, as well as in 

lower levels of DoD resource management. 

When Congress limits DoD’s contract obligations to specific date ranges via appropriation periodicity, 

it constrains DoD’s ability to transfer funding across years, potentially limiting adaptability. It also may 

create incentives to obligate large amounts of money at the end of the fiscal year, which may result in 

lower contract quality. 

The 80/20 rule, OMB apportionment processes, and DoD Comptroller rephasing create similar, smallerscale incentives across quarters and months. These incentives, however, are all driven by the yearbased periodicity structure of annual appropriations. 

Proposed Solutions 

Several measures have been proposed for addressing the end-year spending surges observed in DoD 

contracting. Some of these, however, may not fully address the underlying, root causes behind endyear spending surges. In some cases, they may in fact exacerbate those core problems. 

Solutions that have been proposed (and, in some cases, implemented) include carryover budget 

authority, the 80/20 rule, no-year money (often described as colorless), working capital funds, biennial 

appropriations, and bonuses for cost-cutters. 

80/20 Rule 

The 80/20 rule specifies that for single-year appropriation accounts, no more than 20 percent of 

appropriated funds may be obligated in the final 2 months of the fiscal year (August and September). 

This rule has been incorporated into defense appropriation bills dating back to at least the 1950s.115

Congress continues to regularly incorporate the 80/20 rule into defense appropriation bills.116 In the 

FY 2018 appropriations law, citing the late date of enactment, Congress approved an increased 

flexibility for that year in the form of a 75/25 rule.117

Unintended Consequences of the 80/20 Rule 

In 1980, when several variations of the 80/20 rule were under discussion in Congress, the ComptrollerGeneral of the United States testified that adopting any of the proposed versions would result in 

 

115 See, for example, Section 625 of An Act Making appropriations for the Department of Defense for the fiscal year ending June 30, 1956, 

and for other purposes, Pub. L. No. 84-157 (1955). 

116 For the 80/20 Rule as it appeared in the FY 2017 omnibus appropriation, see Section 8004 of the Consolidated Appropriations Act, 

2017, Pub. L. No. 115-31 (2017). “No more than 20 percent of the appropriations in this Act which are limited for obligation during the 

current fiscal year shall be obligated during the last 2 months of the fiscal year: Provided, That this section shall not apply to obligations 

for support of active duty training of reserve components or summer camp training of the Reserve Officers’ Training Corps.” 

117 Congressional Record Vol. 164, No. 50, Book II, Explanatory Statement for Pub. L. No. 115-141, March 22, 2018, Operation and 

Maintenance Flexibility, H2157, accessed June 8, 2018, https://www.congress.gov/crec/2018/03/22/CREC-2018-03-22-bk2.pdf. 
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constraints that were “difficult to administer” at the agency-level and failed to “address the real 

problem.”118

The key concern is that the 80/20 rule specifically targets end-year spending surges, instead of the 

periodicity-based constraints that incentivize such surges. By requiring an agency to limit its August 

and September obligations to 20 percent or less, Congress by definition compels agencies to obligate at 

least 80 percent of appropriations in the preceding 10 months. In this way, the 80/20 rule may simply 

create a new, less noticeable obligation surge in July. 

The 80/20 rule may, in fact, exacerbate the negative effects of periodicity-based budgeting. It not only 

adds a new constraining period in which funds must be obligated (the period from October to July), 

but also fails to address the initial constraining period of the regular fiscal year (from October to 

September). 

The Comptroller General added in his 1980 testimony, however, that to “establish a sense of priority 

and clearly demonstrate that a change is needed,” a temporary adoption of some version of the 

80/20 rule would be “desirable.”119

No-Year Money 

With many of the annual defense appropriation accounts, Congress makes funding available to DoD 

for multiple years. The term N-year is colloquially used to refer to these periods of time. Procurement 

appropriations, for example, are made available for obligation during the three fiscal years following 

an appropriation law’s enactment. They are informally described in the acquisition community as 

3-year money. 

No-year appropriations are those without any time restrictions. A no-year appropriation may be 

accessed by an agency in any time period. This flexibility is generally indicated in law using the phrase 

“to remain available until expended” or “to remain available until transferred.”120 Unlike the 80/20 rule 

or other proposed constraints on periodicity, there is no concern that additional no-year appropriations 

would exacerbate end-year obligation surges. There is, however, concern that Congress would limit 

oversight capabilities if it made more no-year money available to DoD. 

Oversight and Scope of No-year Money 

Partly due to the challenges in applying oversight to no-year money, it is relatively uncommon in 

current appropriation law. The four main sections of the annual defense appropriations do not 

 

118 Comptroller-General of the United States Elmer B. Staats, Federal Year-end Spending: Symptom of a Larger Problem, October 23, 1980, 

accessed July 5, 2017, http://www.gao.gov/assets/140/130983.pdf. 

119 Ibid. 

120 For examples in the FY 2018 defense appropriation, see purchases under the Defense Production Act of 1950, for which $67 million 

was appropriated “to remain available until expended,” or Army environmental restoration, for which $236 million was appropriated “to 

remain available until transferred.” Consolidated Appropriations Act, 2018, Pub. L. No. 115-141 (2018). 
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typically contain no-year money. A notable exception is the O&M accounts, of which a small 

percentage has been granted no-year money status in recent appropriation laws.121

Other recurring no-year appropriations (such as Environmental Restoration, Defense Production Act 

Purchases, or several funding categories associated with the U.S. Merchant Marine Academy) tend to 

be limited in scope, targeted at a specific policy area, and sometimes represent constituencies of 

particular congressional interest. 

For these reasons, it is uncertain whether no-year money is a scalable way of addressing the problems 

of budget periodicity. 

Working Capital Funds 

Working capital funds (WCFs) are budget tools intended to “control and account more effectively for 

the cost of programs and work performed in the Department of Defense.”122 Rather than annual 

appropriations, WCFs rely on a model akin to a commercial company, effectively selling goods and 

services to customers (other parts of DoD). Unlike a commercial company, a WCF is not intended to 

make a profit, but rather achieve zero net income in the long term. 

WCFs are designed to receive funding primarily from other parts of DoD, not directly from 

appropriation bills.123 Because a majority of the money they receive is indirectly appropriated, they are 

not subject to the same periodicity-based legal provisions as regular appropriations.124 The core concept 

behind WCFs is to ensure full funding for support activities of appropriated fund programs by letting 

those programs buy what they need, “resulting in the support functions being only as big as the 

primary customers need them to be.”125 Support activities contracted through WCFs must “only be for 

a bona fide need of the period for which the ordering activity’s financing appropriation is available.”126

In recent years, Congress has shown an increasing interest in using WCFs and experimenting with 

different funding models to achieve acquisition objectives. In 2008, Congress created the Defense 

Acquisition Workforce Development Fund (DAWDF). Throughout the early 2010s, DAWDF primarily 

used indirectly appropriated funding, obtained through an effective tax on service contracts applied to 

DoD components.127 In subsequent years, DAWDF was funded mainly through transfers of O&M 

 

121 Under Section 8069 of the FY 2017 defense appropriation (Pub. L. No. 115-31), for example, the Army was permitted to retain 

$76 million of its Operation and Maintenance funding as no-year money, roughly 0.2 percent of the Army’s total Operation and 

Maintenance appropriation for that year ($32.7 billion). 

122 Working-Capital Funds, 10 U.S.C. §2208(a). 

123 WCFs that have been authorized by law are explicitly permitted to use appropriated funds “for the purpose of providing capital.” See 

Working-Capital Funds, 10 U.S.C. § 2208(d). 

124 For example, the Defense-Wide Working Capital Fund (DWWCF, comprising six activities managed under the Defense Logistics Agency, 

Defense Information Systems Agency, and Defense Finance and Accounting Service) disbursed a reported $42.1 billion in FY 2016 but 

received only $45.1 million in direct appropriations. DWWCF took in $42.4 billion in revenue that year. See DoD Comptroller, Defense 

Working Capital Fund: Defense-Wide FY 2017 Budget Estimates, Operating and Capital Budgets, February 2016, accessed July 12, 2017, 

http://comptroller.defense.gov/Portals/45/Documents/defbudget/FY2017/budget_justification/pdfs/06_Defense_Working_Capital_Fun

d/PB17_DWWCF_Operating_Budget.pdf. 

125 Naval Postgraduate School budget professor, emails with Section 809 Panel, September 2017. 

126 DoD Financial Management Regulation, Volume 3, Chapter 8, Section 080901. 

127 See Section 852 of FY 2008 NDAA, Pub. L. No. 110-181 (2008). 
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funding for which normal obligational authority had expired.128 The FY 2018 NDAA funded DAWDF 

via a direct, single-year appropriation of $500 million.129

In December 2017, the Modernizing Government Technology Act of 2017 (MGT Act) was enacted into 

law as part of the FY 2018 NDAA. The MGT Act created a WCF dedicated to funding the 

modernization of government IT upgrades.130

Biennial Appropriations 

Biennial budgeting is a separate and distinct concept from the 2-year budget cycle on which some DoD 

appropriations accounts operate (such as RDT&E). In existing RDT&E accounts, appropriations are 

made every year, but are legally accessible for 2 years (although observers have noted that RDT&E 

funding is not, in effect, available for more than a single year at the program level). 

In a biennial budget cycle, appropriations would be made every 2 years and made available for 

obligation under the same system of periodicity that currently exists. It would essentially be the same 

appropriation process Congress uses today, but drawn out over 2 years instead of just one. 

Proponents of biennial appropriations advocate for this change arguing it would eliminate the need for 

repeated congressional review of routine spending issues every year.131 By encouraging the 

development of spending strategies on a 2-year timeframe rather than a one-year timeframe, biennial 

appropriations could also allow for longer-term thinking by ground-level acquisition professionals. 

A downside to biennial appropriations is that Congress and DoD would lose flexibility to adjust 

amounts in the second year. 

Because it would have little or no effect on the annual cycle of appropriation availability, biennial 

appropriations may not be an ideal way of addressing the skewed incentives related to periodicity in 

the DoD acquisition budget. 

Cash Bonuses for Reporting Waste 

Another proposal for addressing periodicity-based budget constraints involves awarding incentive 

payments to government employees who identify wasteful spending. Several legislators have 

supported such an idea in recent years in various versions of a Bonuses for Cost-Cutters Act.132

An incentive payment system would have the advantage of directly targeting wasteful spending, rather 

than end-period spikes themselves. This approach would presumably address the concern that other 

solutions may focus on symptoms instead of root problems. 

To make such a system effective, however, several concerns would need to be addressed. One potential 

problem is that employees could find themselves incentivized to adopt overly-generous definitions of 

 

128 GAO, Defense Acquisition Workforce: DOD Has Opportunities to Further Enhance Use and Management of Development Fund, 

GAO-17-332, March 2017, 9, accessed July 30, 2018, https://www.gao.gov/asset/690/683748.pdf. 

129 Division C, Title II (Operation and Maintenance) of the Consolidated Appropriations Act, 2018, Pub. L. No. 115-141 (2018). 

130 See Title X, Subtitle G of FY 2018 NDAA, Pub. L. No. 115-91 (2018), 304. 

131 Jessica Tollestrup, Biennial Budgeting: Options, Issues, and Previous Congressional Action, Congressional Research Service, February 2, 

2015, accessed November 4, 2018, https://fas.org/sgp/crs/misc/R41764.pdf. 

132 See, for example, the Bonuses for Cost-Cutters Act of 2017, H.R. 378, introduced January 9, 2017. 
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what constitutes waste in the hope of a cash bonus. Another potential problem could be misaligned 

incentives and counterproductive friction between program leadership and lower-level employees.133

Carryover Authority 

Carryover refers to the practice of permitting annual appropriations to be used in the subsequent year or 

years. Carryover is also sometimes referred to as rollover or carry forward authority. 

Upward Adjustment Carryover Authorities 

DoD is permitted to engage in a limited form of carryover in accordance with OMB Circular A–11, 

which states that “you may adjust apportioned amounts upwards without submitting a 

reapportionment request by up to $400,000 or 2 percent of the amount of total budgetary resources, 

whichever is lower, to reflect upward adjustments in the amount of unobligated balances brought 

forward.”134

DoD’s Financial Management Regulation provides greater detail on this upward adjustment capability: 

“All accounts which must be apportioned must also be reapportioned for any upward adjustment of 

budgetary resources greater than $400,000 or 2 percent (whichever is less) before the increased 

resources may be obligated. The unobligated balances brought forward in unexpired accounts must 

also be reapportioned annually... Expired accounts are not apportioned. Transfer-only accounts are 

exempt from apportionment.”135

GAO characterizes expired balances as remaining available “to make legitimate obligation adjustments, 

that is, to record previously unrecorded obligations and to make upward adjustments in previously 

under recorded obligations.”136

Full Unlimited Carryover 

Unlimited, full carryover for an entire appropriation account could result in an unacceptable 

degradation of the legislature’s oversight capabilities. It would also almost certainly prove politically 

unfeasible. Congress could choose, however, to apply a variety of conditions through which carryover 

authority could provide programs with needed flexibility while still allowing for robust oversight by 

appropriators. 

Conditional Carryover 

There are several ways in which legislators could mitigate concerns about weaker oversight capacity by 

applying added conditions and constraints to carryover authority. A 2009 paper published by the 

 

133 Jason Fichtner and Adam Michel, Curbing the Surge in Year-End Federal Government Spending: Reforming “Use It or Lose It” Rules – 

2016 Update, Mercatus Research, September 2016, 23, accessed September 11, 2017, https://www.mercatus.org/system/files/mercatusfichtner-year-end-spending-v1.pdf. 

134 OMB Circular No. A–11, Part 4: Instructions on Budget Execution, Section 120.49, accessed June 27, 2017, 

https://obamawhitehouse.archives.gov/sites/default/files/omb/assets/a11_current_year/s120.pdf. 

135 DoD Financial Management Regulation, Volume 3, Chapter 2: Apportionment/Reapportionment and Funds Distribution, 

Section 020202: Accounts Requiring Reapportionment.” 

136 GAO, Principles of Federal Appropriations Law, Third Edition, Volume I, GAO-04-261SP, January 2004, 5-72, accessed June 27, 2017, 

https://www.gao.gov/assets/210/202437.pdf. 
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International Monetary Fund provides a detailed overview of several ways in which limitations could 

be applied to DoD carryover authority.137

One option would be capping the amount that could be carried over in each year at a relatively small 

percentage of annual appropriations. This option would ensure that acquisition officials were 

incentivized to obligate nearly all of the annual funding appropriated by Congress, but with a small 

amount of flexibility in case some funds could not be obligated usefully by September 30. 

Another option would be to impose a cap on the total unobligated funds permitted to accumulate in 

the carryover account, rather than the annual carryover amount. Stakeholders in Congress and DoD 

might find this constraint desirable to address the prospect (either real or perceived) of a carryover 

account growing into a slush fund over time.138

These conditions applied to carryover authority would not be mutually exclusive. If Congress were to 

grant carryover flexibilities to DoD or other agencies, it could choose to concurrently adopt all or none 

of these constraints. 

Carryover in Practice 

In recent years’ defense appropriations, Congress has approved a small, 1-year, carryover authority for 

O&M spending by the Defense Health Program (DHP). The purpose of this carryover was to facilitate 

the execution of DHP’s large drug and medical services indefinite-quantity contracts, for which precise 

obligations cannot be predicted to the date due to varying patient and facility needs.139

Some DoD acquisition personnel strongly advocate for a form of departmentwide carryover, claiming 

that it could reduce program budgets substantial amounts. One illustrative example recounted by an 

acquisition professional involved a program’s purchase of computer hardware earlier than needed due 

to appropriation constraints: “If such funding could be carried several months deeper into the 

program, better equipment could be purchased at lower cost.”140

Carryover in State Governments 

According to analysis by the National Association of State Budget Officers, more than half of U.S. state 

governments practiced some form of carryover as of 2015.141 These state-level carryover practices vary 

in size and scope. South Carolina, for example, permits relatively broad carryover authority. Agencies 

are authorized to carry forward up to 10 percent of their annual appropriation to the following fiscal 

 

137 Ian Lienert and Gösta Ljungman, Carry-Over of Budget Authority, International Monetary Fund, Fiscal Affairs Department, 

January 2009, accessed July 12, 2017, http://blog-pfm.imf.org/files/carry-over-of-budget-authority.pdf. 

138 In the past, carryover measures and similar budgeting flexibility measures have been permitted to exist for periods of time, but 

eventually characterized as “slush funds” after accumulating sufficiently large unobligated balances. The history of congressional concern 

over “slush funds” at DoD goes back several decades, spurred in many cases by flexibility authorities similar to carryover. See, for 

example, Senator Alfonse D’Amato’s 1985 letter to the U.S. Comptroller General on this issue and the accompanying report: Comptroller 

General of the United States, Potential for Excess Funds in DOD, GAO/NSIAD-85-145, September 3, 1985, accessed June 27, 2017, 

http://archive.gao.gov/d11t3/127859.pdf. 

139 Defense Health Agency personnel, conversation with Section 809 Panel, October 2017. 

140 Naval Air Systems Command personnel, communication with Section 809 Panel, September 2017. 

141 National Association of State Budget Officers, Budget Processes in the States, Spring 2015, Table 17: Unspent Appropriations, 92, 

accessed November 4, 2018, https://higherlogicdownload.s3.amazonaws.com/NASBO/9d2d2db1-c943-4f1b-b750-

0fca152d64c2/UploadedImages/Budget%20Processess/2015_Budget_Processes_-_S.pdf. 
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year.142 In Hawaii, however, only the department of education is granted carryover authority, and it is 

limited to no more than 5 percent of each annual appropriation.143

States that have adopted carryover laws report positive experiences, with one Washington state budget 

official reporting that the state’s carryover law definitely resulted in more efficient agency purchases.144

Washington, however, encountered a problem that could eventually affect DoD if Congress opted to 

grant DoD some form of carryover authority. In the wake of economic downturn and the resulting 

exogenous fiscal constraints, there was a strong incentive for Washington state lawmakers to locate and 

use unspent funds within agencies. Perhaps for this reason, shortly after the start of the late-2000s 

global financial crisis, the legislature repealed Washington’s carryover authority. 

Some states, such as California, also practice both multiyear and no-year appropriations on a limited 

scale.145

Carryover in Foreign Governments 

Many foreign governments practice some form of carryover in their budgeting systems. The 

International Monetary Fund (IMF) suggests that carryover provisions are best-suited for countries 

with high-quality rule of law and institutional development, where “the prime objective is ensuring the 

most efficient and effective use of government resources.”146

Table 4-4. Carry-Over Authority in Selected Countries147

Country Carryover Authority 

United States Carryover requires specific legislative approval, multiyear appropriations in some cases 

Canada Maximum threshold and approval required 

Mexico None 

United Kingdom Maximum threshold and approval required 

France Maximum threshold and approval required, exceeding thresholds subject to approval 

 

142 South Carolina Comptroller General, State of South Carolina Policy for Use of Purchasing/Payment Document Type, June 30, 2016, 

accessed July 5, 2017, http://www.cg.sc.gov/guidanceandformsforstateagencies/Documents/CGsAPP/06-30-

16/POLICYONUSEOFPURCHASEORDERSANDDIRECTEXPENDITURES_%206-30-16.pdf. 

143 “About State Budgeting,” State of Hawai’i Department of Budget and Finance, accessed July 5, 2017, 

http://budget.hawaii.gov/budget/about-budget. 

144 Washington State budget official, discussion with Section 809 Panel, June 2017. 

145 See California Department of Finance, Finance Glossary of Accounting and Budgeting Terms, accessed July 5, 2017, 

http://www.dof.ca.gov/budget/CA_budget_information/budget_faq/GlossaryofBudgetTerms.pdf. “Appropriations made by the Budget 

Act are available for encumbrance for one year, unless otherwise specified. Appropriations made by other legislation are available for 

encumbrance for three years, unless otherwise specified, and appropriations stating ‘without regard to fiscal year’ shall be available from 

year to year until fully expended.” 

146 “Guidelines for Public Expenditure Management, Section 4: Budget Execution,” International Monetary Fund, accessed July 5, 2017, 

https://www.imf.org/external/pubs/ft/expend/guide4.htm. 

147 Data based on responses to 2012 OECD survey question “for discretionary spending, can line ministers carry over unused funds or 

appropriations from one year to another?” See “About the International Budget Practices and Procedures Database,” Organisation for 

Economic Cooperation and Development, accessed July 5, 2017, http://qdd.oecd.org/subject.aspx?Subject=7F309CE7-61D3-4423-A9E3-

3F39424B8BCA. 
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Country Carryover Authority 

Germany 2-year carryover allowed, subject to restrictions 

Spain Maximum threshold and approval required 

Italy None 

Norway Maximum threshold and approval required 

Sweden Maximum threshold and no approval required, exceeding thresholds subject to approval 

Greece None 

Israel No threshold and no approval required 

Japan No threshold but approval required 

Korea Carryover requires specific legislative approval 

Australia Appropriations do not lapse at end of year 

Difficult Trade-offs 

Congress faces difficult trade-offs in determining how to address this issue. If legislators chose to 

decentralize budget authority among lower-level decision makers (for instance, by allowing PMs and 

contracting officers greater access to no-year money) the result could limit oversight capabilities. 

If Congress opted to pursue alternative forms of the current periodicity-based budget system (for 

example, switching to biennial appropriation cycles) the effect might be limited. The incentives that 

cause obligation surges will not be erased by simply switching federal appropriations to a 2-year cycle 

instead of a 1-year cycle, as some members of Congress have proposed in recent decades.148

If Congress opted to provide cash bonuses as a reward for government employees who identified 

waste, it could lead to mismatched goals between program management and staff, as well as other 

unintended issues. 

If Congress and other decision makers chose to directly target end-year obligation surges (for instance, 

by imposing a monthly percentage cap on DoD contract obligations, essentially a much more rigorous 

version of the 80/20 rule) it would likely eliminate the distorted annual spending patterns seen in 

acquisition data. It would, however, represent an additional incentive for acquisition personnel to 

prioritize timing over contract quality. In this way, such an approach might simply address symptoms 

rather than problems. 

 

148 For examples of members of Congress who have supported biennial appropriations, see Jessica Tollestrup, Biennial Budgeting: 

Options, Issues, and Previous Congressional Action, Congressional Research Service, February 2, 2015, accessed November 4, 2018, 

https://fas.org/sgp/crs/misc/R41764.pdf. 
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Problem Complexity 

Effectively addressing the perverse incentives created by periodicity-based budgeting requires 

acknowledgment of the problem’s complexity. There are many stakeholders involved in DoD 

acquisition budgeting. They include U.S. taxpayers, congressional authorizers, congressional 

appropriators, OMB, DoD functional sponsors, the DoD acquisition community, the DoD resource 

management community, and the defense contractor community. It may not be possible to develop a 

budgeting mechanism that could appease all these groups’ interests while also allowing DoD to 

flexibly allocate funding where and when it is needed. 

Even if all stakeholders were to reach a mutually acceptable solution, there would be trade-offs 

involved in switching to a more flexible budgeting system. Periodicity-based budgeting may allow for 

flexibility to changing economic conditions. In other words, if an unexpected recession occurs, 

appropriators have the option to respond with immediate cuts to defense spending. This type of fiscal 

flexibility might be less feasible if, for example, DoD retained more of its spending authority from prior 

years through carryover provisions. 

Greater flexibility of DoD’s acquisition budget authority across time periods would likely increase the 

efficiency and effectiveness of contract spending within those time periods. Such changes would also 

preserve Congress’s ability to determine the total, long-term dollar amount spent on individual DoD 

components, appropriation titles, or programs. They would, however, limit Congress’s ability to 

modify how much is spent within specific periods of time. Many in Congress clearly view this ability as 

a core aspect of the oversight process. 

Best Solution 

As demonstrated above, there may be no perfect solution to the problematic incentives created by 

periodicity-based budgeting constraints. The most appropriate way of mitigating end-period spending 

surges, however, would be to create a mechanism allowing for a small percentage of single-year 

funding to cross fiscal years. Such a mechanism could be accomplished by allowing the obligation of 

up to 5 percent of O&M funding for 1 year beyond what would normally be the end of its availability. 

This approach would allow for a smoothing effect across fiscal years, mitigating the perceived urgency 

to spend all available funds by end-year by creating a funding bridge across fiscal years, allowing for 

DoD’s single-year funding accounts to more easily meet the legislature’s antideficiency and 

impoundment control requirements. 

Implementation 

Note: The Section 809 Panel considered many congressional options for addressing periodicity problems, 

including multiyear appropriations, cash bonuses for waste reporting, and increasing the rigor of the 80/20 rule. 

There are problems associated with each of these options. For this reason, the panel recommends congressional 

approval of a simple, small-percentage carryover authority for DoD’s O&M accounts. This proposal offers the 

best opportunity to deal with periodicity-related problems as a first step. 

Legislative Branch 

 Permit 5 percent of appropriated O&M funding to be obligated up to 1 year beyond what 

would normally be the end of their availability for obligation. This change would fall within the 
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jurisdiction of the appropriations committees. It would likely be implemented via the addition 

of standard to remain available for obligation until language to the Operation and Maintenance title 

accounts in a regular defense appropriations law. 

Executive Branch 

 Modify business processes, financial management defense business systems, and acquisition 

policies to extend funding availability for the congressionally authorized percentage of the 

O&M accounts. 

 Current policies for obligating Defense Health Program funding may be used as a template. 

Congress regularly grants Defense Health Agency a one-year capped carryover on 1 percent of 

each year’s O&M funds. 

Note: There are no Implementation Details for this recommendation. 

Implications for Other Agencies 

 The proposed carryover pilot programs could serve as a model for acquisition budget reform in 

other agencies. 

RECOMMENDATIONS 50 THROUGH 54 SHARE THE COMMON THEME: 

CONTINUING RESOLUTIONS 

Under the regular appropriations process, Congress enacts about a dozen annual laws prior to the 

beginning of the fiscal year on October 1. Each of these laws appropriates funding for a predefined 

group of agencies or functional portfolios.149

Three regular appropriations bills account for most of DoD’s annual budget. The Department of Defense

appropriations bill contains the majority of annual funding appropriated for DoD. Military 

construction funding is appropriated via the Military Construction and Veterans Affairs bill. Army Corps 

of Engineers civil program funding is appropriated via the Energy and Water Development and Related 

Agencies bill. 

In the past 2 decades, there have been only 5 fiscal years in which regular Department of Defense

appropriations bills were enacted prior to September 30.150 Despite being funded by continuing 

resolutions (CRs) less frequently than other agencies, it could be argued that DoD’s mission is affected 

by CRs to a greater extent. The annual duration for which Congress requires DoD to operate under a 

CR appears to be increasing (see Figure 4-13). 

 

149 For an overview of the basics of appropriations law, see “Principles of Federal Appropriations Law” (the so-called “Red Book”), GAO, 

accessed March 6, 2018, https://www.gao.gov/legal/red-book/overview. 

150 Section 809 Panel analysis of Congress.gov, “Appropriations and Budget,” accessed July 7, 2017. 
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DoD is funded via CRs slightly less often than the rest of the government. In the 4 decades from 

FY 1978 to FY 2018, there were only 3 years in which CRs were not used to fund at least one federal 

agency: FY 1989, FY 1995, and FY 1997.151

Figure 4-13. Number of Days During Which DoD Operated under CRs 

(Government Shutdowns in Black)152

The Budget Control Act of 2011 (BCA) imposes caps on discretionary defense-related spending.153 In 

addition to adding its own restrictions on defense acquisition spending, BCA’s defense caps may 

increase the likelihood or duration of defense CRs by imposing artificial constraints on Congress, 

exacerbating the difficulty of making decisions on competing priorities.154

 

151 Jessica Tollestrup and James Saturno, Continuing Resolutions: Overview of Components and Recent Practices, Congressional Research 

Service, January 14, 2016, accessed November 4, 2018, https://fas.org/sgp/crs/misc/R42647.pdf. The FY 1989 regular appropriations bill 

was officially signed into law by the President on October 1 (a Saturday), but was passed by both House and Senate prior to midnight on 

September 30, 1988. See “H.R. 4781 - Department of Defense Appropriations Act, 1989, Actions Overview” Congress.gov accessed 

January 23, 2018, https://www.congress.gov/bill/100th-congress/house-bill/4781/actions. 

152 Dates from 1998 to present based on Section 809 Panel analysis of Congress.gov, “Appropriations and Budget,” accessed July 7, 2017. 

Dates prior to FY 1998 based on Section 809 Panel analysis of Department of Defense appropriations law texts from Government 

Publishing Office. 

153 Budget Control Act of 2011, Pub. L. No. 112-25 (2011). BCA caps apply not to DoD specifically but to a “revised security category” 

defined in Section 302 of the law. This category includes most discretionary DoD expenditures, Department of Energy nuclear functions, 

and certain non-DoD antiterrorism functions. The category does not include mandatory DoD spending or overseas contingency 

operations. These caps were amended by Pub. L. No. 112-240 (the American Taxpayer Relief Act of 2012), Pub. L. No. 113-67 (the 

Bipartisan Budget Act of 2013), and Pub. L. No. 114-74 (the Bipartisan Budget Act of 2015). 

154 The BCA works by triggering across-the-board funding cuts in the event that discretionary funding accounts are appropriated above a 

preset amount in a given year. The BCA’s caps are constraints that Congress imposes on itself, and it regularly modifies them when it 

wishes to appropriate funding above the mandated level for a given year. Congress has modified the BCA’s caps via legislation enacted in 

January 2013, December 2013, November 2015, and February 2018. See Grant Driessen and Megan Lynch, The Budget Control Act: 

Frequently Asked Questions, Congressional Research Service, February 23, 2018, 11, accessed November 4, 2018, 

https://fas.org/sgp/crs/misc/R44874.pdf. 
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Several constraints generally apply to DoD while the organization is operating under a CR. For 

example, in the first of several CRs used to fund the government in FY 2018, Section 102(a) prohibited 

using funds for “new production of items not funded for production in fiscal year 2017 or prior 

years.”155 Congress regularly incorporates such spending limits, popularly known as new start

prohibitions, into CRs.156 CRs also regularly restrict DoD’s ability to enter into production rate increases

and initiate multiyear procurement contracts.

157 These restrictions are incorporated into both 

appropriations laws and DoD financial regulations.158

Sometimes CRs include exemptions that allow DoD to bypass the new start prohibition and other 

constraints of a CR. These exemptions are popularly known as anomalies and may be used to fund items 

of particular interest to Congress or items that are deemed crucial to national security.159 For example, 

in the third CR through which the government was funded in FY 2018, $673.5 million was appropriated 

to fund repairs to two Navy ships that suffered high-profile collisions in 2017. About $3.8 billion was 

appropriated to fund missile defense via appropriations accounts normally found in NDAAs. A further 

$200 million was appropriated to fund construction of a missile field in Alaska.160

In anticipation of CR enactment, DoD typically sends a list of anomaly requests, compiled with input 

from the Military Services and Defense Agencies, to OMB. OMB may forward this list to the 

congressional appropriations committees, which may choose to include or omit the anomalies in the 

text of CRs to be considered by Congress. 

Anecdotally, DoD officials maintain that convincing the DoD Comptroller to submit a given anomaly 

request to OMB is extremely difficult. One retired official stated that within DoD’s internal process, the 

anomaly request process is “lengthy and contentious” and “lots of important programs are not 

included in favor of a few ‘must haves.’ ”161

A former DoD Comptroller official said that during his time with DoD, the “DoD Comptroller did not 

accept anomalies mainly because of guidance from OMB or Hill staff.”162 According to the official, both 

 

155 Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017, Pub. L. No. 115-56 

(2017). The full provision reads: “No appropriation or funds made available or authority granted pursuant to section 101 for the 

Department of Defense shall be used for: (1) the new production of items not funded for production in fiscal year 2017 or prior years; 

(2) the increase in production rates above those sustained with fiscal year 2017 funds; or (3) the initiation, resumption, or continuation of 

any project, activity, operation, or organization (defined as any project, subproject, activity, budget activity, program element, and 

subprogram within a program element, and for any investment items defined as a P-1 line item in a budget activity within an 

appropriation account and an R-1 line item that includes a program element and subprogram element within an appropriation account) 

for which appropriations, funds, or other authority were not available during fiscal year 2017.” 

156 In many documents published by DoD, Congress, OMB, and other organizations, the most commonly-used phrase is “new start.” In the 

text of most continuing resolutions, however, the term “new production” is used. In this paper, these terms are used interchangeably. 

157 For example, Pub. L. No. 115-56 Section 102(b) reads: “No appropriation or funds made available or authority granted pursuant to 

section 101 for the Department of Defense shall be used to initiate multi-year procurements utilizing advance procurement funding for 

economic order quantity procurement unless specifically appropriated later.” Under a regular appropriations act, DoD is permitted to 

enter into multiyear contracts for the procurement of property and services under 10 U.S.C. § 2306b and 10 U.S.C. § 2306c. 

158 Financial Management Regulation Volume 3, Chapter 6, Section 060401(E), accessed February 23, 2018, 

http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_03.pdf. 

159 Lynn Williams and Jennifer Roscoe, Defense Spending Under an Interim Continuing Resolution: In Brief, Congressional Research 

Service, December 26, 2017, accessed November 4, 2018, https://fas.org/sgp/crs/natsec/R44636.pdf. . 

160 Third Continuing Appropriations for Fiscal Year 2018, Pub. L. No. 115-96 (2017). 

161 Retired deputy assistant secretary, discussions with Section 809 Panel, February 2018. 

162 Former DoD Comptroller official, discussion with Section 809 Panel, March 2018. 
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OMB and appropriations committee staff frequently “made clear that only anomaly-free CRs were of 

interest, making it a waste of time to work the anomalies.”163

If the Comptroller does include a given anomaly in the OMB request, OMB is reportedly unlikely to 

submit the request to appropriators. According to one former OMB official, “OMB hates policy 

anomalies” and “routinely denies” them.164

Congressional use of anomalies may mitigate some of the more high-profile problems that occur when 

DoD is under CR funding. The use of anomalies, however, will not address needs that do not rise to the 

level of congressional visibility. 

In addition to the new start and related prohibitions, CRs produce negative effects on the contracting 

process. When a long CR is in effect and congressional activity indicates a future increase in funding 

levels, contracting personnel may face a situation in which they are expected to put large amounts of 

money on contract but lack the legal authority to do so until the end of the fiscal year. This situation 

can create frantic rushes and enormous workloads at the end of the year—a time that, even without 

CRs, can be chaotic for many contracting offices.165

Under CRs, contracting officers often lack needed authority to enter into long-term contract extensions. 

Consequently, they may need to enter into short-term bridge contracts to ensure continued delivery of 

critical services until the enactment of a regular appropriations bill.166 Because of the uncertainty 

vendors face under these short-term bridge contracts, they may be higher-cost than more long-term 

contracts. 

There is a near-universal view that the uncertainties and disruptive timetables associated with CRs 

increase costs and harm DoD’s ability to efficiently operate its acquisition system. 

DoD Leadership 

Then-Secretary of Defense James Mattis stated in February 2018 testimony that if Congress should 

“stumble into a yearlong continuing resolution,” the military would, among other consequences: 

 Fail to balance ship operations and port maintenance. 

 Ground aircraft due to a lack of maintenance and spare parts. 

 Deplete ammunition, training, and manpower that currently serve as war deterrents. 

 Delay contracts for acquisition programs that are necessary for military modernization.167

Secretary Mattis said in January 2018, “No enemy in the field has done more to harm the readiness of 

the U.S. military than the combined effect of the Budget Control Act’s defense spending cuts, worsened 

 

163 Former DoD Comptroller official, discussion with Section 809 Panel, March 2018. 

164 “Pentagon sends White House detailed list of budget priorities threatened by Capitol Hill stalemate,” Tony Bertuca (quoting Mark 

Cancian), Inside Defense, September 11, 2017, accessed February 23, 2018, https://insidedefense.com/share/189868. 

165 Contracting office personnel, meetings with Section 809 Panel, September 2017. 

166 Former DoD Comptroller official, discussions with Section 809 Panel, March 2018. 

167 House Armed Services Committee, Secretary of Defense Jim Mattis: Written Statement for the Record, February 6, 2018, accessed 

February 7, 2018, http://docs.house.gov/meetings/AS/AS00/20180206/106833/HHRG-115-AS00-Wstate-MattisJ-20180206.pdf. 
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by operating 9 of the last 10 years under continuing resolutions, wasting copious amounts of precious 

taxpayer dollars.”168

Secretary Mattis testified before Congress in 2017 that CRs “result in a steady erosion of military 

readiness” and inhibit “adaptation to new challenges.”169 He focused on acquisition of newer and more 

innovative weapons systems in his comments, stating that “rapid technological change... necessitates 

new investment, innovative approaches, and when necessary, new program starts that have been 

denied us by law when we have been forced to operate under Continuing Resolutions.”170

With respect to military construction contracts, Secretary Mattis wrote that in FY 2018 alone, CRs 

would cause “an inevitable delay in project schedules and potential increased costs” for 91 construction 

projects across the three military departments.171

During the Obama administration, then-Secretary Ashton Carter characterized Congress’s reliance on 

CRs as “a deplorable state of affairs,” adding that CRs force DoD to commit “the obvious mistake of 

having us do this year exactly what we did last year, despite the fact that we’re trying to evolve and 

innovate to stay ahead in a changing world.”172

Secretary Carter elaborated that the budget instability created by CRs “emboldens our foes,” is 

“strategically unsound,” is “dispiriting to our troops,” and adds unnecessary inefficiencies to the 

defense industrial base.173 He described CRs as “one of the greatest threats to American security,” 

specifically pointing to Navy shipbuilding as an area for which CRs diminish warfighting capability, 

because ship funding is appropriated on an individual-program basis.174

DoD leaders have also noted the negative effects of CRs on the defense acquisition workforce because 

they deter hiring, impede the funding of much needed training, and create anxiety among a vulnerable 

civilian workforce. Even a 3-month CR “leaves critical gaps in the workforce skill set and causes 

unnecessary angst among military and civil servants, making the government a far less attractive 

option to the highest-skilled potential candidates.”175

 

168 “Defense Secretary Mattis Tells Congress Pentagon Needs Budget Predictability,” C-SPAN, January 19, 2018, accessed same date, 

https://www.c-span.org/video/?c4709963/defense-secretary-mattis-tells-congress-pentagon-budget-predictability. 

169 Senate Armed Services Committee, Secretary of Defense Jim Mattis: Written Statement for the Record, June 13, 2017, accessed July 7, 

2017, https://www.armed-services.senate.gov/imo/media/doc/Mattis_06-13-17.pdf. 

170 Ibid. 

171 James Mattis, Impacts of a Continuing Resolution Authority in Fiscal Year 2018 (letter to Senate Armed Services Committee), 

September 8, 2017. The letter specifically cited schedule delays and cost increases to 37 Navy projects, 16 Air Force projects, and 38 Army 

projects. 

172 Senate Armed Services Committee, Secretary of Defense Ash Carter: Statement on “U.S. National Security Challenges and Ongoing 

Military Operations,” September 22, 2016, accessed July 7, 2017, https://www.armed-services.senate.gov/imo/media/doc/Carter_09-22-

16.pdf. 

173 Ibid. 

174 Ibid. 

175 James Mattis, Impacts of a Continuing Resolution Authority in Fiscal Year 2018 (letter to Senate Armed Services Committee), 

September 8, 2017. Some have suggested that, because DoD leadership anticipates CRs through the first quarter, 3-month CRs do not 

cause major problems. According to one retired DoD Comptroller official, “Generally major contracts do not come up for renewal during 

first couple of months of new year because of concerns about CRs. The big problems occur when CRs extend into the new calendar year” 

(in other words, past January 1). Former DoD Comptroller official, emails to Section 809 Panel, March 2018. 
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Army Leadership 

Army Chief of Staff GEN Mark Milley said in 2017 that because of CRs, the Army’s “procurement 

efforts currently on hold will remain on hold.”176 He added that CRs would create “operational delays 

in procurement and research across the Army” and cause “further degradation of Army readiness in 

both the current and future fiscal years.”177

Air Force Leadership 

In 2017 testimony, Air Force Chief of Staff Gen David Goldfein stated that CRs and other funding laws 

have “critically challenged” the Air Force’s ability to “improve readiness, modernize our force, and 

invest in research and development to maintain decisive advantages over near-peer competitors.”178

Vice Chief of Staff Gen Stephen Wilson reportedly said in early 2018 that a yearlong CR would cause 

about $1.5 billion in damage.179

Navy Leadership 

In 2017, Secretary of the Navy Richard Spencer provided a concrete estimate of the dollar costs 

associated with CR-related inefficiencies. 

CRs have cost the Department of the Navy roughly $4 billion. Since 2011, we have put $4 billion in a 

trashcan, put lighter fluid on top of it, and burned it... enough to buy a squadron of F-35, two Arleighclass destroyers, 3,000 Harpoon missiles... Instead, that $4 billion of taxpayers’ money was lost because 

of inefficiency of the ways of the continuing resolution.180

Testifying at a 2016 congressional hearing, Chief of Naval Operations ADM John Richardson stated 

that CRs “have driven additional cost and time into just about everything we do.”181 He added that due 

to CRs, “nobody schedules anything important in the first quarter” and the resulting uncertainty 

“translates directly into risk to our Navy and our nation.”182

 

176 U.S. House of Representatives, Statement by General Mark A. Milley, Chief of Staff United States Army, before the Committee of 

Armed Services on Consequences to the Military of a Continuing Resolution, April 5, 2017 accessed September 25, 2017, 

https://docs.house.gov/meetings/AS/AS00/20170405/105832/HHRG-115-AS00-Wstate-MilleyM-20170405.pdf. 

177 Ibid. 

178 U.S. House of Representatives, Statement of General David L. Goldfein, Chief of Staff of the Air Force, to the Committee on Armed 

Services on Impacts of a Year-Long Continuing Resolution, April 5, 2017, accessed September 25, 2017, 

http://docs.house.gov/meetings/AS/AS00/20170405/105832/HHRG-115-AS00-Wstate-GoldfeinD-20170405.pdf. 

179 “$1.5 Billion-Plus Hit on USAF from Yearlong CR, Contract Delays Baked In,” John A. Tirpak, Air Force Magazine, January 12, 2018, 

accessed January 22, 2018, http://www.airforcemag.com/Features/Pages/2018/January%202018/One-Point-Five-Billion-Plus-Hit-onUSAF-from-Yearlong-CR-Contract-Delays-Baked-In-.aspx. 

180 U.S. Navy, Secretary of the Navy Richard V. Spencer, USNI Defense Forum Washington, December 4, 2017, accessed January 22, 2018, 

http://www.navy.mil/navydata/people/secnav/Spencer/Speech/Remarks%20by%20the%20Honorable%20Richard%20V.%20Spencer,%2

0USNI%20Defense%20Forum.pdf. 

181 “Service Chiefs: Budget Uncertainty, Funding Levels are Biggest Challenges,” Cheryl Pellerin, DoD News, Defense Media Activity, 

September 15, 2016, accessed September 25, 2017, https://www.defense.gov/News/Article/Article/945964/service-chiefs-budgetuncertainty-funding-levels-are-biggest-challenges. 

182 “Service Chiefs: Budget Uncertainty, Funding Levels are Biggest Challenges,” Cheryl Pellerin, DoD News, Defense Media Activity, 

September 15, 2016, accessed September 25, 2017, https://www.defense.gov/News/Article/Article/945964/service-chiefs-budgetuncertainty-funding-levels-are-biggest-challenges. 
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At the same hearing, Commandant of the Marine Corps Gen Robert Neller said that CRs have led to 

insufficient readiness in “aviation, facilities sustainment, future modernization, retention of critical 

skills and building the depth on our ready bench forces at home.”183

Congressional Perspectives 

Many members of Congress appear to be in bipartisan agreement with DoD’s assessments. Former 

Senate Armed Services Committee (SASC) Chairman John McCain characterized national defense as 

being “held hostage to domestic political disputes totally separated from the reality of the threats we 

face,” and called for departing from “budget-driven strategy,” instead returning to “strategy-driven 

budget.”184 Then-Chairman McCain and SASC Ranking Member Jack Reed signed a joint letter in 2017 

noting “negative impacts of starting each fiscal year on a continuing resolution.”185 Former SASC 

Chairman Carl Levin has characterized long-term CRs as “a huge and unconscionable problem” that 

not only undermined national defense but also had “a negative impact...on morale and retention.”186

Former House Armed Services Committee (HASC) Chairman Mac Thornberry has said that CRs “do 

enormous, lasting damage to the American military” and contribute to “an alarming increase in 

accidents, growing evidence of a force under stress, and an eroding technological position when 

compared with our adversaries.”187 Former HASC Ranking Member Adam Smith has stated that 

“funding our government by continuing resolutions undermines our national security.”188

The Senate Homeland Security and Government Affairs Committee Federal Spending Oversight and 

Emergency Management Subcommittee held a hearing on CRs in February 2018. Chairman Rand Paul 

stated that congressional dysfunction “causes uncertainty in agencies and delays plans, which may 

increase costs to the taxpayer.”189 Ranking Member Gary Peters added that the pattern of CRs 

“needlessly threatens our national and economic security” and results in “wasting countless hours 

across the federal government as employees prepare for shutdowns or draft detailed, comprehensive 

yearly budget documents that are completely disregarded.”190

 

183 Ibid. 

184 GPO, U.S. Senate Committee on Armed Services, The Impact of the Budget Control Act of 2011 and Sequestration on National Security,

January 28, 2015, accessed July 10, 2017, https://www.gpo.gov/fdsys/pkg/CHRG-114shrg95604/pdf/CHRG-114shrg95604.pdf. 

