SECTION

Report of the Advisory Panel on 

Streamlining and Codifying 

Acquisition Regulations

Volume 1 of 3

January 2018

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Volume 3 — January 201

PANEL 9
   


Report of the Advisory Panel on

Streamlining and Codifying  

Acquisition Regulations  

Volume 1 of 3 

January 2018 

Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

Table of Contents Volume 1 | Page ii

Table of Contents

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

THE DYNAMIC MARKETPLACE .......................................................................... 5 

RECOMMENDATIONS

Section 1 – Commercial Buying ............................................................................ 15 

Section 2 – Contract Compliance and Audit ............................................................ 51

Section 3 – Defense Business Systems: Acquisition of Information Technology Systems ......103 

Section 4 – Earned Value Management for Software Programs Using Agile ......................149 

Section 5 – Services Contracting..........................................................................157 

Section 6 – Small Business .................................................................................167 

Section 7 – Statutory Offices and Designated Officials ...............................................195

Section 8 – Statutory Reporting Requirements ........................................................223

CONCLUSION .......................................................................................... 279 

LIST OF SECTION 809 PANEL RECOMMENDATIONS ............................................. 283 

APPENDICES 

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

Appendix B – Panel Activities ............................................................................. A-5 

Appendix C – Panel Teams .............................................................................. A-15

Appendix D – Communication with the Panel ....................................................... A-17 

Appendix E – Professional Staff ........................................................................ A-19

Appendix F – Supplemental Tables for Section 1: Commercial Buying .......................... A-21 

Appendix G – Acronym List .............................................................................. A-69
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LIST OF FIGURES

Figure 1. The Section 809 Panel’s Vision for Transforming Defense Acquisition ............... 11

Figure 2. A Potential Framework for Solving Problems through the Marketplace .............. 13

Figure 2-1. Business System Relationships ............................................................. 83

Figure 3-1. DoD Active-Record Defense Business Systems by Functional Area .................105

Figure 3-2. Comparison of Compliance and Oversight Effort ......................................115

Figure 3-3. Requirements Process Example ...........................................................120

Figure 3-4. Recommended DBS Governance Structure ..............................................127

Figure 3-5. Integrated Business Framework ...........................................................132

Figure 3-6. Integrated Business Management Process Overview ..................................132

Figure 3-7. Weekly DoD Information Technology Contract Obligations During FY 2017 ......140

Figure 3-8. Comparison of Military Departments’ Weekly IT Contracting 

Obligations, FY 2017 ..................................................................................144

Figure 5-1. FY 2017 Spend—DoD as Funding Department ..........................................161

Figure 6-1. Proposed USD(R&E) Organization .........................................................172

Figure 6-2. Proposed USD(A&S) Organization .........................................................173

Figure 6-3. Percentage of DoD Contract Dollars Obligated To Small Business, 

By Service Contract Category ........................................................................176

Figure 6-4. Minimum Expenditures Toward SBIR (By Fiscal Year) .................................183
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LIST OF TABLES

Table 1-1. Government-Unique Clauses Applicable to the Acquisition of 

Commercial Items ....................................................................................... 35

Table 2-1. Example of DCAA and DCMA Audit and Nonaudit Services ............................. 54

Table 2-2. Contract Audit and Oversight Studies ...................................................... 57

Table 2-3. Types of GAGAS Audits and Attestation Engagements .................................. 73

Table 2-4. On-Demand Oversight Time Limits ......................................................... 77

Table 2-5. Predictable Oversight Time Limits ......................................................... 77

Table 2-6. DCAA Business System Coverage ............................................................ 93

Table 2-7. Risk Assessment Matrix ....................................................................... 96

Table 2-8. Examples of Envisioned Oversight Levels by Risk Category ........................... 98

Table 2-9. CFY 2016 Incurred Cost Proposals Auditable Dollar Value (ADV) Strata ............. 99

Table 3-1. DoD Status of Adopting Selected Agile Principles .......................................118

Table 3-2. Implementation Status of Selected Section 804 IT Acquisition 

Recommendations ......................................................................................123

Table 3-3. Appropriation Accounts Used by DoD to Acquire Business 

Software Solutions .....................................................................................137

Table 3-4. FY 2017 DoD Contract Obligations, By Aggregated Product Code ...................145

Table 5-1. Services Portfolio Group: PSC Definitions; Knowledge-Based Services .............163

Table 6-1. Top Ten FY 2017 DoD Obligations to Small Businesses as a Percentage of 

Total FY 2017 DoD Obligations (for total obligations more than $100 million) ............175

Table 8-1. Reporting Requirement Set to Sunset by November 25, 2017 .......................231

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.

In order to provide up to date information, this report includes FPDS data on FY 2017 transactions. Charts, 

tables, and calculations are cited with date of data extraction. Because these data extractions occurred a few 

weeks before the 120 day deadline, officially certified DoD data will differ slightly from the data in this report.
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Introduction 

This Volume 1 report is the first of three volumes of the Section 809 Panel’s Final Report and continues

the panel’s mandate for making recommendations to streamline acquisition. To date, the efforts of the

panel have proven to be highly productive, and outreach efforts continue to generate hundreds of ideas

for improving acquisition that the panel is diligently investigating.

The May 2017 Section 809 Panel Interim Report provided three statutory recommendations that were all

enacted into law in the Fiscal Year (FY) 2018 National Defense Authorization Act (NDAA).1 Through

these actions, Congress demonstrated its willingness to expedite the panel’s recommendations to

improve the efficiency and effectiveness of the Department of Defense (DoD) acquisition process. In the

coming months, the panel will continue to be a partner to Congress, DoD, and industry in support of

further efforts to streamline acquisition to better enable DoD to meet its strategic warfighting goals.   

This Introduction does not identify all the findings and conclusions included in Volume 1 of the Final

Report, but instead touches briefly on several of the key recommendations and draws attention to

several critically important areas discussed in further detail in the report.

One key area of work for the Section 809 Panel is the conceptualizing of a Dynamic Marketplace

framework—an outcome‐based acquisition process for providing DoD simplified access to the global

marketplace. The panel’s research shows unequivocally that the current acquisition process is an

                                                     

1 FY 2018 NDAA, Pub. L. No. 115‐91, Section 801, Statements of Purpose for DoD Acquisition, Section 881, Extension of Maximum 

Duration of Fuel Storage Contracts, and Section 885, Exception for Business Operations from Requirement to Accept $1 Coins, enacted 

December 12, 2017. 
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obstacle to DoD’s ability to access a marketplace that has moved far beyond the traditional defense

industrial base of the Cold War era. Accordingly, the Section 809 Panel has started to develop a new

framework that can harness the benefits from the global marketplace of ideas, solutions, products, and

services at a speed that is closer to real time than the current acquisition process allows. A preliminary

description of the streamlined alternative acquisition process envisioned as the Dynamic Marketplace

immediately follows this Introduction.

In upholding the mission of the panel to streamline acquisition, this report includes recommendations

to repeal many obsolete provisions of law that are envisioned by the panel to be included in the

FY 2019 NDAA. The purpose of repeal is to remove provisions from statute that either unnecessarily

constrain the authority of the Secretary of Defense (also referred to as the Secretary) or are no longer

operative, giving DoD greater flexibility with which to operate. To better facilitate acquisition of

commercial items and allow for rapid technology insertion, the Section 809 Panel recommends

eliminating 165 government‐unique contract clauses that act as barriers to the acquisition of

commercial items. In an effort to bolster clarity in commercial acquisition, the Section 809 Panel

recommends implementing a single definition of subcontractor to replace the current 27 separate,

sometimes overlapping, definitions.  

The Section 809 Panel learned that modernization requirements for defense business systems (DBS) are

subject to nine approval layers. Accordingly, the panel recommends giving approval authority to

lower‐level, experienced portfolio leaders. To further enhance DoD’s ability to access the best suited

information technology solutions when they are needed, the panel recommends eliminating the

imposition of Earned Value Management (EVM) when developing software using Agile methods.  

This report identifies current acquisition approaches that provide reliable returns on investment for

warfighters, such as the Small Business Innovation Research (SBIR) and the Small Business Technology

Transfer (STTR) programs. A recent Air Force report indicates these programs provide a 10‐fold return

on investment; therefore, the panel recommends making SBIR and STTR acquisition authority

permanent.

As stated in the cover letter above, this report contains recommendations to update the processes by

which DoD updates commercial buying principles, streamline DoD’s auditing requirements, improve

how DoD acquires and funds IT business systems, clarify the definition of personal and nonpersonal

services, address challenges in how the small business community and DoD interact, remove statutory

requirements for acquisition‐related DoD offices, and repeal many obsolete acquisition‐related

statutory reporting requirements.

Each of the recommendations highlighted above, and others, are elaborated on in the Volume 1

sections identified below. The sections ahead are laid out as follows:

 Section 1 – Commercial Buying  

 Section 2 – Contract Compliance and Audit  

 Section 3 – Defense Business Systems: Acquisition of Information Technology Systems  

 Section 4 – Earned Value Management for Software Programs Using Agile
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Introduction    Volume 1   |   Page 3

 Section 5 – Services Contracting

 Section 6 – Small Business  

 Section 7 – Statutory Offices

 Section 8 – Statutory Reporting

To facilitate navigating the report, recommendations are arranged in subsections that identify the

related Problem, Background, Findings, Conclusions, and Implementation. At the end of each section,

the report features gray pages that include Implementation Details, such as draft legislative text,

amendments to the Federal Acquisition Regulations (FAR) and Defense Federal Acquisition Regulation

Supplement (DFARS), and other statutory and regulatory changes to facilitate implementation of the

recommendations.

In preparing recommendations for the next two volumes of its Final Report (to be published in

June 2018 and January 2019), the Section 809 Panel remains committed to considering the views of

stakeholders in government and industry and, consistent with its statutory obligations, encouraging

participation from all stakeholders dedicated to streamlining DoD acquisition.

   
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The Dynamic Marketplace 

The Section 809 Panel is developing an outcome-based acquisition system 

that seeks solutions to DoD’s problems from across the entire marketplace. 

THE FUNDAMENTAL CHALLENGES TO OVERCOME 

Secretary of Defense James Mattis, in his January 19, 2018 National Defense Strategy,1 emphasized that

we face a dynamic threat. The National Defense Strategy states, “We are emerging from a period of

strategic atrophy, aware that our competitive military advantage has been eroding. We are facing

increased global disorder, characterized by decline in the long‐standing rules‐based international

order—creating a security environment more complex and volatile than any we have experienced in

recent memory. Inter‐state strategic competition, not terrorism, is now the primary concern in

U.S. national security.”

To address that concern, the National Defense Strategy2 asserts, “A rapid, iterative approach to

capability development will reduce costs, technological obsolescence, and acquisition risk...This

approach, a major departure from previous practices and culture, will allow the Department to more

                                                     

1 DoD, Summary of the 2018 National Defense Strategy of the United States of America: Sharpening the American Military’s Competitive 

Edge, accessed January 23, 2018, https://www.defense.gov/Portals/1/Documents/pubs/2018‐National‐Defense‐Strategy‐Summary.pdf.  2 Ibid. 
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quickly respond to changes in the security environment and make it harder for competitors to offset

our systems.”

In its May 2017 Interim Report, the Section 809 Panel highlighted the challenges DoD faces because of

the rapidly evolving global threat. In this Volume 1 Report, the panel provides 24 recommendations that

begin to move the DoD acquisition system from one that emphasizes process to one that emphasizes

delivering timely warfighting capabilities.  

The Section 809 Panel’s research shows the acquisition system has many unique challenges. The system

is cost‐centric. DoD often equates cost of a product or service with the risk of an acquisition. As such,

arbitrary dollar thresholds dictate factors such as authorities, processes, and oversight.3 Another

problem is that the acquisition system stresses process perfection over output. This perspective is

shared by many stakeholders with whom the Section 809 Panel has met and was aptly described by

one stakeholder who met with the Section 809 Panel as “mission becoming secondary to perfection of

the contract.”4  

The acquisition system is inflexible and takes a one‐size‐fits‐all approach. Dissimilar products or

services are acquired using the same processes. One example is the application of the many regulatory

and oversight requirements that may be appropriate for major defense acquisition programs (MDAPs)

but are not necessarily appropriate for the acquisition of basic commodities, to which they are also

applied. This approach results in unnecessary process delays and the inability to tailor activities to

meet warfighters’ needs. Despite acquisition regulations permitting risk‐taking, the acquisition

workforce is neither incentivized nor empowered to make decisions, much less take risks. 5  

Collectively, these problems produce an insular, risk‐averse culture that hinders DoD’s ability to work

with the broadest possible array of partners to deliver solutions to DoD’s problems and affect the

outcomes DoD seeks. DoD’s preference for narrowly defined requirements and unique products

creates a barrier for industry to provide innovative technology and results in DoD struggling to achieve

optimal outcomes.

To stay ahead in a dynamic, ever‐changing environment, DoD needs a new approach to acquisition.

Rather than focusing on price and process to measures success, DoD’s acquisition system should focus

on outcomes.

                                                     

3 For example, to date, the Section 809 Panel has identified more than 900 references to dollar thresholds in the Federal Acquisition 

Regulation (FAR).  

4 Meeting with Section 809 Panel, November 2017. 

5 See Statement of Guiding Principles for the Federal Acquisition System, FAR 1.102. 
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THE PANEL’S VISION FOR THE FUTURE 

The Section 809 Panel, thus far, has identified five essential attributes that should be inherent in

tomorrow’s outcome‐based acquisition system:

 Competitive and collaborative   

 Adaptive and responsive

 Transparent

 Time sensitive

 Allows for trade‐offs

The sections below define these attributes and offers initial concepts of how each can be achieved

through bold recommendations.  

Competitive and Collaborative 

The number of companies competing for defense contracts is declining. Industry experts forecast that

acquisitions and mergers in the defense market segment will continue and exacerbate the decline in

competition.6 A report by CSIS that was scheduled for release in January 2018 indicates a substantial

decline has occurred in the number of “first‐tier prime vendors” between 2011 and 2015.7 The number

of small businesses registered to do business with the federal government fell by more than 100,000

companies, and the number of DoD contract actions for small business decreased by approximately

70 percent from FY 2011 to FY 2014.8 As stressed in the Section 809 Panel’s May 2017 Interim Report, the

traditional defense industrial base is dramatically changing shape; consequently, DoD must be able to

operate in a dynamic marketplace in which it wields less influence.9 The Section 809 Panel’s research

has shown that companies for which DoD is not a primary customer either struggle to understand

DoD’s acquisition system or decide not to conform to its transaction rules. These companies are often

unwilling to engage in time‐consuming, tedious, competitive processes, and they do not plan their

transactional calculus around meeting extraneous and irrelevant contractual requirements. In extreme

cases, delays in the award of contracts caused by prolonged process requirements have put some

companies out of business, a problem especially acute among small businesses and technology

innovators.10  

DoD’s current approach to administering competition by predetermining a set of defined specifications

and requirements is too slow and limits opportunities for new entrants into the defense marketplace.

Consequently, the range of potential solutions available to DoD to solve its warfighting challenges is

                                                     

6 Advisory Panel on Streamlining and Codifying Acquisition Regulations, Section 809 Panel Interim Report, May 2017, 10, accessed on 

January 6, 2018, https://section809panel.org/wp‐content/uploads/2017/05/Sec809Panel_Interim‐Report_May2017_FINAL‐for‐web.pdf.   7 Joe Gould, “American exodus? 17,000 US defense suppliers may have left the defense sector,” Defense News, accessed January 8, 2018, 

https://www.defensenews.com/breaking‐news/2017/12/14/american‐exodus‐17000‐us‐defense‐suppliers‐may‐have‐left‐the‐defense‐

sector/.    8 Steve Chabot, Chairman, Committee on Small Business, testimony before House Committee on Armed Services, April 14, 2015, 4‐5,

accessed November 8, 2017, https://smallbusiness.house.gov/uploadedfiles/chabot_written_statement_fy_16_ndaa.pdf.  9 Advisory Panel on Streamlining and Codifying Acquisition Regulations, Section 809 Panel Interim Report, May 2017, 10, accessed on 

January 6, 2018, https://section809panel.org/wp‐content/uploads/2017/05/Sec809Panel_Interim‐Report_May2017_FINAL‐for‐web.pdf.  10 Meeting with the Section 809 Panel, June 22, 2017. 
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artificially constrained by a rigid requirements process.11 As Section 809 Panel Commissioner

Dr. William LaPlante noted in the Panel’s testimony before Congress in May 2017, the nation’s

adversaries are not spending years “studying for analysis of alternatives” but are focusing on quickly

fielding new capabilities and solutions to their own operational and strategic challenges.12   

Given DoD’s myriad acquisition challenges, the Section 809 Panel sees need for bold change—perhaps

even a new definition of competition altogether. The Section 809 Panel is exploring ways to modify

competitive procedures, irrespective of the acquisition dollar value, by recognizing that competition

has taken place in certain market segments—a concept outlined in greater detail below. An open market

adaptation to the current forms of acceptable DoD competitive processes could preclude any need for

further competition. Ideally, a reconfigured competition model could integrate more use of value

analysis (such as valuing the cost avoided due to DoD not having to develop a capability itself), to

assess price reasonableness at the transactional level.

Changing DoD’s competitive procedures to compete solutions to problems, rather than assess a

company’s ability to meet detailed technical specifications, could be another avenue for systemic

change. Using such an approach, DoD could give warfighters greater input into the process by

leveraging their first‐hand experience to articulate problems and select the best solutions put forth by

industry. Changing the character of competition in such a way could shift DoD away from spending

extensive time defining and validating requirements, to using more challenge‐based competitions or

taking advantage of available market solutions to quickly develop and field new capabilities.

DoD’s current approach to acquisition does not foster meaningful collaboration with the private sector

or within DoD itself. DoD’s acquisition workforce fears that communication with industry may result

in punishment. This concern undermines DoD’s ability to work with industry as a true partner.13

An inability or unwillingness to collaborate with industry results in DoD lacking awareness of the full

range of available potential solutions; creates barriers for nontraditional contractors to enter the defense

marketplace; and results in DoD acquiring suboptimal products, services, and solutions. DoD must

foster collaborative partnerships across the entire marketplace to accomplish its mission today and in

the future.  

Adaptive and Responsive 

In addressing responsiveness and adaptability, the Section 809 Panel has researched programs to

inform a potential new acquisition model state. One commonly cited is DoD’s Mine Resistant Ambush

Protected Vehicle (MRAP) program. The program demonstrated when an outcome is urgently required

to save lives, the acquisition system can adapt. Widely considered to be a successful acquisition

                                                     

11 For example, 10 U.S.C. § 2366(b) and subsequent policy guidance to the acquisition community through DoDI 5000.02 mandate that 

prior to the release of an Request for Proposal (RFP), the program requirements to be bid against must be firm.  12 “Initial Findings of the Section 809 Panel: Setting the Path for Streamlining and Improving Defense Acquisition,” U.S. House of 

Representatives Committee on Armed Services, May 17, 2017, accessed January 6, 2018, 

https://armedservices.house.gov/legislation/hearings/initial‐findings‐section‐809‐panel‐setting‐path‐streamlining‐and‐improving.   13 “Jacques Gansler: ‘Global war’ on contractors must stop,” ExecutiveBiz, January 15, 2010, accessed January 6, 2018, 

http://blog.executivebiz.com/2010/01/jacques‐gansler‐global‐war‐on‐contractors‐must‐stop/7105/.  
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program, the MRAP program can also be instructive along several related acquisition fronts to directly

inform the new dynamic marketplace concepts presented here.  

When initially confronted with the problem of Improvised Explosive Devices in the Iraq battlespace,

DoD looked at  solutions already existing in the marketplace, such as those developed abroad by Israel

and South Africa, as well as other tailored solutions. After evaluating the benefits or costs associated

with those alternative approaches, DoD decided to acquire a militarized version of an item

manufactured by various vehicle companies already selling to DoD. Although that choice was

substantially more responsive to the need for armored vehicle protection than the typical DoD

program, and saved lives on delivery, an alternative built around existing items, such as proffered in

this marketplace framework, may also have complemented that tailored capability. The MRAP

acquisition program also relied on direct involvement by the Secretary of Defense and a variety of

waivers and tailored processes.14 Program success that relies on intervention by DoD’s most senior

leadership is not scalable to the majority of DoD acquisitions. Acquisition by exception is neither a

scalable nor a cost‐effective model, and when the process does not take full advantage of the

marketplace, it is still neither fully adaptive nor responsive.  

To demonstrate adaptability and responsiveness, DoD needs to create an organization that is malleable,

and at times decentralized. Leaders and the workforce as a whole must be empowered and trusted to

make quick decisions; policies and procedures must constantly evolve; and cross‐functional teams

must be incentivized to solve problems collaboratively. General Electric’s FastWorks technique of

assembling interdisciplinary teams, constantly seeking customer feedback, and setting aggressive

schedules demonstrates how large organizations can be adaptable to changing environments and end‐

user demands.15 The Section 809 Panel recommends building similar models with demonstrated

success in DoD, such as SOFWERX and Hacking for Defense, to scale such approaches across DoD’s

acquisition system.  

Transparent 

Transparency in DoD acquisition is essential to promoting competition and collaboration, as well as

ensuring the trust of the American people. In the context of acquisition, transparency has entwined

meanings—one being visibility of relevant information to buyers and sellers in the marketplace about

requirements and transactional outcomes, and the other being access to accurate data necessary for

proper oversight. DoD struggles to create an environment in which transparency in acquisition for

either purpose is valued as a critical element of success.  

Companies unfamiliar with DoD struggle to find clear points of entry into the defense marketplace,

and relevant information about business opportunities is difficult to identify through most public

government portals. Many small businesses have no idea, for instance, how to register with SAM.gov

                                                     

14 GAO, Defense Acquisitions: Rapid Acquisition of MRAP Vehicles, Statement of Michael J. Sullivan before the House Armed Services 

Committee, Defense Acquisition Reform Panel, October 2009, GAO‐10‐155T, accessed January 6, 2018, 

http://www.gao.gov/assets/130/123503.pdf.   15 Office of Federal Procurement Policy, “Myth‐busting 3” Further Improving Industry Communication with Effective Debriefings, OMB 

Memorandum, January 5, 2017, accessed January 6, 2018, http://www.ago.noaa.gov/acquisition/docs/ofpp_myth_busting_3.pdf.   
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or how to use FedBizOpps.16 It is time to test the use of transparent, widely‐used media like Twitter

and Facebook to post solicitations and publicize DoD’s needs.  

Even when companies have been able to successfully navigate the preaward processes, award

decisions are often still mystifying to vendors. Although the Section 809 Panel is continuing its

research, it is clear that protests have become a tool for industry to receive feedback and better

understand the government’s acquisition decisions. Such extreme and costly steps should not be

needed for industry to get information on DoD’s needs and processes or to understand the end result

of the acquisition process.  

The U.S. military is one of the most trusted institutions in the United States today.17 It is imperative that

tomorrow’s defense acquisition system maximizes transparency to bolster and maintain that trust.

Time Sensitive 

Time has to become a more valued attribute of the acquisition life cycle. Anecdotes and data abound

about the excessive lead time experienced for delivering products and services to the warfighter; the

FY 2018 NDAA directs DoD to implement a study of Procurement Administrative Lead Time as

evidence of the desire for DoD to account for delays at many process points.18 Slow processes drive

business and healthy market competition away from DoD.  

The prolonged length of an acquisition by DoD indicates the existence of two problematic issues:

a workforce culture beholden to process over mission and a system that lacks incentives to quantify lost

opportunity and manpower costs. The current DoD acquisition workforce culture emphasizes and

rewards process‐driven behavior for which time becomes of secondary or tertiary value, yet there is

little in the acquisition literature to prove that valuing time means sacrificing regulation or safeguards.  

Valuing time comprises balancing speed with the due diligence appropriate for a given acquisition.

U.S. adversaries, both state and nonstate, are not subject to the level of acquisition regulation or

oversight strictures imposed on DoD, and consequently, they can deliver capability to the field much

more rapidly. Tomorrow’s acquisition system must allow DoD to find and deliver to its warfighters the

lethality, technical dominance, and the maintenance of technical dominance necessary to maintain

superiority and deter potential new adversaries.

Allows for Trade-Offs 

The framework introduced here was developed by the Section 809 Panel with the understanding that

not all acquisitions are alike. Allowing for trade‐offs gives DoD the flexibility required to obtain

optimal results. It is not always feasible to implement any or all of the above attributes simultaneously.

When urgency requires immediate delivery, for example, DoD may be willing to forgo competition

altogether. Allowing for trade‐offs empowers informed decision‐making during any given acquisition.  

                                                     

16 See Section 6: Small Business. 

17 “Americans’ Confidence in Institutions Edges Up,” Gallup News, accessed January 17, 2018, 

http://news.gallup.com/poll/212840/americans‐confidence‐institutions‐edges.aspx.  18 Section 886 of FY 2018 NDAA, Pub. L. No. 115‐91 (2017).  
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MOVING TOWARD AN OUTCOME-BASED SYSTEM 

The Section 809 Panel envisions an outcome‐based acquisition system that emphasizes industry

competing solutions to DoD’s problems. Distinct from the current emphasis on defining requirements,

the approach introduced here favors deeper market analysis and problem‐driven competitions.19 DoD

should be more open to and benefit from the full array of potential solutions to the outcomes it seeks to

achieve.  

Figure 1. The Section 809 Panel’s Vision for Transforming Defense Acquisition 

Building on a concept originally developed by the Center for New American Security (CNAS), the

Section 809 Panel’s vision includes four types of products, services, and solutions that DoD acquires:

(1) readily available products and services; (2) products and services requiring minor customization;

(3) products and services requiring major customization; and (4) products and services uniquely

developed for DoD.20 The Section 809 Panel is developing four lanes aligned to these types of products,

services, and solutions. The lanes are further defined by the degree of customization necessary to meet

DoD’s needs, as well as DoD’s influence (relative to other potential buyers) in the marketplace. The

Section 809 Panel builds on CNAS’s original concept by further defining the four lanes as follows:

                                                     

19 Professional Services Council, White Paper: Enhanced Market Research Drives Better Acquisitions, February 2017, accessed January 6, 

2018, https://www.pscouncil.org/Downloads/documents/PSCWhitePaper‐MarketResearchDrivesBetterAcquisitions_02‐10‐17.pdf.   20 CNAS identified the lanes as: military unique systems with constrained competition, military unique systems with viable competition, 

military adapted commercial technology, and purely commercial technology. See Ben FitzGerald, Alexandra Sander, and Jacqueline 

Parziale, Future Foundry: A New Strategic Approach to Military‐Technical Advantage, Center for a New American Security, 

December 2016, 8, accessed November 20, 2017, https://s3.amazonaws.com/files.cnas.org/documents/CNAS‐Report‐FutureFoundry‐

final.pdf?mtime=20161213162640.  
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 Lane 1 – Readily Available:  This lane encompasses existing products and services that require

no vendor customization to meet DoD’s needs. DoD may be one of many potential buyers.

These products are generally marketed and sold to nondefense entities and consumers.21

 Lane 2 – Minor Customization:  The second lane includes products and services that are

primarily sold in the private sector, and for which DoD may be one of many potential buyers.

To meet DoD’s needs; however, venders must perform less‐than‐major customization prior to

DoD use.22

 Lane 3 – Major Customization:  This lane includes products and services for which DoD may

be one of few potential buyers, and for which there may be little or no private‐sector

applicability. Underlying functions, technology, and other customizations may be available for

purchase in the private sector, but the customization required to meet DoD’s needs is of such

significance that it transforms the product or service to have primarily defense‐related

application.

 Lane 4 – Defense‐Specific Development:  In this lane there is no private‐sector applicability, as

the products and services are developed exclusively for defense‐related use. In most cases DoD

will be the only buyer, and in a limited number cases, DoD may be one of a few potential

buyers globally.

Building on the CNAS’ optionality strategy, the Section 809 Panel is developing two additional features

in the proposed acquisition model.23 The first feature is the manner in which DoD arrives at any

particular lane; the second is defining transaction rules appropriate to each lane. How DoD makes its

way to the marketplace is initially represented by Figure 2, and will be more fully develop in the

Section 809 Panel’s June 2018 Volume 2 report.  

                                                     

21 Customization refers to a product completed by vendors, or tailoring of service execution and delivery by vendors to meet DoD needs. 

It does not refer to configuration, which leverages inherent flexibility of a product or services.   22 Major customization refers to changes that fundamentally alter a product’s design or function, or the execution and delivery of a 

service. Whether a customization is minor or major will differ across vendors and industries.   23 Ben FitzGerald, Alexandra Sander, and Jacqueline Parziale, Future Foundry: A New Strategic Approach to Military‐Technical Advantage,

Center for a New American Security, December 2016, accessed November 20, 2017, 

https://s3.amazonaws.com/files.cnas.org/documents/CNAS‐Report‐FutureFoundry‐final.pdf?mtime=20161213162640. 
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The Dynamic Marketplace    Volume 1   |   Page 13

Figure 2. A Potential Framework for Solving Problems through the Marketplace 

In its future reports, the Section 809 Panel will define how competition, transaction, and transparency

rules should differ across the four lanes. By doing so, DoD can tailor how it acquires solutions from

each lane and align itself with market behavior norms. For example, there should be DoD‐unique

transaction rules and oversight when working with the traditional defense marketplace segment

(i.e., companies primarily operating in Lanes 3 and 4). DoD must be able and willing, however, to

reduce management and oversight to capitalize on the nondefense marketplace segment (i.e., those

companies operating principally in Lanes 1 and 2). By ending DoD’s monolithic approach to engaging

with industry to develop and acquire solutions, DoD can become a better customer and more

knowledgeable actor in the marketplace.  

This approach has several advantages:

 It is the result of evidence‐based analysis informing how DoD can best compete for goods and

services in the marketplace.  

 It considers the fundamental limitations of DoD as a consumer in a rapidly changing

marketplace against fast evolving enemies.   

 It is flexible enough to allow for an empowered and informed acquisition leaders and workforce

to work efficiently with industry to deliver effects quickly to the warfighter.

The behavioral norms and standard transaction rules will differ in each lane to align with industry

practices and market dynamics. For example, companies offering products and services that are readily

available (i.e., in Lane 1) may not view DoD as their principal customer; therefore, they will not be

amenable to meeting a litany of DoD‐unique contractual terms and conditions. Not until DoD

determines through a competitive process which solutions best solve its problems does it determine

what it will ultimately acquire and how to will acquire it. This approach will allow DoD to compete

solutions without predetermining its acquisition process. It will enable DoD to operate with greater

sophistication across the marketplace by tailoring its contracts, terms, and conditions to align with

market and industry standards.

Problem Statement

Compete Solutions

Receive/Evaluate Range of Viable Solutions

Solution A Solution B Solution C

Lane 1 Lane 2 Lane 3 Lane 4

Deliver Desired Outcome to Operators/End‐Users

Easy

Problems 

(i.e., not complex, 

novel or risky)
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Page 14   |   Volume 1    The Dynamic Marketplace

THE DYNAMIC MARKETPLACE 

The Section 809 Panel will continue to evolve the vision and framework described above and develop

an outcome‐based system in which to situate future recommendations. The themes identified

throughout the recommendations in this report—flexibility, empowered decision‐making, speed to the

marketplace, and collaboration—underscore the importance and urgent need for an outcome‐based

acquisition model for DoD to employ when it approaches the marketplace. The framework introduced

in this section proposes radical changes by practical means. It identifies ways to solve known problems,

eliminates a one‐size‐fits‐all approach, reflects an understanding of how the marketplace is structured

and operates, and allows as many new ways as possible to meet warfighter needs. Volumes 2 and 3 of

the Final Report, published in June 2018 and January 2019 respectively, will tie this marketplace

framework to more elements of the acquisition system and undertake integration of the concept across

the subjects being researched by the Section 809 Panel.  
Volume 1   |   Page 15

Section 1 

Commercial Buying 

Streamline and simplify DoD’s access to the commercial market. 

RECOMMENDATIONS

Rec. 1: Revise definitions related to commercial buying to simplify their application and

eliminate inconsistency.

Rec. 2: Minimize government‐unique terms applicable to commercial buying.

Rec. 3: Align and clarify FAR commercial termination language.

Rec. 4: Revise DFARS sections related to rights in technical data policy for commercial

products.

   
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INTRODUCTION 

Commercial buying represents an important component of the DoD acquisition process. Congress and

DoD in particular, and the federal government in general, have urged greater use of the commercial

marketplace since the early 1970s. Numerous reports have advocated eliminating government

specifications and clauses to give the government increased access to commercial markets and to help

avoid the high cost of developing unique products.1 Legislation such as the Competition in Contracting

Act of 1984 and the Defense Procurement Reform Act of 1984 mandated use of commercial items

whenever it was technically acceptable and cost effective.2 Despite these efforts, many commercial

firms were still unable to do business with DoD because of the high cost of complying with unique

requirements such as the Truth in Negotiation Act (TINA) and the Cost Accounting Standards, both of

which involved implementing a government‐specific business system. Commercial firms could qualify

for an exception to TINA only if their commercial items were sold in substantial quantities to the public—

subject to a sales test—but modifications to commercial items were all subject to TINA.3

The FY 1991 NDAA directed DoD to establish an advisory panel on streamlining and codifying

acquisition laws (Section 800 Panel). The Section 800 Panel noted that commercial items tend to be

much less expensive; are increasingly more technically advanced than their government‐unique

counterparts; and that buying in the commercial market increases competition, which yields lower

prices, greater economies of scale, increased surge capacity, and increased access to cutting‐edge

technologies. The Section 800 Panel recommended changes in law, including a preference for

commercial items, a definition of commercial items, and relief from numerous statutes and clauses for

items deemed commercial.

4   

Congress adopted many of the Section 800 Panel recommendations to simplify procurement of

commercial items in the Federal Acquisition Streamlining Act of 1994 (FASA). This Act established a

definition for the term commercial item, a preference for procuring commercial items, an emphasis on

commercial market research, greater reliance of commercial sector business processes, a requirement to

use standard commercial terms and conditions to the maximum extent practicable, waiver of many statutes

that would otherwise have been applicable to commercial items, and a framework for maintaining a

limit on the number of future statutes that may be applied to procurements of commercial items. FASA

also required numerous other related changes throughout the FAR and DFARS.5 Congress passed the

Federal Acquisition Reform Act (FARA) in 1996, furthering its preference for buying commercial items

by, among other things, creating a definition for commercially available off‐the‐shelf (COTS) item,

providing additional clause exemptions for COTS items, and establishing a TINA waiver for items

                                                     

1 Acquisition Advisory Panel, Report of the Acquisition Advisory Panel to the Office of Federal Procurement Policy and the United States 

Congress, January 2007, accessed January 9, 2018, https://www.acquisition.gov/sites/default/files/page_file_uploads/ACQUISITION‐

ADVISORY‐PANEL‐2007‐Report_final.pdf.   2 Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Laws, AD‐A262699, January 1993, 

accessed June 6, 2017, http://www.dtic.mil/docs/citations/ADA262699.  3 Ibid. 

4 Ibid. 

5 Federal Acquisition Streamlining Act, Pub. L. No. 103‐355 (1994). 
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determined to be commercial without a sales test.6  FASA’s commercial buying policies are implemented

in Part 12 of the FAR7 and Part 212 of the DFARS.8  

Despite these efforts, commercial buying has not become as widespread in DoD as Congress had

hoped. Only 18 percent of DoD’s total obligations in FY 2017 were for the acquisition of commercial

items, and commercial item spending actually declined by 29 percent between FY 2012 and FY 2017.9

Congress has continued to enact changes to commercial policies, and DoD has continued to evolve its

policies, training, and tools; however, the commercial marketplace is evolving at a much faster rate.

DoD’s commercial buying practices require a comprehensive reevaluation to fulfill the promise offered

by FASA 24 years ago.

DoD’s commercial buying has stagnated for multiple reasons. The acquisition workforce has faced

issues with inconsistent interpretations of policy, confusion over how to identify eligible commercial

products and services, and determining that prices are fair and reasonable.10 DoD contracting officers

have received increasing criticism and oversight from both the DoD Inspector General (IG)11 and the

Government Accountability Office (GAO).12 This confusion has resulted in frequent promulgation of

legislative revisions as Congress seeks ways to encourage DoD to access the commercial marketplace,

as well as agency‐level policy and local guidance intended to improve the workforce’s ability to buy

commercially.13

The FAR has been amended more than 100 times to address various aspects of commercial buying,

making commercial buying policies more difficult to navigate.14 The majority of FAR amendments

related to commercial buying policy were administrative in nature, although others were driven by

statute and agency‐level policy related to contract type, the applicability of various statutes, and

pricing. Since FASA was implemented, the number of DoD‐related commercial buying provisions and

clauses has increased by 188 percent, and the number of commercial clauses that may be flowed down

has increased five‐fold. In 1995, the FAR and DFARS contained a combined total of 57 government

clauses applicable to commercial items. Today there are 165 clauses, with 122 originating in statute,

20 originating in executive orders, and 23 originating in agency‐level policies.15  

                                                     

6 FY 1996 NDAA, Pub. L. No. 104‐106, 110 Stat. 186 (1996).  7 Acquisition of Commercial Items, FAR, Part 12.  8 Acquisition of Commercial Items, DFARS, Part 212.  9 FY 2012–FY2017 decline in commercial obligations was 29 percent and the FY 2012–FY2017 decline in noncommercial obligations was 

7 percent. Data from FPDS, extracted January 7, 2018. 

10 USD(AT&L), Guidance on Commercial Item Determinations and the Determination of Price Reasonableness for Commercial Items, 

June 6, 2017, http://www.acq.osd.mil/dpap/policy/policyvault/USA003554‐16‐DPAP.pdf.  11 DoDIG, Procuring Noncompetitive Spare Parts Through an Exclusive Distributor, accessed June 6, 2017, 

http://www.dodig.mil/audit/reports/fy08/08‐048.pdf.  12 GAO, Contract Management: DOD Vulnerabilities to Contracting Fraud, Waste, and Abuse, accessed June 6, 2017, 

http://www.gao.gov/new.items/d06838r.pdf.  13 USD(AT&L), Guidance on Commercial Item Determinations and the Determination of Price Reasonableness for Commercial Items, 

accessed June 6, 2017, http://www.acq.osd.mil/dpap/policy/policyvault/USA003554‐16‐DPAP.pdf.  14 Based on Section 809 Panel analysis. 

15 The total includes commercial item clauses required to comply with laws unique to government contracts in FAR 52.212‐4(r) and

commercial items clauses required to implement statutes or executive orders in FAR 52.212‐5, DFARS 252.212‐7001/212.301, but does 

not include any alternate clauses. 
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RECOMMENDATIONS 

Recommendation 1: Revise definitions related to commercial buying to simplify 

their application and eliminate inconsistency. 

Problem 

The FAR’s commercial buying terms are confusing, poorly defined, or undefined altogether. The term

commercial item is overly broad, encompassing both commercial products and commercial services. The

terms commercial item and commercially available off‐the‐shelf item appear in the U.S. Code in numerous

sections, but do not incorporate the same universal definition; in some instances, the terms are defined

differently, and in other instances they lack any definition at all. Subcontracting, which is subject to

dozens of unique definitions for the terms subcontract and subcontractor, reflects similar disharmony.

The inconsistency among commercial definitions generates confusion and creates risk that contracting

officers may fail to apply commercial practices uniformly.

Background 

Commercial buying represents an important component of the DoD acquisition process. For more than

2 decades, Congress and DoD have sought to encourage use of commercial buying by easing the

statutory, regulatory, and procedural framework for buying commercial goods and services, as well as

broadening the scope of goods and services that are eligible for revised commercial buying policies.

The Section 800 Panel recognized the potential of commercial buying and recommended a number of

changes in law to facilitate its acceptance. Included within its preference for buying commercial items,

the Section 800 Panel recommended a definition for commercial item.16 The Section 800 Panel’s efforts

contributed to passage of the 1994 FASA in which Congress took a number of important steps to

enhance the federal government’s access to the broader commercial market. These steps included

exempting qualifying items procured at the prime or subcontract level from various statutes, policies,

and contracting requirements unique to the federal procurement process. For this reason, the matter of

the definitions that serve as the criteria for determining if an item qualifies is critically important. Two

years after FASA was signed into law, Congress passed the 1996 FARA, which furthered the preference

for buying commercial items by creating a definition for COTS items.17  

Notwithstanding these efforts to promulgate a wide‐ranging commercial buying policy, DoD’s

acquisition workforce has struggled to consistently interpret and apply the policy.18  Confusion over

how to identify eligible commercial products and services has subjected DoD contracting officers to

                                                     

16 Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Laws, accessed June 6, 2017, 

http://www.dtic.mil/docs/citations/ADA262699.  17 FY 1996 NDAA, Pub. L. No. 104–106, 110 Stat. 186 (1996).  18 USD(AT&L), Guidance on Commercial Item Determinations and the Determination of Price Reasonableness for Commercial Items, 

accessed June 6, 2017, http://www.acq.osd.mil/dpap/policy/policyvault/USA003554‐16‐DPAP.pdf. 
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increased criticism and oversight.19 It has also sparked frequent legislative and regulatory revisions in

an effort to improve the policies and tools available to buy commercially.20  

Findings 

The Section 809 Panel identified a number of problems regarding definitions used in the procurement

of commercial items.

Definition of Commercial Item   

Congress gave DoD the widest possible access to the commercial marketplace by including in the

definition the phrase of a type, which provides DoD the flexibility needed to take full advantage of the

vibrant and constantly changing commercial marketplace. Many challenges have been raised regarding

portions of the definition intended to allow the federal government to acquire items that are of a type

sold in the commercial marketplace or that have minor modifications to satisfy a government‐unique

requirement. The same is true for items that are newly offered for sale, allowing the government the

opportunity to be among the first to procure these state‐of‐the‐art products. Both government and

industry have, in recent years, established a better understanding of the application of the definition.

Issues typically arise regarding facts of a particular acquisition, not as a result of a serious deficiency in

the statutory definitions. Tinkering with the definition to address unique, fact‐specific examples would

not give DoD the broadest reasonable definition for accessing the commercial marketplace.

The definition of a commercial item encompasses both commercial products and commercial services.

Defining an item as meaning either a product or service is confusing. The term item is not generally

thought to include a service. For example, a standard dictionary definition for item is individual article

or unit; 41 U.S.C. § 108, Item and Item of Supply, defines an item as “an individual part, component,

subassembly, or subsystem integral to a major system;” and FAR 2.101, Definitions, defines a common

item as a “material that is common to the applicable government contract and the contractor’s other

work.”21 To illustrate the confusion caused by the existing definition, a service can be a commercial

item offered in support of a product that is also a commercial item. Furthermore, a COTS item is a

subset of a commercial item, but the definition of a COTS item only includes products and does not

include services.22

Commercial Services 

Commercial services have become substantially more important in the 24 years since their inclusion in

FASA. DoD obligated more than $23 billion for commercial services in FY 2017, which was 18 percent

of all service obligations.23 The important statutory language addressing commercial services lies

buried within several subparagraphs of the definition of a commercial item. This aspect of the

definition may lead to confusion over the distinction between services offered directly in support of a

                                                     

19 DoDIG, Procuring Noncompetitive Spare Parts Through an Exclusive Distributor, June 6, 2017, 

http://www.dodig.mil/audit/reports/fy08/08‐048.pdf. GAO, Contract Management: DOD Vulnerabilities to Contracting Fraud, Waste, and 

Abuse, accessed June 6, 2017, http://www.gao.gov/new.items/d06838r.pdf.  20 USD(AT&L), Guidance on Commercial Item Determinations and the Determination of Price Reasonableness for Commercial Items, 

June 6, 2017, http://www.acq.osd.mil/dpap/policy/policyvault/USA003554‐16‐DPAP.pdf.  21 Item and Item of Supply, 41 U.S.C. §108. Definitions, FAR 2.101.  22 Commercially Available Off‐the‐Shelf Item, 41 U.S.C. §104. 

23 FPDS Data, accessed January 7, 2017. 
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commercial item, and services unrelated to a specific commercial item, but of a type offered in the

commercial marketplace.  

Defining a commercial item in a way that includes both commercial products and commercial services

does not reflect the significant roles services and commercial services play today in the DoD

procurement budget. Carefully bifurcating the existing definition into commercial products and

commercial services would better serve DoD.

Addressing Commercial Processes 

The existing definition of a commercial item does not properly consider the output of commercial

processes because it fails to encompass products that are manufactured to federal government

specifications or drawings by manufacturers that customarily manufacture to customer specifications

and drawings (such as paint, castings, mounting components on circuit cards using their standard

commercial processes).  

The Section 800 Panel originally made the recommendation with the intention of providing the federal

government access to this important element of the commercial marketplace.24 The Section 800 Panel

recommendation to allow DoD to access commercial processes, in addition to commercial products and

services, continues to make sense and would benefit DoD today. For DoD to have broader access to the

commercial marketplace and further the objective of greater integration of the commercial and defense

industrial bases, it is important to expand the definition of a commercial item to include not only

commercial products but also certain commercial processes.

Unintended Consequences of the Definition of COTS 

In 1996, with the definition of commercial item less than 2 years old, Congress created a new definition

for COTS item.25 COTS items are a much narrower subset of the broader universe of commercial

products.

26 The intent was to provide additional opportunities for the government to buy from the

commercial market by providing for additional statutory exemptions for commercial items that

satisfied the much narrower COTS definition. FAR 12.505, Applicability of Certain Laws for the

Acquisition of COTS Items, and DFARS 212.570, Applicability of Certain Laws to Contracts and

Subcontracts for the Acquisition of Commercially‐Available Off‐the‐Shelf Items, were established to

identify statutes that were inapplicable or modified in some fashion to further simplify the acquisition

of COTS.

The definition of COTS has provided little additional opportunity for procuring commercial products,

and may have unintended consequences of limiting the acceptance of the broader definition of

commercial products.

Commercial products are defined, generally, as items of a type that have been sold, leased, or

licensed—or offered for sale, lease, or license— to the general public. An item that is not yet available in

the market, but evolved from one that is, may also be procured as a commercial item. By contrast, a

                                                     

24 Section 800 Panel Report, section 8.3.1.6. 

25 Clinger‐Cohen Act of 1996, section 4203 (FY 1996 NDAA, Pub. L. No. 104‐106).  26 Commercially Available Off‐the‐Shelf Item, 41 U.S.C. §104. The term COTS does not apply to commercial services. 
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COTS item must be sold in substantial quantities in the marketplace, a throwback to the pre‐FASA

days of the substantial sales‐based commercial item TINA exception.

A product may be considered commercial if it includes a customary modification or a unique

modification specifically to meet a federal government requirement, as long as that unique

modification is minor. By contrast, a COTS item must be procured by the government without

modification and in the same form as is sold in the commercial marketplace.

The combination of the requirement for COTS products to have sales in substantial quantities and be

without modification substantially limits DoD’s ability to leverage the commercial market, especially

for new or state‐of‐the‐art products. For example, if a commercial company offered for sale a new,

substantially improved version of an existing server, DoD would need to wait until the server was sold

in substantial quantities to be able to procure the product using the additional COTS exemption.

As of January 2018, there are 18 statutes and associated FAR or DFARS clauses that are either exempt

or modified with regard to their applicability to COTS products (see Appendix F, Table F‐1). Of those

18, five exemptions/modifications are established in statute, 11 result from a determination by the FAR

Council or Office of Federal Procurement Policy (OFPP), and two result from a determination by DoD.

Only six of these 18 exemptions/modifications are identified in FAR 12.503 or DFARS 212.570.   

Although these additional COTS exemptions appear helpful on the surface, they may, in fact have

created two distinct classes of commercial products: the broad, inclusive commercial product, and the

very narrow COTS product.

The effect of creating these two classes is that much of the streamlining Congress intended for

commercial products is being more narrowly applied to COTS items. For example, FAR 52.222‐50,

Combating Trafficking in Persons, paragraph (h), requires contractors that offer supplies other than

COTS to prepare and maintain a compliance plan. It is unclear why a contractor selling supplies that

meet the narrow definition of a COTS product should be exempt from the requirement to prepare and

maintain a compliance plan, yet a contractor selling similar supplies that differ only in that they are not

sold in substantial quantities, should not also be exempt.  

Granting relief to contractors selling COTS items, but not those selling the broader commercial

products and commercial services, serves as an obstacle to the government’s stated goal of attracting

the best and the brightest to the government marketplace to solve its most difficult problems. If DoD is

seeking a high‐tech, cutting‐edge solution, that solution will likely not satisfy the sold in substantial

quantities and without modification criteria of the COTS definition. Rather, it is more likely to be new

and innovative and, therefore, sold in less‐than‐substantial quantities; offered, but not yet sold; or entirely

new technologies that evolved from existing products, all of which fall under the definition of

commercial products.

It is time for Congress and DoD to fully accept and embrace the commercial product and commercial

services definitions and use them with all the flexibility FASA intended. DoD needs greater access to

the full breadth of the commercial market place, and especially the cutting edge of that marketplace.

Relieving the burden of government‐unique requirements is an important step DoD must take to make

that happen, but relieving the burden on only the vary narrow universe of COTS products will not
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produce the desired result. Progress will only be made when real relief exists across the full spectrum

of commercial products and commercial services.

Unique Statutory Definitions of Commercial Items 

Congress codified the definition of a commercial item at 41 U.S.C § 103. This definition is used when

determining whether an item qualifies for certain exemptions provided by Congress. To achieve the

maximum benefit and avoid confusion, it is essential that the definitions be clear, well understood, and

consistent. The Section 809 Panel analysis of 10 U.S.C. and 41 U.S.C. identified 40 distinct definitions of

commercial item. Although the majority of these references point to the primary definitions at 41 U.S.C.

§ 103, many others do not, providing their own unique definitions, or none at all.

The definition from 41 U.S.C. § 103 is used for 34 of the 40 distinct citations for commercial items. Six

terms in Title 10 do not incorporate the primary definitions by reference, whether due to the use of

alternative definitions or through the absence of definitions entirely. Six instances of the term

commercial item lacked a definition in accord with Title 41(see Appendix F, Table F‐2). Four of the

terms lacked any definition; a fifth term referred to a definition of commercial items later in its own

section; and a sixth term referred only to the commercial acquisition procedures of FAR Part 12.  

There does not appear to be any stated rationale for the differing definitions in the case of these six

citations. The Section 809 Panel reviewed the legislative histories of each provision, but found no

justification for omitting the primary definitions of Title 41.27 The underlying statutes themselves also

did not explain the lack of definitions, or the existence of separate definitions.

Harmonizing the Use of Terms in Statute 

Commercial buying processes would benefit from harmonizing all U.S.C. references to commercial

products and commercial services—including 41 U.S.C., 10 U.S.C., and other miscellaneous uses of the

terms in other titles of the U.S.C.—with the primary definitions of those terms in Title 41. The

Section 809 Panel identified more than 75 uses of the term commercial item in statute. Every use of the

terms commercial product and commercial service in the U.S.C. should incorporate, by reference, the

primary definitions of those terms at 41 U.S.C. §§ 103, 103a and 104, respectively.

An exception to this general perspective that requires further elaboration is the commercial item

definition at Core Logistics Capabilities, 10 U.S.C. § 2464(a)(3). This unique definition of commercial

item was crafted in 1998.

10 U.S.C. §2464 (a)(5), Core Logistics Support states,

(5) The commercial items covered by paragraph (3) are commercial items that have been sold or leased in

substantial quantities to the general public and are purchased without modification in the same form that

they are sold in the commercial marketplace, or with minor modifications to meet Federal Government

requirements.

                                                     

27 Based on Section 809 Panel analysis. 
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It consists of portions of the definitions of a COTS item (41 U.S.C. § 104) and a commercial item

(41 U.S.C. § 103). This unique definition likely represented the early thinking and concerns about how

the relatively new definition (1995) of commercial item at 41 U.S.C. § 103 might be implemented and

the effect it may have on weapon systems, subsystems, and components.  

The definition states that the covered items addressed in 10 U.S.C. § 2464 are commercial items (a term

that is defined in 10 U.S.C. § 2302 and 41 U.S.C. § 103), but then continues by carving out portions of

the commercial item definition as well as portions of the definition of a COTS item (also defined at

10 U.S.C. 2302 and 41 U.S.C. § 104). The 10 U.S.C. § 2464 definition of commercial item does not include

items of a type, items offered for sale, items that evolved from commercial items, and items that are not yet

available in the commercial marketplace but will be available in time to meet the federal government

delivery requirement. These are all important elements of the commercial item definition Congress

created to give the federal government the opportunity to procure items that are state‐of‐the‐art but

may not otherwise be available to them under a COTS sold in substantial quantities criteria. The

10 U.S.C. § 2464 definition allows for minor modifications unique to the federal government, but does

not include modifications to commercial items that are customarily available in the commercial marketplace.

The 10 U.S.C. § 2464 definition appears to reflect the early concerns that contracting officers would take

a very liberal approach to the definition, procuring many items as commercial, to the point that it

would potentially undermine the depot role in weapon system readiness by tying support of such

items to industry.  

The potential concerns expressed above were prevalent in the late 1990s, but over time, they have

generally proven unfounded. The distinction between commercial and noncommercial items has

remained firm, particularly in regard to the kinds of items that would likely be maintained in a depot.

Contracting officers have been careful to understand the commercial marketplace for an item and the

extent of minor modifications necessary to meet the federal government requirements before making a

determination that an item is a commercial item. Contracting officers have also been careful to consider

the realities of the commercial marketplace (most notably concerning technical data) and to address the

data already available to other customers in the commercial marketplace, as well as data necessary for

the minor modifications.

The unique definition of a commercial item at 10 U.S.C. § 2464 presents a potential practical problem

for the DoD acquisition and logistics support workforce. As noted above, at the time an item is being

considered for procurement as a commercial item, the contracting officer considers all the available

information and, based on the definition at 41 U.S.C. § 103 (commercial item) or § 104 (COTS item),

determines if the item satisfies the appropriate definition and may be procured using the unique FAR

policies and procedures for commercial items and COTS items. Later, when that same item is being

considered for logistics support, the logistics community makes another determination of the item’s

commerciality using the unique definition at 10 U.S.C. § 2464.

These two separate determinations, using two distinct definitions of commercial item, create

considerable conflict, and ignore the reality that the decisions made at the time of initial procurement,

including decisions with regard to the procurement of technical data, make later decisions using

different criteria difficult, if not impractical. This situation is especially relevant when an item

originally procured and planned for support as a commercial product or COTS product under
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41 U.S.C. §§ 103 or 104, later is determined by the logistics support team not to meet the 10 U.S.C.

§ 2464 definition, but lacks the data necessary for depot‐based support. The logistics support

community should participate at the time the initial determination of commerciality is made by the

contracting officer using the definition at 41 U.S.C. §§ 103 or 104, and then carry forward that

determination into the logistics support phase. Making a separate determination, using a different

definition at a later point in time, leads to confusion and inconsistency in the determination. Congress

has recently taken steps at 10 U.S.C. § 2306a(b)(2) to avoid similar inconsistencies in how the initial

commercial item determinations are handled by DoD.

The past 22 years have established a firm foundation for the application of the 41 U.S.C. § 103

commercial item definition and its impact on the depot logistics support, and no longer represents a

compelling argument in favor of a unique definition of commercial item. For these reasons, 10 U.S.C.

§ 2464 should not retain its own unique definition. The citation should be conformed to the primary

definition at 41 U.S.C. § 103 (commercial item).  

Another exception that requires further elaboration is the commercial item definition at 10 U.S.C.

§ 2321, Validation of Proprietary Data Restrictions. This section addresses the contractor justifications

for data use or release restrictions and DoD review and challenge of these restrictions. Paragraph (f) of

this section addresses the special rules “with respect to technical data of a contractor or subcontractor

under a contract for commercial items.” Subsection (f)(1) provides, generally, that “the contracting

officer shall presume the contractor or subcontractor has justified the restriction on the basis that the

item was developed at private expense.” This presumption applies, according to (f)(2)(A):

with regard to a commercial subsystem or component of a major system, if the major system was acquired

as a commercial item in accordance with section 2379(a) of this title;

with regard to a component of a subsystem, if the subsystem was acquired as a

commercial item in accordance with section 2379(b) of this title; and

with regard to any other component, if the component is a commercially available

off‐the‐shelf item or a commercially available off‐the‐shelf item with modifications of a type customarily

available in the commercial marketplace or minor modifications made to meet Federal Government

requirements

Paragraph (i) provides that a commercial subsystem or component of a major system qualifies for the special

presumption because it was acquired as a commercial item. In this paragraph (i), the term commercial item

has the meaning in 10 U.S.C. § 2302, Definitions, subsection which refers back to the definition at

41 U.S.C. § 103. The same analysis is true in paragraph (ii) for components of a subsystem, if the

subsystem was acquired as a commercial item.

Subsection (f)(2)(A)(iii) provides that a component that is not part of a major system or subsystem

would only qualify for the presumption of being developed at private expense if it is a COTS item or a

COTS item with modifications of a type customarily available in the marketplace or minor

modifications made to meet federal government requirements.28 This later portion of subparagraph (iii)

is actually a blending of the existing COTS definition at 41 U.S.C. § 104 and the commercial item

                                                     

28 Validation of Proprietary Data Restrictions, 10 U.S.C. § 2321 (f)(2)(A)(iii). 
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definition at 41 U.S.C. § 103, with several key elements of the commercial item definition left out. The

legislative history provides no rationale for this unique definition.

This unique definition sets up a number of conflicts and adds confusion over the critical issue of

proprietary data restrictions for products procured in the commercial marketplace. The following are

examples:

 By virtue of being in Chapter 137, 10 U.S.C. § 2321 is tied to the definition of commercial item

and COTS item at 41 U.S.C. § 103 and § 104, respectively. The text of 10 U.S.C. § 2321 includes

its own twist on these two established definitions, introducing unnecessary confusion and

potential conflict.

 The blended language raises questions with regard to the criteria for items with minor

modifications. For example, if an item is a “commercially available off‐the shelf item with

...minor modifications made to meet Federal Government requirements,”29 it is unclear if that

means it must meet the sold in substantial quantities criteria in the COTS definition to qualify

for the presumption. It is also unclear if an item with minor modifications incorporated to meet

unique federal government requirements is likely to be sold in substantial quantities to the

general public.

The language of § 2321 (f)(2) is intended to define when a component is a commercial component, yet

41 U.S.C. § 102 already defines a commercial component as a “component that is a ‘commercial

item.’”30

When procuring a component found in the commercial marketplace, the contracting officer will

evaluate the item against the criteria for a commercial item in Definitions, FAR 2.101. The language of

2.101 is the same definition found in Definitions, 41 U.S.C. § 103. When evaluating the contractor or

offeror assertion that a component was developed at private expense, the contracting officer must use

the unique definition in 10 U.S.C. § 2321 to establish if the component meets the criteria for the special

presumption. The possibility exists that the contracting officer could determine a component meets the

definition of a commercial item but does not meet the criteria for the presumption of being developed

at private expense. This ambiguity unnecessarily complicates the contracting officer’s already difficult

task.

Because the standard 41 U.S.C. § 103 definition of a commercial item is not used in § 2321(f)(A), certain

components would not qualify, such as those that are of a type customarily used by the general public

or items sold, leased, or licensed to the general public at less than the substantial quantities criteria

found in the COTS definition; or “any item that evolved...through advances in technology or

performance and that is not yet available in the commercial marketplace.”31 These items are exactly the

types of state of‐the‐art technologies DoD is pursuing. This type of confusion can lead to frustration

                                                     

29 Ibid. 

30 Commercial Component, 41 U.S.C. § 102. 

31 Commercial Item, 41 U.S.C. § 103 and Commercially Available Off‐the‐Shelf Item, 41 U.S.C. § 104. 
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and unnecessary issues over protection of proprietary data for these types of item, making it more

difficult to do business in the high‐tech marketplace.  

It is problematic to have a unique definition of commercial product solely for the purpose of protecting

proprietary data that is inconsistent with the standard definition of the term used throughout the

U.S.C. and the FAR. This inconsistency can only lead to further confusion and complexity, and

potentially serve to discourage high technologies firms in the commercial marketplace from offering

their best to DoD.

Definitions of Subcontract and Subcontractor 

In today’s defense marketplace, prime contractors typically subcontract more than 60 percent of their

work to other firms through numerous tiers of commercial and noncommercial subcontracts. Even for

the most complex, government‐unique items, the further down the supply chain one looks, the more

likely one is to find commercial suppliers with commercial items. Through the flow down process, the

commercial item policies, procedures, and government‐unique terms also generally apply to these

subcontracts, regardless of tier, which complicates the process for procuring commercial items and

commercial services at the subcontract level.  

The FAR currently defines the term contract, an important term used widely throughout the FAR and

DFARS. However, neither the FAR nor DFARS defines the term subcontract, another term used

throughout the FAR and DFARS. The FAR would benefit from a definition for the terms subcontract

and subcontractor, both of which today have numerous definitions in the FAR and DFARS.  

A search of the FAR and DFARS produced 27 distinct definitions of the term subcontract. Seventeen of

these definitions were essentially the same with only minor differences. The other 10 were unique in

one way or another, but shared many of the same common elements. 41 U.S.C. § 87, the Anti‐Kickback

Act, implemented at FAR 3.5 was the only definition based in statute (see Appendix F, Table F‐3).

The FAR and DFARS search also produced 21 distinct definitions of subcontractor. Most of those

definitions shared common elements that could be conducive to drafting a single, common definition.

Several had a unique element that would require accommodation (see Appendix F, Table F‐4).

Subcontracts for Commercial Items for Inventory or Multiple Contracts 

The Section 809 Panel heard from many companies regarding the cost and significant administrative

effort required to flow down terms and conditions to their subcontracts. Of particular interest to the

Panel were the issues associated with the flow down of government‐unique terms and conditions to

commercial suppliers, and where the contractor procured items and components from its

subcontractors for multiple contracts or for their inventory and not for a specific contract.

The requirement to flow down a clause to subcontractors may be mandatory or subject to certain

criteria contained within the clause. A relative few clauses limit the flow down to prime contractors’

first tier of subcontractors, yet other clauses flow down to subcontractors at all tiers that meet the

specified criteria contained in the clause.

The mechanics of flowing down such clauses is often administratively complex, costly, and time

consuming for prime contractors, and potential subcontractors at each successive tier. Before accepting
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these terms and conditions, proposed subcontractors must evaluate each of the clauses, assess the

effects of the requirements of the clause on their businesses and confirm their ability to comply with

each of the individual requirements. In the government business environment, there is an expectation

of strict literal compliance with these requirements, and there is considerable oversight to ensure such

compliance.32 A subcontractor would be taking a substantial business risk to shortcut this important

process.

For those firms that regularly participate in the federal government procurement process at the prime

contractor or subcontracting tier, the flow down of terms and conditions is difficult, complex, and

carries potentially great business risk, yet it is a process that has become one of the costs of doing business

with the federal government. For a prime or subcontractor that sells in both commercial and

government markets, or one that sells only in the commercial market, it is more than just a cost of

doing business.  

Federal government contracting regulations generally assume that procurements are fulfilled on a job‐

order basis, for which each contract stands alone and subsystems and components are only procured

subsequent to, and in direct response to, the award of the higher‐tier contract. Commercial business is

most often based on forecasts of future sales and anticipated demand, for which contractors’ order

materials and subcomponents from their suppliers to satisfy current production and inventory for

meeting future market demands.  

The dichotomy between government and commercial markets presents a number of practical and

compliance risks. For example, a contractor in the commercial market, manufacturing a commercial

product, will typically procure commercial components for inventory without knowing, at the time the

orders are placed, who the customers will be for the yet‐to‐be‐manufactured end items. If the

government subsequently procures even one of those commercial end items, the prime contractor must

accept the government‐unique terms, including the requirement for mandatory flow down to lower‐

tier suppliers. The prime contractor is then faced with the dilemma of asserting that its suppliers have

been given the mandatory terms even though it has already procured the components, and the

components currently reside in its inventory.  

To address this risk, commercial manufacturers may choose to flow down government‐unique terms to

all of their subcontractors (some of which may not accept them) on the chance the government might at

some point procure one of its end items. A commercial contractor that has little or no expectation of

selling to the government would have no reason to take such an inclusive approach to flow down at the

time it procures its components. If the government wanted to procure a commercial item from such a

company, the contractor might be faced with the risk of accepting the terms without the ability to flow

the terms down because the product or components are already on the shelf. The FAR makes no

provisions for situations in which a commercial product is manufactured with components that were

                                                     

32 “Men must turn square corners when they deal with the government,” Supreme Court Justice Oliver Wendell Holmes, Jr. Rock Island 

C.R.R. v. United States, 254 U.S. 141, 143 (22 November 1920). In today’s federal market, oversight includes formal oversight from DCMA, 

DCAA, DOD/IG, GAO, and Congress, and informal oversight by public watch‐dog groups, whistle blowers, and False Claims Act relators. 
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procured for general inventory and already in the prime contractor’s inventory before contracting with

the government.

One commercial contractor that spoke to the Section 809 Panel cited a specific example of an increased

subcontractor workload resulting from flow‐down requirements. This commercial contractor sells the

same or similar items in both government and commercial markets but procures its common

components from its suppliers by administratively issuing two separate purchase orders for the same

part number—one with the mandatory government flow‐down terms to satisfy anticipated

government demand and another without the flow down to satisfy anticipated demand from its

commercial customers. This idea of segregating the procurement of the identical parts simply to satisfy

flow down requirements raises the question of whether the contractor also needs to segregate the parts

in the warehouse. Situations such as this one represent an unreasonable burden on contractors and

their commercial suppliers, and likely serve as a deterrent to firms contemplating entering the

government marketplace.

Congress recently noted this burden and took several steps to address it in two similar sections of the

FY 2017 NDAA. Section 877, Treatment of Commingled Items Purchased by Contractors as

Commercial Items, (codified at 10 U.S.C. § 2380B) addresses the burden associated with the flow down

of mandatory, government‐unique terms and conditions on relatively low‐value items (less than

$10,000). Section 874, Inapplicability of Certain Laws and Regulations to the Acquisition of Commercial

Items and Commercially Available Off‐The‐Shelf Items, (codified at 10 U.S.C. § 2375 (c)(3)) addresses

the issue in a different manner by excluding procurement of certain items from treatment as a

subcontract, and thus the requirement for flow down of government‐unique terms. Below is a summary

comparison of the two provisions.

10 U.S.C § 2380B 

 Applies to items (presumably both commercial and noncommercial) with a value of less than

$10,000.

 For use in performance of multiple contracts with the department of defense and other parties.  

 Not identifiable to any particular contract.  

 Must be treated as a commercial item (and still receive terms to be flowed down, but presumably

only terms and conditions associated with commercial products).

10 U.S.C § 2375(c)(3) 

 Applies to agreements for commodities (the term commodities is undefined).

 Is intended for use in performance of multiple contracts with DoD and other parties.  

 Is not identifiable to any particular contract.
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 Agreement must not be considered a subcontract for a commercial item (and, therefore, is not

subject to flow down of any government‐unique terms and conditions).

 Is limited in its application to “this subsection.”  

Section 874 uses the term commodities. This term is undefined, and the Section 809 Panel was unable to

identify an established DoD definition of the term but did identify the DoD standard definition of the

term commodity loading, an indication of how the term might be defined:

commodity loading — A method of loading in which various types of cargoes are loaded together, such as

ammunition, rations, or boxed vehicles, in order that each commodity can be discharged without

disturbing the others.33

A standard dictionary definition provides an alternative, narrower approach, defining a commodity as

“a mass‐produced unspecialized product: commodity chemicals, commodity memory chips.”34

10 U.S.C. § 2380B and 10 U.S.C. § 2375(c)(3) are positive steps, but procurement of common commercial

items and commercial services can be further simplified. The most practical approach would be to

exclude from the scope of the term subcontract the procurement of commodities as well as commercial

products and commercial services that are intended for use in multiple current or future contracts.

Commercial products are, by their very nature, fungible and likely to be procured from suppliers not

generally engaged in business with the federal government and consequently not subject to the

burdens and risks discussed above. Likewise, commercial services are often procured to meet

specialized needs that cross many products, product lines, and contracts. Exempting commercial

products and common commercial services from flow down of government‐unique terms makes clear

to both government and industry that Congress is serious about simplifying the procurement process,

especially for items that are clearly available on the commercial market, for which the burden would be

the greatest.

Conclusions 

The following actions would enhance the federal government’s preference for acquiring commercial

items:

 Bifurcate the definition of commercial items into commercial products and commercial services,

creating two separate definitions.  

 Incorporate in the definition of a commercial product a provision for a product that the

commercial marketplace manufactures from a customer’s drawings or specifications using its

commercial processes.  

 Remove the definitions of COTS from 41 U.S.C. § 104. Congress and DoD have avoided

granting the relief from government‐unique requirements needed to access the full breadth of

                                                     

33 DoD Dictionary of Military and Associated Terms, August 2017.  34 Merriam Webster Dictionary. 
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the commercial marketplace, and the COTS item definition has had an unintended consequence

of contributing to this problem.

 Align the definitions of commercial products and commercial services. In most instances, the

variation in definitions for commercial items represent an oversight or drafting error, rather

than a deliberate policy decision. This lack of definitional unity can carry real consequences,

potentially generating confusion and risking disputes among stakeholders applying differing

interpretations of commercial products and commercial services to the procurement process.  

 Harmonize the use of terms in statute. Commercial buying processes would benefit from

harmonizing all U.S. Code references to commercial products and commercial services—

including 41 U.S.C., 10 U.S.C., and other miscellaneous uses of the terms in other titles of the

U.S. Code—with the primary definitions of those terms in 41 U.S.C. Every use of the terms

commercial item in the U.S. Code should incorporate, by reference, the primary definitions of

those terms at 41 U.S.C. §§ 103, 103a, and 104, respectively. This recommendation should be

implemented in accordance with the previous recommendation to split the term commercial

item into commercial product and commercial service in 41 U.S.C. §§ 103 and 103a.  

 Establish a uniform definition of subcontract in the U.S. Code and the FAR. The dozens of

distinct definitions of the term subcontract are unnecessary. The difference between the

definition of subcontract at 41 U.S.C. § 87 and the recommended U.S. Code definition is

inconsequential, and using a single definition will simplify the procurement process. A few

instances exist for which it is appropriate to supplement the general definition of subcontract to

accommodate a unique component of the definition.  

 Establish a uniform FAR definition of subcontractor. It is unnecessary to have 21 distinct

definitions of the term subcontractor when the differences among them are inconsequential.  

 Exclude from the definition of subcontract procurements of commodities, commercial products,

and commercial services to be used on multiple contracts. The flow down of government‐

unique terms and conditions represents a costly and administratively complex demand on

contractors engaged in the sale of commercial products to the federal government. The federal

government cannot, however, expect to successfully pursue a preference for commercial

products at all tiers of the supply chain and attract new, innovative commercial supplies, while

still imposing a burden and risk on the procurement of commercial components. Congress

should take bold steps beyond the current language of Sections 877 and 874 of the FY 2017

NDAA by adding a new definition of subcontract to 41 U.S.C. and 10 U.S.C. § 2302. The

definition would exempt purchases of commodities, commercial products, and commercial

services that are being procured for multiple contracts from the flow down of government‐

unique terms.
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Implementation 

Legislative Branch 

 Delete the definition of Commercial Item at 41 U.S.C. § 103.

 Establish the definition of Commercial Product at 41 U.S.C. § 103, and add language to address

commercial process in the definition.

 Establish the definition of Commercial Service at 41 U.S.C. § 103a.

 Delete the definition of Commercially Available Off‐the‐Shelf Item at 41 U.S.C. § 104.

 Revise all references in U.S. Code to the above terms.

 Revise U.S. Code to align all definitions of the above terms with the definitions at 41 U.S.C.

Chapter 1.

 Revise the definition of Commercial Component at 41 U.S.C. § 102.

 Revise the definition of Non‐developmental item at 41 U.S.C. § 110.

 Establish a definition of Subcontract at 41 U.S.C. § 115.

 Revise the references to the above terms at 10 U.S.C. § 2302.

Executive Branch 

The FAR Council should do the following:  

 Amend FAR 2.101, Definitions of Words and Terms, to align with the changes to U.S. Code

described under Legislative Branch above.

 Modify FAR and DFARS references to align with the changes to U.S. Code described under

Legislative Branch above.  

 Establish the definition of subcontractor in FAR 2.101, Definitions of Words and Terms.

 Modify FAR and DFARS to align with the new definitions of subcontractor.

Note: Draft legislative text and sections affected display and consolidated FAR revisions can be found in 

the Implementation Details subsection at the end of Section 1. 

Implications for Other Agencies 

 FASA, Title VIII, placed the commercial item and COTS definitions in the OFPP Act (41 U.S.C.

§ 103), making the definitions applicable to all federal government agencies that are subject to

the FAR. Changes to the definitions of subcontract and subcontractor would be made in the

FAR and would be applied to most federal agencies.
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Recommendation 2: Minimize government-unique terms applicable to 

commercial buying. 

Problem 

FASA was intended to give the government the ability to be more commercial‐like in its dealings with

the commercial marketplace. By substantially streamlining standard federal government procurement

practices, and adopting a much lighter touch in its buying practices, DoD would have the tools to gain

greater access to a broad range of commercial products and commercial services, and in particular,

rapidly evolving state‐of‐the‐art technologies.

Looking back over the 24 years since FASA, success in implementing this light touch has been limited.

The number of government‐unique clauses that may be applicable to commercial‐item and COTS

contracts has expanded rapidly—from 57 in 1995 to 165 today—threatening the simplicity and

commercial‐like terms and practices that were supposed to be a cornerstone of the federal

government’s commercial buying process.  

One safeguard included in FASA intended to help avoid this outcome—a statutory prohibition on

applying new clauses to commercial buying except under specific, limited circumstances—provided

the government with a control in applying those statutes. This statutory mechanism, however, has not

effectively limited the applicability of government‐unique clauses to commercial procurements.

Although these government‐unique clauses and requirements serve a worthwhile purpose, and can

often be justified in a vacuum, the aggregate effect creates unnecessary cost, complexity, and risk on

commercial contractors that discourages their participation in the DoD supply chain and undermines

the central tenet of commercial buying.

Background 

The federal government has two distinct, and often conflicting, roles when procuring commercial

items. In one role, the federal government acts as a buyer, imposing terms that more closely reflect

typical terms and conditions found in the commercial marketplace dealing with such matters as

inspection, acceptance, risk of loss, title transfer, terminations, invoicing, and so forth. In the other role,

the federal government acts as the sovereign, responsible for promoting public policies and imposing

unique requirements to further those public policies. These policies, while serving an important

purpose and promoting the public good, carry with them costs that affect both sides of the buyer–seller

relationship by going well beyond the nature of the product or service being procured and focusing on

the contractor’s business practices and systems. By imposing such terms, the government often limits

the number of entities willing to participate, and may also pay higher prices for its goods and services

because it is limited to only those companies willing and capable of complying with the unique terms.

Complex rules and terms also often make the procurement process exceedingly complex for

government procurement staffs.

Sellers bear considerable costs of accepting the government’s unique terms. For example, sellers often

must modify their existing business processes or create new processes that satisfy the unique terms and

conditions. Sellers may also need to modify their manufacturing processes, which can be especially

costly if doing so disrupts manufacturing of its products to be sold in the commercial marketplace.

Sellers also accept the risks, resulting costs, and other negative effects of noncompliance. For a
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commercial entity doing business in both the commercial and DoD market, the additional costs of

compliance are typically indirect costs borne by both their commercial and government business. For

contractors selling only commercial products or services, the costs associated with compliance unique

to government customers are borne by all commercial customers, often driving establishment of

separate legal entities and cost structure solely to serve the government customers and segregate

related compliance costs. Contractor expenditure spent on unique business systems and compliance

costs show up in higher prices and are not available for meeting DoD mission needs.

From the 1960s through the 1980s, Congress encouraged DoD to pursue greater engagement with the

commercial marketplace to reduce the costs and risks associated with developing and supporting

government‐unique items. It was not until the passage of FASA in 1994 that Congress meaningfully

addressed the obstacles to expanding use of commercial items.

The drafters of FASA recognized the excessive number of procurement‐related statutes, executive

orders, and agency‐driven clauses prescribed for incorporation in virtually every contract were among

the major obstacles to accessing the commercial marketplace. It was not unusual for a relatively simple

contract for a commercial item to include 50 or more prescribed clauses based solely on dollar value or

some other criteria completely unrelated to the product or service being procured. It was the collective,

rather than individual, effect of all the unique clauses and the associated compliance requirements that

pushed companies with commercial products and services away from doing business with DoD, or

into government‐unique business entities, thereby limiting access to the commercial marketplace.

FASA took a novel approach to addressing this problem: Title VIII, section 8002 of FASA stated that the

FAR shall contain:

a list of contract clauses to be included in contracts for the acquisition of commercial end items. Such list

shall, to the maximum extent practicable, include only those contract clauses – (A) that are required to

implement provisions of law or executive orders applicable to acquisitions of commercial items...; or

(B) that are determined to be consistent with standard commercial practice.

With regard to clauses “required to implement provisions of law or executive order,” also took a novel

approach. For laws in effect at the time FASA was enacted (October 13, 1994), Section 8003 (codified at

41 U.S.C. § 1906(b)(1)) directed creation in the FAR of a “list of provisions of law that are inapplicable

to contracts for the procurement of commercial items.” Established at FAR 12.5, Applicability of

Certain Laws to the Acquisition of Commercial Items and Commercially Available Off‐The‐Shelf Items,

this list included a number of laws in effect on October 13, 1994 that Congress deemed inapplicable to

contracts for commercial items (see Section 8103). Congress also directed the creation of a list of clauses

that may be applicable to contracts for commercial items, which is located at FAR 52.212‐5, Contract

Terms and Conditions Required to Implement Statutes and Executive Orders – Commercial Items. The

combination of these two lists created a streamlined approach to government‐unique clauses for

acquiring commercial items.  

With a framework for existing laws in place, Congress then established a streamlined set of clauses

based on provisions of law and executive orders in place at the time FASA was enacted, Congress then

established a process in 41 U.S.C. § 1906, List of Laws Inapplicable to Procurements of Commercial

Items, to protect this framework in the future. 41 U.S.C. § 1906 addresses provisions of law enacted in
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the future by stating that no provision of law enacted after October 13, 1994 will be applicable to

procurement of commercial items unless one of the following applies:

 The law provides for criminal or civil penalties.

 The law specifically refers to 41 U.S.C. § 1906 and provides that, notwithstanding § 1906, it shall

be applicable to contracts for the procurement of commercial items.

 The FAR Council determines in writing that it would not be in the best interests of the

government to exempt contracts for the procurement of commercial items from the provision.

The FY 1996 NDAA (also referred to as the Federal Acquisition Reform Act [FARA]), added 41 U.S.C.

§ 1907, List of Laws Inapplicable to Procurements of Commercially Available Off‐The‐Shelf (COTS)

items. This section is a mirror image of Section 1906 applicable specifically to COTS items.  

In addition to protecting the framework by limiting applicability of laws in place at the time of FASA’s

enactment, and laws enacted subsequent to FASA, it was also necessary to protect this framework from

agency supplementation that might run counter to congressional intent to make selling commercial

items to the federal government as simple as possible. FASA implementation on October 1, 1995,

included at FAR 12.301 (f) a restriction on agency supplementation of Part 12, Acquisition of

Commercial Items:  

Agencies may supplement the provisions and clauses prescribed in this part (to require use of additional

provisions and clauses) only as necessary to reflect agency unique statutes applicable to the acquisition of

commercial item or as may be approved by the agency senior procurement executive, or the individual

responsible for representing the agency on the FAR Council, without power of delegation.

With the enactment of FASA and FARA, Congress created, for the first time, a mechanism to limit

government‐unique terms and conditions applicable to the government’s procurement of commercial

items.

Findings 

Despite these efforts, the framework and mechanisms created in 1994 failed to limit the burden on

contractors from increasing over time. The FAR has been amended more than 100 times to address

various aspects of commercial buying, adding to some of the confusion regarding commercial buying

policies. The applicability of various statutes has been a frequent subject of amendment. For example,

in 1995, the FAR and DFARS contained a combined total of 57 provisions and clauses applicable to the

procurement of commercial items.35 Today there are 165, including 122 originating in statute,

20 originating in executive orders, and 23 originating in agency‐level regulations or policies.36   

                                                     

35 The total includes commercial item clauses required to comply with laws unique to government contracts in FAR 52.212‐4(r) and

commercial items clauses required to implement statutes or executive orders in FAR 52.212‐5 and DFARS 252.212‐7001, but does not 

include any alternate clauses. 

36 The total includes commercial item clauses required to comply with laws unique to government contracts in FAR 52.212‐4(r) and

commercial items clauses required to implement statutes or executive orders in FAR 52.212‐5, and DFARS 252.212‐7001, but does not 

include any alternate clauses or the clause at 52.212‐5(b)(35) which is enjoined indefinitely. 
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Of the 122 statutes that may be applicable to procurements of commercial products and services, eight

are prescribed in FAR 52.212‐4, Contract Terms and Conditions – Commercial Item (January 2017),

paragraph (r), Compliance with Laws Unique to Government Contracts. In FASA, Congress exempted

certain laws from the requirement for a contract clause when procuring commercial items, but did not

exempt commercial items from the requirement to comply with the statute, for example, 49 U.S.C.

40118, Fly American Requirements. It is unclear how exempting commercial contracts from a clause,

but not the underlying statute, might relieve the burden of compliance on contractors selling

commercial items.

In 1995, FAR 52.212‐5(e) required prime contractors selling commercial items to flow down

four commercial buying clauses to subcontractors at various tiers; today that number is 22.37 In 1995,

FAR 52.244‐6(c) required contractors selling noncommercial items to flow down four commercial

buying clauses to commercial subcontractors at all tiers; today that number is 20.38 Table 1‐1

summarizes the increase in commercial clauses between the implementation of FASA in 1995 and the

present day.

Table 1‐1. Government‐Unique Clauses Applicable to the Acquisition of Commercial Items 

1995  2017 

Regulatory Site 

FAR 52.212‐5  28  FAR 52.212‐5  73 

FAR 52.212‐4(r)  6  FAR 52.212‐4(r)  7 

DFARS 252.212‐7001  23  DFARS 212.301  85 

Total  57  Total  165 

Clause Origin 

Statute  57  Statute  122 

Executive Order  0  Executive Order  20 

Agency‐level Policy  0  Agency‐level Policy  23 

Flow Downs 

FAR 52.212‐5(e)  4  FAR 52.212‐5(e)  22 

FAR 52.244‐6(c)  4  FAR 52.244‐6(c)  20 

Federal Acquisition Regulation 

To assess the effectiveness of this mechanism, the Section 809 Panel reviewed clauses prescribed in the

most recent version of FAR 52.212‐5, Contract Terms and Conditions Required to Implement Statutes

and Executive Orders—Commercial Items (January 2017). The panel found substantial growth in the

                                                     

37 The total does not include any alternate clauses or the clause at 52.212‐5(e)(1)(xvii), which is enjoined indefinitely.  38 The Section 809 Panel’s analysis of commercial flow down clauses is limited to the FAR which specifically lists each flow down clause at 

FAR 52.212‐5(e) and FAR 52.244‐6(c). 
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number of FAR clauses (and statutes in 52.212‐4(r)) applicable to commercial items and commercial

services since FASA:

 October 1995: 34 clauses (6 of which have since been removed or replaced)

 January 2017: 80 clauses

All 80 clauses are not applicable to any particular contract. When acquiring commercial products or

commercial services, contracting officers choose applicable clauses from among those 80 clauses.  

Using the FASA framework, the Section 809 Panel analyzed the origins of the applicability of 80 FAR

clauses (see Appendix F, Tables F‐5, F‐6, F‐7, and F‐8):

 0 clauses are based on a statute that provides for civil or criminal penalty

 0 clauses are based on a statute that addresses the applicability to commercial items and COTS

by specifically referring to 41 U.S.C. § 1906 and/or § 1907 and providing that it be applicable.

 14 clauses implement a statute, policy, regulation, or executive order that make no mention of

commercial items or COTS, but has a written FAR Council determination that it was not in the

best interests of the government to exempt contracts for commercial items or COTS.

 66 clauses implement a statute, policy, regulation, or executive order, but meet none of the

41 U.S.C. § 1906 criteria.

Defense Federal Acquisition Regulation Supplement 

FAR 12.301(f) authorizes agencies, such as DoD, to supplement Part 12, but only as necessary to reflect

agency‐unique statutes, or as may be approved by the Senior Procurement Executive or agency

member of the FAR Council. DFARS 212.301, Solicitation Provisions and Contract Clauses for the

Acquisition of Commercial Items, prescribes which clauses and provisions may be included in DoD

contracts for commercial items and COTS items. 41 U.S.C. §§ 1906 and 1907 do not specifically refer to

statutes applicable only to a single agency (such as DoD), but do speak more generally to including in

the Federal Acquisition Regulation a list of provisions of law that are applicable and inapplicable to

contracts for the procurement of commercial items and provisions of law that are excluded from that

list. Because the DFARS is part of the Federal Acquisition Regulations Systems described in FAR Part 1,

an argument can be made that the limitation provisions of 41 U.S.C. §§ 1906 and 1907 would also apply

to the DoD‐unique statutes listed in the DFARS.  

In the 2017 NDAA, Congress enacted 10 U.S.C § 2375, Relationship of Commercial Item Provisions to

Other Provisions of Law. This statute established a framework and a similar mechanism to 41 U.S.C.

§§ 1906 and 1907 for statutes and contract clauses specifically applicable to DoD.

This report previously discussed the authority of OFPP in 41 U.S.C. §§ 1906/1907 to make

determinations that certain governmentwide statutes should not be exempted from applicability to

procurements of commercial items. DoD was given a similar authority in 10 U.S.C. § 2375 to determine
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whether certain defense‐unique statutes and clauses should apply to the department’s commercial item

and COTS contracts:

The Defense Federal Acquisition Regulation Supplement shall include a list of defense‐unique provisions

of law and of contract clause requirements based on government‐wide acquisition regulations, policies, or

executive orders not expressly authorized in law that are inapplicable to contracts for the procurement of

commercial items.39  

10 U.S.C. § 2375 (e) states that a defense‐unique statute, regulation, policy, or executive order is

inapplicable to procurements of commercial products or services unless it:

 Provides for criminal or civil penalties;  

 Requires that certain articles be bought from American sources pursuant to section 2533a of title

10, or requires that strategic materials critical to national security be bought from American

sources pursuant to section 2533b of title 10; or  

 Specifically refers to 10 U.S.C. § 2375 and provides that, notwithstanding this section, it shall be

applicable to contracts for the procurement of commercial items.

In addition to these three criteria, 10 U.S.C § 2375 codifies a defense‐unique determination authority for

the Under Secretary of Defense for Acquisition, Technology, and Logistics [USD(AT&L)] to “make a

written determination that it would not be in the best interest of the Department of Defense” to exempt

contracts or subcontracts for the procurement of commercial items or COTS items from a provision or

contract clause that did not meet the criteria above. This authority permits the USD(AT&L), through

the exercise of individual judgment, to apply statutes and clauses to DoD contracts for commercial

items or COTS items that would not otherwise apply.

10 U.S.C. § 2375 parallels 41 U.S.C. §§ 1906/1907 in another important way. It creates a clear line by

establishing that a provision of law or contract clause enacted after January 1, 2015, be included on the

list of provisions of law or clauses inapplicable to the procurement of commercial items or COTS unless

it meets one of the criteria noted above. This provision parallels similar provisions of 41 U.S.C. §§ 1906

and 1907, which established October 13, 1994 (the date of the enactment of FASA), as the date after

which certain governmentwide statutes would be inapplicable to procurement of commercial items

unless the statute met one of the criteria in 41 U.S.C. § 1906 or § 1907. Statutes enacted prior to these

dates would remain applicable to procurements of commercial items unless some other action is taken

to make then inapplicable.

In assessing how well this DoD‐unique process has worked, the Section 809 Panel reviewed the

85 provisions and clauses based on a statute, executive order, or DoD regulation that are currently

listed in DFARS 212.301 as applicable to procurements of commercial items. The following identifies

the rationale used by DoD to determine that the clauses and provisions should be applicable to DoD’s

procurement of commercial items:

                                                     

39 Applicability of Defense‐Unique Statutes to Contracts for Commercial Items, 10 U.S.C. § 2375(b). 
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 0 clauses impose a civil or criminal penalty.

 6 clauses implementing statutes that satisfy one of the three criteria in 41 U.S.C. §§.1906/1907

and 10 U.S.C. § 2375 for applicability to DoD’s procurements of commercial items.

 8 clauses implementing statutes, regulations, polices, and executive orders with a DoD

determination (using the 41 U.S.C. §§ 1906/1907 criteria) that, notwithstanding that the clause or

provision does not meet any of the three criteria, the clause or provision should apply to DoD’s

procurements of commercial items.

 71 clauses implementing statutes, regulations, policies, and executive orders that do not satisfy

any of the three criteria, and DoD made no written determination explaining its rationale.

In assessing the DFARS clauses, the Section 809 Panel adopted the same approach for defense‐unique

determination authority of 10 U.S.C § 2375 as it did for the governmentwide determination authority of

41 U.S.C. §§ 1906 and 1907.  

Congress clearly asserted in 41 U.S.C. §§ 1906 and 1907, and again in 10 U.S.C. § 2375, that it has a deep

interest in simplifying the procurement of commercial products and services to attract the best and the

brightest in the commercial marketplace to solve the government’s most difficult problems. Congress

has shown its willingness to minimize those statutes that would apply to procurements of commercial

items by establishing a process that presumes a statute would not apply to commercial items unless it

met one of a small number of specific criteria. Most importantly, Congress retained the primary

responsibility to formally designate which statutes it wants applied. Congress gave OFPP and DoD

limited authority to make determinations if other clauses, not specifically designated by Congress,

should also apply. It appears Congress intended that limited authority to be used sparingly.