185 “McCain & Reed Request Information From DOD on Effects of Continuing Resolution,” Jack Reed, News Releases, August 30, 2017, 

accessed September 25, 2017, https://www.reed.senate.gov/news/releases/mccain-and-reed-request-information-from-dod-on-effectsof-continuing-resolution. 

186 GPO, U.S. Senate Committee on Armed Services, The Impacts of Sequestration and/or a Full-year Continuing Resolution on the 

Department of Defense, February 12, 2013, accessed July 10, 2017, https://www.gpo.gov/fdsys/pkg/CHRG-113shrg86707/pdf/CHRG113shrg86707.pdf. 

187 “Thornberry Votes no on CR,” House Armed Services Committee, Press Releases, September 8, 2017, accessed September 25, 2017, 

https://armedservices.house.gov/news/press-releases/thornberry-votes-no-cr. 

188 “Congressman Smith Statement on the passage of the Continuing Resolution for Fiscal Year 2017,” Adam Smith, Press Releases, 

December 8, 2016, accessed September 25, 2017, https://adamsmith.house.gov/media-center/press-releases/congressman-smithstatement-on-the-passage-of-the-continuing-resolution. 

189 Statement of Chairman Rand Paul, Senate Subcommittee on Federal Spending Oversight and Emergency Management, Terrible, No 

Good, Very Bad Ways of Funding Government: Exploring the Cost to Taxpayers of Spending Uncertainty caused by Governing through 

Continuing Resolutions, Giant Omnibus Spending Bills, and Shutdown Crises, February 6, 2018, accessed February 7, 2018, 

http://www.hsgac.senate.gov/download/02/07/2018/sen-paul-opening-statement. 

190 Statement of Ranking Member Gary C. Peters, Senate Subcommittee on Federal Spending Oversight and Emergency Management, 

Terrible, No Good, Very Bad Ways of Funding Government: Exploring the Cost to Taxpayers of Spending Uncertainty caused by Governing 
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Counterargument: 

CRs Should Harm DoD 

The question of how painful a CR should be is complicated and carries implications far beyond defense acquisition. 

Constitutional separation of powers has ensured throughout U.S. history that the legislature can act as a check on the 

Executive Branch. Of the limited number of levers Congress can push and pull to exert power over the executive, the 

most important is arguably the power of the purse. 

Currently, Congress appears to have barely enough political will to enact regular appropriations bills with months of 

delay. If CR rules on DoD acquisition spending were altered sufficiently, it could bring about a scenario in which DoD 

suffered very limited negative effects from even a yearlong CR. In such a scenario, there is a justifiable concern that 

congressional political will would be reduced so much that no regular appropriations bills would be enacted at all. In such 

a scenario, Congress would effectively be tasking DoD with planning the appropriation of its own money via the annual 

President’s budget request. 

Such an arrangement would arguably violate constitutional requirements, institutional norms, and common sense. Were 

DoD to spend money throughout the year despite a consistent nonenactment of regular appropriations, it would appear 

to transfer much of the constitutional power of the purse from legislature to executive. It could dilute Congress’s 

oversight capabilities by undermining lawmakers’ ability to impose financial consequences on DoD for failing to comply 

with laws. It would also appear to create a conflict of interest by making the same entities responsible for both operating 

and resourcing DoD. 

According to this line of thinking, in the absence of timely enactment of regular appropriations bills, CRs should be painful 

for DoD and other Executive Branch agencies. Without this pain and the indirect pressure it puts on lawmakers, the 

political will of Congress could continue to erode in a way that exacerbates the problems faced by the institution. 

The solution implied by this point of view might not be to change the rules associated with DoD acquisition under CRs. 

Instead, it might be to change the rules of Congress in a way that lowers the probability of Congress failing to pass regular 

appropriations before the start of the fiscal year. For instance, congressional rules could be altered to allow for lower 

voting thresholds and limits to filibustering when considering the 12 annual regular appropriations bills.

Industry Perspectives 

In addition to harming warfighter and taxpayer interests, CRs can have several negative effects on the 

companies with which DoD does business. CRs disrupt personnel decisions, as companies have to 

delay hiring to wait for contract awards. In some cases, ideal candidates may already have moved on to 

other jobs.191

Industry representatives also complain of CR effects on payment delays. Under normal circumstances, 

when DoD fails to pay a vendor by a certain date, it must pay an additional interest penalty to account 

for the time value of money.192 When vendor cash flows are disrupted due to a CR, however, the 

government faces no such interest penalty. There are also impacts to industry for fiscal year annual 

 

through Continuing Resolutions, Giant Omnibus Spending Bills, and Shutdown Crises, February 6, 2018, accessed February 7, 2018, 

http://www.hsgac.senate.gov/download/02/06/2018/sen-peters-opening-statement. 

191 “Continuing resolutions jack up government costs,” Jessie Bur, Federal Times, February 2, 2018, accessed March 22, 2018, 

https://www.federaltimes.com/management/budget/2018/02/02/continuing-resolutions-jack-up-government-costs. 

192 Under 31 U.S.C. § 3902: “The head of an agency acquiring property or service from a business concern, who does not pay the concern 

for each complete delivered item of property or service by the required payment date, shall pay an interest penalty to the concern on the 

amount of the payment due... for the period beginning on the day after the required payment date and ending on the date on which 

payment is made.” 
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goals in sales, revenue, profit, and cash flow, especially if their fiscal year overlaps with the calendar 

year.193

One industry organization stated that CRs constitute a failure to “fully support America’s military 

deployed across the globe” and specifically undermine industries with large numbers of high-skill, 

high-wage jobs.194 Another industry group characterized regular NDAAs as vital for avoiding needless 

uncertainty, regaining readiness, recapitalization and modernization, and mitigating long-term damage 

to the defense industrial base.195

CRs have an outsized effect on small businesses that sell to DoD, which are often more dependent on 

week to week cash flows and have less ability to ride out unexpected disruptions.196

Case Study: 

CR Effects on Price Negotiation 

One complaint about CRs involves the reduced length of time between contract obligation authority and the 

expiration of that authority. The resulting increase in urgency reportedly raises contract costs by boosting the 

negotiating leverage of vendors. 

In one mature production program, for instance, acquisition personnel had in prior years begun discussing 

prices with around 9 months of planned negotiation time. The contracting office had previously succeeded in 

negotiating the price down from the vendor’s initial proposals, doing “the typical back and forth trying to get 

them back in the box.”197 They believed the same could be achieved in the FY 2017 acquisition cycle. 

Acquisition personnel anticipated enactment of a regular appropriations bill by sometime in the second 

quarter, but it was not enacted until the middle of the third quarter. As a result, there was much less time 

remaining for the price negotiation process. As the end of the fiscal year approached and the “pressure to 

obligate” increased, senior leadership ultimately stepped in and instructed the contracting office to make the 

award at about 3 percent higher than the price that was considered negotiable without a CR in effect.198

Proposed Solutions 

Enacting regular appropriations bills prior to the start of each fiscal year is the ideal solution to this 

problem. If Congress continues to be unable to reliably enact regular defense appropriations each year, 

viable alternative solutions include creating pilot carryover budget authorities and obligation 

authorities to be employed when Congress adopts a CR, permitting initiation of new starts, permitting 

 

193 Discussion with Defense Acquisition University scholar in November 2018. 

194 “AIA Calls on Congressional Leaders to Finalize FY 18 Spending and Revise Budget Control Act Caps,” David Melcher, President and 

CEO, Aerospace Industries Association, December 22, 2017, accessed March 27, 2018, https://www.aia-aerospace.org/news/aia-calls-oncongressional-leaders-to-finalize-fy-18-spending-and-revise-budget-control-act-caps. 

195 “NDIA puts support behind omnibus bill, calls for fast passage,” National Defense Industrial Association, March 20, 2018, accessed 

March 27, 2018, http://www.ndia.org/about/media/press-releases/2018/3/20/omnibus. 

196 See, for example, House Minority Whip Steny Hoyer’s comments quoted by news media in February 2018: “Continuing resolutions 

jack up government costs,” Jessie Bur, Federal Times, February 2, 2018, accessed March 22, 2018, 

https://www.federaltimes.com/management/budget/2018/02/02/continuing-resolutions-jack-up-government-costs. 

197 Navy program official, discussion with Section 809 Panel, April 2018. 

198 Ibid. 
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initiation of production rate increase, and permitting initiation of multiyear procurements that align 

with the lowest congressional committee marks. 

RECOMMENDATIONS 

Recommendation 50: Enact regular appropriations bills on time. 

Problem 

CRs continue to undermine strategic execution of funds in the defense acquisition system. 

Background 

Congress is the sole entity with constitutional authority to fund the government: 

The Congress shall have Power... to pay the Debts and provide for the common Defence and general 

Welfare of the United States... No Money shall be drawn from the Treasury, but in Consequence of 

Appropriations made by Law.199

If the DoD acquisition system is to be resourced at all, it is Congress’s fundamental constitutional 

responsibility to manage that resourcing process. Despite efforts by congressional leadership and the 

appropriations committees, Congress does not appear able to reliably pass defense appropriations bills 

on an annual basis prior to the start of the fiscal year. 

Discussion

Although there is bipartisan acknowledgement of the problems associated with CRs, Congress 

continues to use CRs as a regular means of funding DoD. This state of affairs points to the intractability 

of the CR issue. Virtually all stakeholders agree that CRs are detrimental to the defense acquisition 

system, but Congress appears to lack the collective action capacity needed to ensure lasting change. 

Conclusions 

Ideally, the only recommendation for addressing the effect of CRs on defense acquisition would be for 

Congress to pass regular defense appropriations bills via the established process. If the appropriations 

process functioned as intended, CRs would be unnecessary and the Section 809 Panel’s CR-related 

recommendations would be irrelevant. The process appears, however, to be broken. Unless Congress 

can find a way of repairing it, the subsequent recommendations in this section may serve as 

alternatives. 

There are no easy solutions. CRs are a product of political gridlock and resulting congressional 

inaction. This problem is particularly intractable because of Congress’s fundamental constitutional 

responsibility for appropriations. The only real solution to the problem of CRs is for the various 

factions of Congress to begin working together to pass appropriations in a timely manner each year 

 

199 U.S. Constitution, Article I, Section 8(12) and Section 9(7). 
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(before October 1).200 Until timely appropriations occur regularly, however, Congress could consider 

several options for mitigating the harmful effects of CRs on defense acquisition. 

One way of avoiding future CRs might be to create a strong disincentive for Congress to rely on them. 

This approach could potentially be implemented without impinging on Congress’s constitutional 

power of the purse. 

For example, Congress could pass a law automatically exempting agencies, when operating under a 

CR, from certain oversight and reporting requirements (or loosening those requirements).201 This 

approach would presumably shorten acquisition timetables and free up limited manpower that would 

otherwise be dedicated to meeting reporting requirements. This manpower could then be reallocated to 

addressing the administrative challenges associated with CRs. Another approach would be to loosen 

DoD’s deadlines and budget line-item rules for execution of funds under CRs. This approach is 

outlined in Recommendations 51 through 54 of this report. 

Implementation 

Legislative Branch 

 Enact defense appropriations and authorization laws prior to the start of the fiscal year on 

October 1.

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: There are no Implementation Details for this recommendation.

Implications for Other Agencies 

 None. 

 

200 Congress has shown a desire to develop a long-term, bipartisan solution to the CR problem. Attached to the fifth CR bill enacted in 

FY 2018, Congress included a provision establishing a Joint Select Committee on Budget and Appropriations Process Reform. The purpose 

of the joint committee is to “provide recommendations and legislative language that will significantly reform the budget and 

appropriations process.” See Title IV, Subtitle B of the Bipartisan Budget Act of 2018, Pub. L. No. 115-123 (2018). 

201 As an example, Congress could enact a law exempting DoD, in years without regular appropriations enacted by October 1, from 

completing its inventory of contracted services reporting requirements under 10 U.S.C. § 2330a. This is just one of many defense 

acquisition reporting requirements from which DoD could be exempted in the event of a CR. 
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Recommendation 51: Mitigate the negative effect of continuing resolutions by 

allowing congressional regular appropriations to remain available for a 

standardized duration from date of enactment. 

Problem 

General consensus exists within DoD leadership, the Military Services, and Congress that the ongoing 

use of CRs is deeply harmful to the defense acquisition system. One of the main problems is the 

relatively short span of time available to obligate funds under a CR. 

Background 

Under the regular appropriations process, Congress appropriates funding for DoD prior to the 

beginning of a fiscal year on October 1. DoD then has a certain number of years, dependent on the 

appropriations account, to obligate the funds. 

Figure 4-14. Multiyear Appropriation Examples from FY 2018202

When a regular appropriations bill is not enacted until late in the year, DoD, in effect, has a shorter 

period to obligate much of the funds. For example, when the FY 2009 Department of Defense

appropriations bill was enacted on the day before the beginning of the fiscal year, it allowed DoD 

12 full months to obligate single-year O&M funds.203 When the FY 2017 Department of Defense

appropriations bill was enacted on May 5, however, the government was already well into the third 

quarter of the fiscal year.204 The appropriations law’s timing restrictions, in effect, allowed DoD less 

than 5 months to fully obligate single-year funding, constrained by new start rules. Although funding 

 

202 See Division C of the Consolidated Appropriations Act, 2018, Pub. L. No. 115-141 (2018). DHA refers to Defense Health Agency. 

Counterterrorism, Iraq, and Afghanistan training O&M appropriation is from FY 2018 defense appropriation Title IX: Overseas 

Contingency Operations/Global War on Terrorism, Operation and Maintenance accounts. For duration of obligation authority for prior 

year shipbuilding cost increases, see Section 8072 of Title VIII: General Provisions. The Military Construction title is not present in the 

Department of Defense Appropriation Act, but rather in the Military Construction and Veterans Affairs, and Related Agencies 

Appropriations Act (see Division J in FY2018 omnibus appropriation). 

203 Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009, Pub. L. No. 110-329 (2008). 

204 Consolidated Appropriations Act, 2017, Pub. L. No. 115-31 (2017). 
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can be obligated under a CR, the timeframe for much of that obligation is reduced. In addition, 

multiple CRs require multiple funding actions which create an unnecessarily increased workload. 

Discussion 

When contracting offices have only a few months from time of appropriation to execute a contract, 

multiple problems arise. The value of strategic planning is diluted when acquisition personnel are 

uncertain how much money will eventually be made available. Vendors have greater leverage over the 

government when they know that funds must be obligated on a more urgent timeframe. The 

workforce, which is already heavily worked at the end of a regular fiscal year, becomes even more 

overworked at that time. This situation causes indirect problems with morale and retention.205

Conclusions 

DoD develops its budget requests to Congress each year, and they detail the periods of time in which 

the DoD intends to spend money. Those yearly budgets then are modified and approved by Congress 

in both appropriations laws and committee reports.206 To meet the intent of appropriations bills that are 

based on yearly budgets, DoD must be able to spend money over the course of the normally defined 

yearly periods. 

U.S. law defines the term fiscal year as the timespan that “begins on October 1 of each year and ends on 

September 30 of the following year.”207 To spend money within the normal yearly blocks of time, DoD 

must be able to operate within a fiscal year that, in fact, lasts approximately 1 year. This proposal 

requires, in effect, modifying the definition of the term fiscal year for years in which DoD depends on 

long-term CR funding. 

Congress should allow for CR-triggered automatic flexibility in timing of expenditures. For instance, 

Congress could pass a law allowing for minimum 1-year validity of all funding appropriated under 

CRs or regular appropriations. This measure would, if a regular appropriations bill were enacted prior 

to the start of the fiscal year, have no effect. If Congress chose to fund the government under one or 

more CRs, however, the measure would eliminate the budget-compression effect that currently takes 

place when Congress fails to appropriate full-year funding until well into the fiscal year. 

Some have suggested that implementation of this proposal would entail technical and legal problems. 

One defense budget expert said, 

The cost to modify accounting systems – which are not yet auditable – to handle varying lengths of fiscal 

years would be a nightmare. A foreseeable consequence of this would be a dramatic increase in the rate of 

Antideficiency Act violations because program offices and commands would easily lose track of how long 

their funding is available.208

 

205 Installation contracting office personnel, meetings with Section 809 Panel, September 2017. 

206 Topline appropriations account numbers exist in the text of appropriations laws and have binding legal force (for example, “Operation 

and Maintenance, Army”). Program element and budget line item numbers, which are much more detailed, appear in appropriations bill 

conference reports. DoD is expected to abide by both sets of funding numbers, but under reprogramming rules, acquisition personnel 

have greater flexibility within appropriations accounts than across them. 

207 Fiscal Year, 31 U.S.C. § 1102. 

208 Emails with Naval Postgraduate School professor, February 2018. The Antideficiency Act, among other things, makes it illegal for a 

federal government representative to “make or authorize an expenditure or obligation exceeding an amount available in an 
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The argument is that the financial management community might experience some disarray stemming 

from extensions to the de facto length of the fiscal year. The program management and contracting 

communities, however, face enormous amounts of disarray under the status quo. The main purpose of 

the DoD acquisition system is to deliver capabilities to the nation’s warfighters. Congress has a 

responsibility to provide relief to the acquisition communities, even if doing so necessitates redesign of 

financial management software or practices. 

To ensure no Antideficiency Act violations occurred, Congress and DoD would need to provide clear 

communication to the working-level acquisition community, detailing exactly what was acceptable and 

unacceptable under the proposed carryover authority. 

Alternative Ideas: Automated Appropriations 

Some have advocated for a process by which if Congress failed to pass regular appropriations, they would be considered 

to have been approved by default. One retired DoD acquisition official suggested that the best way to ensure the proper 

functioning of the defense acquisition system would be for Congress to enact a law guaranteeing defense funding even in 

the face of a complete breakdown in congressional negotiations: 

Should Congress during any budget year fail to enact a Department of Defense Appropriations Bill by the last day 

of the preceding fiscal year for which the budget is being formed, an appropriations bill shall be enacted de facto 

on the first day of the fiscal year for which Congress did not appropriate for the Department of Defense, and 

that the appropriated amount is equal to the prior year's appropriation, and shall include an additional 5 percent 

of the prior year's appropriation such that the appropriations provided are 105 percent of the prior year's 

appropriation. Furthermore, no subsequent action shall be taken by Congress to lessen the amount of funding 

for that fiscal year in which Congress failed to appropriate for the defense of the Nation. Congress may act only 

to increase the appropriated amount above the 5 percent increase. 

Many observers would doubtless see this proposal as raising issues related to constitutionality and separation of powers. 

This report makes recommendations to Congress that are substantially more restrained in their approach.

Implementation 

Note: The precise technical details of the recommendation outlined below would likely require tailoring by experts 

in the congressional appropriations committees, OMB, and DoD. The core recommendation of the Section 809 

Panel is not necessarily to adopt the exact details laid out below, but simply to allow for a longer-lasting 

obligational authority in the event of a long-duration CR authority. The language below is provided as an 

example of possible implementation. With respect to auditability, oversight, and financial management software 

modification, challenges might appear in mid implementation. Congress should defer to OMB, the DoD 

Comptroller, and the Military Service comptrollers in determining the most effective way to permit longer 

obligation authority while effectively addressing technical concerns. This change would primarily fall within the 

jurisdiction of the appropriations committees. 

 

appropriation or fund for the expenditure or obligation.” See 31 U.S.C. § 1341 (Limitations on expending and obligating amounts), 

31 U.S.C. § 1342 (Limitation on voluntary services), and 31 U.S.C. § 1517 (Prohibited obligations and expenditures). Also see 

“Antideficiency Act Resources,” GAO legal explainer, accessed February 23, 2018, https://www.gao.gov/legal/anti-deficiency-act/about. 
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Legislative Branch 

 Grant DoD budget authority that expires at the end of the first quarter (of the relevant fiscal 

year) before which appropriations are enacted into law in fiscal years for which Congress does 

not pass a regular defense appropriation bill by December 31. For example, with single-year 

O&M appropriation accounts: 

 If FY 2017 regular appropriations are enacted in the first quarter of FY 2017, funds must be 

obligated by the end of FY 2017 as is normally the case. 

 If FY 2017 regular appropriations are enacted in the second quarter of FY 2017, the selected 

portfolios and/or commands may obligate funds as late as the end of the first quarter of 

FY 2018 (December 31, 2017). 

 If FY 2017 regular appropriations are enacted in third quarter of FY 2017, funds may be 

obligated as late as the end of the second quarter of FY 2018 (March 31, 2018). 

 Carried over funds may not be decremented from the future budget request simply because 

they were obligated in a later fiscal year. 

Executive Branch 

 Permit recipients of pilot funding flexibilities to access funding until the date at which 

appropriation availability legally expires in the case of a late regular appropriation that is 

enacted past the end date of the first quarter of the fiscal year. 

Note: There are no Implementation Details for this recommendation.

Implications for Other Agencies 

 Altering the period of availability of all DoD appropriations would carry implications for 

regular appropriations bills in addition to the Department of Defense appropriations bill. These 

bills include Military Construction and Veterans Affairs (Division L of the FY 2017 omnibus 

appropriation, Pub. L. No. 115–31) and Energy and Water Development and Related Agencies

(Division D of the FY 2017 omnibus). Both of these annual bills contain several billion dollars in 

appropriations for DoD as well as other agencies. 

 The question of whether to apply a similar solution in other nondefense appropriations bills is 

beyond the scope of the Section 809 Panel. 

 Congress has indicated a willingness to use yearlong CRs for appropriations bills other than 

the Department of Defense bill. In FY 2011, for instance, all appropriations except for the main 

DoD bill provided agency funding via a yearlong CR.209

 In fiscal law circles, a robust argument exists regarding how painful a CR should be for 

Executive Branch agencies. If insufficiently painful, CRs may eliminate the political incentive for 

 

209 Department of Defense and Full-Year Continuing Appropriations Act, 2011, Pub. L. No. 112-10 (2011). 
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members of Congress to enact regular appropriations bills each year. If too painful, CRs may 

cripple the ability of agencies to accomplish their missions. 

 If greater flexibility were granted to DoD than to other Executive Branch agencies under 

CRs, it could dilute the incentive for members of Congress to enact regular appropriations. 

If these incentives decreased to the point at which regular appropriations were not enacted, 

it could produce an indirectly harmful effect on agencies other than DoD. 

Recommendation 52: Permit the initiation of all new starts, provided Congress 

has appropriated sufficient funding. 

Problem 

Continued reliance on CRs prevents deployment of critical new capabilities to warfighters by 

preventing the initiation of program new starts. 

Background 

The new start restriction in CRs generally consists of language prohibiting the “new production of items 

not funded for production” in previous fiscal years.210 This restriction prevents initiation of new 

programs until a regular Department of Defense appropriations bill is enacted. RDT&E programs are also 

affected by the new start restrictions. 

With the uncertainty of multiple CRs, however, acquisition officials cannot plan to award contracts at 

specific points in the year. If they do make such plans and CRs continue beyond those points, they may 

have to restructure the contracts or programs in question. 

Discussion 

Senior officials report that the prohibition on new starts causes increased inefficiency in the defense 

acquisition system. When vendors believe there is a risk that a planned program may not begin on 

time, they will invariably price that risk into a contract. Then-Secretary of Defense James Mattis wrote 

in 2017, 

New start rules and funding constraints carried forward under each CR extension combine to increase 

the likelihood that costs of material and labor in the contracts themselves will also grow. To the vendors 

and manufacturers, the Government becomes a less reliable, higher-risk customer.211

In the first 3 months of FY 2018, the Army had planned 18 new starts that were affected by the CRs 

enacted by Congress. One of the planned new starts was the Interim Combat Service Rifle program, 

which was canceled in November 2017 amidst a succession of CRs.212 Given 6 months of CRs in 

 

210 For example, see Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017, 

Pub. L. No. 115-56 (2017). 

211 James Mattis, Impacts of a Continuing Resolution Authority in Fiscal Year 2018 (letter to Senate Armed Services Committee), 

September 8, 2017. 

212 “The Army’s Powerful New 7.62mm Service Rifle Is Officially Dead,” Jared Keller, Task and Purpose, November 30, 2017, accessed 

January 22, 2018, https://taskandpurpose.com/army-interim-combat-service-rifle. 
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FY 2018, the Navy had seven procurement contracts and three R&D contracts the award of which 

would be delayed due to new start rules.213 The Air Force had six new starts that would be affected by 

6 months of CRs, including multiple fighter aircraft upgrades and a joint space operations system.214

Case Study:

New Start: Enhanced Polar System Recapitalization 

In early 2018, the Air Force’s Enhanced Polar System Recapitalization (EPS-R) was intended to maintain satellite coverage 

of polar regions, a critical function for certain U.S. Navy operations. By partnering with an allied country to launch 

multiple payloads, EPS-R had the opportunity to save approximately $900 million. 

The international partner, however, had a preexisting launch schedule that created an inflexible time constraint. Because 

of the urgency of the requirement, it had to be funded via a new start budget line item for which appropriations did not 

already exist. 

This funding approach required submission of a congressional PA request to the four congressional defense committees. 

According to the acquisition authority, these requests take an average of 182 days to process.215 This would extend past 

the international partner’s launch deadline. 

At the time the Air Force began its request for EPS-R, Congress was still in the process of negotiating regular 

appropriations bills, working through additional CRs, and attempting unsuccessfully to avoid a government shutdown. 

Under some intelligence-related funding authorities, the EPS-R new start would have been automatically approved by 

default after 30 days.216 Due to the slowness of the approval process during a succession of CRs, however, the Air Force 

faced uncertainties in the delivery of critical capabilities to the warfighter and $900 million in taxpayer savings. 

Ultimately, program officials were able to partner with the international agency and obligate money on the required 

contract modification at the last minute, having obtained approval from all four congressional defense committees. Had 

the program not been sufficiently high-cost and high-profile, DoD likely would have been unable to obtain these 

approvals from all congressional stakeholders on such short notice. One senior program official stated, “we narrowly 

escaped disaster” and the acquisition system should not continue to rely on these types of “diving saves.”217

Shortly before the beginning of FY 2018, DoD requested approval of some 75 new start anomalies in 

CRs for FY 2018.218 These requests were not included in the texts of the subsequently enacted CRs. 

There are signs that the urgency of DoD’s new start needs may be increasing. DoD requested 36 new 

start anomalies in the FY 2015 CRs, a figure which had about doubled 3 years later.219 Defense 

 

213 James Mattis, “Impacts of a Continuing Resolution Authority in Fiscal Year 2018” (letter to Senate Armed Services Committee), 

September 8, 2017. 

214 Ibid. 

215 U.S. Air Force Space and Missile Systems Center, presentation to Section 809 Panel, January 24, 2018. 

216 See 50 U.S.C. § 3038(c), under which the Defense Intelligence Agency may expend money on “objects of a confidential, extraordinary, 

or emergency nature” “without regard to the provisions of law or regulation relating to the expenditure of Government funds,” provided 

the intelligence and defense committees have been notified and given 30 days to review the proposed expenditure. 

217 U.S. Air Force Space and Missile Systems Center staff, follow-up discussion with Section 809 Panel, March 2018. 

218 “What the Continuing Resolution Means for Defense Spending in FY 2018,” Seamus Daniels and Todd Harrison, Center for Strategic 

and International Studies, September 27, 2017, accessed January 23, 2018, https://www.csis.org/analysis/what-continuing-resolutionmeans-defense-spending-fy-2018. 

219 U.S. Air Force Space and Missile Systems Center, presentation to Section 809 Panel, January 24, 2018. As an alternative explanation for 

the growth in new start anomaly requests, the increase between FY 2015 and FY 2018 may reflect longer durations of individual CR bills. 

The increase may also reflect what one budgeting expert called “DoD’s growing intolerance of CRs and willingness to ask for anomalies.” 

Naval Postgraduate School professor, emails with Section 809 Panel, February 2018. 
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acquisition officials report that the current process for requesting inclusion of anomalies in CRs is 

ineffective.220

Conclusions 

The prohibition on the initiation of new starts under a CR results in increased contract costs and 

inefficient acquisition outcomes. It also potentially prevents deployment of needed capabilities to 

warfighters in a timely manner. 

Well-intentioned reasons for the ban on new starts may exist. Impeding the defense acquisition system 

may create political incentives for Congress to enact regular appropriations, which might not exist 

otherwise. The current system, however, does not generate incentives for members of Congress as 

much as it negatively affects taxpayers and warfighters. 

At the very least, Congress must allow DoD to initiate the acquisition of critically-needed capabilities, 

regardless of whether Congress has negotiated a funding bill. Determination of which needs are critical 

should be based on the expertise of DoD acquisition professionals and approved by Congress. 

Implementation 

Legislative Branch 

 Consider the initiation of a DoD new start to be automatically approved provided that (a) a 

DoD regular appropriations bill has not been passed by both houses of Congress, (b) DoD has 

been temporarily funded by Congress, (c) the new start has not been marked negatively by any 

of the congressional defense committees in their committee reports, and (d) it is not funded 

above the lowest budget line item mark from among the four congressional defense 

committees.221 This change would primarily fall within the jurisdiction of the appropriations 

committees. 

Executive Branch 

 Track all four congressional defense committee marks to ensure that new starts are not initiated 

in programs or projects that have been marked with prejudice. If a new start request has been 

marked by any of the congressional defense committees, only execute funds to the level of the 

lowest committee’s mark. 

 

220 U.S. Air Force Space and Missile Systems Center, presentation to Section 809 Panel, January 24, 2018. As an alternative explanation for 

the growth in new start anomaly requests, the increase between FY 2015 and FY 2018 may reflect longer durations of individual CR bills. 

The increase may also reflect what one budgeting expert called “DoD’s growing intolerance of CRs and willingness to ask for anomalies.” 

Naval Postgraduate School professor, emails with Section 809 Panel, February 2018. 

221 The four congressional defense committees, when they approve a bill, release committee reports with long data tables detailing their 

recommended changes to the defense budget at the individual line-item level. To resolve potential difference between the House and 

Senate, these committee report data tables are consolidated into a conference report joint explanatory statement. Unlike the dollar 

figures referring to broad accounts in appropriations law, DoD is not directly bound by law to comply with these detailed budget line 

items. There is, however, an expectation that DoD will make every effort to abide by the recommendations in the appropriations 

committee’s conference report joint explanatory statements (which are built from the committee reports). The committee reports, 

therefore, serve as de facto sets of instructions from the legislature to the Executive Branch. 
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Note: There are no Implementation Details for this recommendation. 

Implications for Other Agencies 

 If greater flexibility were granted to DoD than to other Executive Branch agencies under CRs, it 

could dilute the incentive for members of Congress to enact regular appropriations. 

Recommendation 53: Permit the initiation of all production rate increases, 

provided Congress has appropriated sufficient funding. 

Problem 

The CR restrictions on production rate increases, like new start restrictions, are harmful to the 

acquisition system. They disrupt DoD’s ability to plan contracts strategically, raise costs due to vendors 

building risk into their pricing, and potentially prevent the deployment of needed capabilities to 

warfighters. 

Background 

CRs regularly restrict DoD’s ability to enter into procurement production rate increases as well as 

multiyear procurement contracts for property and services.222 Like new start restrictions, production 

rate increase restrictions have proven to be enough of a problem for defense acquisition that DoD has 

requested special approvals for them under CRs at the beginning of the year. 

At the end of FY 2017, DoD reportedly requested that approximately 40 production rate increases be 

permitted under CRs for the coming fiscal year.223 These requests were not approved in the subsequent 

CRs for FY 2018. 

Discussion 

Procurement production unit costs have increased substantially during extended periods of longduration CRs, a situation that Navy officials attribute to “a perception of risk associated with doing 

business with the government because contractors cannot efficiently plan.”224 Between FY 2012 and 

FY 2017, the Navy procured F/A-18 aircraft at an average cost of $81 million each, about $6 million 

higher than the most efficient rate. The Navy procured F-35 aircraft at an average cost of $187 million 

each, $21 million higher than the most efficient rate.225

The CRs in the first quarter of FY 2018 forced the Navy to delay induction of 11 ships. Due to hard 

physical constraints on shipyard capacity at any one time, these types of short-term induction delays 

cause disruption to deployment schedules years into the future.226

 

222 For example, see Pub. L. No. 115-56, Section 102(b). Under a regular appropriations act, DoD is permitted to enter into multiyear 

contracts for the procurement of property and services under 10 U.S.C. § 2306b and 10 U.S.C. § 2306c. 

223 Lynn Williams and Jennifer Roscoe, Congressional Research Service, “Defense Spending Under an Interim Continuing Resolution: In 

Brief,” December 26, 2017. 

224 Office of the Secretary of the Navy personnel, emails with Section 809 Panel, December 2017. 

225 Ibid. 

226 James Mattis, “Impacts of a Continuing Resolution Authority in Fiscal Year 2018” (letter to Senate Armed Services Committee), 

September 8, 2017. 
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In the first 3 months of FY 2018, the Army had planned eight production rate increases that faced an 

effect from CRs. These included handguns, antitank missiles, medium machine guns, and tactical 

parachute systems.227 In the first 6 months of FY 2018, the Navy had 12 production rate increases that 

would have to be deferred under CRs.228

Case Study:

Production Increase: Training Target Purchases 

In FY 2017, a small Navy program managing the procurement of training targets purchased 30 units under a low-rate 

initial production contract, with an option to buy 45 more the following year. The option expired towards the end of the 

second quarter of FY 2018. Program personnel believed this option expiration date would allow enough time for 

Congress to enact a regular appropriations bill permitting the increased production rate. 

The succession of CRs in FY 2018, however, ended up lasting through the bulk of the second quarter. Congress had 

appropriated short-term funding, and the appropriations committees had approved budget line items. Despite these 

measures, the program office had to renegotiate with the vendor to allow an extension to the option period because the 

program could not increase procurement quantities over the previous FY under a CR. 

This work-around would have been unnecessary had Congress permitted production rate increases under the earlier CRs. 

Because of these restrictions and the resulting need to renegotiate the option period, the vendor gained negotiating 

leverage over the government and production deliveries were delayed.229

Conclusions 

Like new start restrictions, production rate increase restrictions introduce unnecessary inefficiency into 

the defense acquisition system. Unpredictable deferrals raise costs, limit DoD’s ability to plan 

acquisitions strategically, and potentially impede delivery of critical capabilities to warfighters. 

Implementation 

Legislative Branch 

 Consider initiation of a DoD production rate increase to be automatically approved provided 

that (a) a Department of Defense regular appropriations bill has not been passed by both houses 

of Congress, (b) DoD has been temporarily funded by Congress, (c) the production rate increase 

has not been marked negatively by any of the congressional defense committees in their 

committee reports, and (d) it is not funded above the lowest budget line item mark from among 

the four congressional defense committees. This change would primarily fall within the 

jurisdiction of the appropriations committees. 

 

227 Ibid. 

228 Ibid. 

229 Navy acquisition personnel, discussions with Section 809 Panel, March 2018. Because of the small size of the program in question, the 

PM reported that a CR anomaly request “never made it out of the building.” There are many acquisition programs of comparable size in 

DoD’s budget. The rejection of this program’s anomaly request at the unit level (before even reaching the Department of the Navy level) 

suggests that a large number of programs may seek relief from production rate increase restrictions, but these requests may never be 

seen or considered by the DoD Comptroller, OMB, or the congressional defense committees. 
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Budget Volume 3 | Page 241 

Executive Branch 

 Track all four congressional defense committee marks to ensure that production rate increases 

are not initiated in programs or projects that have been marked with prejudice. If a production 

rate increase request has been marked by any of the congressional defense committees, only 

execute funds to the level of the lowest committee’s mark. 

Note: There are no Implementation Details for this recommendation.

Implications for Other Agencies 

 If greater flexibility were granted to DoD than to other Executive Branch agencies under CRs, it 

could dilute the incentive for members of Congress to enact regular appropriations. 

Recommendation 54: Permit the initiation of multiyear procurements under a 

CR. 

Problem 

The CR restrictions on multiyear procurements have harmful effects on the acquisition system. 

Background 

CRs regularly restrict DoD’s ability to enter into multiyear procurement contracts for property and 

services.230 Like new start restrictions, multiyear procurement restrictions have threatened to prevent 

efficient execution of critical defense acquisitions. 

Discussion 

In late 2016, two Army helicopter programs required a multiyear procurement contract to realize 

substantial savings.231 Due to a succession of CRs that ended up lasting until the third quarter of 

FY 2017, the Army was initially unable to enter into a multiyear procurement contract to realize these 

savings. 

More than 2 months into the fiscal year, Congress permitted the inclusion in a CR of two targeted 

exemptions to multiyear procurement restrictions for the two helicopter programs in question.232

By exempting the programs from CR restrictions, Congress successfully addressed two very specific 

problems with that year’s CR. Addressing these two problems, however, depended on these problems 

being publicly visible enough to rise to the level of congressional concern. 

 

230 For example, see Pub. L. No. 115-56 Section 102(b). Under a regular appropriations act, DoD is permitted to enter into multiyear 

contracts for the procurement of property and services under 10 U.S.C. § 2306b and 10 U.S.C. § 2306c. 

231 The Army’s multiyear procurement contract to procure remanufactured AH-64E Apache attack helicopters was reportedly projected 

to result in cost savings of approximately 10 percent over five years. See “Boeing, US Army make multibillion, multiyear AH-64E deal 

official,” Jen Judson, Defense News, March 22, 2017, accessed February 23, 2018, 

https://www.defensenews.com/land/2017/03/23/boeing-us-army-make-multibillion-multiyear-ah-64e-deal-official. 

232 Further Continuing and Security Assistance Appropriations Act, 2017, Pub. L. No. 114-254 (2016). The Section 156 modification states, 

“Notwithstanding sections 102 and 104 of this Act, amounts made available pursuant to section 101 may be used for multiyear 

procurement contracts, including advance procurement, for the AH-64E Attack Helicopter and the UH-60M Black Hawk Helicopter.” 
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Conclusions 

In best-case scenarios, multiyear procurement CR restrictions involve subjecting programs to the 

unpredictability and short-term timeframe of political processes in Congress. In worst-case scenarios, 

these restrictions introduce unnecessary inefficiency and cost increases into the defense acquisition 

system and prevent delivery of needed equipment to warfighters. To mitigate this problem, the 

initiation of multiyear procurements should be permitted by default if Congress fails to enact regular 

appropriations, taking into account the lowest budget line item mark from among the four 

congressional defense committees. 

Implementation 

Legislative Branch 

 Consider the initiation of a DoD multiyear procurement to be automatically approved provided 

that (a) a Department of Defense regular appropriations bill has not been passed by both houses 

of Congress, (b) DoD has been temporarily funded by Congress, (c) the multiyear procurement 

has not been marked negatively by any of the congressional defense committees in their 

committee reports, and (d) it is not funded above the lowest budget line item mark from among 

the four congressional defense committees. This change would primarily fall within the 

jurisdiction of the appropriations committees. 

Executive Branch 

 Track all four congressional defense committee marks to ensure that multiyear procurements 

are not initiated in programs or projects that have been marked with prejudice. If a new 

multiyear procurement request has been marked by any of the congressional defense 

committees, only execute funds to the level of the lowest committee’s mark. 

Note: There are no Implementation Details for this recommendation. 

Implications for Other Agencies 

 If greater flexibility were granted to DoD than to other Executive Branch agencies under CRs, it 

could dilute the incentive for members of Congress to enact regular appropriations. 

RECOMMENDATION 55 IS A STAND-ALONE RECOMMENDATION ABOUT 

THE PROMPT PAYMENT ACT 

Recommendation 55: Raise the Prompt Payment Act threshold. 

Problem 

The costs of complying with the current Prompt Payment Act threshold frequently exceed the payment 

owed to the vendors. In other words, the government devotes time, money, and administrative 

capacity to reimburse vendors for negligible dollar amounts. 
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Background 

The Prompt Payment Act (PPA) requires Federal agencies to pay interest on late payments to 

contractors and vendors for services and property. Under the PPA, the government is required to pay 

its bills to contractors no earlier than 7 days prior and no later than 30 days after receiving a proper 

invoice.233 To make these interest payments on time, DoD must devote money and manpower to 

processing, administration, and other work. 

The PPA’s purpose is to mitigate the harm caused to government contractors by late payments for 

services. The minimum payment threshold is set at $1.00 and has not been adjusted for inflation or 

interest rate fluctuations since the 1980s. 

Early History 

In 1981, GAO reported late payments could likely cost contractors at least $150 million per year and 

possibly as much as $375 million.234 The paper-based invoicing used at the time heavily contributed to 

delays in payments, which harmed all parties involved. Vendors suffered because they were forced to 

borrow from other operating funds to cover immediate costs. DoD and other agencies had to deal with 

the additional administrative burden of processing late paperwork. 

One major issue at the time was the lack of uniform standards for invoice payments to vendors and 

contractors. Small businesses, with little budget flexibility, suffered most, sometimes even being forced 

to suspend operations. 

Because no uniform procedures for paying invoices on time existed, agencies sometimes paid too early, 

which cost the government additional money. In the early 1980s, the GAO projected that paying these 

invoices on time would save the government $900 million per year.235 The Prompt Payment Act of 1982 

provided a remedy for these issues.236

Legislative Background 

PPA is codified under 31 U.S.C. Chapter 39.237 There have been several amendments to PPA, the last of 

which occurred in 1998.238 The $1.00 threshold was codified in 1988.239 Related legislation has been 

introduced from time to time in subsequent years.240 The codified section on interest payments reads in 

part as follows: 

 

233 Late Payment Interest Penalties, 5 CFR 1315.10. Also see Contacting Clauses, FAR 32.908 and Prompt Payment, FAR 52.232-25. 

234 GAO, Actions to Improve Timeliness of Bill Paying by the Federal Government Could Save Hundreds of Millions of Dollars, AFMD-82-1,

October 8, 1981, 6, accessed October 30, 2018. https://www.gao.gov/assets/140/135325.pdf. 

235 GAO, Financial Management: The Prompt Payment Act and DOD Problem Disbursements, GAO/AIMD-97-71, May 1997, 3, accessed 

October 30, 2018, https://www.gao.gov/assets/230/224116.pdf. 

236 Prompt Payment Act, Pub. L. No. 97-177, 96 Stat. 85 (1982). 

237 Prompt Payment, 31 U.S.C. §§ 3901–3907. 

238 Pub. L. No. 100-496 (Prompt Payment Act Amendments of 1988) modified several portions of the PPA and added a section on 

construction contracts. Pub. L. No. 105-362 (Federal Reports Elimination Act of 1998) eliminated the requirement that agencies submit 

annual interest payment reports to OMB. 

239 Codified under 31 U.S.C. § 3902(c)(1). Also see Prompt Payments Act Amendments of 1988, Pub. L. No. 100-496, 102 Stat. 2455 (1988). 

240 For examples in the 115th Congress, see S. 2983 (a bill to provide for prompt payments to small business contractors) or H.R. 5337 

(Accelerated Payments for Small Businesses Act of 2018), both of which would make it mandatory for agencies to pay invoices on small 

business contracts in 15 days instead of 30. 
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The interest shall be computed at the rate of interest established by the Secretary of the Treasury, and 

published in the Federal Register, for interest payments under section 7109(a)(1) and (b) of title 41, 

which is in effect at the time the agency accrues the obligation to pay a late payment interest penalty.241

OMB regulations implementing PPA set out detailed requirements for calculating interest due on late 

payments.242 Vendors that meet all other criteria for receiving interest penalties “shall be entitled to an 

additional penalty payment when the vendor is owed a late payment interest penalty by an agency of 

$1.00 or more.”243

In 2012, OMB issued a memorandum directing executive agencies to “assist in expediting contractor 

payments to small business subcontractors” by paying their prime contractors “as soon as practicable, 

with a goal of paying all prime contractors within 15 days of receiving proper documentation.”244 The 

policy affected only payments in exchange for goods and services, and explicitly exempted PPA’s 

provisions on late-payment interest penalties. The policy was rescinded in mid-2017.245

Payment Process 

Interest payments begin to accrue 30 days after the government receives a contractor invoice unless 

a contract includes other specifications. Interest due on a late payment cannot exceed the amount 

accumulated in 1 year. Interest payments are applicable to procurement contracts, vendor payments, 

and utilities.246

Interest payments are paid out of program funds related to the contract to which the penalty is being 

applied. It is possible, however, for DoD to use funds from the larger military department associated 

with the program to cover interest expenses.247 

Discussion 

The administrative workflow for PPA interest payments is shown in Figure 4-15 below. 