As indicated by the above data, DoD has frequently used its authority, with or without a formal written

determination, to impose conditions on commercial and COTS contracts other than those mandated by

Congress. The overuse of this flexibility has undermined the expansion of DoD access to the

commercial marketplace and contradicts congressional intent to support implementation of commercial

policies within DoD. In much the same way as OFPP, DoD’s overuse of its defense‐unique authority

has not promoted commercial buying.

Conclusions 

Stakeholders with whom the Section 809 Panel has interacted have been clear: Contracting with the

federal government to sell commercial products and services needs to be much simpler and more

closely reflect standard commercial practices, especially regarding use of unique terms and conditions

imposed on commercial suppliers to the federal government. The government market is different from

the commercial market. If the federal government and DoD need to have unfettered access to

technologies available in the commercial marketplace, they must take bold and dramatic steps to

simplify processes, policies, and approaches to interacting in the commercial marketplace, even if

doing so means shedding worthwhile, but unnecessarily costly and administratively complex,

government‐unique requirements.  
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Streamlining contracts for commercial items will require discipline on the part of Congress and DoD.

Both parties speak often about the need for DoD to be more commercial‐like in its procurement

practices to attract cutting‐edge companies in the rapidly evolving commercial marketplace. Without a

well‐defined structure and the discipline to stick to that structure, DoD will find itself a few years in the

future struggling with the same issues of unique terms and conditions that confront it today.  

Statutes Applicable to Procurements of Commercial Items 

The framework Congress established in FASA in 1994 for limiting the unique terms and conditions

typical of the government marketplace is a sound one, but should be further narrowed to ensure it

produces the results needed.  

No statute should be applicable to procurements of commercial items unless that statute specifically

refers to 41 U.S.C. § 1906 or 10 U.S.C. § 2375 and provides that, notwithstanding § 1906 or § 2375, it

should be applicable to contracts for procurement of commercial items (governmentwide statutes).

Other statutes, including those that provide for criminal or civil penalties, or that require certain

articles be bought from American sources pursuant to 10 U.S.C. § 2533a, or require that strategic

materials critical to national security be bought from American sources pursuant to 10 U.S.C. § 2533b

must also include the reference to 41 U.S.C. § 1906 or 10 U.S.C. § 2375.   

The current mechanism is clearly not achieving its full potential. Only six of 158 clauses that are

currently applicable to procurements of commercial products and services have the prescribed

language from 41 U.S.C. § 1906 or 10 U.S.C. § 2375. If Congress believes a specific matter of public

policy is so important that it should be included in an otherwise commercial transaction between DoD

and a commercial supplier, then it should be specifically stated in the statute as prescribed in 41 U.S.C.

§ 1906 or 10 U.S.C. § 2375. The FAR Council should not be left to interpret Congress’ silence on these

matters. If Congress does not state that a statute applies to procurements for commercial products, then

it should not apply.

FAR Council Authority 

The need for a well‐defined structure and the discipline to adhere to it raises another issue regarding

the process for FAR Council determinations. The Section 800 Panel indicated there were legitimate

reasons why DoD could not purchase commercial items in precisely the same way as commercial firms.

Thus, it recommended that DoD have flexibility in determining whether it was in its best interest to

buy commercial items.40 FASA allows for those flexibilities in 41 U.S.C. §§ 1906 and 1907, which limit

the applicability of government‐unique provisions of law to contracts for commercial products and

commercial services under certain prescribed circumstances.

As noted above, Congress has on only six occasions specified that a statute should apply to commercial

products and services as prescribed in 41 U.S.C. §§ 1906 and 1907. Alternatively, it could be argued that

Congress did consider that none of the other statutes should be applied to contracts for commercial

products and services. For whatever reason, Congress did not designate these statutes as applicable to

                                                     

40 Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Laws, AD‐A262699, January 1993, 

accessed June 6, 2017, http://www.dtic.mil/docs/citations/ADA262699. 
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procurements of commercial items, yet the FAR Council acted to make them applicable. Regardless,

there has been too much reliance on using the authority of the FAR Council in 41 U.S.C. §§ 1906 and

1907 regarding the applicability of statutes to acquisitions of commercial items and services, which has

contributed to a greater burden on contractors and subcontractors offering commercial items.

Defense‐Unique Authority   

Congress made it clear in Title VIII of FASA that the federal government has a preference for procuring

commercial items. Congress underscored that to implement this preference, the federal government

should use commercial‐like procurement practices to the maximum extent and only impose

government‐unique term and conditions under very limited circumstances. In a unique way, Congress

retained the responsibility in 41 U.S.C. §§ 1906/1907 and then 10 U.S.C. § 2375 for limiting government‐

unique terms based on governmentwide and DoD‐unique statute by establishing very specific criteria

for those limited circumstances.  

Congress went a step further with DoD by requiring in 10 U.S.C § 2375 that DoD establish a list in the

DFARS of provisions of law and contract clauses based on “government‐wide acquisition regulations,

policies, or executive orders not expressly authorized in law that are inapplicable to contracts for the

procurement of commercial items.”  

Congress demonstrated its deep interest in simplified, commercial‐like procurement practices for

commercial products and services with its authority to specifically designate those statutes that apply

to commercial procurements, and by directing that DoD establish a list of “government‐wide

acquisition regulations, policies, or executive orders not expressly authorized in law that are

inapplicable to contracts for the procurement of commercial items.” Given this clear message, OFPP

and DoD should follow Congress’ lead and impose in procurements of commercial products and

services only those statutes, executive orders, regulations, and associated clauses that specifically

mention 41 U.S.C. §§ 1906/1907 and 10 U.S.C § 2375.  

Clause Applicability 

Based on this framework, and on the Section 809 Panel’s own assessment of commercial buying

practices, all existing commercial clauses (including those that were included in the initial

implementations of FASA [FAC 90‐32 and DAC 91‐9]) should be removed from FAR 52.212‐4(r),

52.212‐5, and DFARS 212.301. All but six statutes do not adhere to the framework established by

Congress in 41 U.S.C. §§ 1906/1907 and 10 U.S.C § 2375, which seek to prevent the unnecessary

accumulation of government‐unique aspects within DoD commercial buying practices. The small

number of clauses that satisfy the 41 U.S.C. § 1906 and 10 U.S.C. § 2375 criteria are, nonetheless,

inconsistent with Congress’s intention to minimize the hand of the government in commercial markets

and restrain DoD’s ability to access the full extent of the commercial marketplace.  

These recommendations should give DoD the flexibility and streamlined procurement authority it

needs to simplify its procurement processes and attract more participants from the commercial market.

For those contractors that sell both commercial and noncommercial products and services to the federal

government, these recommendations will offer a measure of relief and encouragement that the

government has taken steps to simplify its procurement process. The government‐unique requirements
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imposed through their noncommercial contracts will continue, many of which affect all contracts in a

given business segment.

These recommended changes will make a substantial difference for those firms that currently sell only

commercial products and services to the federal government, or those that do not yet sell to the

government. These businesses, many that have consciously avoided the administrative and compliance

complexities of government business, will be encouraged by this major step forward. Making these

changes presents an opportunity for Congress and DoD to demonstrate that after 24 years of

experience with commercial‐like practices, the government is now ready to take the next step and

participate as a peer in the commercial marketplace.

Implementation 

Legislative Branch 

 Revise 41 U.S.C. § 1906 (d) to remove “provides for civil and criminal penalties” as a rationale

for imposing a statute on procurements of commercial products and services. Such statutes

should also be required to contain the language of 41 U.S.C. § 1906 or § 1907.

 Revise 41 U.S.C. § 1906 to remove the authority of the FAR Council to make a written

determination that it is not in the best interest of the government to exempt commercial

products or commercial services from the provision of law.  

 Revise 10 U.S.C. § 2375 (e) to remove “provides for civil and criminal penalties” and “requires

that certain articles be bought from American sources pursuant to section 2533a of this title, or

requires that strategic materials critical to national security be bought from American sources

pursuant to section 2533b of this title” as rationale for imposing a statute on procurements of

commercial products or services. Such statutes should also be required to contain the language

of 10 U.S.C. § 2375.

 Revise 10 U.S.C. § 2375 to remove the authority of the Under Secretary of Defense for

Acquisition, Technology, and Logistics to make a written determination that it is not in the best

interest of DoD to exempt contracts for commercial products and services from the applicability

of a defense‐unique statutes, regulations, polices or executive orders.  

 Revisit any provision of law that currently specifically references 41 U.S.C. § 1906, § 1907 or

10 U.S.C. § 2375 to determine if those statutes are of such importance that they should be

inserted into commercial transactions between DoD and commercial suppliers (see Appendix F,

Table F‐5).  

Executive Branch 

The FAR Council should do the following:

 Strike all clauses from 52.212‐5, Contract Terms and Conditions Required to Implement Statutes

or Executive Orders – Commercial items, based on statute that specifically refer to 41 U.S.C.

§ 1906, but are inconsistent with commercial practices (see Appendix F, Table F‐5).  
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 Strike all clauses from FAR 52.212‐4 (r), Contract Terms and Conditions – Commercial Items;

and strike all clauses from FAR 52.212‐5, Contract Terms and Conditions Required to

Implement Statutes or Executive Orders – Commercial Items, based on statute that do not

specifically refer to 41 U.S.C. § 1906 and provides that, notwithstanding § 1906, it should apply

to contracts for the procurement of commercial items (see Appendix F, Table F‐6).  

 Strike all clauses from FAR 52.212‐5, Contract Terms and Conditions Required to Implement

Statutes or Executive Orders – Commercial Items, which are derived from executive orders and

agency policy or regulations (see Appendix F, Table F‐7).  

 Transfer certain clauses in FAR 52.212‐5 to FAR 52.212‐4 Part 12 (see Appendix F, Table F‐8).  

 Going forward, only include in FAR 52.212‐5, Contract Terms and Conditions Required to

Implement Statutes or Executive Orders – Commercial Items, those clauses that are based on

statutes, executive orders, policies or regulations that specifically refer to 41 U.S.C. § 1906 and

state that, notwithstanding section 1906, they are applicable to procurements for commercial

products or services.

The Defense Acquisition Regulations (DAR) Council should do the following:

 Strike all clauses in DFARS 212.301, Solicitation Provisions and Contract Clauses for the

Acquisition of Commercial Items, based on statute that specifically refer to 41 U.S.C. § 1906 or

10 U.S.C. § 2375, but are inconsistent with commercial practices.  

 Strike all clauses from DFARS 212.301, Solicitation Provisions and Contract Clauses for the

Acquisition of Commercial Items, based on statute that do not specifically refer to 10 U.S.C.

§ 2375 and provides that, notwithstanding § 2375, it should apply to contracts and subcontracts

for the procurement of commercial items (see Appendix F, Table F‐4).  

 Strike all clauses from DFARS 212.301, Solicitation Provisions and Contract Clauses for the

Acquisition of Commercial Items, which are derived from executive orders, agency policy, or

regulations (see Appendix F, Table F‐5).  

 Going forward, only include in DFARS 212.301, Solicitation Provisions and Contract Clauses for

the Acquisition of Commercial Items, those clauses that are based on statutes, executive orders,

policies or regulations that specifically refer to 10 U.S.C. § 2375 and state that, notwithstanding

§ 1906, they are applicable to procurements for commercial products or services.

Note: See Appendix F for the recommended disposition of clauses currently applicable to contracts for 

commercial products and commercial services. 

Implications for Other Agencies 

 All federal agencies subject to the FAR procure commercial items or commercial services to one

degree or another. Similarly, all agencies desire to make procurements for commercial goods

and services easier for both the agency and the offerors and contractors. The recommendations

above will serve to improve the acquisition of commercial goods and services across the federal

government.    
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Recommendation 3: Align and clarify FAR commercial termination language. 

Problem 

FAR 52.212‐4, Contract Terms and Conditions – Commercial Items, contains a set of standard terms

and conditions for the procurement of commercial items. These terms are intended to satisfy the

requirement of FASA section 8002 that contracting officers use terms that “are determined to be

consistent with standard commercial practice.”41 Included in 52.212‐4 are terms and conditions

regarding the government’s ability to terminate commercial contracts under various circumstances.  

The termination language has been unchanged for the past 24 years. One commenter brought to the

Section 809 Panel’s attention several areas where the termination‐related language of Part 12 and

52.212‐4 has been the subject of litigation, and recommended the language be addressed. Additionally,

the policy guidance for terminations in FAR Part 49 does not properly align with the policy guidance

for the termination of commercial contracts in FAR Part 12.  

Background 

FASA required that the FAR contain a list of contract clauses for commercial item contracts that are, to

the maximum extent possible, “consistent with standard commercial practices.”42 FAR 52.212‐4,

Contract Terms and Conditions – Commercial Items, was established for that purpose. The language of

FAR 52.212‐4 is not as comprehensive and prescriptive as typical FAR clauses because it is intended to

be more commercial‐like. These simpler, more commercial‐like terms also benefit contractors that may

be unfamiliar with all the details and nuances of government contracting and associated business

processes. These terms are intended to provide a framework that better reflects commercial practices

without each contracting officer having to develop unique terms and conditions for each procurement.

It is impossible to establish a single set of terms and conditions that would be appropriate for every

commercial product or service the federal government might procure. FAR 12.302, Tailoring of

Provisions and Clauses for the Acquisition of Commercial Items, addresses this problem by stating that

FAR 52.212‐4 represent clauses “intended to address, to the maximum extent possible, commercial

practices for a wide range of potential Government acquisitions of commercial items.” 43 Recognizing

that no one set of terms and conditions could be appropriate across all commercial item procurements,

FAR 12.302 gives contracting officers the flexibility to tailor the majority of the terms and conditions in

52.212‐4. This authority allows contracting officers to tailor the procurement to the actual product or

service being procured, including the standard commercial practices for procuring that item in the

commercial marketplace. Of the 21 terms and conditions in 52.212‐4 (paragraphs (a) thru (u)), all but

seven terms may be tailored. Among the terms the contracting officer is given the flexibility to tailor are

paragraphs 52.212‐4(l), Termination for the Government’s Convenience, and 52.212‐4(m), Termination

for Cause.

                                                     

41 FASA, section 8002. 

42 Ibid. 

43 Tailoring of Provisions and Clauses for the Acquisition of Commercial Items, FAR 12.302. 
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Findings 

Applicability of Part 49, Terminations, to Contracts for Commercial Products and Services  

The FAR recognizes that government contracts for commercial products and services need a vehicle for

terminations; however, it also recognizes that those clauses need to reflect, to the maximum extent

possible, standard commercial practice for commercial products and services that were procured in the

commercial marketplace on the basis of price and without the government‐unique cost data or

contractor cost accounting systems. For this reason, the standard FAR Part 49 termination clauses were

not used. Much of the administrative process of termination may apply to the extent it does not conflict

with the more commercial approach in FAR 52.212‐4.

In reviewing the professional literature regarding the relationship between the standard FAR Part 49

clauses and processes and those in FAR 12.403 and FAR 52.212‐4 intended for procurements of

commercial items, it appears there has been some confusion between that language of FAR 12.403,

Terminations, and the language in FAR 49.002, Applicability.44 Specifically, the language in 12.403

states that FAR Part 49 does not apply, but 49.002 states it is to be used as guidance.

Termination for the Government’s Convenience  

52.212‐4(l) reserves for the government the right to terminate a contract for a commercial item at its sole

convenience. This is not necessarily a standard commercial practice; however, it does represent a long‐

standing practice in government procurement. It gives the government the unique, but necessary,

flexibility to respond to changes in its mission or to a threat without the complex, time‐consuming, and

costly process of establishing mutual agreement to terminate a contract prior to completion. For this

reason, FAR 52.212‐4 includes a clause that gives the government the right to terminate at its

convenience, but with more commercial‐like terms than those in FAR Part 49 and associated standard

FAR termination clauses.

In reviewing the professional literature related to the termination for the government’s convenience

clause at FAR 52.212‐4(l), it appears confusion exists and some litigation has taken place regarding

compensation for a terminations for convenience.45 Central to the standard FAR policies for

convenience terminations is the concept of the contractor being compensated fairly for the termination

prior to final delivery under the contract. The existing clause is somewhat unclear about the elements

of a fair compensation.

46

Termination for Cause  

More typical in both commercial and government contracts is a clause providing the buyer with the

right to terminate the contract for cause, including late delivery and failure to provide adequate

                                                     

44 Nash & Cibinic Report, 29 N&CR ¶ 21. The Nash & Cibinic Report is a long‐standing legal periodical that addresses federal government 

contract case law and practice 

45 Ibid. 

46 Fair Compensation is a term discussed in FAR 49.201, but not defined. The FAR states “Fair compensation is a matter of judgment and 

cannot be measured exactly.” The issue here was that terminations under commercial terms were not required to follow Part 49, so it left 

open the question of whether “fair compensation” was necessary as discussed in part 49. 
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assurances of future performance. FAR 52.212‐4(m) provides the government with the authority to

terminate for cause.

FAR 12.403 (c) states “the contracting officer shall send a cure notice prior to terminating a contract for

a reason other than late delivery.”47 The professional literature points out that the clause at 52.212‐4(m)

does not contain a similar requirement. 48 This disconnect needs to be corrected.

Conclusions 

FAR 12.403 is the policy regarding terminations of commercial items, but the policies in Part 49 are

intended to be used as guidance in such terminations. The lack of alignment between FAR Parts 12 and

49 should be reconciled by the elimination of the guidance language in Subpart 12.403.  

FAR 52.212‐4(l) and (m) are intended to represent standard or customary commercial practice, but both

may be tailored or replaced by the contracting officer to better reflect the commercial practice for the

product or service being procured. Because these two clauses are frequently used as is, it is important

they reflect best practices, given their scope and intent. As a result, the language of FAR 52.212‐4(l) and

(m) requires further clarification to elucidate the fair compensation principle in paragraph (l) and the use

of a cure notice for a termination for cause in paragraph (m).

Implementation 

Legislative Branch 

 No statutory changes are required.

Executive Branch 

The Section 809 Panel recommends the FAR Council do the following:

 Revise FAR Subpart 12.403, Terminations, paragraph (a) to remove the reference to Part 49 as

guidance.  

 Revise FAR 52.212‐4(l), Terminations for the Government’s Convenience, to clarify the elements

of fair compensation when a contract for commercial product or service is terminated for the

government’s convenience.  

 Revise FAR 52.212‐4(m), Termination for Cause, to include language regarding cure notices and

to align this clause with the language at 12.403(c)(1).  

Note: The recommended changes to FAR 12.403 and 52.212-4 can be found in the Implementation Details 

subsection at the end of Section 1. 

Implications for Other Agencies 

 The recommended changes will benefit all federal agencies that use the FAR.    

                                                     

47 Termination, FAR 49.607. Delinquency Notices, FAR 12.403.  48 Packer v. Social Security Administration, CBCA 5038, 16‐1 BCA ¶36,260. 
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Recommendation 4: Revise DFARS sections related to rights in technical data 

policy for commercial products. 

Problem 

DFARS clauses 252.227‐7015 and 252.227‐7037 establish rights in intellectual property for DoD that are

not aligned with commercial practice. Both clauses deter companies that rely on their intellectual

property (IP) to differentiate themselves in the marketplace from doing business with the federal

government.  

Background 

FASA made substantial changes in policy regarding technical data for commercial products procured

by the federal government. FASA set forth the following statutory changes intended to reduce barriers

to the acquisition of commercial items:

 Establishment of the commercial item definition.  

 A statutory preference for the acquisition of commercial items.  

 Establishment of a presumption of development at private expense for commercial items.

The FASA conferees intended to exempt commercial items from requirements to provide technical data

(other than data on form, fit, and function), unless the government could prove that an item was

developed at government expense. Although Congress has amended 10 U.S.C. §§ 2320 and 2321 in the

years since FASA enactment, nothing in the congressional record indicates that Congress has intended

the statutes apply to commercial items that have not been proven to be developed at government

expense. The current DFARS approach of mandating the flow down of data rights clauses to

commercial items that have not been proven to be developed at government expense exceeds the

express legislative intent of Congress (as originally established in FASA).  

Many commercial items must be adapted in some way to meet unique DoD requirements. Minor

modifications made to commercial items to meet unique DoD requirements do not rise to the level of

new technology development. This practice is consistent with the intellectual property white paper

titled, DoD, Innovation, and Intellectual Property in Commercial and Proprietary Technologies, which

supports efforts to cultivate relationships with commercial companies and nontraditional contractors,

such as those in Silicon Valley. 49 The white paper states that, “only those modifications that rise to the

level of a new technology ‘development’ should affect the standard license rights granted to DoD in the

newly developed modification.”  

Consistent with the express legislative intent of Congress, the technical data statutes may be applied to

commercial items that will undergo of a type modifications only if the parties determine that the

modifications rise to the level of new technology development. Taking into consideration the cost and

business effects of mandating flow down of the data‐rights clauses to all commercial contractors and

                                                     

49 OUSD(AT&L), “DoD, Innovation, and Intellectual Property in Commercial & Proprietary Technologies,” accessed January 25, 2017,

https://www.dau.mil/cop/stm/_layouts/15/WopiFrame.aspx?sourcedoc=/cop/stm/DAU%20Sponsored%20Documents/IP%20White%20p

aper%20from%20osd%20Jjan%202016.pdf&action=default. 
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suppliers—and to incentivize commercial and other nontraditional suppliers to do business with the

DoD—it is not in the best interest of the government to apply the technical data statutes to commercial

items or commercial items with minor modifications.  

Findings 

Although the FAR itself emphasizes relying on customary commercial practice, the DFARS treats IP

rights acquisition as an act of the sovereign, which can grant or deny as it pleases by claiming

government purpose. In the commercial world, assignment of IP rights is subject to negotiation, and

transfer of rights typically involves fair compensation in the form of a purchase or payment of license

fees. The FAR is more closely aligned to commercial practice, stating, for example, in FAR 27.102(d)

that “The Government recognizes rights in data developed at private expense, and limits its demands

for delivery of that data. When such data is delivered, the government will acquire only those rights

essential to its needs.” Other sections of the FAR are similarly circumspect when it comes to

commercial practice. 50

The basic policy at DFARS 227.7102‐1 establishes what appears to be a requirement for contractors to

provide three classes of technical data beyond what may be customary in commercial markets:

227.7102‐1 Policy.

(a)  DoD shall acquire only the technical data customarily provided to the public with a commercial

item or process, except technical data that—

    (1)  Are form, fit, or function data;

    (2)  Are required for repair or maintenance of commercial items or processes, or for the proper

installation, operating, or handling of a commercial item, either as a stand alone unit or as a part of a

military system, when such data are not customarily provided to commercial users or the data provided to

commercial users is not sufficient for military purposes; or

    (3)  Describe the modifications made at Government expense to a commercial item or process

in order to meet the requirements of a Government solicitation.

DFARS 227.7102‐1 appears to acknowledge the role IP has in encouraging or discouraging commercial

firms to offer solutions to DoD requirements, stating,  

(b)  To encourage offerors and contractors to offer or use commercial products to satisfy military

requirements, offerors and contractors shall not be required, except for the technical data described in

paragraph (a) of this subsection, to—

    (1)  Furnish technical information related to commercial items or processes 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 technical data pertaining to commercial items or processes except for

a transfer of rights mutually agreed upon.  

                                                     

50 See, for example, FAR 12.211, FAR 12.212, and FAR 27.405‐3. 
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And in 227.7102‐2, the DFARS states,

a) The clause at 252.227‐7015, Technical Data–Commercial Items, provides the Government specific

license rights in technical data pertaining to commercial items or processes. DoD may use, modify,

reproduce, release, perform, display, or disclose data only within the Government. The data may not

be used to manufacture additional quantities of the commercial items and, except for emergency

repair or overhaul and for covered Government support contractors, may not be released or disclosed

to, or used by, third parties without the contractorʹs written permission. Those restrictions do not

apply to the technical data described in 227.7102‐1(a).

It is the exceptions in 227.7102‐1(a), and the implication that these exceptions are not negotiable, and

the contractor may not propose to meet these requirements in another manner other than conveying

these minimum rights (and others addressed below) that constitute overreach. In the commercial

world, to the extent that the exceptions exceed normal practice, they would be subject to negotiation

between the parties.

DFARS 252.227‐7015, Technical Data – Commercial Items, further expands the government’s assertion

of rights without negotiations, stating in subsection (b):

License.

    (1)  The Government shall have the unrestricted right to use, modify, reproduce, release,

perform, display, or disclose technical data, and to permit others to do so, that—

     (i)  Have been provided to the Government or others without restrictions on use,

modification, reproduction, release, or further disclosure other than a release or disclosure resulting from

the sale, transfer, or other assignment of interest in the technical data to another party or the sale or

transfer of some or all of a business entity or its assets to another party; (emphasis added.)

     (ii)  Are form, fit, and function data;

     (iii)  Are a correction or change to technical data furnished to the Contractor by the

Government;  

     (iv)  Are necessary for operation, maintenance, installation, or training (other than

detailed manufacturing or process data); or

     (v)  Have been provided to the Government under a prior contract or licensing

agreement through which the Government has acquired the rights to use, modify, reproduce, release,

perform, display, or disclose the data without restrictions.

    (2)  Except as provided in paragraph (b)(1) of this clause, the Government may use, modify,

reproduce, release, perform, display, or disclose technical data within the Government only.  The

Government shall not—

     (i)  Use the technical data to manufacture additional quantities of the commercial

items; or

     (ii)  Release, perform, display, disclose, or authorize use of the technical data outside

the Government without the Contractorʹs written permission unless a release, disclosure, or permitted

use is necessary for emergency repair or overhaul of the commercial items furnished under this contract,

or for performance of work by covered Government support contractors.  
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DFARS 227.7102‐3 and 227.7102‐4 compound the problem by extending policies intended to guide

contracting officers in resolving issues where technical data may have been developed using

government funds or a combination of government and contractor funds to commercial data items. For

example, DFARS 227.7102‐3 directs use of the procedures at DFARS 227.7103‐13, Government Right to

Review, Verify, Challenge, and Validate Asserted Restrictions. DFARS subpart 227.7103 applies to

noncommercial items, not commercial products and services. Mixed funding issues arise in commercial

contracts too, and they are usually resolved by negotiation between the parties. All of these assertions

of rights go beyond the original intent of FASA.

Conclusions 

The policies in FAR 27.102 and DFARS 227.7102‐1 are generally adequate to protect DoD and balance

the interests of the government and the contractor (except as noted above); however, subsequent

paragraphs of DFARS 227.7102 deviate from commercial practice by requiring rights that are

customarily addressed in negotiated commercial licenses. Adopting policies aligned with commercial

practice will remove barriers to greater access to innovations in the commercial market. The

recommendations below will enable that alignment.

Implementation 

Legislative Branch 

 No statutory changes are required.

Executive Branch 

The DAR Council should do the following:  

 Rescind DFARS 252.227‐7015 and remove DFARS 252.227‐7037 from DFARS 212.301. They go

beyond the intent of FASA and are not representative of commercial practice, and therefore

represent a disincentive for commercial firms to do business with the department.  

 Rescind DFARS 227.7102‐1 and move the policy contained therein to an appropriate place in

DFARS 212. This change will make the processes for commercial buying easier for commercial

firms to understand by collocating commercial technical data policy with other policies for

commercial products and services.

 Rescind DFARS 227.7102‐2 through 227.7102‐4. Generally, these subsections adapt DoD policies

and practices to recognize challenges contracting officers may face when transacting technical

data issues in commercial environments. They do, however, attempt to shape commercial

practices to fit DoD models and methods, rather than guiding contracting officers on how to

operate in commercial markets. They go beyond the intent of FASA and are not representative

of commercial practice; therefore, they represent a disincentive for commercial firms to do

business with DoD.

Note: No additional Implementation Details are included for this recommendation. 

Implications for Other Agencies  

 There are no cross‐agency implications for this recommendation.       
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Section 1 

Commercial Buying

Implementation Details 

Recommendation 1 

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LEGISLATIVE PROVISIONS — 809 PANEL 

STATUTORY RECOMMENDATIONS 

RELATING TO COMMERCIAL BUYING

1 TITLE III—COMMERCIAL BUYING

Sec. 301. Revision of definition of “commercial item” for purposes of Federal acquisition statutes. 

Sec. 302. Definition of subcontract. 

Sec. 303. Limitation on applicability to Department of Defense commercial contracts of certain 

provisions of law and certain Executive orders and regulations. 

2 SEC. 301. REVISION OF DEFINITION OF “COMMERCIAL ITEM” FOR PURPOSES 

3 OF FEDERAL ACQUISITION STATUTES. 

4 (a) DEFINITIONS IN CHAPTER 1 OF TITLE 41, UNITED STATES CODE.— 

5 (1) SEPARATION OF “COMMERCIAL ITEM” DEFINITION INTO DEFINITIONS OF 

6 “COMMERCIAL PRODUCT” AND “COMMERCIAL SERVICE”.—Chapter 1 of title 41, United 

7 States Code, is amended by striking section 103 and inserting the following new 

8 sections: 

9 “§ 103. Commercial product 

10 “In this subtitle, the term ‘commercial product’ means any of the following: 

11 “(1) A product, other than real property, that— 

12 “(A) is of a type customarily used by the general public or by 

13 nongovernmental entities for purposes other than governmental purposes; and 

14 “(B) has been sold, leased, or licensed, or offered for sale, lease, or 

15 license, to the general public.

16 “(2) A product that— 
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1 “(A) evolved from a product described in paragraph (1) through advances 

2 in technology or performance; and 

3 “(B) is not yet available in the commercial marketplace but will be 

4 available in the commercial marketplace in time to satisfy the delivery 

5 requirements under a Federal Government solicitation.

6 “(3) A product that would satisfy the criteria in paragraph (1) or (2) were it not 

7 for— 

8 “(A) modifications of a type customarily available in the commercial 

9 marketplace; or

10 “(B) minor modifications made to meet Federal Government 

11 requirements.

12 “(4) A product that— 

13 “(A) is produced in response to a Federal Government drawing or 

14 specification; and

15 “(B) is ordinarily produced using customer drawings or specifications for 

16 the general public using the same workforce, plant, or equipment. 

17 “(5) Any combination of products meeting the requirements of paragraph (1), (2), 

18 (3), or (4) that are of a type customarily combined and sold in combination to the general 

19 public. 

20 “(6) A product, or combination of products, referred to in paragraphs (1) through 

21 (5), even though the product, or combination of products, is transferred between or 

22 among separate divisions, subsidiaries, or affiliates of a contractor. 
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1 “(7) A nondevelopmental item if the procuring agency determines, in accordance 

2 with conditions in the Federal Acquisition Regulation, that— 

3 “(A) the product was developed exclusively at private expense; and 

4 “(B) has been sold in substantial quantities, on a competitive basis, to 

5 multiple State and local governments or to multiple foreign governments. 

6 “§ 103a. Commercial service

7 “In this subtitle, the term ‘commercial service’ means any of the following: 

8 “(1) Installation services, maintenance services, repair services, training services, 

9 and other services if— 

10 “(A) those services are procured for support of a commercial product, 

11 regardless of whether the services are provided by the same source or at the same 

12 time as the commercial product; and

13 “(B) the source of the services provides similar services 

14 contemporaneously to the general public under terms and conditions similar to 

15 those offered to the Federal Government; 

16 “(2) Services of a type offered and sold competitively, in substantial quantities, in 

17 the commercial marketplace— 

18 “(A) based on established catalog or market prices; 

19 “(B) for specific tasks performed or specific outcomes to be achieved; and 

20 “(C) under standard commercial terms and conditions.

21 “(3) A service, even though the service is transferred between or among separate 

22 divisions, subsidiaries, or affiliates of a contractor.”.
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1 (2) REPEAL OF DEFINITION OF COMMERCIALLY AVAILABLE OFF-THE-SHELF ITEM.—

2 Section 104 of such title is repealed.

3 (3) CONFORMING AMENDMENTS TO TITLE 41 DEFINITIONS. —

4 (A) DEFINITION OF COMMERCIAL COMPONENT.—Section 102 of such title

5 is amended by striking “commercial item” and inserting “commercial product”.

6 (B) DEFINITION OF NONDEVELOPMENTAL ITEM.—Section 110(1) of such

7 title is amended by striking “commercial item” and inserting “commercial 

8 product”. 

9 (4) CLERICAL AMENDMENT.—The table of sections at the beginning of chapter 1

10 of title 41, United States Code, is amended by striking the items relating to sections 103 

11 and 104 and inserting the following new items: 

“103. Commercial product.

“103a. Commercial service.”.

12 (b) CONFORMING AMENDMENTS TO OTHER PROVISIONS OF TITLE 41, U.S.C.—Title 41,

13 United States Code, is further amended as follows: 

14 (1) Section 1502(b) is amended—

15 (A) in paragraph (1)(A), by striking “commercial items” and inserting

16 “commercial products or commercial services”;

17 (B) in paragraph (1)(C)(i), by striking “commercial item” and inserting

18 “commercial product or commercial services”; and

19 (C) in paragraph (3)(A)(i), by striking “commercial items” and inserting

20 “commercial products or commercial services”.

21 (2) Section 1705(c) is amended by striking “commercial items” and inserting

22 “commercial products and commercial services”.
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1 (3) Section 1708 is amended by striking “commercial items” in subsections (c)(6) 

2 and (e)(3) and inserting “commercial products or commercial services”.

3 (4) Section 1901 is amended—

4 (A) in subsection (a)(2), by striking “commercial items” and inserting

5 “commercial products or commercial services”; and

6 (B) in subsection (e)—

7 (i) by striking “COMMERCIAL ITEMS” in the subsection heading and

8 inserting “COMMERCIAL PRODUCTS AND COMMERCIAL SERVICES”; and

9 (ii) by striking “commercial items” and inserting “commercial

10 products or commercial services”.

11 (5) Section 1903(c) is amended—

12 (A) in the subsection heading, by striking “COMMERCIAL ITEM” and

13 inserting “COMMERCIAL PRODUCT OR COMMERCIAL SERVICE”; 

14 (B) in paragraph (1), by striking “as a commercial item” and inserting “as

15 a commercial product or a commercial service”; and 

16 (C) in paragraph (2), by striking “for an item or service treated as a

17 commercial item” and inserting “for a product or service treated as a commercial 

18 product or a commercial service”.

19 (6)(A) Section 1906 is amended by striking “commercial items” each place it 

20 appears in subsections (b), (c), and (d) and inserting “commercial products or commercial 

21 services”. 

22 (B)(i) The heading of such section is amended to read as follows: 
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1 § 1906. List of laws inapplicable to procurements of commercial products and commercial 

2 services”.

3 (ii) The table of sections at the beginning of chapter 19 is amended by striking the

4 item relating to section 1906 and inserting the following new item:

“1906. List of laws inapplicable to procurements of commercial products and commercial services.”.

5 (7)(A) Section 1907 is repealed.

6 (B) The table of sections at the beginning of chapter 19 is amended by striking the

7 item relating to section 1907. 

8 (8) Section 3304 is amended by striking “commercial item” in subsections (a)(5)

9 and (e)(4)(B) and inserting “commercial product”. 

10 (9) Section 3305(a)(2) is amended by striking “commercial items” and inserting

11 “commercial products or commercial services”.

12 (10) Section 3306(b) is amended by striking “commercial items” and inserting

13 “commercial products or commercial services”.

14 (11)(A) Section 3307 is amended— 

15 (i) in subsection (a)—

16 (I) by striking “COMMERCIAL ITEMS” in the subsection heading and

17 inserting “COMMERCIAL PRODUCTS AND COMMERCIAL SERVICES; and

18 (II) in paragraph (1), by striking “commercial items” and inserting

19 “commercial products and commercial services”; and

20 (III) in paragraph (2), by striking “a commercial item” and

21 inserting “a commercial product or commercial service”;

22 (ii) in subsection (b)—
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1 (I) in paragraph (2), by striking “commercial items or, to the extent 

2 that commercial items suitable to meet the executive agency's needs are 

3 not available, nondevelopmental items other than commercial items” and 

4 inserting “commercial services or commercial products or, to the extent 

5 that commercial products suitable to meet the executive agency's needs are 

6 not available, nondevelopmental items other than commercial products”; 

7 and

8 (II) in paragraph (3), by striking “commercial items and

9 nondevelopmental items other than commercial items” and inserting 

10 “commercial services, commercial products, and nondevelopmental items 

11 other than commercial products”; 

12 (iii) in subsection (c)—

13 (I) in paragraphs (1) and (2), by striking “commercial items or

14 nondevelopmental items other than commercial items” and inserting 

15 “commercial services or commercial products or nondevelopmental items 

16 other than commercial products”; 

17 (II) in paragraphs (3) and (4), by striking “commercial items or, to

18 the extent that commercial items suitable to meet the executive agency's 

19 needs are not available, nondevelopmental items other than commercial 

20 items” and inserting “commercial services or commercial products or, to 

21 the extent that commercial products suitable to meet the executive 

22 agency's needs are not available, nondevelopmental items other than 

23 commercial products”; and 
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1 (III) in paragraphs (5) and (6), by striking “commercial items” and 

2 inserting “commercial products and commercial services”; 

3 (iv) in subsection (d)(2), by striking “commercial items or, to the extent

4 that commercial items suitable to meet the executive agency's needs are not 

5 available, nondevelopmental items other than commercial items” and inserting 

6 “commercial services or commercial products or, to the extent that commercial

7 products suitable to meet the executive agency's needs are not available, 

8 nondevelopmental items other than commercial products”; and 

9 (v) in subsection (e)—

10 (I) in paragraph (1), by inserting “103a, 104,” after “sections 102,

11 103,”; 

12 (II) in paragraph (2)(A), by striking “commercial items” and

13 inserting “commercial products or commercial services”;

14 (III) in the first sentence of paragraph (2)(B), by striking

15 “commercial end items” and inserting “end items that are commercial 

16 products”; 

17 (IV) in paragraphs (2)(B)(i), (2)(C)(i) and (2)(D), by striking

18 “commercial items or commercial components” and inserting 

19 “commercial products, commercial components, or commercial services”;

20 (V) in paragraph (2)(C), in the matter preceding clause (i), by

21 striking “commercial items” and inserting “commercial products or 

22 commercial services”;
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1 (VI) in paragraph (4)(A), by striking “commercial items” and 

2 inserting “commercial products or commercial services”;

3 (VII) in paragraph (4)(C)(i), by striking “commercial item, as

4 described in section 103(5)” and inserting “commercial product, as 

5 described in section 103a(1)”; and

6 (VIII) in paragraph (5), by striking “items” each place it appears

7 and inserting “products”. 

8 (B)(i) The heading of such section is amended to read as follows: 

9 § 3307. Preference for commercial products and commercial services”.

10 (ii) The table of sections at the beginning of chapter 33 is amended by striking the

11 item relating to section 3307 and inserting the following new item:

“3307. Preference for commercial products and commercial services.”.

12 (12) Section 3501 is amended—

13 (A) in subsection (a)—

14 (i) by striking paragraph (1);

15 (ii) by redesignating paragraphs (2) and (3) as paragraphs (1) and

16 (2), respectively; and

17 (iii) in paragraph (2) (as so redesignated), by striking “commercial

18 items” and inserting “commercial products or commercial services”; and

19 (B) in subsection (b)—

20 (i) by striking “ITEM” in the heading for paragraph (1); and

21 (ii) by striking “commercial items” in paragraphs (1) and (2)(A)

22 and inserting “commercial services”.

23 (13) Section 3503 is amended—
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1 (A) in subsection (a)(2), by striking “a commercial item” and inserting “a 

2 commercial product or a commercial service”; and

3 (B) in subsection (b)—

4 (i) by striking “COMMERCIAL ITEMS” in the subsection heading and

5 inserting “COMMERCIAL PRODUCTS OR COMMERCIAL SERVICES; and

6 (ii) by striking “a commercial item” each place it appears and

7 inserting “a commercial product or a commercial service”. 

8 (14) Section 3505(b) is amended by striking “commercial items” each place it

9 appears and inserting “commercial products or commercial services”.

10 (15) Section 3509(b) is amended by striking “commercial items” and inserting

11 “commercial products or commercial services”.

12 (16) Section 3704(c)(5) is amended by striking “commercial item” and inserting

13 “commercial product”.

14 (17) Section 3901(b)(3) is amended by striking “commercial items” and inserting

15 “commercial products or commercial services”.

16 (18) Section 4301(2) is amended by striking “commercial items” and inserting

17 “commercial products or commercial services”.

18 (19)(A) Section 4505 is amended by striking “commercial items” in subsections 

19 (a) and (c) and inserting “commercial products or commercial services”.

20 (B)(i) The heading of such section is amended to read as follows: 

21 § 4505. Payments for commercial products and commercial services”.

22 (ii) The table of sections at the beginning of chapter 45 is amended by striking the

23 item relating to section 4505 and inserting the following new item:

“4505. Payments for commercial products and commercial services.”.
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1 (20) Section 4704(d) is amended by striking “commercial items” both places it 

2 appears and inserting “commercial products or commercial services”. 

3 (21) Sections 8102(a)(1), 8703(d)(2), and 8704(b) are amended by striking

4 “commercial items (as defined in section 103 of this title)” and inserting “commercial 

5 products or commercial services (as defined in sections 103 and 103a, respectively, of 

6 this title)”.

7 (c) AMENDMENTS TO CHAPTER 137 OF TITLE 10, UNITED STATES CODE.—Chapter 137 of

8 title 10, United States Code, is amended as follows: 

9 (1) Section 2302(3) is amended—

10 (A) by redesignating subparagraphs (J), (K), and (L) as subparagraphs (K),

11 (L), and (M); and 

12 (B) by striking subparagraph (I) and inserting the following new

13 subparagraphs (I) and (J): 

14 “(I) The term ‘commercial product’.

15 “(J) The term ‘commercial service’.”.

16 (2) Section 2304 is amended—

17 (A) in subsections (c)(5) and (f)(2)(B), by striking “brand-name

18 commercial item” and inserting “brand-name commercial product”; 

19 (B) in subsection (g)(1)(B), by striking “commercial items” and inserting

20 “commercial products or commercial services”; and

21 (C) in subsection (i)(3), by striking “commercial item” and inserting

22 “commercial product”. 

23 (3) Section 2305 is amended—
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1 (A) in subsection (a)(2), by striking “commercial items” and inserting 

2 “commercial products or commercial services”; and

3 (B) in subsection (b)(5)(B)(v), by striking “commercial item” and

4 inserting “commercial product”. 

5 (4) Section 2306(b) is amended by striking “commercial items” and inserting

6 “commercial products or commercial services”.

7 (5) Section 2306a is amended—

8 (A) in subsection (b)—

9 (i) in paragraph (1)(B), by striking “a commercial item” and

10 inserting “a commercial product or a commercial service”; 

11 (i) in paragraph (2)—

12 (I) by striking “COMMERCIAL ITEMS” in the paragraph

13 heading and inserting “COMMERCIAL PRODUCTS OR COMMERCIAL

14 SERVICES”; and

15 (II) by striking “commercial item” each place it appears

16 and inserting “commercial product or commercial services”; 

17 (iii) in paragraph (3)—

18 (I) by striking “COMMERCIAL ITEMS” in the paragraph

19 heading and inserting “COMMERCIAL PRODUCTS”; and

20 (II) by striking “item” each place it appears and inserting

21 “product”; and

22 (iv) in paragraph (4)—
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1 (I) by striking “COMMERCIAL ITEM” in the paragraph 

2 heading and inserting “COMMERCIAL PRODUCT OR COMMERCIAL 

3 SERVICE”; 

4 (II) by striking “commercial item” in subparagraph (A) 

5 after “applying the”;

6 (III) by striking “prior commercial item determination” in 

7 subparagraph (A) and inserting “prior commercial product or 

8 commercial service determination”;

9 (IV) by striking “of such item” in subparagraph (A) and 

10 inserting “of such product or service”; 

11 (V) by striking “of an item previously determined to be a 

12 commercial item” in subparagraph (B) and inserting “of a product 

13 or service previously determined to be a commercial product or a 

14 commercial service”;

15 (VI) by striking “of a commercial item,” in subparagraph 

16 (B) and inserting “of a commercial product or a commercial 

17 service, as the case may be,”;

18 (VII) by striking “the commercial item determination” in 

19 subparagraph (B) and inserting “the commercial product or 

20 commercial service determination”; and

21 (VIII) by striking “commercial item” in subparagraph (C); 

22 and
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1 (v) in paragraph (5), by striking “commercial items” and inserting 

2 “commercial products or commercial services”;

3 (B) in subsection (d)(2), by striking “commercial items” each place it

4 appears and inserting “commercial products or commercial services”; and

5 (C) in subsection (h)—

6 (i) in paragraph (2), by striking “commercial items” and inserting

7 “commercial products or commercial services”; and

8 (ii) by striking paragraph (3).

9 (6) Section 2307(f) is amended—

10 (A) by striking “COMMERCIAL ITEMS” in the subsection heading and

11 inserting “COMMERCIAL PRODUCTS AND COMMERCIAL SERVICES”; 

12 (B) by striking “commercial items” in paragraphs (1) and (2) and inserting

13 “commercial products and commercial services”.

14 (7) Section 2320(b) is amended—

15 (A) in paragraph (1), by striking “a commercial item, the item” and

16 inserting “a commercial product , the product”; and

17 (B) in paragraph (9)(A), by striking “any noncommercial item or process”

18 and inserting “any noncommercial product or process”. 

19 (8) Section 2321(f) is amended—

20 (A) in paragraph (1)—

21 (i) by striking “commercial items” and inserting “commercial

22 products”; and
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1 (ii) by striking “the item” both places it appears and inserting 

2 “commercial products”; and

3 (B) in paragraph (2)(A)—

4 (i) in clauses (i) and (ii), by striking “commercial item” and

5 inserting “commercial product”; and

6 (ii) in clause (iii), by striking “is a commercially” and all that

7 follows and inserting “is a commercial product; and”. 

8 (9) Section 2324(l)(1)(A) is amended by striking “commercial items” and

9 inserting “commercial products or commercial services”.

10 (10) Section 2335(b) is amended—

11 (A) by striking “commercial items” and inserting “commercial products

12 and commercial services”; and

13 (B) by striking “, the procurement of commercial-off-the-shelf-items,”.

14 (d) AMENDMENTS TO CHAPTER 140 OF TITLE 10, UNITED STATES CODE.—Chapter 140 of

15 title 10, United States Code, is amended as follows: 

16 (1) Section 2375 is amended—

17 (A) in subsection (a)—

18 (i) by striking “commercial item” in paragraphs (1) and (2) and

19 inserting “commercial product or commercial service”; and

20 (ii) by striking paragraph (3);

21 (B) in subsections (b) and (c)—

22 (i) by striking “COMMERCIAL ITEMS” in the subsection heading and

23 inserting “COMMERCIAL PRODUCTS AND COMMERCIAL SERVICES”; and
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1 (ii) by striking “commercial items” each place it appears and 

2 inserting “commercial products and commercial services”; 

3 (C) by striking subsection (d); and 

4 (D) in subsection (e)(3), by striking “commercial items” and inserting 

5 “commercial products and commercial services”.

6 (2) Section 2376(1) is amended— 

7 (A) by striking “terms ‘commercial item’,” and inserting “terms 

8 ‘commercial product’, ‘commercial service’,”; and

9 (B) by striking “chapter 1 of title 41” and inserting “sections 103, 103a, 

10 110, 105, and 102, respectively, of title 41”. 

11 (3) Section 2377 is amended—

12 (A) in subsection (a)— 

13 (i) in paragraph (2), by striking “commercial items or, to the extent 

14 that commercial items suitable to meet the agency's needs are not 

15 available, nondevelopmental items other than commercial items” and 

16 inserting “commercial services or commercial products or, to the extent 

17 that commercial products suitable to meet the agency's needs are not 

18 available, nondevelopmental items other than commercial products”; and 

19 (ii) in paragraph (3), by striking “commercial items and 

20 nondevelopmental items other than commercial items” and inserting 

21 “commercial services, commercial products, and nondevelopmental items 

22 other than commercial products”; 

23 (B) in subsection (b)— 
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1 (i) in paragraphs (1) and (2), by striking “commercial items or 

2 nondevelopmental items other than commercial items” and inserting 

3 “commercial services or commercial products or nondevelopmental items 

4 other than commercial products”; 

5 (ii) in paragraphs (3) and (4), by striking “commercial items or, to 

6 the extent that commercial items suitable to meet the agency's needs are 

7 not available, nondevelopmental items other than commercial items” and 

8 inserting “commercial services or commercial products or, to the extent 

9 that commercial products suitable to meet the agency's needs are not 

10 available, nondevelopmental items other than commercial products”; and 

11 (iii) in paragraphs (5) and (6), by striking “commercial items” and 

12 inserting “commercial products and commercial services”; 

13 (C) in subsection (c)— 

14 (i) in paragraph (2), by striking “commercial items or, to the extent 

15 that commercial items suitable to meet the agency's needs are not 

16 available, nondevelopmental items other than commercial items” and 

17 inserting “commercial services or commercial products or, to the extent 

18 that commercial products suitable to meet the agency's needs are not 

19 available, nondevelopmental items other than commercial products”; and 

20 (ii) in paragraph (4), by striking “items other than commercial 

21 items” and inserting “products other than commercial products or services 

22 other than commercial services”;

23 (D) in subsection (d)— 
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1 (i) in the first sentence, by striking “commercial items” and 

2 inserting “commercial products or commercial services”; 

3 (ii) in paragraph (1), by striking “items” and inserting “products or 

4 services”; and

5 (iii) in paragraph (2), by striking “items” and inserting “products or 

6 services”; and

7 (E) in subsection (e)(1), by striking “commercial items” and inserting 

8 “commercial products and commercial services”. 

9 (4) Section 2379 is amended— 

10 (A) by striking “COMMERCIAL ITEMS” in the headings of subsections (b) 

11 and (c) and inserting “COMMERCIAL PRODUCTS”; 

12 (B) by striking “commercial item” and “commercial items” each place

13 they appear and inserting “commercial product” and “commercial products”, 

14 respectively; 

15 (C) in subsections (b) and (c), by striking “commercially available off-the16 shelf item as defined in section 104 of title 41” and inserting “commercial 

17 product”; and

18 (D) in subsection (d)(3), by striking “commercially available off-the-shelf 

19 item” and inserting “commercial product”. 

20 (5) Section 2380 is amended— 

21 (A) in subsection (a), by striking “commercial item determinations” in 

22 paragraphs (1) and (2) and inserting “commercial product and commercial service 

23 determinations”; and
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1 (B) in subsection (b) (as added by section 848 of the National Defense 

2 Authorization Act for Fiscal Year 2018)— 

3 (i) by striking “ITEM” in the subsection heading; 

4 (ii) by striking “an item” each place it appears and inserting “a 

5 product or service”; 

6 (iii) by striking “item” after “using commercial” each place it 

7 appears;

8 (iv) by striking “prior commercial item determination” and 

9 inserting “prior commercial product or service determination”;

10 (v) by striking “such item” and inserting “such product or service”; 

11 and

12 (vi) by striking “the item” both places it appears and inserting “the 

13 product or service”. 

14 (6) Section 2380a is amended— 

15 (A) in subsection (a)— 

16 (i) by striking “items and” and inserting “products and”; and

17 (ii) by striking “commercial items” and inserting “commercial 

18 products and commercial services, respectively,”; and

19 (B) in subsection (b), by striking “commercial items” and inserting 

20 “commercial services”.

21 (7) Section 2380B is amended by striking “commercial item” and inserting 

22 “commercial product”.

23 (8) AMENDMENTS TO HEADINGS, ETC.— 
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1 (A) The heading of such chapter is amended to read as follows: 

2 “CHAPTER 140—PROCUREMENT OF COMMERCIAL PRODUCTS AND 

3 COMMERCIAL SERVICES”.

4 (B) The heading of section 2375 is amended to read as follows: 

5 “§ 2375. Relationship of other provisions of law to procurement of commercial products 

6 and commercial services”. 

7 (C) The heading of section 2377 is amended to read as follows: 

8 “§ 2377. Preference for commercial products and commercial services”. 

9 (D) The heading of section 2379 is amended to read as follows: 

10 “§ 2379. Procurement of a major weapon system as a commercial product: requirement for 

11 prior determination by Secretary of Defense and notification to Congress”. 

12 (E) The heading of section 2380 is amended to read as follows: 

13 “§ 2380. Commercial product and commercial service determinations by Department of 

14 Defense”. 

15 (F) The heading of section 2380a is amended to read as follows: 

16 “§ 2380a. Treatment of certain products and services as commercial products and 

17 commercial services”.

18 (G) Section 2380B is redesignated as section 2380b and the heading of 

19 that section is amended to read as follows: 

20 “§ 2380b. Treatment of commingled items purchased by contractors as commercial 

21 products”.

22 (H) The table of sections at the beginning of such chapter is amended to 

23 read as follows:
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“2375. Relationship of other provisions of law to procurement of commercial products and commercial services.

“2376. Definitions.

“2377. Preference for commercial products and commercial services.

“2379. Procurement of a major weapon system as a commercial product: requirement for prior determination by 

Secretary of Defense and notification to Congress. 

“2380. Commercial product and commercial service determinations by Department of Defense. 

“2380a. Treatment of certain products and services as commercial products and commercial services.

“2380b. Treatment of commingled items purchased by contractors as commercial products.”.

1 (e) OTHER AMENDMENTS TO TITLE 10, UNITED STATES CODE.—Title 10, United States 

2 Code, is further amended as follows:

3 (1) Section 2226(b) is amended by striking “for services” and all that follows 

4 through “deliverable items” and inserting “for services or deliverable items”.

5 (2) Section 2384(b)(2) is amended by striking “commercial items” and inserting 

6 “commercial products”.

7 (3) Section 2393(d) is amended by striking “commercial items (as defined in 

8 section 103 of title 41)” and inserting “commercial products or commercial services (as 

9 defined, respectively, in sections 103 and 103a of title 41)”.

10 (4) Section 2402(d) is amended— 

11 (A) in paragraph (1), by striking “commercial items” both places it 

12 appears and inserting “commercial products or commercial services”; and

13 (B) in paragraph (2), by striking “the term” and all that follows and 

14 inserting “the terms ‘commercial product’ and ‘commercial service’ have the 

15 meanings given those terms in sections 103 and 103a, respectively, of title 41.”.

16 (5) Section 2408(a)(4)(B) is amended by striking “commercial items (as defined 

17 in section 103 of title 41)” and inserting “commercial products or commercial services 

18 (as defined, respectively, in sections 103 and 103a of title 41)”. 

19 (6) Section 2410b(c) is amended by striking “commercial items” and inserting 

20 “commercial products”.
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1 (7) Section 2410g(d)(1) is amended by striking “Commercial items (as defined in 

2 section 103 of title 41)” and inserting “Commercial products or commercial services (as 

3 defined, respectively, in sections 103 and 103a of title 41)”. 

4 (8) Section 2447a is amended— 

5 (A) in subsection (a)(2), by striking “commercial items and technologies” 

6 and inserting “commercial products and technologies”; and

7 (B) in subsection (c), by inserting before the period at the end the 

8 following: “and the term ‘commercial product’ has the meaning given that term in 

9 sections103 of title 41”. 

10 (9) Section 2451(d) is amended by striking “commercial items” and inserting 

11 “commercial products (as defined in section 103 of title 41)”. 

12 (10) Section 2464 is amended— 

13 (A) in subsection (a)— 

14 (i) in paragraph (3), by striking “commercial items” and inserting 

15 “commercial products”; and

16 (ii) in paragraph (5), by striking “commercial items” the first place 

17 it appears and all that follows in that paragraph and inserting “commercial 

18 products covered by paragraph (3) are commercial products as defined in 

19 section 103 of title 41.”; and

20 (B) in subsection (c)— 

21 (i) by striking “COMMERCIAL ITEMS” in the subsection heading and 

22 inserting “COMMERCIAL PRODUCTS”; and
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1 (ii) by striking “commercial item” and inserting “commercial 

2 product”. 

3 (11) Section 2484(f) is amended— 

4 (A) by striking “COMMERCIAL ITEMS” in the subsection heading and 

5 inserting “COMMERCIAL PRODUCTS”; and

6 (B) by striking “commercial item” and inserting “commercial product”.

7 (12) The items relating to chapter 140 in the tables of chapters at the beginning of 

8 subtitle A, and at the beginning of part IV of subtitle A, are amended to read as follows: 

“140. Procurement of Commercial Products and Commercial Services .......................... 2377”.

9 (f) AMENDMENTS TO PROVISIONS OF NATIONAL DEFENSE AUTHORIZATION ACTS.— 

10 (1) Section 806(b) of the National Defense Authorization Act for Fiscal Years 

11 1992 and 1993 (Public Law 102-190; 10 U.S.C. 2302 note) is amended by striking 

12 “commercial items (as defined in section 103 of title 41, United States Code)” and 

13 inserting “commercial products or commercial services (as defined in sections 103 and 

14 103a, respectively, of title 41, United States Code)”. 

15 (2) Section 821(e) of the Floyd D. Spence National Defense Authorization Act for 

16 Fiscal Year 2001 (as enacted into law by Public Law 106-398; 10 U.S.C. 2302 note) is 

17 amended— 

18 (1) by striking paragraph (2);

19 (2) by redesignating paragraph (3) as paragraph (2).

20 (3) Section 821(b) of the National Defense Authorization Act for Fiscal Year 

21 2008 (Public Law 110-181; 10 U.S.C. 2304 note) is amended— 
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1 (A) in paragraph (1), by striking “a commercial item” and inserting “a 

2 commercial product or a commercial service”;

3 (B) in paragraph (2), by striking “commercial item” and inserting 

4 “commercial product ”; and

5 (C) by adding at the end the following new paragraph” 

6 “(3) The term ‘commercial service’ has the meaning provided by section 103a of 

7 title 41, United States Code.”.

8 (4) Section 817 of the Bob Stump National Defense Authorization Act for Fiscal 

9 Year 2003 (Public Law 107-314; 10 U.S.C. 2306 note) is amended— 

10 (A) in subsection (d)— 

11 (i) in the subsection heading, by striking “ANNUAL REPORT ON

12 BOTH COMMERCIAL ITEM AND EXCEPTIONAL CASE EXCEPTIONS AND 

13 WAIVERS” and inserting “ANNUAL REPORT ON COMMERCIAL PRODUCTS

14 AND COMMERCIAL SERVICES AND EXCEPTIONAL CASE EXCEPTIONS AND 

15 WAIVERS”; 

16 (ii) in paragraph (1), by striking “commercial item exceptions” and 

17 inserting “commercial product-commercial service exceptions”; and

18 (iii) in paragraph (2)(A)— 

19 (I) by striking “commercial item exception” and inserting 

20 “commercial product-commercial service exception”; and 

21 (II) by striking “commercial items” and inserting 

22 “commercial products or commercial services, as the case may 

23 be”.
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1 (B) in subsection (e)(2), by striking “commercial item exception” and 

2 inserting “commercial product-commercial service exception”.

3 (5) Section 852(b)(2)(A)(ii) of the National Defense Authorization Act for Fiscal 

4 Year 2007 (Public Law 109-364; 10 U.S.C. 2324 note) is amended by striking “a 

5 commercial item, as defined in section 103 of title 41” and inserting “a commercial 

6 product or a commercial service, as defined in sections 103 and 103a, respectively, of 

7 title 41”.

8 (6) Section 805 of the National Defense Authorization Act for Fiscal Year 2008 

9 (Public Law 110-181; 10 U.S.C. 2330 note) is amended— 

10 (A) in subsection (b), by striking “commercial items” in paragraphs (1) 

11 and (2)(A) and inserting “commercial services”; and 

12 (B) in subsection (c)— 

13 (i) by striking “ITEM” in the headings for paragraphs (1) and (2) 

14 and inserting “SERVICES”; 

15 (ii) in the matter in paragraph (1) preceding subparagraph (A), by 

16 striking “commercial item” and inserting “commercial service”; 

17 (iii) in paragraph (1)(A), by striking “a commercial item, as 

18 described in section 103(5) of title 41” and inserting “a product, as 

19 described in section 103a(1) of title 41”; 

20 (iv) in paragraph (1)(C)(i), by striking “section 103(6) of title 41” 

21 and inserting “section 103a(2) of title 41”; and 

22 (v) in paragraph (2), by striking “item” and inserting “service”. 
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1 (7) Section 849(d) of the National Defense Authorization Act for Fiscal Year 

2 2017 (Public Law 114-328; 10 U.S.C. 2377 note) is amended— 

3 (A) by striking “commercial items” in paragraph (1) and inserting 

4 “commercial products”; 

5 (B) by striking “commercial item” in paragraph (3)(B)(i) and inserting 

6 “commercial product”; and

7 (C) by adding at the end the following new paragraph: 

8 “(5) DEFINITION.—In this subsection, the term ‘commercial product’ has the 

9 meaning given that term in section 103 of title 41.”. 

10 (8) Section 856(a)(1) of the National Defense Authorization Act for Fiscal Year 

11 2016 (Public Law 114-92; 10 U.S.C. 2377 note) is amended by striking “commercial 

12 items or services” and inserting “a commercial product or a commercial service, as 

13 defined in sections 103 and 103a, respectively, of title 41,”.

14 (9) Section 879 of the National Defense Authorization Act for Fiscal Year 2017 

15 (Public Law 114-328; 10 U.S.C. 2302 note) is amended— 

16 (A) in the section heading, by striking “COMMERCIAL ITEMS” and 

17 inserting “COMMERCIAL PRODUCTS”; 

18 (B) in subsection (a), by striking “commercial items” and inserting 

19 “commercial products”;

20 (C) in subsection (c)(3)— 

21 (i) by striking “COMMERCIAL ITEMS” in the paragraph heading and 

22 inserting “COMMERCIAL PRODUCTS OR COMMERCIAL SERVICES”; and
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1 (ii) by striking “commercial items” and inserting “commercial 

2 products or commercial services”; and

3 (D) in subsection (e)(2), by striking “item” in subparagraphs (A) and (B) 

4 (10) Section 880 of the National Defense Authorization Act for Fiscal Year 2017 

5 (Public Law 114-328; 41 U.S.C. 3301 note) is amended by striking “commercial items” 

6 in subsection (a)(1) and inserting “commercial products”. 

7 (g) CONFORMING AMENDMENTS TO OTHER STATUTES.— 

8 (1) Section 604(g) of the American Recovery and Reinvestment Act of 2009 (6 

9 U.S.C. 453b(g)) is amended— 

10 (A) by striking “COMMERCIAL ITEMS” in the subsection heading and 

11 inserting “COMMERCIAL PRODUCTS”; 

12 (B) by striking “procurement of commercial” in the first sentence and all 

13 that follows through “items listed” and inserting “procurement of commercial 

14 products notwithstanding section 1906 of title 41, United States Code, with the 

15 exception of commercial products listed”; and

16 (C) in the second sentence— 

17 (i) by inserting “product” after “commercial”; and

18 (ii) by striking “in the” and all that follows and inserting “in 

19 section 103 of title 41, United States Code.”. 

20 (2) Section 142 of the Higher Education Act of 1965 (20 U.S.C. 1018a) is 

21 amended— 

22 (A) in subsection (e)— 
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1 (i) by striking “COMMERCIAL ITEMS” in the subsection heading and 

2 inserting “COMMERCIAL PRODUCTS AND COMMERCIAL SERVICES”; 

3 (ii) by striking “that commercial items” and inserting “that 

4 commercial products or commercial services”; 

5 (iii) by striking “special rules for commercial items” and inserting 

6 “special rules for commercial products and commercial services”; 

7 (iv) by striking “without regard to—” and all that follows through 

8 “dollar limitation” and inserting “without regard to any dollar limitation”; 

9 (v) by striking “; and” and inserting a period; and 

10 (vi) by striking paragraph (2);

11 (B) in subsection (f)— 

12 (i) by striking “ITEMS” in the subsection heading and inserting 

13 “PRODUCTS AND SERVICES”; 

14 (ii) by striking “ITEMS” in the heading of paragraph (2) and 

15 inserting “PRODUCTS AND SERVICES”; and

16 (iii) by striking “a commercial item” in paragraph (2) and inserting 

17 “a commercial product or a commercial service”; 

18 (C) in subsection (h)— 

19 (i) by striking “ITEMS” in the subsection heading and inserting 

20 “SERVICES”; and 

21 (ii) by striking “commercial items” in paragraph (1) and inserting 

22 “commercial services”; and

23 (D) in subsection (l)— 
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1 (i) by redesignating paragraphs (2), (3), (4), and (5) as paragraphs 

2 (3), (4), (5), and (6), respectively; 

3 (ii) by striking paragraph (1) and inserting the following new 

4 paragraphs: 

5 “(1) COMMERCIAL PRODUCT.—The term ‘commercial product’ has the meaning 

6 given the term in section 103 of title 41, United States Code. 

7 “(2) COMMERCIAL SERVICE.—The term ‘commercial service’ has the meaning 

8 given the term in section 103a of title 41, United States Code.”; 

9 (iii) in paragraph (3), as so redesignated, by striking “in section” 

10 and all that follows and inserting “in section 152 of title 41, United States 

11 Code.”; 

12 (iv) in paragraph (5), as so redesignated— 

13 (I) by striking “COMMERCIAL ITEMS” in the paragraph 

14 heading and inserting “COMMERCIAL PRODUCTS AND COMMERCIAL 

15 SERVICES”; 

16 (II) by striking “commercial items” and inserting 

17 “commercial products and commercial services”; and

18 (III) by striking “pursuant to” and all that follows and 

19 inserting “pursuant to sections 1901 and 3305(a) of title 41, United 

20 States Code.”; and

21 (v) in paragraph (6), as so redesignated, by striking “pursuant to” 

22 and all that follows and inserting “pursuant to sections 1901(a)(1) and 

23 3305(a)(1) of title 41, United States Code.”. 
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1 (3) Section 3901(a)(4)(A)(ii)(II) of title 31, United States Code, is amended by 

2 striking “commercial item” and inserting “commercial product”.

3 (4) Section 2455(c)(1) of the Federal Acquisition Streamlining Act of 1994 (31 

4 U.S.C. 6101 note) is amended— 

5 (A) by striking “commercially available off-the-shelf items (as defined in 

6 section 35(c) of the Office of Federal Procurement Policy Act (41 U.S.C. 431(c))” 

7 and inserting “commercial products (as defined in section 103 of title 41, United 

8 States Code)”; and

9 (B) by striking “commercial items” and inserting “commercial products”.

10 (5) Section 508(f) of the Federal Water Pollution Control Act (33 U.S.C. 1368(f)) 

11 is amended— 

12 (A) in paragraph (1), by striking “commercial items” and inserting 

13 “commercial products or commercial services”; and

14 (B) in paragraph (2), by striking “the term” and all that follows and 

15 inserting “the terms ‘commercial product’ and ‘commercial service’ have the

16 meanings given those terms in sections 103 and 103a, respectively, of title 41, 

17 United States Code.”.

18 (6) Section 3707 of title 40, United States Code, is amended by striking “a 

19 commercial item (as defined in section 103 of title 41)” and inserting “a commercial 

20 product (as defined in section 103 of title 41) or a commercial service (as defined in 

21 section 103a of title 41)”.

22 (7) Subtitle III of title 40, United States Code, is amended— 
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1 (A) in section 11101(1), by striking “COMMERCIAL ITEM.—The term 

2 ‘commercial item’ has” and inserting “COMMERCIAL PRODUCT.—The term 

3 ‘commercial product’ has”; and

4 (B) in section 11314(a)(3), by striking “items” each place it appears and 

5 inserting “products”. 

6 (8) Section 8301(g) of the Federal Acquisition Streamlining Act of 1994 (42 

7 U.S.C. 7606 note) is amended by striking “commercial items” and inserting “commercial 

8 products or commercial services”.

9 (9) Section 40118(f) of title 49, United States Code, is amended— 

10 (A) in paragraph (1), by striking “commercial items” and inserting 

11 “commercial products”; and

12 (B) in paragraph (2), by striking “commercial item” and inserting 

13 “commercial product”.

14 (10) Chapter 501 of title 51, United States Code, is amended— 

15 (A) in sections 50113(c)— 

16 (i) by striking “COMMERCIAL ITEM” in the subsection heading and 

17 inserting “COMMERCIAL PRODUCT OR COMMERCIAL SERVICE”; and

18 (ii) by striking “commercial item” in the second sentence and 

19 inserting “commercial product or commercial service”; and

20 (B) in sections 50115(b)— 

21 (i) by striking “COMMERCIAL ITEM” in the subsection heading and 

22 inserting “COMMERCIAL PRODUCT OR COMMERCIAL SERVICE”; and
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1 (ii) by striking “commercial item” in the second sentence and 

2 inserting “commercial product or commercial service”; and

3 (C) in sections 50132(a)— 

4 (i) by striking “COMMERCIAL ITEM” in the subsection heading and 

5 inserting “COMMERCIAL SERVICE”; and

6 (ii) by striking “commercial item” in the second sentence and 

7 inserting “commercial service”.

8 (h) SAVINGS PROVISION.—Any provision of law that on the day before the effective date 

9 of this section is on a list of provisions of law included in the Federal Acquisition Regulation 

10 pursuant to section 1907 of title 41, United States Code, shall be deemed as of that effective date 

11 to be on a list of provisions of law included in the Federal Acquisition Regulation pursuant to 

12 section 1906 of such title. 

13 SEC. 302. DEFINITION OF SUBCONTRACT. 

14 (a) STANDARD DEFINITION IN TITLE 41, UNITED STATES CODE.— 

15 (1) IN GENERAL.—Chapter 1 of title 41, United States Code, is amended— 

16 (A) by redesignating sections 115 and 116 as sections 116 and 117, 

17 respectively; and

18 (B) by inserting after section 114 the following new section 115: 

19 “§ 115. Subcontract

20 “(a) IN GENERAL.—In this subtitle, the term ‘subcontract’ means a contract entered into 

21 by a prime contractor or subcontractor for the purpose of obtaining supplies, materials, 

22 equipment, or services of any kind under a prime contract. The term includes a transfer of a 
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1 commercial product or commercial service between divisions, subsidiaries, or affiliates of a 

2 contractor or subcontractor. 

3 “(b) MATTERS NOT INCLUDED.—In this subtitle, the term ‘subcontract’ does not 

4 include— 

5 “(1) a contract the costs of which are applied to general and administrative 

6 expenses or indirect costs; or 

7 “(2) an agreement entered into by a contractor or subcontractor for the supply of a 

8 commodity, a commercial product, or a commercial service that is intended for use in the 

9 performance of multiple contracts.”. 

10 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of chapter 1 

11 of title 41, United States Code, is amended by striking the items relating to sections 115 

12 and 116 and inserting the following new items: 

“115. Subcontract. 

“116. Supplies. 

“117. Technical data.”.

13 (b) CONFORMING AMENDMENTS TO TITLE 41, UNITED STATES CODE.—Title 41, United 

14 States Code, is further amended as follows: 

15 (1) Section 1502(b)(1) is amended— 

16 (A) by striking subparagraph (A); 

17 (B) by redesignating subparagraphs (B) and (C) as subparagraphs (A) and 

18 (B), respectively; and

19 (C) in subparagraph (B), as so redesignated, by striking “Subparagraph 

20 (B)” and inserting “Subparagraph (A)”.

21 (2) Section 1906 is amended— 

22 (A) in subsection (c)— 
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1 (i) by striking paragraph (1);

2 (ii) by redesignating paragraphs (2), (3), and (4) as paragraphs (1), 

3 (2), and (3), respectively; 

4 (iii) in paragraph (1), as so redesignated, by striking “paragraph 

5 (3)” and inserting “paragraph (2)”; and 

6 (iv) in paragraph (2), as so redesignated, by striking “paragraph 

7 (2)” and inserting “paragraph (1)”; and 

8 (B) in subsection (e), by striking “(c)(3)” both places it appears and 

9 inserting “(c)(2)”.

10 (3) Section 3307(e)(2) is amended— 

11 (A) by striking subparagraph (A); 

12 (B) by redesignating subparagraphs (B), (C), (D), and (E) as 

13 subparagraphs (A), (B), (C), and (D), respectively; 

14 (C) in subparagraph (C), as so redesignated— 

15 (i) by striking “subparagraph (B)” and inserting “subparagraph 

16 (A)”; and

17 (ii) by striking “subparagraph (C)” and inserting “subparagraph 

18 (B)”; and

19 (D) in subparagraph (D), as so redesignated, by striking “subparagraph 

20 (B)” and inserting “subparagraph (A)”.

21 (4) Section 3501(a) is amended by striking paragraph (3). 

22 (c) INCORPORATION OF TITLE 41 DEFINITION IN CHAPTERS 137 AND 140 OF TITLE 10,

23 UNITED STATES CODE.— 
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1 (1) DEFINITIONS FOR PURPOSES OF CHAPTER 137.—Section 2302(3) of title 10, 

2 United States Code, is amended by adding at the end the following new subparagraph: 

3 “(N) The term ‘subcontract’.”.

4 (2) DEFINITIONS FOR PURPOSES OF CHAPTER 140.— 

5 (A) Section 2375(c) of title 10, United States Code, is amended— 

6 (i) by striking paragraph (3); and

7 (ii) by redesignating paragraph (4) as paragraph (3). 

8 (B) Section 2376(1) of such title is amended by striking “and ‘commercial 

9 component’ have” and inserting “‘commercial component’, and ‘subcontract’ 

10 have”.

11 SEC. 303. LIMITATION ON APPLICABILITY TO DEPARTMENT OF DEFENSE 

12 COMMERCIAL CONTRACTS OF CERTAIN PROVISIONS OF LAW 

13 AND CERTAIN EXECUTIVE ORDERS AND REGULATIONS. 

14 (a) INAPPLICABILITY OF CERTAIN PROVISIONS OF LAW.— 

15 (1) SECTION 2375.—Section 2375 of title 10, United States Code, is amended— 

16 (A) in subsection (b)(2), by striking “January 1, 2015” and inserting 

17 “October 13, 1994”; and

18 (B) in subsections (b)(2), (c)(2), and (d)(2), by striking “unless the” and all 

19 that follows and inserting a period. 

20 (2) SECTION 2533a.—Section 2533a of such title is amended— 

21 (A) in subsection (a), by striking “through (h)” and inserting “through (i)”; 

22 and 

23 (B) by striking subsection (i) and inserting the following: 
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1 “(i) EXCEPTION FOR PURCHASES OF COMMERCIAL PRODUCTS.—Subsection (a) does not 

2 apply to purchases of commercial products, as defined in section 103 of title 41.”;

3 (3) SECTION 2533b.—Section 2533b of such title is amended— 

4 (A) by striking subsection (h) and inserting the following: 

5 “(h) EXCEPTION FOR PURCHASES OF COMMERCIAL PRODUCTS.—Subsection (a) does not 

6 apply to acquisitions of commercial products.”; 

7 (B) in subsection (j)(2), by striking “commercially available off-the-shelf 

8 items” and inserting “commercials products”; and

9 (C) in subsection (m), by striking paragraph (5) and inserting the 

10 following: 

11 “(5) The term ‘commercial product’ has the meaning provided in section 103 of 

12 title 41.”.

13 (b) INAPPLICABILITY OF CERTAIN EXECUTIVE ORDERS AND REGULATIONS.—Chapter 140 

14 of title 10, United States Code, is amended by inserting after section 2375 the following new 

15 section:

16 “§ 2375a. Applicability of certain executive orders and regulations 

17 “(a) EXECUTIVE ORDERS.— 

18 “(1) COMMERCIAL CONTRACTS.—No Department of Defense commercial contract 

19 shall be subject to an Executive order issued after the date of the enactment of this section 

20 unless the Executive order specifically provides that it is applicable to contracts for the

21 procurement of commercial products and commercial services by the Department of 

22 Defense.
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1 “(2) SUBCONTRACTS UNDER COMMERCIAL CONTRACTS.—No subcontract under a 

2 Department of Defense commercial contract shall be subject to an Executive order issued 

3 after the date of the enactment of this section unless the Executive order specifically 

4 provides that it is applicable to subcontracts under Department of Defense contracts for 

5 the procurement of commercial products and commercial services. 

6 “(b) REGULATIONS AND POLICIES.— 

7 “(1) COMMERCIAL CONTRACTS.—No Department of Defense commercial contract 

8 shall be subject to any Department of Defense regulation or policy prescribed after the 

9 date of the enactment of this section unless the regulation or policy specifically provides 

10 that it is applicable to contracts for the procurement of commercial products and 

11 commercial services by the Department of Defense. 

12 “(2) SUBCONTRACTS UNDER COMMERCIAL CONTRACTS.—No subcontract under a 

13 Department of Defense commercial contract shall be subject to any Department of 

14 Defense regulation or order prescribed after the date of the enactment of this section

15 unless the regulation or policy specifically provides that it is applicable to subcontracts 

16 under Department of Defense contracts for the procurement of commercial products and 

17 commercial services. 

18 “(c) DEPARTMENT OF DEFENSE COMMERCIAL CONTRACTS.—In this section, the term 

19 “Department of Defense commercial contract’ means a contract for the procurement of a 

20 commercial product or commercial service entered into by the Secretary of Defense.”.

21 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of such 

22 chapter is amended by inserting after the item relating to section 2375 the following new 

23 item:

“2375a. Applicability of certain Executive orders and regulations.”.
   
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 Amend U.S. Code, Title 41, to add the following new section: 

41 U.S.C. XXX – “Subcontract means any contract or contractual action entered into by a prime 

contractor or subcontractor for the purpose of obtaining supplies, materials, equipment, or services 

of any kind under a prime contract. The term includes a transfer of commercial product or service 

between divisions, subsidiaries, or affiliates of a contractor or subcontractor. The term does not 

include contracts the costs of which are normally applied to general and administrative expenses or 

indirect costs. The term does not include agreements entered into by a contractor or subcontractor 

for the supply of commodities, commercially available off-the-shelf products, or commercial 

services that are intended for use in the performance of multiple contracts.”

 Amend FAR, Subpart 2.101, Definitions of Words and Terms, to add the following new definition: 

Subcontract means any contract, as defined in Subpart 2.101, entered into by a prime contractor or 

subcontractor for the purpose of obtaining supplies, materials, equipment, or services of any kind 

under a prime contract. The term includes a transfer of commercial items between divisions, 

subsidiaries, or affiliates of a contractor or subcontractor. The term does not include contracts the 

costs of which are normally applied to general and administrative expenses or indirect costs. The 

term does not include agreements entered into by a contractor or subcontractor for the supply of 

commodities, commercial products, or commercial services that are intended for use in the 

performance of multiple contracts.

 Amend FAR and DFARS at the citations noted and in the manner noted for each citation in 

Appendix F).

 Amend FAR, Subpart 2.101, Definitions of Words and Terms, to add the following new definition:

“Subcontractor means any person other than the prime contractor (including a supplier, distributor, 

vendor, consultant, or firm) furnishing supplies, materials, equipment or services under a 

subcontract.” 

 Revise FAR 2.101, Definitions, as follows 

Commercial computer software means any computer software that is a commercial item product 

or commercial service. 

“Commercial item” means --

(1) Any item, other than real property, that is of a type customarily used by the general public or 

by non-governmental entities for purposes other than governmental purposes, and--

(i) Has been sold, leased, or licensed to the general public; or, 

(ii) Has been offered for sale, lease, or license to the general public;
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(2) Any item that evolved from an item described in paragraph (1) of this definition through 

advances in technology or performance and that is not yet available in the commercial 

marketplace, but will be available in the commercial marketplace in time to satisfy the delivery 

requirements under a Government solicitation; 

(3) Any item that would satisfy a criterion expressed in paragraphs (1) or (2) of this definition, but 

for --

(i) Modifications of a type customarily available in the commercial marketplace; or 

(ii) Minor modifications of a type not customarily available in the commercial marketplace made 

to meet Federal Government requirements. Minor modifications means modifications that do not 

significantly alter the nongovernmental function or essential physical characteristics of an item or 

component, or change the purpose of a process. Factors to be considered in determining whether 

a modification is minor include the value and size of the modification and the comparative value 

and size of the final product. Dollar values and percentages may be used as guideposts, but are 

not conclusive evidence that a modification is minor; 

(4) Any combination of items meeting the requirements of paragraphs (1), (2), (3), or (5) of this 

definition that are of a type customarily combined and sold in combination to the general public; 

(5) Installation services, maintenance services, repair services, training services, and other services 

if-- 

(i) Such services are procured for support of an item referred to in paragraph (1), (2), (3), or (4) of 

this definition, regardless of whether such services are provided by the same source or at the 

same time as the item; and 

(ii) The source of such services provides similar services contemporaneously to the general public 

under terms and conditions similar to those offered to the Federal Government;

(6) Services of a type offered and sold competitively in substantial quantities in the commercial 

marketplace based on established catalog or market prices for specific tasks performed or specific 

outcomes to be achieved and under standard commercial terms and conditions. For purposes of 

these services— 

(i) “Catalog price” means a price included in a catalog, price list, schedule, or other form that is 

regularly maintained by the manufacturer or vendor, is either published or otherwise available 

for inspection by customers, and states prices at which sales are currently, or were last, made to a 

significant number of buyers constituting the general public; and

(ii) “Market prices” means current prices that are established in the course of ordinary trade 

between buyers and sellers free to bargain and that can be substantiated through competition or 

from sources independent of the offerors.
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(7) Any item, combination of items, or service referred to in paragraphs (1) through (6) of this 

definition, notwithstanding the fact that the item, combination of items, or service is transferred 

between or among separate divisions, subsidiaries, or affiliates of a contractor; or

(8) A nondevelopmental item, if the procuring agency determines the item was developed 

exclusively at private expense and sold in substantial quantities, on a competitive basis, to 

multiple State and local governments.

Commercial product means - 

(1) A product, other than real property, that— 

(A) is of a type customarily used by the general public or by nongovernmental entities for 

purposes other than governmental purposes; and

(B) has been sold, leased, or licensed, or offered for sale, lease, or license, to the general 

public.

(2) A product that— 

(A) evolved from a product described in paragraph (1) through advances in technology or 

performance; and

(B) is not yet available in the commercial marketplace but will be available in the 

commercial marketplace in time to satisfy the delivery requirements under a Federal Government 

solicitation.

(3) A product that would satisfy the criteria in paragraph (1) or (2) were it not for— 

(A) modifications of a type customarily available in the commercial marketplace; or

(B) minor modifications made to meet Federal Government requirements. 

(4) A product that— 

(A) is produced in response to a Federal Government drawing or specification; and 

(B) is ordinarily produced using customer drawings or specifications for the general 

public using the same workforce, plant, or equipment. 

(5) Any combination of products meeting the requirements of paragraph (1), (2), (3), or (4) 

that are of a type customarily combined and sold in combination to the general public.

(6) A product, or combination of products, referred to in paragraphs (1) through (5), even 

though the product, or combination of products, is transferred between or among separate 

divisions, subsidiaries, or affiliates of a contractor.
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(7) A nondevelopmental item if the procuring agency determines, in accordance with 

conditions in the Federal Acquisition Regulation, that— 

(A) the product was developed exclusively at private expense; and 

(B) has been sold in substantial quantities, on a competitive basis, to multiple State and 

local governments.

Commercially available off-the-shelf (COTS) item product - 

(1) Means any item product or supply (including construction material) that is— 

(i) A commercial item product (as defined in paragraph (1) of the definition in this 

section); 

(ii) Sold in substantial quantities in the commercial marketplace; and 

(iii) Offered to the Government, under a contract or subcontract at any tier, without 

modification, in the same form in which it is sold in the commercial marketplace; and 

(2) Does not include bulk cargo, as defined in 46 U.S.C. 40102(4), such as agricultural 

products and petroleum products.

Commercial service means - 

(1) Installation services, maintenance services, repair services, training services, and other 

services if— 

(A) those services are procured for support of a commercial product, regardless of 

whether the services are provided by the same source or at the same time as the commercial 

product; and

(B) the source of the services provides similar services contemporaneously to the general 

public under terms and conditions similar to those offered to the Federal Government;

(2) Services of a type offered and sold competitively, in substantial quantities, in the 

commercial marketplace— 

(A) based on established catalog or market prices; 

(B) for specific tasks performed or specific outcomes to be achieved; and 

(C) under standard commercial terms and conditions.

(3) A service, even though the service is transferred between or among separate divisions, 

subsidiaries, or affiliates of a contractor. 
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Nondevelopmental item means --

(1) A commercial product;

(2) Any previously developed item of supply that is in use by a department or agency of 

the Federal Government, a State or local government, or a foreign government with which the 

United States has a mutual defense cooperation agreement; 

(3) An item of supply described in paragraph (1) or (2) that requires only minor 

modification or modifications of the type customarily available in the commercial marketplace in 

order to meet the requirements of the procuring department or agency; or 

(34) Any item of supply currently being produced that does not meet the requirements of 

paragraph (1), (2) or (3) solely because the item is not yet in use. 

 Add the following definition of “commercial item” at 10 U.S.C. § 2464 

Note: The highlighted text is shared between the definition at 10 U.S.C. § 2464 and the two definitions at 41 

USC 103 and 104. 

10 USC 2464 (a)(5), Core Logistics Support: 

(5) The commercial items covered by paragraph (3) are commercial items that have been sold or

leased in substantial quantities to the general public and are purchased without modification in 

the same form that they are sold in the commercial marketplace, or with minor modifications to 

meet Federal Government requirements.

 Modify 41 U.S.C. § 103, Commercial Item (portions relevant to an item or product) as indicated 

below:

§ 103. Commercial item 

In this subtitle, the term "commercial item" means— 

(1) an item, other than real property, that— 

(A) is of a type customarily used by the general public or by nongovernmental 

entities for purposes other than governmental purposes; and

(B) has been sold, leased, or licensed, or offered for sale, lease, or license, to the 

general public;

(2) an item that— 
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(A) evolved from an item described in paragraph (1) through advances in 

technology or performance; and

(B) is not yet available in the commercial marketplace but will be available in the 

commercial marketplace in time to satisfy the delivery requirements under a Federal 

Government solicitation; 

(3) an item that would satisfy the criteria in paragraph (1) or (2) were it not for— 

(A) modifications of a type customarily available in the commercial marketplace; 

or

(B) minor modifications made to meet Federal Government requirements; 

(4) any combination of items meeting the requirements of paragraph (1), (2), (3), or (5) 

that are of a type customarily combined and sold in combination to the general public; 

 Modify 41 U.S.C. § 104, COTS as indicated below:

41 U.S.C. § 104, COTS: 

§104. Commercially available off-the-shelf item

In this subtitle, the term "commercially available off-the-shelf item"— 

(1) means an item that— 

(A) is a commercial item (as described in section 103(1) of this title); 

(B) is sold in substantial quantities in the commercial marketplace; and

(C) is offered to the Federal Government, without modification, in the same form 

in which it is sold in the commercial marketplace; but 

(2) does not include bulk cargo, as defined in section 40102(4) of title 46, such as 

agricultural products and petroleum products.

 Amend 10 U.S.C. § 2464 as follows: 
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Section 2464 is amended— in subsection (a) — in paragraph (5), by striking “commercial items” 

the first place it appears and all that follows in that paragraph and inserting “commercial 

products covered by paragraph (3) are commercial products as defined in section 103 and 104 

of title 41.”; 
   
Recommendation 3 

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Volume 1 of 3 | January 2018

Termination Clauses

FAR Subpart 12.403

(a) General. The clause at 52.212-4 permits the Government to terminate a contract for commercial items 

either for the convenience of the Government or for cause. However, the paragraphs in 52.212-

4 entitled “Termination for the Government’s Convenience” and “Termination for Cause” contain 

concepts which differ from those contained in the termination clauses prescribed in Part 49. 

Consequently, contracting officers shall follow the requirements and procedures in this section and the 

termination paragraphs in 52.212-4. 

(b) Policy. The contracting officer should exercise the Government’s right to terminate a contract for 

commercial items either for convenience or for cause only when such a termination would be in the 

best interests of the Government. The contracting officer should consult with counsel prior to 

terminating for cause.

(c) Termination for cause.

(1) The paragraph in 52.212-4 entitled “Excusable Delay” requires contractors notify the contracting 

officer as soon as possible after commencement of any excusable delay. In most situations, this 

requirement should eliminate the need for a show cause notice prior to terminating a contract. The 

contracting officer shall send a cure notice prior to terminating a contract for a reason other than late 

delivery.

(2) The Government’s rights after a termination for cause shall include all the remedies available to any 

buyer in the marketplace. The Government’s preferred remedy will be to acquire similar items from 

another contractor and to charge the defaulted contractor with any excess reprocurement costs together 

with any incidental or consequential damages incurred because of the termination. 

(3) When a termination for cause is appropriate, the contracting officer shall send the contractor a 

written notification regarding the termination. At a minimum, this notification shall --

(i) Indicate the contract is terminated for cause;

(ii) Specify the reasons for the termination; 

(iii) Indicate which remedies the Government intends to seek or provide a date by which the 

Government will inform the contractor of the remedy; and 

(iv) State that the notice constitutes a final decision of the contracting officer and that the contractor has 

the right to appeal under the Disputes clause (see 33.211).

(4) The contracting officer, in accordance with agency procedures, shall ensure that information related 

to termination for cause notices and any amendments are reported. In the event the termination for 

cause is subsequently converted to a termination for convenience, or is otherwise withdrawn, the 
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Volume 1 of 3 | January 2018

contracting officer shall ensure that a notice of the conversion or withdrawal is reported. All reporting 

shall be in accordance with 42.1503(h).

(d) Termination for the Government’s convenience.

(1) When the contracting officer terminates a contract for commercial items for the Government’s 

convenience, the contractor shall be paid --

(i) (A) The percentage of the contract price reflecting the percentage of the work performed prior to the 

notice of the termination for fixed-price or fixed-price with economic price adjustment contracts, or 

(B) An amount for direct labor hours (as defined in the Schedule of the contract) determined by 

multiplying the number of direct labor hours expended before the effective date of termination by the 

hourly rates(s) in the Schedule; and 

(ii) Any charges the contractor can demonstrate directly resulted from the termination. The contractor 

may demonstrate such charges using its standard record keeping system and is not required to comply 

with the cost accounting standards or the contract cost principles in Part 31. The Government does not 

have any right to audit the contractor’s records solely because of the termination for convenience.

(2) Generally, the parties should mutually agree upon the requirements of the termination proposal. 

The parties must balance the Government’s need to obtain sufficient documentation to support 

payment to the contractor against the goal of having a simple and expeditious settlement. 
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FAR 52.212-4(l) and (m)

(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 to fairly 

compensate the contractor. Reasonable charges include costs and reasonable profit on such costs 

incurred in anticipation of performing the entire contract, not adequately reflected as a percentage of 

the work performed. 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.

(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. The Government’s right to terminate this contract for a reason other than late delivery 

may be exercised if the contractor does not cure such failure within 10 days (or more if authorized in 

writing by the Contracting Officer) after receipt of the notice from the Contracting Officer specifying 

the failure. 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.
   
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Section 2 

Contract Compliance and Audit 

Improve the contract compliance and audit processes by focusing on 

the needs of contracting officers and acquisition team members. 

RECOMMENDATIONS

Enhance DCAA’s Focus on the Contracting Officer and Acquisition Team 

Rec. 5: Align DCAA’s mission statement to focus on its primary customer, the

contracting officer.

Rec. 6: Revise the elements of DCAA’s annual report to Congress to incorporate

multiple key metrics.

Recommendations continued on following page.
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Page 52   |   Volume 1    Contract Compliance and Audit

RECOMMENDATIONS

Enhance DCAA’s Focus on the Contracting Officer and Acquisition Team 

(Continued) 

Rec. 7: Provide flexibility to contracting officers and auditors to use audit and advisory

services when appropriate.

7a: Prior to requesting field pricing/audit assistance, contracting officers should

consider other available internal resources and tailor their request for assistance to the

maximum extent possible.

7b: Define the term audit.

7c: DCAA should use the full range of audit and nonaudit services available.

7d: Direct a review of the roles of DCAA and DCMA to ensure appropriate alignment

and eliminate redundancies.

Rec. 8: Establish statutory time limits for defense oversight activities.

Rec. 9: Permit DCAA to use IPAs to manage resources to meet time limits.

Use Accepted Commercial Standards and Practices with 

Objective and Standardized Compliance Criteria 

Rec. 10: Replace system criteria from DFARS 252.242‐7006, Accounting System

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

accounting systems.

Rec. 11: Develop a Professional Practice Guide for DoD’s oversight of contractor costs

and business systems.

Rec. 12: Require DCAA to obtain peer review from a qualified external organization.

Provide More Effective and Efficient Contract Compliance Oversight 

Rec. 13: Increase coverage of the effectiveness of contractor internal control audits by

leveraging IPAs.

Rec. 14: Incentivize contractor compliance and manage risk efficiently through robust

risk assessment.

Rec. 15: Clarify and streamline the definition of and requirements for an adequate

incurred cost proposal to refocus the purpose of DoD’s oversight.
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Contract Compliance and Audit    Volume 1   |   Page 53

INTRODUCTION 

The DoD contract compliance oversight process is one of the barriers to entry into the DoD marketplace

because DoD’s oversight process is not always timely, efficient, or effective. Stakeholders argue that the

costs of DoD’s compliance process outweigh the benefits the government attains.

Contracting officers are the warranted agents within DoD authorized to award, administer, and

terminate contracts.1 Under this authority, contracting officers “are responsible for ensuring

performance of all necessary actions for effective contracting, ensuring compliance with the terms of

the contract, and safeguarding the interests of the United States in its contractual relationships.”2 As

part of their duty, contracting officers manage risk allocation between contractors and government by

choosing effective contract types for the goods and services they acquire. Contract types are generally

either fixed priced or flexibly priced, and the decision to use fixed priced or flexibly priced contracts

directly affects what actions contracting officers can take to protect the government’s interests.

A “firm‐fixed‐price contract provides for a price that is not subject to any adjustment on the basis of the

contractor’s cost experience in performing the contract. This contract type places upon the contractor

maximum risk and full responsibility for all costs and resulting profit or loss.”3 For competitively

awarded contracts, the contracting officer is generally able to rely on market forces to evaluate the

reasonableness of an offeror’s price. For noncompetitively awarded contracts, the contracting officer

relies on other means of analysis—typically historical analysis, parametric estimate, or cost and pricing

data. Fixed price contracts are generally more predictable and less risky to DoD.

For flexibly priced contracts, DoD “agrees to pay those costs of the contractor that are allowable,

reasonable, and allocable to the extent prescribed by the contract.”4 During the performance of the

flexibly priced contract, contracting officers may decide to provide additional funding, withhold

funding, or terminate the contract. The flexible nature of the contract means the government will pay

all costs incurred in performance subject to the terms of the contract. The flexibility of these contracts

adds risk to DoD, so only contractors with adequate accounting systems may be awarded these types

of contracts.5   

Contracting officers award more than $250 billion in contracts each year to support DoD’s warfighters.6

More than half of these awards are noncompetitive and more than a third are flexibly priced contracts.7

The absence of market forces in noncompetitive fixed price contracts and the uncertainties of flexibly

priced contracts may require that contracting officers obtain additional assurance that DoD pays

                                                     

1 Contracting Officers: Authority, FAR 1.602‐1. 

2 Ibid.

3 Firm‐fixed‐price contracts: Description, FAR, 16.202‐1. 

4 GAO, Contract Audits: Role in Helping Ensure Effective Oversight and Reducing Improper Payments, GAO‐11‐331T, 4, accessed 

October 23, 2017, http://www.gao.gov/assets/130/125445.pdf. 5 Selecting Contract Types: Factors in Selecting Contract Types, FAR, Subpart 16.104(i). Cost‐Reimbursement Contracts: Limitations, 

FAR 16.301‐3(3). 

6 GAO, Contracting Data Analysis: Assessment of Government‐wide Trends, GAO‐17‐244SP, 5, accessed October 24, 2017, 

http://www.gao.gov/assets/690/683273.pdf.   7 Section 809 Panel staff analysis of USASpending.gov data for FY 2017: 33.6 percent or $77.8 billion of cost‐type contracts out of 

$231.9 billion total awarded in FY 2017; 56.1 percent or $130.2 billion noncompetitive contracts out of $231.9 billion total awarded in 

FY 2017.  
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Page 54   |   Volume 1    Contract Compliance and Audit

contractors fair prices. This responsibility includes ensuring that DoD is not charged inappropriate

costs.

DoD contracting officers obtain this additional assurance by requiring contractors to maintain effective

internal controls for defense contractor accounting systems and other business systems. The presence

or absence of contractor internal controls is a critical risk factor for determining not only what gets

reviewed or audited but also how, and to what extent, it must be reviewed or audited to provide

contracting officers sufficient levels of assurance. Without assurance that a defense contractor has

effective internal controls for its accounting system and other business systems, the reviewers and

auditors default to determining virtually everything as high risk. This determination may result in

more areas being reviewed than warranted and lead to performing more substantive tests than

otherwise would be required. When auditors cannot obtain sufficient assurance that internal controls

are effective, they must perform less efficient audits that are generally more costly and time‐

consuming.

The FAR directs contracting officers to “request and consider the advice of specialists in audit.”8 In

practice, this generally results in contracting officers using the Defense Contract Audit Agency (DCAA)

and the Defense Contract Management Agency (DCMA) for audit, advisory, and contract management

services.

DCAA and DCMA are essential components of DoD’s system of contracting internal controls. They

provide many different services based on contract phase, need, and risk. Both DCAA and DCMA

provide advisory or nonaudit services; however, only DCAA performs audits that must meet

professional auditing standards. Both audit and nonaudit services can be valuable if used

appropriately to meet contracting officers’ needs.

Table 2‐1. Example of DCAA and DCMA Audit and Nonaudit Services9

Contract Phase and Service  Audit and Nonaudit Services 

Preaward and Award Phase 

DCMA Cost and Pricing  Nonaudit: DCMA Cost and Pricing Center and its integrated Cost Analysis Teams 

can provide complete proposal pricing reports or tailored prices on individual 

components of a contractor’s proposal. DCMA‐INST 120

Accounting System  Audit: DCAA determines adequacy of contractors’ accounting systems prior to 

award of cost‐reimbursable or other flexibly priced contracts. 

FAR § 16.301‐3(a)(1).  

                                                     

8 Contracting Officers: Responsibilities, FAR 1.602‐2.  9 Section 809 Panel staff analysis of audit and nonaudit services based on the following: GAO, Contract Audits: Role in Helping Ensure 

Effective Oversight and Reducing Improper Payments, GAO‐11‐331T, accessed October 23, 2017,

http://www.gao.gov/assets/130/125445.pdf and “DCMA Policy Publications,” Defense Contract Management Agency, accessed 

October 26, 2017, http://www.dcma.mil/POLICIES/. 
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Contract Phase and Service  Audit and Nonaudit Services 

Contractor Accounting 

Disclosure Statements 

Audit: DCAA reviews contractors’ disclosure statements for adequacy and CAS 

compliance and determines whether contractors’ disclosure statements are 

current, accurate, and complete. DCAA also reviews disclosure statements during 

the postaward phase if contractors revise them. 

FAR §§ 30.202‐6(c), 30.202‐7 and 30.601(c).  

Estimating Systems  Audit: DCAA determines adequacy of contractor estimating systems. FAR 15.407‐5 

and DFARS 252.215‐7002(d), (e).  

Earned Value Management 

System (EVMS) Review 

Nonaudit: DCMA reviews and determines whether contractors’ or subcontractors’ 

EVMS complies with American National Standards Institute/Electronic Industries 

Alliance Standard 748 (ANSI/EIA‐748). FAR Subpart 34.2, 52.234‐4, and 

DFARS  252.234‐7002 

Contract Price Proposals 

and Forward Pricing 

Proposals 

Audit: DCAA examines contractor records to ensure that cost or pricing data are 

accurate, current, and complete and support the determination of fair and 

reasonable prices. 10 U.S.C. §§ 2306a and 2313 (DoD) and 41 U.S.C. § 254d (other 

agencies); FAR Subpart 15.4 (esp. FAR 15.404‐2(c)) and 52.215‐2(c); and 

DFARS 215.404‐1.  

Financial Liaison Advisory 

Services 

Nonaudit: DCAA director establishes and maintains liaison auditors and financial 

advisors, as appropriate, at major procuring and contract administration offices. 

These services are also provided during the postaward phase, as needed. 

DoDD 5105.36, paras. 7.1.1 and 5.9.  

Postaward Administration and Management Phase 

Purchasing Systems Review  Nonaudit: DCMA determines adequacy of contractors’ or subcontractors’ 

purchasing system. FAR Subpart 44.3 and DFARS 252.244‐7001  

Government Property 

System Review 

Nonaudit: DCMA reviews and determines adequacy of contractors’ or 

subcontractors’ government property management system. FAR Part 45, 52.245‐1, 

and DFARS 252.245‐7003. 

Progress Payments  Nonaudit: DCAA verifies amount claimed, determines allowability of contractor 

requests for cost‐based progress payments, and determines if the payment will 

result in undue financial risk to the government. FAR 32.503‐3, 32.503‐4, and 

52.232‐16.  

Incurred Cost Claims  Audit: DCAA determines acceptability of contractors’ claimed costs incurred and 

submitted by contractors for reimbursement under cost‐reimbursable, fixed‐price 

incentive, and other types of flexibly priced contracts and compliance with 

contract terms, FAR, and CAS, if applicable. FAR 42.101, 42.803(b), and 

DFARS 242.803.  

Billing Rates and Final 

Indirect Cost Rates 

Audit: DCAA may establish billing rates for interim indirect costs and final indirect 

cost rates as well as a Contracting Officer. FAR 42.704, 42.705 and 42.705‐2 and 

DFARS 42.705‐2.  

Defective Pricing  Audit: DCAA determines the amount of cost adjustments related to defective 

pricing. See above authorities to audit contractor cost and pricing data and 

FAR 15.407‐1.  
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Contract Phase and Service  Audit and Nonaudit Services 

CAS Compliance  Audit: DCAA determines contractor and subcontractor compliance with CAS set 

forth in 48 CFR § 9903.201 and determines cost impacts of noncompliance. 

FAR 1.602‐2, 30.202‐7, and 30.601(C).  

Other Specially Requested 

Services 

Audit and Nonaudit: DCAA conducts performance audits and other audits based 

on requests from DoD Components and requests from other federal agencies. DoD 

Directive 5105.36, Sec. 5  

Paid Voucher Reviews  Nonaudit: DCAA reviews sampled vouchers after payment to approve them for 

provision payment. CAM 6‐1007.6; FAR 42.803; DFARS 242.803; DoDD 5105.36, 

paras. 5.4 and 5.5; and DoD Financial Management Regulation (FMR), vol. 10, 

ch. 10, para. 100202.  

Approval of Vouchers Prior 

to Payment 

Nonaudit: DCAA reviews and approves contractor interim vouchers for payment 

and suspends payment of questionable costs. FAR 42.803; DFARS§ 242.803(b)(i)(B); 

DoD Directive 5105.36, paras. 5.4 and 5.5; and DoD FMR vol. 10, ch. 10, 

para. 100202.  

Overpayment Reviews  Nonaudit: At the request of the contracting officer, DCAA reviews contractor data 

to identify potential contract overpayments. FAR 2.605, 52.216‐7(g), (h)(2).  

Closeout Phase 

Contract Closeout  Nonaudit: DCMA Contract Closeout Center and the Administrative Contract Officer 

lead the contract closeout process with the buying command, DFAS, DCAA, and 

other agencies as necessary. DCMA‐INST 135 

Contract Closeout 

Procedures and Audits 

Audit: DCAA reviews final completion vouchers and the cumulative allowable cost 

worksheet and may review contract closing statements. DFARS 242.803(b)(i)(D).  

History 

Prior to 1952, the Army, Navy, and Air Force audited military contracts separately using their

respective military service personnel and policies. In 1952 the services issued a contract audit manual

that applied to Army, Navy, and Air Force contracts. In 1965, Secretary of Defense Robert McNamara

directed establishment of DCAA to conduct all contract audits for DoD.10 The contract auditors who

previously worked for the military service audit agencies became part of DCAA.  

Since the creation of DCAA, hundreds of acquisition studies and oversight reports have offered

perspective, comment, and recommendations to improve contract audit and oversight. Pervasive

challenges associated with contract audit and oversight exist, and these past efforts are useful in

understanding where prior recommendations either succeeded or failed.  

                                                     

10 GAO, Contract Audits: Role in Helping Ensure Effective Oversight and Reducing Improper Payments, GAO‐11‐331T, 5‐6, accessed 

October 23, 2017, http://www.gao.gov/assets/130/125445.pdf.  
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Table 2‐2. Contract Audit and Oversight Studies 

Study  Perspective, Comment, or Recommendation 

McNamara Initiatives, 1960s  In 1961 former Ford Motor Company executive, Robert McNamara, became the 

Secretary of Defense. McNamara laid the groundwork for many acquisition 

organizations in the early 1960’s to reduce cost overruns and schedule delays, 

including DCAA and Defense Contract Administration Service (DCAS).11  

The Blue Ribbon Panel, also 

known as the Fitzhugh 

Report, 1970 

The Blue Ribbon Panel reported on a wide range of defense acquisition 

management challenges. One of the panel’s conclusions was that no clear 

division of authority existed among the program manager, contracting officer, 

and contract auditor.12  

Commission on Government 

Procurement, 1972 

The Commission on Government Procurement recommended that OFPP set 

uniform CAS across government to simplify contracting with government. The 

commission also recommended DCAS be separated from the Defense Supply 

Agency (DSA) and consolidated with DCAA. This consolidation never occurred.13  

Private Sector Survey on Cost 

Control, also known as the 

Grace Commission, 1983 

The Grace Commission recommended DoD establish a procurement audit 

service (PAS) to review the internal controls of DoD’s acquisition system. The 

PAS would also review the quality, accuracy, and scope of work performed by 

DCAA. PAS would report to the DoDIG. This recommendation was not 

implemented.14  

Packard Commission, 1985  Established after years of perceived fraud, waste, and abuse, the Packard 

Commission concluded that: 

 The public is “almost certainly mistaken about the extent of corruption in 

industry and waste in the Department.” 

 The lack of public support may actually affect important defense 

programs, weakening national security. 

 Public opinion regarding runaway fraud and waste “undermines crucial 

support for implementing precisely those management reforms that 

would increase efficiency.” 

 An adversarial atmosphere will harm our defense industrial base. 

 “Private businesses bear the brunt of public indignation over waste and 

fraud.”15  

                                                     

11 J. Ronald Fox, Defense Acquisition Reform, 1960–2009: An Elusive Goal, Center for Military History (Washington DC: United States Army

Center of Military History, 2011), accessed November 24, 2017, http://www.history.army.mil/html/books/051/51‐3‐1/CMH_Pub_51‐3‐

1.pdf.   12 Gilbert W. Fitzhugh et al., Blue Ribbon Defense Panel, Report to The President and the Secretary of Defense on the Department of 

Defense, July 1, 1970, 8, accessed November 24, 2017, https://www.documentcloud.org/documents/2695392‐1972‐Fitzhugh‐Report‐

1970‐Blue‐Ribbon‐Defense.html.  13 GAO, Recommendations of the Commission on Government Procurement: A Final Assessment, PSAD‐79‐80, May 31, 1979, 97, accessed 

November 24, 2017, http://www.gao.gov/assets/130/126976.pdf.   14 Congressional Budget Office and General Accounting Office, Analysis of the Grace Commission’s Major Proposals for Cost Control,

February 1984, 73, accessed November 24, 2017, https://www.gao.gov/assets/200/190441.pdf.   15 GAO, Defense Management: Status of Recommendations by Blue Ribbon Commission on Defense Management, GAO/NSAID‐89‐19FS, 

66, accessed November 24, 2017, http://www.gao.gov/assets/90/88245.pdf. 
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Study  Perspective, Comment, or Recommendation 

Packard Commission, 1985 

(continued) 

In light of these findings, the Commission recommended: 

 The Undersecretary of Defense (Acquisition) should oversee DoD‐wide 

establishment of contract audit policy, supervise established oversight 

policy for defense contractors, and recognize established GAO and 

professional auditing standards. GAO later noted that the Inspector 

General Act of 1978 and the National Defense Authorization Act of 1987 

provide for the DoD Inspector General to perform this role. 

 Audit policy should be designed to do the following: 

 Clearly define responsibilities and jurisdictions of DoD oversight. 

 Develop guidelines for oversight organizations to share contractor 

data to rely on each other’s work. 

Improve audit strategies that consider contractors’ past performance, 

effectiveness of their internal control systems, the results of prior and ongoing 

reviews conducted by DoD and contractors themselves, and relative costs and 

benefits.16

Defense Organization:  

The Need for Change, 1985 

The Subcommittee on Defense Acquisition Policy of the Senate Armed Services 

Committee found evidence that suggested duplication of various audit and 

review activities among at least four different DoD Entities: DCAS, DCAA, the 

buying command of a Service, and DoDIG.17

Defense System Management 

College Survey, 1992 

A Defense System Management College (DSMC) survey indicated that 

administrative costs associated with selling to the government were four times 

those associated with commercial sales.18  

Integrating Civilian and 

Military Technologies: An 

Industry Survey, 1993 

The Center for Strategic and International Studies (CSIS) surveyed 

206 companies and found the administrative costs associated with selling to 

government were more than five time those when selling commercially. 

Government‐unique accounting requirements were identified as the primary 

cause.19

Section 800 Panel, 1993  The Section 800 Panel found that commercial companies often set up separate 

divisions to deal with government‐unique requirements. The panel 

recommended tailored audit and compliance requirements for commercial 

products or services to limit this burden.20

                                                     

16 Ibid.  17 U.S. GPO, Defense Organization: The Need for Change, Staff Report to the Committee on Armed Services, United States Senate, 

S. Prt. 99‐86, 559, accessed November 24, 2017, https://digitalndulibrary.ndu.edu/cdm/compoundobject/collection/goldwater/id/2160.  18 Office of Assistant Secretary of Defense (Public Affairs), News Release No. 517‐93: DOD’s Acquisition Reform Recommendations to 

800 Panel Report, 23, accessed November 24, 2017, http://www.dtic.mil/dtic/tr/fulltext/u2/a273896.pdf.  19 Ibid. 20 Report of the Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Laws: Chapter 2, Contract 

Administration, January 1993, 2‐6. 
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Study  Perspective, Comment, or Recommendation 

Coopers and Lybrand Study, 

1994 

The 1994 joint study performed by Coopers and Lybrand and TASC found the 

average DoD regulatory cost premium to be 18% across 10 company facilities.  

There were 10 primary cost drivers identified (percentage of total DoD cost 

premium is noted in parenthesis) 

 MIL‐Q‐9858A (10.0%) 

 Truth in Negotiations Act (7.5%) 

 Cost/Schedule Control System (5.1%) 

 Configuration Management Requirements (4.9%) 

 Contract Specific Requirements (4.3%) 

 DCAA/DCMA Interface (3.9%) 

 Cost Accounting Standards (3.8%) 

 Material Management Accounting Systems (3.4%) 

 Engineering Drawings (3.3%) 

 Government Property Administration (2.7%)21  

Defense Waste and Fraud 

Disguised as Reinvention, 

1999 

The Project on Government Oversight (POGO) asserted that many reforms of 

the 1980s established to limit fraud, waste, and abuse (False Claims Act 

strengthening, TINA emphasis, Procurement Integrity Statute, CAS Board 

reestablished, Competition in Contracting Act, and increased penalties for 

disallowed costs) were being bypassed as a result of early 1990’s reform 

efforts. 

  

According to POGO and DoDIG, the pivot toward commercial practices had 

“come to mean subservience to contractors and blind acceptance of their 

claimed costs and prices” resulting in DoD overpaying. The report notes 

oversight agencies (DCAA) in place to prevent this abuse were reduced by 

19 percent from FY 1993 to FY 1997. The report’s conclusion indicates 

administration has pushed mergers and acquisitions—which inherently limit 

competition, creating an even greater need for oversight to review cost and 

pricing data and to ensure reasonableness.22  

The findings and recommendations of these studies represent the swinging pendulum of public

perceptions of fraud, waste, and abuse within DoD. For example, the Packard Commission in the 1980s

sought to address contract oversight problems through changes to DoD’s oversight structure. In the

1990s, the Section 800 Panel sought to address the contract oversight problem by limiting government

involvement and relying on commercial market forces for compliance. In the last decade, DoD has

witnessed a familiar scenario of widely vacillating approaches in the government contract oversight

area. This situation generally leaves contracting officers, reviewers, and auditors accused of being soft

on defense contractors, not properly protecting the government’s interests, and performing cursory or

sloppy reviews and audits. After DoD implements recommendations, allegations arise indicating the

government has over‐corrected and created an environment in which perfection is the standard and

                                                     

21 Coopers and Lybrand, TASC, “The DoD Regulatory Cost Premium: A Quantitative Assessment,” Summary Presentation, December 1994, 

12, 18, and 18A, accessed November 24, 2017, http://www.dtic.mil/cgi‐

bin/GetTRDoc?Location=U2&doc=GetTRDoc.pdf&AD=ADA295799.  22 Project on Government Oversight, Defense Waste and Fraud Camouflaged as Reinventing Government, accessed November 24, 2017, 

http://pogoarchives.org/m/ns/camo/report‐19990901.pdf.  
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government decisions have become increasingly arbitrary and capricious. Further attempts to resolve

perceived contract audit issues primarily through congressional legislation and frequent contracting

officer, reviewer, and auditor evaluations have led to confusion and uncertainty for both government

personnel and defense contractors. Consequently, DoD is in a similar place identified in previous

acquisition reform efforts of trying to find an oversight framework that better serves the contracting

officer, protects the government’s interests in a cost‐effective manner, and reduces the barriers and

burdens to defense contractors.

Notable reports issued by the Commission on Wartime Contracting and the GAO add context to the

current state.

GAO Reports 

In 2008 and 2009, GAO issued several critical reports on DCAA regarding its audit quality.23 The

2009 report was titled Widespread Problems with Audit Quality Require Significant Reform.

These reports identified problems with contract audit quality, independence, and supervision. GAO

noted DCAA adhered to a production‐oriented mission that prioritized speedy audits for the

contracting community regardless of quality and a lack of leadership emphasis on the public interest.24

GAO highlighted several examples of DCAA auditors or supervisors of auditors taking actions

perceived to benefit contractors at the expense of the public.

Congressional reaction to the GAO findings on DCAA audit problems was swift and severe. Leaders of

the Senate Homeland Security and Government Affairs Committee called for drastic reforms.25 The

GAO reports and the subsequent congressional hearings set in motion changes to the areas of audit

quality and auditor independence and training.

Commission on Wartime Contracting 

To support combat operations in Iraq and Afghanistan, DoD used contractors at unprecedented levels,

overwhelming DoD’s ability to oversee this work through contract management, contract audits, and

other oversight services.

The Commission on Wartime Contracting issued a special report in 2009 regarding the weakness of

internal controls with contractor business systems being used in Iraq and Afghanistan.26 According to

the report, weakness in the business systems produced unreliable data and DCMA in particular was

not doing enough to require contractors to improve their business systems. DCAA’s role in business

                                                     

23 GAO, DCAA Audits: Allegations That Certain Audits at Three Locations Did Not Meet Professional Standards Were Substantiated, 

GAO‐08‐993T, accessed September 15, 2017, http://www.gao.gov/assets/130/121069.pdf. GAO, DCAA Audits: Widespread Problems with 

Audit Quality Require Significant Reform, GAO‐09‐468, accessed September 15, 2017, http://www.gao.gov/assets/300/295684.pdf. 24 GAO, DCAA Audits: Widespread Problems with Audit Quality Require Significant Reform, GAO‐09‐468, accessed September 15, 2017, 

http://www.gao.gov/assets/300/295684.pdf. 25 “DCAA Called Out Again Over Mismanagement,” Robert Brodsky, Government Executive, accessed September 15, 2017, 

http://www.govexec.com/oversight/2009/09/dcaa‐called‐out‐again‐over‐mismanagement/29995.  26 Commission on Wartime Contracting in Iraq and Afghanistan, Special Report on Contractor Business Systems: Defense Agencies must 

improve their oversight of contractor business systems to reduce waste, fraud, and abuse, accessed November 24, 2017, 

https://cybercemetery.unt.edu/archive/cwc/20110929221533/http://www.wartimecontracting.gov/docs/CWC_SR1_business‐

systems_2009‐09‐21.pdf. 
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system reviews was diminished by DCMA ignoring or overruling DCAA on the adequacy of contractor

business systems. The commission found that DCAA’s effectiveness decreased further in 2008 when it

removed the inadequate in part finding for a business system and judged all systems on a pass/fail basis.

In its final report in 2011, the Commission on Wartime Contracting noted the rapidly growing incurred

cost backlog at DCAA.27 The commission found that Congress did not provide DCAA and DCMA

adequate resources and staffing to accomplish their respective missions. The commission recognized

the difficulty placed on defense contractors when delays in incurred cost audits leave the contractors

facing cash management problems and issues with records retention.

Recent Government Contracting Audit Trends 

Despite its name and home within DoD, DCAA has historically had the authority to perform contract

audits and other financial services for many other federal agencies on a reimbursable basis. That

authority has been modified by statute several times in the past three years to first prohibit non‐defense

audit work28 and then relaxed to allow for audit support to the National Nuclear Security

Administration.29 The National Aeronautics and Space Administration (NASA) and the Department of

Energy (DOE) are two large federal agencies with substantial cost‐type and noncompetitive contracts

awarded that have used DCAA for contract audit and other services for decades. In certain cases

nondefense agencies such as NASA and DOE used third‐party (nongovernment) auditors [also referred

to as independent public accountants (IPAs)] to supplement their contract oversight resources.

One of the major services DCAA provides nondefense agencies is incurred cost audits. Incurred cost

audit backlogs result in delays to contract closeout, which can cause problems not just for defense

contractors but also contracting officers and the Military Services. A backlog of incurred cost audits has

existed for some time. In 2011, Congress expressed concern regarding the backlog of incurred cost

audits at DCAA and directed GAO to review reasons for the backlog and DCAA’s plan to address it.30

At the time, DCAA had a backlog of more than 24,000 incurred cost audits with 10 percent of these

audits for other federal agencies.31 DCAA also stated it would reduce the backlog by 2016 to reach a

steady state of audits.  

Although the incurred cost audit backlog was improved by the end of FY 2014, the backlog still

included more than 10,000 audits.32 In 2015, Congress prohibited DCAA from performing outside audit

work until it cleared the backlog of all incurred cost audits older than 18 months.33 The Senate Armed

Services Committee in particular noted the need for DCAA to focus on the backlog of defense‐related

                                                     

27 Commission on Wartime Contracting, Transforming Wartime Contracting: Controlling costs, reducing risks, 162, accessed November 24, 

2017, http://breakingdefense.sites.breakingmedia.com/wp‐content/uploads/sites/3/2011/08/CWC_FinalReport‐

lowres.pdf?_ga=2.115803139.406810102.1505836409‐450514573.1493689244.  28 Section 893 of FY 2016 NDAA, Pub. L. No. 114‐92 (2015). 

29 Section 891 of FY 2017 NDAA, Pub. L. No. 114‐328 (2016). 

30 GAO, Defense Contracting: DOD Initiative to Address Audit Backlog Shows Promise, but Additional Management Attention Needed to 

Close Aging Contracts, GAO‐13‐131, accessed September 15, 2017, http://www.gao.gov/assets/660/650970.pdf.  31 Defense Contract Audit Agency, Report to Congress on FY 2016 Activities: Defense Contract Audit Agency, 9, accessed on October 30, 

2017, http://www.dcaa.mil/Content/Documents/DCAA_FY2016_Report_to_Congress.pdf.  32 Ibid.  33 Section 893 of FY 2016 NDAA, Pub. L. No. 114‐92, 129 Stat. 952 (2015).
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audits before performing reimbursable work for other federal agencies.34 It noted delays and backlogs

in other areas of DCAA’s work due to DCAA shifting resources to address the incurred cost audits.35

The FY 2016 NDAA prohibited DCAA performing non‐DoD agency services, leaving agencies such as

NASA and the DOE to rely exclusively on third‐party auditors.  

Nondefense agency officials who experienced the transition to using IPAs noted initial challenges;

however, most expressed extremely positive outcomes from this move to allow third‐party auditors to

perform incurred cost audit work.36 Officials stated numerous benefits to include improved timeliness

of audits, greater tailoring of audit work to agency needs, and transparency on costs of audit. In some

cases agencies have been able to review and oversee a higher number of contract payments faster and

at lower cost.37

Guiding Principles 

Financial and business system oversight of defense contractors is a crucial function of DoD’s system of

acquisition internal controls. This oversight function performs both preventive and detective control

activities, designed to ensure DoD contractors comply with a variety of contract requirements. These

contract requirements stipulate that DoD’s procuring and administrative contracting officers comply

with many terms and conditions, while ensuring delivery of timely, high‐quality goods and services to

warfighters and other critical operations.  

In conducting stakeholder meetings and other research, the Section 809 Panel did not question DoD’s

need to perform financial and business system oversight activities, but instead focused on the primary

problems of the type of oversight and when it is performed. Stakeholders indicated it is not important to

them who performs the oversight activities, but they care greatly about how these activities are

conducted. The findings are consistent with many historical studies regarding defense contract audits

and oversight.

This report is different than those that preceded it because it offers holistic, practical recommendations,

along with specific implementation guidance to refocus and modify the behavior of DoD’s financial

and business system oversight functions. These changes will improve the effectiveness and efficiency of

DoD’s system of acquisition internal controls, which currently act as a barrier to entry into defense

contracting. The recommendations support and complement each other and speak to at least one of the

following guiding principles:

 Focus on mission. DoD gives authority and responsibility for contract administration and

compliance to its warranted contracting officers. DoD’s internal controls are intended to

provide timely, useful advice to contracting officers, so they can do their jobs effectively. The

                                                     

34 Senate Armed Services Committee Report 114‐49, Section 878 of FY 2016 NDAA, https://www.congress.gov/congressional‐

report/114th‐congress/senate‐report/49/1?q=%7B%22search%22%3A%5B%22S.1376%22%5D%7D.   35 Ibid.   36 Interview of NASA employees conducted August 2017 by Section 809 Panel Team 4: Barriers to Entry.  37 Interviews of nondefense government employees conducted from August ‐ October 2017 by Section 809 Panel Team 4: Barriers to 

Entry. 
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mission of DoD’s financial and business system oversight is to help both contracting officers

and contractors improve or maintain contract compliance.  

 Value time. DoD’s oversight functions must provide timely, useful advice to contracting

officers and contractors on compliance matters. They must also provide timely advice to

contracting officers regarding cost/price negotiation positions. Timely execution of DoD’s

internal control activities will provide contracting officers and oversight professionals with

insight into contractors’ current operations. Timely solutions to compliance challenges will

reduce future oversight burden for both contractors and oversight organizations.  

 Simplify. DoD’s oversight professionals must provide cost‐effective services that incorporate

(a) understanding what the contracting officer needs and when, (b) using the right tool for the

job (i.e., is an audit necessary?), (c) assessing risk more effectively, and (d) honoring the

oversight process by detaching from preconceived or desired outcomes that impair oversight

professionals’ objectivity, while staying vigilant to the auditing standard concept of professional

skepticism.  

 Operate with a cooperative spirit. DoD’s oversight professionals are important members of the

acquisition team. This team is charged with a common objective: to achieve contract compliance

and, fair and reasonable prices for timely, high quality goods and services. Problem‐solvers are

highly valuable to the acquisition process.

These recommendations, if implemented in their entirety, will better protect the government’s interests,

meaningfully reduce barriers to entry into defense contracting, improve contractor compliance with

contract requirements, and increase the agility of the Department’s procurement process.

The Cost Accounting Standards Board (CASB) in its Statement of Objectives, increased uniformity and

consistency of DoD’s financial and business system oversight functions will improve understanding

and communications between contractors and contracting officers, reduce the incidence of contract

disputes, increase the effectiveness of both DoD’s and contractors’ internal controls, and improve the

timeliness of contract administration.38

                                                     

38 GAO, Future Role of the Cost Accounting Standards Board, Prepared for Congress by the Cost Accounting Standards Board Review Panel,

April 2, 1999, accessed on October 30, 2017, http://www.gao.gov/assets/200/199669.pdf. 
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RECOMMENDATIONS 

RECOMMENDATIONS 5 THROUGH 9 SHARE THE COMMON THEME: 

ENHANCE DCAA’S FOCUS ON THE CONTRACTING OFFICER AND ACQUISITION TEAM.  

Recommendation 5: Align DCAA’s mission statement to focus on its primary 

customer, the contracting officer. 

Problem 

DCAA was established to provide accounting, auditing, and financial advisory services to DoD

contracting officers and acquisition teams. In 2010, DCAA changed its mission statement to emphasize

the taxpayer and the public interest, which takes the focus of the agency away from its primary

customer.

Background 

DoDD 5105.36, revised January 4, 2010, implemented an updated DCAA mission statement.39 Those

changes shown in the highlighted text below:

The DCAA, while serving the public interest as its primary customer, shall perform all necessary

contract audits for the Department of Defense and provide accounting and financial advisory services

regarding contracts and subcontracts to all DoD Components responsible for procurement and contract

administration. These services shall be provided in connection with negotiation, administration, and

settlement of contracts and subcontracts to ensure taxpayer dollars are spent on fair and reasonable

contract prices. DCAA shall provide contract audit and advisory services to other federal agencies, as

appropriate.

DCAA supplements its mission statement, published on its website, with the following:

As a key member of the government acquisition team, we are dedicated stewards of taxpayer dollars who

deliver high quality contract audits and services to ensure that warfighters get what they need at fair and

reasonable prices.40

DCAA added the word taxpayer in its mission statement because of an October 2008 Defense Business

Board (DBB) recommendation, which stated the following

[DCAA’s] mission fostered the culture of supporting contracting officials, and the value system was one

of quantity (number, cost, timeliness of audits) over quality (results and adherence to [Generally

Accepted Government Auditing Standards] GAGAS) which was further reinforced by the performance

metrics that drove the organization. To address this situation, the DCAA mission needs to be redefined to

clearly establish the taxpayer as the ultimate customer and establish a core value of performing high

                                                     

39 Defense Contract Audit Agency (DCAA), DoDD 5105.36 (2010).   40 “About DCAA: Mission,” Defense Contract Audit Agency, accessed November 1, 2017, 

http://www.dcaa.mil/Home/AboutDCAA?title=Mission.  
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quality, independent and objective contract audits that adhere to GAGAS and ensure that taxpayer

dollars are spent on fair and reasonable contract prices.41

GAO criticized DBB’s findings in its 2009 audit report on DCAA’s audit quality. GAO noted:

Our report does not endorse the specific recommendation of the DBB to focus on the taxpayer as the

primary customer. As our report points out, this recommendation does not take into account the

regulatory and policy requirements that establish DCAA’s primary role as an advisor to government

contracting officers and disbursing officers...GAGAS states the principle that ‘observing integrity,

objectivity, and independence in discharging [auditors’] professional responsibilities assists auditors in

meeting the principle of serving the public interest and honoring public trust.’

“In providing [assurance that contract prices are fair, reasonable and compliant with government

accounting rules], DCAA audits would necessarily take into account serving the public interest.

However, when DCAA audits do not meet GAGAS, they do not provide assurance and thus do not serve

the public interest.”42

Findings 

The mission of DCAA is to perform its oversight responsibilities in accordance with professional

standards. Compliance with professional standards will fulfill the agency’s mission, as well as provide

a level of confidence in its work product that is consistent with the highest ethical and professional

standards in the industry. DCAA must emphasize its mission to be a trusted advisor to contracting

officers by exercising unbiased professional judgment relative to contractor compliance with

government accounting laws, rules, and regulations.  

Conclusions 

GAO has accurately assessed that supporting the contracting officer is DCAA’s primary role.

Contracting officers, DCAA auditors, and acquisition team members are all responsible to the taxpayer.

High quality, independent, and objective work performed by DCAA in accordance with professional

standards will serve the taxpayer’s interest. Contracting officers are best supported by DCAA in

adhering to stringent professional standards if the organization’s mission statement focuses on serving

the customers. When DCAA serves contracting officers well and these individuals are able to perform

quality work, taxpayers will benefit as well.

Implementation 

Legislative Branch 

 No statutory changes are required.

                                                     

41 Defense Business Board, Independent Review Panel Report on the Defense Contract Audit Agency, Report FY09‐1, Recommendations for 

improving DCAA mission, strategic planning, culture, structure, and business practices, accessed November 1, 2017, 

http://dbb.defense.gov/Portals/35/Documents/Reports/2008/FY09‐

1_Independent_Review_Panel_Report_Defense_Contract_Audit_2008‐10.pdf.   42 GAO, DCAA Audits: Widespread Problems with Audit Quality Require Significant Reform, GAO‐09‐468, 79‐80, accessed September 15, 

2017, http://www.gao.gov/assets/300/295684.pdf.
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Executive Branch 

 Revise DCAA’s mission statement in DoDD 5105.36 to focus on its primary customer, the

contracting officer.

Note: The recommended revised mission statement 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 6: Revise the elements of DCAA’s annual report to Congress 

to incorporate multiple key metrics. 

Problem 

Congress’s reporting requirement for DCAA lacks critical metrics to adequately measure DCAA’s

performance. To alter the conduct of the DoD’s financial and business system oversight functions,

success must be defined to be consistent with improving mission focus, valuing time, and simplifying

compliance.  

Background 

Congress currently emphasizes the number of audit reports completed, and recovering or sustaining

questioned costs, over measurements on the other advisory services DCAA provides—which are not

mentioned in the report requirements today.43 DCAA’s annual report to Congress requires some

measurements of delayed audits; however, the current report emphasizes the number of audits and

questioned costs.  

Findings 

If DCAA is operating effectively, its success cannot be measured only in questioned and sustained

costs. As DoD and contractor internal controls improve, there may be fewer costs to question and

sustain. In contrast, worsening DoD and contractor internal controls may increase costs questioned and

sustained. Similarly, DCAA’s success as an organization cannot be measured by the quantity of audits

at the expense of quality. Congress’s current emphasis on questioned costs and DCAA’s emphasis on

return on investment alone do not adequately demonstrate performance. DCAA is not, and should not,

be considered a profit center. Most importantly, the current DCAA report has no measure of DCAA’s

primary customers’ (contracting officer or acquisition team) satisfaction with the quality and timeliness

of DCAA’s work.44

Conclusions 

Congress must measure DCAA’s success in a manner that helps DoD meet contract objectives.

Although detecting contractor noncompliance is important, preventing noncompliance through

education and training of contractors and contracting officers is DCAA’s original mission and the best

use of its resources.  

Questioned costs and sustained costs should remain part of DCAA’s report to Congress; however,

these metrics alone are misleading and should not be viewed in isolation of the other key parts of

DCAA’s mission regarding service to the contracting offer and the acquisition team. The current report

makes no mention of contracting officer or acquisition team satisfaction with the quality and timeliness

of DCAA’s work, yet they are DCAA’s primary customer. Congress should measure DCAA using a

balanced scorecard consisting of multiple key metrics to include the following:  

                                                     

43 DCAA’s annual report is mandated by 10 U.S.C. § 2313a. Annual reports dating to 2011, can be accessed through the “Report to 

Congress” page on the DCAA website, http://www.dcaa.mil/Home/ReportToCongress?title=Report%20to%20Congress.  44 There is no direct measure of customer satisfaction in 10 U.S.C. § 2313a (current congressional reporting requirements).  
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 A description of the regulatory requirements that create compliance difficulties for contractors,

including an analysis of how those regulatory requirements affect contractors of different sizes

and industries.

 The total number of new audit or advisory engagements, by type (preaward, incurred cost,

other postaward, and business system), with time limits expiring during the fiscal year that

were completed or were awaiting completion, as compared to total audit and advisory

engagements completed or awaiting completion during the year.

 On‐time performance relative to time limits for each type of audit or advisory engagement

(shown separately for the DCAA and qualified private auditors retained by the agency).

 The time limit (expressed in days) for each type of audit or advisory engagement, along with

the shortest period, longest period, and average period of actual performance (shown

separately for the DCAA and qualified private auditors retained by the agency).

 For preaward audits and advisory engagements of contractor costs, sustained costs as a total

number and as a percentage of total questioned costs, where questioned costs are expressed as

the impact on negotiable contract costs (shown separately for the DCAA and qualified private

auditors retained by the agency).

 For postaward audits and advisory engagements of contractor costs, the questioned costs

accepted by the contracting officers and contractors as a total number and as a percentage of

total questioned costs, where questioned costs are expressed as the impact on reimbursable

contract (shown separately for the DCAA and qualified private auditors retained by the

agency).

 The aggregate cost of performing audits, set forth separately by type of audit.

 The ratio of sustained questioned costs to the aggregate costs of performing audits, set forth

separately by type of audit.

 The total number and dollar value of postaward audits that are pending for a period longer

than 1 year as of the end of the fiscal year covered by the report, and the fiscal year in which the

qualified proposal was received, set forth separately by type of audit.

 A summary of the reasons for the difference between questioned and sustained costs shown in

the statistical tables.

 A description of outreach actions towards industry to promote contract compliance and

professional development of the DCAA workforce (shown separately for collaborative outreach

actions and other outreach actions).

 A statistically representative survey of contracting officers from DoD buying commands and

the DCMA and representatives of small and large businesses to measure the timeliness and
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effectiveness of audit and advisory services provided by the DCAA (shown separately for the

DCAA and qualified private auditors retained by the agency).

Implementation 

Legislative Branch 

 Amend 10 U.S.C. § 2313a to include additional key metrics that measure cost, quality,

timeliness, and customer satisfaction.

Executive Branch 

 No Executive Branch changes are required.

Note: Draft legislative text and sections affected display 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 7: Provide flexibility to contracting officers and auditors to 

use audit and advisory services when appropriate. 

Problem 

Contracting officers too often request a specific service from either DCAA or DCMA without

consulting internal technical specialists about the best way to meet their needs. In addition, DCAA

auditors and DCMA technical specialists perform their most accustomed services without adapting

their services to contracting officers’ specific situations and needs. Contracting officers currently use the

term audit in a way that conflates audit and advisory activities in their functional requests to DCAA for

a wide‐ranging set of technical activities.  

Background 

Contracting officers require input from outside advisors to make sound business decisions in the public

best interest. Contracting officers express they do not believe auditors can or will tailor their services to

meet contracting officer needs, especially in the preaward area relating to cost and pricing services.45 At

one stakeholder meeting, the Section 809 Panel asked a group of acquisition professionals about the

specific insights DCAA provides contracting officers, and whether an audit is required to obtain such

information. Several stakeholders stated trained and experienced contracting officers should be able to

decide whether a proposed cost is fair and reasonable. Contracting officers feel they must request an

audit anyway, however, because of certain dollar thresholds and to avoid criticism later.46 Audits

inappropriately requested by contracting officers or provided by DCAA delay the acquisition process

and decrease their utility. It is imperative for the appropriate engagement (audit/advisory) to be

performed by the most qualified compliance professional with the required expertise and skills to

ensure contracting officer needs are met.

Findings 

Today, contract auditors perform an attestation examination for virtually all contract audit services

provided.47 These attestation examinations “consist of obtaining sufficient, appropriate evidence to

express an opinion on whether the subject matter is based on (or in conformity with) the criteria in all

material respects or the assertion is presented (or fairly stated), in all material respects, based on the

criteria.”48 This type of engagement can be too restrictive or irrelevant for many contract cost or price

evaluation circumstances for which contracting officers look to auditors for advice, guidance, and

recommendations on how to proceed.

Using an attestation examination engagement to help contracting officers develop a negotiation

position illustrates this point. In an attestation examination engagement, the auditor may only attest to

whether a contractor’s cost estimates comply with established audit criteria (e.g., FAR and any

contractor cost assumptions within the proposal). In this type of engagement, the auditor many times

does not perform the work required to provide needed advice and guidance to the contracting officer

beyond a statement indicating whether a contractorʹs proposed costs are compliant with established

                                                     

45 Data collection interviews conducted from August – November 2017 by Section 809 Panel Team 4: Barriers to Entry.  46 Ibid. 

47 “Services,” Defense Contract Audit Agency, accessed November 17, 2017, http://www.dcaa.mil/Home/Services?title=Services.  48 GAO, Government Auditing Standards, 2011 Revision, GAO‐12‐331G, 16, accessed November 17, 2017, 

http://www.gao.gov/assets/590/587281.pdf.  
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criteria (e.g., determining the root cause of any noncompliance incidents). This practice falls short of

what contracting officers require to develop a negotiation position. Contracting officers need to know

whether costs are compliant, and if not, then they need advice on how best to proceed based on audit

findings.

Conclusions 

Subrecommendation 7a: Prior to requesting field pricing/audit assistance, contracting 

officers should consider other available internal resources and tailor their request for 

assistance to the maximum extent possible. 

Contracting officers should use internal resources to understand if, and specifically where, field pricing

support is required. With the help of internal resources, contracting officer requests for field pricing

assistance should be tailored to the maximum extent possible—requesting only what is needed and

nothing more. Over‐reliance on outside support, and unnecessarily broad requests, overtax the

compliance workforce and add bureaucracy to the already slow acquisition process.

Requests for field pricing support, by default, become requests to DCAA for proposal audits. A group

of contracting officers told the Section 809 Panel they believe many of the questions DCAA asked later

in the audit process are the same things a contracting officer could have asked earlier on. These

contracting officers see value in DCAA’s services, but not at the current expense of how long it takes in

many situations.49 At a separate meeting, another stakeholder told the Section 809 Panel that “DCAA is

not in the fair and reasonable business,” implying that other resources may be better suited for

proposal support.50 By dedicating resources to build pricing expertise, DoD could cultivate a growing

culture of self‐reliance and attempt to rebuild organic pricing capability at the agency level that was

lost during the 1990 DoD downsizing, rather than automatically request DCAA support.

There is precedent for this model. After Congress prohibited DCAA from performing other agency

audits, non‐DoD agencies relying on DCAA for contract audit and oversight were forced to look

elsewhere.51 As one of the biggest non‐DoD users of cost‐type contracts, NASA was affected greatly by

this congressional prohibition, and responded by creating a DCAA‐like internal organization within

NASA. After outsourcing contract audit support for 40 years, NASA was able to identify efficiencies

after taking ownership of all responsibilities, and NASA officials consider the transition to internal

auditing a success.52

Previously, when NASA relied on DCAA for audit proposal support, the agency lacked the ability to

dictate what DCAA reviewed and how. Today, NASA contracting officers tailor proposal analysis

requests to their internal support. NASA has invested heavily in internal cost and price analysis

capabilities by developing cadres of subject matter experts, acknowledging that audits may not always

be needed for purposes of proposed cost and price evaluation. One NASA official told the Section 809

Panel this approach has changed the culture from defaulting to calling DCAA first, to asking “what do

                                                     

49 Data collection interviews conducted from August – November 2017 by Section 809 Panel Team 4: Barriers to Entry.  50 Ibid. 

51 FY 2016 NDAA, Pub. L. No. 114‐92, § 893, 129 Stat. 952 (2015).  52 Data collection interviews with NASA officials conducted August 28, 2017 by Section 809 Panel Team 4: Barriers to Entry. 
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I have within NASA to do this?” As a result of the efficiencies and insight gained from taking back

ownership of proposal audits from DCAA, NASA has no intent to go back to DCAA.53

Subrecommendation 7b: Define the term audit. 

The term audit is not defined in the FAR, contributing to confusion surrounding contracting officers’

precise needs when requesting support services. Certain elements of FAR require an audit when other

forms of reviews may be more appropriate to meet contracting officer needs and responsibilities. The

level of assurance contracting officers need should dictate the service required, not the other way

around. The terms audit and audits should be defined through DoDD 5105.36, which will filter into

FAR Part 2 and DCAM to bring consistency to a term that is often over and inappropriately used.

Definition of audit:  

A systematic examination, performed in accordance with Generally Accepted Government Auditing

Standards (GAGAS), for the purpose of rendering  professional opinions and conclusions that provide

assurance to one or more third‐parties regarding the reasonableness of an individual’s or organization’s

representations or performance relative to established, objective standards or criteria..

All instances in which the FAR currently requires an audit should be evaluated against the definition

set forth above and incorporated into FAR Part 2. Such an evaluation would produce three possible

outcomes:

 Keep the word audit.

 Supplement the word audit with the phrase advisory services (e.g., contracting officers will

request an audit or advisory services).

 Supplant audit with advisory services.

The net result of this process would not be to preclude audits. Rather, it would provide flexibility, so

DCAA can provide contracting officers the appropriate service for the level of assurance required. For

example, FAR 42.101 directs contract auditors to perform “analysis of the contractor’s financial and

accounting records or other related data.”54 The current FAR language provides for a variety of

different services depending on the circumstances—not solely a GAGAS audit.

Subrecommendation 7c: DCAA should use the full range of audit and nonaudit services 

available. 

In almost every situation for which DCAA provides an audit level of assurance to contracting officers,

DCAA auditors perform an attestation examination engagement regardless of the contracting officer’s

needs.55 Contract auditors should perform services other than attestation engagement based on the

requirements of contracting officers as appropriate. If the audit objectives overlap with different types

of audit services, contract auditors should evaluate the needs of contracting officers to determine which

                                                     

53 NASA officials, interview conducted August 28, 2017 by Section 809 Panel Team 4: Barriers to Entry.  54 Contract audit responsibilities, FAR 42.101.  

55 “Services,” Defense Contract Audit Agency, accessed November 17, 2017, http://www.dcaa.mil/Home/Services?title=Services. 
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engagement type is best suited. DCAA should encourage its contract auditors to review the needs of

contracting officers to determine the audit or advisory service most appropriate to the objectives of

contracting officers.

According to GAGAS, the types of engagements auditors may use include those listed in Table 2‐3

below:

Table 2‐3. Types of GAGAS Audits and Attestation Engagements56

Service Type  Description 

Financial Audits  Financial audits provide an independent assessment of whether an 

entity’s reported financial information (e.g., financial condition, results, 

and use of resources) is presented fairly in accordance with recognized 

criteria. Financial audits performed in accordance with GAGAS include 

financial statement audits and other related financial audits. 

Attestation Examination 

Engagement 

Attestation examination engagement consists of obtaining sufficient, 

appropriate evidence to express an opinion on whether the subject 

matter is based on (or in conformity with) the criteria in all material 

respects or the assertion is presented (or fairly stated), in all material 

respects, based on the criteria. 

Attestation Review 

Engagement 

Consists of sufficient testing to express a conclusion about whether any 

information came to the auditors’ attention on the basis of the work 

performed that indicates the subject matter is not based on (or not in 

conformity with) the criteria or the assertion is not presented (or not 

fairly stated) in all material respects based on the criteria. Auditors 

should not perform review‐level work for reporting on internal control 

or compliance with provisions of laws and regulations. 

Attestation Agreed‐Upon 

Procedures 

Agreed‐upon procedures consist of auditors performing specific 

procedures on the subject matter and issuing a report of findings based 

on the agreed‐upon procedures. In an agreed‐upon procedures 

engagement, the auditor does not express an opinion or conclusion, but 

only reports on agreed‐upon procedures in the form of procedures and 

findings related to the specific procedures applied. 

Performance Audits  Performance audits are defined as audits that provide findings or 

conclusions based on an evaluation of sufficient, appropriate evidence 

against criteria. Performance audits provide objective analysis to assist 

management and those charged with governance and oversight in using 

the information to improve program performance and operations, 

reduce costs, facilitate decision making by parties with responsibility to 

oversee or initiate corrective action, and contribute to public

accountability. The term program is used in GAGAS to include 

government entities, organizations, programs, activities, and functions. 

  

                                                     

56 GAO, Government Auditing Standards, 2011 Revision, GAO‐12‐331G, 14‐17, accessed November 17, 2017, 

http://www.gao.gov/assets/590/587281.pdf.  
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Subrecommendation 7d: Direct a review of the roles of DCAA and DCMA to ensure 

appropriate alignment and eliminate redundancies. 

A group of contracting officers told Section 809 Panel staff “the distinction between DCMA and DCAA

is not always clear—they sometimes look at the same thing.”57 One contracting officer suggested there

needs to be more collaboration and communication between DCAA and DCMA and that “If you align

the priorities, the agencies can work together to achieve overarching desired results faster.”58

Given the continued scrutiny around audit requirements, it is critical that DoD use its oversight

resources as efficiently as possible. The professional skills of auditors should not be inappropriately

used to perform nonaudit work if it can be effectively performed in other ways or by other

organizations. For example, the DCMA Cost and Pricing Center and DCMA’s Integrated Cost Analysis

Teams (ICATs) are already able to assist with business and technical proposal pricing support for the

contracting officer and acquisition team.59 It is possible that some functions performed in DCAA could

be accomplished by the DCMA Pricing Center to include the ICATs.  

The Chief Management Officer (CMO) should direct a review of the work performed by DCAA and

DCMA to identify services that are redundant between the two agencies and then to take targeted

action to improve contract audit and advisory services. The connection between audit work and

nonaudit work has benefits associated with the knowledge gained from each and that knowledge

supports some of the other process controls. Real opportunities exist, however, to consider how the

work of DCAA and DCMA could be more complementary and avoid the current inclination to use

audits to solve every problem. In support of moving forward with IPAs and driving down DCAA

work backlog, this review by DoD should be a priority and completed within 180 days, but either way

prior to execution of the IPA contracts as recommended in Recommendation 9.

Implementation 

Legislative Branch 

 Require in statute that DoD CMO will direct USD(A&S) and the Comptroller to conduct a joint

review of the DCAA and DCMA contract compliance mission requirements for the purpose of

determining if there are functions performed in either DCAA or DCMA that would be more

appropriately aligned in the other Agency. The review shall be complete within 180 days of

assignment and prior to execution of the IPA contracts as recommended in Recommendation 9.

The review will include appropriate statutory or regulatory language as needed to execute any

recommendations emerging from the review.

Executive Branch 

 Amend FAR 15.404‐2(a)(1) and PGI 215.404‐2 to ensure contracting officers fully understand

and clarify their needs prior to requesting outside support.

                                                     

57 Data collection interviews conducted from August – November 2017 by Section 809 Panel Team 4: Barriers to Entry.  58 Ibid. 

59 DoD Memorandum from USD(AT&L), Integrated Cost Analysis Team Support to Major Proposals, accessed November 17, 2017, 

https://www.acq.osd.mil/dpap/policy/policyvault/D_DP_Signed_ICAT_Memo_Oct_2014.pdf.  
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 Define the term audit in DoDD 5105.36, FAR Part 2, and the DCAM. Use the definition to

determine if an audit is the appropriate activity in all instances where FAR and

DFARS currently require an audit.

 Modify DoDD 5105.36 to encourage DCAA to consider different types of audit engagements

where and when appropriate.

Note: Recommended modifications to the FAR 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 8: Establish statutory time limits for defense oversight 

activities. 

Problem 

Financial and business system oversight of DoD’s contractors often starts too late and takes too long.

These delays cause problems for both contracting officers and defense contractors and reduce the

utility of oversight findings. To be effective and efficient, DoD’s system of internal controls must

operate in a timely manner.

Background 

Time limits are commonplace in both private industry and the federal government concerning

performance of audits and other forms of advisory engagements. IPAs must complete audits by

financial reporting deadlines established by the Securities Exchange Commission.60

Auditors for federal agencies must complete agency financial statement audits under deadlines

established by the Chief Financial Officers Act of 1990.61 GAO must also complete congressionally‐

requested audits and reviews in accordance with statutory due dates.62 These professional service

providers both in and out of government complete their work in accordance with professional

standards within timeframes established before work begins.

Findings 

DCAA’s work is untimely, which causes delays in contract awards, as well as other negative effects on

the contract life cycle, through and including contract closeout. For example, in FY 2016, DCAA did not

begin work on final indirect cost rate proposals until more than 2 years after contractors’ submissions.63

Contracting officers need DCAA’s work to close out flexibly priced contracts.

Conclusions 

DoD’s system of acquisition internal controls operates most effectively when controls are applied in a

timely way. Statutory time limits for various oversight activities will improve their effectiveness.

Currently, contractors must submit to DoD a wide variety of reports and other documents in

accordance with strict regulatory time limits.64 There are fewer time limits for DoD to perform its

oversight responsibilities.

                                                     

60 Financial Industry Regulatory Authority (FINRA) Information Notice, 2017 and First Quarter 2018 Report Filing Due Dates, accessed 

November 17, 2017, http://www.finra.org/sites/default/files/notice_doc_file_ref/Information‐Notice‐120516.pdf.   61 “OMB BULLETIN NO. 98‐08 – Audit Requirements for Federal Financial Statements,” OMB, accessed November 17, 2017, 

https://www.whitehouse.gov/omb/bulletins_98‐08.   62 For examples of statutory due dates for Comptroller General (GAO) audits and reviews, see sections 147, 224, 235, 238, 536, 578, 751, 

and 1670 et al. in the FY 2017 NDAA, Pub. L. No. 114‐328 (2016). https://www.congress.gov/114/bills/s2943/BILLS‐114s2943enr.pdf.   63 GAO, Federal Contracting: Additional Management Attention and Action Needed to Close Contracts and Reduce Audit Backlog, 

GAO‐17‐738, 27, accessed November 17, 2017, https://www.gao.gov/assets/690/687497.pdf.  64 For example, Final indirect costs rates, FAR 42.705 and Contracting officer determination procedure, FAR 42.705‐1.  
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Congress should establish basic statutory oversight time limits for each of the following contractor

submissions to accomplish the following:

 Focus on the oversight function’s mission by providing contracting officers what they need to

do their jobs in a timely manner.

 Focus on what matters most (i.e., risk management, rather than risk avoidance) by exercising

reasonable professional judgment.

 Better manage audits, engagements, and other services.

 Forge more cooperative working relationships among contracting officers, compliance

professionals, and contractors. The expectation is that both contractor and government actions

will be consistent with the objective of completing audits and advisory services within

established time limits.

On‐Demand Activities  

DoD’s oversight activities, relative to contractor submissions, are either on‐demand or predictable.

These oversight activities are necessary to provide timely information to a procuring contracting officer

in connection with awarding or administering a particular contract. To ensure contracting officers can

help prioritize work requested of DCAA, time limits should be established during which the activities

must be completed.

Table 2‐4. On‐Demand Oversight Time Limits 

Matter for DCAA Review   DCAA Time Limit  

Contractor submission of preaward cost proposal  90 days from date of contracting officer request for review 

Contractor submission of invoices for direct 

contract costs  90 days from date of contracting officer request for review 

Any other contractor submission in connection 

with awarding, administering, or terminating a 

particular contract 

180 days from date of contracting officer request for 

review 

Predictable Activities 

These oversight activities are necessary to provide timely information to an administrative contracting

officer in connection with administering compliance requirements that affect contractors’ portfolio of

contracts.

Table 2‐5. Predictable Oversight Time Limits 

Matter for DCAA Review  DCAA Time Limit 

Contractor submission of forward pricing rate proposal  90 days from date of contracting officer request for 

review 
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Matter for DCAA Review  DCAA Time Limit 

Contractor submission of provisional billing rate 

proposal 

30 days from date of receipt of the contractor submission  

CAS disclosure statement   If the contracting officer requests DCAA review of the 

adequacy of the CAS disclosure statement, 60 days from 

date of contracting officer request for review 

Contractor submission of cost accounting practice 

changes referred to as a General Dollar Magnitude 

(GDM) proposal 

90 days from date of contracting officer request for 

review 

Contractor submission of cost accounting practice 

changes referred to as a Detailed Cost Impact (DCI) 

proposal 

180 days from date of contracting officer request for 

review 

Contractor compliance with CAS in accordance with 

the contractor’s CAS disclosure statement 

90 days from date of contracting officer request for 

review 

Contractor compliance with an CAS   90 days from date of contracting officer request for 

review 

Matter for DCAA review DCAA time limit 

Contracting officers should possess the ability to extend time limits, but extensions should be recorded

separately from the original required or agreed‐upon time limit. Extensions should be categorized as

shown below:

 Contracting officer timing changed

 DCAA/DCMA requested

 Contractor requested/caused  

No extensions should be categorized as contractor requested/caused without the contractor’s express

knowledge. If contractors disagree that they caused the delay, their disagreement should be noted. This

information will be important in determining certain elements of DCAA’s annual report to Congress.  

Time limits should become effective October 1, 2019. DCAA and DCMA should be encouraged to

adopt these time limits sooner to accommodate engagement, resource staffing, and estimated funding

levels for IPA support.

Implementation 

Legislative Branch 

 In accordance with the requirements of DoD and the Section 809 Panel, set forth in Section 803

(a) of the FY 2018 NDAA, Performance of Incurred Cost Audits,  amending 10 U.S.C 2313b (g),

establish statutory time limits for audit and advisory services.

 Revise 10 U.S.C. § 2313b(g) to correspond with statutory time limits recommended above.
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Executive Branch 

 No Executive Branch changes are required.

Note: Draft legislative text and sections affected display 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 9: Permit DCAA to use IPAs to manage resources to meet time 

limits. 

Problem 

DCAA cannot eliminate its current backlog of unaudited final indirect cost rate proposals (i.e., incurred

cost audits) while providing timely financial oversight and advisory services to contracting officers.

DCAA needs additional resources to get and stay current with its oversight responsibilities.  

Background 

DCAA has reduced the backlog of incurred cost audits from more than 20,000 to around 4,500 but still

has a sizeable number of current incurred cost audits in its inventory.65 According to a recent GAO

report, DCAA possesses nearly 10,000 unaudited final indirect cost rate proposals that are not currently

included in its backlog, many of which will be subject to an audit in accordance with DCAA’s risk

assessment approach.66 It currently takes DCAA an average of 747 days to begin its work on a final

indirect cost rate proposal once it is received.67

Findings 

GAO concluded in this report that “the primary reason for the delay is due to the availability of DCAA

staff to begin the audit work.”68 Because DCAA lacks sufficient capacity to perform the current needs of

DoD contracting officers and eliminate its backlog of unaudited final indirect cost rate proposals, the

time it is taking for DCAA to start its nonbacklogged incurred cost audits is growing.

Due to the backlog and previous legislation that prohibited DCAA’s provision of audit services to

nondefense agencies,69 NASA now allows its contracting officers to use IPAs to conduct incurred cost

audits as well as other financial services.70  

Conclusions 

DCAA should use IPAs to provide timely audit and advisory services in accordance with statutory

time limits. This approach will assist DCAA in eliminating its final indirect cost rate proposal backlog

and provide better coverage and more responsiveness in other audits and advisory services. The

contracting community will benefit from increased use of IPAs by DCAA to perform oversight

functions. Timely performance of necessary risk management activities allows oversight professionals

and contracting officers to gain insights into current contractor operations. This insight facilitates faster

corrective actions (if necessary), which, in turn, reduces risks of noncompliance and DoD’s oversight

burden.

                                                     

65 Defense Contract Audit Agency, Report to Congress on FY 2016 Activities: Defense Contract Audit Agency, 9, accessed on October 30, 

2017, http://www.dcaa.mil/Content/Documents/DCAA_FY2016_Report_to_Congress.pdf. 66 GAO, Federal Contracting: Additional Management Attention and Action Needed to Close Contracts and Reduce Audit Backlog, 

GAO‐17‐738, 30, accessed November 2, 2017, http://www.gao.gov/assets/690/687497.pdf.  67 Ibid, 27. 68 Ibid, 32. 69 FY 2016 NDAA, Pub. L. No. 114‐92, § 893, 129 Stat. 952 (2015).  70 “Procurement Notice PN 15‐11: Revision to NFS 1815.404‐2: Use of Contractor to Perform Contract Audit Services, NFS Case 2015‐

N020,” dated December 16, 2015, National Aeronautics and Space Administration, accessed November 2, 2017, 

https://www.hq.nasa.gov/office/procurement/regs/pn15‐11.htm. 
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DCAA is responsible for managing its oversight workload and will need to leverage IPAs to become

and remain current relative to established time limits. IPAs and other professional services firms are

accustomed to performing their work under time limits, in accordance with professional standards,

and delivering useful information to their customers. Once DCAA eliminates its backlog of oversight

responsibilities it is possible DCAA will no longer need to leverage IPAs if DCAA is able to embrace a

more robust risk assessment process, adopt commercial engagement management and materiality

approaches, and focus on the contracting officer as its customer.

Contracting officers should have the authority to request from DCAA the services of an IPA or other

qualified professional services firm if DCAA cannot accommodate contracting officers’ needs.  

The DCAA budget request should include increased appropriated funding for DCAA to contract with

IPAs. To address the backlog of work and provide timely assistance to contracting officers and the

acquisition team, this appropriation must be in addition to DCAA’s current budget. Decreases to

DCAA’s budget to use IPA’s will not address the backlog and timeliness issues facing the acquisition

system. Funding should be made available each year for a 5‐year period beginning with FY 2019.

Extension of this initial period should be subject to DCAA justification.  

Implementation 

Legislative Branch 

 Provide appropriated funds beyond DCAAs current budget, so DCAA can contract with IPAs

to address the backlog of work and provide timely assistance to contracting officers and the

acquisition team.

Executive Branch 

 Modify DoDD 5105.36 to enable use of IPAs (a) to provide timely audit and advisory services in

accordance with statutory time limits and (b) to become and remain current relative to

established time limits.  

Note: Detailed modifications to DoDD 5105.35 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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RECOMMENDATIONS 10 THROUGH 12 SHARE THE COMMON THEME: 

USE ACCEPTED COMMERCIAL STANDARDS AND PRACTICES WITH 

OBJECTIVE AND STANDARDIZED COMPLIANCE CRITERIA. 

Recommendation 10: Replace system criteria from DFARS 252.242-7006, 

Accounting System Administration, with an internal control audit to assess the 

adequacy of contractors’ accounting systems. 

Problem 

The DoD is not obtaining timely assurance that internal controls for defense contractors’ accounting

systems are properly designed and functioning.71 Ensuring effective internal controls is one of the most

efficient ways to protect the government’s interest, reduce risk, and improve performance.

Background 

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission has developed an

Internal Control—Integrated Framework (May 2013) that has gained broad acceptance in the private

sector and is widely used around the world.72 COSO is a private‐sector initiative that was jointly

sponsored by the American Accounting Association (AAA), American Institute of Certified Public

Accountants (AICPA), Financial Executives International (FEI), Institute of Management Accountants

(IMA), and the Institute of Internal Auditors (IIA).73 COSO is dedicated to providing thought

leadership through the development of a comprehensive framework and guidance on internal control,

enterprise risk management, and fraud deterrence designed to improve organizational performance

and oversight and to reduce the extent of fraud in organizations. Its integrated framework of internal

controls enables organizations to develop systems of internal control that adapt to changing business

and operating environments, mitigate risks to acceptable levels, and support sound decision‐making

and governance of the organization.

The federal government has developed a similar framework that adapts the COSO Internal Control –

Integrated Framework principles and addresses the unique government environment in the Standards

for Internal Control in the Federal Government (GAO‐14‐704G), which is commonly referred to as the

Green Book.

74 The U.S. Comptroller General developed the Green Book to set forth the internal control

standards for federal entities. The Green Book defines the standards through components and principles

and explains why they are integral to entities’ internal control system.

Internal control also is defined as a process used by management to help an entity meet its objectives.

Internal control helps an entity run its operations efficiently and effectively, report reliable information

about its operations, and comply with applicable laws and regulations. Intended users of the Green

Book are program managers, independent public accountants conducting audits of federal

                                                     

71 DCAA, email to Section 809 Panel Staff, December 18, 2017. The email indicated that DCAA completed eight accounting system audits 

in FY 2016. 

72 Committee of Sponsoring Organizations of the Treadway Commission, Internal Control – Integrated Framework, Executive Summary, i,

accessed October 30, 2017, https://www.coso.org/Documents/990025P‐Executive‐Summary‐final‐may20.pdf. 73 “Guidance on Internal Control,” COSO: Committee of Sponsoring Organizations of the Treadway Commission, accessed October 30, 

2017 https://www.coso.org/Pages/ic.aspx.  74 GAO, Standards for Internal Control in the Federal Government, GAO‐14‐704G, accessed October 30, 2017, 

http://www.gao.gov/assets/670/665712.pdf. 
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expenditures, and IG staff conducting financial or performance audits. Assurance of an effective

internal control system provides management with added confidence that it can adapt to shifting

environments, evolving demands, changing risks, and new priorities.

Accounting business systems make up much of the business systems in the DoD’s Contract Business

Analysis Repository (CBAR). In addition to being the most prevalent contractor system, it is the most

critical system for ensuring the government’s interests are protected. The accounting system is the

central and integral internal control system that enables companies to successfully conduct business

with the federal government.

Figure 2‐1. Business System Relationships 

FAR 16.301‐3, Limitations, recognizes the criticality of the accounting system by requiring the

contractor to maintain an adequate accounting system for determining cost applicable to contracts

awarded on the basis of cost.75 In addition, FAR subpart 32.5, Progress Payments Based on Costs, and

FAR 32.503, Postaward Matters, contain multiple provisions requiring an adequate accounting system

and controls.76 Even prospective contractors wanting to do business with the federal government must

have the necessary accounting and operational control structure to be deemed responsible in

accordance with FAR 9.104‐1, General Standards.77   

This requires prospective contractors to demonstrate capability to meet the requirements outlined in

the Standard Form 1408, Pre‐Award Survey of a Prospective Contractor Accounting System.78 This pre‐

award system review should not be confused with the reviews required by the DFARS Business System

                                                     

75 Cost‐Reimbursement Contracts: Limitations, FAR 16.301‐3.   76 Progress Payments Based on Costs, FAR 32.5.   77 Responsible Prospective Contractors: Standards, FAR 9.104‐1.   78 Defense Contract Audit Agency, Preaward Survey of Prospective Contractor Accounting System, Version 6.13, dated April 2017,

accessed November 20, 2017, http://www.dcaa.mil/Content/Documents/sap/17740_AP_NA.pdf.  

Labor Compensation

Indirect/

ODCs

B&P

Billing

MMAS

Cost Representations

Purchasing

Property

Accounting

EVMS Estimating
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rule that test the design and capability of the system, as well whether the controls are in place and

functioning properly.

Findings

The Sarbanes–Oxley Act (SOX) established the first mandated audit of Internal Controls over Financial

Reports (ICFR) to determine the effectiveness of controls (SOX 404(b)).79 Most publicly traded

companies, with the exception of those with a market capitalization of $75 million or less, are required

to have an annual audit of ICFR.80  

As a result of SOX, in the last 15 years, industry organizations have established a framework with

standards, objective criteria, and defined terminology. The Public Company Accounting Oversight

Board (PCAOB) has established Auditing Standard 2201 (AS 2201), and the American Institute of

Certified Public Accountants (AICPA) has developed AU‐C Section 940 auditing standards. Both

documents are titled An Audit of Internal Control over Financial Reporting That is Integrated with an Audit

of Financial Statements.

81 Refinements over the last 15 years have brought about reliable, consistent, and

well‐understood guidance for private‐sector auditors.

Conclusions 

DoD should build on the established and well‐understood internal control audit framework provided

by SOX to cover DoD’s contractor accounting system requirements. SOX 404(b) serves as a foundation

to help meet the government’s objectives to obtain assurance that contractors have effective internal

controls for their business systems. Starting with this framework eliminates the need to develop

uniquely defined criteria and terminology, which in turn reduces the time needed to make this

framework operational.

DoD should use the SOX internal control audit framework and adapt it to meet the government’s

objectives for contractor accounting‐system oversight. Audits of internal controls designed to assess

controls over financial reporting (the SOX mandate) cannot meet the government’s contracting audit

needs without some adjustments to the scope of the engagement. Using the current audit of internal

controls over financial reporting as a basis to certify that the government’s control objectives are

adequately addressed and satisfy the intent of the current business is an insufficient approach because

it would not address all of the relevant control objectives. The audit of ICFR addresses some of

government’s objectives, but comes woefully short of addressing all of them.  

Adapting the current internal control framework would address a shortcoming in the FY 2017 NDAA

Section 893 (c)(1) that states “if a registered public accounting firm attests to the internal control

                                                     

79 Securities and Exchange Commission, Office of Economic Analysis, Study of the Sarbanes‐Oxley Act of 2002 Section 404 Internal Control 

over Financial Reporting Requirements, 3, accessed November 20, 2017, https://www.sec.gov/news/studies/2009/sox‐404_study.pdf.   80 Securities and Exchange Commission, Final Rule – Internal Control Over Financial Reporting In Exchange Act Periodic Reports of Non‐

Accelerated Filers, Effective Date: September 21, 2010, accessed November 20, 2017, https://www.sec.gov/rules/final/2010/33‐9142.pdf.   81 Public Company Accounting Oversight Board, Auditing Standard No. 5 – An Audit of Internal Control Over Financial Reporting That Is 

Integrated with An Audit of Financial Statements and Related Independence Rule and Conforming Amendments, PCAOB Release No. 2007‐

005A, June 12, 2007, accessed November 20, 2017, https://pcaobus.org/Rulemaking/Docket%20021/2007‐06‐12_Release_No_2007‐

005A.pdf. American Institute of Certified Public Accountants (AICPA), AU‐C Section 940 – An Audit of Internal Control Over Financial 

Reporting That Is Integrated With an Audit of Financial Statements, accessed November 20, 2017, 

https://www.aicpa.org/content/dam/aicpa/research/standards/auditattest/downloadabledocuments/au‐c‐00940.pdf. 
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assessment of a contractor pursuant to section 404(b) of the Sarbanes‐Oxley Act of 2002 allow the

contractor ... to submit certified documentation ... that the contractor business systems of the

contractor meet the business system requirements referred in subsection (b)(1) and to thereby eliminate

the need for further review of the contractor business system by the Secretary of Defense.”82

The envisioned internal control audits will focus on assessing the key controls that ensure government

objectives are being met. Auditors’ conclusions on the effectiveness of the key controls are essential

information for contracting officers and contractors to evaluate whether the government’s interests are

adequately protected. Specifically, auditors will evaluate whether key internal controls are in place and

operating to do the following:

 Ensure a sound internal control environment and accounting framework.

 Appropriate classification of direct costs from indirect costs.

 Allocate indirect costs properly.

 Exclude unallowable costs.

 Confirm costs by contract.

 Reconcile subsidiary cost ledgers to general ledger accounts.

 Ensure periodic posting of books of account at least monthly for contract billings.

 Certify proper controls over adjusting entries.

 Ensure timekeeping and labor distribution controls are proper.

 Comply with contract terms.

 Ensure accordance with Cost Accounting Standards if applicable and GAAP.

 Monitor the internal control environment.

Under the internal control audit engagement, auditors will determine whether reasonable assurance

exists that controls will prevent any significant or material mischarge from occurring. This is in contrast

to the current evaluation criteria that determine compliance by using an inspection‐like pass or fail for

each of the 18 requirements. In many instances, the current engagement fails to consider a holistic view

of the system of controls and the significance of a noncompliance and the likelihood that a significant

noncompliance could actually occur.  

Using the private‐sector‐established internal control audit framework can resolve a consistent

complaint expressed in Section 809 Panel meetings with stakeholders that the accounting system

criteria were not objective and measureable because of the current terminology used in the business

system rule.83 Internal control audits should be performed as the basis for assessing the adequacy of

defense contractors’ accounting systems because these audits provide the following:

                                                     

82 Section 893 of FY 2017 NDAA, Pub. L. No. 114‐328 (2016). 

83 Defense Industry officials, interview conducted July 25, 2017 by Section 809 Panel Team 4: Barriers to Entry. American Institute of 

CPAs, DoD Comment Letter Finbal‐AICPA, https://www.regulations.gov/document?D=DARS‐2014‐0047‐0020. 
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 An engagement framework used in the private sector that is well established and understood.

 More useful and relevant information to the acquisition team, contracting officer, and

contractor.

 Clear and objective criteria for accounting system requirements.

The framework’s standards and criteria would satisfy the FY 2017 NDAA Section 893 (a) requirement

to develop “clear and specific business system requirements that are identifiable and made publicly

available.”84

Implementation 

Legislative Branch 

 No statutory changes are required.

Executive Branch 

 Revise DFARS 252.242‐7006 to allow DoD use of internal control audits conducted by

contractors for accounting system oversight.

Note: Detailed modification of DFARS 252.242-7006 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.

                                                     

84 Section 893 of FY 2017 NDAA, Pub. L. No. 114–328 (2016).  
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Recommendation 11: Develop a Professional Practice Guide for DoD’s oversight 

of contractor costs and business systems. 

Problem 

DoD’s oversight functions within DCAA provide professional services and skilled advice to

contracting officers. The quality and consistency of this advice is highly dependent on the quality and

consistency of foundational standards that guide the professionals’ work.  

Background 

Although professional standards are common in the accounting and auditing profession, none have

been collaboratively developed or interpreted for the unique purpose of federal government contract

oversight. DCAA’s Contract Audit Manual provides a good foundation, but it lacks the collaborative

inputs, perspectives, and interpretations of knowledgeable professionals outside DCAA and the

government. This point is important because IPAs and other qualified professional services firms are

playing an increasingly important role in the government’s oversight of federal government

contractors.

Findings 

Professional standards represent principles rather than rules and are thus subject to interpretation.

DoD’s oversight professionals will benefit from a uniform, collaborative interpretation of applicable

professional standards. Without a Professional Practice Guide, contracting officers will be underserved

and likely confused by inevitable inconsistencies among audit and advisory reports issued by DCAA,

DCMA, and IPAs. Professional standards of particular importance that require a collaborative

interpretation include (among many others) independence, objectivity, materiality, sufficient evidence,

and reliance on the work of others.

Conclusions 

A Professional Practice Guide will clarify the types of engagements (tools in the toolbox) that may be

performed to accomplish DoD’s contract compliance oversight objectives. Currently, the government’s

oversight lexicon consists of the term audit to describe nearly every type of oversight activity (see

Recommendation 7b). DoD does not need this level of assurance in connection with every oversight

activity. Audits are appropriate in certain circumstances, but other types of advisory engagements

(which may include other forms of audit) may be better suited to provide the information contracting

officers need, when they need it (given the nature and extent of potential risks). For DoD’s internal

controls over contractor costs and business systems to be effective and efficient, DoD’s oversight

professionals must have more tools in their toolboxes.

Performance audits should be used more extensively to meet the contracting officers’ need for a high

level of assurance. Performance audits provide oversight professionals with more flexibility and the

ability to deliver more valuable information without sacrificing the same high level of assurance.  

The Professional Practice Guide should set forth clear materiality guidelines that focus oversight

professionals on providing the information contracting officers need to make reasonable business

decisions. What may be material to a particular business decision will be influenced by a variety of

qualitative and quantitative considerations, recognizing that contracting officers’ role is to manage

DoD’s risk (rather than avoid it). The cost of DoD’s oversight, including adverse effects on the
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timeliness of decision‐making, must be balanced with expected benefits of that oversight. The CASB’s

administrative regulations establish a variety of qualitative materiality considerations appropriate for

and applicable to any business decision affecting contract costs/prices.85  

For instance, materiality is a well‐established concept in the auditing professional standards, and its

application is well understood in financial statement audits. How the materiality concept applies to

contract audits, however, has not been thoroughly examined and defined. The materiality concept is

based on the premise that an amount is material if it would change or influence the view or decision of

a reasonable person. With respect to contract audits, contracting officers and their teams use the

audited information as the basis for negotiating contract prices and reimbursing contractors’ costs.

Thus, to address the user’s needs in this regard, auditors must consider materiality from both qualitative

(nature) and quantitative (dollar amount) perspectives. The considerations at 48 CFR 9903.305 provide a

sound foundation for assessing qualitative aspects of materiality. Establishing quantitative materiality

thresholds for audit planning, determining fair and reasonable contract prices, and settling contract

cost reimbursements would improve the efficiency and effectiveness of the DoD’s oversight function.

Quantitative materiality thresholds represent a margin of permissible imperfection in the potential

expenditure of tax dollars. Accordingly, the quantitative materiality thresholds must be calibrated to a

reasonable users’ expectations concerning the nature and amount of unallowable costs that would

influence or change their decisions. The Section 809 Panel expects the Professional Practice Group to

not only establish quantitative thresholds for various contract audit, contract award, and cost

settlement situations, but also provide guidance and examples on how to apply these thresholds in

these specific situations consistent with the following examples. For individual contract pricing actions,

the procuring contracting officer is primarily concerned about the affect unallowable costs may have on

contract price. Contract type and the degree of competition are also significant considerations bearing

on cost/price risk.  

Example 1a: Competition is the largest influence in contract price determination. Cost

allowability is an ongoing requirement for payment during contract performance on cost‐

type contracts. Thus, any unallowable costs that may have been included in the initial

contract price can be identified and removed at any time prior to contract close‐out. Higher

preaward materiality thresholds do not adversely affect the Government’s ability to

manage cost risk. An appropriate quantitative materiality threshold could be 10 percent of

the total proposed contract price.

Example 1b: Negotiation of non‐competitive fixed prices represents the highest degree of

cost risk for contracting officers. Unlike cost type contracts, the Government generally

cannot detect and remove unallowable costs after contract award. This circumstance

suggests a progressively lower materiality level is appropriate as contract value increases

as envisioned below:

                                                     

85 Materiality, 48 CFR 9903.305.  
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Up to 

$100k 

Up to 

$500k 

Up to 

$1m 

Up to 

$5m 

Up to 

$10m 

Up to 

$50m 

Up to 

$100m 

Up to 

$500m 

Over 

$500m 

5%  5%  5%  3%  

Step‐

down 

0.5% per 

$1m 

2.5% 

Step‐

down 

0.1% per 

$1m 

2%  

Step‐

down 

0.1% per 

$10m 

1.5% 

Step‐

down 

0.1% per 

$10m 

1%  

Step‐

down 

0.1% per 

$100m 

0.5% 

Certain contract requirements affect the cost/price of more than one contract. These matters are often

managed by administrative contracting officers, who are concerned with the total aggregate impact on

contract costs/prices as well as those of individual contracts.  

Example 2: Potential materiality thresholds for annual final indirect cost rate settlements

will reflect the effect on total reimbursable contract costs for the contractor’s fiscal year. The

thresholds should provide a useful point of reference to guide audit planning and the

nature of final indirect cost rate settlements. A formulaic approach to determine a

contractor’s annual aggregate materiality level is compatible with, and supportive of, the

Governmentʹs materiality thresholds for contract quick‐closeouts (see FAR 42.708). The

formulaic approach below replicates the quantitative materiality thresholds for ranges of

reimbursable incurred costs proposed in the House version of the FY 2018 NDAA.  

ADV 

Up to 

$100k 

Up to 

$500k 

Up to 

$1m 

Up to 

$5m 

Up to 

$10m 

Up to 

$50m 

Up to 

$100m 

Up to 

$500m 

Over 

$500m 

Materiality Threshold = $5,000 x ((Total ADV/$100,000)^.75) 

 $5,000  Up to 

$16,719 

Up to 

$28,117 

Up to 

$94,015 

Up to 

$158,114 

Up to 

$528,686 

Up to 

$889,140 

Up to 

$2,973,018 

Up to  

See 

formula 

In addition to each of the examples, the Section 809 Panel recognizes and endorses that a different and

significantly lower planning materiality would be used for expressly unallowable costs and sensitive

audit areas.

Implementation 

Legislative Branch 

 No statutory changes are required.

Executive Branch 

 In accordance with the statutory requirements of DoD and the Section 809 Panel, set forth in

Section 803 of the FY 2018 NDAA, the Section 809 Panel will establish a team (to include at a

minimum GAO, DCAA, AICPA, and industry) to develop a Professional Practice Guide, which

includes materiality standards, for contract auditing to be completed prior to the sunset of the

Section 809 Panel in January 2019.
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 Require GAO to maintain the Professional Practice Guide, according to best practices.  

Note: There are no additional Implementation Details for this recommendation. 

Implications for Other Agencies 

 There are no cross‐agency implications for this recommendation.
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Recommendation 12: Require DCAA to obtain peer review from a qualified 

external organization. 

Problem 

Peer reviews are designed to validate a professional service organization’s compliance with

professional standards. The peer review process can provide valuable outside perspectives and insights

to the organization. According to GAGAS, the peer reviewer must (a) understand GAGAS, (b) be

independent from the organization subject to peer review, and (c) collectively have enough knowledge

to perform the peer review.86

DoDIG currently performs the peer review for DCAA; however, DoDIG’s mission is vastly different

than DCAA’s and as a result the two organizations do not perform similar services. The audits DoDIG

conducts are FAR different in scope, method, and purpose than contract audits conducted by DCAA.

Background 

According to the Inspector General (IG) Act of 1978 (as amended), DoDIG is required to:

(10) conduct, or approve arrangements for the conduct of, external peer reviews of Department

of Defense audit agencies in accordance with and in such frequency as provided by Government

auditing standards as established by the Comptroller General of the United States.87

DoDIG has not exercised the option to use another organization to conduct peer review of DCAA. In

addition to the peer review, the IG Act directs DoDIG to directly “monitor and evaluate” DCAA for its

work, as well as checking DoD organizations’ responses to contract audit recommendations.88

Findings 

DoDIG cannot serve as an independent, qualified peer reviewer of DCAA while supervising DCAA in

oversight of contract audits. More importantly, DoDIG auditors do not perform contract audits, do not

advise contracting officers during preaward contract activity, and are not part of the acquisition team.

For a peer review to be useful, the reviewer must be well‐versed on how the professional standards

apply to the services provided. The effect of the DoDIG peer review of DCAA is to further remove

DCAA auditors from being advisors to contracting officers and members of the acquisition team.

The Blue Ribbon Commission on Defense Management (also referred to as the Packard Commission)

recommended the Undersecretary of Defense (Acquisition) provide overall policy guidance for contract

audits.89 At the time of the recommendation (and continuing to today), the DoDIG has the role of

developing policy for contract audit and evaluating audit performance as well as the peer review of

                                                     

86 GAO, Government Auditing Standards, 2011 Revision, GAO‐12‐331G, accessed November 20, 2017, 

http://www.gao.gov/assets/590/587281.pdf.  87 Inspector General Act of 1978, as amended, “Section 8, subsection (10)”, accessed November 20, 2017, 

https://www.ignet.gov/sites/default/files/files/igactasof1010(1).pdf.  88 Ibid. 89 GAO, Defense Management: Status of Recommendations by Blue Ribbon Commission on Defense Management, GAO/NSIAD‐89‐19FS,

66, accessed November 24, 2017, http://www.gao.gov/assets/90/88245.pdf.
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DCAA.90 GAO noted that DoD did not adopt the Packard Commission recommendation to improve the

acquisition system by reforming contract audit performance due to the statutory assignment of contract

audit policy development and oversight to DoDIG through the IG Act. 91

Conclusions 

DCAA peer review should be performed by an organization other than DoDIG. Congress should

amend the targeted DoD‐specific portions of the IG Act and other relevant sections of U.S. Code to

DoDIG as the peer reviewer for DCAA.  

DoDIG’s continued monitoring and evaluation of DCAA’s contract audits is problematic because

DoDIG, as an enforcement agency, is not DCAA’s peer. The conduct of a peer review by the IG creates

a natural conflict and is not conducive to independent peer review espoused by audit standards. In

contrast, an IPA can provide a peer review to DCAA that will accomplish the mission of a periodic peer

review: professional review from similarly trained experts not otherwise responsible for the agency’s

day‐to‐day operations.

Implementation 

Legislative Branch 

 Revise 10 U.S.C. § 2313b(e) to require  periodic peer review of DCAA by a commercial auditor.

Executive Branch 

 Amend the targeted DoD‐specific portions of the IG Act to remove DoDIG as the peer reviewer

for DCAA.  

Note: Draft legislative text and sections affected display 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.

   

                                                     

90 Inspector General Act of 1978, as amended, “Section 8, subsection (10)”, accessed November 20, 2017, 

https://www.ignet.gov/sites/default/files/files/igactasof1010(1).pdf.  91 GAO, Defense Management: Status of Recommendations by Blue Ribbon Commission on Defense Management, GAO/NSIAD‐89‐19FS,

66, accessed November 24, 2017, http://www.gao.gov/assets/90/88245.pdf. 
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RECOMMENDATIONS 13 THROUGH 15 SHARE THE COMMON THEME: 

PROVIDE MORE EFFECTIVE AND EFFICIENT CONTRACT COMPLIANCE OVERSIGHT. 