 

241 Interest Penalties, 31 U.S.C. § 3902(a). 

242 Late Payment Interest Penalties, 5 CFR 1315.10. Additional Penalties, 5 CFR 1315.11. 

243 Vendor Entitlements, 5 CFR 1315.11(a). 

244 OMB Memorandum 12-16, Providing Prompt Payment to Small Business Subcontractors, July 11, 2012, accessed June 22, 2018, 

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2012/m-12-16.pdf. 

245 OMB Memorandum 17-26, Reducing Burden for Federal Agencies by Rescinding and Modifying OMB Memoranda, June 15, 2017, 

accessed June 22, 2018, https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/memoranda/2017/M-17-26.pdf. 

246 DoD Financial Management Regulation, Volume 10, Chapter 7, Section 070201. 

247 Department of Defense and Emergency Supplemental Appropriations for Recovery from and Response to Terrorist Attacks on the 

United States Act, Pub. L. No. 107–117, § 8084, 115 Stat. 2266 (2002). The legislative change in this recommendation would make this 

provision a part of U.S. Code. 
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Administrative Process 

Figure 4-15. DoD Invoice Processing Workflow 

Contractors and DoD have standardized procedures for payment processing. When a contractor needs 

payment, an invoice is sent to the Defense Finance and Accounting Service (DFAS) through an online 

service called Invoicing, Receipt, Acceptance and Property Transfer (iRAPT).248

When DFAS receives an invoice from a contractor it is inputted into an entitlement system. As an 

example, one such entitlement system is the Mechanization of Contract Administration Service 

(MOCAS). MOCAS automatically determines the invoice due date in accordance with the contract in 

question.249

Should DFAS process a payment after its due date, MOCAS automatically generates a report which is 

sent to the Prompt Payment Interest Branch. Here DFAS personnel review each invoice case-by-case to 

determine if interest is due. Applicable interest rates for payments can be obtained from the 

Department of Treasury’s Financial Management Service Prompt Payment Help Line or from the 

organization’s website. Interest rates are updated biannually, at the end of June and December.250

Contracts with interest payments are entered into the Prompt Payment Database. This system then 

makes payments to contractors. Completed interest payment vouchers are available via Electronic 

Document Access (EDA). 

 

248 “iRAPT – Invoicing, Receipt, Acceptance and Property Transfer (formerly Wide Area Work Flow),” Defense Finance and Accounting 

Service, accessed June 22, 2018, https://www.dfas.mil/contractorsvendors/irapt.html. 

249 DoD Inspector General, Financial Management: Report on DoD Compliance with the Prompt Payment Act on Payments to Contractors 

(D-2006-076), April 19, 2006, 1, accessed October 30, 2018, https://media.defense.gov/2006/Apr/19/2001712515/-1/-1/1/06-076.pdf. 

250 “Prompt Pay Interest Rate History,” U.S. Department of the Treasury, Bureau of the Fiscal Service, accessed on October 30, 2018, 

https://www.fiscal.treasury.gov/fsservices/gov/pmt/promptPayment/rates.htm. 
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Depending on which entitlement system is being used, DFAS has automated processes to calculate 

interest in some cases. If the process is not automated, then each interest calculation can take 

approximately 10 minutes to process.251

Problems with Compliance 

PPA has created a regulatory headache for agencies over time. Several GAO and IG reports have 

confirmed issues with accurate reporting, including within DoD. A 2012 GAO report indicated 

$54 billion funds subject to PPA were not being considered or reported.252

Proliferation of accounting and resource management systems is part of the issue. At the time of the 

2012 report, DoD had 19 different entitlement systems associated with commercial payments subject to 

PPA. Nine of these Enterprise Resource Planning systems were run by components of DoD that are not 

part of DFAS. GAO found that these nine systems were not considering their funds in the context of 

PPA legislation.253 In FY 2011, DoD paid approximately $19 million in PPA penalties. By ignoring the 

commercial payments made by the nine non-DFAS systems identified by GAO, DoD underpaid 

vendors nearly $2 million in penalties.254 

After these findings, GAO recommended DoD and DFAS set up a more comprehensive system to 

identify all commercial payments subject to the PPA. Although DoD made changes in response to the 

GAO report, this episode illustrates the complexity of making payments from DoD to vendors. With 

this issue in mind, emphasis should be placed on eliminating non-value-added actions. 

Value Added Breakdown 

Congress passed PPA in 1982 at a time when invoice processing was paper based. This system was 

often backlogged and inefficient. Automation has increased payment rates with the adoption of 

systems such as iRAPT.255

Late payments of less than $1.00 are not subject to PPA. The interest rate has fluctuated over the last 

3 decades, yet this threshold has remained constant, with no regard to inflation or changes to the 

government’s invoice paying process. 

 

251 DFAS employee, discussions with Section 809 Panel staff, June-July 2018. 

252 GAO, DOD Financial Management: Improvements Needed in Prompt Payment Monitoring and Reporting, GAO-12-662R, June 26, 2012, 

3, accessed October 30, 2018, https://www.gao.gov/assets/600/591902.pdf. 

253 Ibid, 3–4. 

254 Ibid, 5. 

255 DFAS employee, discussions with Section 809 Panel staff, June-July 2018. 
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Figure 4-16. Volume of MOCAS Interest Payments to Businesses in FY 2017256

Of the 14,195 PPA transactions in FY 2017 within MOCAS, nearly 34 percent were for amounts less 

than $15. This lack of adjustment has led to an increase in penalties for small dollar amounts. By raising 

the penalty threshold to $15, these transactions would disappear. This change would only reduce 

payments to vendors by less than $30,000, or less than 1 percent of total interest payments made out of 

MOCAS in FY 2017.257

Macroeconomic Context 

In the decades since PPA enactment, the U.S. dollar has experienced cumulative inflation of about 

160 percent.258 For the PPA threshold amount to have the same purchasing power equivalent to its 

original $1.00, it would have to be set to about $2.60. In addition to dollar inflation over time, the 

opportunity costs of delayed payment have declined since PPA enactment. In the early 1980s, 

U.S. interest rates were at historic highs for the post-WWII era. In mid-1982 when the PPA was enacted, 

returns on short-term U.S. Treasury securities exceeded 13 percent. As of mid-2018, the equivalent rate 

was less than 2 percent, meaning that late payments cost companies much less than when the PPA 

threshold was first established.259

 

256 MOCAS data provided by DFAS. 

257 Ibid. 

258 Based on Urban Consumer Price Index (CPI-U) from May 1982 to May 2018, from Bureau of Labor Statistics, accessed July 5, 2018, 

https://www.bls.gov/data/inflation_calculator.htm. 

259 “Data Download Program: H.15 Selected Interest Rates,” Board of Governors of the Federal Reserve System, accessed July 5, 2018, 

https://www.federalreserve.gov/datadownload/Download.aspx?rel=H15&series=d7e27b7b09a3a7feae95b9c61781fcd8&filetype=csv&la

bel=include&layout=seriescolumn&from=05/01/1982&to=05/31/2018. Analysis based on monthly market yield on U.S. Treasury 

securities at 3-month constant maturity, quoted on investment basis. Rates of return are rounded from 13.08 percent in June 1982 and 

1.90 percent in May 2018. 
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Transaction Costs 

Table 4-5. Transaction Costs for DFAS and Industry (FY 2017 Estimated)260

Low-End Estimate Medium Estimate High-End Estimate 

DFAS employees working on PPA payments261 4 4 4 

Annual Salary262 $ 47,485 $ 60,000 $ 80,000 

Indirect Cost263 0% 50% 75% 

Total Annual Cost $ 189,940 $ 360,000 $ 560,000 

FY 2017 PPA Transactions264 14,195 14,195 14,195 

Total DFAS Cost Per Transaction (Estimated)265 $ 13.83 $ 25.36 $ 39.45 

Contractor Transaction Processing Expense

Annual Salary Accounts Receivable Analyst (Estimated)266 $ 60,000 $ 80,000 $ 80,000 

Hourly Rate (Estimated)267 $ 28.85 $ 38.46 $ 38.46 

Indirect Cost (Estimated)268 0% 50% 75% 

Adjusted Hourly Rate (Estimated)269 $ 28.85 $ 57.69 $ 67.31 

Time to Process (Hours)270 0.20 0.50 1.00 

Total Contractor Cost Per Transaction $ 5.77 $ 28.85 $ 67.31 

Combined DoD/Contractor Cost Per Transaction $ 19.60 $ 54.21 $ 106.76 

PPA costs both contractors and DoD time and money. DFAS employs four full-time staff whose sole job 

is to process MOCAS PPA-related payments. An industry estimate of employee salaries and related 

costs indicated each PPA transaction costs the government approximately $14 and costs industry 

approximately $6.271 In FY 2017, approximately 40 percent of PPA interest payments were for less than 

 

260 Data provided by DFAS and the Aerospace Industries Association. DFAS data only covers payments made through MOCAS. 

261 Based on emails with DFAS employees. Only includes those working on MOCAS PPA data on a full-time basis, as of mid-2018. 

262 Low cost estimates assume that DFAS salaries are GS-7 pay grades; higher cost estimates assume higher pay grades. 

263 This line item assumes overhead costs in DFAS including the costs of running IT systems and the partial salaries of additional 

employees who may periodically work on PPA issues. The low cost estimate assumes no money is spent on this. 

264 FY 2017 figures provided by DFAS employees. 

265 Based on total annual estimated cost to government divided by total number of reported transactions. 

266 Provided via consultation with industry analyst of PPA and other financial issues. 

267 Accountant Salary divided by work year of 2,080 hours. 

268 Estimate of industry’s overhead costs involved in processes transactions. Assumed to be zero for low-cost estimate. 

269 Hourly Rate adjusted for indirect cost. 

270 Based on estimates of number of minutes needed to process a payment, provided by industry expert. 

271 Cost estimates based on work performed by Aerospace Industries Association, with underlying assumptions verified by DFAS staff. 
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$20 in MOCAS alone.272 Representatives from industry and DoD have expressed agreement that smallvalue PPA payments are unnecessary.273

Conclusions 

PPA should be amended to increase its out-of-date payment threshold. Raising the threshold for late 

payments would save the government time and money without substantially harming contractors. 

In 1982 invoicing was slow and paper based. With advances in technology, there is much less reason 

that the government will be late paying its bills. The administrative process involved with PPA is a 

burden on DFAS and DoD. There is little value added to processing small payments for vendors 

because the transaction costs are high. With small changes to the U.S. Code, Congress can make these 

changes to the benefit of the government and the vendors on which it relies. 

Implementation 

Legislative Branch 

 Amend 31 U.S.C. § 3902(c)(1) to change the $1 threshold for late interest payments to $15. 

Executive Branch 

 Amend 5 CFR 1315.10 and 5 CFR 1315.11 in accordance with legislative changes to the late 

interest payment threshold. 

 Modify business processes for DFAS and DoD to accommodate the threshold change. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 4. 

Implications for Other Agencies 

 The increased dollar threshold would apply to all other agencies subject to 31 U.S.C. § 3902. 

 

272 Calculation based on analysis of 14,195 MOCAS transactions in FY 2017 (information provided by DFAS). 8,679 of these transactions 

(38.9%) were below $20. 

273 Representatives from Aerospace Industry Association and DFAS, interviews with Section 809 Panel, May 2018. 
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RECOMMENDATION 56 IS A STAND-ALONE RECOMMENDATION ABOUT 

EQUIPMENT AND RECAPITALIZATION 

Recommendation 56: Use authority in Section 1077 of the FY 2018 NDAA to 

establish a revolving fund for information technology modernization projects 

and explore the feasibility of using revolving funds for other money-saving 

investments. 

Problem 

The federal government’s apparent inability to internally finance projects that show promise for 

improving agency efficiency and effectiveness—such as recapitalizing facilities, upgrading IT systems, 

and improving the energy efficiency of existing systems—frustrates federal agencies and contractors 

alike. In some cases, private contractors offer to finance such projects on behalf of federal agencies, only 

to be told such action is impossible under the budgetary scoring rules. 

Background 

The most important factors in determining whether or not a lease, lease–purchase, or other capitalintensive federal facility or equipment recapitalization or upgrade project is funded should be the 

validity of the requirement, whether the project is executed properly and delivers quality goods and/or 

services, and whether the price is fair. Notwithstanding, a project’s budget score also can play a role in 

the government’s decision to move forward with a project. 

The manner in which a project is scored is governed by complex scorekeeping rules (also known as the 

scorekeeping guidelines) promulgated by OMB and Congressional Budget Office (CBO). The budget 

scorekeeping roles of OMB and CBO are an outgrowth of the modern era of concern about federal 

spending and deficits. The scorekeepers play a role analogous to an independent test and evaluation 

entity for weapons performance—enforcing a neutral set of rules to ensure a level playing field on 

which potential investments compete for funding. 

The ability of a government agency to engage in a long-term capital or real property project is 

governed by the OMB A-11 scorekeeping rules (adopted in 1991).274 These rules generally require that 

the entire amount of a long-term obligation be scored upfront in fiscal year 1, instead of spreading the 

obligation over each year of the project. 

Perhaps because these rules have at times been perceived as too rigid, exceptions to the rules have 

occasionally been made. In addition, multiple mechanisms have been developed that ensure certain 

types of projects receive favorable scoring treatment or are otherwise exempt from the requirement to 

have full budgetary authority up front. For example, the exception for operating leases provides that 

the lease payments due in each year are scored only in that year, and not upfront. Energy savings 

performance contracts (ESPCs) and enhanced use leases promise increased resources through energy 

savings and other efficiencies that pay for themselves over time. DoD relies on these existing 

 

274 OMB Circular No. A-11, Appendix B—Budgetary Treatment of Lease-Purchases and Leases of Capital Assets, accessed November 3, 

2018, https://obamawhitehouse.archives.gov/sites/default/files/omb/assets/a11_current_year/app_b.pdf. 
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authorities for efficient use of its real estate assets, so the first principle in this area should be to do no 

harm to this foundation when seeking even greater flexibility. 

Additional flexibility could assist in ensuring that DoD’s infrastructure needs are met and that 

additional exceptions could or should be drawn. CBO and OMB have historically been opposed to such 

mechanisms, although over time OMB has granted exceptions ad hoc. Some have suggested that CBO 

and OMB opposition has been driven in part by a reaction to the 2001 Air Force tanker lease proposal, 

which appears to have been attractive to the Air Force because the lease costs would not have to be 

paid until after the end of the Future Years Defense Program. 

As such, any proposal to change the current scorekeeping rules should be tailored to meet the 

objectives behind the scorekeeping rules: ensuring that the budget-making process is as fair and 

transparent as possible. 

Discussion

Revolving Funds for Money-Saving Investments 

Federal law and regulations permit the use of private-sector capital to augment federal funds under 

certain circumstances. Among these mechanisms are Energy Savings Performance Contracts (ESPCs) 

and Utility Energy Service Contracts (UESCs). These arrangements permit DoD to third-party 

financing as private contractors invest in energy-saving improvements on behalf of the federal 

government and are paid out of the resulting savings. Under OMB memoranda M-98-13 and M-12-21, 

OMB does not treat these facilities investments as capital improvements (which would require scoring 

the net present value of the government’s obligations of the contract up front), but rather, scores 

payments to contractors on an annual basis as they are made. 

In principle, the ESPC/UESC safe harbor approach could be applied to other money-saving investments, 

such as aircraft re-engining programs that promise a similar stream of savings in reduced fuel and 

maintenance costs. By mandating a minimum level of return on investment or payback period, and 

requiring that contractors be paid out of the savings, the government could ensure these programs 

would pay for themselves over time, rather than simply push off investment costs onto future 

taxpayers. 

CBO and OMB have historically been opposed to additional mechanisms that would allow annual 

scoring of private financing mechanisms. The use of public, rather than private-sector, financing could 

be one way of avoiding this political problem. One potentially viable method of alternative public 

financing could be increased use of revolving funds. 

In particular, the federal government could establish revolving funds with the express purpose of 

investing in money-saving improvements. Reimbursement of the revolving funds would be tied to 

money saved as a result of increased efficiencies. After an initial investment, the revolving funds 

should, in theory, pay for themselves. Because the financing mechanism would be internal to the 

government, this approach should not be subject to the OMB and CBO scoring problems hindering 

private-sector financing proposals. 
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Tying the reimbursement of the funds to any savings achieved would create several complexities. 

Agencies would be required to estimate future savings, which can be difficult and is subject to a 

number of assumptions. Actual savings would be difficult to determine because of external factors, 

such as increased operational tempo and changes in maintenance standards or schedules. Savings 

would appear in multiple accounts of different DoD organizations, requiring some kind of mechanism 

to ensure that entities realizing the savings would reimburse the entity paying the contractor bills. 

The Information Technology Systems Modernization Funds authorized by Section 1077 of the FY 2018 

NDAA is an attempt to address these issues, authorizing federal agencies to establish revolving funds 

for IT modernization projects. DoD elected not to take advantage of Section 1077 authority. In a 

memorandum to Congress, the DoD Chief Information Officer (CIO) stated, “The Department 

appreciates the subcommittee’s advocacy of Defense IT systems, and the authority Modernizing 

Government Technology (MGT) Act provides. However, we believe our existing Working Capital 

Fund (WCF) structure, policies, and processes provide the type of flexibilities and incentives 

envisioned by the MGT Act.”275 DoD should still exercise this opportunity and put in place a pilot 

program for IT investments as authorized in the FY 2018 NDAA. The pilot’s success would help 

determine whether a similar process could be applied toward other investments for which savings 

would be used to reimburse the fund and allow contractors to be paid on an annual basis. Re-engining 

aircraft is one area where such a model might be applied. 

Revolving Funds Not Expressly Tied To Savings 

The complexities associated with estimating future savings, and then accounting for those savings 

when they occur, could potentially be avoided by developing a method of public financing whereby 

repayments are tied to annual appropriations. This is the method endorsed by OMB and the current 

administration in the Analytical Perspectives volume of the FY 2019 budget, which proposes a Federal 

Capital Revolving Fund (FCRF) for investments in nondefense capital infrastructure. As OMB 

explained, “balances in the FCRF would be available for transfer to purchasing agencies to fund largedollar capital acquisitions to the extent projects are designated in advance of appropriations Acts and 

the agency receives a discretionary appropriation for the first of a maximum of 15 required annual 

repayments.”276 Agencies would borrow from the FCRF to cover the full cost of acquiring a capital asset 

and then repay the FCRF over time using appropriated funds. Because “future discretionary 

appropriations will have to be used to repay the FCRF” rather than all from the agencies’ discretionary 

budgets in the first year, OMB believes that this structure will “provide an incentive for agencies, OMB, 

and the Congress to select projects with the highest mission criticality and return.”277

 

275 Chief Information Officer Memorandum to U.S House of Representatives, Committee on Oversight and Government Reform, 

Subcommittee on Information Technology, dated May 21, 2018. 

276 OMB, An American Budget: Analytical Perspectives, Fiscal Year 2019, February 2018, 119, accessed November 4, 2018, 

https://www.whitehouse.gov/wp-content/uploads/2018/02/spec-fy2019.pdf. The principle in the fund would be provided by Congress 

through direct spending which would be subject to the PayGo requirements that any increase in direct spending be offset by reductions 

in other direct spending or an increase in revenue. This paper assumes that Congress will find such a fund a high enough priority that it 

will provide the requisite direct spending. The subject of this paper is the scoring by OMB of long-term projects whether reliant upon a 

federal capital revolving fund or otherwise. 

277 OMB, An American Budget: Analytical Perspectives, Fiscal Year 2019, February 2018, 120, accessed November 4, 2018, 

https://www.whitehouse.gov/wp-content/uploads/2018/02/spec-fy2019.pdf. 
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If this approach is successfully implemented for federal civilian agencies, it may be useful for DoD as 

well. DoD should explore use of revolving funds for which reimbursement is tied to appropriations 

rather than savings. 

Current and Past Program-Specific Interpretations to the Scoring Rules 

DoD currently uses several mechanisms that allow supplementing federal funds with private-sector 

capital under specific circumstances, in addition to ESPCs and UESCs. Among those mechanisms are 

enhanced-use leasing, public–private partnerships (P3s), capital leases, and performance-based service 

contracts (e.g., for aircraft engine maintenance). 

At times, OMB has interpreted the scoring rules as mandating differing treatment for these types of 

public–private endeavors. The deal structure determines whether a project must be scored upfront. For 

example, in 1997, OMB Director Franklin D. Raines issued guidelines (the Raines Memo) that provided 

extensive guidance on how different types of Military Family Housing Privatization Initiative (MHPI) 

transactions would be scored. Among other things, the Raines Memo gave DoD authority to convey 

property in exchange for housing or an equity investment in a limited liability company. Under these 

circumstances, there would be no scoring impact if there was no cash income or expenditure. 

According to an Army history of the MHPI program, it was this clear scoring guidance that enabled the 

privatization program to proceed.278 

OMB has at times interpreted its scoring rules to exempt certain types of long-term projects, including 

those involving private capital, from being fully scored upfront. Commissioning a study of these past 

interpretations would allow better insight into why OMB scores certain types of projects differently 

than others. Understanding the factors that led to these scoring outcomes would provide additional 

predictability to both DoD and the private sector when considering pursuing such projects. The lessons 

learned could be used to identify candidates for future projects. 

A Study of Mature Statutory and Regulatory Regimes from Other Jurisdictions 

A form of financing public infrastructure that has gained traction in recent years in state and local 

jurisdictions, as well as internationally, is the P3. Jurisdictions that have recognized the benefits of P3s 

have adopted legislation and regulation to authorize and then guide their P3 programs. The federal 

government is outpaced by states such as Virginia and countries such as Canada when it comes to P3 

program use. Many developing countries are in the process of putting in place such legislation. 

Currently, no comprehensive statutory regime exists that governs circumstances under which DoD 

may make use of a P3. P3s are not appropriate for all situations, but when they are, they could be an 

additional tool to address DoD’s infrastructure requirements. A study of mature P3-authorizing 

statutes and regulations from other jurisdictions could assist in determining whether the P3 model 

could be further implemented at the federal level and include analysis of how P3 projects would be 

scored by OMB. 

 

278 Matthew C. Godfrey et al., Privatizing Military Family Housing: A History of the U.S. Army’s Residential Communities Initiative, 1995–

2010 (Washington, DC: GPO, 2012), 41, accessed November 4, 2018, http://www.rci.army.mil/programinformation/docs/RCI_history.pdf. 
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Conclusions 

DoD is unlikely to obtain approval for private financing of public investment projects under current 

conditions because such financing could be seen as a maneuver to get around the budget rules and 

require future generations to pay for today’s investments. Internal investments in money-saving 

efficiencies (such as upgraded IT systems or more fuel-efficient engines) may pay for themselves out of 

future operation and maintenance funds savings. In these cases, there is a public financing alternative 

that may be acceptable: the use of a revolving fund that provides financing for an initial set of 

investments. If the savings from the initial investments can be tracked and used to reimburse the 

revolving funds, additional money-saving investments could follow. 

DoD could conduct studies to assess whether other approaches to financing public projects could be 

viable. For example, the recently proposed FCRF is intended to be a revolving fund that is reimbursed 

out of annual appropriations, instead of from savings. Although the FCRF is intended to fund 

investments in civilian infrastructure, DoD could study whether such a model would work for defense 

infrastructure and could explore the characteristics that led OMB to interpret its budget scoring rules in 

favorable ways (i.e., from lower upfront scores to the continuation of individual projects or programs, 

including projects and programs that employ private sector financing). Better predictability of how 

projects and programs will be scored will encourage initiation of such projects or programs, or a 

decision not to begin at all. Models of mixed public–private financing, such as the P3s, could be studied 

to determine whether such a model would be as feasible at the federal level as they are at state and 

local levels as well as internationally. 

The Secretary of Defense should issue a memorandum requiring DoD to use the authority in 

Section 1077 of the FY 2018 NDAA to establish a revolving fund for IT modernization projects. This 

revolving fund should serve as a pilot program to prove the feasibility of using the revolving fund 

mechanism to finance continuous, money-saving upgrades to DoD systems and facilities. To ensure the 

success of the pilot program, DoD should establish specific guidance for estimating future savings from 

IT investments financed through the revolving fund, tracking actual savings and identifying the 

accounts in which they accrue, and ensuring the transfer of savings to the extent needed to reimburse 

the revolving fund for initial investments. 

If DoD is able to navigate these hurdles and successfully implement the IT revolving fund on an 

ongoing basis, it should seek additional authority to use revolving funds for other money-saving 

investments, such as aircraft re-engining programs. 

 DoD should commission a feasibility study for using the revolving fund for capital projects, to 

be reimbursed annually out of appropriations, similar to the FCRF. 

 DoD should analyze the characteristics of projects and programs that OMB has employed when 

accepting that such projects and programs do not require full, upfront scoring, whether the 

projects are privately or publicly financed. The goal of the study would be to make transparent 

the additional, and currently unstated, factors that OMB will consider. 

 DoD should commission a study of mature P3 authorizing statutes and regulations from which 

to develop and adopt federal level P3 statutes and regulations for DoD to promote 

infrastructure projects in partnership with the private sector. 
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Implementation 

Legislative Branch 

 Authorize $100 million to be appropriated to the Secretary of Defense for a revolving fund 

established under Section 1077 of the FY 2018 NDAA (Pub. L. No. 115–91; 40 U.S.C. § 1130 note) 

to fund an IT systems modernization pilot. 

 Appropriate $100 million for a revolving fund established under Section 1077 of the FY 2018 

NDAA (Pub. L. No. 115–91; 40 U.S.C. § 1130 note) to fund an IT systems modernization pilot. 

 Authorize the transfer of savings back to the revolving fund, to the extent needed to reimburse 

the revolving fund for initial investments in money-saving IT projects. These transfers would be 

subject to the appropriations process under the same terms and conditions laid out in 

section 1077. 

Executive Branch 

 Issue a decision memorandum directing establishment of a pilot Information Technology 

Systems Modernization Fund pursuant to section 1077 of the FY 2018 NDAA. 

 Direct the Under Secretary of Defense(Comptroller) (USD(C)), in consultation with the CIO, to 

provide guidance for estimating future savings from IT investments financed through the 

revolving fund; tracking actual savings and identifying the accounts in which they accrue; and 

ensure the transfer of savings to the extent needed to reimburse the revolving fund for initial 

investments. 

 Request legislative authority—on completion of one successful round of investments, up to and 

including reimbursement of the revolving fund for initial investments—to establish additional 

revolving funds for other money-saving investments, such as aircraft re-engining programs. 

 Commission studies of the following: 

 The advantages and disadvantages of a revolving fund for capital projects, to be reimbursed 

annually out of appropriations, similar to the FCRF. 

 The factors OMB uses when agreeing to exceptions to the current budget scoring rules, 

including for specific projects and programs. 

 Mature P3 authorizing statutes and regulations from which to develop and adopt federal P3 

statutes and regulations for DoD to promote infrastructure projects in partnership with the 

private sector and to study the scoring of such projects by OMB. 

 Other executive branch changes to analyze mechanisms to improve industrial capitalization. 

Recommended studies are included in the Section 809 Panel’s Volume 3, Section 2. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 4. 
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Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

RECOMMENDATIONS 57 AND 58 SHARE THE COMMON THEME: 

EXTENDED CANCELLATION OF FUNDS 

Industry groups and government officials have identified a need to extend the expiration duration of 

appropriated funds before cancellation from 5 years to 10 years. Two problems drive the need to 

extend the deadline for cancellation of funds: (a) funding periods are not currently aligned with today’s 

acquisition and delivery of increasingly complex weapon systems, and (b) there is a backlog of overaged contracts to be audited. Both of these problems have implications for putting current-year funds 

at risk because the government is still liable for paying contracts (previous year’s obligations), whether 

or not the funds have expired. Having to use current-year funds to pay contracts with cancelled funds 

contradicts the original intent of those appropriations by Congress. It also increases workload and cost 

for both industry and government agencies by placing focus on cancelling funds versus contract closeout. 

RECOMMENDATIONS 

Recommendation 57: Modify fiscal law to extend the duration of when funds 

cancel from 5 years to 8 years in expired status to align program acquisitions 

with funding periods and prevent putting current funds at risk and to support 

meeting appropriation intent. 

Problem 

Since the early 1990s, when Congress enacted the 5-year time limit on expired funds, DoD weapon 

systems and the methods used to contract for them have become more complex. By law, DoD has set 

periods within which it is required to obligate and disburse appropriated funds, referred to here as 

fund periods (obligation period based on the type of appropriation/expiration period of 

5 years/cancelation). Updating the time of expired funds from 5 years to 8 years would align the fund 

periods with how programs are contracted, executed, and closed out. 

Background 

The current 5-year term for expired funds deadline (31 U.S.C. § 1552) specifies, “On September 30th of 

the 5th fiscal year after the period of availability for obligation of a fixed appropriation account ends, 

the account shall be closed and any remaining balance (whether obligated or unobligated) in the 

account shall be cancelled and thereafter shall not be available for obligation or expenditure for any 

purpose.”279 The deadline was originally codified in the FY 1991 NDAA (Pub. L. No. 10–510) as part of 

a broad reorganization of certain U.S. fiscal law provisions.280 In the same NDAA, Congress provided 

that current appropriation accounts could be used to pay for obligations chargeable from closed 

 

279 Procedure for appropriation accounts available for definite periods, 31 U.S.C. § 1552. 

280 See Section 1405 of FY 1991 NDAA, Pub. L. No. 101-510 (1990). 
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appropriation accounts with a stipulation that this use “may not exceed an amount equal to 1 percent 

of the total appropriations for that account.”281 

Prior to 1990, DoD obligations made but not liquidated were placed into a merged (M) account at the 

Department of Treasury. There was a 2-year period during which funds retained their fiscal year 

identity after their availability for new obligations expired. Beyond this 2-year span, unobligated funds 

entered merged surplus accounts and already obligated funds entered M accounts.282 Agencies were then 

able to disburse money from these accounts irrespective of fiscal year, provided they were used for the 

same general purpose for which Congress had originally appropriated the funding. DoD was able to 

access these appropriated funds without having to obtain authorizing legislation, appropriations 

legislation, or even reprogramming approval from Congress. This ability provided the defense 

acquisition system with a high degree of fiscal flexibility. 

Congress enacted the 5-year time limit on expired funds in 1990 as a reaction to GAO reports that DoD 

spent large amounts of money using funds from the M accounts. One particular example cited was the 

Air Force contract for more than a billion dollars in upgrades to the B-1 bomber using merged account 

funds from the Treasury. The B-1 bomber was a high-interest item to members of Congress and the Air 

Force’s use of the merged accounts to contract for upgrades was viewed as a circumvention of 

congressional oversight and prerogative. GAO noted that, as of 1990, the Army’s Operation and 

Maintenance merged surplus account still contained spending authority dating back as far as 1956.283

This situation resulted in the 1990 reductions in flexibility, but the expired funds deadline has been 

unchanged since 1990, and the basis for establishing a 5-year expiration is unclear.

Discussion 

As a result of the FY 1991 NDAA (Pub. L. No. 101–510), when DoD exceeds the expired funds period, 

the appropriated funds cancel and are no longer available for payment. This legal time limit on 

payments saves no money for taxpayers or DoD as the government remains responsible for paying 

contractors for their work despite cancelation of appropriated funds. Instead DoD pays contractors 

using appropriations that have not yet cancelled (current appropriations), harming existing programs 

and DoD strategic interests, as well as undermining the original intent of the appropriators. 

Figure 4-17 reflects that $2–3 billion was spent of current-year appropriations in FY 2016 and FY 2017 

on cancelled appropriation accounts. Defense Contract Management Agency (DCMA) also projects 

cancelling-year actions potentially reaching $8.74 billion of current funds being at risk in the near 

future. DCMA will work to reduce this projection prior to FY 2020. 

 

281 Availability of appropriation accounts to pay obligations, 31 U.S.C. § 1553(b)(2). 

282 An Act to revise, codify, and enact without substantive change certain general and permanent laws, related to money and finance, as 

title 31, United States Code, “Money and Finance,” Pub. L. No. 97-258 (1982). 

283 GAO, The Government’s Use of “M” and Merged Surplus Accounts, GAO/T-AFMD-90-26, August 2, 1990, accessed November 1, 2018, 

https://www.gao.gov/assets/110/103446.pdf. 
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Figure 4-17. DCMA Projected Cancelling Year Funds at Risk ($B)284

Paying for obligations chargeable to cancelled appropriation accounts creates additional workload and 

cost for DoD and contractors. A 2018 paper by defense industry representatives and DoD officials listed 

several cost estimates associated with current rules, including the following:285

 $56 million per year in administrative activity by DoD and its contractors 

 $1.2 million in administrative costs to obtain and pay for DoD contractor invoices with 

cancelled funds 

When the 5-year expiration period was established, neither Congress nor DoD recognized how difficult 

it would be to close out contracts within the required statutory expiration period of 5 years. Figure 4-18 

(also included as Attachment 4-1) depicts these complexities with varying examples of how fund 

periods (obligation/expiration/ cancelled) are associated with acquisition and delivery of weapon 

systems. The graphic portrays examples with different appropriations and the timelines associated 

with closing out flexibly priced contracts involving industry, Defense Contract Audit Agency (DCAA), 

and DCMA. The subsequent examples describe the complexities and how difficult it is to close out 

contracts within the statutory fund periods (Obligation/Expiration/Cancelled). 

 

284 Data points gathered from DCMA response to the RMD700A2 from the PBR19-23 cycle, email to Section 809 Panel, July 2, 2018. 

285 Statistics reported by DCMA, DFAS, and AIA in reports provided to Section 809 Panel, April 2018. 
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Figure 4-18. Contract Closeout Complexities to Stay Within Statutory Fund Periods 

Note: To see a larger-scale version of this figure, see Attachment 4-1 at the end of Section 4. 

Example 1 

Based on contract closeout time standards provided by the FAR paying out a contract should take no 

longer than 3 years.286 Example 1 is a traditional procurement, with no schedule slips or continuing 

resolutions. It reflects that contract closeout could be accomplished prior to funds being cancelled. 

Example 2 

Example 2 reflects incorporation of Section 802 of the FY 2018 NDAA, which decreased the statutory 

time limit for DCAA to complete incurred cost audits, but offered more time for DCMA. Although the 

FAR shows 6 months for DCMA to perform closeout activities, on average it takes approximately 

12 months for DCMA to negotiate final closeout rates with industry and then contractors have another 

120 days to submit their final invoice, as well as an additional 1 to 2 months for invoice reconciliation. 

After reconciliation, DFAS has 30 days to process the invoice. Implementation of the FY 2018 provision 

gives DCMA time needed to conduct contract closeout activities. 

Example 3 

Example 3 depicts industry perception of how long it takes to close out a contract—approximately 

78 months. The 78-month period is driven by the time it takes prime contractors to receive final 

invoices from subcontractors. The depiction doubled the time recommended by the FAR. The timeline 

is also affected by variation of vendors’ calendar accounting cycles. Vendors cannot submit their 

incurred-cost proposal to DCMA until after the accounting cycle ends and all costs have been 

 

286 Closeout by the Office Administering the Contract, FAR 4.804-1(a)(1-4). 
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identified. This sequential process needs concurrent improvements. Industry experts believe 

eliminating or modifying the expired period time limits to a duration commensurate with the 

complexity of the acquisition process would generate substantial cost savings for DoD without creating 

risk for U.S. Taxpayer.287 

Not only does it take longer to close out a contract than the FAR recommends, but also the majority of 

cancelling-year risk exposure is related to currently active contracts (as opposed to those contracts in 

closeout). A DFAS root cause data analytics initiative noted that 66 percent and 68 percent of cancelling 

funds in FY 2017 and FY 2018 respectively are against active contracts. Table 4-6 provides breaks out of 

cancelled and cancelling funds by category. 

Table 4-6. DFAS Data Analytics Root Cause Analysis288

FY 2018 Cancelled Dollars—MOCAS DCMA and Non-DCMA Administered (July 2018)

ACRNS % of ACRN Contracts $Billion % of Dollars 

Active Contracts 6710 34% 2150 1.078 66% 

Pending Closeout 12233 61% 5299 0.434 27% 

Litigation 947 5% 524 0.117 7% 

Pending Adjustment 35 0% 21 .004 0% 

Total 19925 1.634 

FY 2018 Cancelled Dollars—MOCAS DCMA and Non-DCMA Administered (July 2018)

ACRNS % of ACRN Contracts $Billion % of Dollars 

Active Contracts 9460 34% 2150 2.385 68% 

Pending Closeout 17462 62% 5299 0.900 26% 

Litigation 1221 4% 524 0.199 6% 

Pending Adjustment 20 0% 21 0.004 0% 

Total 28163 3.488 

Ongoing DFAS analysis with the Military Services continues to illuminate the relationships between 

cancelling-year risk exposure and contract type, incentives, and fiscal policy (e.g., effect of full funding 

and antecedent liabilities). 

 

287 AIA, meeting with Section 809 Panel, July 30, 2018. 

288 DFAS representatives, email to Section 809 Panel, July 26, 2018. 
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Example 4 

Example 4 depicts a long-duration contract for which delivery of an end item occurs at the end of the 

expiration period, thus contract closeout cannot begin until the funds have already cancelled. DoD 

requires longer delivery schedules when procuring technically complex systems, such as the satellite in 

this example. This contract type potentially places current funds at risk. 

Examples 5 and 6 

Many RDT&E funded efforts are at risk of having cancelling-year funds problems. As shown in 

Examples 5 and 6, if an RDT&E contract is longer than 48 months, it is likely that a portion of the initial 

year’s funding for that contract will cancel prior to final payment. This situation happens because many 

RDT&E funded fixed-price contracts have progress payments limited to 80 percent of total cost, and the 

final 20 percent is not paid until contract closeout. DFAS default payment method is to use 80 percent 

of each year’s funding and hold the other 20 percent for the final payment. Although RDT&E efforts 

are funded incrementally, up to 20 percent of the initial year’s funding of an RDT&E effort may not be 

paid until the final closeout. Program contracts awarded prior to December 2017 could make special 

payment instructions (such as paying oldest-year funds first) in their contracts to mitigate the risk of 

having cancelling funds. Allowance for these special payment instructions was removed from the 

DFARS, Procedures Guidance and Information, so DoD can no longer use special instructions as a 

payment methodology when the line item is multifunded. Eliminating this option for dealing with 

cancelling funds leaves more funds at risk of cancelling. Because of the change, those contracts with 

special payment instructions now must be manually processed and reconciled, which increases 

workload at DFAS to process the special payments. 

Examples 4 through 6 could place current funds at risk due to technical complexities, and DoD and 

industry spend many hours working to lower the risk, whether the contract is in active status or 

closing. Similar to the DFAS Data Analytics, the Space and Missile Systems Center (SMC) at 

Los Angeles Air Force Base analyzed upward obligation adjustments (UOAs) processed during a 

5-year period to pay cancelled-year bills. For UOAs exceeding $10,000, SMC examined the specific 

cause for delayed billing and payment. SMC found that 97 percent of $116.8 million cancelled-year bills 

were associated with programmatic issues (e.g., hardware integration issues) on active contracts as 

opposed to contracts pending closeout by DCMA. SMC found that $102 million of the $116 million in 

cancelled-year invoices analyzed could have been paid out from the original appropriation if the 

period of availability was extended another 2 years. Figure 4-19 illustrates a graphical depiction of 

SMC’s breakout of cancelled year bills by reason.289

 

289 SMC, email to Section 809 Panel, July 24, 2018. 
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Figure 4-19. SMC Cancelled Year Bills Analysis (more than $10K) By Reason 

Examples 6 and 7 

Examples 6 and 7 in Figure 4-18 are a Navy shipbuilding and conversion account, which has a 5-year 

obligation period. In accordance with the FMR, the Navy can add an additional 5 years to the 

obligation work limit date with approval from the Department of the Treasury.290 Having a longer 

obligation period allows Navy shipbuilding to close out contracts prior to funds expiration and not 

place current funds at risk. 

Conclusions 

Industry groups and government officials have advocated for a permanent change to U.S. fiscal law 

extending the funds cancellation deadline from 5 to 10 years.291 A permanent change to 8 years would 

better align the funding periods with how complex weapon systems are administered. This change 

would provide contract administration organizations that deal with contract closeouts, such as DCMA 

and DFAS, with the time required to close out existing contracts without accessing current-year funds 

and provide time needed to ensure the costs proposed are allowable, allocable, and reasonable. It 

could, in some cases, reduce the wait time for industry to receive payment. 

Extending the expired funds period would in no way change the intended use of expired funds. The 

expired funds cannot be used for new obligations. Congress should extend the expiration period to 

8 years, allowing complex program acquisitions ample time to close out contracts without placing 

current funds at risk. This practice would arguably serve the interests of Congress, by aligning 

disbursements more closely with the original intent of appropriations laws. It also would reduce the 

burden caused by addressing cancelling-year efforts and refocus efforts on actually closing out 

contracts. 

 

290 Shipbuilding and Conversion (SCN), Navy Appropriation, DoD FMR, Volume 3, Chapter 10, Section 100203. 

291 Representatives from defense agencies and defense contractors, discussions with Section 809 Panel, April and May 2018. 
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Implementation 

Legislative Branch 

 Amend 31 U.S.C. § 1552 to extend time available for expired funds from 5 to 8 years. 

Executive Branch 

 Amend appropriate portions of the DoD Financial Management Regulation, Volume 3, to reflect 

the change from 5 years to 8 years. 

 Chapter 10, Accounting Requirements for Expired and Closed Accounts, Sections 1002.C, 

100302.A, 100303.A, 100304.D.1-2, 100305.B.1-2, 100312.B.1, 100314.A.1, 100314.B.3.e. 

 Chapter 11, Unmatched Disbursements, Negative Unliquidated Obligations, and In-Transit 

Disbursements, Section 1102.F. 

 Chapter 13, Receipt and Distribution of Budgetary Resources Departmental-Level, 

Section 130202.A.2.b, 130208.B. 

 Chapter 15, Receipt and Distribution of Budgetary Resources – Execution Level, 

Section 150305.A-B, 150306.A & C. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 4. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

Recommendation 58: Address the issue of over-age contracts through 

(a) establishing an end-to-end, integrated, streamlined process, (b) codifying 

DCMA’s Quick Close Out class deviation in the DFARS, and (c) extending DCMA’s 

Low Risk Quick Close Out initiative by 2 years. 

Problem 

If Recommendation 57 is adopted, and the 5-year cancellation deadline is lengthened to 8 years, it may, 

in the short term, result in reduced pressure on the contract administration organizations that deal with 

contract closeouts. DCMA currently has a large backlog of approximately 65,000 over-aged contracts 

and this issue needs to be resolved to allow agencies to reach a workload steady state of closing out 

contracts. Resource constraints and processes that limit the ability to close out contracts appear to cause 

this backlog. The current DCMA backlog represents only a portion of the contracts administered by 

DoD and the entire scope of over-aged contracts needs to be identified. A cross-organization mitigation 

strategy with streamlined process improvements would preclude this situation from reoccurring and 

placing current funds at risk of use for cancelled bills. 
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Background 

The primary focus of the acquisition system is the selection and administration of contracts. Work on a 

contract can go on long after the delivery of the last product or the performance of the last service with 

contract closeout the final step in the contract lifecycle. 

Contract closeout is a complex set of processes and subprocesses that includes the contractor and 

government working together to confirm all deliveries or performance services have been properly 

completed, settling up the final contract indirect costs rates, reconciling the various type and year of 

funds used on the contract, dispositioning residual inventory or government property, disposing of 

any classified information, addressing any patents filed by the contractor related to work performed 

under the contract, addressing any open warranty matters, settling any partial terminations of the work 

to be performed, resolution of any contract disputes or other legal matters, and more. 

Closeout can be a relatively simple process in firm-fixed-price contracts but can be enormously 

complex for flexibly priced (fixed-price-incentive and cost-reimbursement) contracts. Among the most 

time-consuming of these closeout tasks is the settling of the contractor’s final indirect costs and the 

settlement of the indirect costs are found to be the root cause of the overaged contract backlog. 