Recommendation 13: Increase coverage of the effectiveness of contractor 

internal control audits by leveraging IPAs. 

Problem 

In recent years, DoD has not provided sufficient reviews and audits of contractor business systems that

would satisfy the DFARS Business Systems requirements under DFAR clause 252.242‐7005.  

Background 

As shown in the chart below, the coverage varies by business system, but no system is receiving

extensive coverage. The lack of coverage of these systems prevents DoD from obtaining assurance that

contractors’ business systems have effective controls and can be relied on when deciding what to

review or audit and how much substantive test of details to perform. The absence of assurance causes

auditors to consider most areas high risk resulting in less efficient and less timely audits.

Findings 

The deficiency reports shown in the chart below indicate the system has a significant deficiency.

Currently the identification of significant deficiencies almost always occurs in a nonsystem audit.

During a nonsystem audit, an alleged finding is identified and a determination is made that the finding

results from weak internal controls within the business system. In this current scenario, DoD only

becomes aware of business system vulnerabilities when a significant deficiency already has occurred.

By obtaining positive assurance of the system’s effectiveness, an opportunity exists to prevent or

correct vulnerabilities before there is any adverse effect on DoD interests.  

Table 2‐6. DCAA Business System Coverage92

Type of System  Approximate 

Total Systems  2016 Audits  % of 2016 Coverage 

Accounting  3,786  8  0.2% 

MMAS  373  7  1.9% 

Estimating  774  7  0.9% 

Business System Deficiency Reports  78 

  

Conclusions 

Obtaining timely assurance that defense contractors have effective internal controls is an essential

component of all cost‐effective compliance frameworks. Timely audits of controls can prevent or

resolve problems before they become significant. Having a recent assessment is a critical part of the risk

model stated in Recommendation 14, and confirming effective internal controls exist will permit all

                                                     

92 Data under “Total Systems” is from DCMA CBAR and was provided to the Section 809 Panel by DCAA. The data in the other two 

columns is from DCAA, email to Section 809 Panel Staff, December 18, 2017. 
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additional contract audits to be performed more efficiently and timely. However, none of the benefits

can currently be attained because adequate coverage has not been accomplished in several years.

Implementation 

Legislative Branch 

 No statutory changes are required.

Executive Branch 

 Revise DFARS 242.7501(a) to define auditor for the purpose of permitting contracting officers to

rely on the work of an IPA to determine the adequacy of a contractor’s accounting system.  

Note: Detailed modifications to DFARS 242.7501(a) 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 14: Incentivize contractor compliance and manage risk 

efficiently through robust risk assessment. 

Problem 

DCAA uses a simple risk assessment to prioritize workload. Because DCAA bears all oversight

responsibilities regarding contractor costs and related business systems, and it will be affected by

recommended oversight time limits. DCAA needs a more robust risk assessment approach.  

Background 

DCAA plays an important role within DoD’s system of acquisition internal controls. When these

controls are operating effectively and efficiently, they provide DoD reasonable assurance that contract

prices and cost reimbursements are free of material unallowable costs. This concept, established by the

COSO Internal Control Framework and incorporated into the GAO’s Standards for Internal Control in

the Federal Government (i.e., Green Book), is fully compatible with the FAR guiding principle of shifting

focus from risk avoidance to risk management.

93 To accomplish the desired outcome of both the federal

government’s internal control framework and the FAR’s Guiding Principles, DCAA must embrace a

more insightful risk assessment process.

Findings 

DCAA has made progress in the last 7 years to better focus the agency’s resources based on risk.

Currently, the agency uses Auditable Dollar Volume (ADV) as its primary risk consideration to

determine which contractors’ costs will be subject to oversight.94 With the recommended expansion of

the types of oversight tools available in DCAA’s toolbox (see Recommendation 7), the agency will no

longer need to perform full‐scope financial statement‐like audits as its only means to deliver

information and assurance to contracting officers. The oversight agility provided by a wider variety of

oversight tools necessitates a more insightful view of contractor cost risk. Although ADV is an

important measure of potential risk—arguably the most important—consideration of other important

risk measures will help DCAA better focus its resources on the contractors and cost areas that present

meaningful risk to DoD.

Contractors whose final indirect cost rate proposals exceed DCAA’s high risk ADV threshold

(i.e., $250 million) cannot reduce their risk profile to anything less than high risk due to DCAA’s

limited risk assessment processes.95 Defense contractors should have the opportunity to reduce their

risk profile by demonstrating their commitment to consistent compliance through their own robust

systems of internal control. This is precisely the objective of DoD’s system of acquisition internal

controls.

In the late 1980s, DoD and contractors worked together to create the Contractor Risk Assessment Guide

(CRAG) Program with the intent of contractors implementing and monitoring systems of internal

                                                     

93 Performance Standards, FAR 1.102‐2(c)(2). 

94 DoD, Defense Contract Audit Agency Memorandum 12‐PPD‐023(R), Audit Guidance on Revised Policy and Procedures for Sampling Low‐

Risk Incurred Cost Proposals, dated September 6, 2012, accessed November 20, 2017, 

https://www.dcaa.mil/Content/Documents/MMR/12‐PPD‐023.pdf.  95 Ibid. 
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control to improve contract cost compliance.96 Improved contractor internal controls ideally yield more

effective government oversight. Some participating contractors still did not experience reduced

oversight despite demonstrated improvements in compliance during the CRAG program,97 although

the program is no longer even active.

Conclusions 

It is unclear why DoD’s oversight has not changed when contractors invest in stronger systems of

internal control; however, a clear path to that desired outcome is needed. With a refocused mission,

oversight time limits, more tools in the oversight professional’s toolbox, and more robust risk

assessments, DCAA can become more effective and efficient.

DoD should implement a risk assessment approach whereby weightings are assigned to a variety of

fact‐based risk considerations. Risk weights, based on objective criteria aligned with low, medium, and

high risk classifications, are assigned for each risk consideration. See Table 2‐7 for proposed risk

considerations and potential objective criteria for each risk classification.  

Table 2‐7. Risk Assessment Matrix 

Risk Considerations 

Low Risk Score = 1 

(unless otherwise 

noted) 

Medium Risk Score 

=2 

High Risk Score =3 

(unless otherwise 

noted) 

Total Auditable Dollar Volume (ADV)  Less than $50m (0 

for less than $15m) 

Between $50m‐

250m 

Over $250m (4 for 

more than $500m; 

5 for more than 

$1.0b) 

Cost reimbursable direct and indirect costs 

Total ADV as a % of business unit total 

costs 

Less than 20% (0 for 

less than 10%) 

Between 20%‐ 60%  More than 60%

(4 for more than 

80%) 

Overall Government Participation in 

Indirect Costs 

Less than 20%  Between 20%‐ 60%  More than 60% 

% of indirect costs allocable to cost‐

reimbursable contracts from indirect cost 

pools in which the government participates 

Highest Participation among all allocable 

Indirect Cost Pools 

Less than 20%  Between 20%‐ 60%  More than 60% 

% of indirect costs allocable to cost‐

reimbursable contracts from the indirect 

cost pool with the highest government 

participation 

                                                     

96 Department of Defense, The DoD Contractor Risk Assessment Guide (AD‐A203 565).  97 U.S. Congress, Office of Technology Assessment, Building Future Security, OTA‐ISC‐530, accessed December 29, 2017, 

https://www.ota.fas.org/reports/9205.pdf. 
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Risk Considerations 

Low Risk Score = 1 

(unless otherwise 

noted) 

Medium Risk Score 

=2 

High Risk Score =3 

(unless otherwise 

noted) 

Number of Final Indirect Cost Rates 

Applicable to Government Contracts 

Less than 4  Between 4‐8  More than 8 

Number of Intermediate Cost Pools  Less than 4  Between 4‐8  More than 8 

Net Annual Indirect Cost True‐up  Less than 1%  Between 1% and 3%  More than 3% 

Most‐recently closed contractor fiscal year 

– Total true‐up amount (provisionally‐billed 

vs. proposed final) as a percent of total 

final proposed indirect costs 

Adequacy of Final Indirect Cost Rate 

Proposals 

All required in last 3 

years 

More than 50% in 

last 3 years 

Less than 50% in last 

3 years 

Cost Accounting Practice Changes  None  Less than 2  More than 1 

Most‐recently closed Fiscal Year, as 

reported on Schedule M; exclude 

organizational changes and adoption of 

new practices 

Prior Fiscal Year Sustained Questioned 

Costs 

Less than 1% or N/A  Between 1% and 3%  More than 3% 

Net impact to cost‐reimbursable contracts 

of questioned costs agreed upon or 

accepted by the contracting officer 

Business Unit CAS‐Covered Contracts  Neither (Small 

Business = 0) 

Modified coverage  Full coverage or 

both 

Modified Coverage, Full Coverage, Neither, 

or Both 

Accounting System Status  Approved with no 

significant 

deficiencies 

Approved w/ one or 

more significant 

deficiencies or not 

evaluated 

Disapproved 

(i.e., one or more 

material 

weaknesses) 

Within last three contractor fiscal years 

These recommended risk considerations provide meaningful insight into contractors’ business and

contract profiles, how much the government participates in indirect cost pools, the complexity of a

contractors’ indirect cost structure, the status of contractors’ business systems, and whether contractors  

must comply with CAS, among other things.

The sum of all risk weightings for a particular contractor business unit (as determined by the contractor

organization responsible for submitting an annual final indirect cost rate proposal), should be used to

make an initial objective determination of that business unit’s overall risk profile.
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 High risk business units should be subject to the most robust oversight, which may include the

broadest scope and the oversight agency’s highest level of assurance. High risk contractor

business units will have an overall risk score greater than 30.

 Medium risk business units will be subject to oversight in targeted areas (i.e., cost items that

represent the most significant cost risk to the department). The agency may not need to perform

oversight on all contractor cost representations if prior oversight activities demonstrate a high

degree of contractor compliance. Medium risk contractor business units will have an overall

risk score between 25 and 30.

 Low risk business units will be subject to periodic oversight pursuant to DCAA’s current low

risk sampling approach. Low risk contractor business units will have an overall risk score less

than 25.

The table below illustrates the level of oversight for each of the above risk categories. Most small

businesses would receive a low risk score, and thus receive the most‐targeted and least burdensome

oversight.

Table 2‐8. Examples of Envisioned Oversight Levels by Risk Category 

Contractor Submission  Low Risk  Medium Risk  High Risk 

Final Indirect Cost Rate 

Proposal 

May be selected for 

analysis on a sample 

basis. Analysis limited to 

material indirect cost 

accounts that may 

contain unallowable 

costs, or other 

procedures designed to 

address potential 

material indirect cost 

allocation risks 

May be selected for 

limited‐scope audit on a 

sample basis. Audit 

procedures limited to 

material indirect cost 

accounts and evaluation 

of cost allocation bases 

with over 50 percent 

government participation 

Full‐scope audit of 

material indirect costs, as 

well as the completeness 

and accuracy of cost 

allocation bases. 

Forward Pricing Rate Proposal  Analyze historical trends 

and review of contractor 

explanation for material 

rate changes 

Analyze historical trends 

and year‐over‐year 

variances in material 

indirect cost elements 

Analyze historical trends, 

year‐over‐year cost 

variances, and evaluate 

bases of estimates for 

material cost elements 

and business volume 

This risk assessment process will allow certain otherwise high‐risk business units (in terms of ADV) to

migrate into medium‐risk with strong past performance and sound accounting system internal

controls. Conversely, otherwise low‐risk business units may migrate into medium or high risk with

poor prior compliance history, poor internal controls, and overly complex cost accounting structures

relative to their size. As shown in Table 2‐9, 81 percent of DoD’s contractors that are required to submit

final indirect cost proposals have an ADV of less than $15 million and will generally receive a low risk

score, and thus receive the most targeted and least burdensome oversight (see Table 2‐9).
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Table 2‐9. CFY 2016 Incurred Cost Proposals Auditable Dollar Value (ADV) Strata98

ADV Strata  Contractors  Total ADV ($000)  Percent Total ADV $ 

$1 to $15M  2,961  81.0%   $      9,172,162  5.8% 

$15M to $100M  525  14.4%   $    23,103,974  14.6% 

> $100M  154  4.2%   $    52,334,571  33.1% 

> $1B  17  0.5%   $    73,684,447  46.5% 

Total  3,657  100.0%   $  158,295,154  100.0% 

  

All of the data necessary for the risk considerations exist within a contractor business unit’s final

indirect cost rate proposal, or are otherwise readily available. To facilitate consistent, reliable data‐

gathering across all contractors, a new summary schedule should be added to each required Final

Indirect Cost Rate Proposal (FAR 52.216‐7(d)) to assist DCAA with capturing this necessary

information. DCAA should share its annual risk assessments with contractor business units, upon their

request, to ensure the agency’s data are accurate and to create transparency.

Implementation 

Legislative Branch 

 No statutory changes are required.

Executive Branch 

 DoD should implement a risk assessment approach.  

 In accordance with the statutory requirements of DoD and the Section 809 Panel, and as set

forth in Section 803 of the FY 2018 NDAA, the Section 809 Panel will deliberate on the draft risk

matrix shown in Table 2‐7 and provide definitive recommendations prior to the sunset of the

panel in January 2019.

Note: There are no additional Implementation Details for this recommendation. 

Implications for Other Agencies 

 There are no cross‐agency implications for this recommendation.

                                                     

98 DCAA, emails to the Section 809 Panel staff, September8, 2017 and September 17, 2017. 
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Recommendation 15: Clarify and streamline the definition of and requirements 

for an adequate incurred cost proposal to refocus the purpose of DoD’s 

oversight. 

Problem 

The term incurred cost proposal is not defined within federal acquisition regulations, the effect of which

has been to create unnecessary burdens on both the Government and contractors.99 Incurred cost

proposal is the government contracting community’s shorthand way of referring to a contractor’s final

indirect cost rate proposal. An annual final indirect cost rate proposal, the elements of which are defined

in FAR 52.216‐7(d), is necessary for the contractor and the government to establish final indirect cost

rates for purposes of settling provisionally billed (i.e., estimated) indirect costs on flexibly priced

contracts. The government’s responsibilities for negotiating or establishing final indirect cost rates is set

forth in FAR 42.705.  

Although the final indirect cost rate proposal necessarily includes details regarding all contract costs

(indirect and direct), direct costs are included because (a) the government needs to verify the

completeness and accuracy of the contractor’s total costs to avoid double‐counting and (b) direct costs

are the most common means by which contractors allocate indirect costs to contracts. A final indirect

cost rate proposal is not a claim for direct costs incurred and billed during contract performance.

FAR 42.702 indicates that an audit of the final indirect cost rate proposal is performed for the sole

purpose of negotiating final indirect cost rates.100

In recent years, DCAA began auditing direct costs, as well as indirect costs, during its incurred cost audits.

Before then, DCAA’s audit procedures concerning direct costs were limited to verifying their

completeness such that final indirect cost rates are calculated accurately. In general, expanding the

scope of incurred costs audits may increase the time it takes DCAA to complete incurred cost audits

and increase the time it takes contracting officers to address and resolve the results of DCAA’s audits.

Background 

The government added new requirements of an adequate final indirect cost rate proposal to FAR 52.216‐

7(d)(2)(iii) in 2011.101 These newly required elements of a final indirect cost rate proposal were directly

based on DCAA’s incurred cost electronic model, which DCAA created many years ago to help

contractors prepare their final indirect cost rate proposals in a consistent manner and provide

appropriate cost detail to make DCAA’s audit oversight more efficient. Many of the required elements

of an adequate final indirect cost rate proposal have no bearing on calculating, understanding,

auditing, and negotiating final indirect cost rates. This collection of unnecessary data has contributed to

DCAA losing its focus on the purpose and scope of contractors’ final indirect cost rate proposal and has

created unnecessary work for contractors, DCAA, and especially contracting officers.

                                                     

99 Definitions of Word and Terms, FAR Part 2. Contract Administration and Audit Services, FAR Part 42.   100 Indirect Cost Rates: Purpose, FAR 42.702.  101 “Federal Acquisition Regulation; Contract Closeout,” Federal Register, accessed November, 2017, 

https://www.federalregister.gov/documents/2011/05/31/2011‐12852/federal‐acquisition‐regulation‐contract‐closeout. 
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Findings 

The timeliness of final rate settlements and consequent contract closeouts will substantially improve if

DCAA refocuses its oversight on the purpose of the final indirect cost rate proposal to reasonably

ensure the allowability of contractors’ actual indirect costs, not direct costs. The term incurred cost

proposal is not defined anywhere in the FAR, it must be made clear it is the same as—not different

from—a final indirect cost rate proposal. This small change will help DCAA and contracting officers

refocus on the purpose of FAR 52.216‐7(d) and FAR 42.705.

Conclusions 

Reviewing and settling contractor final indirect cost rates as a reform measure may raise concern

among some stakeholders about DCAA’s oversight of contractor direct costs. The allowability of

contractor direct costs is also an important compliance requirement. It is not, however, the purpose of

DCAA’s evaluation of contractor final indirect cost rate proposal. Rather, a contracting officer may

request DCAA to audit the direct costs of a contract pursuant to FAR 52.216‐7(g), which is an entirely

different oversight request than a final indirect cost rate proposal audit.102 If DCAA performs adequate

voucher reviews, which has always been one of DCAA’s important responsibilities, there should be no

cause for concern.

DCAA must refocus on its mission of providing contracting officers with the information they need to

do their jobs as prescribed in contracts and by the FAR. DCAA should not be auditing direct contract

costs unless requested to do so by the contracting officer as set forth in FAR 52.216‐7(g).  

Several final indirect cost rate proposal schedules that have no bearing on evaluating or settling final

indirect cost rates should be removed. These schedules are currently required; they should be made

optional information that may be required, if necessary, during the audit process. This relatively minor

adjustment will meaningfully reduce contractors’ burden to prepare its final indirect cost rate proposal

and help DCAA stay focused on the purpose of contractors’ proposals and contracting officers’

responsibility to settle indirect cost rates.

Implementation 

Legislative Branch 

 No statutory changes are required.

Executive Branch 

 Define incurred cost proposal in FAR 52.216‐7 as being synonymous with a final indirect cost rate

proposal, and make some elements (I‐M and O) of the indirect cost rate proposal in FAR 52.216‐

7(d)(2)(iii) optional.

                                                     

102 Allowable Cost and Payment: Audit, FAR 52.216‐7(g), states: “At any time or times before final payment, the Contracting Officer may 

have the Contractor’s invoices or vouchers and statements of cost audited. Any payment may be: (1) reduced by amounts found by the 

Contracting Officer not to constitute allowable costs; or (2) Adjusted for prior overpayments or underpayments.”  
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Note: Detailed modifications to FAR 52.216-7 can be found in the Implementation Details subsection at the 

end of Section 2. 

Implications for Other Agencies 

 Because the FAR pertains to agencies across the federal government, any changes to the

FAR would affect other agencies in that they would be expected to implement the changes, as

would DoD.
Section 2 

Contract Compliance and Audit

Implementation Details 

Recommendation 5

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Revised DCAA Mission Statement

DCAA shall perform all necessary accounting and financial advisory services and contract 

audits for the Department of Defense. DCAA will be a trusted advisor to all contracting officers 

of DoD Components responsible for procurement and contract administration. These services 

shall be provided in connection with negotiation, administration, and settlement of contracts 

and subcontracts to assist contracting officers as they protect the public interest by establishing 

fair and reasonable prices in accordance with contract terms. DCAA shall provide contract audit 

and advisory services to other federal agencies, as appropriate. 
   
Recommendations 6, 7, 8, and 12 

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LEGISLATIVE PROVISIONS — 809 PANEL

 STATUTORY RECOMMENDATIONS 

RELATING TO CONTRACTOR AUDITS

[NOTE: The draft legislative text below is followed by a “Sections Affected” 

display, showing the text of each provision of law affected by the draft 

legislative text below.]

1 TITLE II—CONTRACTOR AUDITING

Sec. 201. Time limits for Defense Contract Audit Agency review of certain contractor submissions and contractor 

compliance. 

Sec. 202. Peer review of Defense Contract Audit Agency. Sec. 203. Defense Contract Audit Agency annual report. Sec. 204. Review of roles of Defense Contract Audit Agency and Defense Contract Management Agency.

2 SEC. 201. TIME LIMITS FOR DEFENSE CONTRACT AUDIT AGENCY REVIEW OF 

3 CERTAIN CONTRACTOR SUBMISSIONS AND CONTRACTOR 

4 COMPLIANCE. 

5 (a) TIME LIMITS.— 

6 (1) IN GENERAL.—Chapter 137 of title 10, United States Code, is amended by 

7 inserting after section 2313b the following new section: 

8 ‘‘§ 2313c. DCAA review of contractor submissions and contractor compliance: time limits

9 ‘‘(a) TIME LIMITS FOR DCAA REVIEW.—The Secretary of Defense shall require the 

10 Director of the Defense Contract Audit Agency (in this section referred to as ‘DCAA’) to 

11 prescribe procedures to ensure that DCAA, upon receipt of a contractor submission, or of a 

12 request from a contracting officer, that is specified in a table in subsection (b), completes the 

13 DCAA review within the time limit specified in the table or, in the case of a review requested by 

14 a contracting officer, within any shorter time limit agreed to by DCAA at the time of the request 
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1 from the contracting officer (and subject to any extension authorized pursuant to subsection (c)). 

2 The time limits in subsection (b) shall take effect on October 1, 2019. 

3 “(b) TIME LIMITS.— 

4 “(1) ON-DEMAND ACTIVITIES.—The following time limits shall apply under the 

5 procedures prescribed under subsection (a): 

Matter for DCAA review DCAA time limit

Contractor submission of pre-award cost 

proposal 

90 days from date of contracting officer 

request for review

Contractor submission of invoices for direct 

contract costs

90 days from date of contracting officer 

request for review

Any other contractor submission in 

connection with awarding, administering, or 

terminating a particular contract

180 days from date of contracting 

officer request for review

 

6 “(2) PREDICTABLE ACTIVITIES.—The following time limits shall apply under the 

7 procedures prescribed under subsection (a): 

Matter for DCAA review DCAA time limit

Contractor submission of forward pricing rate 

proposal 

90 days from date of contracting officer 

request for review

Contractor submission of provisional billing 

rate proposal 

30 days from date of receipt of the 

contractor submission 

Contractor submission of Cost Accounting 

Standards (CAS) disclosure statement 

If the contracting officer requests 

DCAA review of the adequacy of the 

CAS disclosure statement, 60 days from 

date of contracting officer request for 

review
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Contractor submission of cost accounting 

practice changes referred to as a General 

Dollar Magnitude (GDM) proposal 

90 days from date of contracting officer 

request for review

Contractor submission of cost accounting 

practice changes referred to as a Detailed Cost 

Impact (DCI) proposal 

180 days from date of contracting 

officer request for review

Contractor compliance with Cost Accounting 

Standards in accordance with the contractor’s 

CAS disclosure statement 

90 days from date of contracting officer 

request for review

Contractor compliance with an individual 

Cost Accounting Standard 

90 days from date of contracting officer 

request for review

 

1 “(c) EXTENSIONS.— 

2 “(1) AUTHORITY FOR EXTENSIONS.—The procedures prescribed under subsection 

3 (a) shall provide that a contracting officer may grant an extension of a time limit under 

4 this section (whether the applicable time limit is prescribed under subsection (b) or was 

5 agreed to by DCAA at the time of the request from the contracting office). Those 

6 procedures shall require that any such extension be recorded separately from the original 

7 time limit. 

8 “(2) TYPES OF EXTENSIONS.—Any such extension shall be categorized as one of 

9 the following: 

10 “(A) Contracting officer change.

11 “(B) DCAA request. 

12 “(C) Contractor request or contractor caused. 

13 “(3) REQUIREMENT AS TO CONTRACTOR REQUESTED OR CAUSED EXTENSIONS.—An 

14 extension may not be categorized as having been requested or caused by a contractor 
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1 unless the contractor is informed that the extension will be so categorized. If the 

2 contractor disagrees with that categorization, the contracting officer shall record such 

3 disagreement.”.

4 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of such 

5 chapter is amended by inserting after the item relating to section 2313b the following new 

6 item:

‘‘2313c. DCAA review of contractor submissions and contractor compliance: time limits.’’.

7 (b) TIMELINESS OF INCURRED COST AUDITS.— 

8 (1) CONSISTENCY WITH NEW SECTION 2313C.—Subsection (g) of section 2313b of 

9 title 10, United States Code, is amended— 

10 (A) by striking paragraph (2);

11 (B) by redesignating paragraph (3) as paragraph (2) and in that 

12 paragraph— 

13 (i) by striking “qualified” both places it appears; and

14 (ii) by striking “on or after the date of the enactment of this 

15 section” and inserting “after December 11, 2017,”; 

16 (C) by redesignating paragraph (4) as paragraph (3) and in that 

17 paragraph— 

18 (i) by striking “paragraph (5)” and inserting “paragraph (4)”; and 

19 (ii) by striking “qualified”; and

20 (D) by redesignating paragraph (5) as paragraph (4) and in that 

21 paragraph— 

22 (i) by striking “The Under Secretary of Defense (Comptroller) may 

23 waive the requirements of paragraph (4) on a case-by-case basis” and 
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1 inserting “(A) The contracting officer (or an official within the contracting 

2 activity senior to the contracting officer) may grant an extension of the 

3 time limit under paragraph (2) for issuance of audit findings for an 

4 incurred cost submission and may waive the requirements of paragraph (3)

5 with respect to the period of any such extension. Any such extension and 

6 waiver may only be made on a case-by-case basis and only”; 

7 (ii) by designating the sentence beginning “The Director of” as 

8 subparagraph (B) and in that subparagraph— 

9 (I) by inserting “for any fiscal year” after “of this title”; and

10 (II) by inserting “under this paragraph during such fiscal 

11 year” after “waivers issued”; and

12 (iii) by adding at the end the following new subparagraphs: 

13 “(C) The provisions of section 2313c(c) of this title shall apply to an extension granted 

14 under this paragraph. 

15 “(4) A time limit under this subsection for issuance of audit findings for an incurred cost 

16 submission does not apply in a case in which the contractor requests a multiyear audit and the 

17 contracting officer (or an official within the contracting activity senior to the contracting officer) 

18 approves.”.

19 (b) CONFORMING AND TECHNICAL AMENDMENTS.—Such section is further amended— 

20 (1) in subsection (b)(1)— 

21 (A) in subparagraph (B), by striking “a qualified incurred” and inserting 

22 “an incurred”; and

23 (B) in subparagraph (E)— 
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1 (i) by redesignating clauses (A) and (B) as clauses (i) and (ii), 

2 respectively;

3 (ii) by striking “a qualified incurred” in clause (i) (as so 

4 redesignated) and inserting “an incurred”; and

5 (iii) by striking “more than 12 months before the date of the 

6 enactment of this section” and inserting “before December 12, 2016”; and 

7 (2) in subsection (i)— 

8 (A) by striking paragraph (6); and

9 (B) by redesignating paragraph (7) as paragraph (6).

10 SEC. 202. PEER REVIEW OF DEFENSE CONTRACT AUDIT AGENCY. 

11 (a) REMOVAL OF DCAA PEER REVIEWS FROM DOD IG. —Section 8(c)(10) of the 

12 Inspector General Act of 1978 (5 U.S.C. App) is amended by inserting before the period at the 

13 end the following: “, except that this paragraph does not apply to the Defense Contract Audit 

14 Agency”. 

15 (b) REQUIREMENT FOR DCAA PEER REVIEW BY COMMERCIAL AUDITOR.—Section 

16 2313b(e) of title 10, United States Code, is amended— 

17 (1) by redesignating paragraph (2) as paragraph (3); 

18 (2) by designating the second sentence of paragraph (1) as paragraph (2) ; and 

19 (3) in paragraph (2), as so designated, by inserting before “Such peer review” the 

20 following: “The Secretary of Defense shall provide for periodic peer review of the 

21 Defense Contract Audit Agency by a commercial auditor.”.

22 SEC. 203. DEFENSE CONTRACT AUDIT AGENCY ANNUAL REPORT.
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1 (a) REVISIONS TO REPORT ELEMENTS.—Subsection (a) of section 2313a of title 10, United 

2 States Code, is amended— 

3 (1) in paragraph (1), by striking “significant” and all that follows and inserting 

4 “the regulatory requirements that create compliance difficulties for contractors, including 

5 an analysis of how those regulatory requirements affect contractors of different sizes and 

6 industries;”;

7 (2) in paragraph (2)— 

8 (A) by striking subparagraphs (A) through (E) and inserting the following: 

9 “(A) the total number of new audit or advisory engagements, by type (pre10 award, incurred cost, other post-award, and business system), with time limits 

11 expiring during the fiscal year that were completed or were awaiting completion, 

12 as compared to total audit and advisory engagements completed or awaiting 

13 completion during the year; 

14 “(B) on-time performance relative to time limits for each type of audit or 

15 advisory engagement (shown separately for the Defense Contract Audit Agency 

16 and qualified private auditors retained by the agency);

17 “(C) the time limit (expressed in days) for each type of audit or advisory 

18 engagement, along with the shortest period, longest period, and average period of 

19 actual performance (shown separately for the Defense Contract Audit Agency and 

20 qualified private auditors retained by the agency);

21 “(D) for pre-award audits and advisory engagements of contractor costs, 

22 sustained costs as a total number and as a percentage of total questioned costs, 

23 where questioned costs are expressed as the impact on negotiable contract costs 
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1 (shown separately for the Defense Contract Audit Agency and qualified private 

2 auditors retained by the agency);

3 “(E) for post-award audits and advisory engagements of contractor costs, 

4 the questioned costs accepted by the contracting officers and contractors as a total 

5 number and as a percentage of total questioned costs, where questioned costs are 

6 expressed as the impact on reimbursable contract (shown separately for the 

7 Defense Contract Audit Agency and qualified private auditors retained by the 

8 agency);’’; and

9 (B) in subparagraph (H)— 

10 (i) by inserting “post-award” after “dollar value of”; and

11 (ii) by striking “submission” and inserting “proposal”;

12 (3) by redesignating paragraphs (3), (4), (5), (6), and (7) as paragraphs (4), (5), 

13 (6), (7), and (9), respectively; 

14 (4) by inserting after paragraph (2) the following new paragraph (3): 

15 “(3) A summary of the reasons for the difference between questioned and 

16 sustained costs shown in the statistical tables under paragraph (2).”;

17 (5) in paragraph (4) (as redesignated by paragraph (3) of this subsection), by 

18 striking “needed to improve the audit process;” and inserting “needed by the Defense 

19 Contract Audit Agency to improve the audit process or that would enhance compliance 

20 with regulatory requirements.”;

21 (6) in paragraph (7) (as redesignated by paragraph (3) of this subsection), by 

22 striking “more effective use of audit resources;” and inserting “contract compliance and 
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1 professional development of the Defense Contract Audit Agency workforce (shown 

2 separately for collaborative outreach actions and other outreach actions).”; and

3 (7) by inserting after paragraph (7) (as redesignated by paragraph (3) of this 

4 subsection) the following new paragraph: 

5 “(8) A statistically representative survey of contracting officers form Department 

6 of Defense buying commands, the Defense Contract Management Agency, and small and 

7 large business representatives from industry to measure the timeliness and effectiveness 

8 of audit and advisory services provided (shown separately for the Defense Contract Audit 

9 Agency and qualified private auditors retained by the Defense Contract Audit Agency).”.

10 (b) CONFORMING AMENDMENTS.—Subsection (a) of such section is further amended— 

11 (1) in the matter preceding paragraph (1), by striking “shall include, at a 

12 minimum—“ and inserting “shall include the following:”; 

13 (2) by capitalizing the first letter following the paragraph designation in each of 

14 paragraphs (1), (2), (4), (5), (6), (7), and (9); and 

15 (3) by striking the semicolon at the end of each of paragraphs (1), (2), (5), and (6) 

16 and inserting a period. 

17 (c) DEFINITIONS.—Subsection (d)(1) of such section is amended by striking “qualified 

18 incurred cost submission” and inserting “qualified private auditor”. 

19 (d) EFFECTIVE DATE.—The amendments made by this section shall take effect on 

20 October 1, 2020. 

21 SEC. 204. REVIEW OF ROLES OF DEFENSE CONTRACT AUDIT AGENCY AND 

22 DEFENSE CONTRACT MANAGEMENT AGENCY.
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1 (a) REVIEW.—The Secretary of Defense, acting through the Chief Management Officer of 

2 the Department of Defense, shall direct the Under Secretary of Defense for Acquisition and 

3 Sustainment and the Under Secretary of Defense (Comptroller) to conduct a joint review of the 

4 functions of the Defense Contract Management Agency and the Defense Contract Audit Agency

5 to determine whether there are functions being performed by either Agency that could more 

6 appropriately be performed by the other Agency. The review shall consider the extent to which 

7 redundancies exist between the two Agencies and how best to align the functions and workload 

8 of the two Agencies to best serve the acquisition community. 

9 (b) REPORT.—The Under Secretaries shall submit to the Secretary of Defense a report 

10 with the results of the review under subsection (a) not later than 180 days after the date of the 

11 enactment of this Act. The report shall include a draft of any statutory or regulatory change

12 needed to implement recommendations of the review. 

—————— 

SECTIONS AFFECTED BY THE PROPOSAL 

[The material below shows changes proposed to be made by the proposal 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. (Where an amendment in the proposal 

would add a full new section to existing law, the text of that proposed new section is NOT 

set forth below since it is set out in full in the legislative text above.)] 

[NOTE: Text shown as current law incorporates amendments made by the FY2018 NDAA, 

Public Law 115-91, enacted Dec. 12, 2017] 

Section 8 of the Inspector General Act of 1978

SEC. 8. ADDITIONAL PROVISIONS WITH RESPECT TO THE INSPECTOR 

GENERAL OF THE DEPARTMENT OF DEFENSE.

(a) No member of the Armed Forces, active or reserve, shall be appointed Inspector 

General of the Department of Defense.
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(b)(1) Notwithstanding the last two sentences of section 3(a), the Inspector General shall 

be under the authority, direction, and control of the Secretary of Defense with respect to audits or 

investigations, or the issuance of subpoenas, which require access to information concerning— 

(A) sensitive operational plans; 

(B) intelligence matters;

(C) counterintelligence matters;

(D) ongoing criminal investigations by other administrative units of the 

Department of Defense related to national security; or

(E) other matters the disclosure of which would constitute a serious threat to 

national security.

(2) With respect to the information described in paragraph (1) the Secretary of Defense 

may prohibit the Inspector General from initiating, carrying out, or completing any audit or 

investigation, from accessing information described in paragraph (1), or from issuing any 

subpoena, after the Inspector General has decided to initiate, carry out or complete such audit or 

investigation, access such information, or to issue such subpoena, if the Secretary determines that 

such prohibition is necessary to preserve the national security interests of the United States.

(3) If the Secretary of Defense exercises any power under paragraph (1) or (2), the 

Inspector General shall submit a statement concerning such exercise within thirty days to the 

Committees on Armed Services and Governmental Affairs of the Senate and the Committee on 

Armed Services and the Committee on Government Reform and Oversight of the House of 

Representatives and to other appropriate committees or subcommittees of the Congress. 

(4) The Secretary shall, within thirty days after submission of a statement under 

paragraph (3), transmit a statement of the reasons for the exercise of power under paragraph (1) 

or (2) to the congressional committees specified in paragraph (3) and to other appropriate 

committees or subcommittees.

(c) In addition to the other duties and responsibilities specified in this Act, the Inspector 

General of the Department of Defense shall— 

(1) be the principal adviser to the Secretary of Defense for matters relating to the 

prevention and detection of fraud, waste, and abuse in the programs and operations of the 

Department;

(2) initiate, conduct, and supervise such audits and investigations in the 

Department of Defense (including the military departments) as the Inspector General 

considers appropriate; 

(3) provide policy direction for audits and investigations relating to fraud, waste, 

and abuse and program effectiveness;

(4) investigate fraud, waste, and abuse uncovered as a result of other contract and 

internal audits, as the Inspector General considers appropriate; 

(5) develop policy, monitor and evaluate program performance, and provide 

guidance with respect to all Department activities relating to criminal investigation 

programs; 

(6) monitor and evaluate the adherence of Department auditors to internal audit, 

contract audit, and internal review principles, policies, and procedures; 
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(7) develop policy, evaluate program performance, and monitor actions taken by 

all components of the Department in response to contract audits, internal audits, internal 

review reports, and audits conducted by the Comptroller General of the United States; 

(8) request assistance as needed from other audit, inspection, and investigative 

units of the Department of Defense (including military departments);

(9) give particular regard to the activities of the internal audit, inspection, and 

investigative units of the military departments with a view toward avoiding duplication 

and insuring effective coordination and cooperation; and 

(10) conduct, or approve arrangements for the conduct of, external peer reviews 

of Department of Defense audit agencies in accordance with and in such frequency as 

provided by Government auditing standards as established by the Comptroller General of 

the United States, except that this paragraph does not apply to the Defense Contract 

Audit Agency. 

(d) *** 

*******

——————— 

Title 10, United States Code

§ 2313a. [current law shown as in effect on October 1, 2018] Defense Contract Audit 

Agency: annual report 

(a) REQUIRED REPORT.—The Director of the Defense Contract Audit Agency shall 

prepare an annual report of the activities of the Agency during the previous fiscal year. The 

report shall include, at a minimum— the following:

(1) [a] A description of significant problems, abuses, and deficiencies encountered 

during the conduct of contractor audits the regulatory requirements that create 

compliance difficulties for contractors, including an analysis of how those regulatory 

requirements affect contractors of different sizes and industries[;] .

(2) [s]Sstatistical tables showing— 

(A) the total number and dollar value of audit reports completed and 

pending, set forth separately by type of audit; 

(B) the priority given to each type of audit; 

(C) the length of time taken for each type of audit, both from the date of 

receipt of a qualified incurred cost submission and from the date the audit begins; 

(D) the sustained questioned costs, set forth separately by type of audit, 

both as a total value and as a percentage of the total questioned costs for the audit; 

(E) the total number and dollar value of incurred cost audits completed, 

and the method by which such incurred cost audits were completed; 

(A) the total number of new audit or advisory engagements, by type (preaward, incurred cost, other post-award, and business system), with time limits 

expiring during the fiscal year that were completed or were awaiting 

completion, as compared to total audit and advisory engagements completed or 

awaiting completion during the year;
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(B) on-time performance relative to time limits for each type of audit or 

advisory engagement (shown separately for the Defense Contract Audit Agency 

and qualified private auditors retained by the agency);

(C) the time limit (expressed in days) for each type of audit or advisory 

engagement, along with the shortest period, longest period, and average period 

of actual performance (shown separately for the Defense Contract Audit 

Agency and qualified private auditors retained by the agency);

(D) for pre-award audits and advisory engagements of contractor costs, 

sustained costs as a total number and as a percentage of total questioned costs, 

where questioned costs are expressed as the impact on negotiable contract costs 

(shown separately for the Defense Contract Audit Agency and qualified private 

auditors retained by the agency);

(E) for post-award audits and advisory engagements of contractor costs, 

the questioned costs accepted by the contracting officers and contractors as a 

total number and as a percentage of total questioned costs, where questioned 

costs are expressed as the impact on reimbursable contract (shown separately 

for the Defense Contract Audit Agency and qualified private auditors retained 

by the agency);

(F) the aggregate cost of performing audits, set forth separately by type of 

audit; 

(G) the ratio of sustained questioned costs to the aggregate costs of 

performing audits, set forth separately by type of audit; and 

(H) the total number and dollar value of post-award audits that are 

pending for a period longer than one year as of the end of the fiscal year covered 

by the report, and the fiscal year in which the qualified submission proposal was 

received, set forth separately by type of audit[;] .

(3) A summary of the reasons for the difference between questioned and 

sustained costs shown in the statistical tables under paragraph (2).

(3) (4) [a] A summary of any recommendations of actions or resources needed by 

the Defense Contract Audit Agency to improve the audit process or that would enhance 

compliance with regulatory requirements[;] .

(4) (5) [a] A summary, set forth separately by dollar amount and percentage, of 

indirect costs for independent research and development incurred by contractors in the 

previous fiscal year[;] .

(5) (6) [a] A summary, set forth separately by dollar amount and percentage, of 

indirect costs for bid and proposal costs incurred by contractors in the previous fiscal 

year[;] .

(6) (7) [a] A description of outreach actions toward industry to promote more 

effective use of audit resources; contract compliance and professional development of 

the Defense Contract Audit Agency workforce (shown separately for collaborative 

outreach actions and other outreach actions). 

(8) A statistically representative survey of contracting officers from Department 

of Defense buying commands and the Defense Contract Management Agency and 

representatives of small and large businesses to measure the timeliness and 

effectiveness of audit and advisory services provided by the Defense Contract Audit 
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Agency(shown separately for the Defense Contract Audit Agency and qualified private 

auditors retained by the agency).

(7) (9) [a]Any other matters the Director considers appropriate. 

(b) SUBMISSION OF ANNUAL REPORT.—Not later than March 30 of each year, the Director 

shall submit to the congressional defense committees the report required by subsection (a). 

(c) PUBLIC AVAILABILITY.—Not later than 60 days after the submission of an annual 

report to the congressional defense committees under subsection (b), the Director shall make the 

report available on the publicly available website of the Agency or such other publicly available 

website as the Director considers appropriate.

(d) DEFINITIONS.— 

(1) The terms “incurred cost audit” and “qualified incurred cost submission

qualified private auditor” have the meaning given those terms in section 2313b of this 

title.

(2) The term “sustained questioned costs” means questioned costs that were 

recovered by the Federal Government as a result of contract negotiations related to such 

questioned costs. 

§ 2313b. Performance of incurred cost audits 

(a) COMPLIANCE WITH STANDARDS OF RISK AND MATERIALITY.—Not later than October 

1, 2020, the Secretary of Defense shall comply with commercially accepted standards of risk and 

materiality in the performance of each incurred cost audit of costs associated with a contract of 

the Department of Defense.

(b) CONDITIONS FOR THE USE OF QUALIFIED AUDITORS TO PERFORM INCURRED COST 

AUDITS.—(1) To support the need of the Department of Defense for timely and effective 

incurred cost audits, and to ensure that the Defense Contract Audit Agency is able to allocate 

resources to higher-risk and more complex audits, the Secretary of Defense shall use qualified 

private auditors to perform a sufficient number of incurred cost audits of contracts of the 

Department of Defense to— 

(A) eliminate, by October 1, 2020, any backlog of incurred cost audits of the 

Defense Contract Audit Agency; 

(B) ensure that incurred cost audits are completed not later than one year after the 

date of receipt of a qualified an incurred cost submission; 

(C) maintain an appropriate mix of Government and private sector capacity to 

meet the current and future needs of the Department of Defense for the performance of 

incurred cost audits; 

(D) ensure that qualified private auditors perform incurred cost audits on an 

ongoing basis to improve the efficiency and effectiveness of the performance of incurred 

cost audits; and 

(E) limit multiyear auditing to ensure that multiyear auditing is conducted only— 

(A) (i) to address outstanding incurred cost audits for which a qualified

an incurred cost submission was submitted to the Defense Contract Audit Agency 
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more than 12 months before the date of the enactment of this section before

December 12, 2016; or 

(B) (ii) when the contractor being audited submits a written request, 

including a justification for the use of multiyear auditing, to the Under Secretary 

of Defense (Comptroller). 

(2) The Secretary of Defense shall consult with Federal agencies that have awarded 

contracts or task orders to qualified private auditors to ensure that the Department of Defense is 

using, as appropriate, best practices relating to contracting with qualified private auditors. 

(3) The Secretary of Defense shall ensure that a qualified private auditor performing an 

incurred cost audit under this section— 

(A) has no conflict of interest in performing such an audit, as defined by generally 

accepted government auditing standards; 

(B) possesses the necessary independence to perform such an audit, as defined by 

generally accepted government auditing standards; 

(C) signs a nondisclosure agreement, as appropriate, to protect proprietary or 

nonpublic data; 

(D) accesses and uses proprietary or nonpublic data furnished to the qualified 

private auditor only for the purposes stated in the contract; 

(E) takes all reasonable steps to protect proprietary and nonpublic data furnished 

during the audit; and 

(F) does not use proprietary or nonpublic data provided to the qualified private 

auditor under the authority of this section to compete for Government or nongovernment 

contracts.

(c) PROCEDURES FOR THE USE OF QUALIFIED PRIVATE AUDITORS.—(1) Not later than 

October 1, 2018, the Secretary of Defense shall submit to the congressional defense committees 

a plan to implement the requirements of subsection (b). Such plan shall include, at a minimum— 

(A) a description of the incurred cost audits that the Secretary determines are 

appropriate to be conducted by qualified private auditors, including the approximate 

number and dollar value of such incurred cost audits; 

(B) an estimate of the number and dollar value of incurred cost audits to be 

conducted by qualified private auditors for each of the fiscal years 2019 through 2025 

necessary to meet the requirements of subsection (b); and

(C) all other elements of an acquisition plan as required by the Federal 

Acquisition Regulation.

(2) Not later than April 1, 2019, the Secretary of Defense or a Federal department or 

agency authorized by the Secretary shall award a contract or issue a task order under an existing 

contract to two or more qualified private auditors to perform incurred cost audits of costs 

associated with contracts of the Department of Defense. The Defense Contract Management 

Agency or a contract administration office of a military department shall use a contract or a task 

order awarded or issued pursuant to this paragraph for the performance of an incurred cost audit, 

if doing so will assist the Secretary in meeting the requirements in subsection (b).

(3) To improve the quality of incurred cost audits and reduce duplication of performance 

of such audits, the Secretary of Defense may provide a qualified private auditor with information 

on past or ongoing audit results or other relevant information on the entities the qualified private 

auditor is auditing. 
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(4) The Secretary of Defense shall consider the results of an incurred cost audit 

performed under this section without regard to whether the Defense Contract Audit Agency or a 

qualified private auditor performed the audit. 

(5) The contracting officer for a contract that is the subject of an incurred cost audit shall 

have the sole discretion to determine what action should be taken based on an audit finding on 

direct costs of the contract.

(d) QUALIFIED PRIVATE AUDITOR REQUIREMENTS.—(1) A qualified private auditor 

awarded a contract or issued an task order under subsection (c)(2) shall conduct an incurred cost 

audit in accordance with the generally accepted government auditing standards. 

(2) A qualified private auditor awarded a contract or issued an task order under 

subsection (c)(2) shall develop and maintain complete and accurate working papers on each 

incurred cost audit. All working papers and reports on the incurred cost audit prepared by such 

qualified private auditor shall be the property of the Department of Defense, except that the 

qualified private auditor may retain a complete copy of all working papers to support such 

reports made pursuant to this section. 

(3) A breach of contract by a qualified private auditor with respect to use of proprietary 

or nonpublic data may subject the qualified private auditor to– 

(A) criminal, civil, administrative, and contractual actions for penalties, damages, 

and other appropriate remedies by the United States; and

(B) civil actions for damages and other appropriate remedies by the contractor or 

subcontractor whose data are affected by the breach.

(e) PEER REVIEW.—(1) Effective October 1, 2022, the Defense Contract Audit Agency 

may issue unqualified audit findings for an incurred cost audit only if the Defense Contract Audit 

Agency is peer reviewed by a commercial auditor and passes such peer review. 

(2) The Secretary of Defense shall provide for periodic peer review of the Defense 

Contract Audit Agency by a commercial auditor. Such peer review shall be conducted in 

accordance with the peer review requirements of generally accepted government auditing 

standards, including the requirements related to frequency of peer reviews, and shall be deemed 

to meet the requirements of the Defense Contract Audit Agency for a peer review under such 

standards. 

(2) (3) Not later than October 1, 2019, the Secretary of Defense shall provide to the 

Committees on Armed Services of the Senate and the House of Representatives an update on the 

process of securing a commercial auditor to perform the peer review referred to in paragraph (1).

(f) NUMERIC MATERIALITY STANDARDS FOR INCURRED COST AUDITS.—(1) Not later than 

October 1, 2020, the Department of Defense shall implement numeric materiality standards for 

incurred cost audits to be used by auditors that are consistent with commercially accepted 

standards of risk and materiality. 

(2) Not later than October 1, 2019, the Secretary of Defense shall submit to the 

congressional defense committees a report containing proposed numeric materiality standards 

required under paragraph (1). In developing such standards, the Secretary shall consult with 

commercial auditors that conduct incurred cost audits, the advisory panel authorized under 

section 809 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114-92; 

129 Stat. 889), and other governmental and nongovernmental entities with relevant expertise. 
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(g) TIMELINESS OF INCURRED COST AUDITS.—(1) The Secretary of Defense shall ensure 

that all incurred cost audits performed by qualified private auditors or the Defense Contract 

Audit Agency are performed in a timely manner. 

(2) The Secretary of Defense shall notify a contractor of the Department of Defense 

within 60 days after receipt of an incurred cost submission from the contractor whether the 

submission is a qualified incurred cost submission.

(3) (2) With respect to qualified incurred cost submissions received on or after the date 

of the enactment of this section after December 11, 2017, audit findings shall be issued for an 

incurred cost audit not later than one year after the date of receipt of such qualified incurred cost 

submission. 

(4) (3) Not later than October 1, 2020, and subject to paragraph (5) (4), if audit findings 

are not issued within one year after the date of receipt of a qualified incurred cost submission, 

the audit shall be considered to be complete and no additional audit work shall be conducted. 

(5) (4)(A) The Under Secretary of Defense (Comptroller) The contracting officer (or an 

official within the contracting activity senior to the contracting officer) may grant an 

extension of the time limit under paragraph (2) for issuance of audit findings for an incurred 

cost submission and may waive the requirements of paragraph (4) (3) with respect to the period 

of any such extension. Any such extension and waiver may only be made on a case-by-case 

basis and only if the Director of the Defense Contract Audit Agency submits a written request. 

(B) The Director of the Defense Contract Audit Agency shall include in the report 

required under section 2313a of this title for any fiscal year the total number of waivers issued 

under this paragraph during such fiscal year and the reasons for issuing each such waiver.

(C) The provisions of section 2313c(c) of this title shall apply to an extension granted 

under this paragraph. 

 (5) A time limit under this subsection for issuance of audit findings for an incurred 

cost submission does not apply in a case in which the contractor requests a multiyear audit 

and the contracting officer (or an official within the contracting activity senior to the 

contracting officer) approves.

(h) REVIEW OF AUDIT PERFORMANCE.—Not later than April 1, 2025, the Comptroller 

General of the United States shall submit to the congressional defense committees a report that 

evaluates for the period beginning on October 1, 2019, and ending on August 31, 2023— 

(1) the timeliness, individual cost, and quality of incurred cost audits, set forth 

separately by incurred cost audits performed by the Defense Contract Audit Agency and 

by qualified private auditors; 

(2) the cost to contractors of the Department of Defense for incurred cost audits, 

set forth separately by incurred cost audits performed by the Defense Contract Audit 

Agency and by qualified private auditors; 

(3) the effect, if any, on other types of audits conducted by the Defense Contract 

Audit Agency that results from incurred cost audits conducted by qualified private 

auditors; and 

(4) the capability and capacity of qualified private auditors to conduct incurred 

cost audits for the Department of Defense.

(i) DEFINITIONS.—In this section: 
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(1) The term “commercial auditor” means a private entity engaged in the business 

of performing audits. 

(2) The term “incurred cost audit' means an audit of charges to the Government 

by a contractor under a flexibly priced contract. 

(3) The term “flexibly priced contract” has the meaning given the term “flexiblypriced contracts and subcontracts” in part 30 of the Federal Acquisition Regulation 

(section 30.001 of title 48, Code of Federal Regulations). 

(4) The term “generally accepted government auditing standards” means the 

generally accepted government auditing standards of the Comptroller General of the 

United States.

(5) The term “numeric materiality standard” means a dollar amount of 

misstatements, including omissions, contained in an incurred cost audit that would be 

material if the misstatements, individually or in the aggregate, could reasonably be 

expected to influence the economic decisions of the Government made on the basis of the 

incurred cost audit. 

(6) The term “qualified incurred cost submission” means a submission by a 

contractor of costs incurred under a flexibly priced contract that has been qualified 

by the Department of Defense as sufficient to conduct an incurred cost audit.

(7) (6) The term “qualified private auditor” means a commercial auditor— 

(A) that performs audits in accordance with generally accepted 

government auditing standards; and 

(B) that has received a passing peer review rating, as defined by generally 

accepted government auditing standards. 

 

———— 
Recommendation 7

Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

 Add words to the effect of the following to DoDD 5105.36: 

Establish and maintain indefinite delivery, indefinite quantity contracts with qualified 

Independent Public Accounting (IPA) firms. DCAA will use IPAs to meet statutory time 

limits for contract audit and oversight services. 

(1) IDIQ contracts will require that IPAs: 

(a) Make work papers available to DCAA and GAO upon request. 

(b) Be responsible for their own peer reviews. Failure to pass a peer review may 

subject the IPA to a default termination of its contract. 

(2) As part of administering IPA contracts, DCAA will: 

(a) Maintain copies of all accepted work products from IPAs and other 

professional services firms (whether retained by the agencies or contractors) 

to maintain a complete oversight record for each contractor.

(b) Ensure the end-user of deliverables (e.g., administrative contracting officer) 

is named the contracting officer technical representative (COTR) in all task 

order awards; responsible for accepting the work of IPAs.

(c) Honor contracting officer requests to use IPAs, but remain responsible for 

determining the nature and scope of work to be performed with each 

respective contracting officer.

a. DCAA has not been able to complete the work within timeframes 

needed by contracting officers.

(d) Honor contractor’s request to retain IPAs (where the contract privity is 

between the contractor and IPA) as an allowable expense if:

a. DCAA has not been able to complete the work within timeframes 

needed by contracting officers.

b. DCAA has not been able to issue a task order to complete the work. 
   
Recommendation 9

Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

 Add words to the effect of the following to DoDD 5105.36: 

Establish and maintain indefinite delivery, indefinite quantity contracts with qualified 

Independent Public Accounting (IPA) firms. DCAA will use IPAs to meet statutory time 

limits for contract audit and oversight services. 

(1) IDIQ contracts will require that IPAs: 

(a) Make work papers available to DCAA and GAO upon request. 

(b) Be responsible for their own peer reviews. Failure to pass a peer review may 

subject the IPA to a default termination of its contract. 

(2) As part of administering IPA contracts, DCAA will: 

(a) Maintain copies of all accepted work products from IPAs and other professional 

services firms (whether retained by the agencies or contractors) to maintain a 

complete oversight record for each contractor. 

(b) Ensure the end-user of deliverables (e.g., administrative contracting officer) is 

named the contracting officer technical representative (COTR) in all task order 

awards; responsible for accepting the work of IPAs. 

(c) Honor contracting officer requests to use IPAs, but remain responsible for 

determining the nature and scope of work to be performed with each respective 

contracting officer.

(d) Honor contractor’s request to retain IPAs (where the contract privity is between 

the contractor and IPA) as an allowable expense if:

a. DCAA has not been able to complete the work within timeframes needed by 

contracting officers.

b. DCAA has not be able to issue a task order to complete the work. 
   
Recommendation 10

Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

 Revise DFARS 252.242-7006 to allow DoD to use internal control audits.

252.242-7006 Accounting System Administration.

As prescribed in 242.7503, use the following clause:

ACCOUNTING SYSTEM ADMINISTRATION (FEB 2012)

(a) Definitions. As used in this clause— 

 (1) “Acceptable accounting system” means a system that has an effective internal 

control structure complies with the system criteria in paragraph (c) of this clause to provide 

reasonable assurance that— 

 (i) Applicable laws and regulations are complied with; 

 (ii) The accounting system and cost data are reliable;

 (iii) Risk of misallocations and mischarges are minimized; and

 (iv) Contract allocations and charges are consistent with billing procedures.

 (2) “Accounting system” means the Contractor’s system or systems for accounting 

methods, procedures, and controls established to gather, record, classify, analyze, summarize, 

interpret, and present accurate and timely financial data for reporting in compliance with 

applicable laws, regulations, and management decisions, and may include subsystems for 

specific areas such as indirect and other direct costs, compensation, billing, labor, and general 

information technology.

 (3) “Significant deficiency” means a shortcoming in the system that materially affects 

the ability of officials of the Department of Defense to rely upon information produced by the 

system that is needed for management purposes. In the context of an audit of internal control 

over a contractor’s accounting system, a significant deficiency is equivalent to a “material 

weakness,” which means a deficiency, or a combination of deficiencies, in internal control, such 

that there is a reasonable possibility that a material unallowable cost (see FAR 31.201-2, 

Determining allowability) or misstatement will not be prevented or detected on a timely basis

“Reasonable possibility”, as used in this definition of significant deficiency, means when the 

likelihood of an event is either "reasonably possible" or "probable," as those terms are used in 

Financial Accounting Standards Board Statement No. 5, Accounting for Contingencies ("FAS 5"). 

(b) General. The Contractor shall establish and maintain an acceptable accounting system. 

Failure to maintain an acceptable accounting system, as defined in this clause, shall result in the 
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Volume 1 of 3 | January 2018

withholding of payments if the contract includes the clause at 252.242-7005, Contractor Business 

Systems, and also may result in disapproval of the system.

(c) System criteria. The Contractor’s accounting system shall be evaluated by an internal 

control audit that provides reasonable assurance that government reporting objectives are met. 

The auditor will evaluate whether key internal controls are in place and operating in order to – 

provide for—

 (1) Ensure a sound Internal Control Environment and Accounting Framework A sound 

internal control environment, accounting framework, and organizational structure;

 (2) Appropriate classification of direct costs from indirect costs Proper segregation of 

direct costs from indirect costs;

 (3) Allocate indirect costs properly Identification and accumulation of direct costs by 

contract;

 (4) Exclude unallowable costs A logical and consistent method for the accumulation 

and allocation of indirect costs to intermediate and final cost objectives;

 (5) Confirm costs by contract Accumulation of costs under general ledger control;

 (6) Reconcile subsidiary cost ledgers to general ledger accounts Reconciliation of 

subsidiary cost ledgers and cost objectives to general ledger;

 (7) Ensure period posting of books of account at least monthly for contract billings

Approval and documentation of adjusting entries;

 (8) Certify proper controls over adjusting entries Management reviews or internal 

audits of the system to ensure compliance with the Contractor’s established policies, procedures, 

and accounting practices;

 (9) Ensure timekeeping and labor distribution controls are proper A timekeeping 

system that identifies employees’ labor by intermediate or final cost objectives;

 (10) Comply with contract terms A labor distribution system that charges direct and 

indirect labor to the appropriate cost objectives;

 (11) Ensure accordance with Cost Accounting Standards if applicable and GAAP

Interim (at least monthly) determination of costs charged to a contract through routine posting of 

books of account;
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 (12) Monitor the Internal Control Environment Exclusion from costs charged to 

Government contracts of amounts which are not allowable in terms of Federal Acquisition 

Regulation (FAR) part 31, Contract Cost Principles and Procedures, and other contract 

provisions;

 (13) Identification of costs by contract line item and by units (as if each unit or line item 

were a separate contract), if required by the contract;

 (14) Segregation of preproduction costs from production costs, as applicable;

 (15) Cost accounting information, as required— 

 (i) By contract clauses concerning limitation of cost (FAR 52.232-20), limitation of 

funds (FAR 52.232-22), or allowable cost and payment (FAR 52.216-7); and

 (ii) To readily calculate indirect cost rates from the books of accounts;

 (16) Billings that can be reconciled to the cost accounts for both current and cumulative 

amounts claimed and comply with contract terms; 

 (17) Adequate, reliable data for use in pricing follow-on acquisitions; and

 (18) Accounting practices in accordance with standards promulgated by the Cost 

Accounting Standards Board, if applicable, otherwise, Generally Accepted Accounting Principles.

(d) Significant deficiencies. (1) The Contracting Officer will provide an initial determination 

to the Contractor, in writing, of any significant deficiencies. The initial determination will 

describe the deficiency in sufficient detail to allow the Contractor to understand the deficiency. 

 (2) The Contractor shall respond within 30 days to a written initial determination from 

the Contracting Officer that identifies significant deficiencies in the Contractor's accounting 

system. If the Contractor disagrees with the initial determination, the Contractor shall state, in 

writing, its rationale for disagreeing.

 (3) The Contracting Officer will evaluate the Contractor's response and notify the 

Contractor, in writing, of the Contracting Officer’s final determination concerning— 

 (i) Remaining significant deficiencies;

 (ii) The adequacy of any proposed or completed corrective action; and

 (iii) System disapproval, if the Contracting Officer determines that one or more 

significant deficiencies remain.
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(e) If the Contractor receives the Contracting Officer’s final determination of significant 

deficiencies, the Contractor shall, within 45 days of receipt of the final determination, either 

correct the significant deficiencies or submit an acceptable corrective action plan showing 

milestones and actions to eliminate the significant deficiencies.

(f) Withholding payments. If the Contracting Officer makes a final determination to 

disapprove the Contractor’s accounting system, and the contract includes the clause at 252.242-

7005, Contractor Business Systems, the Contracting Officer will withhold payments in 

accordance with that clause.

(End of clause)
Recommendation 13

Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

 Revise DFARS 242.7501(a) to define auditor for the purpose of permitting contracting 

officers to rely on the work of an IPA to determine the adequacy of a contractor’s accounting 

system. 

Modify DFARS 242.7501 – Definitions to: 

242.7501 Definitions. 

As used in this subpart—— 

“Acceptable accounting system,” and “accounting system” are defined in the clause at 

252.242-7006, Accounting System Administration.

“Significant deficiency” is defined in the clause at 252.242-7006, Accounting System 

Administration.

“Auditor” is the assigned and responsible party, to include independent public accountants, 

auditing the accounting system in accordance with DFARS 252.242-7006.
   
Recommendation 15

Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

 Define incurred cost proposal in FAR 52.216-7 as being synonymous with a final indirect cost 

rate proposal, and make some elements (I-M and O) of the indirect cost rate proposal in FAR 

52.216-7(d)(2)(iii) optional.

Modify standard clause FAR 52.216-7 as follows:

(d) Final indirect cost rates.

(1) Final annual indirect cost rates and the appropriate bases shall be established in 

accordance with Subpart 42.7 of the Federal Acquisition Regulation (FAR) in effect for 

the period covered by the indirect cost rate proposal.

(2) 

(i) The Contractor shall submit an adequate final indirect cost rate proposal (i.e., 

an “incurred cost proposal”) to the Contracting Officer (or cognizant Federal 

agency official) and auditor within the 6-month period following the expiration 

of each of its fiscal years. Reasonable extensions, for exceptional circumstances 

only, may be requested in writing by the Contractor and granted in writing by 

the Contracting Officer. The Contractor shall support its proposal with adequate 

supporting data. 

(ii) The proposed rates shall be based on the Contractor’s actual cost experience 

for that period. The appropriate Government representative and the Contractor 

shall establish the final indirect cost rates as promptly as practical after receipt of 

the Contractor’s proposal. 

(iii) An adequate indirect cost rate proposal shall include the following data 

unless otherwise specified by the cognizant Federal agency official: 

(A) Summary of all claimed indirect expense rates, including pool, base, 

and calculated indirect rate.

(B) General and Administrative expenses (final indirect cost pool). Schedule of 

claimed expenses by element of cost as identified in accounting records 

(Chart of Accounts).

(C) Overhead expenses (and/or other final indirect cost pool). Schedule of 

claimed expenses by element of cost as identified in accounting records 

(Chart of Accounts) for each final indirect cost pool.

(D) Occupancy expenses (and/or other intermediate indirect cost pool). 

Schedule of claimed expenses by element of cost as identified in 
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Volume 1 of 3 | January 2018

accounting records (Chart of Accounts) and expense reallocation to final 

indirect cost pools.

(E) Claimed allocation bases, by element of cost, used to distribute 

indirect costs. 

(F) Facilities capital cost of money factors computation.

(G) Reconciliation of books of account (i.e., General Ledger) and claimed 

direct costs by major cost element.

(H) Schedule of direct costs by contract and subcontract and indirect 

expense applied at claimed rates, as well as a subsidiary schedule of 

Government participation percentages in each of the allocation base 

amounts. 

(I) Schedule of cumulative direct and indirect costs claimed and billed by 

contract and subcontract.

(J) Subcontract information. Listing of subcontracts awarded to companies 

for which the contractor is the prime or upper-tier contractor (include 

prime and subcontract numbers; subcontract value and award type; 

amount claimed during the fiscal year; and the subcontractor name, 

address, and point of contact information). 

(K) Summary of each time-and-materials and labor-hour contract 

information, including labor categories, labor rates, hours, and amounts; 

direct materials; other direct costs; and, indirect expense applied at 

claimed rates.

(L) Reconciliation of total payroll per IRS form 941 to total labor costs 

distribution. 

(M) Listing of decisions/agreements/approvals and description of 

accounting/organizational changes. 

(H)(N) Certificate of final indirect costs (see 52.242-4, Certification of Final 

Indirect Costs). 

(O) Contract closing information for contracts physically completed in 

this fiscal year (include contract number, period of performance, contract 

ceiling amounts, contract fee computations, level of effort, and indicate if 

the contract is ready to close). 
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(iv) The following supplemental information is not required to determine if a 

proposal is adequate, but may be required during the evaluation of proposed 

final indirect costs rates or other cost evaluations applicable under this clause. 

audit process: 

(A) Comparative analysis of indirect expense pools detailed by account to 

prior fiscal year and budgetary data.

(B) General organizational information and limitation on allowability of 

compensation for certain contractor personnel. See 31.205-6(p). 

Additional salary reference information is available at 

http://www.whitehouse.gov/omb/procurement_index_exec_comp/ . 

(C) Identification of prime contracts under which the contractor performs 

as a subcontractor.

(D) Description of accounting system (excludes contractors required to 

submit a CAS Disclosure Statement or contractors where the description 

of the accounting system has not changed from the previous year’s 

submission). 

(E) Procedures for identifying and excluding unallowable costs from the 

costs claimed and billed (excludes contractors where the procedures have 

not changes from the previous year’s submission). 

(F) Schedule of cumulative direct and indirect costs claimed and billed by 

contract and subcontract.

(G) Subcontract information. Listing of subcontracts awarded to companies 

for which the contractor is the prime or upper-tier contractor (include 

prime and subcontract numbers; subcontract value and award type; 

amount claimed during the fiscal year; and the subcontractor name, 

address, and point of contact information). 

(H) Summary of each time-and-materials and labor-hour contract 

information, including labor categories, labor rates, hours, and amounts; 

direct materials; other direct costs; and, indirect expense applied at 

claimed rates.

(I) Reconciliation of total payroll per IRS form 941 to total labor costs 

distribution. 

(J) Listing of decisions/agreements/approvals and description of 

accounting/organizational changes. 
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(K) Contract closing information for contracts physically completed in 

this fiscal year (include contract number, period of performance, contract 

ceiling amounts, contract fee computations, level of effort, and indicate if 

the contract is ready to close). 

(L)(F) Certified financial statements and other financial data (e.g., trial 

balance, compilation, review, etc).

(M)(G) Management letter from outside CPAs concerning any internal 

control weaknesses.

(N)(H) Actions that have been and/or will be implemented to correct the 

weaknesses described in the management letter from subparagraph (G) of 

this section. 

(O)(I) List of all internal audit reports issued since the last disclosure of 

internal audit reports to the Government.

(P)(J) Annual internal audit plan of scheduled audits to be performed in 

the fiscal year when the final indirect cost rate submission is made. 

(Q)(K) Federal and State income tax returns. 

(R)(L) Securities and Exchange Commission 10-K annual report.

(S)(M) Minutes from board of directors meetings.

(T)(N) Listing of delay claims and termination claims submitted which 

contain costs relating to the subject fiscal year.

(U)(O) Contract briefings, which generally include a synopsis of all 

pertinent contract provisions, such as: Contract type, contract amount, 

product or service(s) to be provided, contract performance period, rate 

ceilings, advance approval requirements, pre-contract cost allowability 

limitations, and billing limitations.

(v) The Contractor shall update the billings on all contracts to reflect the final 

settled rates and update the schedule of cumulative direct and indirect costs 

claimed and billed, as required in paragraph (d)(2)(iii)(I) of this sections, within 

60 days after settlement of final indirect cost rates. 

(3) The Contractor and the appropriate Government representative shall execute a 

written understanding setting forth the final indirect cost rates. The understanding shall 

specify
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Volume 1 of 3 | January 2018

(i) the agreed-upon final annual indirect cost rates,

(ii) the bases to which the rates apply, 

(iii) the periods for which the rates apply, 

(iv) any specific indirect cost items treated as direct costs in the settlement, and 

(v) the affected contract and/or subcontract, identifying any with advance 

agreements or special terms and the applicable rates. 

The understanding shall not change any monetary ceiling, contract obligation, or 

specific cost allowance or disallowance provided for in this contract. The 

understanding is incorporated into this contract upon execution. 

(4) Failure by the parties to agree on a final annual indirect cost rate shall be a dispute 

within the meaning of the Disputes clause. 

(5) Within 120 days (or longer period if approved in writing by the Contracting Officer) 

after settlement of the final annual indirect cost rates for all years of a physically 

complete contract, Contractor shall submit a completion invoice or voucher to reflect the 

settled amounts and rates. The completion invoice or voucher shall include settled 

subcontract amounts and rates. The prime contractor is responsible for settling 

subcontractor amounts and rates included in the completion invoice or voucher and 

providing status of subcontractor audits to the contracting officer upon request. 

(6) 

(i) If the Contractor fails to submit a completion invoice or voucher within the 

time specified in paragraph (d)(5) of this clause, the Contracting Officer may--

(A) Determine the amounts due to the Contractor under the contract; and 

(B) Record this determination in a unilateral modification to the contract. 

(ii) This determination constitutes the final decision of the Contracting Officer in 

accordance with the Disputes clause. 
   
Volume 1   |   Page 103

Section 3 

Defense Business Systems: 

Acquisition of Information Technology Systems 

Increase use of commercial best practices and business processes to 

deliver capability faster and keep DoD’s technology current and supportable. 

RECOMMENDATIONS

Rec. 16: Combine authority for requirements, resources, and acquisition in a single,

empowered entity to govern DBS portfolios separate from the existing acquisition chain

of command.

Rec. 17: Eliminate the separate requirement for annual IRB certification of DBS

investments.

Rec. 18: Fund DBSs in a way that allows for commonly accepted software development

approaches.

   
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Page 104   |   Volume 1    Defense Business Systems: Acquisition of IT Systems

INTRODUCTION 

Defense Business Systems 

A defense business system (DBS) is any information system DoD uses to run itself as an organization.

DBSs support functions such as finance, logistics, human resources, and contracting. DBSs generally do

not include national security systems or internal information systems that use nonappropriated funds

(such as commissary and exchange systems).1

The legal requirements for DBSs, established at 10 U.S.C. § 2222, Defense Business Systems: Business

Process Reengineering; Enterprise Architecture; Management, include requirements for initial

approval, annual certification, and investment reviews prior to obligation of funds. 2 At the department

level, the Deputy Chief Management Officer (DCMO) issues guidance to manage DBS investments.3 In

addition, the Under Secretary of Defense for Acquisition, Technology and Logistics (USD(AT&L)), the

DoD Chief Information Officer (CIO), and the Chief Management Officer (CMO) of each service issue

and maintain supporting guidance within their respective areas of responsibility. DCMO, Defense

Business Council (DBC), and service CMOs work together to implement guidance.4  

DBSs are managed as the portfolio of information technology (IT) investments that enable and support

the DoD business mission area (BMA). The DoD business enterprise architecture (BEA) guides

decisions regarding business processes and enabling systems in the BMA portfolio. BEA primarily

serves as a blueprint to guide transition of legacy business systems to interoperable DBSs using

standardized business processes. For example, as new finance systems replace predecessors, they must

comply with the standard financial information structure contained in the BEA to ensure consistent

financial reporting across DoD.  

DBSs are primarily intended to be implemented using COTS software solutions. This acquisition

preference for commercial IT solutions first appeared in legislation in the 1996 Clinger–Cohen Act,

which built on the general preference for COTS in the 1994 FASA.5 The current DBS portfolio includes a

spectrum ranging from decades‐old, custom‐coded (i.e., developed from scratch) legacy systems, to

customized COTS, and, rarely, pure COTS. Despite laws and regulations that dictate a strong

                                                     

1 Defense Business Systems: Business Process Reengineering; Enterprise Architecture; Management, 10 U.S.C. § 2222 (i)(1). Deputy Chief 

Management Officer, Defense Business Systems Investment Management Guidance, Version 4.0, accessed April 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Governance/DBS%20Investment%20Management%20Guidance%20Version%204.0%20

‐%20April%202017.pdf?ver=2017‐05‐30‐110052‐673.  2 FY 2005 NDAA, Pub. L. No. 108–375, 118 Stat. 1851, Section 332 (2004). Defense Business Systems: Business Process Reengineering; 

Enterprise Architecture; Management, 10 U.S.C. § 2222 (g).  3 Deputy Chief Management Officer, Defense Business Systems Investment Management Guidance, Version 4.0, April 2017, accessed 

November 28, 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Governance/DBS%20Investment%20Management%20Guidance%20Version%204.0%20

‐%20April%202017.pdf?ver=2017‐05‐30‐110052‐673.

4 “Defense Business Council and Investment Management,” DoD Deputy Chief Management Officer, accessed May 31, 2017, 

http://dcmo.defense.gov/Governance/Defense‐Business‐Council.   5 FY 1996 NDAA, Pub. L. No. 104–106, 110 Stat. 670. Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103–355 (1996). 
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preference for COTS software, over‐customized COTS solutions and custom developed systems are

still common.6 Some argue that substantial customization is necessary to meet mission requirements.  

As of August 22, 2017, DoD had 2,098 active DBSs, and of that total, 1,253 were certified in accordance

with the certification and approval requirements in 10 U.S.C. § 2222.

7 Figure 3‐1 below provides

a breakdown of these systems by functional area. For FY 2017, DoD requested $7.5 billion for its BMA

investments.8

Figure 3‐1. DoD Active‐Record Defense Business Systems by Functional Area 

Problems with DBSs 

The basic premise of DBSs was that DoD should adopt COTS software solutions to run its business

operations, implement interoperable systems, and replace outdated legacy systems, and that those

solutions could be implemented relatively quickly at a reasonable and predictable cost. This strategy

did not come to fruition. In fact, the opposite happened. Most large DBS programs have taken a decade

or more to implement and optimistic efforts to replace legacy systems lag behind schedule.

Interoperability and integrated systems are not the norm, nor are enterprisewide views of timely,

reliable, and accurate integrated data. The analysis below details the main reasons for these challenges.

                                                     

6 According to a Gartner Report conducted for the U.S. Army Office of Business Transformation, TIME Findings and Lessons Learned, 

August 2016, of 659 Army DBSs analyzed, 14 percent were unmodified COTS, 15 percent were partially modified COTS, 8 percent were 

heavily modified COTS, and 63 percent were custom developed applications.  7 Data extracted from DoD Information Technology Portfolio Repository (DITPR) and DoD IT Investment Portal (DITIP) on August 22, 2017.  8 “Defense Business Council and Investment Management,” DoD Deputy Chief Management Officer, accessed May 31, 2017, 

http://dcmo.defense.gov/Governance/Defense‐Business‐Council. FY2017 IT President's Budget Request Reports, accessed August 22, 

2017, https://snap.pae.osd.mil/snapit/budgetDocs2017.aspx.  

Health (117)

Installation (226)

Acquisition (162)

HR (494)

Logistics (615)

Finance (245)

Other (239)
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Customization 

Although there is debate as to whether DoD is unique when it comes to adopting commercial software,

heavy customizations to DBSs are frequently requested by users.9 The default justifications for this

customizing are capability requirements and mission imperatives. Interview data analyzed by the

Section 809 Panel indicate that although some customizations were necessary to support government‐ 

and defense‐unique requirements (e.g., color of money in the financial system, a concept commercial

industry does not have), others were based on user preference or the way we have always done it, rather

than on laws, regulations, or critical mission requirements.10

Customization is typically accomplished through custom coding of reports, interfaces, conversions,

extensions, forms, and workflows (RICEFW) software objects. These objects take longer and cost more

to develop and test than configuring standard out‐of‐the‐box functionality; they are also more

expensive to sustain. Further, customization can limit the ability to upgrade to the vendor’s new

releases without additional work, which has both cost and schedule implications.  

The premise that DoD could implement COTS products without extensive customization led to awards

of firm‐fixed‐price contracts to implement some DBSs. This approach was unsuccessful because the

department lacked sufficient understanding of its requirements; consequently, the contractors did not

have an accurate basis for their cost estimates. For several major DBS programs based on COTS

enterprise resource planning (ERP) software, this situation led to contract changes and substantial cost

and schedule growth.11 For the Logistics Modernization Program (LMP), the Army awarded a firm‐

fixed‐price contract to a lead systems integrator that said the Army Materiel Command (AMC) would

adopt the commercial business processes embedded in SAP’s (the software vendor’s) software, but the

user community insisted the lead systems integrator adapt SAP to the way AMC did business. This

situation ultimately caused the Army to pay $277 million to the contractor to settle numerous claims

and execute a sole‐source extension with the lead systems integrator for 5 years of additional work.12

Lead systems integrator contracts normally require the contractor to work with the government to

maximize use of COTS functionality. In practice, when government program managers request change

orders to provide the functionality end users want, the contractors typically oblige. These changes

frequently result in schedule extensions and cost overruns. Congress and DoD have attempted to

address these problems in statutory requirements and associated regulations that mandate business

process reengineering as a key step in the DBS approval process, but DBS customization remains

                                                     

9 The Logistics Modernization Program (LMP), which is based on the commercial product SAP, has more than 3,000 customizations. 

Specifically, these customizations are implemented as reports, interfaces, conversions, extensions, forms, and workflows (RICEFW) 

development objects. 

10 DoD Inspector General, Logistics Modernization Program System Procure‐to‐Pay Process Did Not Correct Material Weaknesses, DODIG‐

2012‐087, 19, accessed November 28, 2017, http://www.dtic.mil/dtic/tr/fulltext/u2/a561589.pdf. “Army managers did not perform 

sufficient business process reengineering to implement the BEA’s P2P business process within LMP successfully. Instead, the Army 

recreated most of the legacy business processes within LMP, which did not correct the long‐standing material weaknesses within the P2P 

business process.” 

11 DoD, Performance Assessment and Root Cause Analysis (PARCA) Root Cause Analysis for Enterprise Resource Planning Systems, 

Information Memorandum (2011). 

12 Alternative Dispute Resolution Settlement Agreement between the United States Department of the Army and Computer Sciences 

Corporation, September 20, 2011. “CSC takes $250M hit in contract settlement,” Nick Wakeman, Washington Technology, accessed 

July 3, 2017, https://washingtontechnology.com/articles/2011/08/24/csc‐contract‐dispute‐settled.aspx.  
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common.13 Business process reengineering is intended to streamline the user organization’s business

processes (i.e., the steps required to complete a particular transaction or activity) to fit the COTS

software, as opposed to modifying the software to fit the existing business process.  

Linear Lifecycle 

Initially, the same DoDI 5000.02 lifecycle that governed MDAPs governed DBSs.14 MDAPs often entail

developing a new product or platform from scratch, require special testing, and include a

manufacturing phase. DBSs, by contrast, usually implement an existing software product with some

customizations. Many of the concepts applied to MDAPs were wrongly applied to DBSs. DoD

continues to use this linear model, most frequently with the waterfall approach to development, even

though the IT industry started aggressively moving to Agile methods a decade ago.15  

The Agile model assumes software developers will create a minimum viable product in close

collaboration with end users, and the product will continually evolve to provide additional capabilities

and adapt to changes in technology over time. Agile does not rely on complete requirements as a

prerequisite for development. This iterative and dynamic model is quite different from the rigid DoD

linear lifecycle that includes, in order, concept, requirements, development, test, and deployment.

There is currently a concept for iterative development in DoD (known as spirals), but these spirals

repeat the linear lifecycle over years, and sometimes decades. By contrast, a typical Agile model

delivers software releases much more frequently; some commercial companies using Agile practices

release software enhancements to their products every day.16

In DoD’s linear lifecycle, the requirements process alone can take years. By the time those requirements

are documented, approved, and funded, the technology has changed. Once a DBS program has a

baseline cost and schedule (a process that can take years for acquisition category [ACAT] I DBS

programs), it is difficult to accommodate changes in requirements or to adopt new, better commercial

solutions. The linear model’s constraints run counter to a key characteristic of technology innovation—

it changes rapidly and constantly.17 This mismatch between technology and the acquisition process

leads to unnecessary costs and extended schedules.

DBS stakeholders generally want a more responsive acquisition process that can quickly accommodate

new requirements and capabilities, but the linear lifecycle does not typically permit program changes.

                                                     

13 Defense Business Systems: Business Process Reengineering; Enterprise Architecture; Management, 10 U.S.C. § 2222 (g)(1)(C). Business 

Systems Requirements and Acquisition, DoDI 5000.75 (2017). Logistics Modernization Program System Procure‐to‐Pay Process Did Not 

Correct Material Weaknesses, DODIG‐2012‐087, 19 (2012). “Army managers did not perform sufficient business process reengineering to 

implement the BEA’s P2P business process within LMP successfully. Instead, the Army recreated most of the legacy business processes 

within LMP, which did not correct the long‐standing material weaknesses within the P2P business process.”  14 Operation of the Defense Acquisition System, DoDI 5000.02 (2017).  15 Agile methods have been used commonly since the early 2000s, following the 2001 publication of the Agile Manifesto. The concepts 

and practices now known as Agile have been around much longer, starting in the 1960s. Software Engineering Institute, Agile Methods: 

Selected DoD Management and Acquisition Concerns, 11, accessed November 9, 2017, 

https://resources.sei.cmu.edu/asset_files/TechnicalNote/2011_004_001_15335.pdf. “Agile Practices Timeline,” AgileAlliance.org, 

accessed November 9, 2017, https://www.agilealliance.org/agile101/practices‐timeline/.   16 “Uber Engineering’s Micro Deploy: Deploying Daily with Confidence,” Mathias Schwarz, accessed July 3, 2017, 

https://eng.uber.com/micro‐deploy/.   17 Jacques S. Gansler, Commercial Off The Shelf (COTS): Doing It Right, presentation for Acquisition Research Symposium, May 14–15, 

2008. 
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The requested changes can include mandated compliance changes (e.g., reducing cyber vulnerabilities,

updating financial standards) as well as capability changes. Compliance changes, paid for out of hide,

compromise the programs’ ability to deliver their original requirements and make it nearly impossible

to take on other capability changes that may come with funding. In either case, the linear lifecycle

thwarts flexibility and often pushes new requirements into future increments that are years away.  

In 2011, DoD formally recognized that DBS programs were different, and published the Business

Capability Lifecycle (BCL) as an alternative lifecycle for DBSs.18 Although many in the DBS community

found the concepts in the BCL encouraging, it was rescinded less than 3 years later in November 2013,

and DBS acquisition guidance was incorporated back into DoDI 5000.02.19 DoD eventually published

the successor to the BCL, DoDI 5000.75, in February 2017.20 DoDI 5000.75 establishes the Business

Capability Acquisition Cycle (BCAC) for DBSs with the intent to streamline decision‐making, allow for

flexibility in the upfront requirements process, and use an information‐centric approach for evaluating

programs. These changes go a long way toward providing flexibility to programs, yet DoDI 5000.75

still relies on a predominantly linear lifecycle that requires programs to do heavy tailoring to achieve

an Agile model.

Culture 

The intent of BCL was good, but its fate is an example of the cultural challenges DoD faces in adapting

its acquisition system to DBSs and other IT. One prominent aspect of BCL was that it was an attempt to

streamline the process by using a major summary document called the business case. Although the

business case was supposed to supplant numerous, more detailed acquisition documents, the various

communities involved in the review and approval process continued to request the full, separate

documents they had seen before (e.g., acquisition strategy, test and evaluation master plan, systems

engineering plan). Such strategies and plans should not be eliminated or excessively abbreviated as

they are important parts of the rigor and discipline necessary to execute a complex undertaking such as

a DBS program. These requirements, however, should be tailored appropriately. Cultural resistance to

change and pushback against tailoring ultimately led to BCL being rescinded. The root of the problem

appears to be a cultural divide between the acquisition and IT disciplines, and until these communities

find common ground on the success factors for IT programs, the department will continue to struggle

with reforming the IT acquisition process.

Oversight 

Oversight regimes put in place by Congress, and implemented by DoD and the Military Services,

further complicate efforts to quickly adopt commercial software to run DoD’s business processes.

These include the Defense Business Systems Management Committee (DBSMC) in 2004,21 later replaced

by the Defense Business Council (DBC); DoD CMO and DCMO in 2008;22 an Investment Review Board

(IRB) in 2011; and the military department CMOs with the DBC in 2016.23 When combined with the

                                                     

18 Acquisition Policy for Defense Business Systems (DBS), DTM 11‐009 (2011).  19 Operation of the Defense Acquisition System, Interim DoDI 5000.02 (2013).  20 Business Systems Requirements and Acquisition, DoDI 5000.75 (2017).  21 FY 2005 NDAA, Pub. L. No. 108–375, 118 Stat. 1855, Section 186 (2004).  22 FY 2008 NDAA, Pub. L. No. 110–181, 122 Stat. 273, Section 904 (2008).  23 FY 2012 NDAA, Pub. L. No. 112–81, 125 Stat. 1530, Section 901 (g). FY 2016 NDAA, Pub. L. No. 114‐92, 129 Stat. 946, Section 883 (a)(1). 
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regular DoD acquisition governance and oversight structures, these oversight processes represent what

one program manager called a parallel acquisition system24 that is a substantial burden on DBSs and has

reached crippling levels of bureaucracy for some programs. One DBS program management office

support contractor described the related frustration to the Section 809 Panel as follows, and clarified

that many of these activities are based on service‐specific policy and culture issues:

Our program office maintains a staff of 15 people just to comply with all of the oversight and decision

processes, which include never‐ending briefings to intermediate bodies that may or may not add value or

provide advice reflective of the ultimate decision maker’s thinking. It is not unusual to produce 50

different versions of a PowerPoint briefing over the course of several months before getting a decision.

What value is DoD getting out of that exercise?25

The FY 2016 NDAA provided some relief from these oversight requirements by delegating funds

certification down to the Military Services for DBS investments less than $250 million over the Future

Years Defense Program (FYDP) and increasing the threshold of a covered DBS from $1 million to

$50 million.26 Some Military Services quickly implemented this new delegation authority, yet others

decided to use lower thresholds or have not updated guidance and are still using the $1 million

threshold.27 Other efforts to power down decision authority include the delegation of milestone decision

authority (MDA) for several DBSs from the USD(AT&L) to the Military Services in 2015 and similar

changes for MDAPs in Section 901 of the FY 2017 NDAA.28 Although these steps are improvements,

they constitute only an incremental change to one part of the process, and more changes are needed to

realize a modern, flexible DBS acquisition process that quickly delivers capabilities to users.

Approach to DBS Problems 

The Section 809 Panel organized its research and analysis of the problems with DBSs around three

main areas and corresponding issues:

 Agile delivery of business capabilities: The current acquisition process inhibits use of modern

methodologies and commercial best practices.  

 Requirements process and DoDI 5000.75: Creation and approval of DBS requirements take too

long and need a more flexible and dynamic lifecycle.

 Oversight and compliance processes: Dissect the many layers of reviews and approvals

required for DBS investments to determine whether they are contributing to better outcomes.

To study the acquisition process for DBSs, the Section 809 Panel reviewed and analyzed current laws;

regulations; policies; previous reform initiatives; and studies conducted by government, industry,

federally funded research and development centers, and universities. The panel held more than

                                                     

24 Captain Michael Abreu (USN), meeting with Section 809 Panel Staff, June 20, 2017.  25 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, from March to July 2017.  26 FY 2016 NDAA, Pub. L. No. 114–92, 129 Stat. 946, Section 883 (a)(1) (2016).  27 Air Force – issued a guidance memorandum in October 2016 implementing the new delegation authority for systems funded under 

$50 million across the FYDP; Navy – has issued temporary implementing guidance that uses a threshold of $5 million rather than the 

allowable $50 million; Army – has not yet updated guidance and therefore still using the $1 million threshold in the meantime. 28 USD(AT&L), Program Delegation Decisions Acquisition Decision Memorandum, (2015). 
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30 separate interviews with relevant government stakeholders and commercial companies, and

conducted a series of workshops to distill the information collected and formulate succinct, direct

recommendations that address the systemic shortcomings of DBS programs in the department.29 The

themes that emerged from this research provide the basis for the panel’s DBS findings and

recommendations.

Using this approach, the Section 809 Panel developed three recommendations for the DBS acquisition

process:  

 Combine authority for requirements, resources, and acquisition in a single, empowered entity

to govern DBS portfolios separate from the existing acquisition chain of command.

 Eliminate the separate requirement for annual IRB certification of DBS investments.

 Fund DBSs in a way that allows for commonly accepted software development approaches.

The first recommendation is overarching and lays the groundwork for the following two

recommendations, which are complementary to the first and will further streamline the DBS

acquisition process.  

                                                     

29 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, from March to July 2017. 
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RECOMMENDATIONS 

Recommendation 16: Combine authority for requirements, resources, and 

acquisition in a single, empowered entity to govern DBS portfolios separate 

from the existing acquisition chain of command. 