A major component of any flexibly priced contract is the cost associated with general and 

administrative expenses, labor rates, receiving and inspection costs and other essential, but indirect 

costs. At the time a contract is priced, negotiated estimates of indirect rates are used to establish billing 

rates. At the end of each contractor fiscal year in which the contract was performed the contractor must 

prepare a final indirect cost overhead rate proposal, including any final indirect costs applicable to any 

corporate headquarters. The final indirect-costs-rate proposal for each year is submitted to DCAA for 

audit and DCMA for final negotiation of all allowable and allocable indirect costs. 

The process described above for the prime contractor’s direct and indirect costs is repeated for each 

flexibly priced subcontract the prime may have awarded in support of the prime contract. The prime 

contractor cannot submit its final indirect-cost proposal to the government for audit and negotiation 

until all its flexibly priced subcontracts have been settled and the final costs incorporated into the 

prime’s final cost proposals for submission to the government. 

This lengthy contract closeout process starts when the contractor prepares a final indirect-cost proposal 

including all direct costs (including final subcontract costs) and the negotiated final overhead rates for 

each year of performance. The final indirect-cost proposal is submitted to DCAA for audit. DCAA 

provides audit and financial advisory services to DoD and other federal entities responsible for 

acquisition and contract administration. When DCAA completes the audit, then DCMA conducts final 

negotiations. Once complete, any excess funds are deobligated or any shortage of funds is addressed by 

working through DFAS. DCMA works directly with defense suppliers to help ensure DoD, federal, and 

allied government supplies and services are delivered on time, at projected cost, and with all 

performance requirements met. 

“DCMA professionals serve as ‘information brokers’ and in-plant representatives for military, Federal, 

and allied government buying agencies — both during the initial stages of the acquisition cycle and 

throughout the life of the resulting contracts. Before contract award, DCMA provides advice and 
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information to help construct effective solicitations, identify potential risks, select the most capable 

contractors, and write contracts that meet the needs of customers in DoD, federal, and allied 

government agencies. After contract award, DCMA monitors contractors’ performance and 

management systems to ensure that cost, product performance, and delivery schedules are in 

compliance with the terms and conditions of the contracts.”292 DCMA serves as the ACO with 

responsibility for more than 20,000 contractors and more than $223 billion in unliquidated obligations.

In 2011, Congress expressed concern about the backlog of incurred cost audits at DCAA and directed 

GAO to review reasons for the backlog, as well as DCAA’s plan to address it.293 At that time, DCAA 

had a backlog of more than 21,000 incurred cost audits.294 Since 2011, DCAA has reduced its inventory 

of contractors’ incurred cost proposals awaiting audit by about half to 14,208, and DCAA has 

substantially reduced its backlog of older proposals.295 

Figure 4-20. DCMA Historical Over-aged Contract Backlog296

DCAA’s focus on completing incurred-cost audits has caused the DCMA contract-closeout backlog to 

increase. It is not a one-for-one relationship. Each incurred cost audit may have many contracts 

associated with it. Currently, DCMA has a backlog of approximately 65,000 over-aged contracts and 

can complete an average of 18,000 contracts a year. Figure 4-20 above reflects the impact of the DCAA 

focus to reduce the incurred cost audit backlog starting in 2011. At the same time, DCMA has been 

prioritizing upcoming cancelling-year invoices versus actually closing out the contract. This is 

 

292 “About the Agency,” Defense Contract Management Agency, accessed November 1, 2018, http://www.dcma.mil/About-Us/. 

293 GAO, Defense Contracting: DOD Initiative to Address Audit Backlog Shows Promise, but Additional Management Attention Needed to 

Close Aging Contracts, GAO-13-131, December 2012, accessed September 15, 2017, http://www.gao.gov/assets/660/650970.pdf. 

294 DCAA, Report to Congress on FY 2016 Activities: Defense Contract Audit Agency, March 31, 2017, 9, accessed November 1, 2018, 

https://www.dcaa.mil/Content/Documents/DCAA_FY2016_Report_to_Congress.pdf. 

295 GAO, Federal Contracting: Additional Management Attention and Action Needed to Close Contracts and Reduce Audit Backlog, 

GAO-17-738, September 2017, 1, accessed June 11, 2018, https://www.gao.gov/assets/690/687497.pdf. 

296 DCMA graph, email to Section 809 Panel, August 9, 2018. 
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necessary in order to prevent using current appropriations to pay final invoices as shown in the 

Figure 4-21. DCMA’s objective is to reduce this projection prior to those funds actually being cancelled. 

Figure 4-21. DCMA Projected Cancelling Year Funds at Risk ($B)297

Discussion 

In addition to addressing the DCMA over-aged contract backlog, streamlining initiatives need to be 

implemented to prevent future incurred- cost audits and over-aged contract backlogs. Research shows 

that initiatives are being developed and implemented as a result of three things: (1) the Section 809 

Panel Volume 1 Report, (2) GAO reports, and (3) emphasis by DCMA senior leadership.298 

Section 809 Panel 

The Section 809 Panel recommendations in Volume 1, Section 2: Contract Compliance and Audit, 

proposed initiatives to prevent backlogs of incurred cost audits such as (a) providing flexibility to 

contracting officers and auditors to use audit and advisory services when appropriate, (b) reviewing 

the roles of DCAA and DCMA to ensure appropriate alignment and eliminate redundancies, 

(c) establishing statutory time limits for defense oversight activities, and (d) clarifying and streamlining 

the definition of and requirements for an adequate incurred cost proposal to refocus the purpose of 

DoD’s oversight. 

GAO and Commission on Wartime Contracting 

GAO reports that the Defense Procurement and Acquisition Policy Group was required to establish the 

Contract Closeout Working Group in September 2014 to improve and streamline the contract closeout 

process, including policy revisions and technology updates to its systems, with no projected 

 

297 Data points gathered from DCMA response to the RMD700A2 from the PBR19-23 cycle, email to Section 809 Panel, July 2, 2018. 

298 DCMA response to the RMD700A2 from the PBR19-23 cycle, email to Section 809 Panel, July 2, 2018. 
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completion date.299 The Commission on Wartime Contracting noted the rapidly growing incurred-cost 

backlog at DCAA in its final report in 2011. The commission found that Congress did not provide 

DCAA and DCMA adequate resources and staffing to accomplish their respective missions. The 

commission also recognized the difficulty placed on defense contractors when delays in incurred cost 

audits leave the contractors facing cash management problems. 

DCMA Initiatives 

DCMA recognized the need to institute streamlining initiatives to address the over-aged contract 

closeouts by issuing a DCMA Quick-Closeout Procedure Class Deviation. This deviation was issued on 

August 15, 2017, but has a sunset date of September 30, 2020. It streamlines the quick-closeout process 

only for DCMA’s ACOs by removing requirements to obtain an audit report or Low-Risk Adequacy 

Memorandum from DCAA prior to settling quick-closeout rates. It also authorizes ACOs to settle final 

overhead rates and close any and all physically complete contracts regardless of dollar value or the 

percent of unsettled direct and indirect costs allocable to the contracts.300 

DCMA recently released new guidance for ACOs to perform the Low Risk Quick Closeout Process 

(LRQCO). This initiative was released April 13, 2018, and has a sunset date of September 30, 2020. 

It allows ACOs to close out low-risk contracts with less than $750,000 of remaining funds by accepting 

the contractor’s indirect rates through a bilateral agreement. Following this process means the ACO 

does not have to wait on final DCAA audits of the contractor’s rates or negotiate the rates with the 

contractor. This new streamlined initiative will help reduce the over-age contracts each year with 

approximately 40,000 contracts currently in this category. 301 

Another initiative DCMA is pursuing is to no longer accept non-core services contracts, which are not 

included in DCMA’s core mission requirements. This could mean a reduction of approximately 

5,000 contracts per year that could potentially become over-aged and have cancelling funds within 

DCMA. Although this initiative could ultimately move the work load back to the services and increase 

their over-aged contract backlog. 

DCMA has partnered with DCAA to prioritize audits and emphasize audits with cancelling funds. This 

partnership allows them to actually perform the audit to close out the contract rather than focusing on 

interim billing for cancelling funds. DCAA now has the audit plan with DCMA priorities (cancelling 

funds) through FY 2020. 

The streamlining initiatives reflect DCMA and external agencies’ recognition that the over-aged 

contract backlog needs to be addressed, but these initiatives will not fully remedy the existing backlog 

of approximately 65,000 over-aged contracts. The existing backlog can only be mitigated by crossorganization monitoring and discipline. As shown in Figure 4-22, DoD recognized that DCMA needed 

additional resources. DoD provided funding for 30 additional full-time equivalents (FTEs) starting in 

FY 2019. DCMA developed the Figure 4-22 burn-down plan based on those 30 additional FTEs and the 

 

299 GAO, Federal Contracting: Additional Management Attention and Action Needed to Close Contracts and Reduce Audit Backlog, 

GAO-17-738, September 2017, 1, accessed June 11, 2018, https://www.gao.gov/assets/690/687497.pdf. 

300 DCMA Memorandum to DCMA Component Heads, DCMA Quick-Closeout Procedure Class Deviation (DCMA 17-142), August 15, 2017. 

301 DCMA Memorandum to DCMA Component Heads, DCMA Low Risk Quick Closeout Initiative, April 13, 2018. 
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implementation of initiatives described in the discussion above. The projection below also reflects that 

DCMA will still not be able to fully address the over-aged contract backlog by FY 2022. The light-blue 

dashed line depicts the point that even if the workforce were augmented again with an additional 30 

FTEs starting in FY 2020, DCMA would still not reach a steady state by FY 2022. To reach a steady state 

workload, DCMA would need process improvements and possibly additional resources to address 

approximately 15,000 over-aged contract audits annually for 3 years starting in FY 2020, and the 

additional resources would require approximately $3.5 million or more annually. Because DoD could 

spend up to $3.5 million of current-year funds to pay cancelled bills, one might suggest applying those 

dollars to remedy this issue. But these current-year funds were originally appropriated for other 

requirements and that would contradict the original intent of the appropriation by Congress. 

Figure 4-22. DCMA Over-aged Contract Burn-down Projection 

Conclusions 

To eliminate the backlog, DCMA must reach a workload steady state, and then apply process 

improvements to prevent reoccurrence. As shown in Figure 4-23 below, the majority of over-aged 

contracts could potentially be closed with application of the DCMA QCO streamlined initiatives 

described above. As depicted in Figure 4-22 above, DCMA will not reach a workload steady state by 

2020 and the Secretary of Defense should require the DCMA class deviation initiative dated August 15, 

2017 be made a permanent change versus a temporary deviation that sunsets in 2020. DCMA, through 

the class deviation, has been operating in this manner for years without any negative consequences. In 

addition, the LRQCO sunset date should be extended at least another 2 years. 
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The application of these recommendations could eliminate the over-aged contract backlog within 2 to 

3 years and allow DCMA to reach a workload steady state, but for DCMA to maintain that level, the 

DCMA Quick-Closeout Procedure Class Deviation should be a permanent change to the DFARS. 

Figure 4-23. DCMA Over-aged Contracts (Total Contract Value) 

To prevent reoccurrence of this backlog, the Secretary of Defense should direct the DoD Chief 

Management Officer (CMO) to work with USD(C) and USD(Acquisition and Sustainment), to perform 

further analysis that describes the entire scope of the problem to develop an end-to-end integrated 

streamlined process. The metrics reflected in Figure 4-23 are only for DCMA-administered contracts 

and not the entire scope of DoD. CMO should present the results in a report to Congress and propose a 

mitigation strategy that addresses the entire over-aged contract issue for DoD. The report should 

contain the following: 

 Recommendation assigning responsibility to a single process owner with authority to set 

priorities and approve closeout policies affecting all involved agencies (recognizing that the 

current problem started when DCAA made a unilateral policy change on what a low risk

closeout is, without regard to the downstream effects on other agencies, particularly DCMA). 

 Recommendation of process improvements such that closeout happens in a timely manner. 

Timely in this regard should mean that expiring funds are identified, and prioritized for closeout 

in sufficient time so the Services/Agencies don’t have to use current funds to satisfy past 

obligations. 

 Recommendation of appropriate metrics and levels of review to ensure appropriate leadership 

attention so this cycle of contract backlogs doesn’t recur. 

 Reporting tools and emphasis should be put in place to preclude the utilization of current 

year funds to address cancelled funding bills 

 Automation where appropriate to align and integrate business systems 
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Congress has already set precedence in Sections 925–927 of the FY 2019 NDAA that the DCMO review 

the roles and responsibilities of DCAA, DCMA, and DFAS, but does not require an integrated end-toend look across the three organizations. DCMO should expand the FY 2019 NDAA direction to include 

an integrated look to determine much needed process improvements and prevent the over-aged 

contract backlog from reoccurring in the future. It is imperative that this issue be addressed now and in 

the future to eliminate the application of current-year funds to pay cancelled bills, which results in 

harming existing programs and DoD strategic interests, as well as undermining the original intent of 

the appropriators. 

Implementation 

Legislative Branch 

 Direct the Secretary of Defense to submit a report that reflects an end-to-end, integrated, 

streamlined process-improvement strategy for preventing the reoccurrence of over-aged 

contract backlog by March 1, 2021. 

Executive Branch 

Note: DoD, in implementing these recommendations, should engage with industry in accordance with the 

recommendations in Section 8.

 Codify DCMA’s Quick Close Out class deviation in the DFARS by: 

 Removing requirements to obtain an audit report or low-risk adequacy memorandum from 

the DCAA prior to settling quick-closeout rates. 

 Authorizing ACOs to settle final overhead rates when it is in the best interest of the 

government and close any and all physically complete contracts regardless of dollar value 

or the percent of unsettled direct and indirect costs allocable to the contracts. 

 Applying the streamlined QCO process to flexibly priced contracts. 

 Develop a report to Secretary of Defense providing the entire scope of the DoD over-aged 

contract backlog with current funds at risk for cancelling and an integrated mitigation strategy 

to resolve and prevent reoccurrence. 

 Develop a QCO burn-down plan addressing the entire DoD over-aged contract backlog with 

quarterly status reports to the Secretary of Defense. 

 Extend the current sunset date of the DCMA LRQCO initiative that was issued April 13, 2018 by 

2 years. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 4. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 
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Budget Volume 3 | Page Insert 4-1 

Figure 4-18. Contract Closeout Complexities to Stay Within Statutory Fund Periods 

Section 4 

Budget 

Implementation Details 

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RECOMMENDED REPORT LANGUAGE

SEC.___. INCREASE IN THRESHOLD FOR PAYMENT OF INTEREST UNDER THE 

PROMPT PAYMENT ACT ON LATE PAYMENTS TO CONTRACTORS.

This section would amend section 3902 of title 31, United States Code, to increase the 

threshold above which the government must pay contractors added interest penalties in cases 

of delayed contract payments. The threshold would increase from $1 to $15. The committee 

notes that the $1 threshold has not been increased since it was established in the 1980s, and 

inflation has risen substantially since then. The committee further notes that the advisory panel 

established under section 809 of the National Defense Authorization Act for Fiscal Year 2016 

(Public Law 114-92) addressed this issue. According to the panel’s analysis, in many cases

government and industry combined pay more in administrative overhead to process these 

transactions than the value of the payments themselves.
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1 SEC. ___. INCREASE IN THRESHOLD FOR PAYMENT OF INTEREST UNDER THE 

2 PROMPT PAYMENT ACT ON LATE PAYMENTS TO CONTRACTORS. 

3 (a) MINIMUM AMOUNT OF INTEREST PAYABLE BY GOVERNMENT.—Subsection (c)(1) of 

4 section 3902 of title 31, United States Code, is amended by striking “$1.00” and inserting “$15”. 

5 (b) EFFECTIVE DATE.—The amendment made by subsection (a) shall apply with respect 

6 to payments under contracts awarded, contracts renewed, and contract options exercised on or 

7 after the first day of the first fiscal quarter that begins more than 180 days after the date of the 

8 enactment of this Act. 

9 (c) CODIFICATION OF PROVISION RELATING TO DEPARTMENT OF DEFENSE.—

10 (1) CODIFICATION.—Subsection (f) of such section is amended by inserting before 

11 the period at the end the following: “, except that interest penalties may be paid by the 

12 Department of Defense from funds financing the operation of the military department or 

13 defense agency with which the invoice or contract payment is associated”. 

14 (2) REPEAL OF CODIFIED PROVISION.—Section 8084 of the Department of Defense 

15 Appropriations Act, 2002 (Public Law 107-117; 31 U.S.C. 3902 note), is repealed. 

---------- 

TITLE 31, UNITED STATES CODE 

§3902. Interest penalties 

(a) Under regulations prescribed under section 3903 of this title, the head of an agency acquiring 

property or service from a business concern, who does not pay the concern for each complete delivered 

item of property or service by the required payment date, shall pay an interest penalty to the concern on 

the amount of the payment due. The interest shall be computed at the rate of interest established by the 

Secretary of the Treasury, and published in the Federal Register, for interest payments under section 

7109(a)(1) and (b) of title 41, which is in effect at the time the agency accrues the obligation to pay a late 

payment interest penalty. 

(b) The interest penalty shall be paid for the period beginning on the day after the required 

payment date and ending on the date on which payment is made. 

(c)(1) A business concern shall be entitled to an interest penalty of $1.00 $15 or more which is 

owed such business concern under this section, and such penalty shall be paid without regard to whether 

the business concern has requested payment of such penalty. 
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(2) Each payment subject to this chapter for which a late payment interest penalty is required to 

be paid shall be accompanied by a notice stating the amount of the interest penalty included in such 

payment and the rate by which, and period for which, such penalty was computed. 

(3) If a business concern— 

(A) is owed an interest penalty by an agency; 

(B) is not paid the interest penalty in a payment made to the business concern by the 

agency on or after the date on which the interest penalty becomes due; 

(C) is not paid the interest penalty by the agency within 10 days after the date on which 

such payment is made; and 

(D) makes a written demand, not later than 40 days after the date on which such payment 

is made, that the agency pay such a penalty, 

such business concern shall be entitled to an amount equal to the sum of the late payment interest penalty 

to which the contractor is entitled and an additional penalty equal to a percentage of such late payment 

interest penalty specified by regulation by the Director of the Office of Management and Budget, subject 

to such maximum as may be specified in such regulations. 

(d) The temporary unavailability of funds to make a timely payment due for property or services 

does not relieve the head of an agency from the obligation to pay interest penalties under this section. 

(e) An amount of an interest penalty unpaid after any 30-day period shall be added to the 

principal amount of the debt, and a penalty accrues thereafter on the added amount. 

(f) This section does not authorize the appropriation of additional amounts to pay an interest 

penalty. The head of an agency shall pay a penalty under this section out of amounts made available to 

carry out the program for which the penalty is incurred, except that interest penalties may be paid by the 

Department of Defense from funds financing the operation of the military department or defense 

agency with which the invoice or contract payment is associated. 

(g) *** 

(h) *** 

————— 

Department of Defense Appropriations Act, 2002 

(Public Law 107-117; 31 U.S.C. 3902 note) 

SEC. 8084. Notwithstanding 31 U.S.C. 3902, during the current fiscal year and hereafter, interest 

penalties may be paid by the Department of Defense from funds financing the operation of the military 

department or defense agency with which the invoice or contract payment is associated. 

————— 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. REVOLVING FUND TO FINANCE MONEY-SAVING INVESTMENTS.

This section would direct the Secretary of Defense to use the authority in Section 1077 of 

the National Defense Authorization Act for Fiscal Year 2018 (P.L. 115-91) to establish a 

revolving fund for an information technology (IT) modernization pilot and explore the 

feasibility of using revolving funds for other money-saving investments.

The committee recognizes the need to create financing opportunities to internally 

finance projects that show promise for improving agency efficiency and effectiveness—such as 

recapitalizing facilities, upgrading IT systems, and improving the energy efficiency of existing 

systems. The funding authority in Section 1077 of the FY 2018 NDAA offers an opportunity to 

establish a revolving fund for information technology modernization projects. This revolving 

fund would serve as a pilot program to prove the feasibility of using the revolving fund 

mechanism to finance continuous, money-saving upgrades to Department of Defense systems 

and facilities.

The committee notes that the most important factors in determining whether or not a 

lease, lease–purchase, or other capital-intensive federal facility or equipment recapitalization or 

upgrade project is funded should be the validity of the requirement, whether the project is 

executed properly and delivers quality goods and/or services, and whether the price is fair. 

A project’s budget score also may play a role in the government’s decision to move forward 

with a project. The committee further notes that the new fund created under this section could 

be used as a pilot program to gauge the feasibility of easing the financing rules for certain 

projects. In addition, the committee expects the Secretary of Defense to conduct studies on 

public–private funding in other countries and at state and local levels, and the exceptions that 

have been granted to the Office of Management and Budget scoring rules to determine what 

would need to be done to increase opportunities for equipment recapitalization. This section 

would require a report on implementation of the revolving fund be delivered to congressional 

defense committees within 180 days of enactment as well as a subsequent report on the 

Secretary’s further analysis within one year. 
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1 SEC. ___. REVOLVING FUND TO FINANCE MONEY-SAVING INVESTMENTS. 

2 (a) ESTABLISHMENT OF FUND.—The Secretary of Defense shall— 

3 (1) use the authority in section 1077 of the National Defense Authorization Act 

4 for Fiscal Year 2018 (Public Law 115-91; 40 U.S.C. 11301 note) to establish a revolving 

5 fund to finance information technology modernization projects and to be reimbursed 

6 through savings on such projects; and 

7 (2) if the revolving fund established pursuant to paragraph (1) is successful, seek 

8 authority from Congress to establish additional revolving funds for other money-saving 

9 investments, including investments in the fuel efficiency of weapon systems. 

10 (b) IMPLEMENTATION REPORT. – 

11 (1) Not later than 180 days after the date of the enactment of this Act, the 

12 Secretary of Defense shall submit to the congressional defense committees a report on the 

13 implementation of the revolving fund established pursuant to subsection (a). 

14 (2) The report shall include— 

15 (A) a time-phased plan for the implementation of the revolving fund; and 

16 (B) an explanation of any congressional action (including any new or 

17 additional transfer authority) that may be needed to ensure that future savings 

18 from information technology modernization projects are available to reimburse 

19 the revolving fund for investments in such projects. 

20 (c) ADDITIONAL STUDY AND REPORT. – Not later than one year after the date of the 

21 enactment of this Act, the Secretary of Defense shall submit to the congressional defense 

22 committees a report on— 
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1 (1) the feasibility and advisability of establishing one or more revolving funds that 

2 are not reimbursed through savings to finance defense infrastructure recapitalization 

3 projects; 

4 (2) the existing statutory and regulatory regimes that govern the use of public5 private partnerships to finance defense infrastructure recapitalization projects; and 

6 (3) any favorable interpretations of the existing scoring rules by the Office of 

7 Management and Budget or the Congressional Budget Office that may apply to private 

8 sector financing of defense infrastructure recapitalization projects. 

9 (d) AUTHORIZATION.—There is authorized to be appropriated to the Secretary of Defense 

10 the amount of $100,000,000 to be available only for deposit into the revolving fund established 

11 pursuant to subsection (a). 
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RECOMMENDED REPORT LANGUAGE

SEC.___. EXTENSION OF PERIOD FOR CLOSURE OF FIXED APPROPRIATION 

ACCOUNTS FOLLOWING EXPIRATION OF AVAILABILITY FOR 

OBLIGATION.

This section would amend section 1552(a) of title 31, United States Code, to increase the 

period for closure of fixed appropriation accounts following expiration of availability for 

obligations from five years to eight years. After the eight years, an account would be closed and 

any remaining balance (whether obligated or unobligated) in the account would be cancelled 

and would not be available for obligation or expenditure for any purpose.

The committee notes that when agencies exceed the time available for payments of 

obligations (the expiration period), the appropriated funds are canceled and are no longer 

available for payment. The committee further notes that this legal time limit on payments saves 

no money for the taxpayer or agencies since the government remains responsible for paying 

vendors for their work despite the cancellation of appropriated funds. Instead agencies must 

pay vendors using current appropriations, potentially harming existing programs and agencies’

strategic interests, as well as undermining the original intent of the appropriators.
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RECOMMENDED REPORT LANGUAGE

SEC. ___. REVIEW OF CONTRACT CLOSEOUT FUNCTIONS PERFORMED BY THE 

DEFENSE CONTRACT AUDIT AGENCY, THE DEFENSE CONTRACT MANAGEMENT 

AGENCY, AND THE DEFENSE FINANCE AND ACCOUNTING SYSTEM.

This section would direct the Secretary of Defense to perform an integrated review of 

the contract closeout functions performed by the Defense Contract Audit Agency (DCAA), the 

Defense Contract Management Agency (DCMA) and the Defense Finance and Accounting 

System (DFAS).

The committee recognizes the need for process improvements in the area of contract 

closeout. Because of closeout delays that have created a large backlog of overaged contracts in 

the Department of Defense, vendors must in some cases be paid out of appropriations from 

different fiscal years, undermining the original purpose of the funding. Because contract 

closeout responsibilities are performed by different organizations under different leaderships 

within the Department, the Secretary of Defense, pursuant to this section, would direct the 

Chief Management Officer (CMO) to perform an analysis that describes the entire scope of the 

contract closeout problem. The CMO would work with the Office of the Undersecretary of 

Defense (Comptroller) and the Undersecretary of Defense for Acquisition & Sustainment in 

order to develop an end-to-end integrated streamlined process to improve contract closeouts in 

a timely manner. Results of the review, along with a proposed mitigation strategy addressing 

the entire over-aged contract issue for the Department, would be presented to the congressional 

defense committees by March 1, 2021.
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RECOMMENDATION 57: 

1 SEC. ___. EXTENSION OF PERIOD FOR CLOSURE OF FIXED APPROPRIATION 

2 ACCOUNTS FOLLOWING EXPIRATION OF AVAILABILITY FOR 

3 OBLIGATION. 

4 (a) PERIOD FOR CLOSURE.—Section 1552(a) of title 31, United States Code, is amended 

by striking “5th fiscal year” and inserting “8th 5 fiscal year”. 

6 (b) APPLICABILITY.—The amendment made by subsection (a) shall apply with respect to 

7 any fixed appropriation account subject to section 1552(a) of title 31, United States Code, that as 

8 of the date of the enactment of this Act has not been closed pursuant to that section. 

******* 

Title 31—MONEY AND FINANCE 

CHAPTER 15— APPROPRIATION ACCOUNTING 

SUBCHAPTER IV-CLOSING ACCOUNTS 

§ 1552. Procedure for appropriation accounts available for definite periods 

 (a) On September 30th of the 5th 8

th fiscal year after the period of availability for 

obligation of a fixed appropriation account ends, the account shall be closed and any remaining 

balance (whether obligated or unobligated) in the account shall be canceled and thereafter shall 

not be available for obligation or expenditure for any purpose. 

 (b) Collections authorized or required to be credited to an appropriation account, but not 

received before closing of the account under subsection (a) or under section 1555 of this title 

shall be deposited in the Treasury as miscellaneous receipts. 

—————— 
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RECOMMENDATION 58: 

1 SEC. ___. REVIEW OF CONTRACT CLOSEOUT FUNCTIONS PERFORMED BY THE 

2 DEFENSE CONTRACT AUDIT AGENCY, THE DEFENSE CONTRACT 

3 MANAGEMENT AGENCY, AND THE DEFENSE FINANCE AND 

4 ACCOUNTING SYSTEM. 

5 (a) REVIEW.—The Secretary of Defense shall, acting through the Chief Management 

6 Officer of the Department of Defense, direct the Under Secretary of Defense for Acquisition and 

7 Sustainment and the Under Secretary of Defense (Comptroller) to conduct an integrated review 

8 of the contract closeout functions of the Defense Contract Audit Agency, the Defense Contract 

9 Management Agency, and the Defense Finance and Accounting System. The review shall 

10 include the following: 

11 (1) An assessment for providing a recommendation of an integrated end-to-end 

12 process for contract closeouts. 

13 (2) An assessment for providing improvements to the end-to-end contract closeout 

14 process so that closeout can happen in a timely manner. 

15 (3) An assessment of appropriate metrics and levels of review to ensure 

16 appropriate leadership attention so as to prevent overaged contract closeout backlogs, 

17 including— 

18 (A) an assessment of recommended reporting tools to preclude the 

19 utilization of current year funds to address canceled funding bills; and 

20 (B) an assessment of required automation where appropriate to align and 

21 integrate business systems. 
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1 (4) Determination of a single process owner with authority to set policies and 

2 priorities and approve process changes to ensure contract closeouts continue to happen in 

3 a timely manner. 

4 (b) DEFINITION.—In this section, the term “timely” means that expiring funds are 

5 identified and prioritized for closeout in sufficient time so that the responsible component of the 

6 Department of Defense does not have to use current funds to satisfy past obligations. 

7 (c) REPORT.—Not later than March 1, 2021, the Secretary of Defense shall submit to the 

8 congressional defense committees a report setting forth the results of the review conducted under 

9 subsection (a). 
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Section 5 

Acquisition Workforce 

As the transformation of the defense acquisition system continues, 

DoD will require a professional, talented, and forward-thinking 

workforce to successfully represent the warfighter’s interests. 

RECOMMENDATIONS

Rec. 59: Revise the Defense Acquisition Workforce Improvement Act to focus more on 

building professional qualifications. 

Rec. 60: Implement acquisition career paths that are integrated with an institutionalized 

competency model tailored to mission needs. 

Rec. 61: Create a comprehensive public–private exchange program for DoD’s 

acquisition workforce. 

 
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INTRODUCTION 

In its Volume 2 Report, the Section 809 Panel issued several recommendations regarding the DoD 

acquisition workforce (AWF). Those recommendations centered on the hiring process for acquisition 

career fields, the personnel system for acquisition members, and the budget for AWF development 

programs. Through those issues, the panel sought to ensure DoD would possess tools and resources 

necessary to prioritize continued improvement of its AWF. Management structures alone, however, are 

not enough for the workforce to succeed. More subtle qualities that determine the quality of a 

workforce exist. They are harder to quantify, but equally important, such as professionalism, 

competency, and deep understanding of the arena in which the workforce operates. These qualities, 

which lie at the intersection of an institution’s structures and its culture, represent the crux of the 

panel’s recommendations in this concluding report. 

Career management is a critical element for the AWF, and the Section 809 Panel’s initial framework for 

examining workforce issues included development as one of its main pillars. The panel’s outreach to 

stakeholders in DoD and the private sector confirmed that the career development of AWF members 

needed to be a focus. In an August 2017 report to Congress, DoD noted that proposed changes to the 

operation of the AWF would rely on “the re-education of our workforce” and require “a significant 

cultural shift.”1 Reforms of this nature do not occur overnight. Career development is likely the 

necessary catalyst for DoD to achieve its ambitions for the AWF. 

The following set of workforce recommendations concentrates on workforce development issues. In 

this chapter, the Section 809 Panel proposes a series of changes to DoD’s career development 

framework for AWF members. The proposals revolve around three crucial aspects of career 

development: professional certifications, career paths for all acquisition career fields with a competency 

model for the entire workforce; and public–private exchange programs (PPEPs). 

The current three-level certification system, established by DoD to implement the Defense Acquisition 

Workforce Improvement Act (DAWIA), has been a central feature in the professionalization of the 

AWF during the past 3 decades. Although the workforce has steadily gained training and relevant 

experience, today’s government-unique certification process has proven to be less successful at 

ensuring competence as individuals advance through their careers. Recommendation 59 proposes an 

overhaul of DoD’s implementation of DAWIA to introduce qualifications (a member’s demonstrated 

occupational competencies and proficiencies), in addition to certifications (a combination of member’s 

education, training, and experiences). 

To truly reform how DoD develops a highly qualified AWF, the entire system needs to change. Such 

change requires a career development model that continuously deepens and broadens defense AWF 

members’ experience throughout their entire career. Recommendation 60 notes that DoD should 

implement career paths that cultivate and develop key work experience in the form of multidiscipline

training, so the acquisition team trains together throughout members’ careers. DoD needs to 

institutionalize a competency model with technical and nontechnical skills and associated proficiency 

 

1

 Secretary of Defense, Report to Congress: Restructuring the Department of Defense Acquisition, Technology and Logistics Organization 

and Chief Management Officer Organization, August 2017, accessed November 6, 2018, 

https://www.defense.gov/Portals/1/Documents/pubs/Section-901-FY-2017-NDAA-Report.pdf. 
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standards for every acquisition career field. Doing so creates flexibility to integrate these skills in 

experiential opportunities for career progression while addressing the competencies necessary to keep 

the warfighting capabilities superior to any adversary. A robust and dynamic career development 

model would provide clarity to AWF members on the competencies and qualifications required to 

reach their full potential and contribute to optimal mission outcomes. 

PPEPs enjoy widespread support among DoD officials, and both Congress and DoD have made 

repeated attempts in recent years to establish two-way exchange programs to temporarily assign DoD 

members to the private sector and vice versa. Although certain exchange programs have achieved 

limited success, efforts to implement a comprehensive exchange program have failed due to structural 

and cultural factors that have created disincentives for DoD employing offices, DoD employees, and 

private-sector companies. A new, comprehensive, two-way PPEP for the AWF, as described in 

Recommendation 61, would eliminates these disincentives and provide a foundation on which an 

exchange program can thrive. 

In its workforce recommendations for Volume 2 and Volume 3, the Section 809 Panel has endeavored to 

address the current problems in AWF policy directly and offer concrete solutions to overcome them. As 

the rapid transformation of the defense acquisition system continues, DoD will require a professional, 

talented, experienced, and broad-minded workforce to succeed on the warfighter’s behalf. 

RECOMMENDATIONS 

Recommendation 59: Revise the Defense Acquisition Workforce Improvement 

Act to focus more on building professional qualifications.

Problem 

Provisions in DAWIA are intended to professionalize the DoD AWF by establishing specific 

requirements for education, training, and experience.2 After nearly 30 years, DoD is still attempting to 

use a certification structure that includes a greater emphasis on experience and ensuring AWF members 

attain necessary qualifications to fulfill their responsibilities.3 A current problem is that DoD’s 

certification programs create a sense among the AWF that professional development occurs in a finite 

period at the beginning of members’ careers rather than being a continuing process. Congress and DoD 

should revise DAWIA to focus on building a professional AWF qualified to tackle the challenges of the 

21st century and beyond. Such a refocus would comprise substantiating qualifications and a 

modernization of the certification process. 

Background 

Congress enacted DAWIA (Chapter 87 of Title 10 U.S. Code) on November 5, 1990 to provide a 

foundation for the AWF management framework.4 In Chapter 87, DAWIA charges the Secretary of 

Defense with responsibility for establishing education, training, and experience requirements for 

personnel serving in acquisition positions. It also charges the Secretary with establishing requirements 

 

2

 Management Policies, 10 U.S.C. § 1701. 

3

 DoD, Department of Defense Acquisition Workforce Strategic Plan FY 2016 – FY 2021, 1, accessed November 6, 2018, 

http://www.hci.mil/docs/DoD_Acq_Workforce_Strat_Plan_FY16_FY21.pdf. 

4

 Management Policies, 10 U.S.C. § 1701. 
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for continuing education and a certification process.5 The Office of the Under Secretary of Defense for 

Acquisition and Sustainment’s Human Capital Initiatives (HCI) Office is responsible for executing 

DoD-wide AWF governance, strategies, policies, programs, and talent management initiatives.6

“The content of DAWIA has evolved since its initial implementation in the early 1990s, but the intent 

remains the same—the recruitment, development, and retention of a professional, educated, and 

experienced workforce.”7 DoD uses a certification process to determine whether an employee meets the 

required education, training, and experience standards for an acquisition career field.8 

DoD has made improvements in developing a certification process that serves as a model for federal 

civilian agency acquisition programs as well as industry but has made less progress in identifying and 

addressing employees’ job skill gaps.9 Former Undersecretary of Defense for Acquisition, Technology, 

and Logistics Frank Kendall highlighted this issue in the Better Buying Power 2.0 objective to increase 

professional qualification requirements for all acquisition specialties and DoD addressed it by 

launching the Acquisition Workforce Qualification Initiative (AWQI) employment development tool in 

May 2013.10

Discussion 

The Section 809 Panel interviewed DoD acquisition executives and members, acquisition career 

managers, AWF subject matter experts (SMEs), civilian agency experts and industry experts. The panel 

also reviewed DoD AWF certification standards listed in the Defense Acquisition University (DAU) 

icatalog, various Office of Federal Procurement Policy (OFPP) memoranda, Government 

Accountability Office (GAO) reports, and other acquisition career-field-related literature. 

DAWIA 

In 1990, Congress required DoD to establish a management and career development structure with 

specific education, training, experience, and other qualification requirements for the AWF. The 

structure included (a) contracting officer qualification requirements, (b) acquisition corps membership 

selection and eligibility requirements, (c) program and deputy program manager assignment and other 

qualification requirements, and (d) requirements for acquisition personnel assigned to Critical 

Acquisition Positions (CAPs).11

 

5

 General Education, Training, and Experience Requirements, 10 U.S.C. § 1723. 

6

 Charles H. Porter et al., Independent Study of Implementation of Defense Acquisition Workforce Improvement Efforts, CNA, 

December 2016, 26, accessed November 6, 2018, 

http://www.hci.mil/docs/Policy/Reports%20to%20Congress/CNA_Study_Def_AWF_Improvements (Public Release) Feb2017.pdf. 

7

 Ibid. 

8

 Defense Acquisition Workforce Program Desk Guide, DoDI 5000.66, 3 (2017). 

9

 OMB Memorandum, The Federal Acquisition Certification in Contracting Program, January 20, 2006, revised December 2008, accessed 

December 2, 2018, https://obamawhitehouse.archives.gov/sites/default/files/omb/assets/procurement/fac_contracting_program.pdf. 

Bryan Herdlick, Ph.D., Discipline-Specific Certifications (SE, T&E, MGT): Can they serve as surrogates for DAWIA Qualifications in the DoD 

Contractor Workforce?, presentation at INCOSE, May 30, 2014, accessed August 6, 2018, http://www.incose-somd.org/wpcontent/uploads/2014/06/Professional-Certifications-INCOSE-SoMD.pptx. 

10 Data obtained during Section 809 Panel interviews with DoD senior leaders, August 2018. 

11 GAO, Defense Management Implementation of the Defense Acquisition Workforce Improvement Act, 2, 

https://www.gao.gov/products/NSIAD-93-129. 
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Since DAWIA enactment, DoD substantially increased DAWIA certification rates (see Figure 5-1). DoD 

has also improved education levels of DoD AWF members and the training capacity of DAU.12

Figure 5-1. Defense Acquisition Workforce Certification Rates13

Source: Adapted from DAU graphic. 

Education 

Congress specified educational requirements for each acquisition career field in DAWIA to 

professionalize the AWF. Specifically, the law requires contracting officers and DoD acquisition corps 

members to have a baccalaureate degree from an accredited educational institution and have 

completed at least 24 semester credit hours in various disciplines.14 The Office of Personnel 

Management (OPM) implemented governmentwide qualification requirements for acquisition 

occupations in accordance with DAWIA.15 DoD implemented DAWIA so that only five career fields 

require formal education as a prerequisite for an employee to be hired: 

 The auditing and contracting career fields require 24 semester credit hours in accounting or 

business disciplines, in addition to their baccalaureate degree prerequisites. 

 

12 Charles H. Porter et al., Independent Study of Implementation of Defense Acquisition Workforce Improvement Efforts, CNA, 

December 2016, 26, accessed November 6, 2018, 

http://www.hci.mil/docs/Policy/Reports%20to%20Congress/CNA_Study_Def_AWF_Improvements (Public Release) Feb2017.pdf. 

13 DoD, Department of Defense Acquisition Workforce Strategic Plan FY 2016 – FY 2021, 17, accessed November 6, 2018, 

http://www.hci.mil/docs/DoD_Acq_Workforce_Strat_Plan_FY16_FY21.pdf. 

14 Contracting positions: qualification requirements, 10 U.S.C. § 1724 and Selection criteria and procedures, 10 U.S.C. § 1732. 

15 “Classification & Qualifications, General Schedule Qualification Standards,” Office of Personnel Management, accessed August 28, 

2018, https://www.opm.gov/policy-data-oversight/classification-qualifications/general-schedule-qualification-standards/#url=List-byTitle. 
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 The engineering and science and technology manager career fields require baccalaureate degrees in 

various technical and engineering disciplines. 

 The test and evaluation career field requires an associate’s degree in any discipline as a 

prerequisite. 

 The international acquisition career field educational requirements are permitted to be specified 

by the career field. 

 DoD does not specify any formal education for the other nine AWF career fields.

16

 

Although the educational requirements have helped DoD professionalize the DoD AWF, they also limit 

the ability to hire individuals who do not meet the requirements. The case study below provides an 

example of how the current DAWIA educational requirements restricts the ability for DoD to hire a 

talented individual interested in public service.

Case Study: 

Individual’s Federal Hiring Experience 

PROBLEM: An individual the Section 809 Panel interviewed explained that she graduated from college with a 

baccalaureate degree in political science that included 12 semester hours of business credits. She hoped to enter the 

government as a DoD contracting intern but did not meet the DAWIA minimum education requirements and could not be 

hired without obtaining the additional business credits the law requires. She encountered three challenges in her 

experience looking to be hired as an 1102 in DoD: 

Requirement to Have 24 Semester Hours: For DoD 1102 positions, minimum education requirements are a 

baccalaureate degree AND 24 semester hours of business credits. This differs from OPM’s 1102 requirements that 

require either a baccalaureate degree OR 24 semester hours of business credits. The interviewee explored the possibility 

of obtaining the additional 12 semester hours that she needed by going to a local community college. This solution would 

cost more than $2,000 and would take almost a year to complete the training if she took the courses during the summer 

or as a part-time student. 

Hiring Process: The interviewee further encountered a frustrating experience navigating her way around the USAJobs 

website. For example, one position for which she wanted to apply was open for an entire year, all grades, and all 

locations. She contacted the point of contact listed on the job announcement for more information and was told there 

was no information available about whether a position is actually open and mentioned that some of these postings are 

online so offices can collect resumes in case hiring needs come up later. She sought assistance from individuals who were 

more experienced with the federal hiring process and was advised the following: 

 If a job posting was open for a short period of time (1–2 weeks), it was likely there was an actual position that 

needed to be filled. 

 On the submitted resume, applicants should mark themselves as highly qualified in all criteria for the application 

package to pass through the algorithm to a human reviewer. 

 Job postings may say they are open to the public when actually, the hiring manager wants to hire internally but 

must post the position publicly because of human resources requirements to do so. 

 It can take 6 months to 1 year to get hired and on-boarded. 

 The best way to get hired is for applicants to know someone who can push their resume to the top. 

 

16 “iCatalog,” Defense Acquisition University, accessed August 10, 2018, http://icatalog.dau.mil/onlinecatalog/CareerLvl.aspx. 
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Case Study: 

Individual’s Federal Hiring Experience 

Limited Opportunities for Nonrecent Graduates: Through her research, she learned about the Pathways Program for 

entry-level 1102s, but Pathways is only open to recent college graduates. Because she graduated in 2015, she was 

ineligible. 

CONCLUSION: The interviewee was faced with two choices: (a) Pay $2,000 to obtain the additional business credits, 

delaying her ability to apply for positions until at least Sept 2018, and then potentially wait a year to get hired or (b) Seek 

employment outside of DoD. She chose the latter, applied for a position outside the federal government, and was hired 

within 2 months. She currently works in an entry-level contracting position for a major defense contractor. 

Training 

As required by DAWIA, the Secretary of Defense established DAU to develop and deliver the core 

acquisition training required for DAWIA certifications, continuous learning courses, assignmentspecific courses, and executive-level development training.17 One major challenge DAU faced from its 

inception was an “overwhelming backlog of training requirements it has created. The number of 

people attempting to sign up for required courses and for newly created courses threatened to 

overwhelm DAU’s capability.”18 DoD addressed the backlog in two ways: 19 

 Allowing some students to meet their training requirements by receiving credit for previous 

experience through a process called fulfillment. 

 Developing distance learning courses that allow students to receive immediate training at a 

reduced cost and with minimum interference with their work schedules. 

Today, DAU continues its distance-learning program via online acquisition resources, job support 

tools, and on-the-job assistance to acquisition organizations and teams.20 DoD’s efforts to increase 

DAU’s training capacity and enhance DAU training contributed toward improved workforce 

certification levels.21 Notwithstanding DAU’s efforts to increase training capacity, DoD officials told the 

Section 809 Panel that they desire a better balance among the three elements (diamonds) of DAU’s 

acquisition learning model, which is designed to deliver learning that enhances performance at the 

precise time it is needed.22 The three diamonds model (Figure 5-2) consists of foundational learning 

(structured training courses, continuous learning modules, and policy updates), workflow learning 

(online courses/webinars), and performance learning (multifunctional team training). As DAU’s 

training model has evolved, it has become clear that the workforce’s and DAU’s focus on certification 

 

17 DoD, Department of Defense Acquisition Workforce Strategic Plan FY 2016 – FY 2021, 9, accessed November 6, 2018, 

http://www.hci.mil/docs/DoD_Acq_Workforce_Strat_Plan_FY16_FY21.pdf. 

18 Evelyn Layton, The Defense Acquisition University: Training Professionals for the Acquisition Workforce 1992-2003, 46, accessed August 

10, 2018, https://www.dau.mil/about/Documents/DAU%20History%20Book.pdf. 

19 Ibid. 

20 DoD, Department of Defense Acquisition Workforce Strategic Plan FY 2016 – FY 2021, 9, accessed November 6, 2018, 

http://www.hci.mil/docs/DoD_Acq_Workforce_Strat_Plan_FY16_FY21.pdf. 

21 Ibid, 18. 

22 Data obtained during Section 809 Panel interviews with DoD senior leaders, August 2018. 
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and knowledge needs to shift toward a focus on behavioral change and building workplace leadership 

confidence and competence. 

Figure 5-2. DAU’s Acquisition Learning Model: The Three Diamonds23

Source: Adapted from DAU graphic. 

Senior acquisition leaders indicated DoD should consider reducing some content included in 

foundational certification courses and instead offer this content later in employees’ careers when it will 

actually improve their capabilities. The current construct drives overspending due to training atrophy, 

meaning by the time employees actually need the training for successful performance in their position, 

they have forgotten it because the training occurred too far in advance of the need. A related problem is 

that today’s functional integrated product team focuses on a broad range of competency elements. This 

situation leads to a focus on making sure someone—often someone with shallow knowledge—is 

assigned to all of the functional roles, at the expense of ensuring AWF members build confident 

expertise. To compound the problem, AWF members have a difficult time getting refresher training 

because DAU, due to training capacity limitations, prioritizes foundational training for employees 

working toward a certification over advanced employees who need to refresh their knowledge.24

Virtually all of acquisition is a team activity involving multiple functional players, yet in preparing 

AWF members to do their jobs, DoD relies almost exclusively on individual skills training, especially 

for certification. This approach varies greatly from proven performance models in virtually every other 

military mission area or corporate/commercial learning design for which new entrants first learn 

individual skills, then learn how to apply those skills in concert with other teammates in small teams, 

then the small teams learn how to integrate their capabilities either in support of other teams, or how to 

coordinate support from other teams and functions, and so on. 

Experience 

The DoD Acquisition Workforce Strategic Plan sets a goal of prioritizing experiential learning through 

rotational assignments and exchange programs, yet so far it has focused more on workforce shaping 

 

23 “Acquisition Learning Model,” Defense Acquisition University, accessed August 28, 2018, https://www.dau.mil/about/p/AcquisitionLearning-Module. 

24 Data obtained during Section 809 Panel interview with DoD senior leaders, July–August 2018. 
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and relied on certification training completion as a measure of success with regard to DAWIA.25 DoD 

lacks metrics to measure improving workforce proficiency and capability.26 DoD senior leaders 

indicated that certification means nothing without an understanding of true capabilities. Some believe 

employees are over-trained, they are completing certifications they may never need, and DoD should 

balance certification training with getting real work done. Interviewees agreed that experience is the 

greatest contributor through which employees become qualified in their chosen career field. 

According to psychologist K. Anders Ericsson and author Malcom Gladwell, one must accrue 

10,000 hours of practice to become a master of anything.27 Under the current construct, interns and new 

AWF employees are fully certified and considered experts in their field by merely remaining employed 

in a DoD acquisition organization for 4 years, along with the education and training for certification, 

without having to demonstrate that they have mastered the proficiencies of an expert acquisition 

professional. Certification Level III should indicate AWF members have achieved initial readiness, not 

certified expertise. 

AWQI is a positive step for ensuring employees are qualified in addition to being certified, but AWQI 

is a voluntary program, and organizations within DoD have been slow to embrace it. The major 

obstacle seems to be that AWQI is complex and requires a substantial time commitment from 

employees and their supervisors but does not show them an obvious benefit for devoting the time to 

use it. 

Continuous Learning 

Once employees achieve certification to a certain level, they never have to recertify, even though the 

knowledge base of regulations, technology, and best practices applicable to acquisition grows every 

year. Instead, DoD requires certified AWF members to accumulate 80 continuous learning points 

(CLPs) within a 2-year training cycle to maintain certifications. Creditable activities include academic 

courses, training courses, professional activities such as obtaining professional licenses or teaching, and 

experiential learning such as rotational assignments or participating in exchange programs. The point 

credit for each activity is set forth on the DAU website.28 Continuous learning activities are largely selfdirected by employees, with some involvement by immediate supervisors (e.g., a sign-off on an 

employee’s individual development plan (IDP)), but little strategic guidance from the enterprise on 

competencies desired for the future. 

DoD officials offered mixed reviews of this approach to maintaining certification. Some indicated 

80 CLPs was reasonable, but criteria should be factored into the continuous learning requirement so 

that employees are incentivized to take training or participate in activities that will improve their 

performance or prepare them for future job opportunities. One official pointed out that DoD’s selfimposed criteria sometimes misses the mark by allowing AWF members to be trained in areas that they 

do not need in their current positions because it is easy for them to take training courses available 

 

25 DoD, Department of Defense Acquisition Workforce Strategic Plan FY 2016 – FY 2021, 28, accessed November 6, 2018, 

http://www.hci.mil/docs/DoD_Acq_Workforce_Strat_Plan_FY16_FY21.pdf. 

26 Data obtained during Section 809 Panel interviews with DoD senior leaders. August 2018. 

27 Malcolm Gladwell, Outliers: The Story of Success (New York: Little, Brown and Co., 2008), 40. 

28 “Continuous Learning Center, Point Credit,” Defense Acquisition University, accessed August 28, 2018, 

https://www.dau.mil/training/clc/p/Point-Credit. 
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through DAU.29 A better, less used alternative, would be for employees to fulfill continuous learning 

requirements by actively seeking training from other education providers (e.g., local community 

colleges, commercial training providers) that addresses knowledge gaps. CLPs should be used to 

maintain certification by focusing on competencies needed for current and future positions. 

Specialties and Leadership 

DAU worked with functional leaders to establish a set of Core Plus courses for each career field and 

each DAWIA certification level.30 Employees and their supervisors can use the DAU Core Plus 

Development Guide to identify training beyond certification requirements that allows employees to 

specialize in a specific acquisition area and may be beneficial to employees’ career development or 

performance in a particular assignment.31 Officials indicated they like the idea of Core Plus 

specialization and that it is a step in the direction of better training focused on the competencies 

required for the position and could result in a more capable workforce that delivers improved 

acquisition outcomes.32

DAU is also making inroads with regard to leadership development training. It offers five courses that 

embed leadership development within some Level II certification but primarily Level III certification 

courses across all acquisition career fields. It also promotes employee participation in leadership and 

management courses such as the Harvard Business School for Continuous Learning credit as a means 

of maintaining their certification after acquiring Level III certification.33 Further, DAU established a 

Leadership Learning Center of Excellence (LLCOE) “to increase awareness of the importance of 

leadership to successful acquisition outcomes.”34 The LLCOE offers a combination of courses and 

executive coaching to develop future leaders. In September 2018, DAU began piloting an Acquisition 

Leader Development (ALD) series of seven integrated programs delivered through a combination of 

on-line, classroom, and workplace experiences. The initial ALD program targets early-career 

professionals and the subsequent programs will be available as professionals move through their 

career.35

DoD-unique Certification 

Both the government AWF and industry recognize the DAWIA construct as a well-developed 

certification program. It serves as a model for federal civilian agencies’ acquisition workforce and 

industry.36 However there are no universal certification standards. 

 

29 Data obtained during Section 809 Panel interviews with DoD senior leaders, August 2018. 

30 Charles H. Porter et al., Independent Study of Implementation of Defense Acquisition Workforce Improvement Efforts, CNA, 

December 2016, 26, accessed November 6, 2018, 

http://www.hci.mil/docs/Policy/Reports%20to%20Congress/CNA_Study_Def_AWF_Improvements (Public Release) Feb2017.pdf. 

31 “What is Core Plus?” United States Army Acquisition Support Center, accessed August 28, 2018, https://asc.army.mil/web/faqs-train42/. 

32 Data obtained during Section 809 Panel interviews with DoD senior leaders, August 2018. 

33 DoD, Department of Defense Acquisition Workforce Strategic Plan FY 2016 – FY 2021, 19, accessed November 6, 2018, 

http://www.hci.mil/docs/DoD_Acq_Workforce_Strat_Plan_FY16_FY21.pdf. 

34 “Defense Systems Management College, Leadership Learning Center of Excellence,” DAU, accessed November 20, 2018, 

https://www.dau.mil/locations/dsmc/p/Leadership-Center. 

35 Data obtained during Section 809 Panel interviews with DoD senior leaders, August 2018. 

36 OMB Memorandum, The Federal Acquisition Certification in Contracting Program, January 20, 2006, revised December 2008, accessed 

December 2, 2018, https://obamawhitehouse.archives.gov/sites/default/files/omb/assets/procurement/fac_contracting_program.pdf. 
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The exclusivity associated with DAWIA certification has some unintended, negative consequences. 

DoD-unique standards use DoD-unique terminology that is not widely accepted. Project management, 

for example, is different than DoD science and technology and acquisition governance. DAU has 

comingled the two concepts, which has rendered the associated training unnecessarily complex, 

focusing on policy at the expense of building solid program management or systems engineering skills. 

The intent of DAWIA was to professionalize the DoD AWF; however, a certification program unique to 

DoD presents problems.37 For example, AWF members may have difficulty communicating with 

industry due to use of DoD-unique terminology, and DoD employees may not understand the 

language of business, business activity, or motives, and the realities of how the private sector 

operates.38 This situation can result in insufficiently developed requirements and suboptimally 

negotiated contracts. Standards that support a common foundation for communication and 

collaboration in both government (including DoD) and industry would render workforce members 

more effective.39 It is important to recognize economics and market forces are key differences in dealing 

with firms that offer defense-unique products as compared to firms that offer commercial products. 

DoD’s unique certification program makes it difficult, and sometimes impossible, to hire quality 

employees when they do not comply with DAWIA requirements but are otherwise qualified and 

desirable to do the job. “No rules are so good that there should not be some mechanism to allow 

unusual people to enter the acquisition work force.”40 DoD’s implementation of DAWIA does not give 

hiring managers enough flexibility in choosing the right person for a job. 

Leveraging commercial certification programs would help DoD overcome the unintended 

consequences created by adopting a DoD-unique certification process. The certification programs must 

be based on nationally or internationally recognized standards, not those that simply offer a certificate 

upon completion of training. In implementing this shift in certification focus, it is important to 

recognize what learning content commercial certification programs address, and what learning content 

will need to be addressed in DoD-provided training as truly DoD-unique. 

Conclusions 

Current implementation of DAWIA in DoD policy has succeeded in its goal of supporting 

professionalism of its AWF.41 DoD’s robust AWF management framework promotes education, 

training, and experience that, on completion, allows personnel serving in acquisition positions to be 

certified at various levels. DoD’s implementation of DAWIA falls short, however, by making 

 

Bryan Herdlick, Ph.D., Discipline-Specific Certifications (SE, T&E, MGT): Can they serve as surrogates for DAWIA Qualifications in the DoD 

Contractor Workforce?, presentation at INCOSE, May 30, 2014, accessed August 6, 2018, http://www.incose-somd.org/wpcontent/uploads/2014/06/Professional-Certifications-INCOSE-SoMD.pptx. 

37 Management policies, 10 U.S.C. §1701. 

38 Data obtained during Section 809 Panel interview with industry leaders, August 2018. 

39 Bryan Herdlick, Ph.D., Discipline-Specific Certifications (SE, T&E, MGT): Can they serve as surrogates for DAWIA Qualifications in the DoD 

Contractor Workforce?, presentation at INCOSE, May 30, 2014, accessed August 6, 2018, http://www.incose-somd.org/wpcontent/uploads/2014/06/Professional-Certifications-INCOSE-SoMD.pptx. 

40 Dr. Robert B. Costello, former Under Secretary of Defense (Acquisition), testimony before the Investigations Subcommittee of the 

Committee on Armed Services House of Representatives (Hearing Record), March 28 and April 24, 1990, 163-10. 

41 Charles H. Porter et al., Independent Study of Implementation of Defense Acquisition Workforce Improvement Efforts, CNA, 

December 2016, 26, accessed November 6, 2018, 

http://www.hci.mil/docs/Policy/Reports%20to%20Congress/CNA_Study_Def_AWF_Improvements (Public Release) Feb2017.pdf. 
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certification the goal and not linking certification to occupational qualifications that AWF members can 

demonstrate on the job. 

As DoD continues to reform its AWF policies, it can improve the capabilities of the AWF by 

abandoning the three-level certification structure and instead addressing employee development 

through two processes: 

 Modernizing the existing certification process to emphasize professional skills that are 

transferable across the AWF and industry by relying more on professional certifications based on 

nationally or internationally recognized standards. 

 Preparing employees to perform better in their current jobs and for future positions by adding 

occupational qualifications or demonstrated competencies to an employee’s job series for defense 

acquisition-specific skills. 

The three-level certification structure burdens DoD with mandatory training requirements that, 

although important, do not align with employees’ learning needs as they progress through their 

careers. The layers of DAU training are often not timed to employee job needs and unnecessarily drive 

DAU resources to focus on basic foundational training that can be gained in many other ways. 

Additionally, the three-level structure provides a false sense of assurance that AWF members are jobready without any consideration of their proficiency. A second-order effect of this flaw is DoD uses the 

AWF certification system as selection criteria for filling positions. Thus, it is possible that a level-threecertified applicant for a position with little or no proven job experience would be more likely to be 

considered to fill a position than an experienced applicant who is not level-three certified. 

Professional certification should be to industry- and governmentwide standards. Examples of such 

practice would be certified public accountants (CPAs) or professional engineers for which accepted 

standards fundamental to the profession exist, and they do not vary whether practitioners are in 

industry or government. Training related to these certifications is sanctioned by the professional 

community through independent validation processes. Adoption of a professional standards model 

would permit DAU to shift its training focus and resources to offer employees experiences that fit their 

precise needs as they flow through various jobs in their careers. DAU would also need to focus on the 

defense-unique buying context because it would not be content addressed in industry certification 

programs. It is vital that AWF members understand the similarities and differences in economic and 

market forces for defense-unique and commercial markets and how DoD policies and processes 

address those differences. 

Amend DAWIA to Require Professional Certification 

Professional certification is defined as the process by which an AWF member participates in a program 

that offers a combination of education, training, or experiences based on third-party accredited, 

nationally or internationally recognized standards. Third-party accreditation adds credibility to the 

standard. 

DoD should require professional certification as part of DAWIA when such a program exists for a 

particular career path. Introducing professional certification as an element of the DAWIA process will 
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help to avoid the unintended consequences created by the current DoD-unique certification construct. 

Requiring a professional certification would allow DoD and industry to work from a common body of 

knowledge, improve communication and collaboration between government and industry, increase the 

applicant pool, and raise the professionalism of the DoD AWF to meet national or international 

standards. 

Once DoD AWF members acquired professional certification, they would rely on the certifying 

organization’s process for maintaining certification. That could involve recertifying by means of 

retesting or continuous learning. 

Amending DAWIA to require professional certification also would provide an opportunity for DoD AWF 

members to acquire their training and testing for certification and continuous learning from local 

academic institutions or other accredited education providers in the commercial marketplace. This 

approach could help reduce costs associated with employees being sent to DAU training courses. 

Additionally, costs associated with employees’ professional certification could be covered by DoD 

through redirection of certain training funds. 

If a third-party accredited program based on nationally or internationally recognized standards does 

not exist for a particular DoD AWF career field the certification requirement would not simply 

disappear. Instead, DoD would be responsible for creating its own certification program for that 

particular career field using whatever institutions or resources were deemed appropriate. DoD would 

need to determine the best approach to satisfying the certification requirement and ensuring that it 

conforms with the practices of national accrediting bodies such as ISO. The professional certification 

program should focus on validating employees’ attainment of the fundamental knowledge and skills 

needed for them to be successful across a career continuum. 

In a modernized implementation of DAWIA, professional certification would no longer be the goal for 

AWF members but would instead be a baseline used to demonstrate AWF members’ understanding of 

acquisition subject matter. Beyond professional certification, AWF members would also need to 

demonstrate they are capable of performing acquisition-specific skills in their current or future 

positions to be considered qualified—the new goal. Adopting industry-/governmentwide professional 

certifications similar to the CPA profession as a baseline is not a substitute for the training and 

development responsibility that DoD and other federal agencies bear for the lifetime learning needed 

by their workforces. 

Amend DAWIA to Eliminate the Mandated 24 Semester-Hour Prerequisite 

DAWIA has succeeded in professionalizing the DoD AWF. The number of DoD AWF members with 

baccalaureate and advance degrees has steadily increased.42 Having specific credit requirements in 

statute may hinder hiring managers’ ability to choose the right person for a job. 

DoD should be allowed to determine for itself if specific credit requirements should be applied to any 

particular DoD AWF career fields. Eliminating the statutory mandate would not preclude DoD from 

 

42 DoD, Department of Defense Acquisition Workforce Strategic Plan FY 2016 – FY 2021, 17, accessed November 6, 2018, 

http://www.hci.mil/docs/DoD_Acq_Workforce_Strat_Plan_FY16_FY21.pdf. 
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instituting its own educational requirements if it chose to do so. DoD would have the flexibility to 

make that determination for the acquisition workforce based on its own evaluation, rather than a 

congressional directive. This flexibility would allow DoD to become more agile in hiring candidates 

with backgrounds and education that no one imagined when DAWIA passed, such as data analysis, 

cyber security, supply chain management, or artificial intelligence, including fields that may emerge as 

important skills for a future AWF. 

Implementation 

Legislative Branch 

 Amend 10 U.S.C. § 1701a, Management for Acquisition Workforce Excellence. 

 Require DoD to implement an AWF professional certification program based on third-party 

accredited, nationally or internationally recognized standards for each DoD acquisition 

career field. 

 If a third-party accredited, nationally or internationally recognized certification program 

does not exist for a DoD acquisition career field, require DoD to establish a certification 

program using the best approach determined by the Secretary of Defense for meeting the 

requirement including implementation through entities outside DoD. 

 Amend 10 U.S.C. § 1724, Contracting Positions: Qualification Requirements. 

 Eliminate the requirement for contracting officers to have completed at least 24 semester 

credit hours (or the equivalent) of study in the specified areas. 

 Amend 10 U.S.C. § 1732, Selection Criteria and Procedures. 

 Eliminate the requirement for contracting officers to have completed at least 24 semester 

credit hours (or the equivalent) of study in the specified areas. 

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 5. 

Implications for Other Agencies 

 If Congress agrees to statutorily mandate DoD AWF members to acquire professional 

certifications, then the Section 809 Panel recommends Congress also extend the mandate to the 

federal civilian AWF and provide adequate funding to accommodate such a program. DoD and 

civilian agencies share an applicant pool. Extending the mandate to all federal civilian AWF 

members would raise the professionalism of the entire federal AWF, giving hiring managers 

added assurance they are hiring quality employees, regardless of whether applicants come to 

them from inside or outside their own agency. 
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Recommendation 60: Implement acquisition career paths that are integrated 

with an institutionalized competency model tailored to mission needs. 

Problem 

DoD has taken an unbalanced approach to professionalizing the workforce by focusing primarily on 

training to meet certification requirements, rather than enhancing the qualifications of the workforce. 

To develop the workforce, occupational qualifications and competency measures must exist from the 

time the member enters the AWF until they separate or retire. Twenty-nine percent of AWF members 

are early in their career, meaning they have 20 or more years until they reach retirement eligibility. 

More than half of those individuals have less than 5 years of experience.43 This situation indicates a 

large wave of early career (i.e., pipeline) professionals who require a long-range plan today for their 

development. DoD has not addressed the appropriate standards to guide AWF members in increasing 

their technical and nontechnical competencies to advance in their careers. Solving these problems 

requires culture change regarding how DoD develops highly qualified AWF members. 

Background 

A disconnect exists between what behaviors and qualifications members perceive necessary for 

advancement and promotion, as compared to the actual performance results and promotion potential 

recognized by their agencies.44 Today, pipeline members race to become Level III certified within their 

first 5 years in the AWF, expecting several promotions along the way.45 This promotion momentum 

creates a false impression that members are fully qualified and proficient at or near the 5-year mark, 

whether or not the members have actually performed well in critical elements of their positions and 

demonstrated competencies needed for future positions.46 

Career Paths 

Career paths are used to illustrate career possibilities for employees to progress in their field. Career 

paths help ensure that qualified members are available to fill positions in DoD that require specific 

professional qualifications. A long-range career path includes jobs of increasing variety, complexity, 

responsibility, and accountability, leading to management and leadership opportunities. They describe 

the occupational qualifications (i.e., education, training, and competencies) and key work experiences 

required to advance.47 Career advancement does not constitute a race up the career ladder, but rather, it 

is an escalation of skills to enhance mission success and fulfill the employee. Career paths would 

provide AWF members and their supervisor’s guidance to help determine what each member needs for 

career success. 

 

43 Sean McKenna et al., Retirement in the Acquisition Workforce: Update and Insights for the Section 809 Panel Research,

RAND Corporation, August 30, 2018, 39. 

44 AWF stakeholders, communication with the Section 809 Panel, July-August 2018. 

45 Ibid. 

46 Ibid. 

47 For purposes of this recommendation, the panel defines key work experiences as interactions inside and outside of government that 

foster professional development and career broadening (e.g., rotational assignments, temporary assignments, managerial and leadership 

experience, defense joint/service/agency collaboration, or simulation/exercise engagement). 
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Competency Models 

The purpose of a competency model is to provide measurable and objective means to determine if 

members have demonstrated the needed proficiency to execute tasks and meet position requirements 

for a given job. Competencies are generally gained by a combination of education, training, and 

practice. They are initially verified when the member demonstrates the task, and validated when 

someone who has already mastered the competency, such as a supervisor, acknowledges the member’s 

mastery. In the AWF, most positions require competencies that are characterized by varying 

proficiency requirements. Competency models can add data and direction to career development 

planning by objectively quantifying skill gaps for the individual and DoD Components.48

Competencies are not measures of performance, and are not used to evaluate how well AWF members 

are performing in their current jobs. A member could demonstrate a task competency to a specified 

proficiency standard, yet when expected to execute that task fall short. Competencies are used to 

determine a member’s qualifications, and what level of proficiency a member has mastered for a new 

competency task, or to validate that they have gained or maintained proficiency in a competency task. 

The nontechnical or soft skills are also necessary. AWF members often demonstrate technical 

proficiency but it is equally important that they demonstrate leadership skills that result from 

confidence and commitment. 

For example, new cadet-pilots are gradually introduced to increasingly complex skills under the 

guidance of instructor pilots. The instructor must observe the cadet successfully perform a skill or 

maneuver to specific standards before certifying that the cadet can move on to learn new skills. Only 

when cadets have demonstrated to the instructor that they can handle the aircraft without supervision, 

are they allowed to solo. 

When veteran pilots move to a different aircraft, or return to flying after an extended period away, they 

go through the same process. Although they may not have to recertify on basic flight principles, they 

have to demonstrate to a flight examiner who is experienced and current in the particular aircraft that 

they are qualified to fly that type of aircraft safely. Similarly, AWF members should demonstrate task 

competencies at the required proficiency standard to a more senior AWF member that is qualified and 

experienced in those skills to be considered qualified to perform duties requiring those skills. 

Career Development Culture 

Creating a policy that simply publishes career paths and implements a competency model, without 

recognizing the heavy lifting needed to change culture, would be inadequate. Creating career paths 

and competency models through changes in statute and DoD policy would trigger a fundamental 

pivot, allowing DoD to transform the acquisition culture. This approach would bring together the 

acquisition team in new ways, requiring more interdisciplinary/multifunctional collaboration in 

training and execution. It would shift away from a singular focus on technical skills, to qualifying 

members based on a mix of technical and nontechnical skills necessary for career development and 

mission needs. It would emphasize practices that, if implemented, would be the forcing function to 

change the status quo with respect to how DoD shares new ideas and practices. Shifting to a system 

 

48 For example, Military Departments are U.S. Air Force, U.S. Navy, U.S. Army; DoD Agencies can be Defense Contract Management 

Agency (DCMA), Defense Logistics Agency (DLA). 
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that allows the AWF to develop tailored practical experiences across occupational boundaries would 

enhance DoD’s ability to build teams, think critically, collaborate, innovate, and become less risk 

averse. 

Discussion 

Career Paths 

Career paths are the range of opportunities available within an AWF functional career field and the 

criteria for vertical and horizontal movement to positions of increasing responsibility and opportunity, 

up to the highest position in that field.

Existing Statute 

Although Congress has provided statutory direction that specifically requires DoD to develop career 

paths with key work experiences for more than 27 years, little evidence exists that those measures have 

been implemented comprehensively for the AWF. DAWIA (codified in Chapter 87 of Title 10 

U.S. Code) provided direction to DoD concerning career paths and key work experiences. The statutory 

sections in Table 5-1 all specify career path requirements. In each case Congress’s direction has not 

been implemented in DoD.49

Table 5-1. Chapter 87, Title 10 U.S.C., Statute Governing Career Development 

DAWIA Statute Purpose

§ 1701a(b) 

Performance 

Management 

Requires DoD development of attractive career paths. Requires managers to develop 

performance plans to give members an understanding of how their performance contributes to 

their organization's mission and the success of the defense acquisition system. 

§ 1721 Designation of 

acquisition positions 

Chapter 87, 10 U.S.C, states that as a minimum the AWF comprises the following acquisitionrelated positions: 

 Program management 

 Systems planning, research, development, engineering, and testing 

 Procurement, including contracting 

 Industrial property management 

 Logistics 

 Quality control and assurance 

 Manufacturing and production 

 Business, cost estimating, financial management, and auditing 

 Education, training, and development 

 Construction 

 Joint development and production (other agencies and foreign) 

 Intellectual property 

§ 1722 Career 

Development 

Requires appropriate career paths that include education, training, experience, and assignments 

necessary for career progression to the most senior acquisition positions. 

 

49 Defense Acquisition Workforce, 10 U.S.C. Chapter 87. 
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DAWIA Statute Purpose

§ 1722b Special 

requirements for 

civilian employees in 

the acquisition field 

Requires DoD to establish policy/guidance for proper development, assignment, and 

employment of civilian members. Specifically requires the following: 

 Career paths 

 Workforce strategy 

 Opportunities for promotion 

 Succession planning 

 Workforce development strategy which focuses on diversity in promotion, 

advancement, and experiential opportunities. 

§ 1723(b) Career Path 

Requirements 

Requires career paths to include “completion of course work, on-the-job-training and 

demonstration of qualifications.” Requires DoD to “develop key work experiences to foster 

interaction with AWF & end-user.” Specifically for the AWF, these experiences are to be 

imbedded in the end-user environment to enhance experiential learning and help AWF members 

become seasoned. 

Need for Change 

10 U.S.C. § 1722 “requires appropriate career paths that include education, training, experience, and 

assignments necessary for career progression to the most senior acquisition positions,” yet DoD has not 

created career paths for all of its acquisition career fields.50 Congress purposefully allowed DoD to use 

discretion in applying this statute; however, DoD failed to make substantial strides to implement career 

paths and key experiences for career progression. Congress needs to reinforce what is already in 

statute.

Discussion with all of the DoD Directors, Acquisition Career Management (DACMs) and several key 

DAU stakeholders highlighted that DoDI 5000.66, Defense Acquisition Workforce Education, Training, 

Experience, And Career Development Program, and its accompanying Defense Acquisition Workforce 

Program Desk Guide (Desk Guide), issued on July 27, 2017, do not clearly explain the workforce 

requirements for career paths.51 For example, the DoDI contains Section 6.2, Career Path Requirements, 

however it provides no actual requirements. DACM and DAU engagement also revealed that 

Section 6.2 currently only applies to specialty career fields (e.g., international acquisition). The Desk 

Guide defines the AWF by adding a career field not previously defined anywhere else (small business), 

and excludes international acquisition. DoD fails to use instructions and policy consistently for the 

AWF to identify which DoD policy requirements apply to them, falling short of congressional intent. 

DoD’s instructions and guides governing career paths and key work experiences is summarized in 

Table 5-2 below.52

 

50 Career Development, 10 U.S.C. § 1722. 

51 Defense Acquisition Workforce Education, Training, Experience, and Career Development Program, DoDI 5000.66 (2017). 

52 Defense Acquisition Workforce, 10 U.S.C. Chapter 87. 
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Table 5-2. DoD Instruction Governing Career Paths and Development 

DoDI Purpose

DoDI 5000.66 Defense Acquisition 

Workforce Education, Training, Experience, 

and Career Development Program [AWF 

Program] 

Replaces any other policy and procedure 

formally issued by the DoD to the AWF for 

career development. 

“In order to establish a consistent framework for constructing acquisition 

competency models and to facilitate the analysis of cross-functional 

competencies, the AWF has adopted the 5-tiered DoD Competency 

Management Framework outlined in Volume 250 of DoDI 1400.25.” 

Contains Section 6.2, Career Path Requirements, which states, “AWF members 

assigned to career path positions must complete requirements for the career 

path.” 

Current DoD policy is confusing to the point that it has become unusable, largely because its 

regulations fail to define terms to specify the career fields to which this guidance applies. For example, 

10 U.S.C § 1721, Designation of Acquisition Positions, broadly designates positions that are considered 

related to the AWF; however, DoD never crosswalks any AWF career fields to this designation. 

“DoDI 5000.66 gives no direction to its workforce; it’s not written for the workforce, it’s written to 

describe roles.”53 Adding a layer of confusion to the problem, existing workforce career development 

guidance such as the DAU websites, DoDI 5000.66, and the Acquisition Workforce Strategic Plan FY16–

21, indicate either 14 or 15 career fields. 

Requirements for Career Paths—Key Work Experience 

Congress has directed DoD to develop and implement key work experiences in career paths for 

decades.54 Key work experiences are interactions inside and outside of government that foster 

professional development and career broadening (e.g., industry exchange, temporary/rotational 

assignments, managerial and leadership experience/development, multidiscipline/multi-occupational 

collaboration, simulation/exercise engagements, and contingency deployments). 

Providing AWF members with a variety of key work experiences is vital for enhancing their 

proficiency in collaboration and networking as technology evolves and becomes increasingly prevalent 

in the AWF’s daily operations. 

Technology is also making some jobs far more important, especially those that only smart government 

managers can perform, like building bridges among the increasingly networked government and 

connecting with the ever-growing array of government’s constituencies.55

Each AWF career path should include key work experiences that can give AWF members opportunities 

to develop technical and nontechnical competencies necessary by acquiring skills for innovatively 

solving real-world problems. AWF stakeholders emphasized the importance of determining how well a 

 

53 DACM, AWF stakeholders, communication with the Section 809 Panel, July-August 2018. 

54 General Education, Training, and Experience Requirements, 10 U.S.C. § 1723. 

55 “Excellence in Government: Solving the Right Problem with the Federal Workforce,” Terry Gerton and Donald F. Kettl, Government 

Executive, September 25, 2018, accessed November 6, 2018, https://www.govexec.com/excellence/managementmatters/2018/09/solving-right-problem-federal-workforce/151511/. 
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member learns to reflect on and solve problems.56 These key experiences can allow individual members 

and the organization to which they belong to experience different roles and prepare for additional 

responsibilities. 

Rotational Assignments 

Recommendation 61 of this chapter stresses the importance of PPEPs for building the AWF’s 

understanding of how industry contributes to national security. The opportunities for professional 

development fostered by an exchange with industry cannot be matched by internal government 

mechanisms.57 Specific opportunities like PPEPs should be identified for each career field, and 

integrated into career paths. Rotational assignments within DoD can also be used to provide joint key 

work experience and to spread best practices among the acquisition community. 

SME Track 

Many AWF members are specialists in their craft, and although they want to skillfully master their 

jobs, they have no desire to lead organizations. These members’ goals may be to have a career as an 

SME. Similarly, DoD has many missions that require specific technical career paths. DoD needs the 

flexibility to identify career paths that focus on accumulating high expertise in a particular domain or 

key technical skills. Providing key work experiences that focus on enhancing domain expertise and 

technical skills would support members who want to pursue the SME track. Supervisors and members 

should continue career development conversations throughout members’ careers. Members who select 

an SME track should, however, have an option to change course and gain the competencies necessary 

for leading people. 

Managerial/Leadership Track 

A recurring theme in stakeholder feedback was the importance of leadership. In general, stakeholders 

indicated DoD needs to identify members with managerial and leadership interests earlier in their 

careers and provide avenues for them to practice small-scale leadership before taking on a supervisory 

role. This practice is common in military career models, but not often practiced in the civilian 

workforce. DoD should facilitate early leadership experiences for members interested in 

managerial/leadership tracks and prepare them in nontechnical skills discussed below. 

Implementing a Career Path Framework in the AWF 

The Section 809 Panel assessed the case study below, focused on the financial management (FM) 

workforce, as an example that could be emulated for the AWF. This case study notes similarities 

between the AWF and the financial-management sector, with its 13 distinct career fields, and 

acknowledged the AWF career fields have a broader array of disciplines that perform drastically 

different roles within DoD. Because the AWF performs across many different domains and supports 

many different missions, functional communities should provide input to the DoD Components 

regarding the broad body of knowledge that is common across their functional career fields, and the 

 

56 AWF senior leader, communication with the Section 809 Panel, June-August 2018. 

57 AWF stakeholders, communication with the Section 809 Panel, July-August 2018. 
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DoD Component should be responsible for developing career paths that consider the functional input 

yet are tailored to the DoD Components’ respective missions. 

Case Study: 

Best Practice Civilian Career Roadmap and Competency Development in the FM Workforce 

This case study provides overarching career development information for the FM workforce, which marries measurable 

job activities and aligns competencies for its workforce into career paths.58 This case study, which highlights career paths, 

as a best practice and is similar to what is recommended for the DoD AWF. More information about the FM competency 

model is available at: https://fmonline.ousdc.osd.mil/Professional/Civilian-Career.aspx. 

Problem: The DoD FM community recognized that no institutionalized, standard body of knowledge existed for the 

FM workforce and used a competency foundation to improve the overall proficiency of the workforce. 

Example: An Air Force hiring manager looking for a GS-12 0510 Accountant could not determine the competency or 

proficiency of an Army GS-12 0510 Accountant. 

Context: The Human Capital and Resource Management unit for the Office of the Under Secretary of Defense (OUSD) 

(Comptroller) developed a comprehensive FM workforce portfolio that includes DoD-wide FM civilian career roadmaps. 

The portfolio also includes a competency-based certification program that mirrors the expectations in the career 

roadmaps. After a pilot in 2013 and approval of DoDI 1300.26, implementation began in 2014 and the program was fully 

operational in 2015. 

Highlights: The program’s foundation is a set of 24 enterprisewide competencies aligned to applicable occupational 

series, their associated proficiency levels, and selected leadership competencies. FM community leaders are able to 

assess and close gaps between current competencies and capabilities and those required in the future. Because the 

program is based on enterprisewide FM competencies, it is the centerpiece of the community’s strategic human capital 

mosaic, which binds together career roadmaps, IDPs, competency gap assessments, associated strategies to close the 

gaps, and ultimately hiring practices. 

 As members progress, at a certain level there is a mandate for a minimum 3-month developmental assignment. 

 An e-catalogue includes a course inventory with more than 13,000 courses aligned to the FM competencies to 

include 80 web-based courses developed by the OUSD(Comptroller) office. 

 The program spans the tenure of the employee and uses technical and nontechnical competencies and 

proficiency levels. 

 The program operates within a governance structure of DoD FM leaders from the DoD Components; they 

provide input and recommendations on the program’s policy and overall operation. 

The program enables DoD FM leadership to focus training in necessary areas and track progress. It reinforces the culture 

of professional development within DoD, ultimately increasing proficiency in technical and leadership disciplines and 

enabling the FM community to keep pace with evolving warfighter needs. 

In this construct, members of the AWF can visualize what experiences, (i.e., education, competencies, 

potential assignments, leadership) constitute a path toward career progression that aligns with their 

individual goals to move toward being an SME or leader. It is important to identify how the AWF 

could develop these two integrated concepts for each career field, similar to the FM community’s career 

roadmap. 

 

58 “Civilian Career Roadmaps & Job Items Library,” DoD FM Online, accessed November 6, 2018, 

https://fmonline.ousdc.osd.mil/Professional/Civilian-Career.aspx. 
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How DoD establishes its policies and funding to support these initiatives will dictate the range and 

success they will have on influencing the workforce. To be truly effective, echelons below OSD 

(i.e., DoD Components) should manage their own programs’ Defense Acquisition Workforce 

Development Fund (DAWDF) allocations to match specific mission-related, career-broadening 

opportunities to what would be best for the individual AWF members and their organizations’ mission 

requirements. DoD also must understand that talent management plays an important role in 

integrating career paths within its workforce. Successfully implementing a talent management 

framework would help unleash the benefits of career paths for individual employees and DoD as a 

whole. 

Competency Models 

Congress needs to enact statute and guidance to require competency models with proficiency 

standards that include technical and nontechnical skills to be implemented for the AWF. A competency 

model requires a tailored, mission-related task set of competencies, with proficiency standards that 

measure both technical and nontechnical skills. It must be designed to assist each AWF member to 

develop and demonstrate the competencies and proficiencies for success through all phases of their 

careers, based on the following definitions: 

 Task Competency: Methods for a member to demonstrate individual tasks or task elements 

specific to the member’s current position in an effort to occupationally qualify the member in 

“an observable, measurable pattern of knowledge, abilities, skills, and other characteristics that 

individuals need to perform work roles or occupational functions successfully.”59 Task 

competencies use specific mission-related tasks that require direct supervisor feedback to 

identify any on-the-job training gaps present in real-time. At all stages of their career, AWF 

members should be assessed by a more senior acquisition professional for each task competency 

using proficiency standards. Competencies may be gained through education, training, or 

experience. Task competencies can be categorized as technical or nontechnical as follows: 

 Technical: Associated with a specific occupation or functional skills to perform the job task 

required. These competencies reflect domain-specific requirements and are associated with 

critical functions particular to the mission.60

 Nontechnical: Demonstrate the ability to relate, manage, lead and/or develop others. 

Personal attributes and characteristics associated with “people skills or soft skills.”61 

 Proficiency Standards: Distinct formal categories used to describe various levels of expertise 

which represent a scale of demonstrated occupational skills. These categories describe the 

member’s ability to execute a task competency successfully and are used as an occupational 

qualification measure. 

 

59 DoD Civilian Personnel Management System: Civilian Strategic Human Capital Planning (SHCP), DoDI 1400.25, Volume 250, 21 (2016). 

60 Ibid. 

61 Ibid. 
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DoD should consider following proficiency standards, which would correspond to specific task 

competencies, as a way for the supervisor to determine how a member demonstrates a single task for 

purposes of occupational qualification. The following are examples of possible proficiency standards: 

 Entry: The level at which an individual demonstrates a particular task competency in basic 

acquisition situations. As related to tasks, the member can identify “simple processes; name 

parts, tools, and simple facts/terms about the task; requires close/extensive guidance, and needs 

to be told or shown how to do most of the tasks.”62 

 Intermediate: The level at which the individual demonstrates a particular task competency in 

some difficult acquisition situations. As related to the task, the member demonstrates 

successfully most parts of the task but requires frequent guidance and oversight.63 On-the-job 

training is necessary to develop task proficiency. Intermittently executes tasks independently. 

 Advanced: The level at which the individual demonstrates a particular task competency in 

select complex acquisition situations. As related to the task competency, the member 

demonstrates extensive skill and is technically competent in most complex situations in one or 

more areas. “Applies the competency in difficult situations, needing only spot checks; can 

determine step-by-step procedures for the tasks; only requires occasional guidance.”64 

 Expert: The level at which the individual demonstrates a particular task competency in the 

widest variety of acquisition situations. As related to the task competency, the member 

demonstrates expert technical skills at the highest level of complexity with no assistance. 

Superior ability to transform technical skill into teachable actions for the occupational series in 

which they reside. 

Competency Model with Proficiency Standards 

To date, AWF qualifications have centered on skills that were largely unmeasurable because they lack 

proficiency standards to gauge the competency level. Consequently, DoD has used time served and 

certification levels as a proxy for experience when qualifying the workforce. This model does not allow 

DoD to plan for future career development, while measuring current competencies. “We need to move 

from a focus on rules and compliance to a focus on performance and learning.”65 A formalized method 

to determine individual proficiency standards would identify how a member actually demonstrates the 

job tasks, and to what level of proficiency, rather than just cataloging how many years a member has 

held an acquisition position. By knowing what proficiency is expected of them in the future, members 

and their supervisors can address appropriate development needs when creating IDPs. 

 

62 OUSD, DoD Financial Management: Certification Program Handbook, October 2016, accessed November 6, 2018, 

https://fmonline.ousdc.osd.mil/Assets/documents/docs-certification/DoD_FMCertification_Handbook.pdf. 

63 Ibid. 

64 Ibid. 

65 “Excellence in Government: Solving the Right Problem with the Federal Workforce,” Terry Gerton and Donald F. Kettl, Government 

Executive, September 25, 2018, accessed November 6, 2018, https://www.govexec.com/excellence/managementmatters/2018/09/solving-right-problem-federal-workforce/151511/. 
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At the DoD Component or unit level, hiring activities do not have a method to effectively qualify 

members using a set of competencies, so they cannot effectively determine their person’s fitness for the 

next job.66

Replace the over-defined job specifications of the current system with a competency-based, talentmanagement model. Competencies should be vested in individuals and individuals should be matched to 

missions, instead of having static occupations define both. Rules have calcified the federal personnel 

system to the point that compliance has become the driving rule. What the federal government most needs 

is a system that recognizes that it doesn’t matter where government employees sit—what matters is what 

they know and how they contribute to the mission. It’s the capacity of the government’s managers, not the 

specifications of their seats, that counts. As work becomes more complex and more managers need to work 

across complex networks to get the job done, that’s going to be increasingly important.67

In today’s system, if new members demonstrate the same tasks every year for 4 years in a row with no 

attempt made to broaden their career experiences, they are presumed to be equally qualified as 

individuals who demonstrated a variety of tasks over the same period.68 In either case, 4 years’ 

experience provides no information about how proficient the members are at the tasks they 

demonstrated, or to what degree new tasks have been introduced and mastered. 

DoD must stop attempting to categorize the AWF into buckets of apprentice, journeyman, and expert. 

Every AWF occupation requires varying degrees of expertise as it relates to mission tasks. Those tasks 

represent an array of proficiency standards. Individuals should be considered for moving to the next 

tier based on how they perform mission-related tasks at the appropriate mission-related proficiency 

standard. 

Many stakeholders and senior leaders reported that AWF members need a level of proficiency that 

directly correlates to a current position and current and future mission requirements. They indicated 

there is no value in attempting to master a general list of competencies for a career field, some of which 

their AWF members may never be required to use. Some pointed to their own careers, for which they 

have mastered a specific AWF competency so long ago that their skills atrophied far below what would 

be considered expert level today.69 Not all competencies are necessary to master, and competency 

requirements should be tailored for each position. DoD should consider the following in implementing 

competency models: 

 

66 Unit is a level of organization below the Military Department/Defense Agency. It is usually associated with a command led by a flag 

officer. Designation of the unit to participate in the development of competency and proficiency standards is left to the Military 

Department/Defense Agency. 

67 “Excellence in Government: Solving the Right Problem with the Federal Workforce,” Terry Gerton and Donald F. Kettl, Government 

Executive, September 25, 2018, accessed November 6, 2018, https://www.govexec.com/excellence/managementmatters/2018/09/solving-right-problem-federal-workforce/151511/. 

68 AWF stakeholders, communication with the Section 809 Panel, July-August 2018 

69 Ibid. 
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 Key work experiences have a return on investment greater than a classroom can offer.70

 A competency model allows for DoD to consider the competencies commercial-sector 

employees gained by their experience in industry that could satisfy competencies in the 

government AWF, and enable DoD to recruit qualified midcareer candidates when needed. It 

would allow AWF members to leave government for jobs in industry and return later, bringing 

with them an increased understanding of industry that DoD needs. If DoD considers the 

competencies developed in industry as part of the competency models, AWF members may 

regard opportunities with industry as career enhancements, rather than career interruptions. 