Problem 

Responsibility for acquisition of DBSs is diffused across DoD, with no single entity accountable for

results. Consequently, DBS programs take too long and cost too much to implement. Extended

implementation timelines prolong use of legacy systems at a substantial cost and delay migration to

more modern business capabilities to support the warfighting mission.30 Second‐order effects include

managing a large, burdensome portfolio of aging systems and interfaces—reducing DoD’s ability to

become financially auditable and increasing cyber risk. Billions of dollars have been spent to modernize

DoD’s business operations with only limited success to date.31

Background 

Nearly 20 years ago, the challenge of modernizing DoD’s business systems and processes was formally

recognized, and since then Congress and department leadership have established a progressively more

complex set of acquisition rules and oversight bodies. Today, the cumulative effect is that DBS

programs fail to operate with the speed and agility needed to keep pace with commercial technology

advances.  

The initial catalyst for a major DoD business modernization effort was the 2001 Quadrennial Defense

Review (QDR), which stated, “While America’s business[es] have streamlined and adopted new

business models to react to fast‐moving changes in markets and technologies, the Defense Department

has lagged behind without an overarching strategy to improve its business practices.”32 A key theme

from the 2001 QDR was to “Modernize DoD business processes and infrastructure,” which led to the

creation of the Financial Management Modernization Program (FMMP). Recognizing that financial

management overhauls alone would not resolve broader business challenges, in May 2003 DoD

expanded FMMP and renamed it the Business Management Modernization Program (BMMP). One of

the key concepts that came from BMMP was the DoD BEA. BEA was intended “to provide a blueprint

for the end state of successful business transformation—the ‘to‐be’ environment for business

systems.”33

It was in these early stages of BMMP that Congress enacted the first legislation specific to defense

business modernization. The FY 2005 NDAA created a new section in Title 10—Defense Business

                                                     

30 GAO testimony before the House Committee on Oversight and Government Reform, May 25, 2016. The testimony stated: “The federal

government spent more than 75 percent of the total amount budgeted for information technology (IT) for fiscal year 2015 on operations 

and maintenance (O&M) investments. Such spending has increased over the past 7 fiscal years, which has resulted in a $7.3 billion 

decline from fiscal years 2010 to 2017 in development, modernization, and enhancement activities.”  31 GAO, DOD Business Systems Modernization: Additional Action Needed to Achieve Intended Outcomes, GAO‐15‐627, accessed 

November 9, 2017, https://www.gao.gov/products/GAO‐15‐627.  32 DoD, Quadrennial Defense Review Report, September 30, 2001, 49, accessed November 9, 2017, 

https://www.documentcloud.org/documents/2695397‐2001‐Quadrennial‐Defense‐Review.html.  33 “History,” Deputy Chief Management Officer, accessed August 11, 2017, http://dcmo.defense.gov/About/History.  
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Systems: Architecture, Accountability and Modernization. 34 This new legislation (10 U.S.C. § 2222) did

the following:

 Defined the term defense business system modernization.

 Set forth conditions for certification and approval of funds for any DBS modernization with a

cost exceeding $1 million.

 Established the Defense Business Systems Management Committee (DBSMC)—chaired by the

Deputy Secretary of Defense—as the entity responsible for certification and approval of funds

for DBS investments, among other duties.

 Required (a) development of an enterprise architecture to cover all DBSs and the functions and

activities supported by DBSs and (b) development of a transition plan for implementing the

enterprise architecture for DBSs.

 Required DoD to establish an investment review process consistent with 40 U.S.C. § 11312,

Capital Planning and Investment Control.

 Required DoD to submit specific DBS budget information and reports to Congress.

As BMMP progressed, the program’s leadership was realigned from the USD(Comptroller) to the

USD(AT&L) in March 2005. In October of the same year, the Deputy Secretary of Defense established

the DoD Business Transformation Agency (BTA) with the mission to reengineer and integrate the core

business activities of the department. DoD submitted the first enterprise transition plan to Congress in

September 2005. The plan provided an overview of business transformation at the DoD and component

levels, and established a set of priorities for new systems and capabilities to guide further development

of the enterprise architecture.35

BMMP eventually dissolved primarily due to a focus on building an enterprise architecture rather than

delivering business capabilities.36 The broader business system modernization effort continued under

numerous separate DBS programs. Many, but not all, of these programs were under the purview of the

Defense Business Systems Acquisition Executive (DBSAE), a newly created acquisition executive

position within BTA. According to the DoD DCMO:  

In May 2007, the Secretary of Defense used his discretionary authority to designate the Deputy Secretary

of Defense as the CMO of the Department of Defense. Subsequently, Congress codified the department’s

action in the FY 2008 NDAA, formally acknowledging the deputy secretary of defense as DoD CMO,

establishing a new Principal Staff Assistant position, the Deputy Chief Management Officer (DCMO), to

                                                     

34 FY  2005 NDAA, Pub. L. No. 108–375, 118 Stat. 1851, Section 332 (2004).  35 Defense Business Board, Report to the Secretary of Defense, Business Management Modernization Program Task Group, accessed 

November 9, 2017, http://dbb.defense.gov/Portals/35/Documents/Reports/2005/FY05‐

2_Business_Management_Modernization_Program_2005‐5.pdf.  36 Jacques S. Gansler and William Lucyshyn, Defense Business Transformation, 4, accessed November 9, 2017, 

http://www.cpppe.umd.edu/publications/defense‐business‐transformation. 
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assist the Deputy Secretary, and naming the Under Secretaries of the Military Departments as CMOs of

their respective organizations.37

In March 2009, BTA released BEA version 6.0 and DoD decided that updates to BEA would only be

released on an annual basis (as opposed to semiannual). At the same time, BTA released its required

Congressional Report on Defense Business Operations and the department continued to invest in DBS

modernization but demonstrated limited progress in modernizing DBS and business capabilities.38

Congress continued to monitor the department’s progress with DBS in particular, and with

IT acquisition in general. Section 804 of the FY 2010 NDAA required the Secretary of Defense to  

develop and implement a new acquisition process for information technology systems...based on the

recommendations in chapter 6 of the March 2009 report of the Defense Science Board Task Force on

Department of Defense Policies and Procedures for the Acquisition of Information Technology...and

Report to Congress...on the new acquisition process developed.39

The department submitted the required report to Congress in November 2010, titled A New Approach

for Delivering Information Technology Capabilities in the Department of Defense. Although the 2010 DoD

report was consistent with the IT acquisition reforms from the Defense Science Board report, many of

these concepts were never fully implemented (see details in Findings below).

Congress continued to update 10 U.S.C. § 2222 through NDAAs. For example, the FY 2010 NDAA

requires DoD to ensure appropriate business process reengineering (BPR) occurs for each DBS

investment, and the BPR must be certified as a condition of funds certification and approval.40

In August 2010 the Secretary of Defense announced elimination of BTA and the transfer of its functions 

to the DCMO and USD(AT&L), which occurred in October 2011.41 Since 2010, the department has 

continued its multibillion-dollar annual investment in DBSs, and after years of difficulties, some of the 

larger DBS programs are now fully deployed and operational. These programs include Defense 

Logistics Agency’s Enterprise Business System (EBS) and Defense Agencies Initiative (DAI), Navy ERP, 

and Army’s LMP and General Fund Enterprise Business System (GFEBS). Despite this progress, 

criticism from Congress and the GAO continue, making it clear that more needs to be done to realize 

the benefits of the department’s substantial investment in business transformation and DBSs.42 

In February 2017, DoD published DoDI 5000.75, which established the business capability acquisition 

cycle (BCAC) for DBSs with the intent to streamline decision-making, allow for flexibility in the upfront 

requirements process, and use an information-centric instead of a document-centric approach for 

                                                     

37 “History,” Deputy Chief Management Officer, accessed August 11, 2017, http://dcmo.defense.gov/About/History. 38 Jacques S. Gansler and William Lucyshyn, Defense Business Transformation, 33, accessed November 9, 2017, 

http://www.cpppe.umd.edu/publications/defense‐business‐transformation. Between 2004 and 2009 a total of 581 new DBSs were 

registered in the DoD Information Technology (IT) Portfolio Repository database. GAO, DOD Business Systems Modernization: Recent 

Slowdown in Institutionalizing Key Management Controls Needs to Be Addressed, GAO‐09‐586, accessed November 9, 2017, 

http://www.gao.gov/products/GAO‐09‐586.  39 FY 2010 NDAA, Pub. L. No. 111–84, 123 Stat. 2402, Section 804 (b) (2009).  40 FY 2010 NDAA, Pub. L. No. 111–84, 123 Stat. 2470, Section 1072 (a) (2009).  41 “History,” Deputy Chief Management Officer, accessed August 11, 2017, http://dcmo.defense.gov/About/History. 42 GAO, DoD Business Systems Modernization, GAO‐15‐627, accessed June 15, 2017, http://www.gao.gov/assets/680/671452.pdf
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evaluating programs.43 DoDI 5000.75 superseded DoDI 5000.02 for DBSs. Although this new regulation

for DBSs moves the process in the right direction, it is not as far‐reaching as the recommendations from

the 2010 Report to Congress, A New Approach for Delivering Information Technology Capabilities in the

Department of Defense.

44 The Section 809 Panel intends to revive and enhance some of the 2010 report’s

more ambitious ideas that were never fully implemented.

Findings 

In its research and analysis, the Section 809 Panel found the following, discussed in detail below:

 Fragmented and overlapping oversight processes create a burdensome parallel acquisition 

system that hinders flexibility for the programs needing it most. 

 The defense acquisition system’s linear lifecycle inhibits use of modern commercial IT 

acquisition and implementation practices.45

 Previous recommendations to substantially change the DoD IT acquisition process, including 

acquisition of DBSs, were not implemented. 

Oversight Processes 

Fragmented and overlapping oversight processes create a burdensome, parallel acquisition system that

hinders flexibility for programs needing it most. DBS programs are implementing fast‐changing

technology solutions and changing business processes (i.e., the way people do their jobs) as a result. To

be successful, such projects require maximum flexibility to adjust as new information or new

technology solutions become available. The current system, however, saddles DBS programs with

additional oversight beyond that of a traditional DoD acquisition program (see Figure 3‐2 below).

                                                     

43 Business Systems Requirements and Acquisition, DoDI 5000.75 (2017).  44 DoD, A New Approach for Delivering Information Technology Capabilities in the Department of Defense: Report to Congress Pursuant to 

Section 804 of the National Defense Authorization Act for Fiscal Year 2010, accessed November 9, 2017, 

https://www.dau.mil/policy/PolicyDocuments/the849OSD13744‐10‐804ReportToCongress.pdf.  45 “What is DevOps?” Amazon Web Services, accessed June 6, 2017, https://aws.amazon.com/devops/what‐is‐devops. 
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Figure 3‐2. Comparison of Compliance and Oversight Effort 

In 2012, the DoD Director of Acquisition Resources and Analysis studied the average number of

touchpoints (e.g., document reviews, preparation meetings, formal briefings) during the typical lifecycle

of an MDAP. The average number of touchpoints between the materiel development decision (MDD)

and Milestone C (initial production) was 893.46 This analysis was for non‐IT programs. Referring back

to Figure 3‐2, it is evident the additional oversight prescribed in the Clinger–Cohen Act (CCA) and

10 U.S.C. § 2222 add more touchpoints. Additional compliance and oversight requirements to which

DBS programs are subject as reported by GAO in May 2014, beyond the standard defense acquisition

system, include the following:

 CCA compliance to the CIO based on a checklist of 11 major items 

 BEA compliance47

 BPR certification 

 Funding certification (in addition to normal planning, programming, budgeting, and execution 

[PPBE] activities) 

 Authorization to Operate (Cyber Security/Risk Management Framework) 

                                                     

46 Nancy Spruill, Defense Acquisition Executive Summary (DAES) briefing, April 4, 2012.  47 Some DBS practitioners interviewed by the Section 809 Panel posit that BEA has become a rubber stamp that consumes substantial 

time and resources but does not have a noticeable effect on the outcome of the program. In extreme cases, the myriad BEA products 

produced do not represent the actual system being implemented. GAO, DoD Business Systems Modernization: Further Actions Needed to 

Address Challenges and Improve Accountability, GAO‐13‐557, accessed November 9, 2017, http://www.gao.gov/assets/660/654733.pdf. 

The report states: “even though DoD has spent more than 10 years and at least $379 million on its business enterprise architecture, its 

ability to use the architecture to guide and constrain investments has been limited.” 
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These requirements create additional touchpoints that impede speed and agility in adopting

commercial technology and business capabilities.

The results these activities produce are not always commensurate with the effort they require. The

current system places little value on time, yet in the technology world, as in warfighting and business,

time is a key factor that can affect outcomes. Satisfying the compliance‐heavy, process‐oriented

requirements described above can add years to program schedules and comes at a substantial cost. This

financial burden includes both the direct cost of labor to conduct the activities and opportunity cost of a

solution that may be obsolete by the time it is deployed. When acquiring technology, DoD must take

reasonable risks, move quickly, and stop performing double and triple checks before it takes action.

To obtain results faster, DoD needs to empower decision‐makers and simplify acquisition processes,

not create committees, or worse yet, layers upon layers of committees.48 A recent study commissioned

by the Deputy Assistant Secretary of Defense, Command, Control, and Communication (C3), Cyber,

and Business Systems (DASD[C3CB]) acknowledged that the existence of a separate acquisition

organization poses one of the major systemic challenges in DoD business transformation:

Business System modernizations tend to be more successful when led by a business leader and supported

by IT. For instance, a human resource management system led by the head of HR and supported by the

CIO organization. The business unit best understands the processes and requirements that the technology

must support.49  

Industry typically has a business (user) organization and an IT organization (CIO) and must decide

which one will lead a project, whereas DoD has three different entities: a business organization, an

IT organization, and an acquisition organization. Involving more entities is inefficient and precludes

the common commercial industry practice of business‐led projects.50 In the current DBS acquisition

system, industry standard practice for project leadership and organization is not even an option.

This constraint is another symptom of applying concepts originally intended for weapon system

programs to IT and business capabilities. One of the objectives of the Goldwater–Nichols Act was to

separate the military‐oriented requirements generation process from the acquisition process and put

acquisition under separate, civilian leadership.51 There are arguments for and against this separation,

but in the case of IT and business systems, it has clearly diminished DoD’s ability to operate in a

manner resembling commercial industry. As stated above, to increase the likelihood of success for

business systems projects, the business owner must lead the project, not a separate acquisition

organization.

                                                     

48 Navy PEO EIS, Enterprise IT Acquisition Efficiency Study. The study states: “Industry favors a decentralized core competence as opposed 

to centralized governance and oversight.” 

49 DASD(C3CB) Study of Commercial Practices, Focus Area 5: Cost, Schedule and Performance, Acquisition Baselines, Variance Analysis, 

and IT Governance, September 23, 2016, 12. 

50 Ibid, 15. The study states: “BPR and requirements development are more successful at the commercial organizations where the 

individuals that own the process are directly involved in the re‐engineering and requirements development, since they should understand 

the process better than the IT organization.” 

51 Goldwater–Nichols Department of Defense Reorganization Act of 1986, Pub. L. No. 99‐433 (1986). Civilian Management of the Defense 

Acquisition System, 10 U.S.C., Subtitle A, Part IV, Chapter 149, § 2546. 
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In developing this concept, business leaders need to be responsible not only for individual projects but

also for the entire portfolio of projects supporting their business areas (e.g., finance, logistics, HR).

Empowered business owners or portfolio leaders would then be able to make the important trade‐off

decisions required when modernizing business practices. Use of portfolio leaders closely resembles

recommendations in previous studies on IT acquisition, and in current and proposed legislation.52 To

be efficient and fully effective, DoD needs to formalize this approach with authority outside of the

current acquisition chain of command.53 The 2010 DoD Report to Congress stated:  

A major change in the new process will be moving from large multi‐year programs to portfolios of short‐

duration projects. This requires a new approach to project oversight. This approach will place more

accountability on timely coordination, quicker decision‐making, and increased stakeholder involvement

through more frequent performance‐based in‐process reviews. Oversight will be conducted by integrated

and empowered governance bodies that have ownership of a capability roadmap.54  

In the current system, portfolio governance is an interim step in a complex funds‐certification process

instead of being an empowered function to make critical trade‐off decisions.

Modern Commercial IT Acquisition and Implementation 

The defense acquisition system’s linear lifecycle inhibits use of modern commercial IT acquisition and

implementation practices. The lifecycle models in the DoD 5000 Series are generally linear because they

are based on the waterfall approach to systems development.55 Although appropriate in some

situations, the waterfall approach has numerous limitations, especially when it comes to acquiring IT at

the speed of commercial innovation.56 The Defense Acquisition Guidebook states that for large and

complex projects using the waterfall approach, a single incomplete task can grind an entire project to a

halt and often the “underlying technology is obsolete before delivery.”57 Current DoD policy includes

some variations of the waterfall approach, such as spirals and increments; however, DoD’s acquisition

system typically treats increments as separate programs that take years, not weeks or months, as one

                                                     

52 Senate Armed Services Committee, Report No. 115‐125, FY 18 NDAA Mark, Section 884, Review and Realignment of Defense Business

Systems to Emphasize Agile Methods. 

53 Recent changes to Defense Business Systems: Business Process Reengineering; Enterprise Architecture; Management, 10 U.S.C. § 2222, 

that increased the threshold for covered DBS from $1 million to $50 million help reduce some of the bureaucracy associated with DBS 

acquisitions, but also make some investments invisible to a certain extent. An empowered portfolio leader would have visibility (and 

trade off authority) for all of the DBS investments in their portfolio.   54 DoD, A New Approach for Delivering Information Technology Capabilities in the Department of Defense: Report to Congress Pursuant to 

Section 804 of the National Defense Authorization Act for Fiscal Year 2010, 6, accessed November 9, 2017, 

https://www.dau.mil/policy/PolicyDocuments/the849OSD13744‐10‐804ReportToCongress.pdf.  55 According to the Defense Acquisition Guidebook Chapter 6‐3.4.1, the waterfall software development method is defined as follows: 

The waterfall method is a classical software development method for which tasks are arranged to fall sequentially. One phase is 

completed before the next phase is started. Several software builds are completed before deployment. In its purest form, all 

requirements are known before IT is developed and the finished product is not delivered until all tasks are completed.  56 House Armed Services Committee Panel on Defense Acquisition Reform, DAR Interim Report, 17, accessed November 9, 2017, 

http://www.govexec.com/pdfs/031110rb1.pdf. The report states: “As a result, the Department is unable to keep pace with the rate of IT 

innovation in the commercial market place, cannot fully capitalize on IT‐based opportunities, and seldom delivers IT‐based capabilities 

rapidly. By way of example, the private sector is able to deliver capabilities and incrementally improve on those initial deliveries on a 

12 to 18 month cycle; defense IT systems typically take 48‐60 months to deliver. In an environment where technology is obsolete after 

18 months, defense IT systems are typically two to three generations out of date by the time they are delivered.”  57 Defense Acquisition University, Defense Acquisition Guidebook, Chapter 6, Section 3.4.1., accessed November 9, 2017, 

https://www.dau.mil/tools/dag. 
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would expect.58 The current DoD lifecycle models are out of step with modern commercial IT practices,

which heavily rely on Agile principles that are markedly different from the waterfall approach.  

The concept of Agile development stems from the Agile Manifesto, published in 2001 by software

developers who wanted a more efficient and responsive way to address user needs. The Agile

Manifesto includes many guiding principles. Some of the well‐known principles are listed in Table 3‐1

below along with the Section 809 Panel’s assessment of their adoption status within DoD.

Table 3‐1. DoD Status of Adopting Selected Agile Principles 

Agile Manifesto  DoD Status 

“Focus on customer satisfaction through 

continuous software delivery.”59

DoD does not continuously deliver software to customers under most 

existing programs, but rather engages in deployments once an 

acquisition process is completed. During these procurements and

subsequent deployments, customer satisfaction is arguably not the 

principal metric with which DoD aligns performance incentives for 

requirements staff, program staff, contracting staff, testing staff, or 

vendors. 

“Deliver working products on a rapid‐

turnaround timeframe of a few weeks or 

months.” 60

DoD’s acquisition apparatus does not usually abide by this principle. 

Most business systems require several years to progress from 

conceptualization to delivery of usable functionality. 

“Accept that requirements will change, even 

late in the development process.”61

DoDI 5000.75 includes flexibility that may, in some cases, allow for 

adoption of this principle in DoD IT acquisition programs: “Functional 

requirements will include enough detail to inform definition of

potential business system solutions and evaluation criteria, but 

without including too much detail that would overly constrain 

solution selection.”62

“The metric by which success is primarily 

measured should be whether software is 

built and works well.”63

The primary metrics by which DoD, the Military Services, and 

Congress measure success tend to be growth in cost and schedule, as 

well as compliance with predetermined technical requirements. 

These technical requirements may in some cases be obsolete by the 

time the software is built. 

“Acquisition professionals and system 

architects should pursue simplicity in 

programs, or ‘the art of maximizing the 

amount of work not done’.”64

The current approach to DBS programs, with its myriad compliance 

and oversight requirements and layers of committees, is arguably the 

opposite of simple. A great amount of work occurs, and much of it to 

satisfy a process metric or regulation, not to produce an outcome or 

capability. 

One particular problem area in the current linear acquisition model for DBSs is the requirements

process. Agile principles are based on the assumption that requirements will not be complete upfront

                                                     

58 Operation of the Defense Acquisition System, DoDI 5000.02 (2017).  59 Adapted from “Principles behind the Agile Manifesto,” AgileManifesto.org, accessed November 9, 2017, 

http://agilemanifesto.org/principles.html.  60 Ibid. 

61 Ibid. 

62 See Business Systems Requirements and Acquisition, DoDI 5000.75, section 4.2(c)(3)(a), (2017 update).  63 Adapted from “Principles behind the Agile Manifesto,” AgileManifesto.org, accessed November 9, 2017, 

http://agilemanifesto.org/principles.html.  64 Ibid. 
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and will change over the course of a project. The current DoD requirements process for DBSs is the

opposite; it entails an exhaustive analysis of requirements, BPR, and even a return on investment (ROI)

analysis prior to approval of requirements. These activities typically rely on not just requirements, but

also on the selection of a specific solution (usually a COTS product in the case of DBSs). Attempting to

complete BPR and ROI analysis prior to selection of a solution is not just difficult; some argue it is

impossible.65 Reengineering of DoD’s business processes has not happened to the extent envisioned

and needed. Consequently, the department contends with many customized systems that are costly to

sustain and limit the ability to take advantage of innovations and new capabilities developed by

software vendors.

The DBS requirements document, until recently referred to as a problem statement, has several parts

addressing a wide range of topics and can take years to complete and approve, even for small

projects.66 The Army Materiel Command’s (AMC’s) price‐and‐credit tool project described in Figure 3‐3

below illustrates this challenge.67

The price‐and‐credit tool illustration shows how DoD’s current DBS requirements process is not only

out of step with, but explicitly inhibits, use of modern commercial IT implementation practices such as

Agile. It is impractical for users to define requirements up front, lock them down, and subsequently

hand them off to an acquisition organization that takes years to deploy the capability. This approach

ignores the reality that IT solutions change at a dizzying pace. To have anything resembling modern

business capabilities, DoD must fundamentally change its expectations about the requirements process

and lifecycle for DBS acquisitions.68 The budget cycle exacerbates the challenges of the requirements

process by further limiting flexibility to quickly adopt new technologies and solutions—a problem

resulting from the expectation that requirements will be known years in advance of when they are

needed.69  

                                                     

65 DASD(C3CB) Study of Commercial Practices, Focus Area 1: Business Process Re‐engineering and Requirements, September 23, 2016,

p. 4 “Only so much BPR can be done prior to tool selection and implementation.”  66 The Problem Statement terminology was changed with the issuance of DoDI 5000.75 in February 2017. It is now split between 

Capability Requirements (former Problem Statement Part 1) and Business Processes / BPR Changes (some of which was in Problem 

Statement Part 2, some of which is new with the 5000.75). 

67 Project Manager Army Enterprise Systems Integration Program (PM AESIP) personnel, information for AMC price‐and‐credit tool case 

study provided to the Section 809 Panel staff, from July 31 to August 7, 2017.   68 DASD(C3CB) Study of Commercial Practices, Focus Area 1: Business Process Re‐engineering and Requirements, September 23, 2016. 69 One DoD official told the Section 809 Panel staff, “There is also the linear and lengthy budget cycle that makes it hard to get funds for 

IT following the process. It would take over a year to get funds...to just get started on getting the system procured.” 
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Figure 3‐3. Requirements Process Example 

Price‐and‐credit is a capability to consolidate the five 

budget formulation tools used by AMC to determine 

pricing on the material record. Initial estimates showed 

the project would take about 2 years and cost $9 million. 

At first, the customer/user organization was unaware it 

would need to complete a formal problem statement 

because this small project was not an acquisition 

program, and it had the required funding available. 

Under the DBS policy, the customer was in fact required 

to complete the multipart problem statement, including 

a business case analysis, and obtain approval all the way 

up to the DoD IRB. Instead of beginning the contracting 

process based on the requirements the customer had 

already documented, in April 2015, the customer began 

developing Part 1 of the problem statement, which took 

about 3 months. Part 1 was approved more than a year 

later in September 2016, and Part 2 was approved in 

conjunction with required funds certification another 

8 months later, in May 2017. Altogether, it took more 

than 2 years to formalize and approve a requirement for 

what by DoD standards is a very small project intended 

to enhance a business capability and resolve long‐

standing shortcomings in the current legacy systems. 

The nine review and approval layers depicted at right are 

only the formal steps. Many briefs that are more 

informal and prebriefs typically occur during this 

process. One interviewee with knowledge of the process 

told the Section 809 Panel there are actually 77 separate 

steps to get a problem statement approved.70

Nine Layers in the DBS requirements  

approval process for a $9M project 

 > 2 years to approve requirements 

Another aspect of the current lifecycle model that suboptimizes defense business capabilities is the

concept of system sustainment (formally referred to as capability support in DoDI 5000.75).71 The linear

lifecycle model is based on a program executing predetermined phases and milestones, and eventually

declaring a full deployment (FD) milestone, which signifies the capability is in sustainment. At

sustainment, DoD cannot add new, related capabilities or enhancements to the baseline quickly.

Instead, any changes must go through the time‐consuming problem statement process as described

                                                     

70 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, from March to July 2017.   71 Business Systems Requirements and Acquisition, DoDI 5000.75, 18 (2017). 

Army Business Council 

(2 Star)

Office of Business 

Transformation

Army Business Council 

(3 Star)

Army DCMO

Precertification 

Authority

Domain

Governance Review

Customer/User 

Organization

DoD DCMO

DoD IRB
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above and are essentially treated as a separate program (often referred to as an increment). Even in the

best circumstances, these subsequent increments can take years to fully implement.72 This model is

starkly different than the one used by most commercial organizations. In common commercial

approaches, IT projects do not have a defined point at which they transition to sustainment. Instead,

commercial entities recognize that business capabilities and their supporting technology require

ongoing enhancements and cannot wait for a lengthy requirements approval process to feed a waterfall

development approach. Delayed implementation of capabilities, which are often outdated by the time

they are deployed, is simply unacceptable to commercial companies, as it should be to DoD.

Serial test events in the current lifecycle process constitute yet another inhibitor to the speed and agility

needed in modern DBS implementations. A 2010 House Armed Services Committee Panel on Defense

Acquisition Reform report indicated,  

Testing is integrated too late and serially in current IT systems acquisition practices, with testing in

realistic operational environments deferred until the mandated operational test. The acquisition

community has been reluctant to embrace virtualized testing or is overtly precluded from reusing or

accessing operationally‐relevant test data and environments.73

DoD struggles to use Agile concepts under the rigid rules of its current acquisition system, yet many

commercial entities are moving beyond Agile to Development Operations (DevOps). DevOps breaks

down the traditional barriers and hand‐offs between IT development and operations with the goal of

getting functionality into production more quickly and more frequently. When using DevOps,

technical staff may work at each phase of the process; little distinction may exist between developers,

testers, and sustainment staff who work on the same product over the course of its lifecycle.74 This

model integrates capabilities more quickly and seamlessly.

The flexibility inherent in Agile and DevOps cannot be achieved with the existing DBS acquisition

process. Advocates of the current DoD process argue that every requirement must be reviewed in the

context of the DoD BEA to ensure there is no duplication of effort. Advocates also contend layers of

governance committees are needed to ensure proper oversight and stewardship of taxpayer dollars.

Although there is a need for enterprisewide oversight, the reality is that the current process cannot

deliver the kind of agility and results desired. The system requires change to provide more flexibility

and autonomy, along with requisite accountability.

Congress and DoD acquisition leadership have clearly expressed a desire to inject more flexibility and

agility into IT acquisition.75 For this transition to happen, the current system must be radically changed

                                                     

72 The Logistics Modernization Program Increment 2 is considered a successful example of a subsequent increment of a DBS, but still took 

nearly 4 years from initiation through full deployment. 

73 House Armed Services Committee Panel on Defense Acquisition Reform, DAR Interim Report, 17, accessed November 9, 2017, 

http://www.govexec.com/pdfs/031110rb1.pdf.  74 “What is DevOps?” Amazon Web Services, accessed June 6, 2017, https://aws.amazon.com/devops/what‐is‐devops.  75 James MacStravic, acting in the capacity of USD(AT&L), noted, “Right now, to make a Milestone B decision on a major acquisition 

program, I have to sign up to 20 waivers in order to not conform to a statutory requirement that may or may not be relevant to the actual 

problem I was facing. A best practice on a hardware system has migrated into a statutory requirement on every system. I need those 

relieved, and the more I can pull those down so we can make contextually appropriate decisions that relate to the technical and 

operational changes we’re actually facing, the more we’ll see acquisition agility.” “DoD’s acting acquisition chief looks to purge ‘the 
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from a serial, process‐oriented model to a dynamic, outcome‐oriented one in which individuals are

empowered to make decisions and obtain results without layers of committees expecting analysis of

every possible scenario before rendering a decision.76 Agile methods change the frame of reference

from measuring processes to measuring the outcomes, usually by observing the working software

(e.g., does this transaction work the way the user expected? by how many days does it reduce cycle

time?). Continuous feedback from business users is one of the hallmarks of Agile, and in conjunction

with frequent releases, it allows for adjusting the project more quickly and ultimately solving the

business problem better and faster.

A recurring theme in the Section 809 Panel’s interviews in particular, and in IT research in general, is

that smaller projects are more likely to succeed. The Standish Group’s 2015 CHAOS Report, based on

surveying more than 10,000 software projects, concluded that small projects using Agile had a

58 percent success rate compared to 44 percent when the project used the waterfall process. Large

projects experience an even more pronounced gap, with the success rate for Agile 18 percent and a

mere 3 percent for waterfall. 77 A case study by the software development estimation company

Quantitative Software Management (QSM) showed that although Agile was less efficient when first

adopted, by the second year, software deliveries were 34 percent faster and used 27 percent less effort

than waterfall methods.78 The takeaway is clear: DBS projects should be kept small and use Agile

methods as much as possible.

A comparison of DoD and commercial industry enterprise resource planning (ERP) systems supports

the argument that projects should remain small. ERPs are major COTS business systems that run

functions such as finance and human resources. A 2009 study by the DoD BTA, cited in a report by the

Center for Public Policy and Private Enterprise, revealed that several Fortune 100 companies have more

ERP systems than DoD, even though DoD is a much larger organization. For example, General Electric,

with an annual revenue of approximately $150 billion, had 15 ERP systems, yet DoD had more than

three times that budget/revenue and only nine ERP systems.79 The implication is that commercial

industry determined that breaking up its business systems based on product line, geography, or other

factors was the optimal strategy, and DoD has tried to implement massive systems with a much higher

likelihood of failure.80 Numerous GAO reports from 2012 to 2017 document these results.81

                                                     

stupid’ from IT procurement,” by Jared Serbu, Federal News Radio, June 6, 2017, https://federalnewsradio.com/dod‐reporters‐notebook‐

jared‐serbu/2017/06/dods‐acting‐acquisition‐chief‐looks‐to‐purge‐the‐stupid‐from‐it‐procurement/.   76 House Armed Services Committee hearing on the initial findings of the Section 809 Panel, May 17, 2017, Representative Duncan 

Hunter, “Because people screw up...we’re going to take...the personal responsibility element out of acquisition and create so many steps 

and milestones that no one has to take responsibility for anything...Talk about putting just somebody in charge, because that’s—in the 

past 50 years that’s one way that we’ve done a lot of our great stuff is by putting one person in charge and saying, ‘You—you just do it.’ 

And you can fail and try again and fail and try again, but we're going to put it on—on you to get it right.”  77 Standish Group, CHAOS Report, accessed November 9, 2017, https://www.projectsmart.co.uk/white‐papers/chaos‐report.pdf.  78 Taylor Putnam, Quantitative Software Management, A Case Study in Implementing Agile, accessed August 11, 2017, 

file:///D:/User/My%20Documents/Downloads/A_Case_Study_in_Implementing_Agile.pdf.  79 Jacques S. Gansler and William Lucyshyn, Implementing the U.S. Army’s Logistics Modernization Program, 28–29, accessed 

November 9, 2017, http://www.cpppe.umd.edu/publications/implementing‐us‐army%E2%80%99s‐logistics‐modernization‐program.  80 U.S. Senate Permanent Subcommittee on Investigations, The Air Force’s Expeditionary Combat Support System (ECSS): A Cautionary 

Tale on the Need for Business Process Reengineering and Complying with Acquisition Best Practices, accessed November 9, 2017, 

file:///D:/User/My%20Documents/Downloads/PSI%20REPORT%20‐%20The%20Air%20Force's%20ECSS%20(July%207%202014).pdf.  81 GAO, DoD Business Systems Modernization, GAO‐15‐627, accessed June 15, 2017, http://www.gao.gov/assets/680/671452.pdf.
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IT Recommendations Not Implemented 

Previous recommendations for substantial change to the DoD IT acquisition process, including

acquisition of DBSs, were not implemented. 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.”82 The department 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. Data from a 2016 GAO report and information collected

through Section 809 Panel interviews suggest one of the main reasons for failure to implement these

reforms was frequent turnover of senior leaders whose strong and consistent sponsorship would have

been necessary to bring sweeping changes to fruition.83 Prominent examples of specific reforms not

fully implemented are listed in Table 3‐2 below.

Table 3‐2. Implementation Status of Selected Section 804 IT Acquisition Recommendations 

Section 804 Recommendation  Implementation Status 

Eliminate service and department‐level oversight 

redundancy.84

The majority of DBS programs’ milestone decision authority 

(MDA) was delegated to the Military Service level, which was 

positive. Other parts of the process, especially requirements 

approval, are still redundant. Reviews by interim bodies without 

decision‐making authority remain a challenge. BCL was an 

attempt to address some of these issues, but was rescinded 

before it could be institutionalized. DBS programs have a unique 

and ongoing challenge in terms of oversight redundancy among 

the acquisition, CMO/DCMO, and CIO roles. 

Realign traditional DoD 5000 milestone reviews 

for major program phases to frequent decision 

points more appropriate for the dynamics of IT 

acquisition.85

The latest model for DBS in DoDI 5000.75 appears similar to 

traditional DoD 5000 milestone reviews, although tailoring is 

encouraged. Substantial tailoring is not yet common, and likely

more of a cultural challenge than a policy issue. 

Change institutional processes with separate 

acquisition and sustainment phases to a model 

that allows for continuous IT capability 

development.86

A separate sustainment phase remains in all DoD 5000 lifecycle 

models, including the model in the DoDI 5000.75 designed 

specifically for DBSs. Continuous IT development is difficult to 

achieve under the current models. 

Shorten the lengthy project initiation timeline to 

be responsive to the dynamic IT environment.87

No progress has occurred on this recommendation. By some 

accounts, initiating a project takes longer than it ever has (see 

case study in Figure 3‐3). 

                                                     

82 FY 2010 NDAA, Pub. L. No. 111–84, 123 Stat. 2402, Section 804 (b) (2009).  83 Between 2009 and 2017, five different individuals held or acted in the position of DoD CIO (four of the five in only an acting capacity). 

This represents an average tenure of approximately 1.5 years per individual, and acting officials rarely make major policy changes. The 

DoD CMO and DCMO positions were each held by four different individuals between 2010 and 2016 (GAO, Defense Business 

Transformation: DoD Should Improve Its Planning with and Performance Monitoring of the Military Departments, GAO‐17‐9, accessed 

November 9, 2017, https://www.gao.gov/products/GAO‐17‐9.)  84 Adapted from DoD, A New Approach for Delivering Information Technology Capabilities in the Department of Defense: Report to 

Congress Pursuant to Section 804 of the National Defense Authorization Act for Fiscal Year 2010, accessed November 9, 2017, 

https://www.dau.mil/policy/PolicyDocuments/the849OSD13744‐10‐804ReportToCongress.pdf.  85 Ibid. 

86 Ibid. 

87 Ibid. 
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Section 804 Recommendation  Implementation Status 

Move from large multiyear programs to 

portfolios of short‐duration projects governed by 

empowered bodies that can make trade‐offs 

across a portfolio to deliver valued mission 

capabilities.88

Portfolio governance bodies are but one step in the current DBS

Investment Management process, and they are simply an interim 

review as opposed to being the final decision makers (i.e., not

empowered).89 Additionally, trade‐off decisions are slow to be 

implemented due to the cumbersome governance and budgeting 

processes. 

Change the Planning, Programming, Budgeting, 

and Execution (PPBE) system to more accurately 

reflect the nature of IT capability investment 

(e.g., a single appropriation type for IT projects, 

establishing an IT revolving fund, defining a new 

funding element).90

No substantial progress has been made on this recommendation, 

although as of the writing of this report DASD(C3CB) has a study 

in progress with the intent of making more specific 

recommendations related to funding flexibility for IT acquisitions. 

Incorporate continuous user engagement into 

the process of delivering IT.91

Progress varies by functional customer, but typically the process 

includes hand‐off of a requirement from a user (capability 

developer in DoD acquisition speak) to a project manager as 

opposed to continuous user engagement. Intensity of user 

engagement needs to be increased to ensure the right users with

appropriate knowledge and skills are participating in delivery of 

new IT solutions. 

Acknowledge the requirements uncertainty 

associated with the dynamic IT environment and 

incorporate the flexibility to responsively 

manage changing needs.92

No substantial progress has been made on this recommendation. 

Based on current DBS guidance, the expectation is that 

requirements are exhaustively defined upfront and approved at 

the Office of the Secretary of Defense (OSD) level, even for a 

Service‐specific program/system. Changing requirements once a 

program has commenced is extremely difficult and not timely. 

Supplant the deliberate and time‐consuming 

waterfall process.93

Limited progress has occurred on this recommendation. Waterfall

is still the dominant and default lifecycle methodology. 

Conclusions 

Some progress has been made in terms of deployed DBSs, but it was achieved through the brute force

approach of expending vast amounts of financial and personnel resources. These successes occurred

despite the acquisition process and culture, rather than because of them, often resulting in slipped

schedules and cost overruns.94 DoD has not adopted the majority of the reforms identified in the

2010 Section 804 report, yet those recommendations remain relevant today, and more needed than ever

as the rate of IT change continues to outpace DoD’s ability to adopt technology and improve its

                                                     

88 Ibid. 

89 DCMO, Defense Business Systems Investment Management Guidance, Version 4.0, accessed August 11, 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Governance/DBS%20Investment%20Management%20Guidance%20Version%204.0%20

‐%20April%202017.pdf?ver=2017‐05‐30‐110052‐673.   90 Adapted from Department of Defense, A New Approach for Delivering Information Technology Capabilities in the Department of 

Defense: Report to Congress Pursuant to Section 804 of the National Defense Authorization Act for Fiscal Year 2010, accessed 

November 9, 2017, https://www.dau.mil/policy/PolicyDocuments/the849OSD13744‐10‐804ReportToCongress.pdf.  91 Ibid. 

92 Ibid. 

93 Ibid. 

94 GAO, DOD Financial Management: Reported Status of Department of Defense's Enterprise Resource Planning Systems, GAO‐12‐565R, 

accessed November 9, 2017, https://www.gao.gov/products/GAO‐17‐9. 
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business operations.95 Recommendations from the 2010 Section 804 report also closely align to the

conclusions of more recent studies by Navy PEO EIS and DASD (C3CB).96

The greatest shortcomings in the current DBS acquisition process include the following:

 Requirements are still expected to be fully known and locked down at the outset of a project

using the lengthy and onerous problem statement process, compromising DoD’s ability to keep

up with the technology innovation cycle.97

 It is too difficult to change policies and regulations to conform to commercially available,

innovative functionality or business processes provided by COTS solutions. Customization

persists because DoD acquisition professionals perceive it as less difficult than changing policies

and regulations.98

 The linear program lifecycle and associated milestones/authority to proceed (ATP) that inhibit

flexibility and agility persist in DoD regulations, including lengthy separate test events.99

Continuous IT development is not a viable option. Tailoring is officially encouraged, but in

practice is widely discouraged in the current system. The level of tailoring required to truly use

Agile concepts breaks most of the paradigms in the current lifecycle, representing too much of a

perceived risk for most decision‐makers.

 The overlapping compliance and oversight processes of the CCA and 10 U.S.C. § 2222 layered

on the defense acquisition system represent an additional burden on programs most needing

the flexibility.

 Lack of funding flexibility limits the ability of DBS programs to quickly adopt the latest

technologies and take advantage of opportunities for business operations improvement.100

In preparing this report, the Section 809 Panel reviewed Section 901 of the FY 2017 NDAA and DoD’s

report to Congress in response to Section 901. The Section 809 Panel also interviewed several

individuals involved in producing the Section 901 report, with a specific focus on “Part 2: Restructuring

                                                     

95 House Armed Services Committee Panel on Defense Acquisition Reform, Findings and Recommendations, March 23, 2010, 17.  96 Enterprise IT Acquisition Efficiency Study, Navy PEO EIS, July 2016. DASD(C3CB) Study on Commercial Practices, September 2016.  97 DASD(C3CB) Study on Commercial Practices, Acquisition of Technology, July 7, 2017, 25. As stated in the study, in the current DoD IT 

acquisition process “3.5 Year Period Between Identifying User Needs and Executing the Contract” while “6+ Technology Innovation Cycles 

passed between identifying the user need and executing the contract.” The “Problem Statement” terminology was changed with the

issuance of DoDI 5000.75 in February 2017. It is now split between “Capability Requirements” (former Problem Statement Part 1) and 

“Business Processes / BPR Changes” (some of which was in Problem Statement Part 2, some of which is new with the 5000.75).  98 Logistics Modernization Program System Procure‐to‐Pay Process Did Not Correct Material Weaknesses, DoD Inspector General Report 

No. DODIG‐2012‐087, 19, May 29, 2012. The report states, “Army managers did not perform sufficient business process reengineering to 

implement the BEA’s P2P business process within LMP successfully. Instead, the Army recreated most of the legacy business processes 

within LMP, which did not correct the long‐standing material weaknesses within the P2P business process.”  99 “DoD’s acting acquisition chief looks to purge ‘the stupid’ from IT procurement,” by Jared Serbu, Federal News Radio, June 6, 2017, 

https://federalnewsradio.com/dod‐reporters‐notebook‐jared‐serbu/2017/06/dods‐acting‐acquisition‐chief‐looks‐to‐purge‐the‐stupid‐

from‐it‐procurement/. Quoted in the piece, Acting USD(AT&L) James MacStravic states, “By using modern software development and 

automation tools, it’s possible to build in and validate the functionality and information assurance as you’re doing the software, and our 

whole procurement model didn’t reflect that.”  100 See Recommendation 18 on funding flexibility. 
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the Chief Management Officer Organization.” Although the scope of the Section 901 report is broader

than the Section 809 Panel’s acquisition reform mandate, many of the CMO themes in the Section 901

report are consistent with the Section 809 Panel’s DBS recommendations.101 The general structure of the

CMO organization is consistent, with some variations in terminology (e.g., the reform leader role in the

Section 901 report is the enterprise business process owner in the Section 809 Panel’s recommendations).  

The Section 901 report identifies a new PEO for IT Business Systems within the CMO organization and

states this PEO “will plan and execute the transformation of all business systems affecting support

areas within the Department.”102 The Section 809 Panel agrees with the concept of the CMO planning

and executing transformation of business systems; however, acquisition authority for the CMO is not

explicitly stated in the Section 901 report. The CMO must have authority sufficient to accomplish this

responsibility; therefore, the CMO should have consolidated authority for requirements, resources, and

acquisition.  

The other notable difference between the CMO structure in the Section 901 report and the Section 809

Panel’s DBS recommendations is the Military Services supporting the enterprise business process owners.

The Section 901 report is silent on the Military Services’ role; the Section 809 Panel’s recommendations

specify empowered portfolio leads with responsibility for all DBS projects/programs within the Military

Services’ business process (e.g., financial management, supply chain, and logistics). The need exists to

transition to enterprise services, and the Military Services must be empowered to transform their own

DBS portfolios while supporting the larger departmentwide transition to enterprise services.  

Implementation 

Legislative Branch 

 Provide consolidated acquisition authority to the CMO, including requirements, resources, and

acquisition (see Figure 3‐4 and the corresponding explanation below the figure for proposed

governance structure).103

                                                     

101 DoD’s Section 901 report Part 2 addresses DoD’s business operations as a whole; the Section 809 Panel recommendations are specific 

to acquisition of DBSs enabling those business operations. 

102 DoD, Report to Congress, Restructuring the Department of Defense Acquisition, Technology and Logistics Organization and Chief 

Management Officer Organization In Response to Section 901 of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 

114‐328), 18, accessed November 9, 2017, https://www.defense.gov/Portals/1/Documents/pubs/Section‐901‐FY‐2017‐NDAA‐Report.pdf.  103 Follow a similar approach to the one that provided acquisition authority to U.S. Special Operations Command. See Unified Combatant 

Command for Special Operations Forces, 10 U.S.C. §167(e)(4). 
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Figure 3‐4. Recommended DBS Governance Structure 

Roles and responsibilities of entities depicted in Figure 3‐4:

DoD Chief Management Officer (CMO) 

 As stated in the FY 2018 NDAA, becomes the third most senior official in the

department by precedence and is responsible for all enterprise business operations

including the CIO functions for DBSs.

 Maintain a simplified DoD BEA described in 10 U.S.C. § 2222 (e) as “a blueprint to guide

the development of integrated business processes within the Department of Defense.”

 Change policies and regulations that prevent the use of commercial software solutions,

and advocate for changes to statute when necessary.

 Approve budget requests for business system portfolios as part of the PPBE/POM

process.

Defense Business Council (DBC) 

 As currently specified in 10 U.S.C. § 2222 (f) except now chaired by the DoD CMO

instead of being cochaired by the Under Secretary of Defense for Business Management

and Information and the DoD CIO.  

Enterprise Business Process Owners 

 Recommend approval of budget requests for business system portfolios.

 Identify and advocate for enterprise (cross‐Service) DBS solutions.

 Provide oversight of, and adjudicate issues among, the Service DBS portfolios.

DoD CMO

Finance Logistics HR Acquisition/

Contracting

Installation & 

Environment

Training & 

Readiness

Enterprise Business Process Owners

Army

Finance

Portfolio Lead

Navy

Finance

Portfolio Lead

Air Force

Finance

Portfolio Lead

This structure

replicated for

each business 

process portfolio

Portfolios of 

Agile Projects led by 

Project Managers

DBC



















Contracting Office(s)

Matrix Support to Portfolios:

• User

• Systems Engineering

• Test

• RMF and Cyber

• ...
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Service Portfolio Leads 

 Provide business process leadership and expertise to projects and project managers

within the portfolio.

 Identify, select, prioritize, and resource projects within the portfolio based on desired

business outcome measures and support to the mission via the Portfolio Execution Plan

(a replacement for the current Organizational Execution Plan [OEP]) which according to

current DBS Investment Management Guidance (p. 8) “articulates an organization’s

approach to align with the Functional Strategies and produce business results.”

 Ensure appropriate matrix support from necessary disciplines to enable successful

project execution.

 Advocate for changes to laws, regulations, and policies (LRPs) when such changes will

enable more efficient business processes or better outcome measures.

 Assume the responsibilities previously fulfilled by the Service Chief Management

Officer/Pre‐Certification Authority (CMO/PCA): “the senior accountable official that is

responsible for ensuring compliance with investment review policies...including BPR

and BEA assertions.”

 Amend 10 U.S.C. § 2222 to be the sole statute applicable to acquisition of DBSs and do the

following:

 Eliminate the separate funding certification process (see Recommendation 17).

 Define a new empowered role (portfolio lead) to lead business capability portfolios with

accountability for business metrics and outcomes, and authority sufficient to affect those

outcomes.

 Change basis of oversight from covered defense business systems to portfolios of business

processes. Remove priority defense business systems.

 Remove responsibility of milestone decision authority paragraph to provide authority for project

decisions to the new empowered portfolio lead.

 Remove the requirement for the CIO’s information technology enterprise architecture to

address “each of the major business processes conducted by the Department of Defense.”

Empower the CMO to address business processes.

Executive Branch 

 Revise DoD’s DBS Investment Management Guidance to reflect the following:

 The new empowered and accountable role of portfolio lead.

 A simplified governance process that includes only the CMO, enterprise business process

owners, and portfolio leads in the chain of command, with the DBC continuing in its current

capacity as an advisory body.

 Elimination of the separate funding certification process that is now integrated into the

PPBE process (see Recommendation 17).

 New funding structure based on portfolios of projects instead of individual programs.  
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 Rescind the DoD requirements validation and IT business case analysis template for business systems

and empower portfolio leads to determine the optimal requirements definition process for their

business areas with concurrence of the CMO.  

 Revise DoDI 5000.75 to reflect the following:

 A simplified and iterative requirements‐identification and documentation process that

acknowledges exhaustive requirements and BPR cannot be completed prior to initiation of a

project and selection of a specific vendor or technology solution.

 Replacement of the single linear lifecycle and milestone (ATP) decision points with multiple

lifecycle models, including both Agile and waterfall. Portfolio leads should establish

lifecycles and decision points based on the attributes of the specific project, and not be

bound by a set of predetermined decision points. Projects should not be required to have a

defined point at which they transition to sustainment. Business capabilities and their

supporting technology will require ongoing development and enhancements.

 New structure of portfolios reflecting a preference for smaller, shorter projects instead of

large, individual programs; elimination of business system categories and thresholds.

 Responsibility of empowered portfolio leads to change policies and regulations whenever

possible to enable BPR and adopt commercial processes and technology instead of

customizing COTS products/solutions.  

 Elimination of the hand‐off of requirements from a functional sponsor to a project manager

in favor of continuous partnership with end users.  

 Prioritization of working software (business capabilities) and improvement of business

outcome metrics as the definition of success.

 Inclusion of a reference table summarizing all statutory and regulatory information

requirements applicable to DBSs.  

 Instruct CMO to publish new BEA guidance reducing the burden on programs to the minimum

necessary as required by 10 U.S.C. § 2222(e).

Note: The recommended draft legislative text and sections affected display can be found in the 

Implementation Details subsection at the end of Section 3. 

Implications for Other Agencies 

 There are no cross‐agency implications for this recommendation.

   
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Recommendation 17: Eliminate separate requirement for annual IRB 

certification of DBS investments. 

Problem 

The Investment Review Board (IRB) annual certification requirement for DBS investments leads to

unnecessary delays and is duplicative of the program objective memorandum (POM) in the planning,

programming, budgeting, and execution (PPBE) process. PPBE is the annual resource allocations and

requirements process used to review and approve funding decisions for the defense budget, including

DBS investments.  

Background 

The concept of an IRB as a governance mechanism to oversee DBS investments originated from the

Financial Management Modernization Program, a 2001 initiative to modernize DoD business

operations.104 In the FY 2005 NDAA, Congress added the statutory requirement for IRB review and

approval for DBSs in 10 U.S.C. § 2222.105  

In the FY 2012 NDAA, Congress directed the DoD Deputy Chief Management Officer (DCMO) to

establish an IRB and investment management process for covered DBSs by March 2012.106 In response,

DoD designated the Defense Business Council (DBC) to serve as the IRB for covered DBSs.107 In the

FY 2016 NDAA, Congress eliminated the term Investment Review Board and codified the DBC in

10 U.S.C. § 2222(f), requiring it to “provide advice to the Secretary on developing the defense business

enterprise architecture, reengineering DoD’s business processes, developing and deploying defense

business systems, and developing requirements for defense business systems.”108  

DBC’s membership consists of the DoD DCMO; CIO; the USD(AT&L); USD for Policy; DoD

Comptroller; USD for Personnel and Readiness; USD for Intelligence; Director of Cost Assessment and

Program Evaluation; Joint Staff; and the Service‐level DCMOs and CIOs.109

DoD uses the IRB process to certify covered DBSs and recertify them each year. DBS programs “cannot

proceed into development (or, if no development is required, into production or fielding)” unless they

are IRB certified.110 By law, these criteria include the following:

 DBS must be “reengineered to be as streamlined and efficient as practicable.”111

                                                     

104 USD(AT&L), Investment Review Process Overview and Concept for Operations for Investment Review Boards, June 2, 2005, accessed 

June 5, 2017, http://ogc.hqda.pentagon.mil/EandF/Fiscal_Documentation/TabASignedMemo%20with%20CONOPS.pdf.  105 FY 2005 NDAA, Pub. L. No. 108‐375, 118 Stat. 1853 (2004).   106 FY 2012 NDAA, Pub. L. No. 112‐81, 125 Stat. 1530 (2011).   107 DoD, Department of Defense Investment Review Board and Investment Management Process for Defense Business Systems, 

March 2012, accessed August 10, 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Publications/NDAA/NDAA_2012_IRB_Report.pdf.   108 FY 2016 NDAA, Pub. L. No. 114‐92, 129 Stat. 944 (2015).   109 DoD, Defense Business Council, December 10, 2014, accessed August 11, 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Governance/DBC_Charter_12122014.pdf.  110 Defense Business Systems Investment Review, 10 U.S.C. § 2222(g)(1).  111 Defense Business Systems Investment Review, 10 U.S.C. § 2222(g)(1)(A). 
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 DBS’s implementation must “maximize the elimination of unique software requirements and

unique interfaces.”112

 DBS must be in “compliance with the defense business enterprise architecture.”113

 DBS must have “valid, achievable requirements and a viable plan for implementing those

requirements.”114

 DBS’s acquisition strategy must be designed to “eliminate or reduce the need to tailor

commercial off‐the‐shelf systems to meet unique requirements.”115

 DBS must be in “compliance with the Department’s auditability requirements.”116

According to DBC’s 2014 charter, its role as the IRB for DBSs includes these criteria as well:

 Validating “requirements for defense business capabilities.”

 Ensuring that “investments are aligned to DoD’s lines of business.”

 Supporting “measurable improvements to DoD’s business objectives.”  

 Generating “a measureable return on investment.”117

The IRB process outlined in DoD’s DBS Investment Management Guidance118 describes the integrated

business framework (IBF) as the overarching structure to manage business IT investments.119 As

Figure 3‐5 shows, IBF includes eight functional areas that require functional strategies (FSs) to direct

PPBE activities, and organizational execution plans (OEPs) to specify the certification request for each

functional area and component.120

                                                     

112 Ibid.  113 Defense Business Systems Investment Review, 10 U.S.C. § 2222(g)(1)(B).  114 Defense Business Systems Investment Review, 10 U.S.C. § 2222(g)(1)(C).  115 Defense Business Systems Investment Review, 10 U.S.C. § 2222(g)(1)(D).  116 Defense Business Systems Investment Review, 10 U.S.C. § 2222(g)(1)(E).  117 DoD, Defense Business Council, December 10, 2014, accessed August 11, 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Governance/DBC_Charter_12122014.pdf.   118 DoD, Office of the Deputy Chief Management Officer, Defense Business Systems Investment Management Guidance, Version 4.0, 

accessed November 9, 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Governance/DBS%20Investment%20Management%20Guidance%20Version%204.0%20

‐%20April%202017.pdf?ver=2017‐05‐30‐110052‐673.   119 Ibid.  120 Ibid. 
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Figure 3‐5. Integrated Business Framework 

As Figure 3‐6 shows, FSs and OEPs undergo a review process, resulting in certification decisions.

Figure 3‐6. Integrated Business Management Process Overview 
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Findings 

Statute specifies that IRB approval is required before programs can proceed to development.121 In

practice, however, DoD requires IRB approval well before development. DBS program personnel have

indicated to the Section 809 Panel that a major issue with the IRB process is the approval of the problem

statement—a step that takes place before the first program milestone, and in at least one case, several

years before the start of product development.122  

One purpose of requiring a problem statement is to ensure sufficient BPR, yet, in several cases, DoD

misapplied the problem statement check in the IRB process, because BPR was already complete.

Prominent examples of misapplied problem statement checks in the last 2 years include the following:

 The Integrated Personnel and Pay System–Army (IPPS‐A) was delayed in FY 2015 because its

fund certification was pending approval of its problem statement.123 Despite the fact that (a) it

was a follow‐on increment after OSD directed the division of IPPS‐A into two separate

increments, and (b) the first increment was already operating under an approved business case

and problem statement, yet DoD required a separate problem statement for the follow‐on

increment. The follow‐on increment was delivering the same required capability and was

fielded using approved program requirements documents.124

 The Medical Communications for Combat Casualty Care (MC4) program, which fields the

Theater Medical Information Program‐Joint (TMIP‐J) software for Army computers in medical

units, was delayed for FY 2015 because its fund certification was pending approval of its

problem statement.125 For a number of years, MC4 has had to explain that it previously received

IRB certification under the provisions of the TMIP‐J authorization documents.126  

 The Army’s LMP Increment 1 was not recertified in FY 2016 due to lack of a problem

statement;127 however, the program was fielded fully as of November 2011, was in sustainment

per OSD, and should not have required certification.128

                                                     

121 Defense Business Systems Investment Review, 10 U.S.C. § 2222(g)(1).  122 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, from March to July 2017. The Problem Statement

terminology was changed with the issuance of DoDI 5000.75 in February 2017. It is now split between Capability Requirements (former 

Problem Statement Part 1) and Business Processes / BPR Changes (some of which was in Problem Statement Part 2, some of which is new 

with the 5000.75). 

123 Office of the Deputy Chief Management Officer, Army Organizational Execution Plan (OEP) Investment Decision Memorandum (IDM) 

for Fiscal Year (FY) 2015 Defense Business Systems (DBS), (2014).  124 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, from March to July 2017.  125 Office of the Deputy Chief Management Officer, Army Organizational Execution Plan (OEP) Investment Decision Memorandum (IDM) 

for Fiscal Year (FY) 2015 Defense Business Systems (DBS) (2014).  126 Data collection interviews conducted from March to July 2017 by Section 809 Panel Team 6: IT Acquisition.  127 Office of the Deputy Chief Management Officer, Army Organizational Execution Plan (OEP) Investment Decision Memorandum (IDM) 

for Fiscal Year (FY) 2016 Defense Business Systems (DBS) (2015).  128 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, from March to July 2017. 
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 The Global Combat Support System–Army Increment 2 was required to obtain IRB certification

for its materiel development decision, which was two milestones and several years in advance

of planned development.129   

Another issue with the IRB process is the redundancy of a separate certification process.130 By

definition, the covered DBSs certified by IRBs have already been approved via the POM and

subsequently had funds appropriated by Congress.  

According to the Defense Acquisition Guidebook, “methods through which more detailed

requirements are documented are not dictated by policy,” but rather on a program‐by‐program basis.131

Some program‐level personnel have indicated that the ability to generate more detailed requirements

on an ad hoc basis creates incentives for the IRB process to overburden programs with requirements

that do not add value to end products.132

In 2016, DoD DCMO Peter Levine suggested that the IRB process had encountered problems with

“getting mired in small detail” and needed to “focus instead on broader issues.”133 Several officials

have also suggested that IRB‐related problems persist.134 In particular, the assessment checklists,

multipart requirements templates, technical documentation requirements, and long wait times are

major roadblocks for getting programs IRB‐certified in a timely manner.135

                                                     

129 Office of the Deputy Chief Management Officer, Army Organizational Execution Plan (OEP) Investment Decision Memorandum (IDM) 

for Fiscal Year (FY) 2016 Defense Business Systems (DBS) (2015). In the case of this program, the MDD milestone was renamed 

Incremental Development Decision.   130 PEO personnel, conversation with Section 809 Panel staff, June 2017.  131 Defense Acquisition University, “Defense Acquisition Guidebook,” Chapter 6—3.5.2, accessed June 5, 2017, 

https://www.dau.mil/guidebooks/Shared%20Documents/Chapter%206%20Information%20Technology%20and%20Business%20Systems.

pdf.  132 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, from March to July 2017.  133 House Armed Services Committee, “Statement of The Honorable Peter Levine, Deputy Chief Management Officer Department of 

Defense,” March 22, 2016, http://docs.house.gov/meetings/AS/AS26/20160322/104711/HHRG‐114‐AS26‐Wstate‐LevineP‐20160322.pdf, 

accessed June 5, 2017. 

134 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, from March to July 2017.  135 Technical documentation requirements may be perceived by program‐level staff as particularly burdensome. Descriptive data 

elements associated with DBSs must be drawn up, formatted, and entered into—at a minimum—four different data systems, all prior to 

the initiation of an IRB review. These are the DoD Information Technology Portfolio Repository (DITPR), the Select and Native 

Programming Data Input Systems for Information Technology (SNaP‐IT), the Integrated Business Framework Data Alignment Portal (IBF‐

DAP), and the DoD Information Technology Investment Portal (DITIP). Each of these data systems focuses on a different functional area 

and requires unique types of expertise and skillsets. See Deputy Chief Management Officer, Defense Business Systems Investment 

Management Guidance, Version 4.0, 21, accessed April 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Governance/DBS%20Investment%20Management%20Guidance%20Version%204.0%20

‐%20April%202017.pdf?ver=2017‐05‐30‐110052‐673.

The multipart requirements template takes the form of a 34‐page business case analysis (BCA) guidance document published by the DoD 

CIO. Program personnel are expected to provide detailed analysis of cost, alternatives, risk, funding sources, and many other topics 

associated with the business system. See Department of Defense Chief Information Officer, DoD IT Business Case Analysis Template, 

October 22, 2014, accessed June 5, 2017, 

http://dodcio.defense.gov/Portals/0/Documents/DOD%20IT%20Business%20Case%20Analysis%20(BCA).pdf. 
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There may also be unnecessary bureaucracy built into DBS Investment Management Guidance. For

example, the guidance states,  

10 U.S.C. § 2222 gives greater responsibilities to Military Department Chief Management Officers

(CMOs) and defines the statutory thresholds for a covered DBS. However, military departments and

Fourth Estate CMOs may lower thresholds used internally as discussed later in this document.136  

The statutory threshold for a covered DBS is $50M over the current FYDP period.137 DoD lowered the

threshold, however, and designated the Fourth Estate minimum threshold at $1M over the period of

the current FYDP later in the guidance.138 Instead of embracing this increased authority, DoD expanded

its oversight role and designated nearly all Fourth Estate DBS programs as covered DBSs, requiring

time‐consuming annual fund certification and recertification.   

Conclusions 

The review and approval of DBS investments can be satisfied through the POM and PPBE processes,

which already occur on an annual basis. The term IRB does not appear in law (10 U.S.C. § 2222), and

the DBC is established in law “to provide advice” (i.e., it is not a decision body). The only statutory

basis for the IRB process is the annual certification requirement in 10 U.S.C. §§ 2222(g)(3) and (g)(4).

Accordingly, 10 U.S.C. §§ 2222(g)(3) and (g)(4) should be eliminated.  

The proposed governance structure in Recommendation 16 allows a newly empowered CMO to

address the goals of the IRB process, such as minimizing customization and aligning with the business

enterprise architecture, in a much more streamlined manner.

Implementation 

Legislative Branch 

 Eliminate 10 U.S.C. §§ 2222(g)(3) and (g)(4), which states:  

 “(3) Annual certification.‐For any fiscal year in which funds are expended for development

or sustainment pursuant to a covered defense business system program, the appropriate

approval official shall review the system and certify, certify with conditions, or decline to

certify, as the case may be, that it continues to satisfy the requirements of paragraph (1). If

the approval official determines that certification cannot be granted, the approval official

shall notify the milestone decision authority for the program and provide a

recommendation for corrective action.”

                                                     

136 Deputy Chief Management Officer, Defense Business Systems Investment Management Guidance, Version 4.0, 5, accessed April 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Governance/DBS%20Investment%20Management%20Guidance%20Version%204.0%20

‐%20April%202017.pdf?ver=2017‐05‐30‐110052‐673. The term Fourth Estate refers to Defense agencies that are not the Military Services 

(e.g., Defense Acquisition University, Defense Logistics Agency). 137 Defense Business Systems Investment Review, 10 U.S.C. § 2222(i)(2).  138 Deputy Chief Management Officer, Defense Business Systems Investment Management Guidance, Version 4.0, accessed April 2017, 

http://dcmo.defense.gov/Portals/47/Documents/Governance/DBS%20Investment%20Management%20Guidance%20Version%204.0%20

‐%20April%202017.pdf?ver=2017‐05‐30‐110052‐673. 
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 “(4) Obligation of funds in violation of requirements.‐The obligation of Department of

Defense funds for a covered defense business system program that has not been certified in

accordance with paragraph (3) is a violation of section 1341(a)(1)(A) of title 31.”  

Executive Branch 

 Eliminate the IRB fund certification requirement from the DBS Investment Management

Guidance.  

Note: The recommended draft legislative text and sections affected display can be found in the 

Implementation Details subsection at the end of Section 3. 

Implications for Other Agencies 

 There are no cross‐agency implications for this recommendation.
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Recommendation 18: Fund DBSs in a way that allows for commonly accepted 

software development approaches. 

Problem 

The current statutory and policy regime does not enable the speed DoD needs to effectively acquire

DBSs. Funding constraints, in various forms, are key contributors to this problem. One constraint

applies to the appropriations account and/or program element/budget line item (PE/BLI) from which

money is spent. Another constraint applies to the point in time at which money is spent.

Because DBS acquisition follows a model similar to that of major weapon systems acquisition, program

managers (PMs) are required to spend money from different appropriation accounts and PEs/BLIs

based on the acquisition stage. Depending on financial management regulations (FMR) and Military

Department regulations, DoD may need to fund a specific DBS requirement via Research,

Development, Test, and Evaluation (RDT&E), Procurement, and/or Operation and Maintenance

(O&M). These accounts categorize phases of weapon system engineering. When applied to business

software IT, which by its nature does not have such clear phases, the account categories introduce

inefficiencies.

PMs must also use different types of funding at different points in time, depending on the years in

which Congress appropriated those funds and appropriation availability. This requirement prevents

DoD from modifying DBS funding timetables on a monthly or even weekly basis. To accommodate

continuous user feedback and changing technical requirements of DBSs, DoD needs the ability to make

funding modifications with such frequency.

Appropriation system timing and account constraints are commonly known as colors of money in

defense acquisition circles. DBS experts cite color of money as a major problem.139

Background 

In the regular federal budgeting system, Congress appropriates money each year for agency use. This

money must be obligated within a date range specified by the appropriation in question and may not,

generally, be obligated beyond that range (see Table 3‐3 below).140 The obligation of these funds is also

limited to the specific purpose identified in the appropriation.141

Table 3‐3. Appropriation Accounts Used by DoD to Acquire Business Software Solutions 

Appropriation account  Period of availability 

Research, Development, Test, and Evaluation (RDT&E)  2 years 

Other Procurement  3 years 

Operation and Maintenance (O&M)  1 year (some exceptions)142

                                                     

139 Approximately 30 DBS experts, interviews with the Section 809 Panel staff, mid‐2017.  140 Balances Available, 31 U.S.C. § 1502.  141 Application, 31 U.S.C. § 1301(a).  142 For example, 1 percent of the Defense Health Agency appropriation is given 2‐year availability (de facto carryover authority).  
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Fundamentals of the modern appropriation system are outlined in sections of law originally enacted in

1809.143 Current law states that regular appropriations “may be construed to be permanent or available

continuously only if the appropriation... expressly provides that it is available after the fiscal year

covered by the law in which it appears.”144

DBSs receive funding primarily from three appropriation accounts—RDT&E, Procurement, and

O&M—all of which have different periods of availability and restrictions on use. PMs cannot use these

funds interchangeably. For RDT&E and Procurement, program‐specific funding is approved by the

House and Senate appropriations committees after moving through a lengthy POM process within

DoD.

Unlike RDT&E and Procurement funds, for which control resides at the program element level, O&M

funding control takes place at a higher level and is not tied to specific programs. Additional constraints

apply to O&M funding. In practice, a DBS PM’s ability to plan and execute use of funds is restricted

based on factors such as type of activity on which money is spent, production document scope, dollar‐

cost of purchase, and technical details of system modification.145

For example, DoD financial regulations distinguish between investments and expenses based not simply

on the qualitative aspects of what is being purchased, but on whether the purchase falls within a dollar

threshold of $250,000. Investments, greater than $250,000, must be funded via (specifically

appropriated) Procurement dollars; whereas, expenses, less than $250,000, may be funded via O&M

dollars.146

                                                     

143 GAO, Principles of Federal Appropriations Law, Third Edition, Volume I, Chapter 4, 4–6, accessed August 10, 2017, 

http://www.gao.gov/special.pubs/3rdeditionvol1.pdf.  144 Application, 31 U.S.C. § 1301(c).   145 For differentiation based on type of activity, see FMR Volume 2A, Chapter 1, Section 010212(B)(1): “The underlying purpose for each 

discrete task within an IT effort determines the correct appropriation for budgeting of that task. An 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.” For differentiation based on dollar threshold, see FMR Volume 2A, Chapter 1, Section 

010212(B)(4): For DBS modification efforts of less than $250,000, Operation and Maintenance funding may be used. For DBS 

modifications involving “a complete system with a cost of $250,000 or more,” however, PMs must use Procurement funds. These funds 

must be either explicitly appropriated by Congress and programmed by DoD at the PE/BLI level, or reprogrammed from another account 

(which often requires Congressional approval). Differentiation based on production document scope and technical thresholds may

indicate Service‐level decision‐making problems in addition to regulatory problems. According to Service‐level DBS acquisition officials in 

contact with Section 809 Panel staff in August 2017, if modification requirements are not explicitly listed in a DBS’s current requirements 

document, RDT&E funding must be used for that requirement. Even if the DBS’s requirements document explicitly lists the modification 

requirements in question, if a preponderance of development objects being modified are new, RDT&E funding must be used. Only if a 

majority of development objects being modified are not written from scratch may O&M funding be used. This requirement is important 

because unlike RDT&E and Procurement, O&M spending does not require the initiation of DBS‐specific approval years in advance via the 

PPBE and appropriation processes. 

146 FMR, Volume 2A, Chapter 1, Section 010212(B)(4). This section of the FMR was codified in Use of Operations and Maintenance Funds 

for Purchase of Investment Items: Limitation, 10 U.S.C. § 2245a, but repealed in the FY 2017 NDAA (Pub. L. No. 114–328). 
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Case Study: 

Dollar Thresholds Impeding Financial Auditability 

In 2016, the Army’s General Fund Enterprise Business System (GFEBS) required new computer code 

to enhance property management auditability reporting. The program contractor estimated that 

writing this code would cost approximately $600,000.147

The program office determined that the work primarily would take the form of newly written code, 

not modifications to existing code. This determination, combined with the fact that the feature’s cost 

rose beyond the FMR’s $250,000 investment threshold, necessitated funding the feature’s 

development with RDT&E appropriations.148

At the time, the program was already in sustainment and had no RDT&E funding. As a result, the 

program had to postpone the addition of this financial auditability feature. As of late 2017, the Army 

requested $1.7 million in FY 2019 and $6.7 million in FY 2020 for GFEBS Increment II RDT&E 

funding.149 Some of this funding, if approved by Congress, presumably will be allocated to the 

development of the GFEBS auditability feature in question. 

In addition to constraints created by applying normal appropriations accounts to DBSs, other laws,

policies, and decision‐making bodies may affect DBS spending patterns. These items include the

statutory 80/20 rule, OMB quarterly apportionment practices, DoD comptroller rephasing practices, and

Service‐level comptroller policies.

As an illustration of these phenomena, Figure 3‐7 below shows DoD’s weekly IT contract obligations.

In addition to the large peak in IT obligations in the final weeks of September (see rightmost bars of

chart), there are smaller peaks visible throughout the fiscal year.

                                                     

147 Army DBS program office staff, emails to Section 809 Panel staff, August 2017.  148 To some degree, this impediment may have been produced by the Army’s interpretation of FMR language. According to one DCMO 

official, “some Services are known to be more conservative in the way they interpret” the distinction between expenses and investments. 

This situation suggests that part of the problem may be the FMR’s excess complexity—as of August 2017, the document was more than 

7,000 pages long. 

149 Assistant Secretary of the Army for Financial Management and Comptroller, “Department of Defense Fiscal Year (FY) 2018 Budget

Estimates: Army Justification Book of Research, Development, Test & Evaluation, Army” (see page 225 of Volume II, Budget Activity 5B, 

under Project EV4, General Fund Enterprise Business System Inc. 2), accessed August 14, 2017, 

https://www.asafm.army.mil/documents/BudgetMaterial/fy2018/vol5b.pdf. 
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Figure 3‐7. Weekly DoD Information Technology Contract Obligations During FY 2017150

A small peak in obligations is visible in the 43rd week of the fiscal year (at the end of July). This

observation overlaps with the 80/20 rule, under which Congress requires at least 80 percent of single‐

year obligations to occur between the months of October and July. Small peaks also occur at midyear,

the end of each quarter, and the end of most months. These peaks may overlap with temporal

constraints applied by OMB, DoD, Military Departments, and lower‐level organizations.

There are several important and legitimate reasons for imposing time‐ and account‐based constraints

on normal DoD program budgets. One reason may be that the annual appropriation process allows for

a regular, standardized oversight process to occur by default. Another issue may be the concern that if

funding never expires, it may result in large unobligated balances that could be used for inappropriate

purposes. This second justification was alluded to in the 1980s and 1990s, during which some observers

viewed certain forms of DoD budget flexibility as “slush funds.”151

Program officials, however, describe the current appropriation system as a major impediment to the

success of DBS programs. One former DBS PM noted commercial companies do not develop market‐

competitive software IT using the type of siloed‐funding model that results from appropriation timing

                                                     

150 Dataset includes all DoD contract actions coded with Product and Service Codes D3 or 70 from the Federal Procurement Data System, 

https://www.fpds.gov, accessed January 2, 2018. To ensure comparability of data across years, each weekly period contains the same 

days of the week. The first day of the fiscal year (or first 2 days for leap years) are omitted.  151 See, for example, Senator Alfonse D’Amato’s 1985 letter to the U.S. Comptroller General on this issue and the accompanying report: 

GAO, Comptroller General of the United States, Potential for Excess Funds in DOD, GAO/NSIAD‐85‐145, accessed June 27, 2017, 

http://www.gao.gov/assets/150/143300.pdf. In the past, funding flexibilities (such as the M accounts) have been permitted to exist for 

long periods of time but eventually were shut down after accumulating large unobligated balances. The flexibility accounts in question 

were eliminated by the FY 1991 NDAA (Pub. L. No. 101–510).  End Q1

End Q2

End Q3

80/20 rule cutoff

End FY

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

Contract Action Obligation, Billion USD

Week of Fiscal Year

IT services IT products
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and account constraints. The PM suggested that the main problem was a failure to recognize that as

users’ needs become clearer, DBS technical specifications change. This fact, however, is not reflected in

a requirement and PPBE process that attempts to lay out every technical detail of DBSs in advance. One

DBS PM explained, “If you try to build the fifth floor of your house before the first floor, it isn’t going

to work.”152

Findings 

Time‐ and account‐based funding constraints may address some of the accountability concerns raised

by oversight officials. These constraints, however, are counter to two key characteristics of software:

It changes rapidly and constantly.153 For some DBS programs, these constraints can create serious

inefficiencies. If a PM wishes to provide new capabilities to end‐users based on their feedback from

previous software releases, the PM must have the ability to modify requirements on relatively short

notice. To modify requirements on short notice, the PM must be able to access congressionally

appropriated funding with flexibility regarding time and account. The current DBS funding system

lacks such flexibility and serves as a major constraint.

Case Study: 

Embrace Funding Models That Can Accommodate Older IT Systems 

The Air Force’s Aviation Resource Management System (ARMS) is a 30‐year‐old ACAT III aviation 

information reporting system, historically funded with O&M appropriations.154 Due to its age, it did 

not have any of the documentation associated with the DoDI 5000.02 major program acquisition 

process. 

The Air Force determined that required upgrades to the system would have to be carried out using 

RDT&E appropriations, for which DoDI 5000.02 process documentation would be required, causing a 

2‐year delay.

155 By loosening the distinctions between O&M and RDT&E, Congress would allow for 

necessary upgrades to older software systems. 

Statistical evidence lends some support to the hypothesis that the time periods of appropriation

accounts are connected to the quality of DBS procurements. A 2013 study focused on U.S. federal

government IT acquisition projects showed a correlation between funding obligated at the very end of

the fiscal year and comparatively low quality of project outcomes.156 A 2016 paper reiterated many of

these points, concluding that although existing data “do not prove that wasteful year‐end spending

exists,” current constraints “may encourage wasteful spending of taxpayer dollars.”157 Senior defense

officials such as former DoD Comptroller Robert Hale, former Acting Army Secretary Patrick Murphy,

                                                     

152 Former Army DBS PM, conversations with Section 809 Panel staff, May 2017.  153 Jacques S. Gansler, Commercial Off The Shelf (COTS): Doing It Right, presentation for Acquisition Research Symposium, May 14‐15, 

2008. 

154 Defense Information Technology Portfolio Repository (DITPR), accessed August 15, 2017.  155 Air Force CIO staff, emails with Section 809  Panel staff, August 15, 2017.  156 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.  157 Jason J. Fichtner and Adam N. Michel, Curbing the Surge in Year‐End Federal Government Spending: Reforming ‘Use It or Lose It’ Rules, 

accessed August 7, 2017, https://www.mercatus.org/system/files/mercatus‐fichtner‐year‐end‐spending‐v1.pdf. 
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and former Army Business Transformation Office Director LTG Tom Spoehr have all suggested that

timing constraints lead to suboptimal spending outcomes.158

Acquisition officials also described funding flexibility as necessary to build effective cybersecurity

measures into DBSs. In their assessment, when critical needs arise due to unforeseen vulnerabilities,

flexible funding must be available for the immediate development of new capabilities, as going

through a formal POM process can take as long as 2 years.159

Case Study: 

Using Appropriation Account and PE/BLI Flexibility to 

Promote Business Process Reengineering 

The Air Force Way system (AFWay) is an electronic portal that enables users to securely order IT 

hardware, software, and services online. During development of the system’s Version 4.0 technical 

refresh, acquisition personnel leading the effort believed many of the business processes involved in 

ordering IT hardware and services could be made more efficient. Compliance with then‐current DoD 

security requirements necessitated a complete rewrite of the application code, which provided an 

opportunity to introduce concurrently the desired business process efficiencies. 

The proposed improvements were considered new capabilities that required RDT&E funding. AFWay 

was an aging system with a 20‐year‐old set of requirements, being funded solely by O&M. As such, it 

not only lacked RDT&E funds, but also lacked a PE/BLI at which to assign such funds. 

Because of the inability to use O&M dollars for application enhancements in this case, the proposed 

business process improvements could not be included in the rollout of AFWay’s Version 4.0 in 

2015.160 Congress could mitigate this impediment to improving business processes by allowing for 

more malleable distinctions between DBS appropriation accounts.

                                                     

158 Robert Hale, “Why DoD’s Year‐End Spending Needs to Change,” Breaking Defense, September 23, 2016, accessed December 28, 2017, 

http://breakingdefense.com/2016/09/why‐dods‐year‐end‐spending‐needs‐to‐change. Changing Management Behavior: Every Dollar 

Counts, U.S. Army Directive 2016‐16 (2016). David Vergun, “End‐of‐year ‘use it or lose it’ budget mindset to get tossed,” Army News 

Service, April 18, 2016, accessed December 28, 2017, https://www.army.mil/article/166098.  159 Air Force IT acquisition officials, conversations with Section 809 Panel staff, June 2017.  160 Air Force CIO staff, emails with Section 809 Panel staff, August 15, 2017. 
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Case Study: 

Tailoring Funding Timetables to Acknowledge Special Characteristics of DBSs 

The Air Force’s Contracting‐Information Technology (CON‐IT) program is intended to replace the 

outdated Standard Procurement System (SPS) as the departmentwide contract writing system. The 

Air Force used an integrated team of acquisition and contracting personnel to develop an innovative 

acquisition strategy for CON‐IT. 

By using an existing software solution owned by Defense Information Systems Agency (DISA) and 

outsourcing much of the development and training to USDA, the Air Force anticipated avoiding $83 

million in costs and shortening the program schedule by 23 months.161 The integrated team adopted 

an Agile software development methodology and provided a working prototype in 6 weeks, which 

shortened the program schedule by an additional 3 months. 

Because the program succeeded in shortening its timeline by about 2 years, however, the Air Force 

required end‐user software licenses much earlier than originally anticipated or budgeted. End‐user 

license purchases constitute a system deployment, so they must be purchased using Procurement 

appropriations. 

The FY 2018 POM request had already been delivered prior to successful delivery of the prototype 

system. Acquisition officials were able to locate sources of funding in other programs, but none of 

this funding was in the Procurement account, so they could not use it for purchasing end‐user 

licenses. 

Air Force acquisition personnel anticipated that an initial operational deployment would occur at the 

end of 2017 and broader fielding of CON‐IT would occur in late 2018. This timetable was jeopardized 

by different appropriation accounts and the complex rules surrounding them. 

The Air Force was stymied in deployment because it completed a prototype 23 months ahead of time 

and $83 million under budget. Due to substantial time savings, it lacked Procurement appropriations 

specific to the time period in which the budget originally called for them. Officials estimated that if 

money were not obtained for purchase of end‐user licenses in FY 2017, it would cause deployment 

delays and approximately $7 million in added program costs due to simply “waiting for the right color 

of money.”162

By modifying the rules on appropriations timetables and accounts for DBSs, Congress can mitigate 

the unnecessary program delays that exist due to the inherently unpredictable process of Agile DBS 

development. 

One senior industry representative advised Congress to “kill the color of money immediately” with

respect to DBSs.163 He stated that although problems had arisen in implementation, “the concepts are

sound” behind flexibility mechanisms such as the working capital fund used by DISA.164

Other government representatives outside DoD were less vocal in their condemnation of time‐ and

account‐based funding constraints. Software developers from the General Services Administration said

                                                     

161 Ibid.  162 Ibid.  163 Industry organization managing director, conversation with Section 809 Panel staff, June 2017.  164 Ibid. 
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that because they focused on delivering capabilities within very short timeframes, color of money was

rarely a major problem. The software developers did suggest, however, these funding constraints

might have greater effect on other agencies that run larger‐scale development projects. They described

themselves as favoring working capital fund models for software IT acquisition.165

The effect of color of money on DBS programs can be quantifiably estimated using publicly available

federal procurement data. If there were a perfectly even distribution of DBS spending within fiscal

years, about 2 percent of such spending would occur each week. In fact, recent observations show

approximately 10 percent of IT spending concentrated in the final week of the fiscal year.166

Figure 3‐8. Comparison of Military Departments’ Weekly IT Contracting Obligations, FY 2017167

Much of the data in the chart are likely not DBS‐related, but simply represent the purchase of

computers and other equipment for day‐to‐day office use. This analysis, however, quantifies one of the

most clearly visible ways in which the appropriation system produces skewed incentives for

IT acquisition.

                                                     

165 GSA employees, conversation with Section 809 Panel staff, June 2017.  166 Section 809 Panel analysis of FY 2017 Federal Procurement Data System data, January 2, 2018.  167 Data from Federal Procurement Data System, extracted via Adhoc Report on January 2, 2018. Dataset includes all DoD contract actions 

coded with Product and Service Codes D3 or 70 from the Federal Procurement Data System, https://www.fpds.gov, accessed January 2, 

2018. To ensure comparability of data across years, each weekly period contains the same days of the week. The first day of the fiscal 

year (or first 2 days for leap years) are omitted. 

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

$1.2

$1.4

$1.6

$1.8

$2.0

1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52

Contract Action Obligation, Billion USD

Week of Fiscal Year

Army Navy Air Force Other DoD
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This end‐year skewing effect is higher for IT and IT‐related products than for any other aggregate

category of products purchased in substantial quantities by DoD in FY 2017.

Table 3‐4. FY 2017 DoD Contract Obligations, By Aggregated Product Code168

PSC  PSC description  FY 2017 

obligation 

Obligation in final 

week of FY 2017 

Final week as percent 

of FY 2017 total 

69  Training Aids and Devices169  $1.5 billion  $384 million  22.9% 

70 

Information Technology 

Equipment, Including Firmware 

and Software 

$7.0 billion  $945.6 million  13.6% 

19  Ships, Small Craft, Pontoons, and 

Floating Docks  $15.1 billion  $1.8 billion  11.8% 

58  Communication, Detection, and 

Coherent Radiation Equipment  $12.3 billion  $1.4 billion  11.2% 

13  Ammunition and Explosives  $5.5 billion  $581.5 million  10.6% 

Conclusions 

No meaningful distinction exists among RDT&E, Procurement, or O&M for software systems

developed according to modular, Agile principles. According to senior DoD IT officials, “Current

appropriations laws and authorities are not aligned with the way technology is acquired for business

operations.”170 The officials elaborate on the changes that would need to occur to achieve such

alignment:  

To acquire a technology solution that takes advantage of the latest available alternatives Congress would

provide flexibility to current appropriations for business system capability needs. To avoid technical debt,

resources would be available in the appropriation needed immediately for technology capabilities current

in the marketplace.171

The traditional appropriations model provides a helpful framework when developing complex weapon

systems over the course of many years. This traditional model, however, is fundamentally

incompatible with open‐architecture business software programs intended to deliver new capabilities

multiple times per year.

The defense acquisition funding system faces constraints associated with timing, appropriation

account, and PEs/BLIs. These funding constraints lock DBS development into rigid, predetermined

pathways fundamentally at odds with widely accepted best practices for commercial software

development and the continuous engineering nature of software. These best practices include core

principles of Agile development:

                                                     

168 Data from Federal Procurement Data System, extracted via Adhoc Report on January 2, 2018. Only includes 2‐digit product codes with 

FY 2017 DoD obligations greater than $1 billion. 

169 PSC 69, Training Aids and Devices, includes some computers and electronic communications equipment.   170 Deputy Assistant Secretary of Defense for Communications, Command and Control, Cyber and Business Systems (DASD C3CB), Study of 

Commercial Practices: Resourcing Alternatives Deep Dive, July 10, 2017.  171 Ibid. 
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 Delivering software on a regular basis, with continuous end‐user feedback involves

simultaneous research, development, acquisition, and sustainment.172 The current system of

defense appropriation accounts and PEs/BLIs does not acknowledge the fusion of these

processes in software development.

 Delivering working software in a span of weeks or months requires a funding system that can

change the allocation of program resources in such a timeframe.173 The current appropriation

system does not allow for the allocation or reallocation of resources on these timeframes.

Analysis: 

Appropriation Labeling and Decision-Point Blockages 

Service acquisition professionals state that the requirement to fund much of IT software 

development via RDT&E imposes a burden “simply because of the word Development within 

RDT&E.”174

This statement suggests that DoD leadership psychology may be one of the problems associated with 

DBS funding. A given piece of software may never be done developing. As connected systems are 

modified, it may require the continual addition of new RICEFW objects. Consequently, program staff 

could potentially justify the funding of many endeavors under RDT&E, Procurement, or O&M. Those 

concerned primarily with legal compliance, however, may tend to default to the most liberal possible 

interpretation of the term development to ensure they avoid violating the law. 

By allowing the type of funding flexibilities outlined below, Congress can mitigate the degree to 

which nonprogram officials impede DBS development due to DoD’s overabundance of caution 

regarding fiscal law and regulation. 

Ultimately, the more work DBS PMs devote to obligating funds within specific time periods or

accounts, the less work they devote to ensuring positive outcomes for end‐users. For this reason,

greater funding flexibility is required if DBSs are to deliver value to warfighters at substantially lower

cost to taxpayers.

Implementation 

Legislative Branch 

 Fund DBSs in a way that allows for commonly accepted software development approaches. To

do so requires flexibility in both time period limits and appropriation account limits. DoD

cannot effectively manage large IT projects in accordance with best practices without this

flexibility. Account flexibility recommendations (internal reprogramming) and time period

flexibility recommendations (carryover authority) are described below.

                                                     

172 See first principle of Agile Manifesto, “Principles behind the Agile Manifesto,” AgileManifesto.org, accessed November 9, 2017, 

http://agilemanifesto.org/principles.html.  173 Ibid, third principle.  174 Air Force CIO staff, conversation with Section 809 Panel staff, August 15, 2017. 
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 To address appropriation account constraints and allow Agile, sprint‐based software

development decisions to be made in real time, congressional defense committees should

allow internal reprogramming for DBSs, provided that each internal reprogramming is

within an individual DBS portfolio. Congress should allow DoD to manage DBS funding

through internal reprogramming guidelines for reclassifying funds (including maximum

thresholds). Further, movement of DBS funding across O&M accounts, RDT&E accounts,

and Procurement accounts of a DBS portfolio should not count against general transfer

authority and should not require prior approval from congressional committees.

 To address time period constraints, add a section to the annual defense appropriation act

permitting DBS carryover authority of 10 percent up to 6 months. In other words, DoD

would be empowered to delay the obligation of funds for up to 6 months beyond the end of

the fiscal year.

 Repeal the regular appropriations bill section on investment item unit costs to acknowledge

that, for the purpose of modifying or enhancing DBSs, there is no technically meaningful

distinction between RDT&E, Procurement, and O&M.175

 In future appropriations acts, omit the section reading, “appropriations which are available

to the Department of Defense for operation and maintenance may be used to purchase items

having an investment item unit cost of not more than $250,000.”176

Executive Branch 

 Allow for flexibility across appropriation accounts at the DBS portfolio level, by delegating

internal reprogramming authority to portfolio leads.