 The AWF is dynamic. DoD’s mission evolves continuously, so the AWF must be able to 

innovate with changes in mission, technology, law, policy, operating concepts, or other factors. 

AWF members’ skills cannot be static, and must be tailored to the mission. 

Defense Acquisition Corps 

As articulated in 10 U.S.C. § 1731, Defense Acquisition Corps (DAC) and 10 U.S.C. § 1732, Selection 

Criteria and Procedures, the DAC construct has outlived its purpose, and should be eliminated from 

statute. 10 U.S.C. § 1732, Critical Acquisition Positions, requires AWF members to meet a 4-year 

experience requirement, specific education requirements, and “demonstrated analytical and decisionmaking capabilities, job performance, and qualifying experience.” These criteria flow over to § 1733 

(CAP) because these candidates are required to be members of DAC. A shift in focus from years of 

experience to demonstrated skill would render DAC qualification criteria obsolete. 

Interviews with DoD stakeholders showed that, for the most part, the DoD Components do not use the 

DAC construct to manage the AWF. Since DAWIA was enacted in statute, other means have been used 

to track and manage the AWF to ensure that the requirements of these provisions are met. Specific 

DAC provisions, such as officer promotion rate and the mobility statement, should be retained in 

statute but not explicitly linked to DAC. 

Critical Acquisition Positions 

The requirements in 10 U.S.C. § 1733, Critical Acquisition Positions, do not appropriately describe the 

competencies necessary for these positions. Experience based on years in a job as well as specific 

education requirements should be replaced with competency requirements. DoD should specify 

competency requirements for CAPs. The implementation of career paths and a competency model for 

the AWF should allow DoD the flexibility to define the standards for the AWF and CAPs within each 

career field. 

Basis for Statutory Change to Require Competency Model 

DoD has dedicated substantial resources toward competency development (e.g., AWQI, Acquisition 

Qualification Standard, DoDI 1400.25 Civilian Personnel Management System).71 Although these 

 

70 Ibid. 

71 DAU Stakeholder Engagement, August 2018. DoD Civilian Personnel Management System: Civilian Strategic Human Capital Planning 

(SHCP), DoDI 1400.25, Volume 250, 2 (2016). R. Wood, “Knowledge vs. Experience; The Need for an Acquisition On-the-Job Qualification 

Standard,” Defense AT&L Magazine, May-June 2009, 10-12. 
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models were developed, they have not been successfully implemented into the civilian AWF. Because 

all of these efforts and guidance are not mandatory for the AWF, they have not been implemented. The 

panel does not endorse any particular model, rather examples are provided to demonstrate that a 

significant body of knowledge already exists to begin the work needed to develop a competency model 

for each AWF career field. 

Nontechnical Competencies 

With implementation of this recommendation, AWF members would be required to demonstrate the 

appropriate balance of technical and nontechnical skills, as both technical and nontechnical skills are 

required to meet mission needs. The AWF has failed to appropriately develop nontechnical 

competencies before members begin to supervise. Requiring AWF members to demonstrate 

nontechnical competencies helps their supervisors determine members’ readiness for positions that 

requires them to interact more with people. The following are examples derived from the DoD FM 

community requirements:72 

 brainstorming in a group setting 

 flexibility 

 patience 

 resilience 

 interpersonal skills 

 credibility 

 team building 

Congress has repeatedly directed DoD to “develop key work experiences that foster interaction with 

the acquisition workforce and end-user.”73 In doing so, DoD should include appropriate nontechnical 

competencies that meet Congress’s intent for each AWF career field. 

Arguably, the civilian workforce is reluctant to evaluate the same type of character traits known as 

people skills that the military evaluates. Military performance reports target individual nontechnical 

competencies in addition to technical competencies to assess performance and encourage specific 

behaviors to build military culture. For example, the Army officer rating system evaluates individuals 

on these skills:74

 communication 

 teamwork 

 followership 

 team building 

 interpersonal skills (i.e., people, coaching, teaching, counseling, motivating, empowering) 

 emotional characteristics (i.e., self-control, calm under pressure) 

 

72 “Civilian Career Roadmaps & Job Items Library,” DoD FM Online, accessed November 6, 2018, 

https://fmonline.ousdc.osd.mil/Professional/Civilian-Career.aspx. 

73 Career Path Requirements, 10 U.S.C. § 1723(b). 

74 See sample Army Officer Evaluation Report, DA Form 67-9, October 2011, accessed September 5, 2018, 

https://www.femplate.com/wp-content/uploads/2017/10/army-oer-support-form-army-oer-support-form-army-oer-support-formexamples-army-oer-support-form-character-bullets-army-oer-support-form.jpg. 
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 ability to develop subordinates 

 conducting assessments (i.e., after action reports, facilitating continuous improvement) 

The Senior Executive Service (SES) qualification standards provide an example of how the civilian 

workforce assesses critical nontechnical skills (e.g., collaboration, team building, innovation). Almost 

all of the SES skills depend on employees’ ability to successfully master nontechnical skills that 

demonstrate their ability to lead people, lead change, drive results, build business acumen, and build 

coalitions. 75 To qualify for an SES position, an employee must draw from accomplishments only within 

the last 10 years prior to appointment. 76 

There are specific things DoD can do to help develop critical nontechnical competencies, as they relate 

to career development. Enhancing these competencies could help alleviate cultural boundaries that 

exist around stove-piped career fields in the AWF. Some examples include fostering the ability to build 

and lead cohesive teams, applying critical thinking to technical problems, collaborating, and 

experimenting with ways to eliminate risk-averse habits and build innovative solutions. 

Change Status Quo Culture 

There is a continuous demand for culture change in the AWF, yet DoD does not routinely provide 

AWF members with the nontechnical skills needed to drive change. To build practical experience, 

reduce gaps, and cultivate these nontechnical competencies, DoD must develop these nontechnical 

skills earlier in members’ careers. “Innovation occurs when organizations solve difficult problems in an 

environment that encourages experimentation, risk taking and allows for short term failure.”77 With 

new ideas come increased risk, unacquainted procedure, and inexperience. Often, it can be difficult for 

a good idea to withstand the momentum familiarity carries. 

Furthering a culture of innovation within the DoD will contribute to the achievement of these 

transformational visions. Senior DoD leaders have endorsed and promulgated a culture of innovation ... 

and challenged officers during a speech at the U.S. Naval Academy to ‘risk failure, because in failure, we 

will learn and acquire the knowledge that will make successful innovation possible.’78

The functional communities and DoD Components must provide means for the AWF to cultivate new 

experiences—cross-functional and cross-organizational discussions with scenarios that highlight best 

practices in critical thinking, collaboration, innovation, and reduced risk aversion—resulting in a more 

mission focused mindset. AWF members can benefit from trusted sources that have navigated similar 

situations. AWF members are often reluctant to try innovative practices without a coach or a mentor.79

 

75 “Senior Executive Service: Executive Core Qualifications,” OPM.gov, accessed September 1, 2018, https://www.opm.gov/policy-dataoversight/senior-executive-service/executive-core-qualifications/. 

76 Ibid. 

77 Jeff Windham, “20 Observations on Innovation,” Defense AT&L Magazine, July-August 2016, accessed November 6, 2018, 

https://www.dau.mil/library/defense-atl/DATLFiles/Jul-Aug2016/Windham.pdf. 

78 Craig Whittinghill, David Berkowitz, and Phillip A. Farrington, “Does Your Culture Encourage Innovation?,” Defense Acquisition Research 

Journal, Volume 22, Issue 2, 216-239 (2015). 

79 AWF stakeholders, communication with Section 809 Panel, July-August 2018. 
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Mentorship 

Military leaders spend much of their time developing subordinates; it is engrained in their culture, and 

they are evaluated on how well they develop people and teams.80 Military leaders encourage critical 

thinking skills by coaching and mentoring at all levels.81 Much can be gained from how the privatesector provides mentoring as well. A February 2018 GAO report noted that in one Fortune 500 

company “leaders are expected to participate in long-term career development for people two-levels 

below them, and provide managers access to external coaches who focus more on leadership.”82 

Case Study: 

Defense Logistics Agency (DLA) Energy’s Contracting Officer Mentoring Program 

This case study of DLA Energy’s Contracting Officer Mentoring Program, illustrates the power of mentorship and 

collaboration. The agency cross-populates its contracting officers within an organization. This program resulted in a 

chain-reaction of critical thinking and innovation, while cultivating acquisition conversations in small-group settings to 

help solve unique problem sets. 

DLA Energy’s Contracting Officer Mentoring Program enhances experiential and collaborative skills. This program 

purposefully brings together individuals from diverse experiences regarding contract types, complexity, tactics, policy 

barriers, career path, and rotational experiences. This method provided a platform for cross-directorate networking and 

experiential learning. 

The Contracting Officer Mentoring Program runs annually for 8-months, meeting monthly to discuss a specific topic with 

senior leaders or SMEs. The program has a mix of small-group sessions and large-group guest speaker sessions. The largegroup sessions are led by an assigned emerging leader (someone new to supervision), which provides these individuals 

the opportunity to lead a larger group and interact independently with the senior leader when establishing a forum for 

the session. In the small group sessions, contracting officers interact with an organizational senior leader on topics 

chosen based on workforce feedback. 

The idea-sharing approach resulted in new uses of contracting methods and techniques to streamline award time, learn 

more about industry challenges, and collaborate on best practices. It also forged informal mentoring matches. Workforce 

feedback regarding this program indicates it has been completely successful and rewarding to both the participants and 

the organization. 

Implementing a Competency Model Framework in the AWF 

Although functional communities play a critical role identifying career field foundational knowledge 

that is common across DoD, the role of the DoD Components in shaping competencies based on 

mission requirements and the role of members’ direct units in determining the competencies and 

proficiencies for specific jobs is more important.83 DoD should consider the FM Case Study’s best 

practice of the functional community only flowing down the broadest competencies from the top. For 

example, the FM community had just 24 DoD-wide competencies established across all 13 FM career 

 

80 Ibid. Army Officer Evaluation Report, DA Form 67-9, October 2011, accessed September 5, 2018, https://www.femplate.com/wpcontent/uploads/2017/10/army-oer-support-form-army-oer-support-form-army-oer-support-form-examples-army-oer-support-formcharacter-bullets-army-oer-support-form.jpg. 

81 AWF stakeholders, communication with Section 809 Panel, July-August 2018. 

82 GAO, Defense Acquisition Workforce: Opportunities Exist to Improve Practices for Developing Program Managers, GAO-18-217,

February 2018, accessed July 25, 2018, https://www.gao.gov/assets/700/690094.pdf. 

83 AWF stakeholders, communication with Section 809 Panel, July-August 2018. 
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fields. FM’s additional competencies were tailored at the DoD Component and unit level. In the AWF 

context, equivalent inputs could come from the following: 

 Functional communities (i.e., functional leads and functional integrated product teams) for 

broad technical knowledge. 

 DoD Components (e.g., U.S. Air Force, Defense Contract Management Agency) for mission- and 

domain-specific knowledge. 

 Unit (e.g., Acquisition Systems Command, DLA Energy) for job-specific requirements. 

The broadest input would come from the functional communities, which would determine each 

acquisition career field’s baseline range of competencies, define the terms that describe proficiency 

standards, and ensure the baseline is consistent across DoD. Then, the DoD Components would add 

competencies specific to their respective current or future mission requirements. Lastly, the unit would 

develop occupational competencies unique to its specific jobs and mission needs. DoD must recognize 

that the competency model would be best served by placing the functional communities in a 

supporting role in relation to the DoD Components. DoD Components are well-positioned to 

understand their own competency requirements, and they should take the lead in developing the 

competency model within their ranks. 

At this lowest level, the unit would draw from the functional communities’ and DoD Components’ 

catalogs of competencies for the career fields to determine which requirements for a particular job or 

position are necessary. Supervisors would then qualify AWF members by assessing their competencies 

and proficiencies against job requirements to determine their development needs. 

These layers would not produce competencies that duplicate each other, but rather would build off of 

the foundational competencies described at the functional community level, and become more mission 

focused with the agency and unit task competencies. This example shows the functional community, 

DoD Components, and units as decision makers for task competency and proficiency standard 

development; however, DoD should be given the flexibility to implement this arrangement in any 

appropriate fashion to allow the development of the proficiency standards. DoD would have the 

flexibility to recognize existing models from career fields, like FM, that may have already implemented 

competency models. 

Conclusions 

To help ensure members of the DoD AWF are adequately qualified to perform tasks associated with 

their respective positions and prepared to traverse their chosen career trajectory, DoD must clearly 

identify and define AWF career paths and create competency models. 

It’s no secret that Department of Defense (DoD) acquisition professionals work in a very challenging, 

high-pressure environment. The acquisition process involves an integrated product team of diverse 

functional experts who must employ critical thinking skills, collaborative problem-solving and robust 
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communications to be effective. This dynamic means that the acquisition team’s behaviors often can be 

critical factors in a program’s outcome.84

Integrating Career Paths and Competency Models 

DoD could accelerate cultural change in the AWF by using career paths and competency models 

together. Although either could be implemented independently, integrating them adds leverage to 

create change. If, for example, acquisition units map the competencies and proficiencies to acquisition 

career field career paths, AWF members would see “the range of opportunities available within an 

AWF functional career field and the criteria for vertical and horizontal movement to positions of 

increasing responsibility and opportunity, up to the highest position in that field,” and could direct 

their career development to acquire needed technical and nontechnical skills.85 Although some DoD 

Components have made progress in creating an integrated career path and competency model, none 

have a complete system as described here. 

Such a model can best be achieved when DoD Components use key work experiences to bring 

acquisition teams together in ways that transform the workforce culture. The following are three key 

areas that illustrate how DoD can reinforce competency model skills by creating key career path work 

experiences: 

 Building and leading cohesive teams to enhance critical thinking. 

 Providing opportunities for collaboration. 

 Encouraging risk taking and innovation. 

AWF members need opportunities to practice certain nontechnical skills that would match well with 

the key work experiences needed to reinforce the acquisition team concept (i.e., multidiscipline/cross 

organizational teams). These interconnected competencies (i.e., building teams, critical thinking, 

collaboration, innovation, and risk taking) embody the core nontechnical skills required to navigate 

defense acquisition in the 21st century dynamic marketplace. The examples below illustrate a sample of 

the broader opportunities. 

Creating Key Work Experiences that Broaden Culture and Break Down Barriers 

Building and Leading Cohesive Teams in Effort to Enhance Critical Thinking 

Successful teams identified in academic literature—such as New Zealand’s All Blacks rugby team, the 

Navy Seals, Clemson Football, the Miami Heat, Apple, and Ford—consistently practice team building, 

cohesiveness, and distinct team development using team-oriented critical thinking to solve problems.86

Much of the academic research showed that critical thinking occurs in multidiscipline/ crossoccupational collaborative group settings, exercises, and simulations that bring together the acquisition 

team to practice specific decision-making and problem-solving skills. To capitalize on this success 

model, DoD needs to do the following: 

 

84 Brian Schultz, “The Seven Lethal Acquisition Diseases,” Defense AT&L Magazine, January-February 2017, 32-35, accessed 

September 13, 2018. https://www.dau.mil/library/defense-atl/DATLFiles/Jan-Feb2017/Schultz.pdf. 

85 As cited under the career path definition earlier in this section. 

86 Jon Gordon, The Power of Positive Leadership (Hoboken, NJ: John Wiley & Sons, Inc., 2017). 
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 Transition all AWF career paths from presentation-based training to experiential learning that 

incorporates simulation exercises for which critical thinking, rather than rote learning, is 

demonstrated. 

 Include open-ended exercises for which critical thinking is emphasized throughout all AWF 

career paths. Training, other than for basic technical skills, should include multidiscipline/crossoccupational, team-based scenarios. 

Collaboration 

Many programmatic roadblocks and cultural issues can be addressed if DoD enhances internal and 

external collaboration. “Collaboration is NOT cooperation...it is more than the intersection of common 

goals, but a collective determination to reach an identical objective by sharing knowledge, learning and 

building consensus.”87 Every conversation that explores how other entities solve acquisition problems 

induces innovation. 

Innovation, in the commercial and the DoD context, tends to be based on collaboration. Multiple 

technical disciplines often have to come together, and the synergy between multiple disciplines may be the 

central feature of the innovative idea. In the DoD, technical ideas only reach the market when the using 

[M]ilitary Service decides to embrace the new concept or new product. This is not quite the same as the 

commercial market where ‘early adopters’ from a large customer base may help a technology establish a 

foothold and gain credence. Commercial entrepreneurs build the better mouse trap first and expect 

customers to come. In DoD the customers, the [M]ilitary Departments, ask for fairly specific products 

and then budget the resources to pay for the development of those products.88

DoD could enhance collaboration by promoting and using a platform specifically for the AWF to 

effectively share ideas, collaborate, and trade documents representing best practice.89 Examples that 

illustrate how such collaboration can work already exist: 

 One stakeholder organization indicated that it recognizes and rewards implementation of other 

agencies’ best practices.90 Often, recognition is given to the inventor of a best practice, which 

fosters recreating the wheel, rather than collaboration. Real problem solving occurs when two 

DoD components talk to each other when trying to implement a solution. 

 The FM community has mandatory developmental assignments as part of its career 

progression, which greatly aids collaboration and generation of new ideas.91

 

87 “Leadership Collaboration Skills: Everyone Focuses on Developing These,” Mike Schoultz, Digital Spark Marketing, January 11, 2016, 

accessed September 13, 2018, https://digitalsparkmarketing.com/leadership-collaboration-skills/. 

88 Frank Kendall, “Innovation in the Defense Acquisition Enterprise,” Defense AT&L Magazine, November-December 2015, 4-5. 

89 AWF stakeholders, communication with the Section 809 Panel, July-August 2018. 

90 Deputy DACM, AWF stakeholders, communication with Section 809 Panel, July-August 2018. 

91 “Civilian Career Roadmaps & Job Items Library,” DoD FM Online, accessed November 6, 2018, 

https://fmonline.ousdc.osd.mil/Professional/Civilian-Career.aspx. 
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Risk and Innovation 

Lack of opportunity and risk-aversion limit opportunities to innovate. To get the AWF comfortable 

with accepting more risk will require a convergence of key work experiences and nontechnical skill 

development. “DoD is afraid to fail, and if you cannot fail, there is no learning environment.”92 To 

create an avenue for practical experience to innovate means to create an environment that allows for 

short-term failures, trial and error, and latitude to make decisions at a lower level. 

We have a very punitive, risk-averse system that treats most every mistake or failure as an ethical or 

criminal act as opposed to just a mistake. So we shouldn’t be surprised that the workforce, particularly 

those on the acquisition side, is risk averse.93

Scenarios for critical thinking need to be fostered by leadership, but driven by AWF members who 

have the passion to create change. “Passion drives innovation—not rank, power or position.”94

Leadership must create an environment accepting of appropriate risk, or the AWF will lack an avenue 

for practical experience to innovate. “Leaders can’t order innovation to occur; they can be champions 

and help clear roadblocks, but, in general, senior leaders are not the driving force in innovation.”95

Culture and Leadership 

Unless DoD is willing to take a holistic approach to culture change, to include building the AWF 

professionals’ qualifications, rather than relying on certifications, no change will occur.96 Applying a 

concise, well defined competency model in career paths (similar to the FM Case Study) will better 

establish what qualifications should look like. A career path illuminates the possibilities and potential 

areas of focus, and the competency model proposed here goes beyond focusing on qualification. When 

combined, career paths and competency models support cultural change. 

To date, DoD has operated with disjointed instructions and inconsistent application. Instead, DoD 

should operate with tailored competencies and proficiency standards with integration of technical and 

nontechnical skills, so AWF members can understand what is expected of them, and how to work 

toward managerial/leadership and SME positions. The legislative changes associated with this 

recommendation will require AWF leadership to develop AWF members capable of building a 

cohesive, mission-focused team that thrives on exchanges inside and outside of government. 

Implementing career paths for each AWF career field and a competency model tailored for each AWF 

career field together, provides AWF members a developmental and experiential career progression, 

and clarifies what qualifications members requires for their current jobs and for future jobs. These 

frameworks complement each other and act as key components to transform workforce development. 

 

92 “Acquisition: Eliminating the culture barrier to innovative acquisition,” Billy Mitchell, FedScoop, April 27, 2015, accessed August 27, 

2018, https://www.fedscoop.com/the-cultural-roadblock-to-innovative-acquisition. 

93 Ibid. 

94 Jeff Windham, Jeff, “20 Observations on Innovation,” Defense AT&L Magazine, July-August 2016, accessed November 6, 2018, 

https://www.dau.mil/library/defense-atl/DATLFiles/Jul-Aug2016/Windham.pdf. 

95 Ibid. 

96 James N. Phillips, Jr., “Instruction, Direction and Correction: Improving the Acquisition Culture,” Defense AT&L Magazine, MarchApril 2018, 26-28, accessed November 6, 2018, https://www.dau.mil/library/defense-atl/DATLFiles/Mar-April_2018/Phillips.pdf. 
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Implementation 

Legislative Branch 

Career Paths 

 Establish a requirement in 10 U.S.C. § 1701a, Performance Management, requiring DoD to 

develop career paths for every designated career field in the AWF within 24 months of 

enactment of this recommendation. 

 Amend 10 U.S.C. § 1722, Career Development, to require DoD to develop appropriate career 

paths for all AWF career fields. 

 Establish a requirement in 10 U.S.C. § 1721, Designation of Acquisition Positions, directing DoD 

to define in policy which occupational career fields are designated for the AWF. These career 

fields must be codified in DoD instruction and kept current.97 In statute, require DoD to publish 

a policy adhering to this statute 6 months after enactment of this recommendation. 

 Establish in 10 U.S.C. § 1722b, Special Requirements for Civilian Employees in the Acquisition 

Field, a requirement that DoD develop key work experience in the form of multidiscipline 

training (e.g., multifunctional, cross-discipline, multi-occupational). 

 Require DoD to submit a plan in 12 months from enactment that identifies specific actions 

the department will take to develop key work experiences for each AWF career field. 

 Amend the requirement in 10 U.S.C. § 1723, Career Path Requirements, to apply to all AWF 

career fields (as opposed to only critical acquisition-related duties and tasks). 

 Require DoD to develop a strategic target that specifies a percent of the workforce, or a 

percent of funding, it will dedicate annually to identifying, developing, and establishing key 

work experiences. Include the target and rationale in the report(s) to be submitted in 

response to the change to 10 U.S.C. § 1722b above. 

Competency Model 

 Establish a requirement in 10 U.S.C. § 1701a, Performance Management, that DoD develop a 

competency-based model with defined proficiency standards and technical and nontechnical 

competencies for every designated career field in the AWF within 24 months of enactment of 

this recommendation. 

 Require civilian qualification assessments to include both technical and nontechnical 

competencies. 

 

97 Currently, 14-15 AWF career fields exist, managed under 20 functional leaders. These career fields are not the same as the acquisition 

related positions designated in 10 U.S.C. § 1721, nor are they designed to be the same; however, DoD must decide exactly which AWF 

career fields are officially apart of the AWF, understanding that each requires a career path. 
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 Repeal 10 U.S.C. § 1731, Defense Acquisition Corp and 10 U.S.C. § 1732, Selection Criteria and 

Procedures.

 Preserve 10 U.S.C. § 1731 (b), Promotion Rate for Officers. 

 Preserve the Mobility Statement and Promotion Rate for Officers currently included in 

10 U.S.C. § 1732(e). 

 Relocate Mobility Statement and Promotion Rate for Officers to 10 U.S.C. § 1733 Critical 

Acquisition Positions. 

Executive Branch 

 Cancel DoDI 5000.66, Defense Acquisition Workforce Education, Training, Experience, and 

Career Development Program. 

 Replace DoDI 5000.66, Defense Acquisition Workforce Education, Training, Experience, and 

Career Development Program, with guidance that clearly establishes responsibility, scope, and 

definitions of the AWF career influencers and DoD’s developmental program within 18 months 

of enactment of this recommendation. 

 Delegate the responsibilities and authorities to the DoD Components to develop and 

implement the guidance on career paths and competency models. The guidance should 

establish the OSD HCI office role as a facilitator in support of the DoD Components in 

developing and implementing the guidance codified in this recommendation. 

 Ensure a peer review, at a minimum with the Military Services’ senior acquisition 

executives (SAEs) or agency component acquisition executives (CAEs). 

 Clarify how career fields are affected by the changes created by the split of Acquisition, 

Technology and Logistics into Acquisition and Sustainment and Research and Engineering, 

identify which career fields will be managed by Acquisition and Sustainment and which by 

Research and Engineering, and indicate how the two organizations will collaborate on 

career management responsibilities. 

 Delegate responsibility and authority to the DoD Components to develop a user guide for AWF 

supervisors. 

 Require DoD Component user guides to include all AWF career fields assigned to the 

respective organizations. 

 Require career paths to include guidance to identify SME and managerial/leadership tracks 

in career paths. 

 Require a report to the Secretary of Defense, within 6 months of enactment of this 

recommendation, that details how DoD will implement Congress’s direction. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 5. 
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Implications for Other Agencies 

 The changes in how the AWF is trained, qualified, and developed should be presented to OFPP. 

If these recommendations are implemented, they may affect how the AWF in other executive 

branch agencies are managed. 

Recommendation 61: Create a comprehensive public–private exchange program 

for DoD’s acquisition workforce. 

Problem 

The relationship between the DoD AWF and its private-sector counterpart is a critical element of the 

defense acquisition system. Because the private sector plays an increasingly prominent role in helping 

to shape defense acquisition outcomes, it is important that DoD AWF members and private-sector 

AWF employees understand each other’s processes, attitudes, and objectives. PPEPs provide DoD a 

valuable tool for fostering such understanding. If implemented properly, PPEPs can form a cornerstone 

of DoD’s efforts to engage with the private sector. Despite its desire to do so, DoD has struggled to 

successfully develop a broad-based, two-way PPEP that would involve its entire AWF. The problem is 

not political; there is widespread support among DoD officials and Congress for PPEPs. Obstacles to 

PPEPs are rooted in implementation rather than intent. A policy response that identifies and eliminates 

the factors hindering DoD’s attempts would allow the department to successfully employ PPEPs for 

the AWF. 

Background 

PPEPs provide legal authority to allow “federal employees to work in external organizations, external 

employees to serve in the Federal Government, or both.”98 Exchange programs can be one-way if 

employees only move from the federal government to the private sector, or two-way if employees 

move between the federal government and the private sector in both directions. Exchange programs 

vary in the duties and responsibilities that participants are allowed to undertake. Some exchange 

programs permit participants to exercise decision-making authority; others restrict participants to 

purely advisory roles. Some exchange programs place participants in research or policymaking 

positions; others direct participants to operational support roles.99 Title 5 authorizes all federal agencies 

to operate one-way exchange programs to send their employees to the private sector. This basic 

authority does not authorize two-way exchange programs for private-sector employees to be assigned 

to the government, and such programs require additional authorization from Congress.100 Within DoD, 

Title 5 exchange program authority is referred to as Training with Industry and implemented through 

DoDI 1322.06, which identifies PPEPs as one type of “education, training, and professional 

 

98 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. 

99 Ibid. 

100 Establishment of Training Programs, 5 U.S.C. § 4103(a). Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA 

Science & Technology Policy Institute, November 2013, accessed June 15, 2018, 

https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. 
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development opportunity” that serves to “enhance the educational and training level of DoD 

personnel.”101 

The recent history of PPEPs across the federal government reveals the range of exchange programs 

within the executive branch. At the end of 2013, 16 exchange program authorities existed among 

federal agencies.102 Several exchange programs focused on research and policymaking duties, such as 

the Franklin Fellows Program of the State Department and U.S. Agency for International 

Development.103 Other exchange programs were purely advisory in nature, such as the Loaned 

Executive Program of the Department of Homeland Security.104 In addition to Training with Industry, 

DoD oversees several agency-specific PPEPs, including the Information Technology Exchange Program 

(ITEP) and the DoD Visiting Research Opportunities program.105 Despite the variety of PPEPs within 

DoD and the federal government as a whole, DoD does not currently manage a comprehensive PPEP 

that encompasses its entire AWF. Instead, DoD uses several smaller, more limited PPEPs to provide 

opportunities to select groups of employees or narrow subsets of the workforce. The Army and Air 

Force both operate distinct PPEPs called Training with Industry and Education with Industry, 

respectively, but the Army program is not open to civilian employees and neither program establishes 

a two-way exchange with the private sector.106 The Navy does not operate its own PPEP; nor can one be 

found among the civilian defense agencies.107 The office of the Secretary of Defense oversees several 

PPEPs that offer opportunities to employees throughout the DoD workforce, but these exchange 

programs are small-scale and tend to focus on specific career fields or prospective leaders.108 

Discussion 

DoD Support and Its Limitations 

The fragmented nature of DoD exchange programs and the lack of specific coverage for the AWF has 

created gaps in DoD’s ability to encourage acquisition employee participation. This situation runs 

counter to DoD’s avowed beliefs regarding the benefits of exchange program participation. DoD’s 

views align with the conclusions of an external study, which argued that “personnel exchanges provide 

myriad benefits for exchangees, destination organizations, and home organizations” and called PPEPs 

a “triple win” for both sides and the employees in between.109 In its regulatory guidance implementing 

Training with Industry, DoD states that such exchanges can supplement existing training and 

education programs by providing opportunities “that are not otherwise available through existing 

military or advanced civilian education programs.”110 DoD also declares that PPEPs can provide DoD 

 

101 Fellowships, Legislative Fellowships, Internships, Scholarships, Training-With-Industry (TWI), and Grants Provided to DoD or DoD 

Personnel for Education and Training, DoDI 1322.06 (2016). 

102 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. 

103 Ibid. 

104 Ibid. 

105 Ibid. 

106 DoD Officials, meetings with Section 809 Panel, October 3 and 4, 2017. 

107 DoD Officials, meetings with Section 809 Panel, November 28 and December 7, 2017. 

108 DoD Official, meeting with Section 809 Panel, June 21, 2018. 

109 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. 

110 Fellowships, Legislative Fellowships, Internships, Scholarships, Training-With-Industry (TWI), and Grants Provided to DoD or DoD 

Personnel for Education and Training, DoDI 1322.06 (2016). 
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personnel with “the opportunity to gain career broadening experience while working in an industry 

environment,” and DoD agencies with “the means to acquire needed skills or expertise to accomplish 

their mission.”111 This clear articulation of DoD’s support for PPEPs is echoed by AWF senior leaders. 

One AWF senior official argued that PPEPs enable the AWF to negotiate more effectively with the 

private sector because acquisition employees become acquainted with industry practices.112 A second 

senior official asserted that any program to bring DoD AWF employees and private-sector employees 

together was positive for the government.113 A third official touted a military service’s efforts to 

provide funding support for PPEPs, despite competition from other priorities and initiatives.114

Regardless of varied circumstances among different DoD Components, senior officials consistently 

support PPEPs and their beneficial effects. 

Broad support for PPEPs has not netted development of a comprehensive, two-way exchange program 

for DoD’s AWF, despite congressional effort to create such a program (as a pilot program) in the 

FY 2016 NDAA.115 DoD’s inability to effectively implement the pilot program is emblematic of its 

overall difficulties in successfully implementing exchange programs. An Army PPEP for civilian 

employees failed due to lack of interest.116 The Navy’s efforts to gain administrative flexibility for a 

prospective PPEP have been stymied.117 A provision in the FY 2017 NDAA creating yet another 

framework for an exchange program is only now nearing implementation, nearly 2 years after its 

passage.118 The cumulative effect of these frustrations has been that large-scale exchange programs 

have produced little benefit for DoD’s AWF. 

Disincentives for Exchange Programs 

The explanation for these setbacks lies within the interplay between the cultural context and the PPEP 

statutory authorities. PPEPs have largely failed to take root due to structural, cultural, and legal factors 

that are embedded within the traditional framework of exchange programs. These factors have had the 

effect of creating disincentives for the essential actors in PPEPs, dissuading them from participating. 

There are three primary actors in any PPEP: the employing office that employs the participating DoD 

employee, the DoD employee, and the private-sector company that either receives the DoD employee 

or sends its own employee to DoD (as well as private-sector employees themselves, although their 

interests can be considered jointly with their employers). The attitudes and incentives of employing 

offices, employees, and private-sector companies require attention to successfully implement a twoway exchange program on a large scale. The factors that have deterred each of these actors must be 

properly understood to craft policy changes to overcome them. 

DoD employing offices are often neglected in considerations of PPEPs. While an employee is 

participating in a PPEP, the employing office is compelled to relinquish a talented employee. Tension 

exists between overall DoD interests, which are furthered by enhanced public- and private-sector 

 

111 Ibid. 

112 DoD Official, meeting with Section 809 Panel, October 3, 2017. 

113 DoD Official, meeting with Section 809 Panel, November 30, 2017. 

114 DoD Official, meeting with Section 809 Panel, February 23, 2018. 

115 FY 2016 NDAA, Pub. L. No. 114-92, 129 Stat. 1030 (2015). 

116 DoD Official, meeting with Section 809 Panel, October 3, 2017. 

117 DoD Official, meeting with Section 809 Panel, November 28, 2017. 

118 Public–private Talent Exchange, 10 U.S.C. §1599g. 
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cooperation, and the interests of a particular office at a particular moment, which can be negatively 

affected by the temporary loss of a valuable employee. The current structure of PPEPs does nothing to 

alleviate the difficulties for participating DoD offices. Consequently, the tension between offices and 

their front-line managers and PPEPs has impeded implementation. 

Recent congressional authorizations for PPEPs have offered no statutory authority for employing 

offices to temporarily replace participating employees, which has increased the strain on the employees 

who remain and raised concern about maintaining productivity.119 Employing offices are required to 

maintain participating employees on their payroll, and recent PPEPs have been unable to muster 

funding to properly support the offices.120 Insufficient personnel flexibility and insufficient funding 

have compounded the friction between employing offices and PPEPs. Civilian supervisors resist PPEP 

participation and do nothing to raise the profile of PPEPs among the workforce.121 One senior official 

with a PPEP characterized front-line civilian managers as one of the few groups that were outright 

opposed to the PPEP and argued that if their resistance dissipated, there would be “twenty times the 

interest” in the exchange program among civilian employees.122 A successful PPEP must ameliorate 

these concerns and convince front-line managers that the short-term costs of encouraging participation 

in the program can be managed, and will be outweighed by the long-term benefits. 

DoD employees are equally critical to the success of any PPEP. The employees must voluntarily join the 

program, properly take advantage of their experiences with the private sector, and use their newfound 

insights on behalf of the government. An outside study of PPEPs concluded that public-sector 

participants gain new skills, are exposed to fresh ideas, and experience a form of external career growth 

without leaving the government.123 These benefits have failed to persuade DoD employees, particularly 

civilians, to embrace the merits of joining a PPEP. 

The skepticism among DoD employees can be traced to several aspects of recent PPEPs, such as a 

chronic lack of awareness among public-sector employees regarding PPEP opportunities.124 The 

primary dilemma is rooted in the culture of career development among the DoD civilian workforce (see 

Recommendation 60). Although senior DoD leaders readily acknowledge PPEP benefits for the 

workforce as a whole, the immediate career benefits for individual participants are far less clear. 

Currently, there are no explicit career advantages to be gained from successfully completing a PPEP. 

PPEPs do not provide additional certification or take the place of any mandatory training program, nor 

do they open any pathways to promotion.125 DoD employees receive no tangible career benefits as an 

inducement to participate in a PPEP. Uncertain whether completing a PPEP will help their careers, 

 

119 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. DoD Official, meeting with 

Section 809 Panel, February 23, 2018. 

120 Ibid. DoD Official, meeting with Section 809 Panel, November 28, 2017. 

121 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. DoD Official, meeting with 

Section 809 Panel, October 4, 2017. 

122 DoD Official, meeting with Section 809 Panel, May 30, 2018. 

123 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. 

124 Ibid. 

125 Ibid. DoD Official, meeting with Section 809 Panel, October 4, 2017. 
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employees are hesitant to accept the potential lifestyle disruption of exchange program participation.126

Some employees fear they could lose their current position in DoD on returning from a PPEP 

placement.127 The absence of PPEP integration into DoD’s career development structure has hindered 

DoD’s attempts to encourage workforce participation. Employees are reluctant to uproot their careers 

for a PPEP without the assurance that doing so will advance their ambitions. A successful PPEP must 

provide that assurance. 

Private-sector companies are the final component of a successful PPEP, particularly if the exchange 

program is designed to operate in both directions and bring private-sector employees into the 

government. These two-way PPEPs carry benefits for the private sector as well as DoD. Private-sector 

companies can gain valuable insights into the structures and processes of the government, which often 

differ substantially from the private sector. Private-sector employees who participate in two-way 

PPEPs can obtain a firsthand perspective regarding the priorities and methods of their public-sector 

counterparts, which can help improve public–private communications on their return to the private 

sector. DoD benefits from an influx of fresh ideas and skill sets that reflect the different approaches of 

the private sector.128 The private sector appreciates the potential advantages that can arise from 

exchange programs, and representatives from the private sector praised PPEPs as “a great experience” 

that they would “definitely support” under the right circumstances.129 Despite the value to the 

companies and their willingness to accept public-sector employees as part of one-way PPEPs, two-way 

PPEPs have failed to overcome reservations among private-sector companies. 

One aspect of the private sector’s hesitation revolves around personal conflicts-of-interest (PCIs), and 

the multitude of statutes that govern PCIs for government employees. Private-sector employees 

frequently become subject to federal PCI statutes as a result of their participation in two-way exchange 

programs, and applicable laws such as the Ethics in Government Act of 1978 and Chapter 21 of Title 41 

of the U.S. Code (relating to obtaining and disclosing of certain information) can limit their activities for 

a period when they return to the private sector. The private sector views PCI as a manageable problem 

in its evaluation of costs and benefits related to two-way PPEPs. 

A stronger source of private-sector resistance is rooted in concerns over organizational conflicts-ofinterest (OCIs). The FAR defines an OCI as a situation involving either for-profit or nonprofit 

organizations for which “factors create an actual or potential conflict of interest on an instant contract, 

or when the nature of the work to be performed on the instant contract creates an actual or potential 

conflict of interest on a future acquisition.”130 Companies seek to avoid situations in which it appears 

prior services rendered to the government provided access or information that offered an unfair 

advantage on a subsequent contract bid, which could expose them to an OCI complaint and jeopardize 

future contracts. Companies fear such situations may arise through their participation in a two-way 

PPEP. The purpose of a PPEP is to increase the communication between public and private sectors, and 

 

126 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. 

127 DoD Official, meeting with Section 809 Panel, October 4, 2017. 

128 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf.

129 Industry Executives, meeting with Section 809 Panel, August 15, 2018. 

130 Organizational and Consultant Conflicts of Interest, FAR 9.5. 
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to provide employees on both sides with a more accurate perspective on the actions of their 

counterparts. But if a private-sector employee joins DoD as a part of a temporary exchange program, 

employers worry that the employee’s return to the private sector could be perceived as an unfair 

advantage, expose the company to OCI complaints on future DoD contracts, and endanger some or all 

of the company’s business with DoD.131 This is a risk that few private-sector companies have been 

willing to take. An external analysis of PPEPs characterized the problem bluntly by stating that “forprofit organizations were unwilling to risk losing future business with the government over potential 

conflicts of interest created by an employee rotating through a Federal agency.”132 Thus, OCI concerns 

represent one of the chief obstacles to implementing a two-way PPEP for DoD. Any proposal for a twoway PPEP must contain a solution that will provide reassurance to private-sector companies to gain 

their assent and participation. 

The Effect of Disincentives 

The fate of recent PPEPs illustrates the effect of structural and cultural disincentives. DoD’s inability to 

overcome these issues has proven a crucial factor concerning the success of its PPEPs. The recent 

histories of two PPEPs—the governmentwide ITEP and the Air Force’s Education with Industry (EWI) 

program—demonstrate the divergent paths that confront exchange programs based upon their relative 

susceptibility to existing disincentives among the key actors within the program. 

Created in the E-Government Act of 2002, ITEP was a governmentwide PPEP that authorized federal 

agencies to “temporarily detail IT staff to private-sector companies and to accept individuals from the 

private sector.”133 ITEP had a troubled existence and never achieved real traction. According to GAO, 

ITEP failed to reassure the private sector regarding potential OCI liability. As a result, OCI concerns 

became a “major issue” for ITEP because it was “not easy to determine what information is appropriate 

for private sector employees,” and private-sector companies feared “that an exchange would interfere 

with future federal contracting opportunities.”134 These anxieties resulted in “few inquiries and little 

interest from private sector companies,” which crippled ITEP’s ability to bring private-sector 

employees into the government.135 At the same time, demand for ITEP among federal agencies and 

employees was low, and OPM struggled to implement the program because of its complexity.136 DoD 

did manage to achieve a functioning ITEP exchange, but that exchange featured exactly one participant 

before the program’s authority was allowed to expire in December 2007.137 ITEP was undermined by its 

inability to eliminate the disincentives experienced by the key actors. 

 

131 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. DoD Official, meeting with 

Section 809 Panel, January 31, 2018. 

132 Susannah V. Howieson et al., Federal Personnel Exchange Mechanisms, IDA Science & Technology Policy Institute, November 2013, 

accessed June 15, 2018, https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. 

133 GAO, Information Technology: Status and Challenges of Employee Exchange Program, GAO-07-216, December 2006, accessed June 15, 

2018, https://www.gao.gov/assets/260/254567.pdf. 

134 Ibid. 

135 Ibid. 

136 Ibid. 

137 Ibid. IDA, Federal Personnel Exchange Mechanisms, November 2013, accessed June 2018, 

https://www.ida.org/idamedia/Corporate/Files/Publications/STPIPubs/D-4906.pdf. 
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By contrast, the Air Force’s EWI program demonstrates that a PPEP can provide real value for DoD if it 

can overcome some of its structural disincentives. EWI represents the Air Force’s implementation of the 

Training with Industry governmentwide authority. EWI assigns selected midcareer professionals—

both uniformed and civilian—to private-sector companies “to provide students with management 

skills and technical expertise as they study best practices with leaders of industry.”138 EWI is broadly 

considered a successful PPEP and widely praised throughout the Air Force. Senior Air Force 

acquisition officials believe the program possesses great merit, and one senior official overseeing EWI 

characterized it as a “pretty loved program.”139 EWI has succeeded primarily because program officials 

have mitigated disincentives that have undermined other PPEPs and offered positive incentives. EWI 

has secured stable funding through DAWDF, which has provided it with greater flexibility to support 

program needs and protect program funding.140 EWI attempts to offer a compelling rationale to AWF 

employees regarding the potential benefits of participation by coordinating career placements for 

returning participants to maximize the advantages of the program.141 Through these efforts, EWI has 

lessened the disincentives confronting the workforce and revealed many of the benefits exchange 

programs can provide. 

Despite its successes, EWI remains limited in its ability to eliminate disincentives, limiting the program 

from fully realizing its potential. Employing offices are still required to pay the salaries for their civilian 

employees who are on an EWI assignment and still restricted in their ability to temporarily fill the 

positions of EWI participants.142 Notwithstanding EWI’s best efforts, Air Force civilian personnel still 

lack a defined, explicit promotion pathway that uses EWI as a means for career advancement.143 EWI 

lacks the statutory authority to bring private-sector employees into the Air Force. Due to these 

disincentives, Air Force front-line managers continue to resist allowing their employees to participate 

in EWI and participation rates among civilians lag far behind uniformed personnel.144 A senior leader 

overseeing EWI stated that personnel concerns among civilian offices suppressed enthusiasm among 

civilian employees, and that greater personnel flexibility and confidence among Air Force offices would 

produce a surge in civilian interest.145 EWI holds valuable lessons for DoD, both in terms of the positive 

effects of successfully implemented PPEPs and limitations that will continue to undermine their appeal 

without statutory changes. 

Conclusions 

Framework for a Comprehensive PPEP for the Acquisition Workforce 

To realize the full potential of PPEPs for the DoD AWF, exchange programs must eliminate the 

disincentives that have dissuaded key actors from participating. Policy changes are necessary to correct 

the persistent flaws in the framework of PPEPs. A useful template for an AWF PPEP already exists in 

 

138 Air Force Institute of Technology, Education with Industry Handbook, August 2009, accessed June 15, 2018, 

https://www.afit.edu/cip/docs/EWI_Handbook.pdf. 

139 DoD officials, meetings with Section 809 Panel, October 4, 2017; February 23, 2018; and May 30, 2018. 

140 DoD official, meeting with Section 809 Panel, May 30, 2018. 

141 Ibid. 

142 Ibid. 

143 Ibid. 

144 Ibid. 

145 Ibid. 
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Section 1104 of the FY 2017 NDAA.146 The provision authorizes DoD to establish a two-way, 

comprehensive PPEP for the entire DoD workforce, a scale and scope that does not currently exist with 

any other PPEP.147 As defined by Section 1104, no ceiling exists to limit the number of participants in 

the exchange program (talent exchange) at any given time. Exchange program assignments can range 

from 3 months to 2 years, and DoD participants in the exchange program must afterwards return to 

DoD for a period twice the length of the exchange program assignment. For legal purposes, DoD 

employees are considered to be on detail within DoD for the extent of their assignment in the private 

sector. DoD is prohibited from using internal transfers, internal reassignments or external contractors 

to temporarily replace participants in the exchange program. Both DoD and private-sector employees 

are governed by conflict-of-interest rules that prohibit them from improperly using nonpublic or 

proprietary information for personal or organizational benefit. Private-sector employees, in particular, 

are “deemed to be an employee of the Department of Defense” in regards to the core personal conflictof-interest and integrity statutes of Title 5, Title 18, Title 31, Title 41, and statutes such as the Ethics in 

Government Act of 1978 and the Federal Tort Claims Act.148 

The Section 1104 talent exchange is a useful foundation for a new PPEP because it is representative of 

the standard exchange program model of previous years, and because its recent enactment makes it a 

relevant reflection of current congressional sentiment regarding exchange programs. The talent 

exchange was intended to “encourage Department of Defense employees to gain skills that align with 

functional communities or occupational specialties.”149 Nearly 2 years after its passage, however, the 

provision is only now being implemented. DoD finally issued regulatory guidelines in July 2018, and 

was slated to be fully operational by the end of December 2018.150 DoD’s policy guidance for 

Section 1104 is impressive, providing detailed criteria for administration of the program.151

Nevertheless, the slow implementation pace has limited the program’s effectiveness. 

Section 1104 is not specifically tailored to the AWF and does not address the key problems confronting 

PPEPs. Accordingly, a new PPEP, based on the Section 1104 framework, should be created with 

application solely to the AWF, while the existing Section 1104 talent exchange would be limited to nonAWF positions. Section 1104 does not specify a range of eligible employees within the DoD workforce 

by statute (although DoD establishes a floor at GS-12 in its implementation guidance).152 The AWF 

PPEP would explicitly define a scope of eligibility between GS-12 and GS-15 for AWF civilian 

employees, or AcqDemo equivalent starting at NH-III. Within the AWF, these midcareer to late-career 

employees are experienced enough to take full advantage of the opportunities afforded by their 

interactions with the private sector, while still being able to use the benefits of the PPEP on DoD’s 

behalf for many years thereafter. Unlike Section 1104, which establishes a minimum duration of 

3 months for an exchange program assignment, the AWF PPEP would contain no minimum duration—

 

146 Public–private Talent Exchange, 10 U.S.C. § 1599g. 

147 Ibid. 

148 Ibid. 

149 FY 2017 NDAA, Pub. L. No. 114-328, Joint Explanatory Statement of the Committee of Conference, 

https://www.congress.gov/114/crpt/hrpt840/CRPT-114hrpt840.pdf. 

150 Deputy Secretary of Defense Memorandum, Public–private Talent Exchange Implementation Procedures, July 19, 2018, accessed 

November 6, 2018, https://www.cpms.osd.mil/Content/Documents/PPTE_Memorandum_2018.pdf. 

151 Ibid. 

152 Ibid. 
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with durations potentially as short as weeks—to provide the greatest flexibility for DoD. The AWF 

PPEP would also permit the Service Acquisition Executives to oversee the selection process for 

exchange program participants within their military departments. The AWF PPEP would also address 

the disincentives confronting employing offices, employees, and the private sector. Once these 

disincentives have been removed, the AWF PPEP can achieve a better outcome than its predecessors. 

Employing Offices: Funding and Personnel Flexibility 

DoD employing offices—representing both the office as an institution and the front-line managers 

within the office—constitute one of the chief pillars of skepticism and resistance toward PPEPs. Their 

resistance is rooted in two issues: funding concerns due to a budgetary responsibility to continue to 

pay employee salaries while they are absent in the exchange program and personnel concerns due to 

the inability of offices to seamlessly replace employees absent for extended periods of time. Both 

concerns can be addressed within the statutory language of the AWF PPEP. 

The most effective way to address the budgetary concerns of employing offices is to ensure a stable 

source of funding for the AWF PPEP and to provide statutory authority for the AWF PPEP to wield 

that funding broadly. The proposed PPEP is designed for the AWF, so DoD should be authorized to 

use DAWDF to cover salary and indirect costs for civilian AWF employees during their participation in 

the exchange program. DAWDF has successfully funded a host of AWF priorities, and the fund’s 

flexibility underscores its potential as a stable source of funding for a PPEP tailored to the AWF. To 

reinforce the AWF PPEP as a budgetary priority, DAWDF funding levels should be increased to fully 

account for the PPEP’s budget. Such a funding boost would send a strong message in support of the 

exchange program and insulate it from competing budgetary pressures. 

The AWF PPEP’s budget, properly funded through DAWDF, would cover several primary 

expenditures. The budget would cover all administrative costs and overhead expenses associated with 

the permanent operation of the PPEP. The budget would also include all salary costs for DoD 

employees who participate in the AWF PPEP for the full duration of their participation. The AWF 

PPEP would possess the resources and authority to relieve employing offices of the burden to support 

employees who have departed for private-sector assignments through the exchange program. 

Employing offices, freed from using their own budgets to pay the salaries of absent employees, could 

redirect those resources to other priorities until the employee returns. Section 841 of the FY 2018 NDAA 

authorized a similar use of DAWDF funding to pay the salaries of participants in the Program Manager 

Development Program—such an approach could garner widespread support.153 The AWF PPEP would 

also fund Temporary Duty (TDY) costs for employees who need to travel to take advantage of 

exchange program opportunities. TDY funding would broaden the geographic reach of the AWF PPEP 

because many DoD installations are located in areas that lack potential private-sector partners and 

would struggle to provide the same local possibilities for employees as large metropolitan regions such 

as Washington, D.C.154 The AWF PPEP’s authority to fund TDY for participants would prevent 

employees from being effectively excluded from the program on a purely geographic basis and allow 

DoD to deploy its resources to maximum effect. The mitigation of budgetary pressures on employing 

 

153 FY 2018 NDAA, Pub. L. No. 115-91, 131 Stat. 1477 (2017). 

154 DoD official, meeting with Section 809 Panel, May 30, 2018. 
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offices would reduce one of the primary sources of tension between those offices and PPEPs. Amended 

budgetary structures and responsibilities could reverse one of the largest disincentives for employing 

offices to support a PPEP for the AWF. 

The other major issue creating disincentives for employing offices to support PPEPs is personnel 

flexibility. The personnel concerns of employing offices are rooted in the basic procedures governing 

Executive Branch civilian personnel actions, and compounded by the existing statutory framework of 

PPEPs such as Section 1104 of the FY 2017 NDAA. PPEPs are unpopular with employing offices and 

front-line managers who are reluctant to lose skilled employees to private-sector assignments for 

extended periods of time. Allowing offices to make temporary and term appointments to replace 

participating employees would address this issue. Existing PPEPs frequently restrict the tools at DoD’s 

disposal to respond quickly to open positions.155 These constraints are too strict, and temporary and 

term appointments—which are time-limited appointments that cannot exceed 1 year and 4 years, 

respectively—could mitigate personnel concerns.156 

The AWF PPEP would authorize employing offices to make temporary and term appointments to fill 

an open position for the duration of the participating employee’s assignment in the private sector. 

Offices would be obligated to fund the temporary or term appointment themselves, but they would 

possess the necessary funding flexibility due to the AWF PPEP’s assumption of salary responsibility for 

participating employees. One senior AWF official argued that temporary and term appointments 

would “alleviate the burden” on employing offices to “continue to achieve the Agency’s mission,” and 

diminish concerns that personnel disruption would undermine the appeal of the AWF PPEP.157 

The AWF PPEP would also allow participating employees to enroll in DoD’s Priority Placement 

Program on their completion of an exchange program assignment, so long as their assignment 

surpassed 9 months. This policy would provide further personnel flexibility to employing offices that 

were required to adapt to long-term employee absences due to the AWF PPEP, and provide an 

additional guarantee to the employee. 

DoD Employees: Career Development 

DoD employees have been reluctant to participate in PPEPs without a clear understanding of the 

benefit to their careers. These doubts are particularly understandable for civilian employees, who lack 

the more extensive career development structures that exist for uniformed members and are often 

expected to forge their own career pathways with little guidance from DoD’s civilian leadership. 

Situating the AWF PPEP within a career development framework for AWF employees is the most 

effective means to eliminate this disincentive. Professional ambition should be an incentive for 

employees to participate in the exchange program. 

The shift toward career pathways and competencies for the AWF recommended above encourages 

greater emphasis on experiential learning, in part by integrating concepts such as “key work 

experiences” into the career development framework. PPEPs represent a decidedly useful form of 

 

155 Public–private Talent Exchange, 10 U.S.C. § 1599g. 

156 Temporary and Term Employment, 5 CFR 316 Subpart C and 5 CFR 316 Subpart D. 

157 DoD official, meeting with Section 809 Panel, November 13, 2017. 
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experiential learning for AWF employees, with the ability to convey substantial benefits upon 

individual employees and the workforce as a whole. The AWF PPEP should function well within the 

shift toward experiential learning. If an employee successfully completes an assignment in the private 

sector through the AWF PPEP, the achievement should provide tangible benefits in terms of the 

employee’s career development, as defined by the functional leaders of each AWF career field. 

Specifically, the benefits should manifest through the designation of the AWF PPEP as a “key work 

experience” that conveys competencies to AWF employees throughout their careers. The benefits 

should also be reflected in competency metrics that value the knowledge conveyed by the exchange 

program. If understanding industry practices represented a part of the competencies required to 

advance in the acquisition field, the AWF PPEP would be a logical vehicle to provide those 

competencies to AWF employees, and by extension the workforce as a whole. 

Clear professional benefits for AWF employees would promote their participation in the AWF PPEP. 

The exchange program would occupy a tangible position along the progression of an employee’s career 

path within DoD’s AWF career fields. It would also assist employees with meeting competency 

requirements, strengthening the link between the skills gained through the exchange program and 

AWF competencies. Ambitious employees would view the AWF PPEP as an opportunity to set 

themselves apart from their peers, having gained a DoD-recognized key work experience and valuable 

form of experiential learning. Within the AWF culture, the AWF PPEP could become a path to 

professional advancement, particularly for talented employees seeking to gain competencies to rise 

quickly through the ranks. This dynamic would complement DoD’s desire to encourage PPEP 

participation and benefit both DoD and its AWF employees. 

Private-sector Companies: Organizational Conflict-of-Interest 

Private-sector companies’ reluctance to embrace two-way PPEPs stems from fear of OCI concerns. 

Private-sector companies have lacked clarity regarding the scope of acceptable activities for their 

employees within a DoD PPEP. Two-way exchange programs contain great promise as a means to 

enhance the communication and understanding between public-sector and private-sector AWF 

employees. The OCI concerns of private-sector companies represent a crucial obstacle to achieving a 

successful PPEP for the DoD AWF. 

The optimal way to offer clarity to the private sector is to incorporate a framework for avoiding OCI 

violations within the statutory authority of the AWF PPEP itself. The proposed OCI framework is in no 

way intended to weaken OCI regulations, which serve an important function in maintaining the 

integrity of the procurement bidding process. The framework is intended to clearly define the 

boundaries of acceptable activities for a private-sector company and its participating employees. With 

the AWF PPEP’s interpretation of OCI clearly defined, the private sector will simply need to abide by 

the PPEP rules to avoid the risk of an OCI protest. 

The central principle of the AWF PPEP’s treatment of OCI should be a straightforward statutory 

declaration that private-sector employees’ participation, in and of itself, does not create an OCI for their 

employers. The statutory authority of the AWF PPEP would establish that as a matter of law, an OCI 

for an employing private-sector organization shall not be created by virtue of an individual’s 

participation in the exchange program. At the same time, the AWF PPEP would also establish that 

private-sector participants would be prohibited from gaining access to trade secrets and other 
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nonpublic information that possesses commercial value to their private-sector employers. Specific and 

tangible evidence of improper access to information would be required to justify a complaint. 

By creating a legal distinction between simply participating in the AWF PPEP and obtaining improper 

access to trade secrets and nonpublic information of commercial value, the statutory OCI framework 

would clarify the implementation of OCI within the exchange program. The private sector could allow 

employees to receive DoD assignments without fear of violating OCI regulations, as long as the 

employees themselves complied with the rules and management decisions made by DoD. Furthermore, 

the AWF PPEP would bear responsibility to ensure that DoD assignments for private-sector employees 

did not create conflicts-of-interest that could run afoul of OCI (and PCI) standards. Under the rules of 

the AWF PPEP, no exchange program assignment could be finalized without the mutual agreement of 

DoD, the private-sector company, and the private-sector employee. A negotiation process would 

require DoD to gain the support of the private sector for an assignment, while providing an 

opportunity to guarantee that assignments would comply with all necessary conflict-of-interest 

guidelines. 

The implementation of the statutory OCI framework would not require any great innovation by DoD. 

Current exchange programs that assign DoD employees to the private sector already account for 

potential conflicts-of-interest by directing employees to particular positions on their return to 

government service. For example, the Air Force’s EWI program specifically guides employees’ next 

assignment within DoD to maximize their benefit to the department and minimize any potential 

complications from their participation in the exchange program. The AWF PPEP would bear a similar 

responsibility. 

Implementation 

Legislative Branch 

 Create a new PPEP in Chapter 87 of Title 10, U.S. Code. 

 Use the public–private talent exchange, codified at 10 U.S.C. § 1599g, as a template for the 

PPEP. 

 Limit the scope of the PPEP to AWF employees. 

 Define the eligibility for the PPEP between GS-12 and GS-15, with equivalent personnel 

grades in the AcqDemo and military personnel systems. 

 Decline to establish any minimum duration for assignments within the PPEP. 

 Direct the use of DAWDF to fund the PPEP budget. 

 Direct the PPEP budget to cover the salary costs of participating employees for the full 

duration of their assignment, notwithstanding any prohibition on the use of DAWDF funds 

to pay the base salaries of DoD employees. 

 Direct the PPEP budget to cover the TDY costs of participating employees for the full 

duration of their assignment. 

 Allow the use of temporary and term appointments to replace participating employees for 

the full duration of their assignment, pursuant to the regulations established at 5 CFR 316 

Subparts C and D. 
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 Establish that employees who successfully complete a PPEP assignment extending at least 

9 months gain eligibility for enrollment in DoD’s Priority Placement Program. 

 Establish that an OCI cannot be created for a private-sector company by virtue of a company 

employee’s participation, in and of itself, in the PPEP. 

 Eliminate the consideration of specific private-sector concerns and areas of expertise in the 

implementation of the PPEP. 

 Increase annual appropriations for DAWDF to fully support the budgetary requirements of the 

PPEP. 

 Amend 10 U.S.C. § 1599g to limit the scope of the public–private talent exchange to non-AWF 

employees. 

Executive Branch 

 Establish that the successful completion of a PPEP assignment shall constitute a key work 

experience in regards to AWF career paths. 

 Establish that the successful completion of a PPEP assignment shall contribute toward AWF 

competency requirements. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 5. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

 
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Section 5 

Acquisition Workforce 

Implementation Details 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. DEFENSE ACQUISITION CERTIFICATION AND EDUCATION 

REQUIREMENTS.

This section would amend 10 U.S.C. § 1701a, Management for acquisition workforce 

excellence.

The committee notes that the Department of Defense (DoD) could better prepare its 

acquisition workforce to perform in their current jobs and prepare for future positions by 

modernizing its certification process to emphasize professional skills that are transferable across 

the workforce and industry. The committee recognizes that DoD could achieve that goal by 

implementing a professional certification program based on third-party accredited, nationally 

or internationally recognized standards, where they exist. If a program based on a third-party 

accredited standard does not exist for a particular acquisition career field, the Secretary would 

be authorized to establish a certification requirement using the best approach determined by the 

Secretary for meeting the requirement, including implementation through entities outside DoD.

This section also would amend 10 U.S.C. § 1724, Contracting positions: qualification 

requirements, to strike the requirement for contracting officers to have completed at least 

24 semester credit hours (or the equivalent) of study from an accredited institution of higher 

education, and make conforming amendments to 10 U.S.C. § 1732, Selection criteria and 

procedures. The committee notes that the Department has succeed in its goal of raising the 

professionalism of its acquisition workforce since enactment of the Defense Acquisition 

Workforce Improvement Act (DAWIA) in 1990 and it is no longer necessary to statutorily 

mandate positive education requirements within DAWIA. This would allow the Department 

the flexibility to establish the specific educational requirements that should be applied to a 

particular workforce career field. 
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1 SEC. ___. DEFENSE ACQUISITION WORKFORCE CERTIFICATION AND 

2 EDUCATION REQUIREMENTS. 

3 (a) PROFESSIONAL CERTIFICATION REQUIREMENT.— 

4 (1) PROFESSIONAL CERTIFICATION REQUIRED FOR ALL ACQUISITION WORKFORCE 

5 PERSONNEL.—Section 1701a of title 10, United States Code, is amended— 

6 (A) by redesignating subsections (c) and (d) as subsections (d) and (e), 

7 respectively; and 

8 (B) by inserting after subsection (b) the following new subsection (c): 

9 “(c) PROFESSIONAL CERTIFICATION.— 

10 “(1) The Secretary of Defense shall implement a certification program to provide 

11 for a professional certification requirement for all members of the acquisition workforce. 

12 Except as provided in paragraph (2), the certification requirement for any acquisition 

13 workforce career field shall be based on standards under a third-party accredited program 

14 based on nationally or internationally recognized standards. 

15 “(2) If the Secretary determines that, for a particular acquisition workforce career 

16 field, a third-party accredited program based on nationally or internationally recognized 

17 standards does not exist, the Secretary shall establish the certification requirement for that 

18 career field that conforms with the practices of national or international accrediting 

19 bodies. The certification requirement for any such career field shall be implemented 

20 using the best approach determined by the Secretary for meeting the certification 

21 requirement for that career field, including implementation through entities outside the 

22 Department of Defense and may be designed and implemented without regard to section 

23 1746 of this title.”. 
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1 (2) CERTIFICATION RENEWAL.—Paragraph (3) of section 1723(a) of such title is 

2 amended by striking the second sentence. 

3 (3) PARTICIPATION IN PROFESSIONAL ASSOCIATIONS.— Section 1701a(b) of such 

4 title is amended— 

5 (A) by redesignating paragraphs (6), (7), (8), and (9) as paragraphs (7), (8), 

6 (9), and (10), respectively; and 

7 (B) by inserting after paragraph (5) the following new paragraph (6): 

8 “(6) authorize members of the acquisition workforce to participate in professional 

9 associations, consistent with their individual performance plans, linked to both 

10 professional development and opportunities to gain leadership and management skills;”. 

11 (4) EFFECTIVE DATE.—The Secretary of Defense shall implement procedures to 

12 institute the program required by subsection (c) of section 1701a of title 10, United States 

13 Code, as added by paragraph (1), not later than 180 days after the date of the enactment 

14 of this Act. 

15 (b) ELIMINATION OF STATUTORY REQUIREMENT FOR COMPLETION OF 24 SEMESTER 

16 CREDIT HOURS.— 

17 (1) QUALIFICATION REQUIREMENTS FOR CONTRACTING POSITIONS.—Section 1724 

18 of title 10, United States Code, is amended— 

19 (A) in subsection (a)(3)— 

20 (i) by striking “(A)” after “(3)”; and 

21 (ii) by striking “, and (B)” and all that follows through “and 

22 management”; and 
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1 (B) in subsection (b), by striking “requirements” in the first sentences of 

2 paragraphs (1) and (2) and inserting “requirement”; 

3 (C) in subsection (e)(2)— 

4 (i) by striking “shall have—” and all that follows through “been 

5 awarded” and inserting “shall have been awarded”; 

6 (ii) by striking “; or” and inserting a period; and 

7 (iii) by striking subparagraph (B); and 

8 (D) in subsection (f), by striking “, including—” and all that follows and 

9 inserting a period. 

10 (2) SELECTION CRITERIA AND PROCEDURES.—Section 1732 of such title is 

11 amended— 

12 (A) in subsection (b)(1)— 

13 (i) by striking “Such requirements,” and all the follows through 

14 “the person—” and inserting “Such requirements shall include a 

15 requirement that the person—“; 

16 (ii) by striking subparagraph (B); and 

17 (iii) by redesignating clauses (i) and (ii) as subparagraphs (A) and 

18 (B), respectively, and realigning those subparagraphs so as to be 4 ems 

19 from the margin; and 

20 (B) in subsection (c), by striking “requirements of subsections (b)(1)(A) 

21 and (b)(1)(B)” in paragraphs (1) and (2) and inserting “requirement of subsection 

22 (b)(1)”. 
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1 (c) DAU CURRICULUM DEVELOPMENT.—Section 1746(c) of title 10, United States Code, 

2 is amended by inserting “, and with commercial training providers,” after “military 

3 departments”. 

4 --------------- 

Changes to Existing Law made by the Legislative Proposal related to education requirements: 

TITLE 10, UNITED STATES CODE 

CHAPTER 87—DEFENSE ACQUISITION WORKFORCE 

§1701. Management policies 

(a) POLICIES AND PROCEDURES.—The Secretary of Defense shall establish policies and procedures for the 

effective management (including accession, education, training, and career development) of persons serving in 

acquisition positions in the Department of Defense. 

(b) UNIFORM IMPLEMENTATION.—The Secretary shall ensure that, to the maximum extent practicable, 

acquisition workforce policies and procedures established in accordance with this chapter are uniform in their 

implementation throughout the Department of Defense. 

§1701a. Management for acquisition workforce excellence 

(a) Purpose.—The purpose of this chapter is to require the Department of Defense to develop and manage a 

highly skilled professional acquisition workforce— 

(1) in which excellence and contribution to mission is rewarded; 

(2) which has the technical expertise and business skills to ensure the Department receives the best 

value for the expenditure of public resources; 

(3) which serves as a model for performance management of employees of the Department; and 

(4) which is managed in a manner that complements and reinforces the management of the defense 

acquisition system pursuant to chapter 149 of this title. 

(b) Performance Management.—In order to achieve the purpose set forth in subsection (a), the Secretary of 

Defense shall— 

(1) use the full authorities provided in subsections (a) through (d) of section 9902 of title 5, 

including flexibilities related to performance management and hiring and to training of managers; 

(2) require managers to develop performance plans for individual members of the acquisition 

workforce in order to give members an understanding of how their performance contributes to their 

organization's mission and the success of the defense acquisition system (as defined in section 2545 of this 

title); 

(3) to the extent appropriate, use the lessons learned from the acquisition demonstration project 

carried out under section 1762 of this title related to contribution-based compensation and appraisal, and 

how those lessons may be applied within the General Schedule system; 

(4) develop attractive career paths; 

(5) encourage continuing education and training; 

(6) authorize members of the acquisition workforce to participate in professional associations, 

consistent with their individual performance plans, linked to both professional development and 

opportunities to gain leadership and management skills; 

(7) develop appropriate procedures for warnings during performance evaluations for members of 

the acquisition workforce who consistently fail to meet performance standards; 

(8) take full advantage of the Defense Civilian Leadership Program established under section 1112 

of the National Defense Authorization Act for Fiscal Year 2010 (Public Law 111–84; 123 Stat. 2496; 10 

U.S.C. 1580 note prec.); 
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(9) use the authorities for highly qualified experts under section 9903 of title 5, to hire experts who 

are skilled acquisition professionals to— 

(A) serve in leadership positions within the acquisition workforce to strengthen 

management and oversight; 

(B) provide mentors to advise individuals within the acquisition workforce on their career 

paths and opportunities to advance and excel within the acquisition workforce; and 

(C) assist with the design of education and training courses and the training of individuals 

in the acquisition workforce; and 

(10) use the authorities for expedited security clearance processing pursuant to section 1564 of this 

title. 

(c) PROFESSIONAL CERTIFICATION.— 

(1) The Secretary of Defense shall implement a certification program to provide for a 

professional certification requirement for all members of the acquisition workforce. Except as provided 

in paragraph (2), the certification requirement for any acquisition workforce career field shall be based 

on standards under a third-party accredited program based on nationally or internationally recognized 

standards. 

(2) If the Secretary determines that, for a particular acquisition workforce career field, a thirdparty accredited program based on nationally or internationally recognized standards does not exist, the 

Secretary shall establish the certification requirement for that career field that conforms with the 

practices of national or international accrediting bodies. The certification requirement for any such 

career field shall be implemented using the best approach determined by the Secretary for meeting the 

certification requirement for that career field, including implementation through entities outside the 

Department of Defense and may be designed and implemented without regard to section 1746 of this 

title. 

(c) (d) NEGOTIATIONS.—Any action taken by the Secretary under this section, or to implement this section, 

shall be subject to the requirements of chapter 71 of title 5. 

(d) (e) REGULATIONS.—Any rules or regulations prescribed pursuant to this section shall be deemed an 

agency rule or regulation under section 7117(a)(2) of title 5, and shall not be deemed a Government-wide rule or 

regulation under section 7117(a)(1) of such title. 

****** 

§1723. General education, training, and experience requirements 

(a) QUALIFICATION REQUIREMENTS.—(1) The Secretary of Defense shall establish education, training, and 

experience requirements for each acquisition position, based on the level of complexity of duties carried out in the 

position. In establishing such requirements, the Secretary shall ensure the availability and sufficiency of training in 

all areas of acquisition, including additional training courses with an emphasis on services contracting, market 

research strategies (including assessments of local contracting capabilities), long-term sustainment strategies, 

information technology, and rapid acquisition. 

(2) In establishing such requirements for positions other than critical acquisition positions designated 

pursuant to section 1733 of this title, the Secretary may state the requirements by categories of positions. 

(3) The Secretary of Defense, acting through the Under Secretary of Defense for Acquisition, Technology, 

and Logistics, shall establish requirements for continuing education and periodic renewal of an individual's 

certification. Any requirement for a certification renewal shall not require a renewal more often than once 

every five years.

(b) CAREER PATH REQUIREMENTS.—For each career path, the Secretary of Defense, acting through the 

Under Secretary of Defense for Acquisition, Technology, and Logistics, shall establish requirements for the 

completion of course work and related on-the-job training and demonstration of qualifications in the critical 

acquisition-related duties and tasks of the career path. The Secretary of Defense, acting through the Under Secretary, 

shall also— 

(1) encourage individuals in the acquisition workforce to maintain the currency of their 

acquisition knowledge and generally enhance their knowledge of related acquisition management 

disciplines through academic programs and other self-developmental activities; and 
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(2) develop key work experiences, including the creation of a program sponsored by the 

Department of Defense that facilitates the periodic interaction between individuals in the acquisition 

workforce and the end user in such end user's environment to enhance the knowledge base of such 

workforce, for individuals in the acquisition workforce so that the individuals may gain in-depth 

knowledge and experience in the acquisition process and become seasoned, well-qualified members of 

the acquisition workforce. 

(c) LIMITATION ON CREDIT FOR TRAINING OR EDUCATION.—Not more than one year of a period of time 

spent pursuing a program of academic training or education in acquisition may be counted toward fulfilling any 

requirement established under this chapter for a certain period of experience. 

§1724. Contracting positions: qualification requirements 

(a) CONTRACTING OFFICERS.—The Secretary of Defense shall require that, in order to qualify to serve in an 

acquisition position as a contracting officer with authority to award or administer contracts for amounts above the 

simplified acquisition threshold referred to in section 2304(g) of this title, an employee of the Department of 

Defense or member of the armed forces (other than the Coast Guard) must, except as provided in subsections (c) and 

(d)— 

(1) have completed all contracting courses required for a contracting officer (A) in the case of 

an employee, serving in the position within the grade of the General Schedule in which the employee is 

serving, and (B) in the case of a member of the armed forces, in the member's grade; 

(2) have at least two years of experience in a contracting position; 

(3)(A) have received a baccalaureate degree from an accredited educational institution 

authorized to grant baccalaureate degrees, and (B) have completed at least 24 semester credit hours 

(or the equivalent) of study from an accredited institution of higher education in any of the 

following disciplines: accounting, business, finance, law, contracts, purchasing, economics, 

industrial management, marketing, quantitative methods, and organization and management; and

(4) meet such additional requirements, based on the dollar value and complexity of the 

contracts awarded or administered in the position, as may be established by the Secretary of Defense for 

the position. 

(b) GS–1102 SERIES POSITIONS AND SIMILAR MILITARY POSITIONS.—(1) The Secretary of Defense shall 

require that in order to qualify to serve in a position in the Department of Defense that is in the GS–1102 

occupational series an employee or potential employee of the Department of Defense meet the requirements

requirement set forth in paragraph (3) of subsection (a). The Secretary may not require that in order to serve in such 

a position an employee or potential employee meet any of the requirements of paragraphs (1) and (2) of that 

subsection. 

(2) The Secretary of Defense shall require that in order for a member of the armed forces to be selected for 

an occupational specialty within the armed forces that (as determined by the Secretary) is similar to the GS–1102 

occupational series a member of the armed forces meet the requirements requirement set forth in paragraph (3) of 

subsection (a). The Secretary may not require that in order to be selected for such an occupational specialty a 

member meet any of the requirements of paragraphs (1) and (2) of that subsection. 

(c) EXCEPTIONS.—The qualification requirements imposed by the Secretary of Defense pursuant to 

subsections (a) and (b) shall not apply to an employee of the Department of Defense or member of the armed forces 

who— 

(1) served as a contracting officer with authority to award or administer contracts in excess of 

the simplified acquisition threshold on or before September 30, 2000; 

(2) served, on or before September 30, 2000, in a position either as an employee in the GS–

1102 series or as a member of the armed forces in a similar occupational specialty; 

(3) is in the contingency contracting force; or 

(4) is described in subsection (e)(1)(B). 

(d) WAIVER.—The Secretary of Defense may waive any or all of the requirements of subsections (a) and 

(b) with respect to an employee of the Department of Defense or member of the armed forces if the Secretary 

determines that the individual possesses significant potential for advancement to levels of greater responsibility and 

authority, based on demonstrated job performance and qualifying experience. With respect to each waiver granted 
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under this subsection, the Secretary shall set forth in a written document the rationale for the decision of the 

Secretary to waive such requirements. 

(e) DEVELOPMENTAL OPPORTUNITIES.—(1) The Secretary of Defense may— 

(A) establish or continue one or more programs for the purpose of recruiting, selecting, 

appointing, educating, qualifying, and developing the careers of individuals to meet the requirements in 

subparagraphs (A) and (B) of subsection (a)(3); 

(B) appoint individuals to developmental positions in those programs; and 

(C) separate from the civil service after a three-year probationary period any individual 

appointed under this subsection who fails to meet the requirements described in subsection (a)(3). 

(2) To qualify for any developmental program described in paragraph (1)(B), an individual shall have— 

(A) been awarded a baccalaureate degree, with a grade point average of at least 3.0 (or the 

equivalent), from an accredited institution of higher education authorized to grant baccalaureate degrees; 

or . 

(B) completed at least 24 semester credit hours or the equivalent of study from an 

accredited institution of higher education in any of the disciplines of accounting, business, finance, 

law, contracts, purchasing, economics, industrial management, marketing, quantitative methods, 

or organization and management.

(f) CONTINGENCY CONTRACTING FORCE.—The Secretary shall establish qualification requirements for the 

contingency contracting force consisting of members of the armed forces whose mission is to deploy in support of 

contingency operations and other operations of the Department of Defense, including— . 

(1) completion of at least 24 semester credit hours or the equivalent of study from an 

accredited institution of higher education or similar educational institution in any of the 

disciplines of accounting, business, finance, law, contracts, purchasing, economics, industrial 

management, marketing, quantitative methods, or organization and management; or 

(2) passing an examination that demonstrates skills, knowledge, or abilities comparable to 

that of an individual who has completed at least 24 semester credit hours or the equivalent of 

study in any of the disciplines described in paragraph (1). 

***** 

§1732. Selection criteria and procedures 

(a) SELECTION CRITERIA AND PROCEDURES.—Selection for membership in the Acquisition Corps shall be 

made in accordance with criteria and procedures established by the Secretary of Defense. 

(b) ELIGIBILITY CRITERIA.—Except as provided in subsections (c) and (d), only persons who meet all of the 

following requirements may be considered for service in the Corps: 

(1) The person must meet the educational requirements prescribed by the Secretary of Defense. 

Such requirements, at a minimum, shall include both of the following: 

(A) A a requirement that the person— 

(i) (A) has received a baccalaureate degree at an accredited educational 

institution authorized to grant baccalaureate degrees, or 

(ii) (B) possess significant potential for advancement to levels of greater 

responsibility and authority, based on demonstrated analytical and decisionmaking 

capabilities, job performance, and qualifying experience. 

(B) A requirement that the person has completed— 

(i) at least 24 semester credit hours (or the equivalent) of study from an 

accredited institution of higher education from among the following disciplines: 

accounting, business finance, law, contracts, purchasing, economics, industrial 

management, marketing, quantitative methods, and organization and management; 

or 

(ii) at least 24 semester credit hours (or the equivalent) from an accredited 

institution of higher education in the person's career field and 12 semester credit 

hours (or the equivalent) from such an institution from among the disciplines listed 
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in clause (i) or equivalent training as prescribed by the Secretary to ensure 

proficiency in the disciplines listed in clause (i). 

(2) The person must meet experience requirements prescribed by the Secretary of Defense. Such 

requirements shall, at a minimum, include a requirement for at least four years of experience in an 

acquisition position in the Department of Defense or in a comparable position in industry or government. 

(3) The person must meet such other requirements as the Secretary of Defense or the Secretary of 

the military department concerned prescribes by regulation. 

(c) EXCEPTIONS.—(1) The requirements of subsections (b)(1)(A) and (b)(1)(B) requirement of 

subsection (b)(1) shall not apply to any employee who, on October 1, 1991, has at least 10 years of experience in 

acquisition positions or in comparable positions in other government agencies or the private sector. 

(2) The requirements of subsections (b)(1)(A) and (b)(1)(B) requirement of subsection (b)(1) shall not 

apply to any employee who is serving in an acquisition position on October 1, 1991, and who does not have 10 years 

of experience as described in paragraph (1) if the employee passes an examination considered by the Secretary of 

Defense to demonstrate skills, knowledge, or abilities comparable to that of an individual who has completed at least 

24 semester credit hours (or the equivalent) of study from an accredited institution of higher education from among 

the following disciplines: accounting, business, finance, law, contracts, purchasing, economics, industrial 

management, marketing, quantitative methods, and organization and management. 

(d) WAIVER.—(1) Except as provided in paragraph (2), the Secretary of Defense may waive any or all of 

the requirements of subsection (b) with respect to an employee if the Secretary determines that the employee 

possesses significant potential for advancement to levels of greater responsibility and authority, based on 

demonstrated analytical and decisionmaking capabilities, job performance, and qualifying experience. With respect 

to each waiver granted under this subsection, the Secretary shall set forth in a written document the rationale for the 

decision of the Secretary to waive such requirements. 

(2) The Secretary may not waive the requirements of subsection (b)(1)(A)(ii). 

(e) MOBILITY STATEMENTS.—(1) The Secretary of Defense is authorized to require civilians in the 

Acquisition Corps to sign mobility statements. 

(2) The Secretary of Defense shall identify which categories of civilians in the Acquisition Corps, as a 

condition of serving in the Corps, shall be required to sign mobility statements. The Secretary shall make available 

published information on such identification of categories. 

***** 

§1746. Defense Acquisition University 

(a) DEFENSE ACQUISITION UNIVERSITY STRUCTURE.—The Secretary of Defense, acting through the Under 

Secretary of Defense for Acquisition, Technology, and Logistics, shall establish and maintain a defense acquisition 

university structure to provide for— 

(1) the professional educational development and training of the acquisition workforce; and 

(2) research and analysis of defense acquisition policy issues from an academic perspective. 

(b) CIVILIAN FACULTY MEMBERS.—(1) The Secretary of Defense may employ as many civilians as 

professors, instructors, and lecturers in the defense acquisition university structure as the Secretary considers 

necessary. 

(2) The compensation of persons employed under this subsection shall be as prescribed by the Secretary. 

(3) In this subsection, the term "defense acquisition university" includes the Defense Systems Management 

College. 

(c) CURRICULUM DEVELOPMENT.—The President of the Defense Acquisition University shall work with 

the relevant professional schools and degree-granting institutions of the Department of Defense and military 

departments, and with commercial training providers, to ensure that best practices are used in curriculum 

development to support acquisition workforce positions. 
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(d) COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS.—(1) In engaging in research and 

development projects pursuant to subsection (a) of section 2358 of this title by a contract, cooperative agreement, or 

grant pursuant to subsection (b)(1) of such section, the Secretary may enter into such contract or cooperative 

agreement or award such grant through the Defense Acquisition University. 

(2) The Defense Acquisition University shall be considered a Government-operated Federal laboratory for 

purposes of section 12 of the Stevenson-Wydler Technology Innovation Act of 1980 (15 U.S.C. 3710a). 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. DEFENSE ACQUISITION WORKFORCE CAREER DEVELOPMENT.

This section would amend title 10, United States Code, by modifying several sections of 

Chapter 87 to institutionalize career paths for all acquisition workforce career fields, and by 

inserting a new section 1765 to develop competencies for every acquisition career field. 

The committee is aware that while Chapter 87 has general career path requirements in 

several sections, none specifically apply to all acquisition career fields, and do not mandate 

recommended attributes to enhance a highly qualified workforce, such as key work experience. 

The committee notes that a key factor in the success of this implementation is in Section 1721, as 

amended; this would require the Department of Defense to identify which specific career fields 

represent the acquisition workforce in order to better institutionalize career paths throughout 

all acquisition career fields. 

The committee recognizes the scope of the new Section 1765, Competency development, 

is designed to establish proficiency standards throughout the acquisition workforce in an effort 

to qualify and assess the technical and nontechnical competencies for all acquisition career 

fields. The committee notes that the inclusion in statute of such standards will require the 

Department to establish occupational qualifiers to enable the workforce to reach their full 

potential. 

This section would make several conforming amendments to legislative provisions 

associated with career path requirements in title 10, United States Code.
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1 SEC. ___. DEFENSE ACQUISITION WORKFORCE CAREER DEVELOPMENT. 

2 (a) CAREER PATHS.— 

3 (1) CAREER PATH REQUIRED FOR EACH ACQUISITION WORKFORCE CAREER FIELD.—

4 Section 1701a(b)(4) of title 10, United States Code, is amended by striking “develop 

5 attractive career paths” and inserting “develop and implement a career path, as described 

6 in section 1722(a) of this title, for each career field designated by the Secretary under 

7 section 1721(a) of this title as an acquisition workforce career field”. 

8 (2) CONFORMING AMENDMENTS.—Section 1722(a) of such title is amended— 

9 (A) by striking “appropriate career paths” and inserting “an appropriate 

10 career path”; and 

11 (B) by striking “are identified” and inserting “is identified for each 

12 acquisition workforce career field”. 

13 (3) DEADLINE FOR IMPLEMENTATION OF CAREER PATHS.—The implementation of a 

14 career path for each acquisition workforce career field required by paragraph (4) of 

15 section 1701a(b) of title 10, United States Code (as amended by paragraph (1)), shall be 

16 completed by the Secretary of Defense not later than the end of the two-year period 

17 beginning on the date of the enactment of this Act. 

18 (b) CAREER FIELDS.— 

19 (1) DESIGNATION OF ACQUISITION WORKFORCE CAREER FIELDS.—Section 1721(a) 

20 of such title is amended by adding at the end the following new sentence: “The Secretary 

21 shall also designate in regulations those career fields in the Department of Defense that 

22 are acquisition workforce career fields for purposes of this chapter.”. 
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1 (2) CLERICAL AMENDMENTS.—(A) The heading of such section is amended to 

2 read as follows: 

3 “§ 1721. Designation of acquisition positions and acquisition workforce career fields”. 

4 (B) The item relating to such section in the table of sections at the beginning of 

5 subchapter II of chapter 87 of such title is amended to read as follows: 

“1721. Designation of acquisition positions and acquisition workforce career fields.”. 

6 (3)(A) The heading of subchapter II of chapter 87 of such title is amended to read 

7 as follows: 

8 “SUBCHAPTER II—ACQUISITION POSITIONS AND ACQUISITION 

9 WORKFORCE CAREER FIELDS” 

10 (B) The item relating to such subchapter in the table of subchapters at the 

11 beginning of such chapter is amended to read as follows: 

“II. Acquisition Positions And Acquisition Workforce Career Fields .......................1721”. 

12 (4) DEADLINE FOR DESIGNATION OF CAREER FIELDS.—The designation of 

13 acquisition workforce career fields required by the second sentence of section 1721(a) of 

14 title 10, United States Code (as added by paragraph (1)), shall be made by the Secretary 

15 of Defense not later than the end of the six-month period beginning on the date of the 

16 enactment of this Act. 

17 (c) KEY WORK EXPERIENCES.— 

18 (1) DEVELOPMENT OF KEY WORK EXPERIENCES FOR EACH ACQUISITION 

19 WORKFORCE CAREER FIELD.—Section 1722b of such title is amended by adding at the end 

20 the following new subsection: 

21 
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1 “(c) KEY WORK EXPERIENCES.—In carrying out subsection (b)(2), the Secretary shall 

2 ensure that key work experiences, in the form of multidiscipline training, are developed for each 

3 acquisition workforce career field.”. 

4 (2) PLAN FOR IMPLEMENTATION of KEY WORK EXPERIENCES.—Not later than one 

5 year after the date of the enactment of this Act, the Secretary of Defense shall submit to 

6 the congressional defense committees a plan identifying the specific actions the 

7 Department of Defense has taken, and is planning to take, to develop and establish key 

8 work experiences for each acquisition workforce career field as required by subsection 

9 (c) of section 1722b of title 10, United States Code, as added by paragraph (1). The plan 

10 shall include specification of the percentage of the acquisition workforce, or funds 

11 available for administration of the acquisition workforce on an annual basis, that the 

12 Secretary will dedicate towards developing such key work experiences. 

13 (d) APPLICABILITY OF CAREER PATH REQUIREMENTS TO ALL MEMBERS OF ACQUISITION 

14 WORKFORCE.—Section 1723(b) of such title is amended by striking “the critical acquisition15 related”. 

16 (e) COMPETENCY DEVELOPMENT.— 

17 (1) IN GENERAL.—(A) Subchapter V of chapter 87 of such title is amended by 

18 adding at the end the following new section: 

19 “§ 1765. Competency development

20 “(a) IN GENERAL.—For each acquisition workforce career field, the Secretary of Defense 

21 shall establish, for the civilian personnel in that career field, defined proficiency standards and 

22 technical and nontechnical competencies which shall be used in personnel qualification 

23 assessments. 
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1 “(b) NEGOTIATIONS.—Any action taken by the Secretary under this section, or to 

2 implement this section, shall not be subject to the requirements of chapter 71 of title 5.”. 

3 (B) The table of sections at the beginning of such subchapter II is amended by 

4 adding at the end the following new item: 

“1765. Competency development.”. 

5 (2) DEADLINE FOR IMPLEMENTATION.—The establishment of defined proficiency 

6 standards and technical and nontechnical competencies required by section 1765 of title 

7 10, United States Code (as added by paragraph (1)), shall be made by the Secretary of 

8 Defense not later than the end of the two-year period beginning on the date of the 

9 enactment of this Act. 

10 (f) TERMINATION OF DEFENSE ACQUISITION CORPS.— 

11 (1) The Acquisition Corps for the Department of Defense referred to in section 

12 1731(a) of title 10, United States Code, is terminated. 

13 (2) Section 1733 of title 10, United States Code, is amended— 

14 (A) by striking subsection (a); and 

15 (B) by redesignating subsection (b) as subsection (a). 

16 (3) Subsection (b) of section 1731 of such title is transferred to the end of section 

17 1733 of such title, as amended by paragraph (2), and amended— 

18 (A) by striking “ACQUISITION CORPS” in the heading and inserting “the 

19 ACQUISITION WORKFORCE”; and 

20 (B) by striking “selected for the Acquisition Corps” and inserting “in the 

21 acquisition workforce”. 
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1 (4) Subsection (e) of section 1732 of such title is transferred to the end of section 

2 1733 of such title, as amended by paragraphs (2) and (3), redesignated as subsection (c), 

3 and amended— 

4 (A) by striking “in the Acquisition Corps” in paragraphs (1) and (2) and 

5 inserting “in critical acquisition positions”; and 

6 (B) by striking "serving in the Corps” in paragraph (2) and inserting 

7 “employment”. 