 To address appropriation account constraints, OSD should issue policy or guidance to the

Comptroller, CMO, and DBS managers. The policy or guidance should specify that DBS

internal reprogramming should be maintained under the decision‐making authority of DBS

portfolio leads. DBS portfolio leads should be permitted to redistribute available funding

among their own subordinate DBS program accounts. The CMO would send regular reports

to the DoD Comptroller detailing all such transfers after the fact, to be incorporated into the

Comptroller’s internal reprogramming notifications to the congressional defense

committees.

 The DoD comptroller and the CMO should issue policy or guidance stating their intent not to

decrement funding due to DBS portfolios retaining unobligated money within targeted phases

of the fiscal year. Without this policy or guidance, carryover provisions would be unlikely to

produce benefits.

                                                     

175 This recommendation would be in keeping with changes under the FY 2017 NDAA. The law repealed Use of Operation and 

Maintenance Funds for Purchase of Investment Items: Limitation, 10 U.S.C. §2245a, which mandated that “funds appropriated to the 

Department of Defense for operation and maintenance may not be used to purchase any item (including any item to be acquired as a 

replacement for an item) that has an investment item unit cost that is greater than $250,000.”  176 Section 8032 of the Consolidated Appropriations Act for FY 2017, Pub .L. No. 115–31 (2016). 
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 Rewrite FMR Volume 2A, Chapter 1, Section 010212(B) to acknowledge that, for the purpose of

modifying or enhancing DBSs, there is no technically meaningful distinction between RDT&E,

Procurement, and O&M.

 Eliminate the $250,000 barrier between expenses and investments in FMR Volume 2A,

Chapter 1, Section 010212(B)(4).

Note: No additional implementation material is included for this recommendation. 

Implications for Other Agencies 

 DoD (or parts of DoD) could serve as a pilot program for changing the U.S. government’s

approach to funding the acquisition of business software IT. Depending on problems

encountered and lessons learned, similar approaches could be adopted by other agencies.
Section 3 

Defense Business Systems:

Acquisition of Information Technology Systems

Implementation Details 

Recommendations 16 and 17

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LEGISLATIVE PROVISIONS — 809 PANEL

STATUTORY RECOMMENDATIONS RELATING TO 

DEFENSE BUSINESS SYSTEMS

[NOTE: The draft legislative text below is followed by a “Sections Affected” display, 

showing the text of each provision of law affected by the draft legislative text 

below.] 

1 SEC. 601. DEFENSE BUSINESS SYSTEMS. 

2 (a) ACQUISITION OF DEFENSE BUSINESS SYSTEMS.— 

3 (1) AUTHORITY OF CHIEF MANAGEMENT OFFICER.—Section 2222 of title 10, 

4 United States Code, is amended by striking subsections (c) and (d) and inserting the 

5 following new subsection (c): 

6 “(c) ACQUISITION OF DEFENSE BUSINESS SYSTEMS.— 

7 “(1) AUTHORITY OF CHIEF MANAGEMENT OFFICER.—Subject to the authority, 

8 direction, and control of the Secretary of Defense, the Chief Management Officer of the 

9 Department of Defense (in this section referred to as the “CMO”), as an element of 

10 CMO’s mission of managing the business operations of the Department, shall be 

11 responsible for, and shall have the authority for, management of defense business system 

12 portfolios, including acquisition of defense business systems included in any such 

13 portfolio. The authority of the CMO under this subsection includes authority for 

14 requirements determination and allocation of resources with respect to defense business 

15 system portfolios. 

16 “(2) EXCLUSION FROM LAWS APPLICABLE TO ACQUISITION OF MAJOR DEFENSE 

17 ACQUISITION PROGRAMS AND MAJOR AUTOMATED INFORMATION SYSTEM PROGRAMS.—
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1 The CMO may conduct acquisitions of defense business systems under paragraph (1) 

2 without regard to the following: 

3 “(A) Any law otherwise applicable to acquisition of programs that are 

4 considered to be major defense acquisition programs. 

5 “(B) Section 1706 of this title. 

6 “(C) Section 2223a of this title and the program established under that 

7 section.

8 “(C) Section 2302d of this title. 

9 “(D) Section 2431a of this title. 

10 “(E) Section 806 of Public Law 109-163 (10 U.S.C. 2302 note). 

11 “(F) Section 883(e) of Public Law 114-92 (10 U.S.C. 2223a note).”.

12 (2) REPEAL OF SUPERSEDED AUTHORITY OF MILESTONE DECISION AUTHORITY.—

13 Such section is further amended by striking subsection (h). 

14 (b) GOVERNANCE STRUCTURE FOR DEFENSE BUSINESS SYSTEMS.—Such section is further 

15 amended by inserting after subsection (c), as added by subsection (a) of this section, the 

16 following new subsection (d): 

17 “(d) GOVERNANCE STRUCTURE FOR DEFENSE BUSINESS SYSTEMS.—The Secretary of 

18 Defense, acting through the CMO, shall provide for a governance structure for defense business 

19 systems based upon— 

20 “(1) identification of Department of Defense enterprise business processes; and

21 “(2) for each such identified enterprise business process— 
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1 “(A) designation of an officer or official within the Office of the CMO to 

2 have responsibility throughout the Department of Defense for the portfolio of 

3 defense business systems supporting that process; and 

4 “(B) designation— 

5 “(i) for each military department, of an officer or official to have 

6 responsibility within that military department for the portfolio of defense 

7 business systems supporting that process, including, to the extent provided 

8 by the CMO, authority for acquisition of such business systems; and 

9 “(ii) for each Defense Agency or Department of Defense Field 

10 Activity designated by the Secretary for this purpose, of an officer or 

11 official to have responsibility within that Defense Agency or Field 

12 Activity for the portfolio of defense business systems supporting that 

13 process, including, to the extent provided by the CMO, authority for 

14 acquisition of such business systems.”.

15 (c) REPEAL OF LIMITATION ON DEFENSE BUSINESS SYSTEMS PROCEEDING INTO 

16 DEVELOPMENT.—Subsection (g) of such section is repealed. 

17 (d) DEFINITIONS.—Subsection (i) of such section is redesignated as subsection (g) as is 

18 amended— 

19 (1) by striking paragraphs (2), (4), (5), and (9); 

20 (2) by redesignating paragraph (3) as paragraph (2) and amending that paragraph 

21 to read as follows: 
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1 “(2) DEFENSE BUSINESS SYSTEM PORTFOLIO.—The term ‘defense business system 

2 portfolio’ means the defense business systems that collectively support a particular 

3 Department of Defense business process or function.”;

4 (3) by redesignating paragraph (6) as paragraph (3);

5 (4) by redesignating paragraph (7) as paragraph (4) and in that paragraph by 

6 striking “section 11101 of title 40, United States Code” and inserting “section 3502 of 

7 title 44”; and

8 (5) by redesignating paragraphs (8), (10), and (11) as paragraphs (5), (6), and (7), 

9 respectively.

10 (e) DEFENSE BUSINESS ENTERPRISE ARCHITECTURE.—Subsection (e) of such section is 

11 amended— 

12 (1) in paragraph (1), by striking “working through the Under Secretary of Defense 

13 for Business Management and Information” and inserting “acting through the CMO”;

14 (2) in paragraph (2), by striking “and shall” and all that follows through the end 

15 and inserting a period; and 

16 (3) in paragraph (4)(B), by striking “, including” and all that follows through the 

17 end and inserting a period. 

18 (f) DEFENSE BUSINESS COUNCIL.—Subsection (f) of such section is amended— 

19 (1) in paragraph (1)— 

20 (A) by inserting “and” after “business processes,”; and

21 (B) by striking “, and developing requirements for defense business 

22 systems”; and

23 (2) in paragraph (2)— 
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1 (A) by striking “Chief Management Officers” in subparagraph (A) and 

2 inserting “Secretaries”; and

3 (B) by striking “Under Secretary of Defense for Acquisition, Technology, 

4 and Logistics” in subparagraph (B) and inserting “Under Secretary of Defense for 

5 Acquisition and Sustainment”.

6 (g) DEFENSE BUSINESS SYSTEMS GENERALLY.—Subsection (b) of such section is 

7 amended— 

8 (1) in the matter preceding paragraph (1), by striking “each covered” and all that 

9 follows through “of Defense” and inserting “each defense business system”; and 

10 (2) in paragraph (2), by striking “a comprehensive” and all that follows and 

11 inserting “the defense business enterprise architecture developed pursuant to subsection 

12 (e)”.

13 (h) SECTION HEADING.— 

14 (1) REVISED HEADING.—The heading of such section is amended by striking the 

15 colon and all that follows. 

16 (2) TABLE OF SECTIONS.—The item relating to such section in the table of sections 

17 at the beginning of chapter 131 of such title is amended by striking the colon and all that 

18 follows and inserting a period. 

—————— 

[Changes recommended to 10 U.S.C. 2222 are shown below. 

[Matter to be deleted is shown in stricken-thru text; matter to be inserted is shown in bold italic

text]

§2222. Defense business systems: business process reengineering; enterprise architecture; 

management 
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(a) DEFENSE BUSINESS PROCESSES GENERALLY.—The Secretary of Defense shall ensure 

that defense business processes are reviewed, and as appropriate revised, through business 

process reengineering to match best commercial practices, to the maximum extent practicable, so 

as to minimize customization of commercial business systems.

(b) DEFENSE BUSINESS SYSTEMS GENERALLY.—The Secretary of Defense shall ensure 

that each covered defense business system developed, deployed, and operated by the Department 

of Defense— 

(1) supports efficient business processes that have been reviewed, and as 

appropriate revised, through business process reengineering; 

(2) is integrated into a the comprehensive defense business enterprise 

architecture developed pursuant to subsection (e); 

(3) is managed in a manner that provides visibility into, and traceability of, 

expenditures for the system; and 

(4) uses an acquisition and sustainment strategy that prioritizes the use of 

commercial software and business practices.

(c) ACQUISITION OF DEFENSE BUSINESS SYSTEMS.— 

(1) AUTHORITY OF CHIEF MANAGEMENT OFFICER.—Subject to the authority, 

direction, and control of the Secretary of Defense, the Chief Management Officer of 

the Department of Defense (in this section referred to as the ‘CMO’), as an element of 

CMO’s mission of managing the business operations of the Department, shall be 

responsible for, and shall have the authority for, management of defense business 

system portfolios, including acquisition of defense business systems included in any

such portfolio. The authority of the CMO under this subsection includes authority for 

requirements determination and allocation of resources with respect to defense 

business system portfolios. 

(2) EXCLUSION FROM LAWS APPLICABLE TO ACQUISITION OF MAJOR DEFENSE 

ACQUISITION PROGRAMS AND MAJOR AUTOMATED INFORMATION SYSTEM PROGRAMS.—

The CMO may conduct acquisitions of defense business systems under paragraph (1) 

without regard to the following: 

(A) Any law otherwise applicable to acquisition of programs that are 

considered to be major defense acquisition programs. 

(B) Section 1706 of this title.

(C) Section 2223a of this title and the program established under that 

section.

(C) Section 2302d of this title.

(D) Section 2431a of this title.

(E) Section 806 of Public Law 109-163 (10 U.S.C. 2302 note). 

(F) Section 883(e) of Public Law 114-92 (10 U.S.C. 2223a note). 

(d) GOVERNANCE STRUCTURE FOR DEFENSE BUSINESS SYSTEMS.—The Secretary of 

Defense, acting through the CMO, shall provide for a governance structure for defense 

business systems based upon— 

(1) identification of Department of Defense enterprise business processes; and

(2) for each such identified enterprise business process— 
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(A) designation of an officer or official within the Office of the Chief 

Management Officer to have responsibility throughout the Department of 

Defense for the portfolio of defense business systems supporting that process; 

and 

(B) designation— 

(i) for each military department, of an officer or official to have 

responsibility within that military department for the portfolio of defense 

business systems supporting that process, including, to the extent 

provided by the CMO, authority for acquisition of such business 

systems; and

(ii) for each Defense Agency or Department of Defense Field 

Activity designated by the Secretary for this purpose, of an officer or 

official to have responsibility within that Defense Agency or Field 

Activity for the portfolio of defense business systems supporting that 

process, including, to the extent provided by the CMO, authority for 

acquisition of such business systems. 

(c) ISSUANCE OF GUIDANCE.— 

(1) SECRETARY OF DEFENSE GUIDANCE.—The Secretary shall issue guidance to 

provide for the coordination of, and decision making for, the planning, programming, and 

control of investments in covered defense business systems.

(2) SUPPORTING GUIDANCE.—The Secretary shall direct the Under Secretary of 

Defense for Business Management and Information, the Under Secretary of Defense for 

Acquisition, Technology, and Logistics, the Chief Information Officer, and the Chief 

Management Officer of each of the military departments to issue and maintain supporting 

guidance, as appropriate and within their respective areas of responsibility, for the 

guidance of the Secretary issued under paragraph (1).

(d) GUIDANCE ELEMENTS.—The guidance issued under subsection (c)(1) shall include the 

following elements:

(1) Policy to ensure that the business processes of the Department of Defense are 

continuously reviewed and revised— 

(A) to implement the most streamlined and efficient business processes 

practicable; and

(B) to eliminate or reduce the need to tailor commercial off-the-shelf 

systems to meet or incorporate requirements or interfaces that are unique to the 

Department of Defense.

(2) A process to establish requirements for covered defense business systems.

(3) Mechanisms for the planning and control of investments in covered defense 

business systems, including a process for the collection and review of programming and 

budgeting information for covered defense business systems.

(4) Policy requiring the periodic review of covered defense business systems that 

have been fully deployed, by portfolio, to ensure that investments in such portfolios are 

appropriate. 

(5) Policy to ensure full consideration of sustainability and technological 

refreshment requirements, and the appropriate use of open architectures. 
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(6) Policy to ensure that best acquisition and systems engineering practices are 

used in the procurement and deployment of commercial systems, modified commercial 

systems, and defense-unique systems to meet Department of Defense missions. 

(e) DEFENSE BUSINESS ENTERPRISE ARCHITECTURE.— 

(1) BLUEPRINT.—The Secretary, working acting through the Under Secretary of 

Defense for Business Management and Information, CMO, shall develop and maintain a 

blueprint to guide the development of integrated business processes within the 

Department of Defense. Such blueprint shall be known as the “defense business 

enterprise architecture”. 

(2) PURPOSE.—The defense business enterprise architecture shall be sufficiently 

defined to effectively guide implementation of interoperable defense business system 

solutions and shall be consistent with the policies and procedures established by the 

Director of the Office of Management and Budget. 

(3) ELEMENTS.—The defense business enterprise architecture shall— 

(A) include policies, procedures, business data standards, business 

performance measures, and business information requirements that apply 

uniformly throughout the Department of Defense; and 

(B) enable the Department of Defense to— 

(i) comply with all applicable law, including Federal accounting, 

financial management, and reporting requirements; 

(ii) routinely produce verifiable, timely, accurate, and reliable 

business and financial information for management purposes; 

(iii) integrate budget, accounting, and program information and 

systems; and

(iv) identify whether each existing business system is a part of the 

business systems environment outlined by the defense business enterprise 

architecture, will become a part of that environment with appropriate 

modifications, or is not a part of that environment. 

(4) INTEGRATION INTO INFORMATION TECHNOLOGY ARCHITECTURE.—(A) The 

defense business enterprise architecture shall be integrated into the information 

technology enterprise architecture required under subparagraph (B). 

(B) The Chief Information Officer of the Department of Defense shall develop an 

information technology enterprise architecture. The architecture shall describe a plan for 

improving the information technology and computing infrastructure of the Department of 

Defense, including for each of the major business processes conducted by the Department 

of Defense. 

(5) COMMON ENTERPRISE DATA.—The defense business enterprise shall include 

enterprise data that may be automatically extracted from the relevant systems to facilitate 

Department of Defense-wide analysis and management of its business operations. 

(6) ROLES AND RESPONSIBILITIES.— 

(A) The Chief Management Officer of the Department of Defense shall 

have primary decision-making authority with respect to the development of 

common enterprise data. In consultation with the Defense Business Council, the 

Chief Management Officer shall— 

(i) develop an associated data governance process; and
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(ii) oversee the preparation, extraction, and provision of data 

across the defense business enterprise. 

(B) The Chief Management Officer and the Under Secretary of Defense 

(Comptroller) shall— 

(i) in consultation with the Defense Business Council, document 

and maintain any common enterprise data for their respective areas of 

authority; 

 (ii) participate in any related data governance process;

(iii) extract data from defense business systems as needed to 

support priority activities and analyses; 

(iv) when appropriate, ensure the source data is the same as that 

used to produce the financial statements subject to annual audit; 

(v) in consultation with the Defense Business Council, provide 

access, except as otherwise provided by law or regulation, to such data to 

the Office of the Secretary of Defense, the Joint Staff, the military 

departments, the combatant commands, the Defense Agencies, the 

Department of Defense Field Activities, and all other offices, agencies, 

activities, and commands of the Department of Defense; and 

(vi) ensure consistency of the common enterprise data maintained 

by their respective organizations. 

(C) The Director of Cost Assessment and Program Evaluation shall have 

access to data for the purpose of executing missions as designated by the 

Secretary of Defense.

(D) The Secretary of Defense, the Chairman of the Joint Chiefs of Staff, 

the Secretaries of the military departments, commanders of combatant commands, 

the heads of the Defense Agencies, the heads of the Department of Defense Field 

Activities, and the heads of all other offices, agencies, activities, and commands 

of the Department of Defense shall provide access to the relevant system of such 

department, combatant command, Defense Agency, Defense Field Activity, or 

office, agency, activity, and command organization, as applicable, and data 

extracted from such system, for purposes of automatically populating data sets 

coded with common enterprise data.

(f) DEFENSE BUSINESS COUNCIL.— 

(1) REQUIREMENT FOR COUNCIL.—The Secretary shall establish a Defense 

Business Council to provide advice to the Secretary on developing the defense business 

enterprise architecture, reengineering the Department's business processes, and 

developing and deploying defense business systems, and developing requirements for 

defense business systems. The Council shall be chaired by the Under Secretary of 

Defense for Business Management and Information CMO and the Chief Information 

Officer of the Department of Defense. 

(2) MEMBERSHIP.—The membership of the Council shall include the following: 

(A) The Chief Management Officers Secretaries of the military 

departments, or their designees. 

(B) The following officials of the Department of Defense, or their 

designees:
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(i) The Under Secretary of Defense for Acquisition, Technology,

and Logistics Sustainment with respect to acquisition, logistics, and 

installations management processes.

(ii) The Under Secretary of Defense (Comptroller) with respect to 

financial management and planning and budgeting processes. 

(iii) The Under Secretary of Defense for Personnel and Readiness 

with respect to human resources management processes.

(g) APPROVALS REQUIRED FOR DEVELOPMENT.— 

(1) INITIAL APPROVAL REQUIRED.—The Secretary shall ensure that a covered

defense business system program cannot proceed into development (or, if no 

development is required, into production or fielding) unless the appropriate approval 

official (as specified in paragraph (2)) determines that— 

(A) the system has been, or is being, reengineered to be as streamlined and 

efficient as practicable, and the implementation of the system will maximize the 

elimination of unique software requirements and unique interfaces; 

(B) the system and business system portfolio are or will be in compliance 

with the defense business enterprise architecture developed pursuant to subsection 

(e) or will be in compliance as a result of modifications planned; 

(C) the system has valid, achievable requirements and a viable plan for 

implementing those requirements (including, as appropriate, market research, 

business process reengineering, and prototyping activities); 

(D) the system has an acquisition strategy designed to eliminate or reduce 

the need to tailor commercial off-the-shelf systems to meet unique requirements, 

incorporate unique requirements, or incorporate unique interfaces to the 

maximum extent practicable; and

(E) the system is in compliance with the Department's auditability 

requirements.

(2) APPROPRIATE OFFICIAL.—For purposes of paragraph (1), the appropriate 

approval official with respect to a covered defense business system is the following:

(A) Except as may be provided in subparagraph (C), in the case of a 

priority defense business system, the Under Secretary of Defense for Business 

Management and Information. 

(B) Except as may be provided in subparagraph (C), for any defense 

business system other than a priority defense business system— 

(i) in the case of a system of a military department, the Chief 

Management Officer of that military department; and

(ii) in the case of a system of a Defense Agency or Department of 

Defense Field Activity, or a system that will support the business process 

of more than one military department or Defense Agency or Department 

of Defense Field Activity, the Under Secretary of Defense for Business 

Management and Information. 

(C) In the case of any defense business system, such official other than the 

applicable official under subparagraph (A) or (B) as the Secretary designates for 

such purpose. 
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(3) ANNUAL CERTIFICATION.—For any fiscal year in which funds are expended for 

development or sustainment pursuant to a covered defense business system program, the 

appropriate approval official shall review the system and certify, certify with conditions, 

or decline to certify, as the case may be, that it continues to satisfy the requirements of 

paragraph (1). If the approval official determines that certification cannot be granted, the 

approval official shall notify the milestone decision authority for the program and provide 

a recommendation for corrective action.

(4) OBLIGATION OF FUNDS IN VIOLATION OF REQUIREMENTS.—The obligation of 

Department of Defense funds for a covered defense business system program that has not 

been certified in accordance with paragraph (3) is a violation of section 1341(a)(1)(A) of 

title 31.

(h) RESPONSIBILITY OF MILESTONE DECISION AUTHORITY.—The milestone decision 

authority for a covered defense business system program shall be responsible for the acquisition 

of such system and shall ensure that acquisition process approvals are not considered for such 

system until the relevant certifications and approvals have been made under this section. 

(i) (g) DEFINITIONS.—In this section: 

(1)(A) DEFENSE BUSINESS SYSTEM.—The term “defense business system” means 

an information system that is operated by, for, or on behalf of the Department of Defense, 

including any of the following: 

(i) A financial system.

(ii) A financial data feeder system.

(iii) A contracting system.

(iv) A logistics system.

(v) A planning and budgeting system. 

(vi) An installations management system.

(vii) A human resources management system.

(viii) A training and readiness system.

(B) The term does not include— 

(i) a national security system; or

(ii) an information system used exclusively by and within the defense 

commissary system or the exchange system or other instrumentality of the 

Department of Defense conducted for the morale, welfare, and recreation of 

members of the armed forces using nonappropriated funds. 

(2) COVERED DEFENSE BUSINESS SYSTEM.—The term “covered defense business 

system” means a defense business system that is expected to have a total amount of 

budget authority, over the period of the current future-years defense program submitted 

to Congress under section 221 of this title, in excess of $50,000,000. 

(3) (2) DEFENSE BUSINESS SYSTEM PORTFOLIO.—The term “defense business 

system portfolio” means all the defense business systems performing functions closely 

related to the functions performed or to be performed by a covered defense business 
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system that collectively support a particular Department of Defense business process or 

function. 

(4) COVERED DEFENSE BUSINESS SYSTEM PROGRAM.—The term “covered defense 

business system program” means a defense acquisition program to develop and field a 

covered defense business system or an increment of a covered defense business system.

(5) PRIORITY DEFENSE BUSINESS SYSTEM.—The term “priority defense business 

system” means a defense business system that is— 

(A) expected to have a total amount of budget authority over the period of 

the current future-years defense program submitted to Congress under section 221 

of this title in excess of $250,000,000; or 

(B) designated by the Under Secretary of Defense for Business 

Management and Information 1 as a priority defense business system, based on 

specific program analyses of factors including complexity, scope, and technical 

risk, and after notification to Congress of such designation. 

(6) (3) ENTERPRISE ARCHITECTURE.—The term “enterprise architecture” has the 

meaning given that term in section 3601(4) of title 44. 

(7) (4) INFORMATION SYSTEM.—The term “information system” has the meaning 

given that term in section 11101 3502 of title 40 44, United States Code. 

(8) (5) NATIONAL SECURITY SYSTEM.—The term “national security system” has 

the meaning given that term in section 3552(b)(6)(A) of title 44. 

(9) BUSINESS PROCESS MAPPING.—The term “business process mapping” means a 

procedure in which the steps in a business process are clarified and documented in both 

written form and in a flow chart. 

(10) (6) COMMON ENTERPRISE DATA.—The term “common enterprise data” means 

business operations or management-related data, generally from defense business 

systems, in a usable format that is automatically accessible by authorized personnel 

and organizations. 

(11) (7) DATA GOVERNANCE PROCESS.—The term “data governance process” 

means a system to manage the timely Department of Defense-wide sharing of data 

described under subsection (a)(6)(A) [Probably should refer to (e)(6)(A)]. 

————— 

Statutes referred to in the Definitions subsection of 10 U.S.C. 2222 are as follows: 

44 U.S.C. 3601(f): 

(4) “enterprise architecture”— 

(A) means— 
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(i) a strategic information asset base, which defines the mission;

(ii) the information necessary to perform the mission;

(iii) the technologies necessary to perform the mission; and

(iv) the transitional processes for implementing new technologies in 

response to changing mission needs; and 

(B) includes— 

(i) a baseline architecture;

(ii) a target architecture; and

(iii) a sequencing plan;

——— 

40 U.S.C. 11101: 

(5) INFORMATION SYSTEM.—The term “information system” has the meaning 

given that term in section 3502 of title 44 [set forth below]. 

(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, 

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. 

40 U.S.C. 11103: 

(a) DEFINITION.— 

(1) NATIONAL SECURITY SYSTEM.—In this section, the term “national security 

system” means a telecommunications or information system operated by the Federal 

Government, the function, operation, or use of which— 

(A) involves intelligence activities;

(B) involves cryptologic activities related to national security;

(C) involves command and control of military forces; 
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(D) involves equipment that is an integral part of a weapon or weapons 

system; or

(E) subject to paragraph (2), is critical to the direct fulfillment of military 

or intelligence missions.

(2) LIMITATION.—Paragraph (1)(E) does not include a system to be used for 

routine administrative and business applications (including payroll, finance, logistics, and 

personnel management applications). 

44 U.S.C. 3502: 

(6) the term “information resources” means information and related resources, 

such as personnel, equipment, funds, and information technology; 

(7) *** 

(8) the term “information system” means a discrete set of information resources 

organized for the collection, processing, maintenance, use, sharing, dissemination, or 

disposition of information; 

(9) the term “information technology” has the meaning given that term in section 

11101 of title 40 but does not include national security systems as defined in section 

11103 of title 40; 

–––– 

44 U.S.C. 3552(b)(6) 

(6)(A) The term “national security system” means any information system 

(including any telecommunications system) used or operated by an agency or by a 

contractor of an agency, or other organization on behalf of an agency- 

(i) the function, operation, or use of which- 

(I) involves intelligence activities;

(II) involves cryptologic activities related to national security;

(III) involves command and control of military forces; 

(IV) involves equipment that is an integral part of a weapon or 

weapons system; or 

(V) subject to subparagraph (B), is critical to the direct fulfillment 

of military or intelligence missions; or

(ii) is protected at all times by procedures established for information that 

have been specifically authorized under criteria established by an Executive order 

or an Act of Congress to be kept classified in the interest of national defense or 

foreign policy. 

(B) Subparagraph (A)(i)(V) does not include a system that is to be used for 

routine administrative and business applications (including payroll, finance, logistics, and 

personnel management applications). 
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Section 4 

Earned Value Management for 

Software Programs Using Agile 

Using the measurement approach appropriate for the IT development process employed 

helps ensure the product meets end-user needs and fulfills the mission requirement. 

RECOMMENDATION

Rec. 19: Eliminate the Earned Value Management mandate for software programs using

Agile methods.

   
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INTRODUCTION 

DoD uses EVM to periodically measure linear, waterfall‐based programs with firm baselines

established prior to starting development. EVM is not well suited as a measurement tool in an Agile

environment, which is dynamic by design. The Section 809 Panel recommends the following in regard

to use of EVM:

 When Agile methods are used for software development or integration contracts, EVM will not

be mandated at any dollar value. EVM is still required for non‐Agile programs.

 For all Agile software development or integration programs, the PEO should approve

appropriate project monitoring and control methods, which may include EVM, that provide

faith in the quality of data and, at a minimum, track schedule, cost, and estimate at completion.
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EVM for Software Programs Using Agile    Volume 1   |   Page 151

RECOMMENDATION 

Recommendation 19: Eliminate the Earned Value Management mandate for 

software programs using Agile methods. 

Problem 

DoD established use of EVM as a requirement for periodically measuring linear programs with firm

baselines established prior to starting development. EVM is not well suited as a measurement tool in an

Agile environment, which is dynamic by design.

Background 

DoD’s use of EVM originated in the 1967 DoDI 7000.2 Performance Measurement for Selected Acquisitions.

1

In simple terms, DoD uses EVM to track contractors’ progress against a baseline and provide a

mechanism for reporting key metrics. For example, cost performance index (CPI) measures

conformance of actual work completed to actual cost incurred, and schedule performance index (SPI) is

the ratio of the earned value to the planned value.2 The following are examples of key metrics:

 Cost variance

 CPI

 Schedule variance

 SPI

 Budgeted cost of work scheduled

 Actual cost of work performed

 Estimate to complete

 Estimate at completion

EVM, an important management tool for DoD for the last several decades, is also used in commercial

industry and advocated for by organizations such as the Project Management Institute (PMI).3 EVM

remains the prevailing tool by which DoD measures performance on large contracts. It was originally

developed to measure project performance using the waterfall approach. Because threats and

technology are now constantly evolving and necessitating rapid responses to changing operational

requirements, DoD programs are transitioning to Agile methods to deliver capability more quickly.4

In March 2009, the Defense Science Board Task Force on DoD Policies and Procedures for the

Acquisition of IT recommended, “The USD(AT&L) should lead an effort in conjunction with the Vice

Chairman, Joint Chiefs of Staff, to develop new, streamlined, and agile capabilities (requirements)

                                                     

1 DoDI 7000.2 was superseded by Earned Value Management Systems, Electronic Industries Alliance Standard 748, current release.  2 “The Time Dependence of CPI and SPI for Software Projects,” R. D. H. Warburton, Project Management Institute, accessed November 9, 

2017, https://www.pmi.org/learning/library/earned‐value‐management‐cost‐index‐6427.  3 Project Management Institute, The Practice Standard for Earned Value Management—Second Edition (Newton Square, PA: Project 

Management Institute, 2011). 

4 “Agile by the Numbers,” Peter Viechnicki and Mahesh Kelkar, Deloitte Insights, accessed November 9, 2017, 

https://dupress.deloitte.com/dup‐us‐en/industry/public‐sector/agile‐in‐government‐by‐the‐numbers.html.  
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Page 152   |   Volume 1    EVM for Software Programs Using Agile

development and acquisition processes and associated policies for information technology programs.”5

Congress accepted this recommendation, and in the FY 2010 NDAA required the “Secretary of Defense

[to] develop and implement a new acquisition process for [IT] systems.” This process included several

principles of Agile development, such as early and continual involvement of the user; multiple rapidly

executed increments or releases of capability; early, successive prototyping to support an evolutionary

approach; and a modular open‐systems approach.6 Although DoD did not fully implement this new

acquisition process for IT systems, Agile continued to gain traction as an effective method for

developing capability more quickly with greater responsiveness to user requirements.

As Agile continued to gain popularity, many viewed EVM techniques as too difficult to implement

effectively on an Agile project.7 The rationale was that EVM cannot easily accommodate fluid

requirements and shifting baselines.8 By its nature, Agile is intended to provide more current and

visible feedback to stakeholders participating in integrated development teams through near real‐time

performance reporting and frequent releases of working capabilities. To analyze this potential conflict,

in July 2014 the Office of Performance Assessments and Root Cause Analysis (PARCA) initiated

discussions with various DoD services and agencies to address the possibility of implementing EVM

and Agile development practices together on DoD programs. PARCA ultimately started an initiative to

explore the joint applicability of Agile and EVM, which resulted in DoD publishing the PARCA Agile

and EVM Project Manager’s Desk Guide in March 2016. The desk guide provides a resource for DoD

personnel whose work includes programs that apply both Agile and EVM.9

Although some argue that EVM and Agile are not compatible, using an Agile approach does not

preclude the need for disciplined program management and performance measurement processes.

Program managers should select appropriate resources from their toolkit based on program

characteristics, and EVM is just one of many tools available. PMI, the Software Engineering Institute at

Carnegie Mellon University, the Institute of Electrical and Electronics Engineers, and the GAO have

published many best practices for effectively planning and managing major IT acquisitions.10

The current DoD requirement to use EVM applies to all cost‐ and incentive‐type contracts of

$20 million or more. For cost‐ and incentive‐type contracts of $100 million or more, the contractor is

required to have a certified EVM system. Both of these requirements apply regardless of the

development approach (e.g., waterfall, Agile, other).11

                                                     

5 Defense Science Board, Report of the Defense Science Board Task Force on Department of Defense Policies and Procedures for the 

Acquisition of Information Technology, OUSD(AT&L), 2009, x, accessed November 27, 2017, https://www.hsdl.org/?view&did=37450.   6 FY 2010 NDAA, Pub. L. No. 111‐84, 123 Stat. 2402, Section 804 (b) (2009).  7 “Measuring Integrated Progress on Agile Software Development Projects,” Tamara Sulaiman and Hubert Smits, Methods and Tools, 

accessed October 23, 2017, http://www.methodsandtools.com/archive/archive.php?id=61.  8 Ibid. 

9 OUSD AT&L (PARCA), Agile and Earned Value Management: A Project Manager’s Desk Guide, accessed November 9, 2017, 

https://www.acq.osd.mil/evm/docs/PARCA%20Agile%20and%20EVM%20PM%20Desk%20Guide.pdf.  10 GAO, DoD Major Automated Information Systems: Improvements Can Be Made in Applying Leading Practices for Managing Risk and 

Testing, GAO Report 17‐322, accessed November 9, 2017, http://www.gao.gov/assets/690/683831.pdf.   11 Earned Value Management System, DFARS 234.2. 
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Findings

Using EVM and Agile Together 

For EVM to work with Agile, users must tailor EVM to integrate into the overall program management

approach. Software programs are frequently tasked with implementing fast‐changing technology or

business solutions (e.g., functional changes needed to achieve future business processes).12 Agile

improves performance visibility, continually adapts to changing priorities, and improves customer

engagement and satisfaction by bringing the most valuable products and features to market faster and

more predictably.13 Agile also complements reengineering of business processes to adopt best business

practices from COTS software products through this customer‐focused approach. Agile projects

inherently require maximum flexibility to adjust the baseline as software development progresses and

releases are developed and delivered. By contrast, EVM methods stress the importance of establishing

a stable baseline for defined work in the planning phase before the project starts.14 EVM also assumes

linear progress on task execution and completion for schedule and cost‐performance measurements.

Coexistence of Agile and EVM requires a tailored approach, which can be costly and time‐consuming

to develop and support. Implementing tailored EVM can appear to be a contrived solution compared

to more modern tools that support the inherent transparency of the Agile development process.

Limited Value of EVM 

Given the dynamic nature of Agile, implementing a batch‐oriented EVM system has limited value in an

Agile environment. By its nature, Agile provides dynamic and ongoing feedback to stakeholders

participating on development teams.15 The opposite is true for EVM techniques, which take a static

measurement at a point in time. Legacy accounting and program management tracking systems can

only accrue performance data once or twice a month. Today, timekeeping systems are linked to a cost

system that updates weekly.16  

An Acquisition Category I project manager interviewed by the Section 809 Panel stated,  

EVM slows me up. It can take up to 9 months for an integrated baseline review [IBR] after which work

actually starts ... then add 3 months to get meaningful metrics, and you are a year in before getting any

usable performance data.17  

                                                     

12 Business Systems Requirements and Acquisition, DoDI 5000.75 (2017).  13 “Embracing Agile,” Darrell K. Rigby, Jeff Sutherland, and Hirotaka Takeuchi, Harvard Business Review, accessed November 9, 2017, 

https://hbr.org/2016/05/embracing‐agile.  14 DoD Defense Contract Management Agency Instruction: Earned Value Management System Compliance Reviews, DCMA‐INST 208, 

Change 1 (2017). 

15 “12 Principles Behind the Agile Manifesto,” Agile Alliance, accessed November 27, 2017, https://www.agilealliance.org/agile101/12‐

principles‐behind‐the‐agile‐manifesto/.  16 “Part 2 – Weekly Earned Value: More trouble than it’s worth?” Humphreys and Associates, accessed November 9, 2017, 

https://blog.humphreys‐assoc.com/part‐2‐weekly‐earned‐value/.  17 COL Pat Flanders, meeting with Section 809 Panel staff, May 11, 2017.  
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This situation is in contrast to an Agile project for which multiple working software releases would be

expected during the first year. DoD culture needs to accept a new paradigm of using software tools that

provide daily information, rather than mandating the use of EVM.

Another substantial shortcoming of EVM is that it does not measure product quality. A program could

perform ahead of schedule and under cost according to EVM metrics, but deliver a capability that is

unusable by the customer. Agile mitigates this risk by incorporating end users on integrated teams that

frequently produce, test, and release working software. Traditional measurement using EVM provides

less value to a program than an Agile process in which the end user continuously verifies that the

product meets the requirement.

Monitoring Tools and Agile Metrics 

There are many tools available to monitor performance, but no single best approach. Numerous project

monitoring and control processes, best practices, and tools exist to track and review the progress and

performance of an acquisition program. Each program must determine the right tool suite and metrics

for its use. Common metrics used in Agile software development include the following:18

 Velocity: The amount of work accomplished, expressed as story points per sprint.19

 Burn‐down: Story points remaining in the sprint backlog.

 Cost Per Story Point: Used to track efficiency and estimate cost of future work.

 Delivery Progress: Relative to current product roadmap and goals for each sprint.

Staff from the U.S. Army’s Reserve Component Automation System (RCAS) program demonstrated for

the Section 809 Panel a suite of leading tools that integrate, review, and report progress in near real‐

time. RCAS managers use this tool as a key information source when they meet daily to review

progress. EVM may be of little or no value when managers can see progress in near real‐time. MITRE’s

recent work on Acquisition in the Digital Age reinforces this concept: “Given the dynamic and iterative

structure and processes of Agile, implementing an EVM system can pose a significant challenge with

little value.”20  

                                                     

18 Will Hayes et al., Software Engineering Institute, Agile Metrics: Progress Monitoring of Agile Contractors, CMU/SEI‐2013‐TN‐029, 

accessed November 27, 2017, https://resources.sei.cmu.edu/asset_files/TechnicalNote/2014_004_001_77799.pdf.   19 A sprint, also known as an iteration, is the time during which an Agile development team works, usually one week to one month, at the 

end of which the team delivers working software. Story points are a unit of measure for expressing an estimate of the overall effort that 

will be required to fully implement a product feature or any other piece of work.  20 Pete Modigliani and Su Chang, The MITRE Corporation, Defense Agile Acquisition Guide: Tailoring DoD IT Acquisition Program 

Structures and Processes to Rapidly Delivery Capabilities, 48, accessed November 27, 2017, 

http://www.acqnotes.com/Attachments/MITRE‐Defense‐Agile‐Acquisition‐Guide.pdf.  
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Conclusions 

PMs should have the option to choose the project monitoring and control methods best suited for their

acquisition programs. The drivers for deciding which methods to use include the benefits of each tool,

technique, and metric and how they contribute to overall program success.  

Overall conclusions include the following:

 Agile and EVM can be tailored to work together, but with near real‐time tools available, it is

questionable whether the tailoring effort yields a commensurate benefit to Agile projects.

 Using EVM with Agile can require requests for waivers and/or deviations to meet current

DFARS requirements.21

 EVM has been required on most large software programs but has not prevented cost, schedule,

or performance issues.22

 PMs should choose the proper project monitoring and control approaches for their acquisition

programs, rather than be mandated to use EVM.

Implementation 

Legislative Branch 

 There are no statutory changes required.

Executive Branch 

 Eliminate the mandate for using EVM at any dollar value when Agile methods are used for

software development or integration contracts. Continue to require EVM for non‐Agile

programs.

 Allow the PEO to approve appropriate project monitoring and control methods for all Agile

software development or integration programs. Selected project monitoring and control

methods, which may include EVM, should provide faith in the quality of data and track the

following at a minimum:

 Schedule accomplishment vs. plan

 Cost accomplishment vs. plan

 Estimate to complete

 Revise DFARS Subpart 234.201, DoDI 5000.02 Table 8, and OMB Circular A‐11 to reflect the

above.

                                                     

21 Earned Value Management System, DFARS 234.2. 

22 GAO, DoD Business Systems Modernization: Additional Action Needed to Achieve Intended Outcomes, GAO‐15‐627, accessed 

November 9, 2017, http://www.gao.gov/assets/680/671452.pdf. 
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Note: Recommended detailed executive branch changes can be found in the Implementation Details 

subsection at the end of Section 4, and words to this effect should be used to modify the DFARS. 

Implications for Other Agencies 

 There are no cross‐agency implications for this recommendation.
Section 4 

Earned Value Management for

Software Programs Using Agile

Implementation Details 

Recommendation 19

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Volume 1 of 3 | January 2018

Regulatory Mark-up 

DFARS

SUBPART 234.2—EARNED VALUE MANAGEMENT SYSTEM

234.201 Policy.

(1) DoD applies the earned value management system requirement as follows: 

(i) For cost or incentive contracts and subcontracts valued at $20,000,000 or more, the 

earned value management system shall comply with the guidelines in the American 

National Standards Institute/Electronic Industries Alliance Standard 748, Earned Value 

Management Systems (ANSI/EIA-748). 

[See DoD Class Deviation 2015-O0017, Earned Value Management System Threshold. 

Effective immediately, the Earned Value Management System (EVMS) compliance 

review threshold at DFARS 234.201(1)(ii), DFARS provision 252.234-7001, and DFARS 

clause 252.234-7002 is raised from $50 million to $100 million. This class deviation 

remains in effect until incorporated in the DFARS or otherwise rescinded.] 

(ii) For cost or incentive contracts and subcontracts valued at $50,000,000 or more, the 

contractor shall have an earned value management system that has been determined by 

the cognizant Federal agency to be in compliance with the guidelines in ANSI/EIA-748. 

(iii) For cost or incentive contracts and subcontracts valued at less than $20,000,000— 

(A) The application of earned value management is optional and is a risk-based 

decision;

(B) A decision to apply earned value management shall be documented in the 

contract file; and

(C) Follow the procedures at PGI 234.201(1)(iii) for conducting a cost-benefit 

analysis. 

(iv) For software development or integration contracts using Agile methods at any dollar value, 

the application of earned value management is optional. For all Agile software development or 

integration programs, the Program Executive Officer or equivalent shall approve appropriate 

project monitoring and control methods that provide faith in the quality of data and track at a 

minimum:

(A) Schedule accomplishment against plan;
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Volume 1 of 3 | January 2018

(B) Cost accomplishment against plan; and

(C) Estimate to complete.

 (ivv) For firm-fixed-price contracts and subcontracts of any dollar value— 

(A) The application of earned value management is discouraged; and 

(B) Follow the procedures at PGI 234.201(1)(iv) for obtaining a waiver before 

applying earned value management. 

234.203 Solicitation provisions and contract clause. 

[Use provision at 252.234-7001, Notice of Earned Value Management System (DEVIATION 

2015-O0017)(SEP 2015), and the clause at 252.234-7002, Earned Value Management System 

(DEVIATION 2015-O0017)(SEP 2015) in lieu of the provision at DFARS 252.234-7001, Notice of 

Earned Value Management System, and the clause at DFARS 252.234-7002, Earned Value 

Management System (May 2011).]

For cost or incentive contracts valued at $20,000,000 or more, except for software development or 

integration contracts using Agile methods, and for other contracts for which EVMS will be applied 

in accordance with 234.201(1)(iii) and (ivv)— 

(1) Use the provision at 252.234-7001, Notice of Earned Value Management System, instead of 

the provisions at FAR 52.234-2, Notice of Earned Value Management System – Pre-Award IBR, 

and FAR 52.234-3, Notice of Earned Value Management System – Post-Award IBR, in the 

solicitation; and 

(2) Use the clause at 252.234-7002, Earned Value Management System, instead of the clause at 

FAR 52.234-4, Earned Value Management System, in the solicitation and contract. 

OMB Circular No. A-11 

Part 7, Capital Programming Guide

I. Planning and Budgeting Phase

I.5.5.4) Planning for Acquisition Management

The risk associated with the asset selected for consideration will determine the type of 

performance-based management system that should be used to monitor contractor 

performance in achieving the cost, schedule, and performance goals during the contract 

period. All major acquisitions with development effort, except for DoD software 

development or integration contracts using Agile methods, will include the requirement for 
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Volume 1 of 3 | January 2018

the contractor to use an Earned Value Management System (EVMS) that meets the 

guidelines in EIA Standard-748 to monitor contract performance. 
   
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Section 5 

Services Contracting 

Clarify the definitions of personal and nonpersonal services and incorporate in the 

DFARS a description of supervisory responsibilities for services contracts. 

RECOMMENDATION

Rec. 20: Clarify the definitions of personal and nonpersonal services and incorporate in

the DFARS a description of supervisory responsibilities for services contracts.

   
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INTRODUCTION 

In recent decades, federal agencies implemented a multisector workforce to gain access to the evolving

and necessary skills, technologies, and expertise required to accomplish their mission in the 21st

century. This approach requires agencies to develop and use the most efficient combination of

government, military, and contractor employees to successfully accomplish their respective missions.

Contracted services, whether personal or nonpersonal, for commercial and noncommercial services, are

the means by which the government acquires the contractor element of the multisector workforce.  

A lack of clear guidance on acquisition of advisory and assistance services (A&AS) and knowledge‐

based services (KBS) has created confusion concerning use of personal and nonpersonal services

contracts and the supervisory responsibilities contractors must exercise when providing contracted

services.

This first phase of the Section 809 Panel’s investigation and recommendations on services contracting

aligns with the panel’s tasking to recommend regulatory changes to improve the acquisition process.

The Section 809 Panel has developed clear guidance on supervisory responsibilities when providing

contracted services. This guidance delineates specific supervisory responsibilities, including proposed

policy and prescriptive language on contracts for contracted services. These proposed policies also

include guidance on what constitutes appropriate direction that government employees may provide

to contractor employees performing on nonpersonal services contracts. Implementing this guidance

will improve acquisition and management of contracts supporting the multisector workforce by

providing clarity concerning the roles and responsibilities of both contractor and government

employees. This guidance will also improve the definition of requirements for contracted services and

performance on awarded contracts.  

In a second phase of reviewing services contracting, the Section 809 Panel will develop a broad set of

recommendations for both statutory and regulatory change across the entire spectrum of services

requirements. The Panel will develop these recommendations based on consultation with the Military

Services and Defense Agencies, engagement with industry, and research on evolving technologies and

services acquisition best practices. These recommendations will recognize the realities of the

multisector workforce, enable the adoption of private‐sector approaches, and reflect the evolving

nature of DoD requirements for which it will use services contracts to acquire solutions and rapid

access to new technologies and innovations needed to accomplish the DoD mission.  
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RECOMMENDATION 

Recommendation 20: Clarify the definitions of personal and nonpersonal 

services and incorporate in the DFARS a description of supervisory 

responsibilities for services contracts. 

Problem 

The FAR, DFARS, and other DoD issuances provide policies for contracted services for mission

support. Confusion exists as to when these commercial and noncommercial services should be

contracted either as a personal or nonpersonal service, and what supervisory responsibilities

contractors must exercise when providing contracted services.

Background 

In recent decades, federal agencies adopted a multisector workforce approach to gain access to the

evolving and necessary skills, technologies, and expertise required to accomplish their missions in the

21st century. DoD policy for total force management, found at 10 U.S.C. § 129a, General Policy for Total

Force Management, stipulates “the Secretary of Defense shall establish policies and procedures for

determining the most appropriate and cost efficient mix of military, civilian, and contractor personnel

to perform the mission of the Department of Defense.”1  

The National Academy of Public Administration, in a November 16, 2005 paper titled Managing Federal

Missions with a Multisector Workforce: Leadership for the 21st Century, cites a variety of reasons for

workforce restructuring. Reasons include the following: “to utilize existing service delivery

mechanisms, to acquire hard to find skills, to save money, to have the private sector do work that is not

inherently governmental, to augment capacity on an emergency basis, and to reduce the size of

government.”2 Within the workforce structure, DoD predominately acquires contractor personnel by

nonpersonal service contracts.  

A stringent requirements‐determination process in DoD ensures that the agency does not award a

contract for services unless the following apply:

 The workload for the requirement has been validated.

 Government personnel with the required training and capabilities are not available within the

agency.

 For a personal services contract, the requirement must be specifically authorized by statute.

                                                     

1 General Policy for Total Force Management, 10 U.S.C. § 129a.  2 The National Academy of Public Administration, Managing Federal Missions with a Multisector Workforce: Leadership for the 21st

Century, Academy Initiative, November 16, 2005, accessed December 8, 2017, 

http://www.distributedworkplace.com/DW/governmentgovernment/National%20Academy%20of%20Public%20Administration%202005.

pdf.  
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A formal review and approval process exists within the DoD Components.3 The following DoDIs

address these requirements:  

 DoDI 5000.74, Defense Acquisition of Services, defines the service acquisition category (S‐CAT)

levels, policies, responsibilities, and procedures for acquiring services.4  

 DoDI 5000.02, Operation of the Defense Acquisition System, requires the program manager, in

conjunction with the designated DoD Component human systems integration staff, to

determine the most efficient and cost‐effective mix of DoD workforce and contract support.5

The mix of military, DoD civilian, and contract support necessary to operate, maintain, and

support the system is determined based on the manpower mix criteria is DoDI 1100.22, Policy

and Procedures for Determining Workforce Mix.6  

KBS (often referred to as A&AS7) contracted commercial and noncommercial services are by far the

largest category of services supporting the multisector workforce, now accounting for $37.7 billion in

annual DoD expenditures.8 DoD acquires the contractor portion of the multisector workforce through

either a personal or nonpersonal services contract; 99.1 percent are awarded as nonpersonal services.

                                                     

3 General Policy for Total Force Management, 10 U.S.C. § 129a. Policy and Procedures for Determining Workforce Mix, DoDI 1100.22 

(2010). 

4 Acquisition of Services, DoDI 5000.74 (2016). Procurement of Contract Services: Management Structure, 10 U.S.C. § 2330.  5 Operation of the Defense Acquisition System, DoDI 5000.02 (2015).  6 Policy and Procedures for Determining Workforce Mix, DoDI 1100.22 (2010).  7 “Knowledge Based Services (A&AS),” DAU Service Acquisition Mall (SAM), accessed December 8, 2017, 

http://sam.dau.mil/Content.aspx?currentContentID=knowledge_based_services.   8 “Services Spend Charts,” Services Acquisition (SA), Defense Procurement and Acquisition Policy, accessed December 8, 2017, 

https://www.acq.osd.mil/dpap/sa/Learn‐More/ServiceSpendCharts.html.  
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Figure 5‐1. FY 2017 Spend—DoD as Funding Department9  

A lack of clarity regarding the differences between personal and nonpersonal services contracts raises

concern among government personnel who may incorrectly conclude that contractor employees

performing alongside government employees are (or should be) under a contract for personal services.  

Congress, federal agencies, and DoD have enacted a number of statutes and policies outlining the

requirements for appropriate use of contracts for A&AS and KBS.  

 In 1992, OMB issued Circular A‐120, Guidelines for the Use of Advisory and Assistance

Services. DoD implemented OMB Circular A‐120 as well as DoDD 4205.2, DoD Contracted

Advisory and Assistance Services (CAAS) outlining policy, responsibilities, and procedures for

the management, acquisition, and use of CAAS for requirements within DoD.10 OMB Circular

A‐120 was rescinded in 1994 and DoD rescinded DoDD 4205.2 in 2004, citing redundancy with

its other service contracting policies.11  

 OMB issued Policy Letter 93‐1, Management Oversight of Services, on May 18, 1994, following

a review of service contracting practices and capabilities across the Executive Branch as part of

the National Performance Review. It established responsibilities and “guiding principles

through the ‘best practices’ concept to help agencies develop, analyze, and perfect requirements

                                                     

9 Data from Federal Procurement Data System, extracted January 2, 2018. Categories based on DPAP Crosswalks services and supplies 

and equipment taxonomy at https://www.acq.osd.mil/dpap/sa/Tools/crosswalks.html, accessed January 2, 2018.  10 DoD Contracted Advisory and Assistance Services (CAAS), DoDD 4205.2 (1992).  11 GAO, Federal Contracting: Congressional Action Needed to Address Long‐standing Problems with Reporting of Advisory and Assistance 

Services, GAO‐08‐319, accessed December 8, 2017, http://www.gao.gov/assets/280/274250.pdf.  

Services ($164.3 bn.) Supplies and equipment ($164.0 bn.)

Aircraft, 

ships/submarines, 

land vehicles 

($64.3 bn.) 39%

Weapons and 

ammunition ($20.5 

bn.) 12%

Electronic and 

communications 

($23.5 bn.) 14%

Sustainment 

($36.7 bn.) 22%

Facilities ($7.6 

bn.) 5%

Clothing, textiles, 

subsistence ($11.3 

bn.) 7% R&D ($25.2 bn.) 

15%

Knowledge 

Based 

Services 

($37.7 bn.) 

23%

Logistics 

management 

($6.0 bn.) 4% Equipment 

related ($19.9 

bn.) 12%

Electronic and 

communication 

($19.2 bn.) 12%

Medical ($13.5 

bn.) 8%

Transportation 

($7.4 bn.) 5%

Facility ($25.4 

bn.) 15%

Construction 

($9.9 bn.) 6%

50% 50%
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for service contracts which, in turn, should help improve contract management and

administration.”12  

 The 1994 FASA provided a definition for A&AS and authorized both civilian agencies and DoD

to use task order contracts with limits on the ordering period to procure A&AS.13 A&AS was

defined as those services provided by nongovernmental sources for management and

professional support services; studies, analyses, and evaluations; and engineering and technical

services.14 FASA also directed OMB to collect and report, annually, obligations for A&AS in the

President’s budget.15 The FAR Subpart 37.2 was amended in 1995 to include the definition for

A&AS. The FAR was later amended in April 2000 to move the definition for A&AS from FAR

Subpart 37.2 to FAR Subpart 2.101, Definitions.16  

‘Advisory and assistance services’ as defined in FAR Subpart 2.101 are ‘those services provided under

contract by nongovernmental sources to support or improve: organizational policy development; decision‐

making; management and administration; program and/or project management and administration; or

R&D activities. It can also mean the furnishing of professional advice or assistance rendered to improve

the effectiveness of Federal management processes or procedures (including those of an engineering and

technical nature). In rendering the foregoing services, outputs may take the form of information, advice,

opinions, alternatives, analyses, evaluations recommendations, training and the day‐to‐day aid of support

personnel needed for the successful performance of ongoing Federal operations.’ They are classified into

three major categories: (1) management and professional support services; (2) studies, analyses and

evaluations; and (3) engineering and technical services.17  

 OFPP issued Policy Letter 11‐01, Performance of Inherently Governmental and Critical

Functions, dated September 12, 2011, pursuant to section 6(a) of the Office of Federal

Procurement Policy Act, 41 U.S.C. 405(a), the President’s March 4, 2009, Memorandum on

Government Contracting, and section 321 of the FY 2009 NDAA, Pub. L. No. 110‐417. The intent

of the policy is to provide guidance to help agencies manage functions that are closely

associated with inherently governmental and critical functions performed by both Federal and

contractor employees.18  

Neither the FAR nor the DFARS defines KBS. DoD designated KBS as a portfolio group in the DoD

taxonomy of services on November 23, 2010,19 subsequently updated on August 12, 2012.20 The

taxonomy now reflects how “DoD organizes its spend for services and supplies, and equipment using a

                                                     

12 Management Oversight of Service Contracting, OMB Policy Letter 93‐1, May 18, 1994.  13 Budget Contents and Submission to Congress, 31 U.S.C. § 1105(g). Advisory and Assistance Services, 41 U.S.C. § 4105.  14 Budget Contents and Submission to Congress, 31 U.S.C. § 1105(g).  15 Ibid. 

16 Federal Acquisition Circular 97‐17, FAR Case 1999‐014 (2000).  17 FAR Subpart 2.101 Definitions, Current to: FAC 2005‐96 (2017). 18 Performance of Inherently Governmental and Critical Functions, OFPP Policy Letter 11‐01 (2011).  19 OSD(AT&L), Defense Procurement Acquisition Policy (DPAP) Memo, Taxonomy for the Acquisition of Services, November 23, 2010, 

accessed December 8, 2017, http://bbp.dau.mil/docs/Taxonomy%20for%20the%20Acquisition%20of%20Services.pdf.   20 OSD(AT&L), Defense Procurement Acquisition Policy (DPAP) Memo, Taxonomy for the Acquisition of Services and Supplies & Equipment,

August 27, 2012, accessed December 8, 2017, https://www.acq.osd.mil/dpap/policy/policyvault/USA004219‐12‐DPAP.pdf.  
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taxonomy that maps Product Service Codes (PSCs), as set forth in the Federal Procurement Data

System Product and Service Codes” (shown below).21  

Table 5‐1. Services Portfolio Group: PSC Definitions; Knowledge‐Based Services 

Portfolio Category  PSC  Title 

Engineering and Technical Services 

R412  Simulation 

R413  Specifications Development Services 

R415  Professional Services/Tech Sharing–Utilization 

R425  Engineering and Technical Services (Includes R414 and R421 

merging in FY 2012) 

Program Management Services 

Axx6  RDT&E Management Support 

B  Special Studies and Analyses—Not R&D 

R405  Operations Research & Quantitative 

R406  Policy Review/Development Services 

R408  Program Management/Support Services 

R410  Program Evaluation/Review Development (Includes R407 and 

R409 merging in FY 2012) 

R499  Other Professional Services 

R707  Contract  & Procurement Support 

R799  Other Management Support Services 

Management Support Services  R7xx  Management Support Services Less R706, R707, and R799 

Administrative & Other Services  R6xx  Administrative Support Services 

T  Photographic, Mapping, Printing, and Publications Services 

Professional Services  R4xx  Professional Services Less R405‐R410, R412‐R415, R421, R425, 

R426 and R499 

Education and Training  U  Education and Training Services 

DoD uses the taxonomy to facilitate strategic sourcing.22 The taxonomy identifies a KBS Portfolio

Group that includes engineering and technical services, program management services, management

support services, administrative and other services, professional services, and education and training.23  

DoD separated the Logistics Management Services Portfolio Group from the KBS Portfolio Group and

established it as its own portfolio group. A&AS is neither discussed nor identified as a separate

portfolio group within the taxonomy.

The following is a description of KBS found in the Defense Acquisition University (DAU) Service

Acquisition Mall (SAM):

KBS, commonly referred to as Advisory and Assistance Services (A&AS), relates to tasks that require the

application of detailed processes or technical knowledge. A&AS pertains to the details provided under

contract by nongovernmental sources to support or improve organizational policy development, decision‐

making, management and administration, program and/or project management and administration, or

research and development (R&D) activities. It can also involve the furnishing of professional advice or

                                                     

21 Ibid. 

22 Ibid. 

23 Ibid. 
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assistance rendered to improve the effectiveness of Federal management processes or procedures,

including those of an engineering and technical nature. The result of these services may take the form of

information, advice, opinions, alternatives, analysis, evaluations, recommendations, training, and the

day‐to‐day aid of support personnel needed for the successful performance of ongoing Federal operations.24  

Section 812 of the FY 2017 NDAA (Pub. L. No. 114‐328 § 812) amended 10 U.S.C. § 2330a to add KBS,

logistics management services, equipment related services, and electronics and communications

services as separate service acquisition portfolio groups for the budgetary data collection requirement.

Additionally, this legislation requires an “annual inventory, of activities performed during the

preceding fiscal year pursuant to staff augmentation contracts for the DoD.”25 The term staff

augmentation contracts is defined in this statute and is stated as,  

means services contracts for personnel who are physically present in a government work space on a full‐

time or permanent part‐time basis, for the purpose of advising on, providing support to, or assisting a

government agency in the performance of the agency’s missions, including authorized personal services

contracts.26  

Agencies acquire A&AS, KBS, and other staff augmentation requirements by either a personal or

nonpersonal services contract. The primary difference between award of a contract for a personal

service and award of a nonpersonal service is that a statutory authority must exist for the award of

certain requirements for a personal service contracts.27 Another difference involves the supervisory

responsibilities of the contractor. In the case of a nonpersonal services contract, the contractor is solely

responsible for the supervision of its employees.

A nonpersonal services contract, as defined in FAR Subpart 37.101, “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.”28  

A personal services contract, as defined in FAR Subpart 2.101, “means a contract that, by its express terms

or as administered, make the contractor personnel appear to be, in effect, government employees

(see 37.104).”29 FAR Subpart 37.104(a) further states, “a personal services contract is characterized by

the employer‐employee relationship it creates between the government and the contractor’s

personnel.30  

                                                     

24 “Knowledge Based Services (A&AS),” DAU Service Acquisition Mall (SAM), accessed December 8, 2017, 

http://sam.dau.mil/Content.aspx?currentContentID=knowledge_based_services.  25 Procurement of Services: Tracking of Purchases, 10 U.S.C. § 2330a.  26 Ibid. 

27 Employment of Experts and Consultants; Temporary or Intermittent, 5 U.S.C. § 3109. Personal Services Contracts, 10 U.S.C. § 1091. 

Authority to Procure Personal Services, 10 U.S.C. § 129b. Employment Experts and Consultants; Temporary or Intermittent, 5 U.S.C. 

§ 3109. 

28 FAR Subpart 37.101 Definitions, Current to: FAC 2005‐96, November 6, 2017.  29 FAR Subpart 2.101 Definitions, Current to: FAC 2005‐96, November 6, 2017.  30 FAR Subpart 37.104(a), Current to: FAC 2005‐96, November 6, 2017. 
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Within a multisector workforce structure, contractor personnel perform alongside government

personnel. A clear understanding of the supervision of contractor employees in this environment is

necessary to ensure that a nonpersonal services contract does not inadvertently function as a personal

services contract. Under nonpersonal services contracts, contractors are solely responsible for

supervision of their employees. This arrangement necessitates a detailed definition of the supervisory

functions provided by the contractor in contrast to the role of the government in providing direction

and oversight to contractor employees. In general, government personnel may provide guidance and

direction to contractor employees and approve work product (see 37 U.S.C. § 104c 1 ii); however,

direction must not include functions such as recruitment, hiring, termination, compensation, and other

functions.

Findings 

Numerous audits issued by GAO and the Inspector General (IG) address long‐standing congressional

concerns with federal agency processes for requirements determination, reporting mechanisms, and

management of A&AS contracts.31 These reports highlight challenges that federal agencies and DoD

encounter with how they manage and track contracts for A&AS, KBS, and staff augmentation services

within their organizations.32  

Current acquisition policies are vague on the supervisory responsibilities of contractors providing

contracted services support. Policies are also vague on the appropriate direction that government

employees can provide to contractors performing under these contracts. This ambiguity has created

confusion about the appropriate use of personal and nonpersonal service contracts. Providing clear and

definitive guidance will streamline the requirements definition process and improve communication

between the requiring activities, contracting organizations, and contractors performing these types of

services.  

The DFARS should include definitions for both KBS and staff augmentation services. Adopting these

recommended regulatory changes would produce a clearer understanding of what is and is not a

personal service or a nonpersonal service, what statutory authorities are necessary for the award of a

personal services contract, and what type of direction government employees can provide contractor

employees on nonpersonal services contracts.  

Conclusions 

DoD acquires the contractor element of Total Force Management using contracted services, whether

personal or nonpersonal.33 In an effort to resolve confusion concerning the acquisition of personal or

nonpersonal services, federal agencies and DoD continue to develop and implement a variety of

policies and instructions aimed at improving vague definitions and existing guidance on data

collection requirements for congressional reporting and internal spend analysis. These efforts have not

fully addressed the challenges and confusion on this topic continues within the acquisition workforce.

There is a need for updated and definitive guidance and policy on when contract services should be

                                                     

31 GAO, DoD Consulting Services: Erroneous Accounting and Reporting of Cost, GAO/NSIAD‐98‐136, Appendix I: Selected Reports About 

A&AS Management and Reporting Problems, 12‐14, accessed December 8, 2017, http://www.gao.gov/assets/230/225673.pdf.   32 GAO, Federal Contracting: Congressional Action Needed to Address Long‐standing Problems with Reporting of Advisory and Assistance 

Services, GAO‐08‐319, accessed December 8, 2017, http://www.gao.gov/assets/280/274250.pdf.  33 Acquisition of Services, DoDI 5000.74 (2016). Policy and Procedures for Determining Workforce Mix, DoDI 1100.22 (2010). 
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acquired as either a personal or nonpersonal service. Furthermore, there is a need to clarify the

supervisory responsibilities of contractors and the types of direction government employees may

provide to contractors.

Implementation 

Legislative Branch 

 No statutory changes are required.

Executive Branch 

 Supplement FAR 37.102 Policy (under FAR 37.1 Service Contracts – General) by adding

DFARS 237.201(j).

 Modify DFARS Subpart 237.5, Management Oversight of Service Contracts, to provide clarity

on supervisory responsibilities of contractors performing contracted services. The modification

includes deleting language in DFARS 237.503 and adding DFARS 237.504.

 Supplement FAR 37.203 Policy for A&AS by adding DFARS 237.203(e) to provide guidance that

it is appropriate to use a personal services contract to acquire A&AS and KBS if the requirement

is authorized by statute.

 Add a definition for Knowledge‐Based Services (KBS) and Logistic Management Services at

DFARS 237.101 Definitions.

 Update the DoD COR Handbook to incorporate these recommendations.

 Update DAU training to reflect these recommendations.

Note: Recommended detailed Executive Branch changes can be found in the Implementation Details 

subsection at the end of Section 5, and words to this effect should be used to modify the DFARS. 

Implications for Other Agencies 

 The recommendations, as stated here, would have no implications for other agencies; however,

civilian agencies would benefit from adopting these recommendations; thus, the Defense

Acquisition Regulation Council should discuss implementation of these recommendations at

the FAR level with the Civilian Agency Acquisition Council.  
Section 5 

Services Contracting

Implementation Details 

Recommendation 20

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Supplement FAR 37.102 Policy (under FAR 37.1 Service Contracts – General) by adding

DFARS 237.102 as proposed below:

SUBPART 237.1--SERVICE CONTRACTS--GENERAL

237.102 Policy. 

(j)  Supervision of employees in a nonpersonal services contract is the sole 

responsibility of the contractor and establishes the employer-employee 

relationship it has with its employees. 

(1)  Supervision includes the continuous employee management of 

recruitment, hiring, termination, compensation, benefits, career development, 

human resources management infrastructure, security clearance management, 

work location, contract assignment and evaluations of contractor employee. 

(2) Government personnel are authorized, dependent on contract terms and 

conditions, 

(i) to regularly assign work tasks and provide guidance on the 

completion of work products or services, 

(ii) give an order for a specific article or service, 

(iii) with the right to reject the finished product or results (See FAR 

37.104(c)(1)(ii)). 

Modify DFARS Subpart 237.5, Management Oversight of Service Contracts, to delete language in

DFARS 237.503 and add DFARS 203.504.

SUBPART 237.5--MANAGEMENT OVERSIGHT OF SERVICE CONTRACTS

237.503 Agency-head responsibilities.

(c) The agency head or designee shall employ procedures to ensure that requirements for service 

contracts are vetted and approved as a safeguard to prevent contracts from being awarded or 

administered in a manner that constitutes an unauthorized personal services contract. Contracting 

officers shall follow the procedures at PGI 237.503, include substantially similar certifications in 

conjunction with service contract requirements, and place the certification in the contract file. 

The program manager or other official responsible for the requirement, at a level specified by the 

agency, should execute the certification. In addition, contracting officers and program managers 

should remain aware of the descriptive elements at FAR 37.104(d) to be aware of the supervisory 

responsibilities of contractors described in DFARS 237.102(j) to ensure that a service contract 

does not inadvertently become administered as a personal-services contract. However, so long as 

the government is not performing supervisory functions (see DFARS 237.504) the descriptive 

elements in FAR 37.104(d) are not applicable to DoD. 
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237.504 Policy Related to Supervisory Responsibilities on Nonpersonal Services. 

Supervision of employees in a nonpersonal services contract is the sole responsibility of the 

contractor and establishes the employer-employee relationship it has with its employees. 

Government personnel shall refrain from exercising supervisory responsibilities for contractor 

personnel as delineated in DFARS 237.102(j) which are inconsistent with the employeremployee relationship the contractor has with its employees. Government personnel are 

authorized to regularly assign work tasks and provide guidance on the completion of work 

products or services, give an order for a specific article or service, with the right to reject the 

finished product or results (See FAR 37.104(c)(1)(ii)). 

Add a definition for “Staff Augmentation” as established in 10 U.S.C. 2330a at DFARS 237.101,

Definitions, and provide guidance on how staff augmentation requirements should be acquired

at DFARS 237.2XX.

A definition, policy and procedures for the acquisition of A&AS are included in the FAR and

DFARS. However, KBS is only described in the taxonomy DoD uses for the acquisition for

services, supplies, and equipment to support strategic sourcing and is not included in FAR

Subpart 37.2. Because the terms A&AS and KBS are used interchangeably, any differences

between the two terms should be clarified that the policy for A&AS also applies to KBS.

Supplement FAR 37.203 Policy for A&AS by adding DFARS 237.203(e) as proposed below:

DFARS SUBPART 237.2 – Advisory and Assistance Services 

237.203(e) Contracts for advisory and assistance services, knowledge-based services, and 

logistics management services, may be appropriate for personal services, but only if the 

requirement for the personal service is specifically authorized by statute. See DFARS 237.104 

for the statutory authorities to acquire personal services. 

Add a definition for Knowledge Based Services and Logistics Management Services at

Subpart 237.101 Definitions as proposed below:

SUBPART 237.1--SERVICE CONTRACTS--GENERAL

237.101 Definitions.

“Knowledge Based Services (KBS) and Logistics Management Services are elements of 

Advisory and Assistance Services (A&AS) defined in FAR 2.101 Definitions and DFARS 

237.102-74 Taxonomy for the acquisition of services, and supplies and equipment.” 

Recommend guidance on how A&AS and KBS requirements should be acquired by adding the

following for the acquisition of knowledge‐based services and logistics management services in

DFARS Subpart 237.2, Advisory and Assistance Services.

 
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SUBPART 237.2--ADVISORY AND ASSISTANCE SERVICES 

237.2XX Acquisition of Knowledge-Based Services and Logistics Management Services 

As Knowledge-Based Services and Logistics Management Services are elements of Advisory 

and Assistance Services, follow the policies and procedures for advisory and assistance services 

as prescribed at FAR 37.2 and DFARS 237.2. 

Add a definition for “Staff Augmentation” as established in 10 U.S.C. 2330a at DFARS 237.101

Definitions and provide guidance on how “staff augmentation” requirements should be

acquired at DFARS 237.2XX.

SUBPART 237.1--SERVICE CONTRACTS--GENERAL

237.101 Definitions.

As used in this subpart— 

“Staff Augmentation” contracts means services contracts for personnel who are 

physically present in a government work space on a full-time or permanent part-time 

basis, for the purpose of advising on, providing support to, or assisting a government 

agency in the performance of the agency’s mission, including authorized personal 

services contracts.”

SUBPART 237.2--ADVISORY AND ASSISTANCE SERVICES 

237.2XX Staff Augmentation Services 

Contracts for staff augmentation requirements can be either personal or nonpersonal services. 

Contracts for staff augmentation requirements shall follow the policies and procedures for 

Advisory and Assistance Services (A&AS) as prescribed at FAR 37.2 and DFARS 237.2. 
   
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Section 6 

Small Business 

Refocus DoD’s small business policies and programs to prioritize mission and 

advance warfighting capabilities and capacities. 

RECOMMENDATION

Rec. 21: Refocus DoD’s small business policies and programs to prioritize mission and

advance warfighting capabilities and capacities.

21a: Establish the infrastructure necessary to create and execute a DoD small business

strategy, ensuring alignment of DoD’s small business programs with the agency’s

critical needs.

21b: Build on the successes of the SBIR/STTR and RIF programs.

21c: Enable innovation in the acquisition system and among industry partners.

   
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INTRODUCTION 

This section addresses businesses falling within the Small Business Size Standards for industries in the

North American Industry Classification System (NAICS) as determined by the U.S. Small Business

Administration (SBA).

The Department of Defense’s (DoD) small business policies and programs do not align with DoD’s

strategic priorities, including the Third Offset Strategy and building a more lethal force.1 DoD is not

fully capitalizing on small businesses’ innovativeness. Instead, DoD appears to focus its small business

policies and programs on acquiring goods and services based on meeting societal goals not related to

mission. Complexity and slowness in the acquisition system, an uncoordinated outreach process, a lack

of clear points of entry into the defense market, and contract compliance requirements deter and

appear to prevent small businesses from working with DoD. Small business programs enabling

research, development, and innovation have the greatest potential to positively affect DoD and the

small business community.  

The Section 809 Panel conducted a literature review and interviews with more than 50 small

businesses, six venture capitalists, and more than a dozen DoD and U.S. government officials

responsible for small business policy and programs. The panel offers one overarching recommendation

relating to small business, along with three subrecommendations:  

 Refocus DoD’s small business policies and programs to prioritize mission and advance

warfighting capabilities and capacities.

 Establish the infrastructure necessary to create and execute a DoD small business strategy,

ensuring alignment of DoD’s small business programs with the agency’s critical needs.

 Build on the successes of the SBIR/STTR and RIF programs.

 Enable innovation in the acquisition system and among industry partners.

   

                                                     

1 The Third Offset Strategy develops and applies “novel capabilities and concepts” to overcome challenges posed by adversaries in 

increasingly contested security environments. See Timothy Walton, Securing the Third Offset Strategy: Priorities for Next US Secretary of 

Defense, accessed August 4, 2017, https://files.acrobat.com/a/preview/b27088c2‐2f87‐466e‐9d64‐90dc23538553.  
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RECOMMENDATION 

Recommendation 21: Refocus DoD’s small business policies and programs to 

prioritize mission and advance warfighting capabilities and capacities. 

Problem 

Today’s increasingly complex and contested security environment places pressure on DoD to optimize  

warfighting capabilities and allocate its resources efficiently. Secretary of Defense James Mattis

prioritized improving DoD’s warfighting capabilities and lethality in his January 2017 memo,

“Implementation Guidance for Budget Directives in the National Security Presidential Memorandum

on Rebuilding the U.S. Armed Forces.”2 In his memo, Secretary Mattis stated that DoD will make

“critical investments in advanced capabilities” as a means to “build a larger, more capable, and more

lethal force.”3 Harnessing innovation is an essential component of DoD’s Third Offset Strategy;

however, DoD’s slow acquisition system and ineffectiveness in engaging with small, innovative

businesses, put DoD at risk of losing the race to advanced capabilities, as potential adversaries such as

China work aggressively to acquire U.S. innovations and new technology.4  

Small businesses produce many of the innovative capabilities, emerging technologies, and complex

services DoD must acquire for warfighting dominance in a dynamic and uncertain strategic

environment. Large contractors traditionally provide products and support to DoD yet studies indicate

small companies are more innovative per dollar of research and development funds spent and per

employee than large firms.5 Therefore, DoD’s challenges in working effectively with small businesses to

address critical needs and achieve the strategic objectives of DoD are of substantial concern.  

DoD would benefit if it aligned its acquisitions from small business with its strategic priorities of

improving warfighting capabilities and lethality, as well as the Third Offset. Instead, DoD’s small

business policies and programs currently focus on acquiring supplies and services that further

socioeconomic goals but do not fully leverage innovative and unique capabilities of small businesses to

support DoD’s mission. A complex and cumbersome acquisition system, coupled with few clear entry

                                                     

2 Implementation Guidance for Budget Directives in the National Security Presidential Memorandum on Rebuilding the U.S. Armed 

Forces, Memorandum from Secretary of Defense (2017).   3 Ibid. 

4 Paul Mozur and Jane Perlez, “China Bets on Sensitive U.S. Start‐Ups, Worrying the Pentagon,” New York Times (2017), accessed 

January 2, 2018, https://www.nytimes.com/2017/03/22/technology/china‐defense‐start‐

ups.html?emc=edit_dk_20170323&nl=dealbook&nlid=69253745&ref=dealbook&te=1&_r=1. Supporting journalistic reporting on Chinese 

government investment into U.S. technologies with potential defense applications, four companies in the San Francisco area and three 

venture capitalists independently informed the Section 809 Panel that Chinese government‐backed firms are increasingly pursuing 

acquisition of U.S. companies, start‐ups, and technologies.   5 Jose M. Plehn‐Dujowich, Product Innovation by Young and Small Firms, accessed August 4, 2017, 

https://www.sba.gov/sites/default/files/files/rs408tot.pdf. Anthony Breitzman, D. Hicks, M. Albert, Small Firms and Technology: 

Acquisitions, Inventor Movement, and Technology Transfer, accessed August 4, 2017, 

http://rdw.rowan.edu/cgi/viewcontent.cgi?article=1012&context=csm_facpub. Diana Hicks and Anthony Breitzman, Small Serial 

Innovators: The Small Firm Contribution to Technical Change, 2003, accessed August 4, 2017, 

http://rdw.rowan.edu/cgi/viewcontent.cgi?article=1038&context=csm_facpub. Anthony Breitzman and Patrick Thomas, Analysis of Small 

Business Innovation in Green Technologies, accessed August 4, 2017, 

https://www.nist.gov/sites/default/files/documents/2017/05/09/analysis‐of‐SM‐innovation‐Technologies.pdf.  
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points into the defense market and uncoordinated outreach to small businesses, deters many small

businesses from pursuing DoD as a customer.  

Background 

DoD has an extensive history of supporting small businesses. Congress first tasked DoD with

establishing a small business program in the Armed Services Procurement Act of 1947.6 The 1953 Small

Business Act also explicitly linked small business set‐asides to DoD’s core mission of national defense.

Section 214 of the Act read,  

To effectuate the purposes of this title, small‐business concerns within the meaning of this title shall

receive any award or contract of any part thereof as to which it is determined by the Administration and

the contracting procurement agency (A) to be in the interest of mobilizing the Nation’s full productive

capacity, or (B) to be in the interest of war or national defense programs.7  

With a large budget and extensive presence across the country, DoD has played, and continues to play,

a substantial role in achieving Congress’s goal of supporting small American businesses. In 1958, the

Small Business Act minimized the importance of using set‐asides to fulfill national defense needs in

favor of maximizing benefits to small businesses by requiring a fair portion of contracts for property and

services go to small businesses in each industry category.8 Concerns that small businesses could not

win a fair portion of contracts, however, ultimately led to Congress creating set‐asides for minority‐

owned small businesses via amendments to the Small Business Act in 1978.9 The statute now

emphasizes the role of small business set‐asides and programs in furthering socio–economic policy

objectives and supporting the U.S. economy.10  

The Small Business Act, as it stands today, does not state a goal for government agencies to leverage

small businesses as a means to enhance or support mission execution. The statute includes a reference

that the American economic system of private enterprise and competition is essential to the “security of

this Nation,” but contains no direct references to agency missions or national defense.11 DoD’s small

business activities are dollar‐goal‐oriented, with little focus on supporting the warfighter and DoD’s

mission. Furthermore, small business provisions and programs in statute today are codified in a

disorganized manner, making it difficult for both government and the private sector to understand and

follow relevant statute.

                                                     

6 Section 202 of the 1947 Armed Services Procurement Act stated, “It is the declared policy of the Congress that a fair proportion of the 

total purchases and contracts for supplies and services for the Government shall be placed with small business concerns. Whenever it is 

proposed to make a contract or purchase in excess of $10,000 by negotiation and without advertising, pursuant to the authority of 

paragraph (7) or (8) of section 2 (c) of this Act, suitable advance publicity, as determined by the agency head with due regard to the type 

of supplies involved and other relevant considerations, shall be given for a period of at least fifteen days, wherever practicable, as 

determined by the agency head.” 

7 Small Business Act of 1953, Pub. L. No. 163‐83, 67 Stat. 238 (1953).   8 Andrew G. Sakallaris, “Questioning the Sacred Cow: Reexamining the Justifications for Small Business Set Asides,” Public Contract Law 

Journal, 36 (2007): 685‐700. Small Business Act of 1953, Pub. L. No. 16‐83, 67 Stat. 238 (1953).  9 Andrew G. Sakallaris, “Questioning the Sacred Cow: Reexamining the Justifications for Small Business Set Asides,” Public Contract Law 

Journal, 36 (2007): 685‐700.   10 Aid to Small Business, 15 U.S.C. Chapter 14a. 

11 Declaration of Policy, 15 U.S.C. § 631. 
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Findings 

DoD’s Lack of a Coherent Small Business Strategy 

A principal challenge for DoD is establishing a coherent strategy and infrastructure for aligning small

business programs and policies with DoD’s mission‐related needs. A number of previous advisory

groups have identified challenges related to DoD’s lack of a strategic approach to working with

industry. For example, a 2012 report produced by the House Committee on Armed Services Panel on

Business Challenges noted, “[T]he Panel found that DoD lacks a clearly articulated strategy that would

provide a corporate vision of DoD’s future technology needs.”12 A decline of nearly 100,000 small

companies registered in the System for Award Management (SAM) to do business with the federal

government since 201213 may be one issue cause by a lack of strategy. Steve Chabot, in 2015 testimony

before the U.S. House of Representatives Committee on Armed Services, noted a lack of policy for

driving small businesses toward “gaps in our industrial base.”14 Although this lack of policy was

framed as a governmentwide problem, it is consistent with the Section 809 Panel’s finding that DoD

lacks an effective small business strategy.  

Numerous offices and organizations exist across DoD to either shape the industrial base or promote

small business use across the department. Examples of such offices include the Deputy Assistant

Secretary of Defense for Manufacturing and Industrial Base Policy (DASD(MIBP)), Office of Small

Business Programs (OSBP), and Defense Logistics Agency (DLA) Office of Small Business Programs.15

Coordination among small‐business‐related offices and DASD(MIBP) is minimal, which has resulted in

a disjointed and incomplete view of small business capabilities and innovations, as well as their

importance to the health and robustness of the defense market.  

DASD(MIBP) conducts analyses of the defense base to ensure critical capabilities and systems are

protected and preserved. DASD(MIBP) does not place meaningful or specific focus on critical

capabilities or emerging technologies developed by small businesses. For example, the 2015 Annual

Industrial Capabilities Report to Congress produced by DASD(MIBP) does not indicate an industrial base

analysis was conducted to identify unique capabilities or preserve critical skills among small

technology companies.16 Although the report references establishment of Defense Innovation Unit

Experimental (DIUx), it includes no information to suggest a robust industrial base assessment of small

technology firms and start‐ups has occurred.17 Not including a thorough assessment of small

businesses or technology in the report suggests DoD has not paid sufficient attention to either

component as being critical to the defense market and enablers of DoD’s strategic imperatives.  

                                                     

12 Panel on Business Challenges in Defense Industry, Challenges to Doing Business with the Department of Defense: Findings of the Panel 

on Business Challenges in Defense Industry, March 2012, vii, accessed November 7, 2017, 

https://wcoeusa.org/sites/default/files/Challenges%20to%20Bus%20with%20DOD.3.12.pdf.   13 Steve Chabot, Chairman, Committee on Small Business, testimony before U.S. House of Representatives Committee on Armed Services, 

April 14, 2015, accessed November 8, 2017, https://smallbusiness.house.gov/uploadedfiles/chabot_written_statement_fy_16_ndaa.pdf.   14 Ibid. 

15 DLA’s Office of Small Business Programs administers the Procurement Technical Assistance Program.   16 OSD(AT&L), Annual Industrial Capabilities Report to Congress for 2015, accessed August 4, 2017, 

http://www.acq.osd.mil/mibp/resources/2015%20AIC%20RTC%2010‐03‐16%20‐%20Public%20Unclassified.pdf.   17 Ibid. 
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OSBP oversees DoD’s implementation of small business policies and programs such as the

8(a) Business Development Program set‐asides, SBIR, STTR, and RIF through small business offices

across DoD. OSBP focuses on ensuring DoD’s compliance with statutorily established small business

contracting goals and administration of programs such as SBIR, STTR, and RIF. Data gathered in

interviews conducted by the Section 809 Panel indicate there is no system or recurring dialogue

between DASD(MIBP) and OSBP to align small business program objectives with critical needs in the

broader defense market.  

DLA administers the Procurement Technical Assistance Program (PTAP), which is designed to help

small businesses enter the government market and navigate government contracting. DLA’s

administration of the program, prescribed in statute,18 lacks a clear link to DASD(MIBP) or OSBP

priorities, much less the SBA. Disjointedness among PTAP, industry, and DoD small business

organizations is not new. In FY 1997 DLA unsuccessfully recommended repeal of Chapter 142 of

Title 10, which requires DLA to administer PTAP, citing overlap between PTAP and SBA’s Small

Business Development Center (SBDC) program.19 (PTAP is discussed again in greater detail below).  

Figure 6‐1. Proposed USD(R&E) Organization 

Source: Report to Congress, August 201720 

                                                     

18 Cooperative Agreements, 10 U.S.C. § 2413. 

19 Office of the Inspector General, Department of Defense Procurement Technical Assistance Cooperative Agreement Program, accessed 

August 4, 2017, http://www.dodig.mil/Audit/reports/FY97/97‐007.pdf.   20 DoD, Report to Congress: Restructuring the Department of Defense Acquisition, Technology and Logistics Organization and Chief 

Management Officer Organization, August 2017, accessed November 8, 2017, 

https://www.sba.gov/sites/default/files/articles/FY2017_Final_Agency_Goals_Spreadsheet_20161201.pdf. 
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Figure 6‐2. Proposed USD(A&S) Organization 

Source: Report to Congress, August 201721

A proposed reorganized structure was released in August 2017 outlining a potential realignment of

USD(AT&L) functions under an Under Secretary of Defense (Research and Engineering) (USD[R&E])

and Under Secretary of Defense (Acquisition and Sustainment) (USD[A&S]) (see Figures 6‐1 and 6‐2

above). Of note, the proposal includes giving USD(A&S) responsibility for DASD(MIBP)’s current

portfolio of industrial base policy and analysis, as well as oversight of DoD’s OSBP. The proposal

leaves OSBP as a distinct office, answering to USD(A&S).

The proposal further suggests realigning the SBIR, STTR, and RIF programs to fall under USD(R&E)

instead of the OSBP.22 DIUx, tasked with helping attract innovative companies and commercial

technologies into the defense market, also would be aligned to USD(R&E). Moving SBIR, STTR, and

RIF under USD(R&E) is a positive step toward aligning small business programs with acquiring

innovations that enhance DoD’s mission‐essential capabilities. The proposed reorganization, however,

does not clearly address the need to create a coordinated outreach program, identify clear points of

entry for companies seeking to enter the defense market (discussed below), or the need for greater

alignment of small business policy and programs with needs across the broader defense market.  

   

                                                     

21 Ibid. 

22 Ibid.  
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Coupled with a disjointed management structure (at least as offices and programs are arranged

currently), DoD’s small business use is driven by the dollar value of contracts awarded to small

businesses with little regard for effect on DoD’s mission. This situation may be due in some part to the

fact that for FY 2017, DoD set a target for at least 22 percent of its government prime contract dollars to

be awarded to small businesses and small, disadvantaged businesses.23 Five percent of prime contracts

and 5 percent of subcontracts are to be awarded to women‐owned small businesses; 5 percent to

disadvantaged business owners; 3 percent to HUBZone small businesses; and 3 percent to service‐

disabled, veteran‐owned small businesses.24  

Contracting officers and program managers, not DoD’s small business specialists, are held accountable

for ensuring small businesses receive contracts, small business requirements are met, and goals are

achieved. As a result, small business programs focus almost exclusively on the amount of money and

number of contracts awarded to small businesses.25 One RAND study notes,  

Small business utilization is generally judged on input. That is, the entire goal‐setting process, as well as

data collection on its effects and reporting of its results, is geared to measuring the dollars and contracts

awarded to small business.26   

Although small business specialists in the field conduct outreach to the small business community, the

Section 809 Panel did not find any information to indicate outreach is informed by a strategy or aligned

to mission‐related needs.  

Multiple experts with whom the Section 809 Panel spoke indicated most DoD small business contracts

go toward procuring basic services and commodities, given an almost singular focus on the aggregate

dollar value of small business contracts.27 It is easier and less risky for contracting officers to meet their

contracting goals by acquiring basic commodities and services than it is to conduct market research and

find new small businesses with which to work; available data confirm this assertion. Small businesses

disproportionately account for the acquisition of basic commodities and services like administrative

support, construction, building and grounds maintenance, and food‐related support. FY 2017’s top‐10

DoD obligations to small businesses (see Table 6‐1), as a percentage of DoD’s total reported obligations,

shows small businesses account for approximately 94 percent of obligated dollars toward fruits and

vegetables; 83 percent toward maintenance of other administrative facilities and service buildings; and

90 percent toward highway and road maintenance.28   

                                                     

23 Small Business Administration, Small Business Procurement—Final FY2017 Goals—As of 12/01/16, accessed Dec. 8, 2017, 

https://www.sba.gov/sites/default/files/articles/FY2017_Final_Agency_Goals_Spreadsheet_20161201.pdf.  24 “Goaling,” U.S. Small Business Administration, accessed August 4, 2017, https://www.sba.gov/contracting/contracting‐officials/goaling.   25 The Section 809 Panel arrived at this finding through interviews with senior officials and staff responsible for small business policy and 

programs across DoD and Small Business Administration.   26 Clifford A. Grammich, et al., Small Business and Defense Acquisitions: A Review of Policies and Current Practices, RAND National 

Defense Research Institute (2011), 35, accessed November 8, 2017, http://www.dtic.mil/dtic/tr/fulltext/u2/a551005.pdf.  27 There is no definition in the FAR for the term commodity. For the purposes of this paper, the Section 809 Panel refers to the Merriam‐

Webster definition of a commodity as “an economic good, such as a mass‐produced unspecialized product.”   28 Calculations based on Product and Service Code (PSC) contract obligation data retrieved from the Federal Procurement Data System as 

of January 2, 2018. Categories refer to PSC 8915: Fruits and vegetables; PSC Z1AZ: Other administrative facilities and service buildings 

maintenance services; and PSC Z1LB: Highways, roads, streets, bridges, and railways maintenance services. 
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Table 6‐1. Top Ten FY 2017 DoD Obligations to Small Businesses as a Percentage of  

Total FY 2017 DoD Obligations (for total obligations more than $100 million)29  

Further analysis of FPDS data indicates that approximately 55 percent of all obligated dollars for

maintenance, repair, and alteration of structures and facilities went to small businesses in 2017.30 By

contrast, only 20 percent of R&D‐related dollars went to small businesses.31 DoD’s dollars obligated to

small businesses ultimately skew toward acquiring commoditized and noninnovative products and

services (see Figure 6‐3).   

Meeting small business goals by acquiring basic commodities and services, rather than obtaining

innovative products and support from small companies, will ultimately hurt DoD’s ability to maintain

warfighting dominance. Research shows small businesses can provide advanced capabilities and

support to DoD; however, data show DoD is not prioritizing working with small businesses to acquire

innovation and technology. According to one study, small companies generate “13 to 14 times more

patents per employee” and produce more cutting‐edge technologies than large companies.32 Large

companies in the technology industry with which the Section 809 Panel met indicated small businesses

often are more innovative and capable of developing unique solutions for their customers. DoD is not

capitalizing on the innovative potential of small businesses; the majority of DoD’s small business

contracts do not prioritize or align with its mission and warfighting needs.

                                                     

29 Data retrieved from FPDS on January 2, 2018.  

30 Calculations based on PSC contract obligation data retrieved from the Federal Procurement Data System on January 2, 2018. Categories 

refer to PSC Z (maintenance, repair, alteration of structures/facilities) and PSC A (research and development).  31 Ibid. 

32 Diana Hicks and Anthony Breitzman, Small Serial Innovators: The Small Firm Contribution to Technical Change, 2003, accessed August 4, 

2017, http://rdw.rowan.edu/cgi/viewcontent.cgi?article=1038&context=csm_facpub.  

PSC and Description Small business 

USD obligations

Percent small 

business

PSC Y1BF: Missile system facilities construction services $121.8 million 98.9%

PSC 4220: Marine lifesaving and diving equipment $1.69 billion 97.6%

PSC Z2EB: Maintenance buildings repair or alteration services $152.2 million 93.9%

PSC 8915: Fruits and vegetables $100.1 million 93.5%

PSC Z1LB: Highways, roads, streets, bridges, and railways maintenance services $107.7 million 89.9%

PSC AC32: Ships applied research and exploratory development defense 

systems R&D $109.1 million 89.7%

PSC Z2EZ: Other industrial buildings repair or alteration services $119.9 million 86.7%

PSC Z1JZ: Miscellaneous buildings maintenance services $217.2 million 85.0%

PSC AD22: Other applied research and exploratory development defense R&D 

services $144.5 million 84.5%

PSC Z1AZ: Other administrative facilities and service buildings maintenance 

services $261.1 million 83.1%
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Figure 6‐3. Percentage of DoD Contract Dollars Obligated to Small Business, by Service Contract Category33

In addition to potentially undermining the acquisition community’s focus on furthering DoD’s core

mission, DoD’s current approach to working with small businesses may not support DoD’s long‐term

interests. The number of small business contract actions dropped nearly 70 percent from FY 2011 to

FY 2016, but during that same timeframe the value of DoD small business contracts rose approximately

290 percent.34 Small companies are receiving contracts of substantial value from the government,

including DoD, but the decline in the number of small business contract actions indicates DoD’s small

business contracting is not promoting competition and fostering robustness in the defense market.  

Small business programs, such as the 8(a) Business Development Program and Mentor–Protégé

Program, aim to help small businesses mature and become capable of handling larger prime contracts.

In theory, helping companies mature promotes healthier competition for federal contracts; however,

small companies that successfully grow beyond the small business threshold for their NAICS code

must compete with large companies for contracts, putting other than large companies at a substantial

disadvantage compared to large contractors. For example, SBA’s Table of Small Business Size

Standards indicates many technology‐related companies have limited room to grow before becoming

                                                     

33 Data extracted from Federal Procurement Data System on January 2, 2018. Service contract categories represent PSCs aggregated at 

the one‐digit level.  

34 Steve Chabot, Chairman, Committee on Small Business, testimony before U.S. House of Representatives Committee on Armed Services, 

April 14, 2015, accessed November 8, 2017, https://smallbusiness.house.gov/uploadedfiles/chabot_written_statement_fy_16_ndaa.pdf. 

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

PSC G: Social Services

PSC E: Purchase of Structures/Facilities

PSC Z: Maintenance, Repair, Alteration of Structures/Facilities

PSC T: Photo/Map/Print/Publication

PSC F: Natural Resources Management

PSC W: Lease/Rental of Equipment

PSC P: Salvage Services

PSC D: Information Technology and Telecommunications

PSC U: Education/Training

PSC Y: Construction of Structures/Facilities

PSC C: Architect and Engineering Services

PSC R: Support (Professional/Administrative/Management)

PSC S: Utilities and Housekeeping

PSC N: Installation of Equipment

PSC X: Lease/Rental of Structures/Facilities

PSC A: Research and Development

PSC B: Special Studies/Analysis, Not R&D

PSC V: Transportation/Travel/Relocation

PSC M: Operation of Structures/Facilities

PSC H: Quality Control, Testing, and Inspection

PSC J: Maintenance, Repair, and Rebuilding of Equipment

PSC Q: Medical Services

PSC L: Technical Representative Services

PSC K: Modification of Equipment

Small business Other than small business
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other than small. Companies offering custom computer programming services, for instance, cannot grow

beyond $27.5 million in average annual revenue over the previous 3 years before losing their small

business classification.35 Companies that exceed this threshold must bid against large competitors that

offer the same services such as Booz Allen Hamilton, Lockheed Martin, and Northrop Grumman,

which respectively posted $5.4 billion, $47.2 billion, and $24.5 billion in revenue in FY 2016.36 Many

companies that are not small, but far from large, struggle to compete for government contracts against

large, well‐established companies without set‐aside programs and other support.  

This structure incentivizes small companies to adopt strategies that may be inconsistent with DoD’s

interests and small business programs’ goals. For example, some small defense contractors adopt a

practice of restricting their growth to ensure they retain their small business classification and maintain

access to preferential contracting and small business programs.37 This practice may run counter to

DoD’s interest in leveraging its small business programs, such as the 8(a) Business Development

Program, to create greater robustness in the defense market.  

Given the complexity and wide range of issue areas included in socio–economic programs and

provisions, the Section 809 Panel will assess their effect on defense acquisition more fully in a

subsequent report. The panel recognizes the importance of products and services to DoD that do not

directly enhance warfighting capabilities or capacities and will outline alternative means for companies

offering such support to sell to DoD in a future report.  

Impediments to Working with Small, Innovative Companies 

The complexity and slowness of DoD’s acquisition system impedes working with small, innovative

companies. To better understand barriers to entry into the defense market for small businesses, the

Section 809 Panel met with more than 50 small companies. Of those companies, at least 30 explicitly

stated that doing business with DoD is too complex and burdensome. Many of these companies also

stressed that the slowness of the acquisition system presents challenges. Small businesses, particularly

those in the technology sector, operate on rapid business cycles. Such companies must raise funds at

least every 12 to 18 months, yet according to one investor DoD often takes at least two years to award a

contract.38 The amount of time it takes DoD to get to yes on executing an acquisition, as well as the

amount of time to say no, is especially problematic for small companies. In a meeting with the

Section 809 Panel, Heidi Roizen, a renowned venture capitalist stated, “Companies would rather reach

                                                     

35 U.S. Small Business Administration, Table of Small Business Size Standards Matched to North American Industry Classification System 

Codes, accessed August 4, 2017, https://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf.   36 Booz Allen Hamilton Holding Corporation, Form 10‐K, accessed August 4, 2017, 

http://investors.boozallen.com/secfiling.cfm?filingID=1443646‐16‐138#BAH‐

20160331X10K_HTM_S366CB8D67F54551397F4E49AC59D9239. Lockheed Martin Corporation, 2016 Annual Report, accessed August 4, 

2017, http://www.lockheedmartin.com/content/dam/lockheed/data/corporate/documents/2016‐annual‐report.pdf. Northrop 

Grumman, 2016 Annual Report, accessed August 4, 2017, 

http://www.northropgrumman.com/AboutUs/AnnualReports/Documents/pdfs/2016_noc_ar.pdf.   37 Donna Huneycutt, Wittenberg Weiner Consulting, presentation to Section 809 Panel, April 25, 2017. Jacques Gansler, William Lucyshyn, 

and Jinee Burdg, Unintended Outcomes of Small Business Legislation & Policy: Opportunities for Improvement, accessed August 4, 2017, 

https://www.publicpolicy.umd.edu/sites/default/files/SPP_Unintended%20Outcomes%20of%20Small%20Business%20Legislation%20and

%20Policy_March%202015_FINAL_0.pdf.   38 Heidi Roizen, DFJ Venture Capital, meeting with Section 809 Panel, February 16, 2017.  
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a quick ‘no’ than deal with a drawn‐out ‘maybe.’ ”39 Setting aside time, personnel, and money to

pursue business with DoD is too risky for many small companies.40 Given the risks of relying on DoD

for revenue, five of six venture capitalists with whom the Section 809 Panel met indicated they advise

the companies in which they invest to avoid doing business with DoD.

Many companies not familiar with DoD struggle to understand requirements as they are articulated in

requests for proposal. Acronyms and jargon that are widely used across DoD are not always

comprehensible for small businesses lacking experience in the defense market, which leads them to

develop proposals that are noncompliant with what DoD actually requires.41 Similarly, DoD’s

workforce may not be sufficiently versed on the language used by small businesses, particularly those

in the technology sector, and might pass on awarding contracts that would acquire potentially better

technologies and solutions.42  

Small companies also desire more open communication with DoD’s acquisition community, much like

the communication they have in private‐sector acquisitions. A roundtable discussion with four small

business in San Diego, CA, highlighted that small businesses experience barriers to entry into the

defense market due to the inability to speak with DoD’s acquisition officials to ask questions about

requirements and receive feedback on proposals. DoD’s lack of transparency and communication with

small businesses subsequently leaves small companies struggling to learn and understand DoD’s needs

and expectations. This situation may lead to small businesses producing noncompliant proposals and

missing opportunities. Some small companies indicated they need more communication and support to

understand administrative requirements, such as how to certify compliance with complex legal liability

and risk provisions included in many contracts, such as cyber security, counterfeit electronic parts

controls, and export controls. Empowering and encouraging contracting officers to engage with small

businesses and help them understand and navigate requirements and processes is one way to reduce

such barriers to entry.  

Need for Clear Entry Points and Effective Outreach 

Small and large businesses alike express frustration over the lack of clear entry points into the defense

market. Companies can spend months or years searching for the appropriate person or office with the

authority to initiate the acquisition process. For example, a San Francisco‐based company met with

multiple potential customers in DoD, and despite those potential customers expressing strong interest

in acquiring the company’s product, the company was unable to find a client with appropriate

                                                     

39 Ibid.  

40 Scott Fredrick, NEA, meeting with Section 809 Panel, June 12, 2017. For further reports demonstrating the effects  of complexity and 

slowness of the defense acquisition system on businesses, see also GAO, Military Acquisitions: DoD is Taking Steps to Address Challenges 

Faced by Certain Companies, accessed August 4, 2017, http://www.gao.gov/assets/690/686012.pdf. Panel on Business Challenges in 

Defense Industry, Challenges to Doing Business with the Department of Defense: Findings of the Panel on Business Challenges in Defense 

Industry, March 2012, accessed November 7, 2017, 

https://wcoeusa.org/sites/default/files/Challenges%20to%20Bus%20with%20DOD.3.12.pdf.  41 Meagan Metzger, Dcode42, meeting with Section 809 Panel, March 29, 2017. Additionally, during a roundtable discussion with the 

Section 809 Panel on June 30, 2017, six small companies seeking entry into the defense market indicated requests for proposals and 

requirements often are unclear, making it difficult for small companies new to the defense market to understand client needs and offer 

effective solutions.  

42 Meagan Metzger, Dcode42, meeting with Section 809 Panel, June 30, 2017. Scott Fredrick, NEA, meeting with Section 809 Panel, 

June 12, 2017. 
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acquisition authorities to carry out the acquisition. Because of the cost and burden of pursuing DoD

contracts, the company decided to abandon all efforts to work with DoD. This company was among

18 companies that told the Section 809 Panel they have no interest or plans to do business with DoD in

the near future.

Anecdotal evidence gathered by the Section 809 Panel indicates that the example above is not a unique

experience; companies with new technology unknown to DoD cannot easily introduce their products

and services into the defense market, to the ultimate detriment of warfighters. Six California‐based

companies independently indicated similar challenges, stating to the Section 809 Panel they had no idea

where to begin when it came to pursuing DoD contracts. Difficulties finding points of entry often lead to

increased costs and burdens for companies actively seeking opportunities in the defense market. For

instance, representatives from one small company that manufactures custom industrial equipment

indicated their company outsources searching for requests for proposal, because it cannot afford to hire

a team with the knowledge to find and pursue business opportunities with DoD.43  

To understand what infrastructure exists to help companies to enter the defense market, the Section 809

Panel reviewed PTAP. Under the program, DoD established Procurement Technical Assistance Centers

(PTACs) nationwide to help businesses “compete successfully in the government marketplace.”44

Awards are made annually to eligible entities (e.g., nonprofits, states, Indian tribes, and universities) to

serve as PTACs, but due to cost‐sharing requirements, becoming a PTAC often is unaffordable or

unattractive to such entities.45  

PTACs operating on a statewide basis can receive up to $750,000 per fiscal year, and those operating on

less than a statewide basis can receive up to $450,000.46 The centers must find matching funds, as DoD

cannot bear more than 65 percent of the cost of providing assistance (or in the case of distressed areas,

75 percent of the cost).47 For example, in the case of the San Diego PTAC, DoD provides $300,000 in

funding per fiscal year, and the center must find matching funds from other sources, such as state and

local governments.48 Funds go to covering administrative costs, including salaries.49 After covering

such expenses, PTACs often find themselves with inadequate funds for advertising and outreach,

causing low awareness among small businesses of the existence of PTACs. During interviews, the

Section 809 Panel asked representatives from 14 small businesses in Silicon Valley if they knew about

the existence of PTACs. None were familiar with the centers.  

A DoDIG report from 1996 expressed concerns over PTAC roles. The report noted PTACs duplicate

some roles of the SBA’s SBDCs, primarily because of an expansion of PTAP’s authorities in the FY 1994

                                                     

43 The Section 809 Panel met with the company in Seattle, WA, in March 2017; the company operates in the manufacturing industry,

producing custom‐designed components for machines, engines, etc.   44 “About the PTAP and APTAC,” Association of Procurement Technical Assistance Centers, accessed August 4, 2017, http://www.aptac‐

us.org/about‐us/.   45 Sherry Savage, Defense Logistics Agency, meeting with Section 809 Panel, July 10, 2017.   46 Limitation, 10 U.S.C. § 2414.  

47 Cooperative Agreements, 10 U.S.C. § 2413.  

48 Rachel Fischer, San Diego Procurement Technical Assistance Center, meeting with Section 809 Panel, June 19, 2017.  49 Ibid. 
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NDAA,50 allowing PTAPs to provide assistance on contracts with other federal agencies, as well as state

and local governments.51  

Each PTAC is different due to the nature of its environment, local industries, and other factors. For

instance, the technical competency of companies from rural, agricultural regions may be very different

from those in urban areas.52 PTACs must develop a unique approach to supporting small businesses

within their areas of responsibility. As such, DLA includes in its assessment of PTACs their

performance against three goals: the number of new clients, number of outreach events, and number of

counseling hours.53  

PTACs with limited staffs and high demand, like the one in San Diego, also struggle at times with

backlog. For instance, in 2009 during the economic downturn, the San Diego PTAC faced a 12‐week

waiting period for small companies to get an appointment. Although the PTAC dealt successfully with

the problem, the experience highlights the lack of integration among PTACs. Additionally, the PTACs

lack a system, and sufficient visibility within DoD, necessary to help build DoD‐wide awareness of

small businesses’ unique offerings and innovations.  

Beyond PTAP, the Section 809 Panel was not able to identify a DoD‐wide program or system designed

to conduct outreach to bring small businesses into the defense market. Although DIUx represents a

concerted effort to work more closely with small technology companies, it does not conduct broad

outreach and technology scouting to discover new technologies and companies. Stated requirements

from DoD customers, such as the Military Service branches, drive DIUx’s process, which only solicits

commercial solutions for DoD’s known needs.54 There are, however, isolated models within DoD that

have demonstrated successes in conducting outreach, and DoD can look to other agencies for lessons

on how to better reach small, nontraditional partners.  

U.S. Special Operations Command (USSOCOM), in partnership with the Doolittle Institute, launched

SOFWERX. SOFWERX aims to cultivate an ecosystem of innovative companies that can deliver

solutions to the special operations community’s unique challenges.55 To do so, SOFWERX accepts

unsolicited proposals, hosts challenges, and advertises widely across social media and through its

university and industry partners. SOFWERX has facilities in which companies can collaborate, conduct

rapid prototyping, and demonstrate capabilities.56 To attract and leverage the ideas of young,

innovative, and entrepreneurial people, the organization offers fellowships, summer camps, and

college internships. USSOCOM reported that for a low cost, SOFWERX gives USSOCOM awareness to

                                                     

50 Office of the Inspector General, Department of Defense Procurement Technical Assistance Cooperative Agreement Program, accessed 

August 4, 2017, http://www.dodig.mil/audit/reports/fy97/97‐007.pdf.  51 Authority to Provide Certain Types of Technical Assistance, 10 U.S.C. § 2418.   52 Sherry Savage, Defense Logistics Agency, meeting with Section 809 Panel, July 10, 2017.   53 Ibid.  

54 “Work With Us,” Defense Innovation Unit Experimental, accessed October 26, 2017, https://www.diux.mil/work‐with‐us/companies.  55 SOFWERX, accessed October 26, 2017, http://www.sofwerx.org/. See also Defensewerx, accessed October 26, 2017, 

http://defensewerx.org/.   56 “Frequently Asked Questions,” SOFWERX, accessed October 26, 2017, http://www.sofwerx.org/faqs/.  
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unknown and emerging technologies, and is successfully cultivating partnerships with innovative

small businesses to support warfighters.57  

Part of SOFWERX’s success may be attributable to the brand and public recognition of the special

operations community. Similarly, the National Aeronautics and Space Administration’s (NASA’s)

iTech program ascribes a portion of its success to NASA’s globally recognizable brand. Small

companies and innovators place great value on recognition from organizations with high visibility, like

the U.S. Special Forces and NASA, because that recognition may attract venture capital investments for

their companies or technology.58

Similar to SOFWERX, NASA’s iTech program targets nonspace small startup companies, as well as

universities and labs seeking to discover innovative technologies that can potentially solve critical

challenges necessary for future space exploration. NASA iTech does not post specific requirements, but

rather posts a broad topic of interest for a given challenge.59 For example, iTech’s third challenge cycle

accepted white papers from potential participants on artificial intelligence, augmented reality,

autonomy, high performance computing, and medical breakthroughs.60 If applicants have a technology

they believe NASA needs, but does not fit into one of the focus areas listed, NASA accepts white

papers submitted under an undefined X Factor category.61 NASA evaluates the white papers, and

semifinalists have an opportunity to demonstrate their technology to all NASA chief technologists,

venture capitalists, and representatives of large companies.62 For little cost, iTech provides NASA an

effective outreach capability and point of entry to identify groundbreaking technologies with both

NASA mission‐related and commercial viability.

Compliance‐Related Requirements 

Based on data gathered from Section 809 Panel interviews with small companies, many that pursue

business with DoD for the first time either are unaware of or underestimate the potential effects of

audits, paperwork, and other processes on their companies’ ability to operate. In one instance, a small

business owner with whom the panel spoke shut down his business due to alleged delays and

inappropriate application of accounting standards by the Defense Contract Audit Agency (DCAA),

causing the company to lose a contract.63 Although that company’s experience may be an extreme case,

the Section 809 Panel consistently heard that auditability requirements place undue burden on small

companies. For example, the panel participated in a roundtable with four small businesses that had

substantial experience operating in the aerospace and defense industries. Despite having experience in

the defense market, all four companies expressed consistent struggles to meet DCAA requirements and

cover audit‐related costs.64 Due to the complexity and depth of audit‐related challenges, this report

                                                     

57 James Geurts, Special Operations Command, presentation to the Section 809 Panel, May 25, 2017.   58 Kira Blackwell, NASA iTech, presentation to the Section 809 Panel, September 14, 2017.   59 Ibid. 

60 NASA iTech, accessed October 26, 2017, https://nasaitech.com/#intro.   61 Kira Blackwell, NASA iTech, presentation to the Section 809 Panel, September 14, 2017.  62 Ibid. 

63 The company was based in the San Diego, CA, vicinity and had been in business for 16 years before ending operations.   64 The roundtable took place in Seattle, WA, in March 2017. Though the companies all operated in aerospace and defense, each offered 

different products and services.  
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includes a separate section that explores the issue and offers recommendations on that topic (see

Section 2).  

In addition to challenges caused by audits, some companies, particularly those without prior

experience in the defense or national security sectors, indicated they have difficulty obtaining security

clearances. Valerie Muck, the Air Force’s Director of Small Business Programs summarized small

businesses’ challenge with security clearances: “Small businesses cannot get a clearance without a

contract, but cannot win a contract without having a clearance.”65 Failure to address such burdens on

small businesses will continue to deter companies from entering the defense market and drive

innovative companies out of the market.  

Small Business Programs and Authorities Enabling Research and Development and Innovation  

The Section 809 Panel researched the SBIR and STTR programs, RIF, Mentor‐Protégé Program, and

consortia to assess their ability to help small businesses gain entry into the defense market.66  

Small Business Innovation and Research Program and Small Business Technology Transfer Program 

Congress created the SBIR and STTR programs in 1982 and 1992 respectively to encourage small

businesses to contribute innovation to solve the nation’s public policy challenges through federal

research and development funding.67 SBIR and STTR encourage domestic small businesses to engage in

federal research/research and development (R/R&D) that has the potential for commercialization.68

SBIR and STTR allow small businesses to profit from the commercialization of products developed

through the program. 69 The SBIR and STTR programs have similar structures, but the STTR program

requires the small business to collaborate with a research institution throughout the program.  

Past reports and performance evaluations indicate the SBIR program generates positive outcomes for

participants and the government. The Government Accountability Office (GAO) found that agencies

were funding high quality and innovative proposals through the program; indicating positive returns

on investment for the agencies involved.70 An analysis of employment and sales growth among

1,435 companies over a 10‐year span indicated that companies participating in SBIR programs across

the U.S. government, particularly companies in the high‐tech sector located in areas with high volumes

                                                     

65 Valerie Muck, United States Air Force Office of Small Business Programs, meeting with Section 809 Panel, September 22, 2017.  66 The Section 809 Panel also identified the Comprehensive Subcontracting Test Program as potentially effecting small businesses’ access 

to the defense market. The Section 809 Panel intends to research the program more extensively as part of its research on subcontracting 

separately from this report.  

67 David Metzger, While the Nation Slept: The Struggle of Small Innovative Businesses in the U.S. (Herndon, VA: Mascot Books, 2016), 180.   68 DoD tends to view commercialization differently than most other agencies administering an SBIR program. DoD typically defines

commercialization as a product being acquired by a DoD entity; most other agencies define commercialization as a product being

marketed and sold outside the government market.  

69 “About SBIR,” U.S. Small Business Administration, accessed August 4, 2017, https://www.sbir.gov/about/about‐

sbir#embedded_flash_111707621.    70 U.S. General Accounting Office, Federal Research: Effectiveness of Small Business Innovation Research Program Procedures, accessed 

August 4, 2017, http://www.gao.gov/assets/150/145342.pdf.  
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of private venture capital investment, were more likely to receive venture capital investments and

grow in size than those companies that did not participate in SBIR.71  

SBIR also offers a rather direct connection between innovative technology companies and the

acquisition community. A survey conducted by the National Research Council revealed SBIR allows

participants “direct access to DoD acquisition officers and other staff without the need to work through

a prime contractor.”72 Statutory requirements for DoD to increase technology transition from SBIR into

programs of record encourage connections between program participants and the acquisition

community.73 Small companies offering niche capabilities that may not attract venture capital funding

can leverage SBIR’s resources and support to improve their products and find potential DoD

customers.74  

Figure 6‐4. Minimum Expenditures Toward SBIR (By Fiscal Year) 

   

                                                     

71 Josh Lerner, “The Government as Venture Capitalist: The Long‐Run Impact of the SBIR Program,” The Journal of Business, 72, no. 3, 

(1999): 285‐318.  

72 Jacques Gansler, et al., SBIR at the Department of Defense (Washington, DC: The National Academies Press, 2014), 143‐144. 73 Goal for SBIR and STTR Technology Insertion, 15 U.S.C. § 638(y)(6).  74 Jacques Gansler et al., SBIR at the Department of Defense (Washington, DC: The National Academies Press, 2014), 142. 

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

1993199419951996199719981999200020012002200320042005200620072008200920102011201220132014201520162017

Percentage Extramural Research & 

Development Funding

Fiscal Year
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SBIR’s funding is currently set at 3.2 percent of DoD’s extramural R&D funds. 75 The SBIR program has

received incremental increases in its percentage allocation from DoD’s extramural R&D funds since

2011.76 STTR receives an allocation of just 0.45 percent of the extramural budget.77 A study

commissioned by the U.S. Air Force offers some insights into the SBIR and STTR programs’ returns on

investment. The study evaluated the economic effects of the U.S. Air Force’s $4 billion investment into

SBIR and STTR from 2000 to 2013, and indicated that the service’s SBIR and STTR investments yielded

$47.9 billion in economic output nationwide.78 The benefits of the SBIR and STTR programs have led to

calls for them to become permanent. Currently, the programs’ reauthorization requires periodic

renewal, with the risk of not being reauthorized.79 Several experts in acquisition and small business

innovation advocate for the permanent authorization of SBIR and STTR. Jacques Gansler, a scholar and

former USD(AT&L), stated in a 2015 Senate Small Business Committee hearing that it is time for the

programs to become permanent.80 During this hearing, the committee asked other outside expert

acquisition witnesses if there were any possible objections to making SBIR and STTR permanent; none

were given.81 Other small business and innovation experts have called for the programs to be improved

and made permanent.82  

Although the SBIR program is lauded as being successful, the program has some limitations. Of

greatest concern to the Section 809 Panel is that the SBIR program lacks speed, agility, and flexibility.

The program’s processes are increasingly onerous.83 Companies, program experts, and prior studies

indicate the topics, time to Phase III, contracting process, and audits undermine the program’s

innovative potential.84 Many companies struggle to transition to Phase III of DoD’s SBIR program and

see their technologies inserted into DoD programs of record.85

Numerous small companies shared concern about DoD’s SBIR topics. Representatives from one San

Diego‐based company noted that the only SBIR topics for which their organization had received an

award were the topics the company wrote themselves and provided to the DoD program managers for

                                                     

75 Required Expenditure Amounts, 15 U.S.C. § 638(f)(1).  

76 Ibid.  

77 Given the relatively small size of the STTR program compared to SBIR, the Section 809 Panel put greater emphasis on researching 

opportunities to improve the SBIR program as a means to reduce barriers to entry for small businesses and better work with the small 

business community to support DoD’s mission.  

78 United States Air Force, The Air Force Impact to the Economy via SBIR/STTR, accessed October 30, 2017, 

https://www.sbir.gov/sites/default/files/USAF%20SBIR‐STTR%20Economic%20Impact%20Study%20FY2015.pdf.   79 SBIR and STTR must be reauthorized by September 30, 2022 under Section 1834 of the FY 2017 NDAA.   80 Jacques Gansler, Acquisition Reform: Next Steps, testimony before United States Senate Committee on Armed Services, December 1, 

2015. 

81 Ibid. 

82 David Metzger, While the Nation Slept: The Struggle of Small Innovative Businesses in the U.S. (Herndon, VA: Mascot Books, 2016), 279‐

282.  

83 Small Business Technology Council, Small Business Innovation Research (SBIR): Leveraging American Business Growth and Jobs, SBIR: 

Entrepreneur‐Driven R&D to Support American Economic Revitalization, 2017, accessed November 20, 2017, http://sbtc.org/wp‐

content/uploads/2017/01/SBTC‐SBIR‐White‐Paper‐2017.pdf.  84 Jacques Gansler et al., SBIR at the Department of Defense (Washington, DC: The National Academies Press, 2014). For further 

information on SBIR topics and program phases, see “About SBIR,” U.S. Small Business Administration, accessed November 30, 2017, 

https://www.sbir.gov/about/about‐sbir#sbir‐three‐phase‐program.   85 Ibid, 220. The report notes improvements have been made in helping small companies reach Phase III, but also notes a number of ways 

in which DoD can improve Phase III transition.  
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inclusion in a broad agency announcement (BAA). Topics often are prescriptive, outlining specific

requirements and thus creating barriers for innovative companies trying to participate in SBIR.

Transitioning away from requirements‐based topics to problem statements or theme‐based topics may

help alleviate this issue. The National Science Foundation (NSF) may serve as a model for such an

approach. NSF’s SBIR topics are thematic in nature; posting broad needs and interests encourages

many companies with different capabilities and ideas to generate SBIR proposals.

Awarding a Phase I contract often takes at least a year.86 The speed at which technologies mature in

DoD’s SBIR program simply does not happen quickly enough; DoD SBIR technologies take 8 to 12

years to reach commercialization.87 The rate of technological advancement far outpaces the speed of

DoD’s SBIR program, potentially causing DoD to acquire already outdated or suboptimal technologies

through SBIR Phase III.88 Other agencies have struggled with lack of speed in the SBIR program in the

past, and have found success in accelerating their programs through rather modest initiatives. For

example, the NSF adopted the Lean LaunchPad methodology89 for its Innovation Corps (I‐Corps)

program. In an effort to improve the pace and effect of its SBIR program, NSF also established an

I‐Corps boot camp program that exposes all SBIR grantees and their program officers to the Lean

LaunchPad process.90  

A master release schedule, which SBA manages,91 determines when DoD can make SBIR awards.92 This

approach constrains DoD from awarding SBIR contracts in response to unsolicited proposals. DoD also

awards all of its SBIR funds using contracts. Federal regulations require that DoD grants officers make

a determination as to whether the proposed activity is for a public purpose or is in support of DoD’s

mission.93 The SBIR program supports research that meets both criteria and could be grant funded.

Even though other federal agencies fund SBIR projects through grants, as well as contracts, current

regulations that apply only to DoD restrict DoD’s options for funding companies’ innovation‐ and

research‐related efforts through SBIR.  

Relative to grant and cooperative agreement funding, FAR‐based contracts are more complex, and

SBIR participants and DoD officials have difficulty with contracting and FAR‐based requirements

                                                     

86 David Sikora, Acting DoD SBIR/STTR Program Administrator, meeting with Section 809 Panel, May 4, 2017.  87 Ibid. 

88 Ample research exists demonstrating the rate of technological change happens exponentially. For example, Moore’s Law projected that 

computing power would double approximately every 2 years (see: Gordon E. Moore, “Cramming More Components onto Integrated 

Circuits,” Electronics, April 19, 1965). Ray Kurzweil’s Law of Accelerating Returns further indicates technological change happens 

exponentially, and the rate of technological advancement is consistently increasing (see Ray Kurzweil, The Law of Accelerating Returns,

accessed August 4, 2017, http://www.kurzweilai.net/the‐law‐of‐accelerating‐returns).   89 The Lean Launchpad methodology, pioneered by Steve Blank, consists of three elements: (1) Companies or organizations develop a 

one‐page business or mission model canvas, which outlines core assumptions and hypotheses about a product to be developed and its 

end‐users; (2) Companies or organizations gather data from potential end‐users to ensure the product to be developed is solving 

actionable problems, rather than meeting prescriptive requirements; and (3) Agile development of the product allows for incremental 

testing and iterative feedback by and from the anticipated end‐users.   90 Errol Arkilic, former Innovation Corps Program Director, phone call with Section 809 Panel, June 28, 2017.  91 Assistance to Small‐Business Concerns, 15 U.S.C. § 638(b)(5).  92 David Sikora, Acting DoD SBIR/STTR Program Administrator, meeting with Section 809 Panel, May 4, 2017.  93 Distinguishing Assistance from Procurement, 32 CFR § 22.205. 
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applicable to the SBIR program.94 Small businesses also struggle to overcome the delays and costs

inherent in DoD’s contracting process and acquisition regulations,95 which introduces difficulties and

delays that can otherwise be avoided.96 At a 2016 hearing on the SBIR program, a Navy senior official

testified,  

Our challenge...[is] the FAR and DFAR. When my SBIR companies have to comply with the same

regulations, procedures, and processes that we expect of our defense primes, it is very difficult if it is two

people in a garage.97

Leveraging grants and cooperative agreements for Phases I and II, as is done by other SBIR

administering agencies, could offer benefits in terms of speed and program flexibility. Grants and

cooperative agreements require less preaward effort than contracts and facilitate awarding contracts

faster.  

By statute, companies can receive only one additional Phase II SBIR award for a given project, which

further limits the flexibility of SBIR to support small companies and promote innovation.98 New

companies that may have more innovative, high‐quality proposals, but also are in need of more capital

to bridge the valley of death99 are restricted to the same number of Phase II awards for a project as

companies with prior SBIR experience. This situation limits DoD’s ability to lend greater support to

small businesses new to SBIR compared to companies that already understand SBIR and likely have

greater knowledge of how to successfully commercialize their technologies.   

Another challenge for small companies is the required audit of the firm’s accounting systems and

procedures. DCAA performs this function for DoD SBIR participants. According to DCAA, SBIR small

businesses potentially are subject to two audits: a preaward audit of the financial system and a

postaward audit of the contract.100 During a roundtable held by the Section 809 Panel, Army

contracting officers identified the requirements for DCAA audits and the onerous contracting process

as a substantial impediment to SBIR participants.101 Audit compliance, (see Section 2), is often

burdensome and costly, especially for small businesses. DoD is by far the largest SBIR agency in terms

of dollars and has the highest number of awardees. DCAA conducts many audits each year, especially

if the awardees are new. Delays and backlogs can range from 6 months to more than a year.102 These

                                                     

94 National Research Council, Charles Wessner, ed., Committee for Capitalizing on Science, Technology, and Innovation: An Assessment of 

the Small Business Innovation Research Program (Washington, DC: National Academies Press, 2009), 25, 194, 201, 210.   95 Ibid, 20.  

96 Ibid, 201.  

97 Robert Smith, Commercializing on Innovation: Reauthorizing the Small Business Innovation Research and Small Business Technology 

Transfer Program, testimony before United States House of Representatives Committee on Small Business, March 2, 2016.   98 Express Authority for Awarding a Sequential Phase II Award, 15 U.S.C. § 638(ff)(1).   99 The valley of death is a commonly used term in the technology and start‐up industries. The term refers to the period of time between 

when a company first receives money to support research and development, to when the product becomes commercialized and 

generates steady revenue.  

100 Defense Contract Audit Agency, Resource Guide for the Small Business Innovation Research/Small Business Technology Transfer 

(SBIR/STTR) Programs, accessed August 4, 2017, http://www.acq.osd.mil/osbp/sbir/sb/resources/index.shtml.   101 U.S. Army contracting officers, meeting with the Section 809 Panel, November 2016.   102 National Research Council, Charles Wessner, ed., Committee for Capitalizing on Science, Technology, and Innovation: An Assessment of 

the Small Business Innovation Research Program (Washington, DC: National Academies Press, 2009), 201. 
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timelines, although normal for larger contractors, can introduce additional cost and risk analysis on

potential SBIR firms.  

Efforts to improve commercialization rates and processes date back to 1992;103 nevertheless, problems

remain. Federal agencies are required by statute to issue Phase III (commercialization) awards “to the

greatest extent practicable.”104 Research indicates there is uneven emphasis on Phase III awards across

DoD, with the Navy being a notable exception, accounting for 70 percent of all DoD Phase III awards.105

Due to inadequate resources dedicated to Phase III, DoD struggles to help SBIR companies reach

commercialization.106 Given that Phase III resources are limited, and that the program receives funds by

taking money from extramural R&D accounts, managers often view SBIR as a tax on their programs.107

The fact that SBIR does not factor prominently in acquisition strategies and programs may also inhibit

commercialization. The only reference to SBIR in DoDI 5000.02 is a single bullet point requiring

program managers to “establish goals” for applying SBIR technologies in programs of record.108  

Rapid Innovation Fund 

The RIF was created in 2011.109 In FY 2016, the program was appropriated $250 million.110 DoD OSBP

and ASD(R&E) Emerging Capability and Prototyping (EC&P) manage the RIF program jointly with

funding administered by OSBP.111 After appropriations, Congress disburses program funds to DoD

OSBP, which allocates a portion of the RIF funds to each of the Military Services and retains a portion

used for projects proposed by the Defense Agencies and Combatant Commands.112 The Services select

and manage their RIF projects, and OSBP and EC&P jointly select projects that defense agencies and

combatant commands manage.113 OSBP, as the program element manager, funds all RIF projects.114

RIF awards cannot exceed $3 million.115 For RIF, BAAs solicit white papers and initiate a competitive

selection process.116 Small businesses receive preference; as of FY 2016, 88 percent of all RIF awards

                                                     

103 Jacques Gansler, et al., SBIR at the Department of Defense (Washington, DC: The National Academies Press, 2014), 96‐97.  104 Phase III Awards, 15 U.S.C. § 638(r)(4).   105 National Research Council, Charles Wessner, ed., Committee for Capitalizing on Science, Technology, and Innovation: An Assessment of 

the Small Business Innovation Research Program (Washington, DC: National Academies Press, 2009), 29.  106 Jacques Gansler et al., SBIR at the Department of Defense (Washington, DC: The National Academies Press, 2014), 167.  107 David Sikora, Acting DoD SBIR/STTR Program Administrator, meeting with Section 809 Panel, May 4, 2017. Jacques Gansler et al., 

SBIR at the Department of Defense (Washington, DC: The National Academies Press, 2014), 167, 211, 221.   108 Operation of the Defense Acquisition System, DoDI 5000.02, Enclosure 1, 48 (2015).  109 FY 2011 NDAA, Pub. L. No. 111‐383, 124 Stat. 4137 (2011).   110 Ellen Purdy and Ted Bujewski, Rapid Innovation Fund (RIF): Program Overview, accessed August 4, 2017, 

http://business.defense.gov/Portals/57/Documents/RIF_Overview‐Feb2017.pdf.   111 Ted Bujewski, DoD Office of Small Business Programs, email to Section 809 Panel, October 12, 2017.  112 Ibid.  113 Ibid. Memorandum from Office of the Undersecretary of Defense, Acquisition, Technology, and Logistics, Announcement of 

Implementation Guidelines and Use of Technology Transition Best Practices for Components Planning to Participate in the Rapid 

Innovation Fund (RIF) Program for Fiscal Year 2017, April 11, 2017.   114 Ibid.  115 Science and technology programs to be conducted so as to foster the transition of science and technology to higher levels of research, 

development, test, and evaluation, 10 U.S.C. § 2359. 

116 Ellen Purdy and Ted Bujewski, Rapid Innovation Fund (RIF): Program Overview, accessed August 4, 2017, 

http://business.defense.gov/Portals/57/Documents/RIF_Overview‐Feb2017.pdf.  
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have gone to small businesses.117 A large business can receive a RIF award if a small business cannot

produce a mature prototype.118   

RIF is a useful tool for enabling acquisition and integration of innovative capabilities developed by

small businesses. For example, RIF provides fiscal resources to help DoD transition SBIR technologies

from Phase II into Phase III; approximately 60 percent of RIF technologies are developed through

SBIR.119 RIF, however, is constrained by inflexibility. The program only posts BAAs once per year on

FedBizOpps, the main source for businesses to find opportunities to contract with the federal

government. Because the statute requires a competitive selection process for RIF awards,120 unsolicited

proposals for technologies may not receive a RIF contract outside the BAA cycle. It is unclear whether

the SBIR process qualifies as a competitive process for RIF awards,121 despite the statute allowing sole

source Phase III awards for SBIR technologies.122  

Survey feedback, as reported by DoD’s OSBP, indicated more than 90 percent of RIF awardees stated

that RIF helped their businesses, and 57 percent reported RIF succeeded in helping transition

technology.123 Given requirements to compete RIF awards, however, the process is slower than

intended. One small company shared with the Section 809 Panel that it took nearly 2 years from a white

paper through the proposal process to get on a RIF contract, concluding, “The Rapid Innovation Fund

wasn’t rapid at all.”124 A 2015 U.S. GAO report expressed similar concerns and indicated the process for

awarding RIF contracts takes approximately 18 months.125 The program’s speed suffers, at least in part,

from lack of dedicated contracting offices and infrastructure.126 Executing a RIF contract, especially for

organizations like combatant commands and defense agencies without contracting offices of their own,

typically requires searching for a contracting office with the bandwidth and willingness to take on the

work.127  

The $3 million cap on RIF project funding (unless the Secretary of Defense or the Secretary’s designee

approves greater funding)128 does not ensure the program can help small companies navigate past the

valley of death and transition their technologies into programs of record. The same company that

                                                     

117 Ibid.   118 Ted Bujewski, DoD Office of Small Business Programs, meeting with Section 809 Panel, May 19, 2017.  119 Ibid.  120 Science and technology programs to be conducted so as to foster the transition of science and technology to higher levels of research, 

development, test, and evaluation, 10 U.S.C. § 2359. 

121 Ibid.  122 Ibid.  123 Ellen Purdy and Ted Bujewski, Rapid Innovation Fund (RIF): Program Overview, accessed August 4, 2017, 

http://business.defense.gov/Portals/57/Documents/RIF_Overview‐Feb2017.pdf.  124 Eric Patten, Ocean Aero, presentation to Section 809 Panel, June 21, 2017.   125 GAO, DoD Rapid Innovation Program: Some Technologies Have Transitioned to Military Users, but Steps Can Be Taken to Improve 

Program Metric and Outcome, accessed August 5, 2017, http://www.gao.gov/assets/680/670090.pdf.   126 Ted Bujewski, DoD Office of Small Business Programs, phone call with Section 809 Panel staff, September 29, 2017.   127 Ibid.  128 Science and technology programs to be conducted so as to foster the transition of science and technology to higher levels of research, 

development, test, and evaluation, 10 U.S.C. § 2359. 
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pointed to slowness in the program indicated $3 million is insufficient to develop the contracted

platform. As a result, the company is taking a loss on the project.129

Mentor–Protégé Program 

The Mentor–Protégé Program facilitates partnerships between small and large businesses, with the goal

of leveraging large businesses’ resources and expertise to help small companies win defense contracts

and promote technology transfer.130 DoD is not the only agency to administer a mentor–protégé

program (although DoD’s program is agency‐specific, whereas other such programs across the federal

government fall under the SBA’s purview).131  

Small business protégés with which the Section 809 Panel spoke, indicated that mentors occasionally

pressure small business protégés to transfer their rights to intellectual property to the mentors. Because

neither DoD nor SBA has tangible data on the program, however, the Section 809 Panel did not identify

any compelling findings on the program’s efficacy. Based on interviews with DoD’s OSBP, efforts are

underway to change the Mentor‐Protégé Program’s data collection and reporting requirements.132  

Consortia and Accelerators 

Consortia and accelerators (referred to as consortia here) are effective resources for DoD to access small

business innovations and technologies. Consortia pool companies with specific technical capabilities

and service offerings, effectively building a community of companies that can collaborate and compete

with one another to deliver better products and services to DoD. Such organizations can tap into their

communities to help connect small businesses with DoD, especially organizations executing other

transaction authorities (OTAs) for R&D and prototyping, allowing DoD to quickly make awards to

small businesses offering innovative capabilities and technologies.133  

For instance, NSTXL helps small businesses pursue, win, and receive awards via OTAs within 80 to

100 days.134 DIUx employs a similar approach to getting companies awards via OTAs.135 The speed at

which consortia can help DoD administer OTAs to acquire innovative capabilities and technologies

meets the needs of small companies for DoD acquisitions to move more quickly, and is an important

tool for enhancing DoD’s warfighting capabilities.    

                                                     

129 Eric Patten, Ocean Aero, presentation to Section 809 Panel, June 21, 2017.  130 “Mentor‐Protégé Program (MPP),” U.S. Department of Defense Office of Small Business Programs, accessed August 5, 2017, 

http://www.acq.osd.mil/osbp/sb/programs/mpp/. Robert Stewart, DOD Mentor Protégé Program, accessed August 5, 2017, 

http://www.acq.osd.mil/osbp/docs/DoD‐MPP_FY16_SlideDeck‐15DEC15.pdf.   131 Robert J. Dilger and Kate M. Manuel, Small Business‐Protégé Programs, accessed August 5, 2017, 

https://fas.org/sgp/crs/misc/R41722.pdf.   132 Alice Williams, Acting Deputy Director of DoD Office of Small Business Programs, meeting with Section 809 Panel, May 4, 2017  133 OTAs are established in 10 U.S.C. § 2371 and give DoD the authority to enter into agreements other than contracts, grants, or

cooperative agreements. OTAs are not covered by the FAR, and are intended for use on basic, applied, advance research and prototyping 

projects. The Section 809 Panel found that OTAs are of increased interest to DoD and an important vehicle for companies to deliver 

innovative products and services to the Department. The Section 809 Panel continues to research OTAs and may offer findings and 

recommendations in a later report.  

134 Tim Greeff, NSTXL, presentation to Section 809 Panel, April 25, 2017.  135 Michael Bold, Speed Contracting, accessed August 5, 2017, https://www.army.mil/article/178968/speed_contracting.
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Consortium managers have no incentives to search for new technologies and recruit new members into

the community. Consortium managers search for technologies within the consortia in response to a

specific DoD requirement, but consortia managers do not typically provide technology‐scouting

support to DoD.136 Because consortium managers may not proactively identify new technologies for

DoD application, finding new technologies by way of consortium managers is not consistent and may

cause innovative technologies to remain unknown to, or overlooked by, DoD.

Some stakeholders the Section 809 Panel met with expressed concern that leveraging consortia to

execute OTAs is creating a pay‐to‐play system in which small companies looking to do business with

DoD through OTAs must pay consortium membership fees.137 The panel noted, however, that

consortium membership fees often are minimal, no more than a few hundred dollars per year.138

Absent alternative revenue sources, membership fees and transaction administration fees are necessary

to fund consortium operations.139 Although this funding approach may not present a substantial barrier

today, the situation may require future consideration if fees become a major barrier for businesses

looking to enter the defense market.   

Conclusions 

Small business policy objectives and programs, as executed today, do not emphasize promoting small

businesses that directly enable DoD to better execute its missions. The pressures that DoD faces, and

will increasingly face, to execute its mission necessitate a clear‐minded focus on leveraging small

businesses to maximize warfighting effectiveness. DoD should refocus its small business policies,

programs, and practices to maximize warfighting capabilities and capacities. A number of issues need

resolution for DoD to work more effectively with small businesses:  

 Greater unity of effort is necessary to direct and align DoD’s small business policy, programs,

and strategy with DoD’s mission. DoD lacks the infrastructure and connectivity between the

small business community and industrial base policy to align small business programs with the

DoD’s strategic needs. Regardless of the ultimate outcome of the current reorganization, it is

important to increase the connectedness of DASD(MIBP), OSBP, and PTAP to develop a

complete view of the defense market, support innovative small businesses, and leverage small

businesses to meet the DoD’s mission‐related needs.  

 DoD must better support small businesses, and in doing so, it should prioritize working with

innovative small businesses that can directly enhance mission capabilities. DoD needs to

articulate a strategy and implementation policy for how it will leverage the innovative capacity

and potential of the small business community to meet critical, mission‐related needs. DoD’s

small business professionals at the field‐level are not focused on finding innovative small

companies with offerings that can enhance DoD’s warfighting capabilities and capacities. DoD

should repurpose its small business assets to find and connect innovative small businesses with

contract opportunities supporting DoD’s strategic needs.

                                                     

136 Chris Van Metre, Advanced Technology International, phone call with Section 809 Panel, May 11, 2017.   137 Meagan Metzger, Dcode42, presentation to the Section 809 Panel, April 25, 2017.  138 Chris Van Metre, Advanced Technology International, phone call with Section 809 Panel, May 11, 2017.  139 Ibid. 
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 Small businesses seeking entry into the defense market need better communication and clearer

points of entry. Small companies require coaching, support, and feedback to enable their

growth, development, and success in supporting DoD. PTAP could help address the need for

greater and more effective communication with small businesses; however, PTAP is not

exclusively DoD‐focused, lacks sufficient resources, and struggles to reach small businesses that

may be interested in the defense market. In addition to increasing small businesses’ awareness

of PTACs and PTACs’ capacities to help small businesses across the country, DoD needs to

align PTAC goals and operations with DoD’s strategic needs and priorities. Open innovation

centers like SOFWERX present another viable approach because they could offer a low‐cost, yet

effective method of attracting innovators into the defense market. DoD should use such centers

more widely to provide entry points and host challenges (like those put on by both SOFWERX

and NASA iTech) to leverage small, innovative companies to solve unique DoD problems. The

mentor–protégé program also helps small businesses grow and mature. To allow for detailed

reviews and studies of the program in the future, DoD should continue to improve data

collection and reporting should continue.

 DoD should invest more heavily in SBIR and RIF, as both effectively leverage small businesses

to further DoD’s mission‐related capabilities; however, both programs could benefit from

greater speed and flexibility. DoD should factor SBIR technologies more explicitly into its

acquisition strategies and plans. Greater speed, as well as the ability to disburse large awards

under both programs, will help companies bridge the valley of death and successfully

commercialize their products.

 Consortia and technology accelerators can help DoD gain greater awareness of emerging

technologies and quickly connect small businesses to DoD customers. Consortia need to

provide greater technology scouting support and services to DoD to maximize their effect.

Consortium fees need to remain affordable for small companies to prevent emergence of

additional barriers to entry into the defense market.

Implementation 

Legislative Branch 

 Enact a Defense Small Business Act, consolidating all statutes pertaining to DoD’s small

business programs under Title 10.  

Executive Branch 

 Introduce policy directing a refocus to working with small businesses to support and enhance

DoD’s warfighting capabilities and capacities.  
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Subrecommendation 21a: Establish the infrastructure necessary to create and execute a 

DoD small business strategy, ensuring alignment of DoD’s small business programs with the 

agency’s critical needs. 

Legislative Branch 

 Introduce a requirement for DoD to develop a small business strategy within 180 days of

enactment, to include the following provisions:  

 Integration of small business into a holistic view of industry;  

 Alignment of DoD small business programs with agency mission; and

 Clarifying points of entry into the defense market, including enabling and promoting the

PTAP to facilitate small business entry into the defense market.

 Amend 10 U.S.C. § 2504 to require DoD to include the following in its annual report to Congress

on the defense base:

 An analysis of capabilities and emerging technologies relevant to DoD’s warfighting

mission across the small business community and among non‐traditional partners.

 How DoD will incorporate small business goals and strategies into the greater industrial

base strategy.

 How relevant offices are integrating small business activities into a greater industrial base

strategy.  

 Amend Chapter 142 of 10 U.S.C. to provide PTACs the flexibility and resources necessary to

conduct greater outreach and provide greater support to small businesses by: increasing

funding of PTACs to cover all operational costs up to a cap that is double what can currently be

allocated to each individual PTAC and eliminating the requirement for PTACs to secure

matching funds.

 Increase the annual appropriation made to the Procurement Technical Assistance Cooperative

Agreement Program to no less than $68 million.

 Encourage small DoD contractors to grow and mature their capabilities by allowing small

businesses that grow beyond their size thresholds to retain their status as a small business

and/or 8(a) for 3 years unless a large company acquires the small businesses.   

Executive Branch 

 No Executive Branch changes are required.
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Subrecommendation 21b: Build on the successes of the SBIR/STTR and RIF programs. 

Legislative Branch 

 Amend 15 U.S.C. § 638 to make SBIR and STTR permanent.

 Amend 10 U.S.C., in recognition of the success of the SBIR program, to increase DoD’s

percentage allocation of extramural R&D funds allocated to SBIR to 7 percent, phased in during

5 years.  

 Amend 10 U.S.C. to authorize DoD SBIR Phase I awards of $500,000 and Phase II awards of $1.5

million.  

 Amend 10 U.S.C. to allow explicitly the application of simplified acquisition procedures to SBIR

Phases I and II, while ensuring SBIR intellectual property protections remain.  

 Amend 10 U.S.C. to allow DoD to issue sole‐source SBIR Phase I and Phase II awards outside

the master release schedule and to nonconforming proposals, not requiring a Justification and

Approval (J&A), and not subject to protest.  

 Amend 10 U.S.C. to allow for DoD SBIR Phase II awards without regard for whether a small

business received a Phase I award.  

 Amend U.S.C. Title 10 to ensure small business concerns participating in the SBIR program for

the first time may receive more than two Phase II awards.  

 Amend U.S.C. Title 10 to allow for the use of grants, cooperative agreements, and other

transaction authority for SBIR and STTR.  

 Amend 10 U.S.C. § 2359 to explicitly allow SBIR and STTR technologies entering into Phase III

to be eligible for sole‐source RIF awards, not requiring a J&A, and not subject to protest.  

 Increase the annual appropriation to RIF to $750 million.  

 Amend 10 U.S.C. § 2359 to eliminate the $3 million spending cap per RIF award, and allow

agencies to issue sole‐source RIF awards to unsolicited proposals deemed critical for enhancing

DoD’s warfighting capabilities and capacities.  

Executive Branch 

 Update DoD policy on major weapons system programs to emphasize SBIR technologies as

essential components of acquisition strategies and plans.  

 Change DoD policy to disburse a share of RIF money to the defense agencies, USSOCOM,

U.S. Transportation Command, and any Combatant Command granted contracting authority;

give those entities the ability to select and manage RIF projects.  
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Page 194   |   Volume 1    Small Business

 Create a specific exemption for the SBIR and STTR programs within Title 32 CFR § 22.205, and

exempt SBIR and STTR funding agreements from Title 32 CFR § 22.205b and § 34.18.  

Subrecommendation 21c: Enable innovation in the acquisition system and among industry 

partners. 

Legislative Branch 

 Authorize through legislation a DoD Nontraditional Technology Partner Initiative to

incentivize outreach and working with nontraditional partners through the following:  

 Awards (to include cash prizes) to DoD civilians and uniformed personnel for efforts to

leverage nontraditional partners for the delivery and/or development of new technologies

directly enhancing warfighting capabilities.

 Cash or noncash awards to DoD contractors for the identification of and subcontracting

with nontraditional partners offering new technologies to DoD.

 Cash or noncash awards to consortia that successfully assist non‐traditional partners in

obtaining DoD contracts (to include other transactions) for the first time.

 Direct the establishment of a Defense Innovation Center Program, expanding the use of robust

open innovation centers, like SOFWERX, across DoD, the Services, and organizations. Under

the program, DoD should do the following:

 Identify DoD components with sufficient public recognition under which open innovation

centers can be established.

 Budget for the establishment and operation of open innovation centers in regions enabling

small, innovative companies to interact directly with DoD end‐users and operators.

 Give sponsoring organizations under which the centers are established authority and

necessary resources to execute business arrangements, to include OTAs and grants, and host

challenges.   

Executive Branch 

 No Executive Branch changes are required.

Note: Recommended draft legislative text and sections affected display and a draft policy memo can be 

found in the Implementation Details subsection at the end of Section 6. 

Implications for Other Agencies 

 Because SBA oversees governmentwide small business activities, changes to DoD’s small

business activities and programs may affect SBA’s oversight of DoD’s programs. Some

recommendations made by the Section 809 Panel may require coordination between SBA and

DoD to implement.   
Section 6 

Small Business

Implementation Details 

Recommendation 21

 SECRETARY OF DEFENSE

 1000 DEFENSE PENTAGON

 WASHINGTON, DC 20301-1000 

 

MEMORANDUM FOR SECRETARIES OF THE MILITARY DEPARTMENTS

CHAIRMAN OF THE JOINT CHIEFS OF STAFF

UNDERSECRETARIES OF DEFENSE

DEPUTY CHIEF MANAGEMENT OFFICER

COMMANDERS OF THE COMBATANT COMMANDS

ASSISTANT SECRETARIES OF DEFENSE

NATIONAL GUARD BUREAU

GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE

DIRECTOR OF COST ASSESSMENT AND PROGRAM EVALUATION

DIRECTOR, OFFICE OF SMALL BUSINESS PROGRAMS

DIRECTORS OF THE DEFENSE AGENCIES

DIRECTORS OF THE DOD FIELD ACTIVITIES

SUBJECT: Refocusing Small Business Activities to Enhance Warfighting Effectiveness and Readiness

On February 17, 2017, I announced my expressed intent to field a larger, more capable and more lethal 

Joint force. In furtherance of my Memorandum on Implementation Guidance for Budget Directives in the 

National Security Presidential Memorandum on Rebuilding the U.S. Armed Forces, I am directing the 

Department to refocus its small business activities to fully capitalize on the small business community’s 

unique capabilities to deliver lethality to the U.S. Armed Forces and align the Department’s small 

business activities to its strategic priorities to better meet warfighting needs.

The Department was the first agency following World War II to establish a requirement to have a 

program leveraging small businesses to meet its mission. The Department continues to rely on and 

emphasize working with the small business community, evidenced by great progress towards meeting our 

small business utilization goals. Small businesses provide innovative capabilities to the Department, and 

are essential to maintaining warfighting dominance in an increasingly contested global environment. It is 

therefore critical that we take further steps to more fully align our commitment to small businesses with 

the Department’s mission.

I am directing the Deputy Secretary of Defense, in conjunction with the Chief Management Officer 

(CMO), Undersecretary of Defense for Acquisition & Sustainment (USD (A&S)) and the Undersecretary 

of Defense for Research & Engineering (USD (R&E)), to develop a strategic plan for my approval within 

three (3) months from the release of this memorandum. The strategic plan shall provide, at a minimum,

ways to accomplish the following objectives: 

• Conduct deeper industrial assessments and build market awareness. To maintain dominance and 

most effectively deter threats from State and non-State actors, the Department must increase its 

market awareness, including intelligence on existing and emerging capabilities available in the 

market. Given the pace of technological advancement and sometimes rapid emergence of new 

threats, industrial base analysis must occur continuously. The strategic plan will therefore 

articulate how to leverage small business and industrial base-related functions currently 

performed by the Office of Small Business Programs, Deputy Assistance Secretary of Defense for 

Manufacturing and Industrial Base Policy (DASD (MIBP)), and small business offices 

throughout the Department and Services to: 
o deepen annual industrial assessments currently required by Congress to increase 

awareness and understanding of existing and emerging capabilities and technologies 

across the market; 

o determine areas of opportunity and risk in how the Department accesses innovation and 

developmental technologies across the small business community and among nontraditional partners; 

o identify how small businesses and emerging technologies can be better leveraged to 

enhance the U.S. Armed Forces’ warfighting capabilities; and

o share industrial assessments and market intelligence with program managers and widely 

across the acquisition community, to inform acquisition strategies and programs. 

• Increase outreach to small businesses. Establish a coordinated program to reach out to small, 

innovative businesses, including those without prior experience working with the Department. 

The outreach shall be informed by the industrial assessments discussed above to target new 

technologies and capabilities, build relationships with potential suppliers, and ensure the 

Department’s access to small business capabilities that enhance warfighting capabilities and 

readiness. 

• Enhance points of entry into the defense market. Establish and effectively communicate a plan 

for creating clear points of entry for small businesses seeking to provide the Department and its 

components with products, services and solutions that enhance warfighting capabilities and 

readiness. Points of entry should consist of easily accessible information for all companies 

irrespective of their experience with and knowledge of the Department of Defense. Points of 

entry should provide companies with information on how to present and share their capabilities 

with the Department of Defense, and provide for regular opportunity to interact directly with 

potential end-users and the acquisition community. In support of this objective, the Procurement 

Technical Assistance Program (PTAP) shall be revitalized. In keeping with Congressional 

direction regarding the PTAP, management of the PTAP will be integrated with this strategic plan 

and realigned small business capabilities (discussed below). Procurement Technical Assistance 

Centers should therefore become a central and effective point of entry for small business. 

• Repurpose the Department’s small business resources. Working with the Services, establish a 

plan to repurpose and realign the Department’s small business resources, including personnel, as 

necessary to support the aforementioned strategic objectives. 

 

To ensure execution of the strategic plan, it will also be codified in policy, regulation, processes, and, if 

necessary, in our organizational structure. Therefore, in addition to development of this strategic plan, I 

am directing USD (A&S) and USD (R&E) to oversee changes to relevant regulations, policies, and 

directives to reflect process changes, roles, and responsibilities necessary to execute the strategy. USD 

(A&S) and USD (R&E) shall also work with the Services to ensure performance management systems 

and program evaluation metrics promote organizational alignment with the Department’s focus on 

leveraging small businesses to enhance warfighting capabilities. 

Furthermore, I am directing USD (A&S) and USD (R&E) to lead changes to Department acquisition 

policies to maximize use of the Small Business Innovation Research (SBIR) program, Small Business 

Technology Transfer (STTR) program, and Rapid Innovation Fund (RIF) in all acquisition plans. 

Policies shall be updated to promote the usage of the RIF to facilitate SBIR and STTR technologies’ 

maturation and optimization, as well as integration into programs of record. 
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LEGISLATIVE PROVISIONS — 809 PANEL

RECOMMENDATIONS RELATING TO SMALL 

BUSINESS AND INNOVATION PROGRAMS 

[NOTE: The draft legislative text below is followed by a “Sections 

Affected” display, showing the text of each provision of law affected by 

the draft legislative text below.]

1 TITLE IV—SMALL BUSINESS AND INNOVATION

2 PROGRAMS 

Sec. 401. Department of Defense small business strategy.

Sec. 402. Permanent Government-wide authority for Small Business Innovation Research Program and 

Small Business Technology Transfer Program. 

Sec. 403. Enhancements to Department of Defense authorities relating to Small Business Innovation 

Research Program and Small Business Technology Transfer Program. 

Sec. 404. Enhancements to Department of Defense research and development rapid innovation program.

Sec. 405. Authority for Department of Defense small business contractors to retain small business status for 

limited period.

Sec. 406. Enhancements to Procurement Technical Assistance Cooperative Agreement Program.

Sec. 407. Department of Defense nontraditional technology partner initiative.

Sec. 408. Department of Defense innovation centers program.

Sec. 409. Additional elements in annual report on defense technology and industrial base policy.

Sec. 410. Cross references to certain small business provisions applicable to Department of Defense. 

Sec. 411. Codification of NDAA section on role of Directors of Small Business Programs in Department of 

Defense acquisition processes. 

Sec. 412. Codification of NDAA section on Department of Defense test program for negotiation of 

comprehensive small business subcontracting plans.

Sec. 413. Codification of Mentor-Protégé program. 

Sec. 414. Repeal of certain obsolete NDAA provisions.

3 SEC. 401. DEPARTMENT OF DEFENSE SMALL BUSINESS STRATEGY.

4 (a) NEW TITLE 10 CHAPTER.—Part IV of subtitle A of title 10, United States 

5 Code, is amended by striking chapter 133 and inserting the following new chapter: 

6 “CHAPTER 132—DEPARTMENT OF DEFENSE SMALL BUSINESS 

7 PROGRAMS

“Subchapter

“I. General .............................................................................. 2231 

“II. SBIR and STTR Programs ....................................................... 2235 

“III. Mentor-Protégé Program ........................................................ 2238 

 
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1 “Subchapter I—General

“Sec.

“2231. Department of Defense small business strategy. 

“2231a. References to Directors and Offices of Small Business Programs. 

“2232. References to certain programs provided in Small Business Act. 

“2233. Department of Defense small business contractors: retention of small business status for limited

period to complete contracts.

“2234. Role of the Directors of Small Business Programs in acquisition processes of the Department of 

Defense. 

“2234a. Program for negotiation of comprehensive small business subcontracting plans. 

2 “§ 2231. Department of Defense small business strategy

3 “(a) IN GENERAL.—The Secretary of Defense shall implement a small business 

4 strategy for the Department of Defense.

5 “(b) UNIFIED MANAGEMENT STRUCTURE.—As part of the Department of Defense 

6 small business strategy, the Secretary shall ensure that there is a unified management 

7 structure within the Department for the functions of the Department relating to— 

8 “(1) small business programs;

9 “(2) manufacturing and industrial base policy; and

10 “(3) the Procurement Technical Assistance Program under chapter 142 of 

11 this title. 

12 “(c) PURPOSE OF SMALL BUSINESS PROGRAMS IN DOD.—As part of the 

13 Department of Defense small business strategy, the Secretary shall ensure that

14 Department of Defense small business activities and programs are carried out so as to 

15 further national defense programs and priorities and the statements of purpose for 

16 Department of Defense acquisition set forth in section 801 of the National Defense 

17 Authorization Act for Fiscal Year 2018 (Public Law 115-91). 

18 “(d) POINTS OF ENTRY INTO DEFENSE MARKET.—As part of the Department of 

19 Defense small business strategy, the Secretary shall ensure— 
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1 “(1) that points of entry for small business firms into opportunities for 

2 contracting with the Department of Defense are identified clearly and are 

3 provided in a form that allows convenient and universal user access; and

4 “(2) that small business firms are able to have access to end-item users, 

5 operators, program managers, and contracting officers to the extent necessary to 

6 inform them of emerging and existing capabilities. 

7 “(e) ENHANCED OUTREACH UNDER PROCUREMENT TECHNICAL ASSISTANCE 

8 PROGRAM MARKET.—As part of the Department of Defense small business strategy, the 

9 Secretary shall enable and promote activities to provide coordinated outreach to small 

10 business concerns through the Procurement Technical Assistance Program under chapter 

11 142 of this title to facilitate small business contracting with the Department of Defense.”.

12 (b) IMPLEMENTATION.— 

13 (1) DEADLINE.—The Secretary of Defense shall develop the small 

14 business strategy required by section 2231 of title 10, United States Code, as 

15 added by subsection (a), not later than 180 days after the date of the enactment of 

16 this Act. 

17 (2) NOTICE TO CONGRESS AND PUBLICATION.—Upon completion of the 

18 defense small business strategy pursuant to paragraph (1), the Secretary shall– 

19 (A) transmit the strategy to Congress; and

20 (B) publish the strategy on a public website of the Department of 

21 Defense.

22 (c) CLERICAL AMENDMENTS.—The tables of chapters at the beginning of subtitle 

23 A of title 10, United States Code, and at the beginning of part IV of such subtitle, are 
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1 amended by striking the item relating to chapter 133 and inserting the following new 

item: 2 

“132. Department of Defense Small Business Programs .............................. 2231”. 

3 SEC. 402. PERMANENT GOVERNMENT-WIDE AUTHORITY FOR SMALL 

4 BUSINESS INNOVATION RESEARCH PROGRAM AND SMALL 

5 BUSINESS TECHNOLOGY TRANSFER PROGRAM.

6 (a) PERMANENT AUTHORITY FOR SBIR PROGRAM.—Section 9 of the Small 

7 Business Act (15 U.S.C. 638) is amended by striking subsection (m). 

8 (b) PERMANENT AUTHORITY FOR STTR PROGRAM.—Subsection (n)(1) of such 

9 section is amended— 

10 (1) by striking “With respect to each fiscal year through fiscal year 2022, 

11 each Federal agency” and inserting “Each Federal agency”; and

12 (2) by striking “for that fiscal year” and inserting “for any fiscal year”. 

13 (c) TECHNICAL AMENDMENT TO DELETE PROVISION REDUNDANT WITH CURRENT 

14 SUBSECTION (s).—Such section is further amended by striking subsection (oo). 

15 SEC. 403. ENHANCEMENTS TO DEPARTMENT OF DEFENSE AUTHORITIES 

16 RELATING TO SMALL BUSINESS INNOVATION RESEARCH 

17 PROGRAM AND SMALL BUSINESS TECHNOLOGY TRANSFER 

18 PROGRAM. 

19 Chapter 132 of title 10, United States Code, as added by section 401(a), is 

20 amended by adding at the end the following new subchapter: 

21 “Subchapter II—SBIR and STTR Programs

“Sec.

“2235. Definitions.

“2235a. SBIR Program: required percentage of extramural research and development funds.
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“2235b. SBIR and STTR Programs: use of grants, cooperative agreements, and other transaction authority; 

use of simplified acquisition procedures.

“2235c. SBIR Program: maximum award amounts.

“2235d. SBIR Program: sole-source awards.

“2235e. SBIR Program: authority for Phase II awards without Phase I awards.

“2235f. SBIR Program: additional Phase II awards for projects of critical importance.

1 “§2235. Definitions

2 “In this subchapter: 

3 “(1) SBIR PROGRAM.—The term ‘SBIR Program’ has the meaning given 

4 the term ‘Small Business Innovation Research Program’ in section 2500(11) of 

5 this title.

6 “(2) STTR PROGRAM.—The term ‘STTR Program’ has the meaning given 

7 the term ‘Small Business Technology Transfer Program’ in section 2500(12) of 

8 this title.

9 “§2235a. SBIR Program: required percentage of extramural research and 

10 development funds 

11 “The percentage applicable to the Department of Defense under section 9(f)(1) of 

12 the Small Business Act (15 U.S.C. 638(f)(1)) for any fiscal year beginning after the date 

13 of the enactment of this section is as follows (in lieu of the percentage specified in that 

14 section):

15 “(1) For the first fiscal year beginning after the date of the enactment of 

16 this section, 3.9 percent. 

17 “(2) For the second fiscal year beginning after the date of the enactment of 

18 this section, 4.6 percent. 

19 “(3) For the third fiscal year beginning after the date of the enactment of 

20 this section, 5.4 percent. 
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1 “(4) For the fourth fiscal year beginning after the date of the enactment of 

2 this section, 6.2 percent. 

3 “(5) For the fifth fiscal year beginning after the date of the enactment of 

4 this section and each fiscal year thereafter, 7.0 percent.

5 “§2235b. SBIR and STTR Programs: use of grants, cooperative agreements, and 

6 other transaction authority; use of simplified acquisition procedures

7 “(a) USE OF GRANTS, COOPERATIVE AGREEMENTS, AND OTHER TRANSACTION 

8 AUTHORITY.—The Secretary of Defense shall provide that grants, cooperative 

9 agreements, and other transactions authorized under section 2371 of this title may be used 

10 in carrying out the SBIR Program and the STTR Program within the Department of 

11 Defense.

12 “(b) USE OF SIMPLIFIED ACQUISITION PROCEDURES FOR CONTRACTS IN AMOUNTS 

13 GREATER THAN SIMPLIFIED ACQUISITION THRESHOLD.— 

14 “(1) AUTHORITY TO USE SIMPLIFIED ACQUISITION PROCEDURES.—In

15 carrying out the SBIR Program and the STTR Program within the Department of 

16 Defense, the Secretary of Defense may use simplified acquisition procedures for a 

17 contract under such program without regard to the amount of the contract. 

18 “(2) INAPPLICABLE LAWS.—Section 2302a(b) of this title, and any other 

19 provision of law for which the applicability of the provision depends on whether 

20 the amount of a contract is not greater than the simplified acquisition threshold, 

21 shall apply to a contract for which the Secretary uses simplified acquisition 

22 procedures by reason of the authority under paragraph (1) in the same manner as 
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1 if the amount of the contract were not greater than the simplified acquisition 

2 threshold. 

3 “(3) INTELLECTUAL PROPERTY RIGHTS.—In carrying out paragraph (1), the 

4 Secretary shall ensure that the applicability of the provisions of the Small 

5 Business Act providing for the determination of the respective rights of the United 

6 States and the small business concern with respect to intellectual property rights, 

7 and with respect to any right to carry out follow-on research, under a funding 

8 agreement under the SBIR Program or the STTR Program is not affected by the 

9 use of simplified acquisition procedures. 

10 “(4) DEFINITIONS.—In this subsection: 

11 “(A) The term ‘simplified acquisition procedures’ means the 

12 simplified acquisition procedures described in section 2302b of this title.

13 “(B) The term ‘simplified acquisition threshold’ has the meaning 

14 given that term in section 134 of title 41. 

15 “§2235c. SBIR Program: maximum award amounts 

16 “(a) MAXIMUM AMOUNTS.—For purposes of the SBIR Program, the amounts in 

17 effect under section 9(j)(2)(D) of the Small Business Act (15 U.S.C. 638(j)(2)(D)) as the 

18 amounts generally established for awards for Phase I, and for Phase II, of an SBIR 

19 program shall, for the Department of Defense, be considered to be— 

20 “(1) for Phase I awards, the amount of $500,000, as adjusted pursuant to 

21 subsection (b); and 

22 “(2) for Phase II awards, the amount of $1,500,000, as adjusted pursuant 

23 to subsection (b). 
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1 “(b) ANNUAL ADJUSTMENT FOR INFLATION.—The Secretary of Defense shall 

2 adjust the amounts in effect under subsection (a) every year for inflation. 

3 “§2235d. SBIR Program: sole-source awards

4 “(a) AUTHORITY.—In carrying out the SBIR Program in the Department of 

5 Defense, the Secretary of Defense may make an SBIR Phase I or Phase II award on a 

6 sole-source basis in response to an unsolicited proposal that was submitted outside the 

7 Department’s solicitation schedule, and outside the master release schedule prepared by 

8 the Administrator of the Small Business Administration under section 9(b)(5) of the 

9 Small Business Act (15 U.S.C. 638(b0(5)), in order for the Department to invest rapidly 

10 in an innovative technology or solution that may not have been contemplated in relevant 

11 solicitations. When such a sole-source award is made, the Secretary may also make a 

12 follow-on SBIR Phase III award on a sole-source basis. 

13 “(b) OTHER PROVISIONS OF LAW.— 

14 “(1) INAPPLICABILITY OF LAWS REQUIRING USE OF COMPETITIVE 

15 PROCEDURES.—This section applies without regard to section 9(s) of the Small 

16 Business Act (15 U.S.C. 638(s)) or any other provision of law that otherwise 

17 requires the use of competitive procedures. 

18 “(2) INAPPLICABILITY OF CERTAIN OTHER PROCEDURES.—An award may 

19 be made on a sole-source basis under this section without regard to any otherwise 

20 applicable requirement relating to justification and approval of the decision to 

21 make the award on a sole-source basis, and such an award under this section is not 

22 subject to any protest process.

23 “§2235e. SBIR Program: authority for Phase II awards without Phase I awards 
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1 “(a) INAPPLICABILITY OF TIME LIMIT UNDER SMALL BUSINESS ACT.—Subsection 

2 (cc) of section 9 of the Small Business Act (15 U.S.C. 638), relating to authority for the 

3 provision of a Phase II SBIR award to a small business concern for a project without 

4 regard to whether the small business concern was provided a Phase I SBIR award for the 

5 project, shall apply to the Department of Defense without regard to any limitation on the 

6 period of applicability of authority under that subsection that is otherwise in effect.

7 “(b) INAPPLICABILITY OF CERTAIN PROCEDURES.—A Phase II SBIR award may be 

8 made by the Department of Defense as authorized by section 9(cc) of the Small Business 

9 Act (15 U.S.C. 638(cc)) and subsection (a) of this section without regard to any otherwise 

10 applicable requirement relating to justification and approval of the decision to make the 

11 award, and such an award is not subject to any protest process. 

12 “§2235f. SBIR Program: additional Phase II awards for projects of critical 

13 importance 

14 “(a) AUTHORITY.—In carrying out the SBIR Program in the Department of 

15 Defense, in the case of a project for which the Secretary of Defense makes an additional 

16 Phase II SBIR award for continued work on the project under the authority of section 

17 9(ff)(1) of the Small Business Act (15 U.S.C. 638(ff)(1)), the Secretary may subsequently 

18 make additional Phase II SBIR awards for the project if— 

19 “(1) the small business concern developing the project is participating in 

20 the SBIR Program for the first time; and

21 “(2) the project is described in subsection (b), 

22 “(b) COVERED PROJECTS.—A project described in this subsection is a project that 

23 is determined by the Secretary of Defense— 
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1 “(1) to be of critical importance to the national security; and

2 “(2) to have the potential to transition to SBIR Phase III. 

3 (c) PUBLICATION OF DETERMINATION.—Any determination by the Secretary under 

4 subsection (b) shall be published on a publicly available website of the Department of 

5 Defense except to the extent that the determination includes classified information.”.

6 SEC. 404. ENHANCEMENTS TO DEPARTMENT OF DEFENSE RESEARCH 

7 AND DEVELOPMENT RAPID INNOVATION PROGRAM.

8 (a) AUTHORITY FOR SBIR AND STTR TECHNOLOGIES ENTERING PHASE III TO BE 

9 ELIGIBLE FOR SOLE-SOURCE AWARDS.—Section 1073 of the National Defense 

10 Authorization Act for Fiscal Year 2011 (Public Law 111-383; 10 U.S.C. 2359 note) is 

11 amended— 

12 (1) in subsection (a), by inserting “and Small Business Technology 

13 Transfer Program” after “Small Business Innovation Research Program”; and

14 (2) in subsection (b)(6)— 

15 (A) by inserting “(A)” after “(6)”; and

16 (B) by adding at the end the following new subparagraph: 

17 “(B)(i) Use of selection procedures under the Small Business Innovation 

18 Research Program or the Small Business Technology Transfer Program shall be 

19 considered to be use of merit-based selection procedures for purposes of this 

20 paragraph, and, to accelerate the fielding of technologies developed pursuant to a 

21 phase II project under the Small Business Innovation Research Program or the 

22 Small Business Technology Transfer Program, the Secretary may authorize the 

23 selection of a proposal for Phase III funding under the program on a sole-source
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1 basis (and without regard to any requirement for a broad agency announcement or 

2 use of other competitive procedures). 

3 “(ii) An award may be made on a sole-source basis under this 

4 subparagraph without regard to any otherwise applicable requirement relating to 

5 justification and approval of the decision to make the award on a sole-source 

6 basis, and such an award is not subject to any protest process.”. 

7 (b) AUTHORITY FOR SOLE-SOURCE AWARDS FOR CERTAIN UNSOLICITED 

8 PROPOSALS.—Subsection (b) of such section is further amended by adding at the end the 

9 following new paragraph: 

10 “(7) The Secretary may provide that, in the case of an unsolicited proposal 

11 for a technology that the Secretary determines would meet a critical need for 

12 enhancement of warfighting capabilities, funding may be provided for the 

13 proposal under the program on a sole-source basis (and without regard to any 

14 requirement for a broad agency announcement or use of other competitive 

15 procedures).’ 

16 (c) REPEAL OF LIMITATION RELATING TO AMOUNT OF FUNDS THAT MAY BE 

17 AWARDED TO ANY PROJECT.—Subsection (b) of such section is further amended by 

18 striking paragraph (3). 

19 SEC. 405. AUTHORITY FOR DEPARTMENT OF DEFENSE SMALL BUSINESS 

20 CONTRACTORS TO RETAIN SMALL BUSINESS STATUS FOR 

21 LIMITED PERIOD. 

22 Subchapter I of chapter 132 of title 10, United States Code, as added by section 

23 401(a), is amended by inserting after section 2231 the following new section: 
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1 “§ 2233. Department of Defense small business contractors: retention of small 

2 business status for limited period to complete contracts

3 “(a) APPLICABILITY.—This section applies to a business concern (in this section 

4 referred to as a ‘covered small business concern’) that is a small business concern and is a 

5 party to a contract with the Department of Defense or to a subcontract (at any tier) under 

6 a contract with the Department of Defense. 

7 “(b) RETENTION OF STATUS AS SMALL BUSINESS CONCERN FOR LIMITED 

8 PERIOD.—A small business concern that grows beyond a small business size standard

9 while it is a covered small business concern shall, for the purpose of any later award of a 

10 contract (or subcontract) referred to in subsection (a), retain its status as a small business 

11 concern during the three-year period beginning on the date as of which the business 

12 concern grew beyond a small business size standard. 

13 “(c) TERMINATION.—Subsection (b) shall cease to apply to a covered small 

14 business concern upon the acquisition of that business concern by another business 

15 concern, unless the acquiring business concern is a small business concern and the 

16 resulting entity is itself a small business concern. 

17 “(d) DEFINITIONS.—In this section:

18 “(1) The term ‘small business concern’ means a business concern that is a 

19 small business concern under section 3 of the Small Business Act (15 U.S.C. 

20 632). 

21 “(2) The term ‘small business size standard’ means a size standard 

22 applicable to the determination of whether a business concern is a small business 

23 concern.”.
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1 SEC. 406. ENHANCEMENTS TO PROCUREMENT TECHNICAL ASSISTANCE 

2 COOPERATIVE AGREEMENT PROGRAM.

3 (a) MAXIMUM ANNUAL AMOUNT OF ASSISTANCE.— 

4 (1) PROGRAMS OPERATED ON A STATEWIDE BASIS.—Subsection (a)(1) of 

5 section 2414 of title 10, United States Code, is amended by striking “$750,000” 

6 and inserting “$1,500,000”. 

7 (2) PROGRAMS OPERATED ON A LESS THAN A STATEWIDE BASIS.—

8 Subsection (a)(2) of such section is amended by striking “$450,000” and inserting 

9 “$900,000”. 

10 (3) PROGRAMS OPERATED BY ELIGIBLE TRIBAL ORGANIZATIONS.— 

11 (A) Subsection (a)(3) of such section is amended by striking 

12 “$300,000” and inserting “$600,000”. 

13 (B) Subsection (a)(4) of such section is amended by striking 

14 “$750,000” and inserting “$1,550,000”. 

15 (b) REPEAL OF MATCHING FUNDS REQUIREMENT.—Section 2413(b) of such title is 

16 amended— 

17 (1) by striking “agreement, the eligible” and inserting “agreement— 

18 “(1) the eligible”;

19 (2) by striking “entities and the Secretary” and inserting “entities; and

20 “(2) the Secretary”;

21 (3) by striking “defray not more than 65 percent of” and all that follows 

22 and inserting “furnish to the eligible entity the full cost of the assistance furnished 
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1 by the eligible entity under such programs, subject to the applicable annual 

2 limitation under section 2414(a) of this title.”.

3 SEC. 407. DEPARTMENT OF DEFENSE NONTRADITIONAL TECHNOLOGY 

4 PARTNER INITIATIVE. 

5 (a) PROGRAM.—Subchapter II of chapter 148 of title 10, United States Code, is 

6 amended by adding at the end the following new section: 

7 “§2509. Nontraditional technology partner initiative 

8 “(a) PROGRAM.—The Secretary of Defense shall carry out a program to provide 

9 incentives for Department of Defense acquisition personnel and for Department of 

10 Defense contractors (and consortia of such contractors) to increase efforts to provide 

11 outreach to, and to contract with, technology firms that are nontraditional defense 

12 contractors. The program shall focus on technology firms with capacity for the 

13 development or delivery of new technologies directly enhancing warfighting capabilities. 

14 “(b) INCENTIVES.—Incentives under the program may include the following: 

15 “(1) Awards (including payment of cash prizes) to Department of Defense

16 civilian employees and members of the armed forces for identifying, and entering 

17 into contracts, grants, and other transactions section under section 2371 of this 

18 title with nontraditional defense contractors for the development or delivery of 

19 new technologies directly enhancing warfighting capabilities. 

20 “(2) Awards (including payment of cash prizes) to Department of Defense 

21 contractors for the identification of, and subcontracting with, nontraditional 

22 defense contractors offering new technologies to the Department of Defense that 

23 directly enhance warfighting capabilities. 
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1 “(3) Awards (including payment of cash prizes) to consortia which 

2 successfully assist nontraditional defense contractor in obtaining Department of 

3 Defense contracts, grants, and other transactions for the first time. 

4 “(c) DEFINITION.—In this section, the term ‘nontraditional defense contractor’ has 

5 the meaning given that term in section 2302(9) of this title.”.

6 (b) CLERICAL AMENDMENT.—The table of sections at the beginning of such 

7 subchapter is amended by adding at the end the following new item: 

“2509. Nontraditional technology partner initiative.”.

8 SEC. 408. DEPARTMENT OF DEFENSE INNOVATION CENTERS PROGRAM. 

9 (a) PROGRAM.—Subchapter II of chapter 148 of title 10, United States Code, is 

10 amended by adding after section 2509, as added by section 406, the following new 

11 section:

12 “§2510. Defense Innovation Centers Program

13 “(a) USE OF OPEN INNOVATION CENTERS.—The Secretary of Defense shall carry 

14 out a program, to be known as the Defense Innovation Centers Program, to expand the 

15 use of robust open innovation centers across the Department of Defense (including within 

16 the military departments, appropriate Defense Agencies and Department of Defense Field 

17 Activities, and the combatant commands that have acquisition authority). 

18 “(b) PROGRAM ACTIVITIES.—Under the program, Secretary shall— 

19 “(1) identify Department of Defense components with sufficient public 

20 recognition under which an open innovation center may be established;

21 “(2) budget for the establishment and operation of open innovation centers 

22 in regions enabling small, innovative companies to interact directly with potential

23 Department of Defense end-users and operators; and
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1 “(3) provide any sponsoring organization under which such a center is

2 established with authority and necessary resources to execute business 

3 arrangements, including use of other transaction authority and grants and prizes.”.

4 (b) CLERICAL AMENDMENT.—The table of sections at the beginning of such 

5 subchapter is amended by adding after the item relating to section 2509, as added by 

6 section 407(b), the following new item: 

“2510. Defense Innovation Centers Program.”.

7 SEC. 409. ADDITIONAL ELEMENTS IN ANNUAL REPORT ON DEFENSE 

8 TECHNOLOGY AND INDUSTRIAL BASE POLICY. 

9 Section 2504 of title 10, United States Code, is amended by adding at the end the 

10 following new paragraphs: 

11 “(5) An analysis of capabilities and emerging technologies relevant to the 

12 warfighting mission of the Department of Defense across the small business 

13 community and among non-traditional partners.

14 “(6) A description of how the Department of Defense will incorporate 

15 small business goals and strategies into an overall industrial base strategy of the 

16 department.

17 “(7) A description of how relevant offices within the department are 

18 integrating small business activities into an overall industrial base strategy.”.

SEC. 410. CROSS REFERENCES TO CERTAIN SMALL BUSINESS 

PROVISIONS APPLICABLE TO DEPARTMENT OF DEFENSE. 

19 Subchapter I of chapter 132 of title 10, United States Code, as added by section 

20 401(a), is amended by inserting after section 2231 the following new sections: 

21 “§ 2231a. References to Directors and Offices of Small Business Programs
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1 “(a) DEPARTMENT OF DEFENSE.—For the Director and the Office of Small 

2 Business Programs of the Department of Defense, see section 144 of this title.

3 “(b) MILITARY DEPARTMENTS.—For the Director and the Office of Small 

4 Business Programs of the Department of the Army, the Department of the Navy, and the 

5 Department of the Air Force, see sections 3024, 5028, and 8024, respectively, of this title. 

6 “§ 2232. References to certain programs provided in Small Business Act

7 “Numerous programs that are applicable to contracting by the Department of 

8 Defense are set forth in the Small Business Act (15 U.S.C. 631et seq.), including the 

9 following: 

10 “(1) The Business Development Program under section 8(a) of the Small 

11 Business Act (15 U.S.C. 637(a)). 

12 “(2) The Women-Owned Small Businesses Program, including the 

13 Economically Disadvantaged Women-Owned Small Business Program, under 

14 section 8(m) of the Small Business Act (15 U.S.C. 637(m)).

15 “(3) The Historically Underutilized Business Zones (HUBZone) Program 

16 under section 31 of the Small Business Act (15 U.S.C. 657a). 

17 “(4) The Service Disabled Veteran-Owned Businesses Program under 

18 section 36 of the Small Business Act (15 U.S.C. 657f).

19 “(5) The Small Disadvantaged Business Set-Aside Program. 

20 “(6) The Small Business Subcontracting Program.”.

21 SEC. 411. CODIFICATION OF NDAA SECTION ON ROLE OF DIRECTORS OF 

22 SMALL BUSINESS PROGRAMS IN DEPARTMENT OF DEFENSE

23 ACQUISITION PROCESSES.
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1 (a) CODIFICATION.—Subchapter I of chapter 132 of title 10, United States Code, 

2 as added by section 401(a), is amended by inserting after section 2233, as added by 

3 section 405(a), the following new section: 

4 “§ 2234. Role of the Directors of Small Business Programs in acquisition processes

5 of the Department of Defense

6 “(a) GUIDANCE REQUIRED.—The Secretary of Defense shall issue guidance to 

7 ensure that the head of each Office of Small Business Programs of the Department of 

8 Defense is a participant as early as practicable in the acquisition processes— 

9 “(1) of the Department, in the case of the Director of Small Business 

10 Programs of the Department of Defense; and

11 “(2) of the military department concerned, in the case of the Director of 

12 Small Business Programs of the Department of the Army, the Department of the 

13 Navy, and the Department of the Air Force.

14 “(b) MATTERS TO BE INCLUDED.—Such guidance shall— 

15 “(1) require the Director of Small Business Programs of the Department of 

16 Defense to provide advice — 

17 “(A) to the Defense Acquisition Board; and 

18 “(B) to the Information Technology Acquisition Board; and 

19 “(2) require coordination as early as practical in the relevant acquisition 

20 processes between— 

21 “(A) the chiefs of staff of the armed forces and the service 

22 acquisition executives, as appropriate (or their designees); and
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1 “(B) the Director of Small Business Programs of the military 

2 department concerned.”.

3 (b) CONFORMING REPEAL OF CODIFIED SECTION.—Section 1611 of the National 

4 Defense Authorization Act for Fiscal Year 2013 (Public Law 112–239; 10 U.S.C. 144 

5 note) is repealed.