8 (5) Sections 1731 and 1732 of such title are repealed. 

9 (6)(A) Section 1733 of such title, as amended by paragraphs (2), (3), and (4), is 

10 redesignated as section 1731. 

11 (B) The table of sections at the beginning of subchapter III of chapter 87 of such 

12 title is amended by striking the items relating to sections 1731, 1732, and 1733 and 

13 inserting the following new item: 

“1731. Critical acquisition positions.”. 

14 (7)(A) The heading of subchapter III of chapter 87 of such title is amended to 

15 read as follows: 

16 “SUBCHAPTER III—CRITICAL ACQUISITION POSITIONS” 

17 (B) The item relating to such subchapter in the table of subchapters at the 

18 beginning of such chapter is amended to read as follows: 

“III. Critical Acquisition Positions .........................................................1731”. 

19 (8) Section 1725 of such title is amended— 

20 (A) in subsection (a)(1), by striking “Defense Acquisition Corps” and 

21 inserting “acquisition workforce”; and 
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1 (B) in subsection (d)(2), by striking “of the Defense Acquisition Corps” 

2 and inserting “in the acquisition workforce serving in critical acquisition 

3 positions”. 

4 (9) Section 1734 of such title is amended— 

5 (A) by striking “of the Acquisition Corps” in subsections (e)(1) and (h) 

6 and inserting “of the acquisition workforce”; and 

7 (B) in subsection (g)— 

8 (i) by striking “of the Acquisition Corps” in the first sentence and 

9 inserting “of the acquisition workforce”; 

10 (ii) by striking “of the Corps” and inserting “of the acquisition 

11 workforce”; and 

12 (iii) by striking “of the Acquisition Corps” in the second sentence 

13 and inserting “of the acquisition workforce in critical acquisition 

14 positions”. 

15 (10) Section 1737 of such title is amended— 

16 (A) in subsection (a)(1), by striking “of the Acquisition Corps” and 

17 inserting “of the acquisition workforce”; and 

18 (B) in subsection (b), by striking “of the Corps” and inserting “of the 

19 acquisition workforce”. 

20 (11) Section 1742(a)(1) of such title is amended by striking “the Acquisition 

21 Corps” and inserting “acquisition positions in the Department of Defense”. 

--------------- 
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Changes to Existing Law made by the Legislative Proposal related to career development: 

TITLE 10, UNITED STATES CODE 

CHAPTER 87—DEFENSE ACQUISITION WORKFORCE 

Subchapter 

Sec. 

I. General Authorities and Responsibilities 

1701 

II. Defense Acquisition Positions and Acquisition Workforce Career Fields

1721 

III. Acquisition Corps Critical Acquisition Positions

1731 

IV. Education and Training 

1741 

V. General Management Provisions 

1761 

 

SUBCHAPTER I—GENERAL AUTHORITIES AND RESPONSIBILITIES 

Sec. 

1701. Management policies. 

1701a. Management for acquisition workforce excellence. 

1702. Under Secretary of Defense for Acquisition, Technology, and Logistics: authorities and 

responsibilities. 

[1703. Repealed.] 

1704. Service acquisition executives: authorities and responsibilities. 

1705. Department of Defense Acquisition Workforce Development Fund. 

1706. Government performance of certain acquisition functions. 

[1707. Repealed.] 

 

§1701. Management policies 

(a) Policies and Procedures.—The Secretary of Defense shall establish policies and procedures for the 

effective management (including accession, education, training, and career development) of persons 

serving in acquisition positions in the Department of Defense. 

(b) Uniform Implementation.—The Secretary shall ensure that, to the maximum extent practicable, 

acquisition workforce policies and procedures established in accordance with this chapter are uniform in 

their implementation throughout the Department of Defense. 

§1701a. Management for acquisition workforce excellence 

(a) Purpose.—The purpose of this chapter is to require the Department of Defense to develop and 

manage a highly skilled professional acquisition workforce— 

(1) in which excellence and contribution to mission is rewarded; 

(2) which has the technical expertise and business skills to ensure the Department receives 

the best value for the expenditure of public resources; 
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(3) which serves as a model for performance management of employees of the Department; 

and 

(4) which is managed in a manner that complements and reinforces the management of the 

defense acquisition system pursuant to chapter 149 of this title. 

(b) Performance Management.—In order to achieve the purpose set forth in subsection (a), the 

Secretary of Defense shall— 

(1) use the full authorities provided in subsections (a) through (d) of section 9902 of title 5, 

including flexibilities related to performance management and hiring and to training of 

managers; 

(2) require managers to develop performance plans for individual members of the 

acquisition workforce in order to give members an understanding of how their performance 

contributes to their organization's mission and the success of the defense acquisition system (as 

defined in section 2545 of this title); 

(3) to the extent appropriate, use the lessons learned from the acquisition demonstration 

project carried out under section 1762 of this title related to contribution-based compensation 

and appraisal, and how those lessons may be applied within the General Schedule system; 

(4) develop attractive career paths develop and implement a career path, as described in 

section 1722(a) of this title, for each career field designated by the Secretary under section 

1721(a) of this title as an acquisition workforce career field; 

(5) encourage continuing education and training; 

(6) develop appropriate procedures for warnings during performance evaluations for 

members of the acquisition workforce who consistently fail to meet performance standards; 

(7) take full advantage of the Defense Civilian Leadership Program established under 

section 1112 of the National Defense Authorization Act for Fiscal Year 2010 (Public Law 

111–84; 123 Stat. 2496; 10 U.S.C. 1580 note prec.); 

(8) use the authorities for highly qualified experts under section 9903 of title 5, to hire 

experts who are skilled acquisition professionals to— 

(A) serve in leadership positions within the acquisition workforce to strengthen 

management and oversight; 

(B) provide mentors to advise individuals within the acquisition workforce on their career 

paths and opportunities to advance and excel within the acquisition workforce; and 

(C) assist with the design of education and training courses and the training of individuals 

in the acquisition workforce; and 

(9) use the authorities for expedited security clearance processing pursuant to section 1564 

of this title. 

(c) Negotiations.—Any action taken by the Secretary under this section, or to implement this section, 

shall be subject to the requirements of chapter 71 of title 5. 

(d) Regulations.—Any rules or regulations prescribed pursuant to this section shall be deemed an 

agency rule or regulation under section 7117(a)(2) of title 5, and shall not be deemed a Government-wide 

rule or regulation under section 7117(a)(1) of such title. 

  

SUBCHAPTER II—DEFENSE ACQUISITION POSITIONS AND ACQUISITION 

WORKFORCE CAREER FIELDS
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Sec. 

1721. Designation of acquisition positions. 

1722. Career development. 

1722a. Special requirements for military personnel in the acquisition field. 

1722b. Special requirements for civilian employees in the acquisition field. 

1723. General education, training, and experience requirements. 

1724. Contracting positions: qualification requirements. 

1725. Senior Military Acquisition Advisors. 

 

§1721. Designation of acquisition positions and acquisition workforce career fields

(a) Designation.—The Secretary of Defense shall designate in regulations those positions in the 

Department of Defense that are acquisition positions for purposes of this chapter. The Secretary shall 

also designate in regulations those career fields in the Department of Defense that are acquisition 

workforce career fields for purposes of this chapter. 

(b) Required Positions.—In designating the positions under subsection (a), the Secretary shall include, 

at a minimum, all acquisition-related positions in the following areas: 

(1) Program management. 

(2) Systems planning, research, development, engineering, and testing. 

(3) Procurement, including contracting. 

(4) Industrial property management. 

(5) Logistics. 

(6) Quality control and assurance. 

(7) Manufacturing and production. 

(8) Business, cost estimating, financial management, and auditing. 

(9) Education, training, and career development. 

(10) Construction. 

(11) Joint development and production with other government agencies and foreign 

countries. 

(c) Management Headquarters Activities.—The Secretary also shall designate as acquisition positions 

under subsection (a) those acquisition-related positions which are in management headquarters activities 

and in management headquarters support activities. For purposes of this subsection, the terms 

"management headquarters activities" and "management headquarters support activities" have the 

meanings given those terms in Department of Defense Directive 5100.73, entitled "Department of 

Defense Management Headquarters and Headquarters Support Activities", dated November 12, 1996. 

§1722. Career development 

(a) Career Paths.—The Secretary of Defense, acting through the Under Secretary of Defense for 

Acquisition, Technology, and Logistics, shall ensure that appropriate career paths an appropriate career 

path for civilian and military personnel who wish to pursue careers in acquisition are identified is 

identified for each acquisition workforce career field in terms of the education, training, experience, and 

assignments necessary for career progression of civilians and members of the armed forces to the most 

senior acquisition positions. The Secretary shall make available published information on such career 

paths. 

(b) Limitation on Preference for Military Personnel.—(1) The Secretary of Defense shall ensure that no 

requirement or preference for a member of the armed forces is used in the consideration of persons for 

acquisition positions, except as provided in the policy established under paragraph (2). 

(2)(A) The Secretary shall establish a policy permitting a particular acquisition position to be specified 

as available only to members of the armed forces if a determination is made, under criteria specified in 
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the policy, that a member of the armed forces is required for that position by law, is essential for 

performance of the duties of the position, or is necessary for another compelling reason. 

(B) Not later than December 15 of each year, the Under Secretary of Defense for Acquisition, 

Technology, and Logistics shall submit to the Secretary a report that lists each acquisition position that is 

restricted to members of the armed forces under such policy and the recommendation of the Under 

Secretary as to whether such position should remain so restricted. 

(c) Opportunities for Civilians To Qualify.—The Secretary of Defense shall ensure that civilian 

personnel are provided the opportunity to acquire the education, training, and experience necessary to 

qualify for senior acquisition positions. 

(d) Best Qualified.—The Secretary of Defense shall ensure that the policies established under this 

chapter are designed to provide for the selection of the best qualified individual for a position, consistent 

with other applicable law. 

[(e) Repealed.] 

(f) Assignments Policy.—(1) The Secretary of Defense shall establish a policy on assigning military 

personnel to acquisition positions that provides for a balance between (A) the need for personnel to serve 

in career broadening positions, and (B) the need for requiring service in each such position for sufficient 

time to provide the stability necessary to effectively carry out the duties of the position and to allow for 

the establishment of responsibility and accountability for actions taken in the position. 

(2) In implementing the policy established under paragraph (1), the Secretaries of the military 

departments shall provide, as appropriate, for longer lengths of assignments to acquisition positions than 

assignments to other positions. 

(g) Performance Appraisals.—The Secretary of each military department, acting through the service 

acquisition executive for that department, shall provide an opportunity for review and inclusion of any 

comments on any appraisal of the performance of a person serving in an acquisition position by a person 

serving in an acquisition position in the same acquisition career field. 

(h) Balanced Workforce Policy.—In the development of defense acquisition workforce policies under 

this chapter with respect to any civilian employees or applicants for employment, the Secretary of 

Defense or the Secretary of a military department (as applicable) shall, consistent with the merit system 

principles set out in paragraphs (1) and (2) of section 2301(b) of title 5, take into consideration the need to 

maintain a balanced workforce in which women and members of racial and ethnic minority groups are 

appropriately represented in Government service. 

** ** 

§1722b. Special requirements for civilian employees in the acquisition field 

(a) Requirement for Policy and Guidance Regarding Civilian Personnel in Acquisition.—The Secretary 

of Defense, acting through the Under Secretary of Defense for Acquisition, Technology, and Logistics, 

shall establish policies and issue guidance to ensure the proper development, assignment, and 

employment of civilian members of the acquisition workforce to achieve the objectives specified in 

subsection (b). 

(b) Objectives.—Policies established and guidance issued pursuant to subsection (a) shall ensure, at a 

minimum, the following: 

(1) A career path in the acquisition field that attracts the highest quality civilian personnel, 

from either within or outside the Federal Government. 

(2) A deliberate workforce development strategy that increases attainment of key 

experiences that contribute to a highly qualified acquisition workforce. 

(3) Sufficient opportunities for promotion and advancement in the acquisition field. 

(4) A sufficient number of qualified, trained members eligible for and active in the 

acquisition field to ensure adequate capacity, capability, and effective succession for 

acquisition functions, including contingency contracting, of the Department of Defense. 
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(5) A deliberate workforce development strategy that ensures diversity in promotion, 

advancement, and experiential opportunities commensurate with the general workforce 

outlined in this section. 

(c) Key Work Experiences.—In carrying out subsection (b)(2), the Secretary shall ensure that 

key work experiences, in the form of multidiscipline training, are developed for each acquisition 

workforce career field. 

§1723. General education, training, and experience requirements 

(a) Qualification Requirements.—(1) The Secretary of Defense shall establish education, training, and 

experience requirements for each acquisition position, based on the level of complexity of duties carried 

out in the position. In establishing such requirements, the Secretary shall ensure the availability and 

sufficiency of training in all areas of acquisition, including additional training courses with an emphasis 

on services contracting, market research strategies (including assessments of local contracting 

capabilities), long-term sustainment strategies, information technology, and rapid acquisition. 

(2) In establishing such requirements for positions other than critical acquisition positions designated 

pursuant to section 1733 of this title, the Secretary may state the requirements by categories of positions. 

(3) The Secretary of Defense, acting through the Under Secretary of Defense for Acquisition, 

Technology, and Logistics, shall establish requirements for continuing education and periodic renewal of 

an individual's certification. Any requirement for a certification renewal shall not require a renewal more 

often than once every five years. 

(b) Career Path Requirements.—For each career path, the Secretary of Defense, acting through the 

Under Secretary of Defense for Acquisition, Technology, and Logistics, shall establish requirements for 

the completion of course work and related on-the-job training and demonstration of qualifications in the 

critical acquisition-related duties and tasks of the career path. The Secretary of Defense, acting through 

the Under Secretary, shall also— 

(1) encourage individuals in the acquisition workforce to maintain the currency of their 

acquisition knowledge and generally enhance their knowledge of related acquisition 

management disciplines through academic programs and other self-developmental activities; 

and 

(2) develop key work experiences, including the creation of a program sponsored by the 

Department of Defense that facilitates the periodic interaction between individuals in the 

acquisition workforce and the end user in such end user's environment to enhance the 

knowledge base of such workforce, for individuals in the acquisition workforce so that the 

individuals may gain in-depth knowledge and experience in the acquisition process and 

become seasoned, well-qualified members of the acquisition workforce. 

(c) Limitation on Credit for Training or Education.—Not more than one year of a period of time spent 

pursuing a program of academic training or education in acquisition may be counted toward fulfilling any 

requirement established under this chapter for a certain period of experience. 

  

§1725. Senior Military Acquisition Advisors 

(a) Position.— 

(1) In general.—The Secretary of Defense may establish in the Defense Acquisition Corps 

acquisition workforce a position to be known as "Senior Military Acquisition Advisor". 

(2) Appointment.—A Senior Military Acquisition Advisor shall be appointed by the 

President, by and with the advice and consent of the Senate. 
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(3) Scope of position.—An officer who is appointed as a Senior Military Acquisition 

Advisor— 

(A) shall serve as an advisor to, and provide senior level acquisition expertise to, the 

service acquisition executive of that officer's military department in accordance with this 

section; and 

(B) shall be assigned as an adjunct professor at the Defense Acquisition University. 

(b) Continuation on Active Duty.—An officer who is appointed as a Senior Military Acquisition 

Advisor may continue on active duty while serving in such position without regard to any mandatory 

retirement date that would otherwise be applicable to that officer by reason of years of service or age. An 

officer who is continued on active duty pursuant to this section is not eligible for consideration for 

selection for promotion. 

(c) Retired Grade.—Upon retirement, an officer who is a Senior Military Acquisition Advisor may, in 

the discretion of the President, be retired in the grade of brigadier general or rear admiral (lower half) if— 

(1) the officer has served as a Senior Military Acquisition Advisor for a period of not less 

than three years; and 

(2) the officer's service as a Senior Military Acquisition Advisor has been distinguished. 

(d) Selection and Tenure.— 

(1) In general.—Selection of an officer for recommendation for appointment as a Senior 

Military Acquisition Advisor shall be made competitively, and shall be based upon 

demonstrated experience and expertise in acquisition. 

(2) Officers eligible.—Officers shall be selected for recommendation for appointment as 

Senior Military Acquisition Advisors from among officers of the Defense Acquisition Corps in 

the acquisition workforce serving in critical acquisition positions who are serving in the 

grade of colonel or, in the case of the Navy, captain, and who have at least 12 years of 

acquisition experience. An officer selected for recommendation for appointment as a Senior 

Military Acquisition Advisor shall have at least 30 years of active commissioned service at the 

time of appointment. 

(3) Term.—The appointment of an officer as a Senior Military Acquisition Advisor shall be 

for a term of not longer than five years. 

(e) Limitation.— 

(1) Limitation on number and distribution.—There may not be more than 15 Senior Military 

Acquisition Advisors at any time, of whom— 

(A) not more than five may be officers of the Army; 

(B) not more than five may be officers of the Navy and Marine Corps; and 

(C) not more than five may be officers of the Air Force. 

(2) Number in each military department.—Subject to paragraph (1), the number of Senior 

Military Acquisition Advisors for each military department shall be as required and identified 

by the service acquisition executive of such military department and approved by the Under 

Secretary of Defense for Acquisition, Technology, and Logistics. 

(f) Advice to Service Acquisition Executive.—An officer who is a Senior Military Acquisition Advisor 

shall have as the officer's primary duty providing strategic, technical, and programmatic advice to the 

service acquisition executive of the officer's military department on matters pertaining to the Defense 

Acquisition System, including matters pertaining to procurement, research and development, advanced 

technology, test and evaluation, production, program management, systems engineering, and lifecycle 

logistics. 
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** * 

SUBCHAPTER III—ACQUISITION CORPS CRITICAL ACQUISITION 

POSITIONS

Sec. 

1731. Acquisition Corps: in general. Critical acquisition positions.

1732. Selection criteria and procedures. 

1733. Critical acquisition positions. 

1734. Career development. 

1735. Education, training, and experience requirements for critical acquisition positions. 

[1736. Repealed.] 

1737. Definitions and general provisions. 

 

§1731. Acquisition Corps: in general 

(a) Acquisition Corps.—The Secretary of Defense shall ensure that an Acquisition Corps is established 

for the Department of Defense. 

(b) Promotion Rate for Officers in Acquisition Corps.—The Secretary of Defense shall ensure that the 

qualifications of commissioned officers selected for the Acquisition Corps are such that those officers are 

expected, as a group, to be promoted at a rate not less than the rate for all line (or the equivalent) officers 

of the same armed force (both in the zone and below the zone) in the same grade. 

§1732. Selection criteria and procedures 

(a) Selection Criteria and Procedures.—Selection for membership in the Acquisition Corps shall be 

made in accordance with criteria and procedures established by the Secretary of Defense. 

(b) Eligibility Criteria.—Except as provided in subsections (c) and (d), only persons who meet all of 

the following requirements may be considered for service in the Corps: 

(1) The person must meet the educational requirements prescribed by the Secretary of 

Defense. Such requirements, at a minimum, shall include both of the following: 

(A) A requirement that the person— 

(i) has received a baccalaureate degree at an accredited educational institution 

authorized to grant baccalaureate degrees, or 

(ii) possess significant potential for advancement to levels of greater responsibility and 

authority, based on demonstrated analytical and decisionmaking capabilities, job 

performance, and qualifying experience. 

(B) A requirement that the person has completed— 

(i) at least 24 semester credit hours (or the equivalent) of study from an accredited 

institution of higher education from among the following disciplines: accounting, 

business finance, law, contracts, purchasing, economics, industrial management, 

marketing, quantitative methods, and organization and management; or 

(ii) at least 24 semester credit hours (or the equivalent) from an accredited institution 

of higher education in the person's career field and 12 semester credit hours (or the 

equivalent) from such an institution from among the disciplines listed in clause (i) or 

equivalent training as prescribed by the Secretary to ensure proficiency in the disciplines 

listed in clause (i). 

(2) The person must meet experience requirements prescribed by the Secretary of Defense. 

Such requirements shall, at a minimum, include a requirement for at least four years of 
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experience in an acquisition position in the Department of Defense or in a comparable position 

in industry or government. 

(3) The person must meet such other requirements as the Secretary of Defense or the 

Secretary of the military department concerned prescribes by regulation. 

(c) Exceptions.—(1) The requirements of subsections (b)(1)(A) and (b)(1)(B) shall not apply to any 

employee who, on October 1, 1991, has at least 10 years of experience in acquisition positions or in 

comparable positions in other government agencies or the private sector. 

(2) The requirements of subsections (b)(1)(A) and (b)(1)(B) shall not apply to any employee who is 

serving in an acquisition position on October 1, 1991, and who does not have 10 years of experience as 

described in paragraph (1) if the employee passes an examination considered by the Secretary of Defense 

to demonstrate skills, knowledge, or abilities comparable to that of an individual who has completed at 

least 24 semester credit hours (or the equivalent) of study from an accredited institution of higher 

education from among the following disciplines: accounting, business, finance, law, contracts, 

purchasing, economics, industrial management, marketing, quantitative methods, and organization and 

management. 

(d) Waiver.—(1) Except as provided in paragraph (2), the Secretary of Defense may waive any or all 

of the requirements of subsection (b) with respect to an employee if the Secretary determines that the 

employee possesses significant potential for advancement to levels of greater responsibility and authority, 

based on demonstrated analytical and decisionmaking capabilities, job performance, and qualifying 

experience. With respect to each waiver granted under this subsection, the Secretary shall set forth in a 

written document the rationale for the decision of the Secretary to waive such requirements. 

(2) The Secretary may not waive the requirements of subsection (b)(1)(A)(ii). 

(e) Mobility Statements.—(1) The Secretary of Defense is authorized to require civilians in the 

Acquisition Corps to sign mobility statements. 

(2) The Secretary of Defense shall identify which categories of civilians in the Acquisition Corps, as a 

condition of serving in the Corps, shall be required to sign mobility statements. The Secretary shall make 

available published information on such identification of categories. 

§1733 1731. Critical acquisition positions 

(a) Requirement for Corps Member.—A critical acquisition position may be filled only by a member of 

the Acquisition Corps. 

(b) (a) Designation of Critical Acquisition Positions.—(1) The Secretary of Defense shall designate the 

acquisition positions in the Department of Defense that are critical acquisition positions. Such positions 

shall include the following: 

(A) Any acquisition position which— 

(i) in the case of employees, is required to be filled by an employee in a senior position in 

the National Security Personnel System, as determined in accordance with guidelines 

prescribed by the Secretary, or in the Senior Executive Service; or 

(ii) in the case of members of the armed forces, is required to be filled by a commissioned 

officer of the Army, Navy, Air Force, or Marine Corps who is serving in the grade of 

lieutenant colonel, or, in the case of the Navy, commander, or a higher grade. 

(B) Other selected acquisition positions not covered by subparagraph (A), including the 

following: 

(i) Program executive officer. 

(ii) Program manager of a major defense acquisition program (as defined in section 2430 

of this title) or of a significant nonmajor defense acquisition program (as defined in section 

1737(a)(3) of this title). 

(iii) Deputy program manager of a major defense acquisition program. 
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(C) Any other acquisition position of significant responsibility in which the primary duties 

are supervisory or management duties. 

(2) The Secretary shall periodically publish a list of the positions designated under this subsection. 

(b) Promotion Rate for Officers in Acquisition Corps the Acquisition Workforce.—The Secretary of 

Defense shall ensure that the qualifications of commissioned officers selected for the Acquisition 

Corps in the acquisition workforce are such that those officers are expected, as a group, to be promoted 

at a rate not less than the rate for all line (or the equivalent) officers of the same armed force (both in 

the zone and below the zone) in the same grade. 

(c) Mobility Statements.—(1) The Secretary of Defense is authorized to require civilians in the 

Acquisition Corps in critical acquisition positions to sign mobility statements. 

(2) The Secretary of Defense shall identify which categories of civilians in the Acquisition Corps in 

critical acquisition positions, as a condition of serving in the Corps employment, shall be required to 

sign mobility statements. The Secretary shall make available published information on such 

identification of categories. 

§1734. Career development 

(a) Three-Year Assignment Period.—(1) Except as provided under subsection (b) and paragraph (3), 

the Secretary of each military department, acting through the service acquisition executive for that 

department, shall provide that any person who is assigned to a critical acquisition position shall be 

assigned to the position for not fewer than three years. Except as provided in subsection (d), the Secretary 

concerned may not reassign a person from such an assignment before the end of the three-year period. 

(2) A person may not be assigned to a critical acquisition position unless the person executes a written 

agreement to remain on active duty (in the case of a member of the armed forces) or to remain in Federal 

service (in the case of an employee) in that position for at least three years. The service obligation 

contained in such a written agreement shall remain in effect unless and until waived by the Secretary 

concerned under subsection (b). 

(3) The assignment period requirement of the first sentence of paragraph (1) is waived for any 

individual serving as a deputy program manager if the individual is assigned to a critical acquisition 

position upon completion of the individual's assignment as a deputy program manager. 

(b) Assignment Period for Program Managers.—(1) The Secretary of Defense shall prescribe in 

regulations— 

(A) a requirement that a program manager and a deputy program manager (except as 

provided in paragraph (3)) of a major defense acquisition program be assigned to the position 

at least until completion of the major milestone that occurs closest in time to the date on which 

the person has served in the position for four years; and 

(B) a requirement that, to the maximum extent practicable, a program manager who is the 

replacement for a reassigned program manager arrive at the assignment location before the 

reassigned program manager leaves. 

Except as provided in subsection (d), the Secretary concerned may not reassign a program manager or 

deputy program manager from such an assignment until after such major milestone has occurred. 

(2) A person may not be assigned to a critical acquisition position as a program manager or deputy 

program manager of a major defense acquisition program unless the person executes a written agreement 

to remain on active duty (in the case of a member of the armed forces) or to remain in Federal service (in 

the case of an employee) in that position at least until completion of the first major milestone that occurs 

closest in time to the date on which the person has served in the position for four years. The service 

obligation contained in such a written agreement shall remain in effect unless and until waived by the 

Secretary concerned under subsection (d). 
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(3) The assignment period requirement under subparagraph (A) of paragraph (1) is waived for any 

individual serving as a deputy program manager if the individual is assigned to a critical acquisition 

position upon completion of the individual's assignment as a deputy program manager. 

(c) Major Milestone Regulations.—(1) The Secretary of Defense shall issue regulations defining what 

constitutes major milestones for purposes of this section. The service acquisition executive of each 

military department shall establish major milestones at the beginning of a major defense acquisition 

program consistent with such regulations and shall use such milestones to determine the assignment 

period for program managers and deputy program managers under subsection (b). 

(2) The regulations shall require that major milestones be clearly definable and measurable events that 

mark the completion of a significant phase in a major defense acquisition program and that such 

milestones be the same as the milestones contained in the baseline description established for the program 

pursuant to section 2435(a) of this title. The Secretary shall require that the major milestones as defined in 

the regulations be included in the Selected Acquisition Report required for such program under section 

2432 of this title. 

(d) Waiver of Assignment Period.—(1) With respect to a person assigned to a critical acquisition 

position, the Secretary concerned may waive the prohibition on reassignment of that person (in subsection 

(a)(1) or (b)(1)) and the service obligation in an agreement executed by that person (under subsection 

(a)(2) or (b)(2)), but only in exceptional circumstances in which a waiver is necessary for reasons 

permitted in regulations prescribed by the Secretary of Defense. 

(2) With respect to each waiver granted under this subsection, the service acquisition executive (or his 

delegate) shall set forth in a written document the rationale for the decision to grant the waiver. 

(e) Rotation Policy.—(1) The Secretary of Defense shall establish a policy encouraging the rotation of 

members of the Acquisition Corps of the acquisition workforce serving in critical acquisition positions to 

new assignments after completion of five years of service in such positions, or, in the case of a program 

manager, after completion of a major program milestone, whichever is longer. Such rotation policy shall 

be designed to ensure opportunities for career broadening assignments and an infusion of new ideas into 

critical acquisition positions. 

(2) The Secretary of Defense shall establish a procedure under which the assignment of each person 

assigned to a critical acquisition position shall be reviewed on a case-by-case basis for the purpose of 

determining whether the Government and such person would be better served by a reassignment to a 

different position. Such a review shall be carried out with respect to each such person not later than five 

years after that person is assigned to a critical position. 

(f) Centralized Job Referral System.—The Secretary of Defense shall prescribe regulations providing 

for the use of centralized lists to ensure that persons are selected for critical positions without regard to 

geographic location of applicants for such positions. 

(g) Exchange Program.—The Secretary of Defense shall establish, for purposes of broadening the 

experience of members of the Acquisition Corps of the acquisition workforce, a test program in which 

members of the Corps of the acquisition workforce serving in a military department or Defense Agency 

are assigned or detailed to an acquisition position in another department or agency. Under the test 

program, the Secretary of Defense shall ensure that, to the maximum extent practicable, at least 5 percent 

of the members of the Acquisition Corps of the acquisition workforce in critical acquisition positions 

shall serve in such exchange assignments each year. The test program shall operate for not less than a 

period of three years. 

(h) Responsibility for Assignments.—The Secretary of each military department, acting through the 

service acquisition executive for that department, is responsible for making assignments of civilian and 

military personnel of that military department who are members of the Acquisition Corps of the 

acquisition workforce to critical acquisition positions. 

**** 
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§1737. Definitions and general provisions 

(a) Definitions.—In this subchapter: 

(1) The term "program manager" means, with respect to a defense acquisition program, the 

member of the Acquisition Corps of the acquisition workforce responsible for managing the 

program, regardless of the title given the member. 

(2) The term "deputy program manager" means the person who has authority to act on 

behalf of the program manager in the absence of the program manager. 

(3) The term "significant nonmajor defense acquisition program" means a Department of 

Defense acquisition program that is not a major defense acquisition program (as defined in 

section 2430 of this title) and that is estimated by the Secretary of Defense to require an 

eventual total expenditure for research, development, test, and evaluation of more than the 

dollar threshold set forth in section 2302(5)(A) of this title for such purposes for a major 

system or an eventual total expenditure for procurement of more than the dollar threshold set 

forth in section 2302(5)(A) of this title for such purpose for a major system. 

(4) The term "program executive officer" has the meaning given such term in regulations 

prescribed by the Secretary of Defense. 

(5) The term "senior contracting official" means a director of contracting, or a principal 

deputy to a director of contracting, serving in the office of the Secretary of a military 

department, the headquarters of a military department, the head of a Defense Agency, a 

subordinate command headquarters, or in a major systems or logistics contracting activity in 

the Department of Defense. 

(b) Limitation.—Any civilian or military member of the Corps of the acquisition workforce who does 

not meet the education, training, and experience requirements for a critical acquisition position 

established under this subchapter may not carry out the duties or exercise the authorities of that position, 

except for a period not to exceed six months, unless a waiver of the requirements is granted under 

subsection (c). 

(c) Waiver.—The Secretary of each military department (acting through the service acquisition 

executive for that department) or the Secretary of Defense (acting through the Under Secretary of Defense 

for Acquisition, Technology, and Logistics) for Defense Agencies and other components of the 

Department of Defense may waive, on a case-by-case basis, the requirements established under this 

subchapter with respect to the assignment of an individual to a particular critical acquisition position. 

Such a waiver may be granted only if unusual circumstances justify the waiver or if the Secretary 

concerned (or official to whom the waiver authority is delegated) determines that the individual's 

qualifications obviate the need for meeting the education, training, and experience requirements 

established under this subchapter. 

  

§1742. Internship, cooperative education, and scholarship programs 

(a) Programs.—The Secretary of Defense shall conduct the following education and training programs: 

(1) An intern program for purposes of providing highly qualified and talented individuals an 

opportunity for accelerated promotions, career broadening assignments, and specified training 

to prepare them for entry into the Acquisition Corps acquisition positions in the Department 

of Defense. 

(2) A cooperative education credit program under which the Secretary arranges, through 

cooperative arrangements entered into with one or more accredited institutions of higher 
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education, for such institutions to grant undergraduate credit for work performed by students 

who are employed by the Department of Defense in acquisition positions. 

(3) A scholarship program for the purpose of qualifying personnel for acquisition positions 

in the Department of Defense. 

(b) Scholarship Program Requirements.—Each recipient of a scholarship under a program conducted 

under subsection (a)(3) shall be required to sign a written agreement that sets forth the terms and 

conditions of the scholarship. The agreement shall be in a form prescribed by the Secretary and shall 

include terms and conditions, including terms and conditions addressing reimbursement in the event that a 

recipient fails to fulfill the requirements of the agreement, that are comparable to those set forth as a 

condition for providing advanced education assistance under section 2005. The obligation to reimburse 

the United States under an agreement under this subsection is, for all purposes, a debt owing the United 

States. 

SUBCHAPTER V—GENERAL MANAGEMENT PROVISIONS 

Sec. 

1761. Management information system. 

1762. Demonstration project relating to certain acquisition personnel management policies and 

procedures. 

[1763. Repealed.] 

1764. Authority to establish different minimum requirements. 

1765. Competency development. 

 ** ** 

§1765. Competency development 

(a) IN GENERAL.—For each acquisition workforce career field, the Secretary of Defense shall 

establish, for the civilian personnel in that career field, defined proficiency standards and technical 

and nontechnical competencies which shall be used in personnel qualification assessments. 

(b) NEGOTIATIONS.—Any action taken by the Secretary under this section, or to implement this 

section, shall not be subject to the requirements of chapter 71 of title 5. 

(c) REGULATIONS.—Any rules or regulations prescribed pursuant to this section shall be deemed 

a Government-wide rule or regulation under section 7117(a)(1) of title 5 and shall not be deemed to be 

an agency rule or regulation under section 7117(a)(2) of such title. 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. PUBLIC-PRIVATE EXCHANGE PROGRAM FOR ACQUISITION WORKFORCE.

This section would create a two-way exchange program between the Defense 

Department acquisition workforce and private sector companies. 

The committee recognizes that exchange programs between the public sector and the 

private sector could benefit the federal government and private sector companies alike. The 

committee is aware that the Defense Department’s previous efforts to implement such exchange 

programs were undermined by structural disincentives for key stakeholders. The committee 

notes that the new statute would eliminate these disincentives. In particular, the committee 

notes that the new statute would preclude the use of a private sector employee’s participation in 

the exchange program, in and of itself, as the basis of an organizational conflict-of-interest 

complaint. 

The committee observes that the new statute should increase exchange program 

participation among public sector employees. The committee recognizes that the Defense 

Department’s willingness to support those employees who participate in the exchange program 

and promote the further development of their careers would be essential to the success of the 

program. 

This section would make conforming amendments to 10 U.S.C. 1705 to permit the use of 

the Defense Acquisition Workforce Development Fund for the exchange program, and to 

10 U.S.C. 1599g to exclude members of the acquisition workforce from that section. 
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1 SEC. ___. PUBLIC-PRIVATE EXCHANGE PROGRAM FOR ACQUISITION 

2 WORKFORCE. 

3 (a) IN GENERAL.—Subchapter IV of Chapter 87 of title 10, United States Code, is 

4 amended by adding at the end the following new section: 

5 “§1749. Public-private exchange program for the acquisition workforce 

6 “(a) ASSIGNMENT AUTHORITY.—(1) Under regulations prescribed by the Secretary of 

7 Defense, the Secretary may, with the agreement of a private-sector organization, arrange for the 

8 temporary assignment under this section of— 

9 “(A) a member of the acquisition workforce to such private-sector organization; 

10 or 

11 “(B) an employee of such private-sector organization to a Department of Defense 

12 organization. 

13 Such an assignment may only be made with the consent of the member of the acquisition 

14 workforce or the employee concerned. 

15 “(2) Members of the acquisition workforce are eligible for an assignment under this 

16 section as follows: 

17 “(A) Civilians in any of grades GS-12 through GS-15 under the General Schedule 

18 or, for employees in the demonstration project under section 1762 of this title, the 

19 equivalent. 

20 “(B) Members of the armed forces serving in any of pay grades O-3 through O-6. 

21 “(3) A private-sector organization shall not be considered to have an organizational 

22 conflict of interest merely by reason of— 
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1 “(A) the assignment of an employee of that organization to the Department of 

2 Defense under this section; or 

3 “(B) the assignment of a member of the acquisition workforce to that organization 

4 under this section. 

5 “(b) AGREEMENTS.—(1) The Secretary of Defense shall provide for a written agreement 

6 among the Department of Defense, the private-sector organization, and the member of the 

7 acquisition workforce or the employee concerned regarding the terms and conditions of an 

8 assignment under this section. Each such agreement shall include the following: 

9 “(A) In the case of an agreement for the assignment of a member of the 

10 acquisition workforce, a requirement that the member of the acquisition workforce, upon 

11 completion of the assignment, will— 

12 “(i) if a member of the armed forces, serve in the armed forces for a period 

13 equal to twice the length of the assignment (in addition to any other period of 

14 obligated service); or 

15 “(ii) if a civilian, serve in the Department of Defense, or elsewhere in the 

16 civil service if approved by the Secretary, for a period equal to twice the length of 

17 the assignment. 

18 “(B) A provision that if the member of the acquisition workforce or the employee 

19 of the private-sector organization (as the case may be) fails to carry out the agreement, 

20 such member or employee shall be liable to the United States for payment of all expenses 

21 of the assignment, unless that failure was for good and sufficient reason, as determined 

22 by the Secretary of Defense. 
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1 “(C) In the case of an agreement for the assignment of a member of the 

2 acquisition workforce, language ensuring that such member of the acquisition workforce 

3 does not improperly use pre-decisional or draft deliberative information that such 

4 member may be privy to or aware of related to Department programing, budgeting, 

5 resourcing, acquisition, or procurement for the benefit or advantage of the private-sector 

6 organization. 

7 “(2) An amount for which an individual is liable under paragraph (1)(B) shall be treated 

8 as a debt due the United States. 

9 “(3) The Secretary may waive, in whole or in part, collection of a debt described in 

10 paragraph (2) based on a determination that the collection would be against equity and good 

11 conscience and not in the best interests of the United States, after taking into account any 

12 indication of fraud, misrepresentation, fault, or lack of good faith on the part of the individual 

13 who is liable for the debt. 

14 “(c) TERMINATION.—An assignment under this section may, at any time and for any 

15 reason, be terminated by the Department of Defense or the private-sector organization 

16 concerned. 

17 “(d) DURATION.—(1) Except as provided in paragraph (2), an assignment under this 

18 section shall be for a period of not more than two years, renewable up to a total of four years. 

19 “(2) An assignment under this section may be for a period in excess of two years, but not 

20 more than four years, if the Secretary determines that such assignment is necessary to meet 

21 critical mission or program requirements. 

22 “(3) A member of the acquisition workforce may not be assigned under this section for 

23 more than a total of four years inclusive of all such assignments. 
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1 “(e) STATUS OF ACQUISITION WORKFORCE MEMBERS ASSIGNED TO PRIVATE-SECTOR 

2 ORGANIZATIONS.—(1) A member of the acquisition workforce who is assigned to a private3 sector organization under this section shall be considered, during the period of assignment, to be 

4 on detail to a regular duty or work assignment in the Department for all purposes. In the case of a 

5 civilian member of the acquisition workforce, the written agreement established under subsection 

6 (b)(1)— 

7 “(A) shall address the specific terms and conditions related to the employee's 

8 continued status as a Federal employee; and 

9 “(B) in the case of an assignment of nine months or longer, shall provide that, if 

10 the employee successfully completes the assignment (as determined by the Secretary), the 

11 employee shall be eligible for consideration for placement in a new position under 

12 programs of the Department of Defense providing priority placement to certain 

13 employees. 

14 “(2) In establishing an assignment of a member of the acquisition workforce of the 

15 Department of Defense to a private-sector organization, the Secretary of Defense– 

16 “(A) may, in the case of a civilian member of the acquisition workforce, provide 

17 for the performance, during the member’s absence, of the normal duties and functions of 

18 that member by making a temporary or term appointment under general civil service 

19 authorities for such appointments 

20 “(B) shall ensure that the normal duties and functions of the acquisition workforce 

21 member can be reasonably performed by other personnel of the Department of Defense 

22 without the transfer or reassignment of other personnel of the Department of Defense, 

23 including members of the armed forces; 
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1 “(C) shall ensure that the normal duties and functions of the acquisition workforce 

2 member are not, as a result of and during the course of such temporary assignment, 

3 performed or augmented by contractor personnel in violation of the provisions of section 

4 2461 of this title; and 

5 “(D) shall certify that the temporary assignment of the acquisition workforce 

6 member will not have an adverse or negative impact on mission attainment, warfighter 

7 support, or organizational capabilities associated with the assignment. 

8 “(f) TERMS AND CONDITIONS FOR PRIVATE-SECTOR EMPLOYEES.—An employee of a 

9 private-sector organization who is assigned to a Department of Defense organization under this 

10 section— 

11 “(1) shall continue to receive pay and benefits from the private-sector 

12 organization from which such employee is assigned and shall not receive pay or benefits 

13 from the Department of Defense, except as provided in paragraph (2); 

14 “(2) is deemed to be an employee of the Department of Defense for the purposes 

15 of— 

16 “(A) chapters 73 and 81 of title 5; 

17 “(B) sections 201, 203, 205, 207, 208, 209, 603, 606, 607, 643, 654, 1905, 

18 and 1913 of title 18; 

19 “(C) sections 1343, 1344, and 1349(b) of title 31; 

20 “(D) the Federal Tort Claims Act and any other Federal tort liability 

21 statute; 

22 “(E) the Ethics in Government Act of 1978; and 

23 “(F) chapter 21 of title 41; 
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1 “(3) shall not have access to any trade secrets or to any other nonpublic 

2 information which is of commercial value to the private-sector organization from which 

3 such employee is assigned; 

4 “(4) may perform work that is considered inherently governmental in nature only 

5 when requested in writing by the Secretary of Defense; and 

6 “(5) may not be used to circumvent the provision of section 2461 of this title nor 

7 to circumvent any limitation or restriction on the size of the Department's workforce. 

8 “(g) PROHIBITION AGAINST CHARGING CERTAIN COSTS TO THE FEDERAL GOVERNMENT.—

9 A private-sector organization may not charge the Department or any other agency of the Federal 

10 Government, as direct or indirect costs under a Federal contract, the costs of pay or benefits paid 

11 by the organization to an employee assigned to a Department organization under this section for 

12 the period of the assignment. 

13 “(h) CONSIDERATION OF TRAINING NEEDS FOR MEMBERS OF THE ACQUISITION 

14 WORKFORCE.—In carrying out this section, the Secretary of Defense shall take into consideration 

15 the question of how assignments under this section might best be used to help meet the needs of 

16 the Department of Defense with respect to the training of members of the acquisition workforce. 

17 “(i) FUNDING; USE OF DEFENSE ACQUISITION WORKFORCE DEVELOPMENT FUND.—Funds 

18 for the expenses for the program under this section shall be provided from amounts in the 

19 Department of Defense Acquisition Workforce Development Fund. For such purpose, expenses 

20 of the program include— 

21 “(1) the base salary of a civilian member of the acquisition workforce assigned to 

22 a private-sector organization under this section, during the period of that assignment (and 

23 notwithstanding section 1705(e)(5) of this title); 
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1 “(2) any expenses relating to assignment under this section of a member of the 

2 acquisition workforce away from the member’s regular duty station, including expenses 

3 for travel, per diem, and lodging; and 

4 “(3) expenses for the administration of the program.”. 

5 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of such 

6 subchapter is amended by adding at the end the following new item: 

7 “1749. Public-private exchange program for acquisition workforce.”. 

8 (b) USE OF DEFENSE ACQUISITION WORKFORCE DEVELOPMENT FUND.—Section 

9 1705(e)(1) of such title is amended by adding at the end the following new subparagraph: 

10 “(C) Amounts in the Fund shall be used to pay the expenses of the public-private 

11 exchange program for the acquisition workforce under section 1749 of this title.”. 

12 (c) ACQUISITION WORKFORCE EMPLOYEES EXCLUDED FROM SECTION 1599G PROGRAM.— 

13 (1) IN GENERAL.—Section 1599g of such title is amended by adding at the end 

14 the following new subsection: 

15 “(i) ACQUISITION WORKFORCE EMPLOYEES.—An employee of the Department of Defense 

16 who is eligible for the public-private exchange program for the acquisition workforce under 

17 section 1749 of this title is not eligible for an assignment under this section.”. 

18 (2) APPLICABILITY.—Subsection (i) of section 1599g of title 10, United States Code, as added by 

19 paragraph (1), shall not apply to an employee of the Department of Defense who entered into an 

20 agreement under that section before the date of the enactment of this Act. 
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