6 SEC. 412. CODIFICATION OF NDAA SECTION ON DEPARTMENT OF 

7 DEFENSE TEST PROGRAM FOR NEGOTIATION OF 

8 COMPREHENSIVE SMALL BUSINESS SUBCONTRACTING 

9 PLANS.

10 (a) CODIFICATION.—Subchapter I of chapter 132 of title 10, United States Code, 

11 as added by section 401(a), is amended by inserting after section 2234, as added by 

12 section 411(a)(1), the following new section: 

13 “§ 2234a. Program for negotiation of comprehensive small business subcontracting 

14 plans

15 “(a) PROGRAM.— 

16 “(1) IN GENERAL.—The Secretary of Defense shall establish a program 

17 under which contracting activities in the military departments and the Defense 

18 Agencies are authorized to undertake one or more demonstration projects to 

19 determine whether the negotiation and administration of comprehensive 

20 subcontracting plans will reduce administrative burdens on contractors while 

21 enhancing opportunities provided under Department of Defense contracts for 

22 covered small business concerns. In selecting the contracting activities to 

23 undertake demonstration projects, the Secretary shall take such action as is 
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1 necessary to ensure that a broad range of the supplies and services acquired by the 

2 Department of Defense are included in the test program.

3 “(2) CONSULTATION AND PUBLIC COMMENT.—In developing the program, 

4 the Secretary of Defense shall— 

5 “(A) consult with the Administrator of the Small Business 

6 Administration; and

7 “(B) provide an opportunity for public comment on the test 

8 program. 

9 “(b) COMPREHENSIVE SMALL BUSINESS SUBCONTRACTING PLAN.— 

10 “(1) IN GENERAL.—In a demonstration project under the program, the 

11 Secretary of a military department or head of a Defense Agency shall negotiate, 

12 monitor, and enforce compliance with a comprehensive subcontracting plan with 

13 a Department of Defense contractor described in paragraph (4). 

14 “(2) ELEMENTS OF COMPREHENSIVE PLAN.—The comprehensive 

15 subcontracting plan of a contractor— 

16 “(A) shall apply to the entire business organization of the 

17 contractor or to one or more of the contractor's divisions or operating 

18 elements, as specified in the subcontracting plan; and 

19 “(B) shall cover each Department of Defense contract that is 

20 entered into by the contractor and each subcontract that is entered into by 

21 the contractor as the subcontractor under a Department of Defense 

22 contract.
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1 “(3) SEMIANNUAL REPORTS BY CONTRACTOR.—Each comprehensive 

2 subcontracting plan of a contractor shall require that the contractor report to the 

3 Secretary of Defense on a semiannual basis the following information: 

4 “(A) The amount of first-tier subcontract dollars awarded during 

5 the six-month period covered by the report to covered small business 

6 concerns, with the information set forth separately— 

7 “(i) by North American Industrial Classification System 

8 code;

9 “(ii) by major defense acquisition program, as defined in 

10 section 2430(a) of this title; 

11 “(iii) by contract, if the contract is for the maintenance, 

12 overhaul, repair, servicing, rehabilitation, salvage, modernization, 

13 or modification of supplies, systems, or equipment and the total 

14 value of the contract, including options, exceeds $100,000,000; 

15 and

16 “(iv) by military department.

17 “(B) The total number of subcontracts active under the test 

18 program during the six-month period covered by the report that would 

19 have otherwise required a subcontracting plan under paragraph (4) or (5) 

20 of section 8(d) of the Small Business Act (15 U.S.C. 637(d)).

21 “(C) Costs incurred in negotiating, complying with, and reporting 

22 on comprehensive subcontracting plans. 
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1 “(D) Costs avoided by adoption of a comprehensive subcontracting 

2 plan. 

3 “(4) COVERED CONTRACTORS.—A Department of Defense contractor 

4 referred to in paragraph (1) is, with respect to a comprehensive subcontracting 

5 plan negotiated in any fiscal year, a business concern that, during the immediately 

6 preceding fiscal year, furnished the Department of Defense with supplies or 

7 services (including professional services, research and development services, and 

8 construction services) pursuant to at least three Department of Defense contracts 

9 having an aggregate value of at least $100,000,000. 

10 “(c) WAIVER OF CERTAIN SMALL BUSINESS ACT SUBCONTRACTING PLAN 

11 REQUIREMENTS.—A Department of Defense contractor is not required to negotiate or 

12 submit a subcontracting plan under paragraph (4) or (5) of section 8(d) of the Small 

13 Business Act (15 U.S.C. 637(d)) with respect to a Department of Defense contract if— 

14 “(1) the contractor has negotiated a comprehensive subcontracting plan 

15 under the test program that includes the matters specified in section 8(d)(6) of the 

16 Small Business Act (15 U.S.C. 637(d)(6));

17 “(2) such matters have been determined acceptable by the Secretary of the 

18 military department or head of a Defense Agency negotiating such comprehensive 

19 subcontracting plan; and 

20 “(3) the comprehensive subcontracting plan applies to the contract. 

21 “(d) FAILURE TO MAKE A GOOD FAITH EFFORT TO COMPLY WITH A 

22 COMPREHENSIVE SUBCONTRACTING PLAN.— 
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1 “(1) LIQUIDATED DAMAGES.—A contractor that has negotiated a 

2 comprehensive subcontracting plan under the test program shall be subject to 

3 section 8(d)(4)(F) of the Small Business Act (15 U.S.C. 637(d)(4)(F)) regarding 

4 the assessment of liquidated damages for failure to make a good faith effort to 

5 comply with its comprehensive subcontracting plan and the goals specified in that 

6 plan. In addition, any such failure shall be a factor considered as part of the 

7 evaluation of past performance of an offeror. 

8 “(2) Effective in fiscal year 2016 and each fiscal year thereafter in which 

9 the program is in effect, the Secretary of Defense shall report to Congress on any 

10 negotiated comprehensive subcontracting plan that the Secretary determines did 

11 not meet the subcontracting goals negotiated in the plan for the prior fiscal year. 

12 “(e) PROGRAM PERIOD.—The program authorized by subsection (a) shall 

13 terminate on December 31, 2027. 

14 “(f) COVERED SMALL BUSINESS CONCERN DEFINED.—In this section, the term 

15 ‘covered small business concern’ includes each of the following: 

16 “(1) A small business concern, as that term is defined under section 3(a) of 

17 the Small Business Act (15 U.S.C. 632(a)).

18 “(2) A small business concern owned and controlled by veterans, as that 

19 term is defined in section 3(q)(3) of such Act (15 U.S.C. 632(q)(3)).

20 “(3) A small business concern owned and controlled by service-disabled 

21 veterans, as that term is defined in section 3(q)(2) of such Act (15 U.S.C. 

22 632(q)(2)).
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1 “(4) A qualified HUBZone small business concern, as that term is defined 

2 in section 3(p)(5) of such Act (15 U.S.C. 632(p)(5)) and effective January 1, 

3 2020, as defined in section 31(b) of such Act (15 U.S.C. 657a(b)). 

4 “(5) A small business concern owned and controlled by socially and 

5 economically disadvantaged individuals, as that term is defined in section 

6 8(d)(3)(C) of such Act (15 U.S.C. 637(d)(3)(C)).

7 “(6) A small business concern owned and controlled by women, as that 

8 term is defined in section 3(n) of such Act (15 U.S.C. 632(n)).”. 

9 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of 

10 subchapter I of chapter 132 of title 10, United States Code, as added by section 

11 401(a), is amended by inserting after the item relating to section 2234, as added 

12 by section 411(a)(2), the following new item:

“2234a. Test program for negotiation of comprehensive small business subcontracting plans.”.

13 (b) CONFORMING REPEAL OF CODIFIED SECTION.—Section 834 of the National 

14 Defense Authorization Act for Fiscal Years 1990 and 1991 (Public Law 101–189; 15 

15 U.S.C. 637 note) is repealed.

16 SEC. 413. CODIFICATION OF MENTOR-PROTÉGÉ PROGRAM. 

17 (a) CODIFICATION.—Chapter 132 of title 10, United States Code, as added by 

18 section 401(a), is amended by adding after subchapter II, as added by section 403, the 

19 following new subchapter: 

20 “Subchapter III—Mentor Protégé Program

[Sec 831 of the FY91 NDAA, Public Law 101–510 (10 USC 2302 note)] 

“Sec.

“2238. [Sec 831(a)&(b)] Mentor-Protégé Program. 

“2238a. [Sec 831(c)&(d)] Program participants. 
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“2238b. [Sec 831(e)] Mentor-protégé agreement. 

“2238c. [Sec 831(f)] Forms of assistance. 

“2238d. [Sec 831(g)] Incentives for mentor firms. 

“2238e. [Sec 831(h)] Relationship to Small Business Act. 

“2238f. [Sec 831(i)] Participation in Mentor-Protégé Program not to be a condition for award of a contract 

or subcontract. 

“2238g. [Sec 831(j)] Expiration of authority. 

"2238h. [Sec 831(k)] Regulations. 

“2238i. [Sec 831(l)&(m)] Annual reports by mentor firms. 

“2238j. [Sec 831(n)] Definitions. 

1 “§ 2238. [Sec 831(a)&(b)] Mentor-Protégé Program

2 “(a) ESTABLISHMENT OF PROGRAM.—The Secretary of Defense shall carry out a 

3 program to be known as the ‘Mentor-Protégé Program’.

4 “(b) PURPOSE.—The purpose of the program is to provide incentives for major 

5 Department of Defense contractors to furnish disadvantaged small business concerns with 

6 assistance designed to— 

7 “(1) enhance the capabilities of disadvantaged small business concerns to 

8 perform as subcontractors and suppliers under Department of Defense contracts 

9 and other contracts and subcontracts; and 

10 “(2) increase the participation of such business concerns as subcontractors 

11 and suppliers under Department of Defense contracts, other Federal Government 

12 contracts, and commercial contracts.

13 “§ 2238a. [Sec 831(c)&(d)] Program participants 

14 “ (a) [831(c)(1)] MENTOR FIRMS.—A business concern meeting the eligibility 

15 requirements set out in subsection (d) may enter into agreements under section 2238b of 

16 this title and furnish assistance to disadvantaged small business concerns upon making 

17 application to the Secretary of Defense and being approved for participation in the 

18 program by the Secretary. A business concern participating in the program pursuant to 

19 such an approval shall be known, for the purposes of the program, as a ‘mentor firm’. 
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1 “(b) [831(c)(2)] PROTÉGÉ FIRMS.—A disadvantaged small business concern 

2 eligible for the award of Federal contracts may obtain assistance from a mentor firm upon 

3 entering into an agreement with the mentor firm as provided in section 2238b of this title. 

4 A disadvantaged small business concern may not be a party to more than one agreement 

5 concurrently, and the authority to enter into agreements under such section shall only be 

6 available to such concern during the five-year period beginning on the date such concern 

7 enters into the first such agreement. A disadvantaged small business concern receiving 

8 such assistance shall be known, for the purposes of the program, as a ‘protégé firm’.

9 “(c) [831(c)(3)] STATUS OF BUSINESS CONCERNS AS DISADVANTAGED SMALL 

10 BUSINESS CONCERNS.—In entering into an agreement pursuant to section 2238b of this 

11 title, a mentor firm may rely in good faith on a written representation of a business 

12 concern that such business concern is a disadvantaged small business concern. The Small 

13 Business Administration shall determine the status of such business concern as a 

14 disadvantaged small business concern in the event of a protest regarding the status of 

15 such business concern. If at any time the business concern is determined by the Small 

16 Business Administration not to be a disadvantaged small business concern, assistance 

17 furnished such business concern by the mentor firm after the date of the determination 

18 may not be considered assistance furnished under the program. 

19 “(d) [831(d)] MENTOR FIRM ELIGIBILITY.— 

20 “(1) [831(d)(1)(A)] IN GENERAL.—Subject to subsection (a), a mentor firm 

21 may enter into an agreement with one or more protégé firms under section 2238b 

22 of this title and provide assistance under the program pursuant to that agreement if 
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1 the mentor firm is eligible for award of Federal contracts and meets the 

2 requirements of paragraph (2).

3 “(2) [831(d)(1)(B)] REQUIREMENTS FOR MENTOR FIRM—A mentor firm 

4 may enter into an agreement as described in paragraph (1) only if it demonstrates 

5 that it meets each of the following requirements:

6 “(A) That it is qualified to provide assistance that will contribute to 

7 the purpose of the program. 

8 “(B) That it is of good financial health and character and does not 

9 appear on a Federal list of debarred or suspended contractors. 

10 “(C) That it can impart value to a protégé firm— 

11 “(i) because of experience gained as a Department of 

12 Defense contractor; or

13 “(ii) through knowledge of general business operations and 

14 government contracting. 

15 “(3) DEMONSTRATION THAT MENTOR FIRM CAN IMPART VALUE.—Whether 

16 a mentor firm can impart value to a protégé firm for purposes of meeting the 

17 requirement of subparagraph (C) of paragraph (2) shall be demonstrated by 

18 evidence that— 

19 “(A) during the fiscal year preceding the fiscal year in which the 

20 mentor firm enters into the agreement, the total amount of the Department 

21 of Defense contracts awarded such mentor firm and the subcontracts 

22 awarded such mentor firm under Department of Defense contracts was 

23 equal to or greater than $100,000,000; or 
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1 “(B) the mentor firm demonstrates the capability to assist in the 

2 development of protégé firms, and is approved by the Secretary of 

3 “Defense pursuant to criteria specified in the regulations prescribed for 

4 purposes of the Mentor-Protégé program.

5 “(4) EFFECT OF AFFILIATION BETWEEN MENTOR FIRM AND PROTÉGÉ FIRM.— 

6 “(A) [831(d)(2)] AGREEMENT PROHIBITED.—A mentor firm may 

7 not enter into an agreement with a protégé firm under section 2238b of 

8 this title if the Administrator of the Small Business Administration has 

9 made a determination finding affiliation between the mentor firm and the 

10 protégé firm.

11 “(B) [831(d)(3)] REQUEST FOR DETERMINATION.—If the 

12 Administrator of the Small Business Administration has not made such a 

13 determination and if the Secretary has reason to believe (based on the 

14 regulations promulgated by the Administrator regarding affiliation) that 

15 the mentor firm is affiliated with the protégé firm, the Secretary shall 

16 request a determination regarding affiliation from the Administrator of the 

17 Small Business Administration.

18 “§ 2238b. [Sec 831(e)] Mentor-protégé agreement 

19 “ (a) AGREEMENT.—Before providing assistance to a protégé firm under the 

20 program, a mentor firm shall enter into a mentor-protégé agreement with the protégé firm 

21 regarding the assistance to be provided by the mentor firm. 

22 “(b) MATTERS TO BE INCLUDED.—The agreement shall include the following:
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1 “(1) DEVELOPMENTAL PROGRAM.—A developmental program for the 

2 protégé firm, in such detail as may be reasonable, including— 

3 “(A) factors to assess the protégé firm's developmental progress 

4 under the program; 

5 “(B) a description of the quantitative and qualitative benefits to the 

6 Department of Defense from the agreement, if applicable;

7 “(C) goals for additional awards that the protégé firm can compete 

8 for outside the Mentor-Protégé Program; and

9 “(D) the assistance the mentor firm will provide to the protégé firm 

10 in understanding contract regulations of the Federal Government and the 

11 Department of Defense (including the Federal Acquisition Regulation and 

12 the Defense Federal Acquisition Regulation Supplement) after award of a 

13 subcontract under this section, if applicable. 

14 “(2) PROGRAM PARTICIPATION TERM.—A program participation term for 

15 any period of not more than three years, except that the term may be a period of 

16 up to five years if the Secretary of Defense determines in writing that unusual 

17 circumstances justify a program participation term in excess of three years.

18 “(3) PROCEDURES FOR AGREEMENT TERMINATION.—Procedures for the 

19 protégé firm to terminate the agreement voluntarily and for the mentor firm to 

20 terminate the agreement for cause.

21 “§ 2238c. [Sec 831(f)] Forms of assistance 

22 “(a) [Sec 831(f)(1)-(5)] FORMS OF ASSISTANCE FROM MENTOR FIRM.—A mentor 

23 firm may provide a protégé firm the following:
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1 “(1) Assistance, by using mentor firm personnel, in— 

2 “(A) general business management, including organizational 

3 management, financial management, and personnel management, 

4 marketing, and overall business planning; 

5 “(B) engineering and technical matters such as production, 

6 inventory control, and quality assurance; and 

7 “(C) any other assistance designed to develop the capabilities of 

8 the protégé firm under the developmental program referred to in section 

9 2238b of this title. 

10 “(2) Award of subcontracts on a noncompetitive basis to the protégé firm 

11 under the Department of Defense or other contracts. 

12 “(3) Payment of progress payments for performance of the protégé firm 

13 under such a subcontract in amounts as provided for in the subcontract, but in no 

14 event may any such progress payment exceed 100 percent of the costs incurred by 

15 the protégé firm for the performance.

16 “(4) Advance payments under such subcontracts.

17 “(5) Loans.

18 “(b) [Sec 831(f)(6)] ASSISTANCE FROM OTHER SOURCES.—In addition to 

19 assistance provided under subsection (a), a mentor firm may provide a protégé firm 

20 assistance obtained by the mentor firm for the protégé firm from one or more of the 

21 following:

22 “(1) A small business development center established pursuant to section 

23 21 of the Small Business Act (15 U.S.C. 648). 
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1 “(2) An entity providing procurement technical assistance pursuant to 

2 chapter 142 of this title.

3 “(3) A historically Black college or university or a minority institution of 

4 higher education.

5 “(4) A women's business center described in section 29 of the Small 

6 Business Act (15 U.S.C. 656). 

7 “§ 2238d. [Sec 831(g)] Incentives for mentor firms 

8 “(a) [Sec 831(g)(1)] REIMBURSEMENT FOR PROGRESS PAYMENTS AND ADVANCE 

9 PAYMENTS.—The Secretary of Defense may provide to a mentor firm reimbursement for 

10 the total amount of any progress payment or advance payment made under the program 

11 by the mentor firm to a protégé firm in connection with a Department of Defense contract 

12 awarded the mentor firm.

13 “(b) [Sec 831(g)(2)] REIMBURSEMENT FOR COSTS OF ASSISTANCE.— 

14 “(1) IN GENERAL.—The Secretary of Defense may provide to a mentor 

15 firm reimbursement for the costs of the assistance furnished to a protégé firm 

16 pursuant to section 2238c of this title (except as provided in paragraph (4)) as 

17 provided for in a line item in a Department of Defense contract under which the 

18 mentor firm is furnishing products or services to the Department, subject to a 

19 maximum amount of reimbursement specified in such contract. However, the 

20 preceding sentence does not apply in a case in which the Secretary of Defense 

21 determines in writing that unusual circumstances justify reimbursement using a 

22 separate contract.
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1 “(2) ANNUAL PERFORMANCE REVIEWS AS FACTOR IN DETERMINATION OF 

2 AMOUNT.—The determinations made in annual performance reviews of a mentor 

3 firm's mentor-protégé agreement shall be a major factor in the determinations of 

4 amounts of reimbursement, if any, that the mentor firm is eligible to receive in the 

5 remaining years of the program participation term under the agreement. 

6 “(3) LIMITATION ON TOTAL AMOUNT OF REIMBURSEMENT FOR COSTS OF 

7 ASSISTANCE.—The total amount reimbursed under this subsecton to a mentor firm 

8 for costs of assistance furnished in a fiscal year to a protégé firm may not exceed 

9 $1,000,000, except in a case in which the Secretary of Defense determines in 

10 writing that unusual circumstances justify a reimbursement of a higher amount. 

11 “(4) NO REIMBURSEMENT FOR CERTAIN FEES.—The Secretary may not 

12 reimburse any fee assessed by the mentor firm— 

13 “(A) for services provided to the protégé firm pursuant to section 

14 2238c(b) of this title; or 

15 “(B) for business development expenses incurred by the mentor 

16 firm under a contract awarded to the mentor firm while participating in a 

17 joint venture with the protégé firm.

18 “(c) [Sec 831(g)(3)] CERTAIN UNREIMBURSED EXPENSES CREDITED TOWARD 

19 ATTAINMENT OF SUBCONTRACTING GOALS.— 

20 “(1) IN GENERAL.—Costs incurred by a mentor firm in providing 

21 assistance to a protégé firm that are not reimbursed pursuant to subsection (b) 

22 shall be recognized as credit in lieu of subcontract awards for purposes of 

23 determining whether the mentor firm attains a subcontracting participation goal 
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1 applicable to such mentor firm under a Department of Defense contract, under a 

2 contract with another executive agency, or under a divisional or company-wide 

3 subcontracting plan negotiated with the Department of Defense or another 

4 executive agency.

5 “(2) AMOUNT OF CREDIT.—The amount of the credit given a mentor firm 

6 for any such unreimbursed costs shall be equal to— 

7 “(A) four times the total amount of such costs attributable to 

8 assistance provided by entities described in section 2238c(b) of this title; 

9 “(B) three times the total amount of such costs attributable to 

10 assistance furnished by the mentor firm's employees; and

11 “(C) two times the total amount of any other such costs. 

12 “(3) AUTHORITY FOR ADJUSTMENT TO AMOUNT OF CREDIT.—Under 

13 regulations prescribed to carry out the Mentor-Protégé Program, the Secretary of 

14 Defense shall adjust the amount of credit given a mentor firm pursuant to 

15 paragraphs (1) and (2) if the Secretary determines that the firm's performance 

16 regarding the award of subcontracts to disadvantaged small business concerns has 

17 declined without justifiable cause.

18 “(d) [Sec 831(g)(4)] CREDITS TOWARD ATTAINMENT OF SUBCONTRACTING GOALS 

19 IN CASE OF CERTAIN BUSINESS CONCERNS OWNED AND CONTROLLED BY SOCIALLY AND 

20 ECONOMICALLY DISADVANTAGED INDIVIDUALS.—A mentor firm shall receive credit 

21 toward the attainment of a subcontracting participation goal applicable to such mentor 

22 firm for each subcontract for a product or service awarded under such contract by a 

23 mentor firm to a business concern that, except for its size, would be a small business 
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1 concern owned and controlled by socially and economically disadvantaged individuals, 

2 but only if— 

3 “(1) the size of such business concern is not more than two times the 

4 maximum size specified by the Administrator of the Small Business 

5 Administration for purposes of determining whether a business concern 

6 furnishing such product or service is a small business concern; and 

7 “(2) the business concern formerly had a mentor-protégé agreement with 

8 such mentor firm that was not terminated for cause. 

9 “§ 2238e. [Sec 831(h)] Relationship to Small Business Act 

10 “(a) [Sec 831(h)(1)] LIMITATION ON DETERMINATIONS OF AFFILIATION OR 

11 CONTROL BETWEEN MENTOR FIRMS AND PROTÉGÉ FIRMS.—For purposes of the Small 

12 Business Act (15 U.S.C. 631 et seq.), no determination of affiliation or control (either 

13 direct or indirect) may be found between a protégé firm and its mentor firm on the basis 

14 that the mentor firm has agreed to furnish (or has furnished) to its protégé firm pursuant 

15 to a mentor-protégé agreement any form of developmental assistance described in section 

16 2238c of this title. 

17 “(b) [Sec 831(h)(2)] LIMITATION ON DETERMINATIONS OF DISADVANTAGED 

18 SMALL BUSINESS CONCERNS AS BEING INELIGIBLE FOR ASSISTANCE UNDER SMALL 

19 BUSINESS ACT.—Notwithstanding section 8 of the Small Business Act (15 U.S.C. 637), 

20 the Small Business Administration may not determine a disadvantaged small business 

21 concern to be ineligible to receive any assistance authorized under the Small Business 

22 Act on the basis that such business concern has participated in the Mentor-Protégé 
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1 Program or has received assistance pursuant to any developmental assistance agreement 

2 authorized under such program. 

3 “(c) [Sec 831(h)(3)] MENTOR-PROTÉGÉ AGREEMENTS AND CERTAIN OTHER 

4 PROGRAM DOCUMENTS NOT REQUIRED TO BE SUBMITTED TO SBA.—The Small Business 

5 Administration may not require a firm that is entering into, or has entered into, an 

6 agreement under section 2238b of this title as a protégé firm to submit the agreement, or 

7 any other document required by the Secretary of Defense in the administration of the 

8 Mentor-Protégé Program, to the Small Business Administration for review, approval, or 

9 any other purpose. 

10 “§ 2238f. [Sec 831(i)] Participation in Mentor-Protégé Program not to be a condition 

11 for award of a contract or subcontract 

12 “A mentor firm may not require a business concern to enter into an agreement 

13 with the mentor firm pursuant to section 2238b of this title as a condition for being 

14 awarded a contract by the mentor firm, including a subcontract under a contract awarded 

15 to the mentor firm.

16 “§ 2238g. [Sec 831(j)] Expiration of authority 

17 “(a) AUTHORITY TO ENTER INTO AGREEMENTS.—No mentor-protégé agreement 

18 may be entered into under section 2238b of this title after September 30, 2018. 

19 “(b) AUTHORITY TO PAY REIMBURSEMENTS AND GRANT CREDITS.—No 

20 reimbursement may be paid, and no credit toward the attainment of a subcontracting goal 

21 may be granted, under section 2238d of this title for any cost incurred after the date that 

22 is three years after the date specified in subsection (a). 

23 “§ 2238h. [Sec 831(k)] Regulations 
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1 “(a) IN GENERAL.—The Secretary of Defense shall prescribe regulations to carry 

2 out the Mentor-Protégé Program. Such regulations— 

3 “(1) shall include the requirements set forth in section 8(d) of the Small 

4 Business Act (15 U.S.C. 637(d)); and 

5 “(2) shall prescribe procedures by which mentor firms may terminate 

6 participation in the program. 

7 “(b) APPENDIX TO DFARS.—The Department of Defense policy regarding the 

8 Mentor-Protégé Program shall be published and maintained as an appendix to the 

9 Department of Defense Supplement to the Federal Acquisition Regulation. 

10 “§ 2238i. [Sec 831(l)&(m)] Annual reports by mentor firms 

11 “(a) [Sec 831(l)] REPORT BY MENTOR FIRMS.—To comply with section 8(d)(7) of 

12 the Small Business Act (15 U.S.C. 637(d)(7)), each mentor firm shall submit to the 

13 Secretary not less than once each fiscal year a report that includes, for the preceding 

14 fiscal year, the following:

15 “(1) All technical or management assistance provided by mentor firm 

16 personnel for the purposes described in section 2238b(a)(1) of this title. 

17 “(2) Any new awards of subcontracts on a competitive or noncompetitive 

18 basis to the protégé firm under Department of Defense contracts or other 

19 contracts, including the value of such subcontracts. 

20 “(3) Any extensions, increases in the scope of work, or additional 

21 payments not previously reported for prior awards of subcontracts on a 

22 competitive or noncompetitive basis to the protégé firm under Department of 

23 Defense contracts or other contracts, including the value of such subcontracts. 
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1 “(4) The amount of any payment of progress payments or advance 

2 payments made to the protégé firm for performance under any subcontract made 

3 under the Mentor-Protégé Program.

4 “(5) Any loans made by the mentor firm to the protégé firm.

5 “(6) All Federal contracts awarded to the mentor firm and the protégé firm 

6 as a joint venture, designating whether the award was a restricted competition or a 

7 full and open competition. 

8 “(7) Any assistance obtained by the mentor firm for the protégé firm from 

9 one or more— 

10 “(A) small business development centers established pursuant to 

11 section 21 of the Small Business Act (15 U.S.C. 648); 

12 “(B) entities providing procurement technical assistance pursuant 

13 to chapter 142 of this title; or 

14 “(C) historically Black colleges or universities or minority 

15 institutions of higher education. 

16 “(8) Whether there have been any changes to the terms of the mentor17 protégé agreement.

18 “(9) A narrative— 

19 “(A) describing the success assistance provided under section 

20 2238b of this title has had in addressing the developmental needs of the 

21 protégé firm and the impact on Department of Defense contracts, and 

22 “(B) addressing any problems encountered. 
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1 “(b) [Sec 831(m)] REVIEW OF MENTOR FIRM REPORTS BY THE OFFICE OF SMALL 

2 BUSINESS PROGRAMS.—The Office of Small Business Programs of the Department of 

3 Defense shall review each report required by subsection (a) and, if the Office finds that 

4 the mentor-protégé agreement is not furthering the purpose of the Mentor-Protégé 

5 Program, may decide not to approve any continuation of the agreement. 

6 “§ 2238j. [Sec 831(n)] Definitions

7 “In this subchapter: 

8 “(1) The term ‘small business concern’ has the meaning given that term 

9 under section 3 of the Small Business Act (15 U.S.C. 632). 

10 “(2) The term ‘disadvantaged small business concern’ means a firm that— 

11 “(A) has less than half the size standard corresponding to its 

12 primary North American Industry Classification System code;

13 “(B) is not owned or managed by individuals or entities that 

14 directly or indirectly have stock options or convertible securities in the 

15 mentor firm; and

16 “(C) is any of the following: 

17 “(i) A small business concern owned and controlled by 

18 socially and economically disadvantaged individuals. 

19 “(ii) A business entity owned and controlled by an Indian 

20 tribe as defined by section 8(a)(13) of the Small Business Act (15 

21 U.S.C. 637(a)(13)). 
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1 “(iii) A business entity owned and controlled by a Native 

2 Hawaiian Organization as defined by section 8(a)(15) of the Small 

3 Business Act (15 U.S.C. 637(a)(15)). 

4 “(iv) A qualified organization employing severely disabled 

5 individuals. 

6 “(v) A small business concern owned and controlled by 

7 women, as defined in section 8(d)(3)(D) of the Small Business Act 

8 (15 U.S.C. 637(d)(3)(D)). 

9 “(vi) A small business concern owned and controlled by 

10 service–disabled veterans (as defined in section 8(d)(3) of the 

11 Small Business Act (15 U.S.C. 637(d)(3))).

12 “(vii) A qualified HUBZone small business concern (as 

13 defined in section 3(p) of the Small Business Act (15 U.S.C. 

14 632(p)) and effective January 1, 2020, as defined in section 31(b) 

15 of the Small Business Act (15 U.S.C. 657a(b))). 

16 “(viii) A small business concern that— 

17 “(I) is a nontraditional defense contractor, as such 

18 term is defined in section 2302 of this title; or

19 “(II) currently provides goods or services in the 

20 private sector that are critical to enhancing the capabilities 

21 of the defense supplier base and fulfilling key Department 

22 of Defense needs.
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1 “(3) The term ‘small business concern owned and controlled by socially 

2 and economically disadvantaged individuals’ has the meaning given that term in 

3 section 8(d)(3)(C) of the Small Business Act (15 U.S.C. 637(d)(3)(C)). 

4 “(4) The term ‘historically Black college and university’ means any of the 

5 historically Black colleges and universities referred to in section 2323 of this title.

6 “(5) The term ‘minority institution of higher education’ means an 

7 institution of higher education with a student body that reflects the composition 

8 specified in section 312(b)(3), (4), and (5) of the Higher Education Act of 1965 

9 (20 U.S.C. 1058(b)(3), (4), and (5)). 

10 “(6) The term ‘subcontracting participation goal’, with respect to a 

11 Department of Defense contract, means a goal for the extent of the participation 

12 by disadvantaged small business concerns in the subcontracts awarded under such 

13 contract, as established pursuant to section 2323 of this title and section 8(d) of 

14 the Small Business Act (15 U.S.C. 637(d)). 

15 “(7) The term ‘qualified organization employing the severely disabled’ 

16 means a business entity operated on a for-profit or nonprofit basis that— 

17 “(A) uses rehabilitative engineering to provide employment 

18 opportunities for severely disabled individuals and integrates severely 

19 disabled individuals into its workforce; 

20 “(B) employs severely disabled individuals at a rate that averages 

21 not less than 20 percent of its total workforce; 

22 “(C) employs each severely disabled individual in its workforce 

23 generally on the basis of 40 hours per week; and 
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1 “(D) pays not less than the minimum wage prescribed pursuant to 

2 section 6 of the Fair Labor Standards Act (29 U.S.C. 206) to those 

3 employees who are severely disabled individuals. 

4 “(8) The term ‘severely disabled individual’ means an individual— 

5 “(A) who is blind (as defined in section 8501 of title 41); or 

6 “(B) who is a severely disabled individual (as defined in such 

7 section).

8 “(9) The term ‘affiliation’, with respect to a relationship between a mentor 

9 firm and a protégé firm, means a relationship described under section 121.103 of 

10 title 13, Code of Federal Regulations (or any successor regulation).”. 

11 (b) CONFORMING REPEAL OF CODIFIED SECTION.—Section 831 of the NDAA for 

12 Fiscal Year 1991 (Public Law 101–510; 10 U.S.C. 2302 note) is repealed.

13 SEC. 414. REPEAL OF CERTAIN OBSOLETE NDAA PROVISIONS.

14 (a) REPEAL OF OBSOLETE NDAA PROVISION RELATING TO SBIR PROGRAM.—

15 Section 4237 of the National Defense Authorization Act for Fiscal Year 1993 (Public 

16 Law 102–484; 15 U.S.C. 638 note) is repealed. 

17 (b) REPEAL OF OBSOLETE NDAA PROVISION RELATING TO CONTRACT 

18 BUNDLING.—Section 801(b) of the National Defense Authorization Act for Fiscal Year 

19 2004 (Public Law 108–136; 10 U.S.C. 2302 note) is repealed. 

—————— 

SECTIONS AFFECTED BY THE PROPOSAL 

[The material below shows changes proposed to be made by the proposal 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. (Where an amendment in the 
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proposal would add a full new section to existing law, the text of that proposed new 

section is NOT set forth below since it is set out in full in the legislative text above.)] 

[NOTE: Text shown as current law incorporates amendments made by the National 

Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91, enacted Dec. 

12, 2017)]

Section 9 of the Small Business Act

 (15 U.S.C. 638) 

SEC. 9. (a) *** 

***** 

(m) TERMINATION.—The authorization to carry out the Small Business Innovation 

Research Program established under this section shall terminate on September 30, 2022. 

(n) REQUIRED EXPENDITURES FOR STTR BY FEDERAL AGENCIES.— 

(1) REQUIRED EXPENDITURE AMOUNTS.—

(A) IN GENERAL.—With respect to each fiscal year through fiscal

year 2022, each Each Federal agency that has an extramural budget for

research, or research and development, in excess of $1,000,000,000 for

that any fiscal year, shall expend with small business concerns not less

than the percentage of that extramural budget specified in subparagraph 

(B), specifically in connection with STTR programs that meet the 

requirements of this section and any policy directives and regulations 

issued under this section.

****** 

(oo) COMPETITIVE SELECTION PROCEDURES FOR SBIR AND STTR PROGRAMS.—

All funds awarded, appropriated, or otherwise made available in accordance with 

subsection (f) or (n) must be awarded pursuant to competitive and merit-based selection 

procedures. 

****** 

———— 

Section 1073 of the National Defense Authorization Act 

for Fiscal Year 2011

(P. L. 111–383; 10 USC 2359 note)

SEC. 1073. DEFENSE RESEARCH AND DEVELOPMENT RAPID 

INNOVATION PROGRAM.

(a) PROGRAM ESTABLISHED.—The Secretary of Defense shall establish a 

competitive, merit-based program to accelerate the fielding of technologies developed 
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pursuant to phase II Small Business Innovation Research Program and Small Business 

Technology Transfer Program projects, technologies developed by the defense 

laboratories, and other innovative technologies (including dual use technologies). The 

purpose of this program is to stimulate innovative technologies and reduce acquisition or 

lifecycle costs, address technical risks, improve the timeliness and thoroughness of test 

and evaluation outcomes, and rapidly insert such products directly in support of primarily 

major defense acquisition programs, but also other defense acquisition programs that 

meet critical national security needs.

(b) GUIDELINES.—Not later than 180 days after the date of the enactment of this 

Act [Jan. 7, 2011], the Secretary shall issue guidelines for the operation of the program. 

At a minimum such guidance shall provide for the following: 

(1) The issuance of an annual broad agency announcement or the use of 

any other competitive or merit-based processes by the Department of Defense for 

candidate proposals in support of defense acquisition programs as described in 

subsection (a). 

(2) The review of candidate proposals by the Department of Defense and 

by each military department and the merit-based selection of the most promising 

cost-effective proposals for funding through contracts, cooperative agreements, 

and other transactions for the purposes of carrying out the program. 

(3) The total amount of funding provided to any project under the program 

shall not exceed $3,000,000, unless the Secretary, or the Secretary's designee, 

approves a larger amount of funding for the project. 

(4) No project shall receive more than a total of two years of funding 

under the program, unless the Secretary, or the Secretary's designee, approves 

funding for any additional year. 

(5) Mechanisms to facilitate transition of follow-on or current projects 

carried out under the program into defense acquisition programs, through the use 

of the authorities of section 819 of the National Defense Authorization Act for 

Fiscal Year 2010 (Public Law 111–84; 10 U.S.C. 2302 note) or such other 

authorities as may be appropriate to conduct further testing, low rate production, 

or full rate production of technologies developed under the program. 

(6)(A) Projects are selected using merit-based selection procedures and the 

selection of projects is not subject to undue influence by Congress or other 

Federal agencies. 

(B)(i) Use of selection procedures under the Small Business Innovation 

Research Program or the Small Business Technology Transfer Program shall 

be considered to be use of merit-selection procedures for purposes of this 

paragraph, and, for the purpose of accelerating the fielding of technologies 

developed pursuant to a phase II project under the Small Business Innovation 

Research Program or the Small Business Technology Transfer Program, the 

Secretary may authorize the selection of a proposal for funding for such a 

project on a sole-source basis (and without regard to any requirement for a 

broad agency announcement or use of other competitive procedures). 

(ii) An award may be made on a sole-source basis under this 

subparagraph without regard to any otherwise applicable requirement relating 
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to justification and approval of the decision to make the award on a sole-source 

basis, and such an award is not subject to any protest process. 

(7) The Secretary may provide that, in the case of an unsolicited 

proposal for a technology that the Secretary determines would meet a critical 

national security need for enhancement of warfighting capabilities, funding 

may be provided for the proposal under the program under this section on a 

sole-source basis (and without regard to any requirement for a broad agency 

announcement or use of other competitive procedures).

(c) TREATMENT PURSUANT TO CERTAIN CONGRESSIONAL RULES.—Nothing in this 

section shall be interpreted to require or enable any official of the Department of Defense 

to provide funding under this section to any earmark as defined pursuant to House Rule 

XXI, clause 9, or any congressionally directed spending item as defined pursuant to 

Senate Rule XLIV, paragraph 5. 

(d) FUNDING.—Subject to the availability of appropriations for such purpose, the 

amounts authorized to be appropriated for research, development, test, and evaluation for 

a fiscal year may be used for such fiscal year for the program established under 

subsection (a). 

(e) TRANSFER AUTHORITY.—The Secretary may transfer funds available for the 

program to the research, development, test, and evaluation accounts of a military 

department, defense agency, or the unified combatant command for special operations 

forces pursuant to a proposal, or any part of a proposal, that the Secretary determines 

would directly support the purposes of the program. The transfer authority provided in 

this subsection is in addition to any other transfer authority available to the Department of 

Defense.

————— 

TITLE 10, UNITED STATES CODE

CHAPTER 142—PROCUREMENT TECHNICAL ASSISTANCE 

COOPERATIVE AGREEMENT PROGRAM

Sec.

2411. Definitions. 

2412. Purposes. 

2413. Cooperative agreements. 

2414. Limitation [should be “Funding”]. 

2415. Distribution. 

2416. Subcontractor information. 

2417. Administrative costs. 

2418. Authority to provide certain types of technical assistance.

2419. Advancing small business growth. 

2420. Regulations. 

 

§2411. Definitions 

In this chapter:

(1) The term "eligible entity" means any of the following:

(A) A State.
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(B) A local government.

(C) A private, nonprofit organization. 

(D) A tribal organization, as defined in section 4(l) of the Indian 

Self-Determination and Education Assistance Act (Public Law 93–638; 25 

U.S.C. 450b(l)),1 or an economic enterprise, as defined in section 3(e) of 

the Indian Financing Act of 1974 (Public Law 93–262; 25 U.S.C. 

1452(e)), whether or not such economic enterprise is organized for profit 

purposes or nonprofit purposes. 

(2) The term "distressed area" means— 

(A) the area of a unit of local government (or such area excluding the 

area of any defined political jurisdiction within the area of such unit of local 

government) that— 

(i) has a per capita income of 80 percent or less of the State average; 

or 

(ii) has an unemployment rate that is one percent greater than the 

national average for the most recent 24-month period for which statistics 

are available; or

(B) a reservation, as defined in section 3(d) of the Indian Financing Act 

of 1974 (Public Law 93–262; 25 U.S.C. 1452(d)). 

(3) The term "Secretary" means the Secretary of Defense acting through the 

Director of the Defense Logistics Agency.

(4) The terms "State" and "local government" have the meaning given those 

terms in section 6302 of title 31.

§2412. Purposes 

The purposes of the program authorized by this chapter are— 

(1) to increase assistance by the Department of Defense to eligible entities 

furnishing procurement technical assistance to business entities; and

(2) to assist eligible entities in the payment of the costs of establishing and 

carrying out new procurement technical assistance programs and maintaining 

existing procurement technical assistance programs.

§2413. Cooperative agreements 

(a) The Secretary, in accordance with the provisions of this chapter, may enter 

into cooperative agreements with eligible entities to carry out the purposes of this 

chapter.

(b) Under any such cooperative agreement, agreement— 

(1) the eligible entity shall agree to sponsor programs to furnish procurement 

technical assistance to business entities; and

(2) the Secretary shall agree to defray not more than 65 percent of furnish to 

the eligible entity the full cost of the assistance furnished by the eligible entity's 

cost of furnishing such assistance under such programs, subject to the applicable 

annual limitation under section 2414(a) of this title except that— 

(1) in the case of a program sponsored by such an entity that provides 

services solely in a distressed area, the Secretary may agree to furnish more than 65 
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percent, but not more than 75 percent, of such cost with respect to such program; 

and

(2) in the case of a program sponsored by such an entity that provides 

assistance for covered small businesses pursuant to section 2419(b) of this title, the 

Secretary may agree to furnish the full cost of such assistance. 

(c) In entering into cooperative agreements under subsection (a), the Secretary 

shall assure that at least one procurement technical assistance program is carried out in 

each Department of Defense contract administration services district during each fiscal 

year.

(d) In conducting a competition for the award of a cooperative agreement under 

subsection (a), the Secretary shall give significant weight to successful past performance 

of eligible entities under a cooperative agreement under this section. 

(e) In determining the level of funding to provide under an agreement under 

subsection (b), the Secretary shall consider the forecast by the eligible entity of demand 

for procurement technical assistance, and, in the case of an established program under 

this chapter, the outlays and receipts of such program during prior years of operation. 

§2414. Funding 

(a) IN GENERAL.—Except as provided in subsection (c), the value of the 

assistance furnished by the Secretary to any eligible entity to carry out a procurement 

technical assistance program under a cooperative agreement under this chapter during 

any fiscal year may not exceed— 

(1) in the case of a program operating on a Statewide basis, other than a 

program referred to in clause (3) or (4), $750,000 $1,500,000; 

(2) in the case of a program operating on less than a Statewide basis, other 

than a program referred to in clause (3) or (4), $450,000 $900,000; 

(3) in the case of a program operated wholly within one service area of the 

Bureau of Indian Affairs by an eligible entity referred to in section 2411(1)(D) of 

this title, $300,000 $600,000; or 

(4) in the case of a program operated wholly within more than one service 

area of the Bureau of Indian Affairs by an eligible entity referred to in section 

2411(1)(D) of this title, $750,000 $1,500,000. 

(b) DETERMINATIONS ON SCOPE OF OPERATIONS.—A determination of whether a 

procurement technical assistance program is operating on a Statewide basis or on less 

than a Statewide basis or is operated wholly within one or more service areas of the 

Bureau of Indian Affairs by an eligible entity referred to in section 2411(1)(D) of this 

title shall be made in accordance with regulations prescribed by the Secretary of Defense.

(c) Exception.—The value of the assistance provided in accordance with section 

2419(b) of this title is not subject to the limitations in subsection (a).

(d) USE OF PROGRAM INCOME.— 

(1) An eligible entity that earned income in a specified fiscal year from 

activities carried out pursuant to a procurement technical assistance program 

funded under this chapter may expend an amount of such income, not to exceed 

25 percent of the cost of furnishing procurement technical assistance in such 

specified fiscal year, during the fiscal year following such specified fiscal year, to 

carry out a procurement technical assistance program funded under this chapter. 
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(2) An eligible entity that does not enter into a cooperative agreement with 

the Secretary for a fiscal year— 

(A) shall notify the Secretary of the amount of any income the 

eligible entity carried over from the previous fiscal year; and

(B) may retain an amount of such income equal to 10 percent of 

the value of assistance furnished by the Secretary under this section during 

the previous fiscal year.

(3) In determining the value of assistance furnished by the Secretary under 

this section for any fiscal year, the Secretary shall account for the amount of any 

income the eligible entity carried over from the previous fiscal year.

§2415. Distribution 

The Secretary shall allocate funds available for assistance under this chapter 

equally to each Department of Defense contract administrative services district. If in any 

such fiscal year there is an insufficient number of satisfactory proposals in a district for 

cooperative agreements to allow effective use of the funds allocated to that district, the 

funds remaining with respect to that district shall be reallocated among the remaining 

districts.

§2416. Subcontractor information 

(a) The Secretary of Defense shall require that any defense contractor in any year 

shall provide to an eligible entity with which the Secretary has entered into a cooperative 

agreement under this chapter, on the request of such entity, the information specified in 

subsection (b). 

(b) Information to be provided under subsection (a) is a listing of the name of 

each appropriate employee of the contractor who has responsibilities with respect to 

entering into contracts on behalf of such contractor that constitute subcontracts of 

contracts being performed by such contractor, together with the business address and 

telephone number and area of responsibility of each such employee. 

(c) A defense contractor need not provide information under this section to a 

particular eligible entity more frequently than once a year.

(d) In this section, the term "defense contractor", for any year, means a person 

awarded a contract with the Department of Defense in that year for an amount in excess 

of $1,000,000. 

§2417. Administrative costs 

The Director of the Defense Logistics Agency may use, out of the amount 

appropriated for a fiscal year for operation and maintenance for the procurement 

technical assistance program authorized by this chapter, an amount not exceeding three 

percent of such amount to defray the expenses of administering the provisions of this 

chapter during such fiscal year.

§2418. Authority to provide certain types of technical assistance

(a) The procurement technical assistance furnished by eligible entities assisted by 

the Department of Defense under this chapter may include technical assistance relating to 
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contracts entered into with (1) Federal departments and agencies other than the 

Department of Defense, and (2) State and local governments. 

(b) An eligible entity assisted by the Department of Defense under this chapter 

also may furnish information relating to assistance and other programs available pursuant 

to the Defense Conversion, Reinvestment, and Transition Assistance Act of 1992. 

(c) An eligible entity assisted by the Department of Defense under this chapter 

also may furnish education on the requirements applicable to small businesses under the 

regulations issued— 

(1) under section 38 of the Arms Export Control Act (22 U.S.C. 2778), and 

on compliance with those requirements; and 

(2) under section 9 of the Small Business Act (15 U.S.C. 638), and on 

compliance with those requirements. 

§2419. Advancing small business growth 

(a) CONTRACT CLAUSE REQUIRED.—(1) The Under Secretary of Defense for 

Acquisition, Technology, and Logistics shall require the clause described in paragraph 

(2) to be included in each covered contract awarded by the Department of Defense. 

(2) The clause described in this paragraph is a clause that— 

(A) requires the contractor to acknowledge that acceptance of the contract 

may cause the business to exceed the applicable small business size standards 

(established pursuant to section 3(a) of the Small Business Act) for the industry 

concerned and that the contractor may no longer qualify as a small business 

concern for that industry; and 

(B) encourages the contractor to develop capabilities and characteristics 

typically desired in contractors that are competitive as an other-than-small 

business in that industry. 

(b) AVAILABILITY OF ASSISTANCE.—Covered small businesses may be provided 

assistance as part of any procurement technical assistance furnished pursuant to this 

chapter.

(c) DEFINITIONS.—In this section: 

(1) The term "covered contract" means a contract— 

(A) awarded to a qualified small business concern as defined 

pursuant to section 3(a) of the Small Business Act; and 

(B) with an estimated annual value— 

(i) that will exceed the applicable receipt-based small 

business size standard; or 

(ii) if the contract is in an industry with an employee-based 

size standard, that will exceed $70,000,000. 

(2) The term "covered small business" means a qualified small business 

concern as defined pursuant to section 3(a) of the Small Business Act that has 

entered into a contract with the Department of Defense that includes a contract 

clause described in subsection (a)(2). 

§2420. Regulations

The Secretary of Defense shall prescribe regulations to carry out this chapter.
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———— 

Section 1611 of the National Defense Authorization Act 

for Fiscal Year 2013 

(P. L. 112–239; 10 USC 144 note) 

[Note that the proposal proposes to codify this section in title 10, USC] 

SEC. 1611. ROLE OF THE DIRECTORS OF SMALL BUSINESS PROGRAMS IN 

ACQUISITION PROCESSES OF THE DEPARTMENT OF 

DEFENSE.

(a) GUIDANCE REQUIRED.—The Secretary of Defense shall develop and issue 

guidance to ensure that the head of each Office of Small Business Programs of the 

Department of Defense is a participant as early as practicable in the acquisition 

processes— 

(1) of the Department, in the case of the Director of Small Business 

Programs in the Department of Defense; and

(2) of the military department concerned, in the case of the Director of 

Small Business Programs in the Department of the Army, in the Department of 

the Navy, and in the Department of the Air Force.

(b) MATTERS TO BE INCLUDED.—Such guidance shall, at a minimum— 

(1) require the Director of Small Business Programs in the Department of 

Defense— 

(A) to provide advice to the Defense Acquisition Board; and 

(B) to provide advice to the Information Technology Acquisition 

Board; and

(2) require coordination between the chiefs of staff of the Armed Forces 

and the service acquisition executives, as appropriate (or their designees), the 

Director of Small Business Programs in each military department as early as 

practical in the relevant acquisition processes.

 —————— 

Section 834 of the National Defense Authorization Act 

For Fiscal Years 1990 and 1991 

(Pub. L. 101–189; 15 U.S.C. 637 note)

[Note that the proposal proposes to codify this section in title 10, USC]

SEC. 834. TEST PROGRAM FOR NEGOTIATION OF COMPREHENSIVE

SMALL BUSINESS SUBCONTRACTING PLANS.

(a) TEST PROGRAM.—(1) The Secretary of Defense shall establish a test program 

under which contracting activities in the military departments and the Defense Agencies 

are authorized to undertake one or more demonstration projects to determine whether the 

negotiation and administration of comprehensive subcontracting plans will reduce 
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administrative burdens on contractors while enhancing opportunities provided under 

Department of Defense contracts for covered small business concerns. In selecting the 

contracting activities to undertake demonstration projects, the Secretary shall take such 

action as is necessary to ensure that a broad range of the supplies and services acquired 

by the Department of Defense are included in the test program.

(2) In developing the test program, the Secretary of Defense shall— 

(A) consult with the Administrator of the Small Business Administration; 

and

(B) provide an opportunity for public comment on the test program. 

(b) COMPREHENSIVE SMALL BUSINESS SUBCONTRACTING PLAN.—(1) In a 

demonstration project under the test program, the Secretary of a military department or 

head of a Defense Agency shall negotiate, monitor, and enforce compliance with a 

comprehensive subcontracting plan with a Department of Defense contractor described in 

paragraph (4). 

(2) The comprehensive subcontracting plan of a contractor— 

(A) shall apply to the entire business organization of the contractor or to 

one or more of the contractor's divisions or operating elements, as specified in the 

subcontracting plan; and 

(B) shall cover each Department of Defense contract that is entered into by 

the contractor and each subcontract that is entered into by the contractor as the 

subcontractor under a Department of Defense contract. 

(3) Each comprehensive subcontracting plan of a contractor shall require that the 

contractor report to the Secretary of Defense on a semi-annual basis the following 

information: 

(A) The amount of first-tier subcontract dollars awarded during the sixmonth period covered by the report to covered small business concerns, with the 

information set forth separately— 

(i) by North American Industrial Classification System code;

(ii) by major defense acquisition program, as defined in section 

2430(a) of title 10, United States Code; 

(iii) by contract, if the contract is for the maintenance, overhaul, 

repair, servicing, rehabilitation, salvage, modernization, or modification of 

supplies, systems, or equipment and the total value of the contract, 

including options, exceeds $100,000,000; and 

(iv) by military department.

(B) The total number of subcontracts active under the test program during 

the six-month period covered by the report that would have otherwise required a 

subcontracting plan under paragraph (4) or (5) of section 8(d) of the Small 

Business Act (15 U.S.C. 637(d)). 

(C) Costs incurred in negotiating, complying with, and reporting on 

comprehensive subcontracting plans. 

(D) Costs avoided by adoption of a comprehensive subcontracting plan. 

(4) A Department of Defense contractor referred to in paragraph (1) is, with 

respect to a comprehensive subcontracting plan negotiated in any fiscal year, a business 

concern that, during the immediately preceding fiscal year, furnished the Department of 

Defense with supplies or services (including professional services, research and 
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development services, and construction services) pursuant to at least three Department of 

Defense contracts having an aggregate value of at least $100,000,000. 

(c) WAIVER OF CERTAIN SMALL BUSINESS ACT SUBCONTRACTING PLAN 

REQUIREMENTS.—A Department of Defense contractor is not required to negotiate or 

submit a subcontracting plan under paragraph (4) or (5) of section 8(d) of the Small 

Business Act (15 U.S.C. 637(d)) with respect to a Department of Defense contract if— 

(1) the contractor has negotiated a comprehensive subcontracting plan 

under the test program that includes the matters specified in section 8(d)(6) of the 

Small Business Act (15 U.S.C. 637(d)(6));

(2) such matters have been determined acceptable by the Secretary of the 

military department or head of a Defense Agency negotiating such comprehensive 

subcontracting plan; and 

(3) the comprehensive subcontracting plan applies to the contract. 

(d) FAILURE TO MAKE A GOOD FAITH EFFORT TO COMPLY WITH A 

COMPREHENSIVE SUBCONTRACTING PLAN.—(1) A contractor that has negotiated a 

comprehensive subcontracting plan under the test program shall be subject to section 

8(d)(4)(F) of the Small Business Act (15 U.S.C. 637(d)(4)(F)) regarding the assessment 

of liquidated damages for failure to make a good faith effort to comply with its 

comprehensive subcontracting plan and the goals specified in that plan. In addition, any 

such failure shall be a factor considered as part of the evaluation of past performance of 

an offeror.

(2) Effective in fiscal year 2016 and each fiscal year thereafter in which the test 

program is in effect, the Secretary of Defense shall report to Congress on any negotiated 

comprehensive subcontracting plan that the Secretary determines did not meet the 

subcontracting goals negotiated in the plan for the prior fiscal year.

(e) TEST PROGRAM PERIOD.—The test program authorized by subsection (a) shall 

begin on October 1, 1990, unless Congress adopts a resolution disapproving the test 

program. The test program shall terminate on December 31, 2027. 

(f) REPORT.—Not later than September 30, 2015, the Comptroller General of the 

United States shall submit a report on the results of the test program to the Committees 

on Armed Services and on Small Business of the House of Representatives and the 

Committees on Armed Services and on Small Business and Entrepreneurship of the 

Senate.

(g) DEFINITIONS.—In this section, the term 'covered small business concern' 

includes each of the following: 

(1) A small business concern, as that term is defined under section 3(a) of 

the Small Business Act (15 U.S.C. 632(a)).

(2) A small business concern owned and controlled by veterans, as that 

term is defined in section 3(q)(3) of such Act (15 U.S.C. 632(q)(3)).

(3) A small business concern owned and controlled by service-disabled 

veterans, as that term is defined in section 3(q)(2) of such Act (15 U.S.C. 

632(q)(2)).

(4) A qualified HUBZone small business concern, as that term is defined 

under section 31(b) of such Act. 
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(5) A small business concern owned and controlled by socially and 

economically disadvantaged individuals, as that term is defined in section 

8(d)(3)(C) of such Act (15 U.S.C. 637(d)(3)(C)).

(6) A small business concern owned and controlled by women, as that 

term is defined under section 3(n) of such Act (15 U.S.C. 632(n)).

 ————— 

SECTION 831 OF THE FISCAL YEAR 1991 NDAA, AS AMENDED

(P. L. 101–510; 10 U.S.C. 2302 note)

[Note that the proposal proposes to codify this section in title 10, USC]

SEC. 831. MENTOR-PROTÉGÉ PILOT PROGRAM.

(a) ESTABLISHMENT OF PILOT PROGRAM.—The Secretary of Defense shall 

establish a pilot program to be known as the “Mentor-Protégé Program”.

(b) PURPOSE.—The purpose of the program is to provide incentives for major 

Department of Defense contractors to furnish disadvantaged small business concerns with 

assistance designed to— 

(1) enhance the capabilities of disadvantaged small business concerns to 

perform as subcontractors and suppliers under Department of Defense contracts 

and other contracts and subcontracts; and 

(2) increase the participation of such business concerns as subcontractors 

and suppliers under Department of Defense contracts, other Federal Government 

contracts, and commercial contracts.

(c) PROGRAM PARTICIPANTS.—(1) A business concern meeting the eligibility 

requirements set out in subsection (d) may enter into agreements under subsection (e) and 

furnish assistance to disadvantaged small business concerns upon making application to 

the Secretary of Defense and being approved for participation in the pilot program by the 

Secretary. A business concern participating in the pilot program pursuant to such an 

approval shall be known, for the purposes of the program, as a “mentor firm”.

(2) A disadvantaged small business concern eligible for the award of Federal 

contracts may obtain assistance from a mentor firm upon entering into an agreement with 

the mentor firm as provided in subsection (e). A disadvantaged small business concern 

may not be a party to more than one agreement concurrently, and the authority to enter 

into agreements under subsection (e) shall only be available to such concern during the 5-

year period beginning on the date such concern enters into the first such agreement. A 

disadvantaged small business concern receiving such assistance shall be known, for the 

purposes of the program, as a “protégé firm”.

(3) In entering into an agreement pursuant to subsection (e), a mentor firm may 

rely in good faith on a written representation of a business concern that such business 

concern is a disadvantaged small business concern. The Small Business Administration 

shall determine the status of such business concern as a disadvantaged small business 

concern in the event of a protest regarding the status of such business concern. If at any 

time the business concern is determined by the Small Business Administration not to be a 

disadvantaged small business concern, assistance furnished such business concern by the 
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mentor firm after the date of the determination may not be considered assistance 

furnished under the program. 

(d) MENTOR FIRM ELIGIBILITY.— 

(1) Subject to subsection (c)(1), a mentor firm may enter into an 

agreement with one or more protégé firms under subsection (e) and provide 

assistance under the program pursuant to that agreement if the mentor firm— 

(A) is eligible for award of Federal contracts; and

(B) demonstrates that it— 

(i) is qualified to provide assistance that will contribute to 

the purpose of the program; 

(ii) is of good financial health and character and does not 

appear on a Federal list of debarred or suspended contractors; and 

(iii) can impart value to a protégé firm because of 

experience gained as a Department of Defense contractor or 

through knowledge of general business operations and government 

contracting, as demonstrated by evidence that— 

(I) during the fiscal year preceding the fiscal year in 

which the mentor firm enters into the agreement, the total 

amount of the Department of Defense contracts awarded 

such mentor firm and the subcontracts awarded such 

mentor firm under Department of Defense contracts was 

equal to or greater than $100,000,000; or 

(II) the mentor firm demonstrates the capability to 

assist in the development of protégé firms, and is approved 

by the Secretary of Defense pursuant to criteria specified in 

the regulations prescribed pursuant to subsection (k). 

(2) A mentor firm may not enter into an agreement with a protégé firm if 

the Administrator of the Small Business Administration has made a determination 

finding affiliation between the mentor firm and the protégé firm.

(3) If the Administrator of the Small Business Administration has not 

made such a determination and if the Secretary has reason to believe (based on the 

regulations promulgated by the Administrator regarding affiliation) that the 

mentor firm is affiliated with the protégé firm, the Secretary shall request a 

determination regarding affiliation from the Administrator of the Small Business 

Administration.

(e) MENTOR-PROTÉGÉ AGREEMENT.—Before providing assistance to a protégé 

firm under the program, a mentor firm shall enter into a mentor-protégé agreement with 

the protégé firm regarding the assistance to be provided by the mentor firm. The 

agreement shall include the following: 

(1) A developmental program for the protégé firm, in such detail as may 

be reasonable, including— 

(A) factors to assess the protégé firm's developmental progress 

under the program; 

(B) a description of the quantitative and qualitative benefits to the 

Department of Defense from the agreement, if applicable;
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(C) goals for additional awards that protégé firm can compete for 

outside the Mentor-Protégé Program; and

(D) the assistance the mentor firm will provide to the protégé firm 

in understanding contract regulations of the Federal Government and the 

Department of Defense (including the Federal Acquisition Regulation and 

the Defense Federal Acquisition Regulation Supplement) after award of a 

subcontract under this section, if applicable.

(2) A program participation term for any period of not more than three 

years, except that the term may be a period of up to five years if the Secretary of 

Defense determines in writing that unusual circumstances justify a program 

participation term in excess of three years.

(3) Procedures for the protégé firm to terminate the agreement voluntarily 

and for the mentor firm to terminate the agreement for cause.

(f) FORMS OF ASSISTANCE.—A mentor firm may provide a protégé firm the 

following: 

(1) Assistance, by using mentor firm personnel, in— 

(A) general business management, including organizational 

management, financial management, and personnel management, 

marketing, and overall business planning; 

(B) engineering and technical matters such as production, 

inventory control, and quality assurance; and 

(C) any other assistance designed to develop the capabilities of the 

protégé firm under the developmental program referred to in subsection 

(e).

(2) Award of subcontracts on a noncompetitive basis to the protégé firm 

under the Department of Defense or other contracts. 

(3) Payment of progress payments for performance of the protégé firm 

under such a subcontract in amounts as provided for in the subcontract, but in no 

event may any such progress payment exceed 100 percent of the costs incurred by 

the protégé firm for the performance.

(4) Advance payments under such subcontracts. 

(5) Loans.

(6) Assistance obtained by the mentor firm for the protégé firm from one 

or more of the following— 

(A) small business development centers established pursuant to 

section 21 of the Small Business Act (15 U.S.C. 648); 

(B) entities providing procurement technical assistance pursuant to 

chapter 142 of this title;

(C) a historically Black college or university or a minority 

institution of higher education; or 

(D) women's business centers described in section 29 of the Small 

Business Act (15 U.S.C. 656). 

(g) INCENTIVES FOR MENTOR FIRMS.—(1) The Secretary of Defense may provide 

to a mentor firm reimbursement for the total amount of any progress payment or advance 

payment made under the program by the mentor firm to a protégé firm in connection with 

a Department of Defense contract awarded the mentor firm.
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(2)(A) The Secretary of Defense may provide to a mentor firm reimbursement for 

the costs of the assistance furnished to a protégé firm pursuant to paragraphs (1) and (6) 

of subsection (f) (except as provided in subparagraph (D)) as provided for in a line item 

in a Department of Defense contract under which the mentor firm is furnishing products 

or services to the Department, subject to a maximum amount of reimbursement specified 

in such contract, except that this sentence does not apply in a case in which the Secretary 

of Defense determines in writing that unusual circumstances justify reimbursement using 

a separate contract.

(B) The determinations made in annual performance reviews of a mentor firm's 

mentor-protégé agreement shall be a major factor in the determinations of amounts of 

reimbursement, if any, that the mentor firm is eligible to receive in the remaining years of 

the program participation term under the agreement. 

(C) The total amount reimbursed under this paragraph to a mentor firm for costs 

of assistance furnished in a fiscal year to a protégé firm may not exceed $1,000,000, 

except in a case in which the Secretary of Defense determines in writing that unusual 

circumstances justify a reimbursement of a higher amount. 

(D) The Secretary may not reimburse any fee assessed by the mentor firm for 

services provided to the protégé firm pursuant to subsection (f)(6) or for business 

development expenses incurred by the mentor firm under a contract awarded to the 

mentor firm while participating in a joint venture with the protégé firm.

(3)(A) Costs incurred by a mentor firm in providing assistance to a protégé firm 

that are not reimbursed pursuant to paragraph (2) shall be recognized as credit in lieu of 

subcontract awards for purposes of determining whether the mentor firm attains a 

subcontracting participation goal applicable to such mentor firm under a Department of 

Defense contract, under a contract with another executive agency, or under a divisional or 

company-wide subcontracting plan negotiated with the Department of Defense or another 

executive agency.

(B) The amount of the credit given a mentor firm for any such unreimbursed costs 

shall be equal to— 

(i) four times the total amount of such costs attributable to assistance 

provided by entities described in subsection (f)(6); 

(ii) three times the total amount of such costs attributable to assistance 

furnished by the mentor firm's employees; and 

(iii) two times the total amount of any other such costs.

(C) Under regulations prescribed pursuant to subsection (k), the Secretary of 

Defense shall adjust the amount of credit given a mentor firm pursuant to subparagraphs 

(A) and (B) if the Secretary determines that the firm's performance regarding the award 

of subcontracts to disadvantaged small business concerns has declined without justifiable 

cause.

(4) A mentor firm shall receive credit toward the attainment of a subcontracting 

participation goal applicable to such mentor firm for each subcontract for a product or 

service awarded under such contract by a mentor firm to a business concern that, except 

for its size, would be a small business concern owned and controlled by socially and 

economically disadvantaged individuals, but only if— 

(A) the size of such business concern is not more than two times the 

maximum size specified by the Administrator of the Small Business 
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Administration for purposes of determining whether a business concern 

furnishing such product or service is a small business concern; and

(B) the business concern formerly had a mentor-protégé agreement with 

such mentor firm that was not terminated for cause. 

(h) RELATIONSHIP TO SMALL BUSINESS ACT.—For purposes of the Small Business 

Act (15 U.S.C. 631 et seq.), no determination of affiliation or control (either direct or 

indirect) may be found between a protégé firm and its mentor firm on the basis that the 

mentor firm has agreed to furnish (or has furnished) to its protégé firm pursuant to a 

mentor-protégé agreement any form of developmental assistance described in subsection 

(f).

(2) Notwithstanding section 8 of the Small Business Act (15 U.S.C. 637), the 

Small Business Administration may not determine a disadvantaged small business 

concern to be ineligible to receive any assistance authorized under the Small Business 

Act on the basis that such business concern has participated in the Mentor-Protégé 

Program or has received assistance pursuant to any developmental assistance agreement 

authorized under such program. 

(3) The Small Business Administration may not require a firm that is entering 

into, or has entered into, an agreement under subsection (e) as a protégé firm to submit 

the agreement, or any other document required by the Secretary of Defense in the 

administration of the Mentor-Protégé Program, to the Small Business Administration for 

review, approval, or any other purpose. 

(i) PARTICIPATION IN MENTOR-PROTÉGÉ PROGRAM NOT TO BE A CONDITION FOR 

AWARD OF A CONTRACT OR SUBCONTRACT.—A mentor firm may not require a business 

concern to enter into an agreement with the mentor firm pursuant to subsection (e) as a 

condition for being awarded a contract by the mentor firm, including a subcontract under 

a contract awarded to the mentor firm. 

(j) EXPIRATION OF AUTHORITY.—(1) No mentor-protégé agreement may be 

entered into under subsection (e) after September 30, 2018. 

(2) No reimbursement may be paid, and no credit toward the attainment of a 

subcontracting goal may be granted, under subsection (g) for any cost incurred after 

September 30, 2021. 

(k) REGULATIONS.—The Secretary of Defense shall prescribe regulations to carry 

out the pilot Mentor-Protégé Program. Such regulations shall include the requirements set 

forth in section 8(d) of the Small Business Act (15 U.S.C. 637(d)); and shall prescribe 

procedures by which mentor firms may terminate participation in the program. The 

Secretary shall publish the proposed regulations not later than the date 180 days after the 

date of the enactment of this Act [Nov. 5, 1990]. The Secretary shall promulgate the final 

regulations not later than the date 270 days after the date of the enactment of this Act. 

The Department of Defense policy regarding the pilot Mentor-Protégé Program shall be 

published and maintained as an appendix to the Department of Defense Supplement to 

the Federal Acquisition Regulation.

(l) REPORT BY MENTOR FIRMS.—To comply with section 8(d)(7) of the Small 

Business Act (15 U.S.C. 637(d)(7)), each mentor firm shall submit to the Secretary not 

less than once each fiscal year a report that includes, for the preceding fiscal year— 

(1) all technical or management assistance provided by mentor firm 

personnel for the purposes described in subsection (f)(1); 
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(2) any new awards of subcontracts on a competitive or noncompetitive 

basis to the protégé firm under Department of Defense contracts or other 

contracts, including the value of such subcontracts; 

(3) any extensions, increases in the scope of work, or additional payments 

not previously reported for prior awards of subcontracts on a competitive or 

noncompetitive basis to the protégé firm under Department of Defense contracts 

or other contracts, including the value of such subcontracts; 

(4) the amount of any payment of progress payments or advance payments 

made to the protégé firm for performance under any subcontract made under the 

Mentor-Protégé Program;

(5) any loans made by mentor firm to the protégé firm;

(6) All Federal contracts awarded to the mentor firm and the protégé firm 

as a joint venture, designating whether the award was a restricted competition or a 

full and open competition; 

(7) Any assistance obtained by the mentor firm for the protégé firm from 

one or more— 

(A) small business development centers established pursuant to 

section 21 of the Small Business Act (15 U.S.C. 648); 

(B) entities providing procurement technical assistance pursuant to 

chapter 142 of this title; or

(C) historically Black colleges or universities or minority 

institutions of higher education; 

(8) whether there have been any changes to the terms of the mentorprotégé agreement; and

(9) a narrative— 

(A) describing the success assistance provided under subsection (f) 

has had in addressing the developmental needs of the protégé firm and the 

impact on Department of Defense contracts, and 

(B) addressing any problems encountered. 

(m) REVIEW OF REPORT BY THE OFFICE OF SMALL BUSINESS PROGRAMS.—The 

Office of Small Business Programs of the Department of Defense shall review the report 

required by subsection (l) and, if the Office finds that the mentor-protégé agreement is 

not furthering the purpose of the Mentor-Protégé Program, decide not to approve any 

continuation of the agreement.

(n) DEFINITIONS.—In this section: 

(1) The term “small business concern” has the meaning given such term 

under section 3 of the Small Business Act (15 U.S.C. 632). 

(2) The term “disadvantaged small business concern” means a firm that 

has less than half the size standard corresponding to its primary North American 

Industry Classification System code, is not owned or managed by individuals or 

entities that directly or indirectly have stock options or convertible securities in 

the mentor firm, and is— 

(A) a small business concern owned and controlled by socially and 

economically disadvantaged individuals; 
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(B) a business entity owned and controlled by an Indian tribe as 

defined by section 8(a)(13) of the Small Business Act (15 U.S.C. 

637(a)(13));

(C) a business entity owned and controlled by a Native Hawaiian 

Organization as defined by section 8(a)(15) of the Small Business Act (15 

U.S.C. 637(a)(15)); 

(D) a qualified organization employing severely disabled 

individuals; 

(E) a small business concern owned and controlled by women, as 

defined in section 8(d)(3)(D) of the Small Business Act (15 U.S.C. 

637(d)(3)(D));

(F) a small business concern owned and controlled by service–

disabled veterans (as defined in section 8(d)(3) of the Small Business 

Act); and

(G) a qualified HUBZone small business concern (as defined in 

section 3(p) of the Small Business Act (15 U.S.C. 632(p)); or 

(H) a small business concern that— 

(i) is a nontraditional defense contractor, as such term is 

defined in section 2302 of title 10, United States Code; or 

(ii) currently provides goods or services in the private 

sector that are critical to enhancing the capabilities of the defense 

supplier base and fulfilling key Department of Defense needs. 

(3) The term “small business concern owned and controlled by socially 

and economically disadvantaged individuals” has the meaning given such term in 

section 8(d)(3)(C) of the Small Business Act (15 U.S.C. 637(d)(3)(C)).

(4) The term “historically Black college and university” means any of the 

historically Black colleges and universities referred to in section 2323 of title 10, 

United States Code.

(5) The term “minority institution of higher education” means an 

institution of higher education with a student body that reflects the composition 

specified in section 312(b)(3), (4), and (5) of the Higher Education Act of 1965 

(20 U.S.C. 1058(b)(3), (4), and (5)). 

(6) The term “subcontracting participation goal”, with respect to a 

Department of Defense contract, means a goal for the extent of the participation 

by disadvantaged small business concerns in the subcontracts awarded under such 

contract, as established pursuant to section 2323 of title 10, United States Code 

and section 8(d) of the Small Business Act (15 U.S.C. 637(d)). 

(7) The term “qualified organization employing the severely disabled” 

means a business entity operated on a for-profit or nonprofit basis that— 

(A) uses rehabilitative engineering to provide employment 

opportunities for severely disabled individuals and integrates severely 

disabled individuals into its workforce; 

(B) employs severely disabled individuals at a rate that averages 

not less than 20 percent of its total workforce; 

(C) employs each severely disabled individual in its workforce 

generally on the basis of 40 hours per week; and 
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(D) pays not less than the minimum wage prescribed pursuant to 

section 6 of the Fair Labor Standards Act (29 U.S.C. 206) to those 

employees who are severely disabled individuals. 

(8) The term “severely disabled individual” means an individual— 

(A) who is blind (as defined in section 8501 of title 41); or 

(B) who is a severely disabled individual (as defined in such 

section).

(9) The term “affiliation”, with respect to a relationship between a mentor 

firm and a protégé firm, means a relationship described under section 121.103 of 

title 13, Code of Federal Regulations (or any successor regulation). 

————— 

Section 4237 of the National Defense Authorization Act 

for Fiscal Year 1993 

(P. L. 102–484; 15 U.S.C. 638 note)

[Note contingent effective date in subsection (h)] 

SEC. 4237. SMALL BUSINESS INNOVATION RESEARCH PROGRAM IN 

DEPARTMENT OF DEFENSE. 

(a) EXTENSION OF PROGRAM.—[Amended section 5 of Pub. L. 97–219.] 

(b) LIMITATION ON PROGRAM AWARDS.—Amounts paid to a small business 

concern by the Department of Defense under the Small Business Innovation Research 

Program for a project- 

(1) in phase I under the program may not exceed $100,000; and 

(2) in phase II under the program may not exceed $750,000. 

(c) COMMERCIAL APPLICATIONS STRATEGY.—Not later than 270 days after the 

date of the enactment of this Act [Oct. 23, 1992], the Secretary of Defense, in 

consultation with the Administrator of the Small Business Administration, shall develop 

and issue a strategy for effectuating the transition of successful projects under the Small 

Business Innovation Research Program from phase II under the program into phase III 

under the program. 

(d) REPEAL OF EXCLUSION OF CERTAIN ACTIVITIES.—[Amended section 9 of the 

Small Business Act.]

(e) PERCENTAGE OF REQUIRED EXPENDITURES FOR SBIR CONTRACTS.—(1) The 

Small Business Innovation Research Program shall apply to the Department of Defense 

(including the military departments) as if the percentage specified in section 9(f)(1) of the 

Small Business Act (15 U.S.C. 638(f)(1)) with respect to fiscal years after fiscal year 

1982 were determined in accordance with the table set forth in paragraph (2) (rather than 

1.25 percent). 

(2)(A) The percentage under section 9(f)(1) of the Small Business Act (15 U.S.C. 

638(f)(1)) for any fiscal year for the Department of Defense and each military department 

shall be determined in accordance with the following table: 

For fiscal year: The percentage is:
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Volume 1 of 3 | January 2018

1993 1.25

1994 1.5

1995 1.75

1996 2.0

1997 2.25

1998 and thereafter 2.5.

(B) If the determination of the Secretary of Defense under subparagraph (C) is a 

negative determination (as set forth in that paragraph), then the percentage under section 

9(f)(1) of the Small Business Act (15 U.S.C. 638(f)(1)) for the Department of Defense 

and each military department for fiscal years after fiscal year 1996 shall remain at the

level applicable for fiscal year 1996 (notwithstanding the percentages specified in 

subparagraph (A) for fiscal years after fiscal year 1996).

(C) Not later than June 30, 1996, the Secretary of Defense during fiscal year 1996 

shall determine whether there has been a demonstrable reduction in the quality of 

research performed under funding agreements awarded by the Department of Defense 

under the SBIR program since the beginning of fiscal year 1993 such that increasing the 

percentage under subparagraph (A) for fiscal years after fiscal year 1996 with respect to 

the department would adversely affect the performance of the department's research 

programs. If the determination of the Secretary is that there has been such a demonstrable 

reduction in the quality of research such that increasing the percentage under 

subparagraph (B) for fiscal years after fiscal year 1996 with respect to the department 

would adversely affect the performance of the department's research programs, the 

Secretary shall be considered for purposes of subparagraph (B) to have made a negative 

determination. The determination of the Secretary concerned under this paragraph shall 

be made after considering the assessment of the Comptroller General with respect to that 

department in the report transmitted under subparagraph (D). 

(D) Not later than March 30, 1996, the Comptroller General shall transmit to the 

Congress and the Secretary of Defense a report setting forth the Comptroller General's 

assessment, with respect to the Department of Defense of whether there has been a 

demonstrable reduction in the quality of research performed under funding agreements 

awarded by the department under the SBIR program since the beginning of fiscal year 

1993 such that increasing the percentage under subparagraph (A) for fiscal years after 

fiscal year 1996 with respect to the department would adversely affect the performance of 

the department's research programs.

(E) The results of each determination under subparagraph (C) shall be transmitted 

to the Congress not later than June 30, 1996. 

(f) DEFINITIONS.—In this section: 

(1) The term “Small Business Innovation Research Program” means the 

program established under the following provisions of section 9 of the Small 

Business Act (15 U.S.C. 638): 

(A) Paragraphs (4) through (7) of subsection (b). 

(B) Subsections (e) through (k).

(2) The term “phase I”, with respect to the Small Business Innovation 

Research Program, means the first phase described in subsection (e)(4)(A) of 

section 9 of the Small Business Act.
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(3) The term “phase II”, with respect to the Small Business Innovation 

Research Program, means the second phase described in subsection (e)(4)(B) of 

such section. 

(4) The term “phase III”, with respect to the Small Business Innovation 

Research Program, means the third phase described in subsection (e)(4)(C) of 

such section. 

(g) EFFECTIVE DATE.—Subject to subsection (h), this section, and the 

amendments made by this section, shall take effect on October 1, 1992, and shall apply 

with respect to fiscal years after fiscal year 1992. 

(h) EFFECTIVENESS OF SECTION CONDITIONAL ON FAILURE TO ENACT OTHER 

LEGISLATION.—(1) In the event of the enactment of H.R. 4400 or S. 2941 [S. 2941 was 

enacted into law as Pub. L. 102–564 on Oct. 28, 1992], 102d Congress, on or before the 

date of the enactment of this Act [Oct. 23, 1992], then this section and the amendments 

made by this section shall not take effect.

(2)(A) In the event of the enactment of H.R. 4400 or S. 2941, 102d Congress, 

after the date of the enactment of this Act, then, effective immediately before the 

enactment of H.R. 4400 or S. 2941, 102d Congress- 

(i) this section shall cease to be effective; and

(ii) the provisions of a small business law that are amended by this section 

shall be effective and read as such provisions of that law were in effect 

immediately before the enactment of this Act, except that to the extent that any 

amendment is made to such a provision of a small business law by any other 

provision of law referred to in subparagraph (B), such provision of a small 

business law shall be effective and shall read as amended by that other provision 

of law.

(B) For the purposes of subparagraph (A)(ii), a provision of law referred to in this 

subparagraph is the following: 

(i) A provision of this Act other than a provision of this section. 

(ii) A provision of any other Act if the provision takes effect during the 

period beginning on the date of the enactment of this Act and ending immediately 

before the enactment of H.R. 4400 or S. 2941, 102d Congress. 

(C) In this paragraph, the term 'small business law' means- 

(i) the Small Business Act (15 U.S.C. 631 et seq.); and 

(ii) the Small Business Innovation Development Act of 1982 [Pub. L. 97–

219] (15 U.S.C. 638 note). 

—————— 

Section 801(b) of the National Defense Authorization Act for Fiscal 

Year 2004 

(P. L. 108–136; 10 USC 2302 note) 

(b) DATA REVIEW.—The Secretary of Defense shall revise the data collection 

systems of the Department of Defense to ensure that such systems are capable of 

identifying each procurement that involves a consolidation of contract requirements 

within the department with a total value in excess of $5,000,000. 
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(2 The Secretary shall ensure that appropriate officials of the Department of 

Defense periodically review the information collected pursuant to paragraph (1) in 

cooperation with the Small Business Administration— 

(A) to determine the extent of the consolidation of contract requirements 

in the Department of Defense; and

(B) to assess the impact of the consolidation of contract requirements on 

the availability of opportunities for small business concerns to participate in 

Department of Defense procurements, both as prime contractors and as 

subcontractors. 

(3) In this subsection: 

(A) The term “consolidation of contract requirements” has the meaning 

given that term in section 2382(c)(1) of title 10, United States Code. 

(B) The term “small business concern” means a business concern that is 

determined by the Administrator of the Small Business Administration to be a 

small-business concern by application of the standards prescribed under section 

3(a) of the Small Business Act (15 U.S.C. 632(a)). 

—————— 
Volume 1   |   Page 195

Section 7 

Statutory Offices and Designated Officials 

Grant the Secretary of Defense the flexibility to structure the DoD organization 

consistent with the intent of the FY 2017 NDAA. 

RECOMMENDATIONS

Rec. 22: Eliminate, or sunset within 5 years, the statutory requirement for certain

acquisition‐related offices and Secretary of Defense designated officials to increase

flexibility and/or reduce redundancy.

22a: Repeal the statutory requirement for Department of Defense Test Resource

Management Center, 10 U.S.C. § 196.  

22b: Repeal the statutory requirement for Office of Corrosion Policy and Oversight,

10 U.S.C. § 2228.

22c: Repeal the statutory requirement for Director for Performance Assessment and

Root Cause Analysis (PARCA), 10 U.S.C. § 2438.

Recommendations continue on following page. 
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RECOMMENDATIONS

22d: Repeal the statutory requirement for Office of Technology Transition, 10 U.S.C.

§ 2515.  

22e: Repeal the statutory requirement for Office for Foreign Defense Critical

Technology Monitoring and Assessment, 10 U.S.C. § 2517.

22f: Repeal the statutory requirement at 10 U.S.C. § 204 for a Small Business

Ombudsman within each defense audit agency.

22g: Repeal the statutory requirement for Secretary of Defense to designate a

competition advocate for the Defense Logistics Agency, 10 U.S.C. § 2318.

22h: Repeal the statutory requirement for the Hypersonics Development section of

Joint Technology Office on Hypersonics, Section 218 of the FY 2007 NDAA (Pub. L.

No. 109–364, 120 Stat. 2126; 10 U.S.C. § 2358 note).

22i: Repeal the statutory requirement for Improvement in Defense Research and

Procurement Liaison with Israel, Section 1006 of the FY 1989 NDAA (Pub. L.

No. 100‐456; 10 U.S.C. § 133 note).

22j: Repeal the statutory requirement for Coordination of Human Systems

Integration Activities Related to Acquisition Programs, Section 231 of the FY 2008

NDAA (Pub. L. No. 110–181, 10 U.S.C. § 1701 note).   

22k: Repeal the statutory requirement for Focus on Urgent Operational Needs and

Rapid Acquisition, Section 902 of the FY 2013 NDAA (Pub. L. No. 112–239; 10 U.S.C.

§ 2302 note).

22l: Repeal the statutory requirement for Senior Official for Dual‐Use Science and

Technology Projects, Section 203(c) of the FY 1998 NDAA (Pub. L. No. 105–85;

10 U.S.C. § 2511 note).  

22m: Repeal the statutory requirement for Executive Agent for Printed Circuit

Boards, Section 256 of FY 2009 NDAA (Pub. L. No. 110–417; 10 U.S.C. § 2501 note). 

22n: Sunset the statutory requirement for Joint Directed Energy Transition Office

(JDETO), 10 U.S.C. § 219 (10 U.S.C. § 2431 note) in FY 2023.

   
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INTRODUCTION 

The Section 809 Panel identified statutorily mandated offices and designated senior officials that

perform specified acquisition‐related functions. In line with the organizational reforms in USD(AT&L),

as required by Section 901 of the FY 2017 NDAA,1 Congress should remove the statutory requirements

for some of these offices.

Congress has from time to time created statutory requirements for positions within DoD that are not

offices to which appointments are made by the President, by and with the advice and consent of the

Senate, but which are filled by officials appointed by the Secretary of Defense. Unlike most DoD

positions below the advice‐and‐consent level, these positions are not subject to internal reorganization or

restructuring. To afford the Secretary of Defense the ability to implement the best structure for DoD

(both now and in the future), Congress should repeal a number of these requirements for specified

positions. This recommendation is consistent with provisions of the FY 2018 NDAA. Repeal of these

statutory requirements would not itself abolish the affected positions, but would allow the Secretary of

Defense to restructure those positions should such action to be warranted.  

Codifying the existence and structure of certain offices may unnecessarily restrict the Secretary of

Defense’s ability to adapt the DoD organizational structure to improve efficiency and effectiveness

consistent with the intent of the FY 2017 NDAA. The following recommendations do not constitute an

assessment of the offices’ individual missions or roles in the acquisition process, but rather are an effort

to remove unnecessarily prescriptive and obsolete requirements from the U.S. Code. The

recommendations address whether DoD could have increased flexibility, defined as freedom of action

to adapt the organization in the future to best suit the needs of USD(R&E) and USD(A&S). In its

analysis, the Section 809 Panel considered whether the provisions examined provide authority that the

Secretary of Defense would not otherwise have.

In most cases, removing statutory requirements would enhance the Secretary’s authority. The

recommendations in this section focus on whether mandating certain offices in statute may

unnecessarily restrict the Secretary’s ability to pursue acquisition‐related missions and may limit the

Secretary’s ability to construct a proactive and adaptive organization. Included here are those cases in

which recommendations are based on rationale other than direct effect on the Section 901

reorganization. This section does not include recommendations regarding the role or mission, leaving

such decisions to appropriate decision‐makers in DoD.  

The analysis below only reviews OSD acquisition‐related offices designated in statute or those that

require the Secretary of Defense to designate an official. The following offices or officials are designated

in statute; however, the Section 809 Panel is not making any recommendations to change the related

statute applicable to these offices at this time:  

 Director of Operational Test and Evaluation (10 U.S.C. § 139)

 Cost Accounting Standards Board (10 U.S.C. § 190)

                                                     

1 FY 2017 NDAA, Pub. L. No. 114–328 (2016). 
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 Director of Small Business Programs (10 U.S.C. § 144)

 Secretary of Defense Waiver of Acquisition Laws to Acquire Vital National Security

Capabilities—designation of responsible official (Section 806(b) of the FY 2016 NDAA (10 U.S.C.

§ 2302 note))
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RECOMMENDATION 

Recommendation 22: Eliminate, or sunset within 5 years, the statutory 

requirement for certain acquisition-related offices and Secretary of Defense 

designated officials to increase flexibility and/or reduce redundancy. 

Problem 

Codifying the existence and structure of certain offices may unnecessarily restrict the Secretary’s ability

to adapt the DoD organizational structure to improve efficiency and effectiveness consistent with the

intent of the FY 2017 NDAA. The subsections below provide analysis of 14 congressionally mandated,

acquisition‐related offices and positions.

THE REQUIREMENT FOR THE FOLLOWING STATUTORY OFFICES SHOULD BE REPEALED. 

Subrecommendation 22a: Repeal the statutory requirement for Department of Defense Test 

Resource Management Center, 10 U.S.C. § 196. 

Background 

As stipulated in 10 U.S.C. § 196, “The Secretary of Defense shall establish within the Department of

Defense under section 191 of this title a Department of Defense Test Resource Management Center

[TRMC]....The Secretary shall designate the Center as a Department of Defense Field Activity.”2 The

statute also states that there will be a director and deputy director who will “be selected by the

Secretary,” and be “subject to the supervision” of the USD(AT&L). The pending Section 901

reorganization affects TRMC.3  

Congress established TRMC in statute in the FY 2003 NDAA.4 TRMC provides oversight of proposed

budgets and expenditures for the test and evaluation (T&E) facilities and resources of DoD’s Major

Range and Test Facility Base (MRTFB).  

DoDI 5105.71 serves as TRMC’s charter, and the director is DoD’s senior advisor on all matters related

to the adequacy of the T&E infrastructure in support of its acquisition process. 5 TRMC provides

strategic guidance on a biennial basis for DoD’s T&E infrastructure based on future and near‐term

warfighting requirements. It also annually certifies the proposed budgets and expenditures for the

Military Services’ and Agencies’ T&E facilities and resources (to include workforce) except for the

“budgets and expenditures for activities described in section 10 U.S.C. § 139(j),” which the Director of

Operational Test and Evaluation (DOT&E) administers.6  

                                                     

2 Department of Defense Test Resource Management Center, 10 U.S.C. § 196.  3 Ibid. 

4 FY 2003 NDAA, Pub. L. No. 107–314, 116 Stat. 2487 (2002).  5 Department of Defense Test Resource Management Center (TRMC), DoDD 5107.71 (2004).  6 Director of Operational Test and Evaluation, 10 U.S.C. § 139. 
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Findings 

TRMC oversees the management and operations of the Major Range and Test Facility Base (MRTFB),

which the designated core set of DoD’s most critical T&E infrastructure dispersed across 23 locations

and employing more than 30,000 T&E personnel. TRMC also maintains awareness of the T&E

capabilities of the rest of the federal government, the private sector, and allies and partners. TRMC

approves substantial modifications—including expansion, divestment, consolidation, or curtailment of

activities—for all non‐MRTFB T&E facilities and resources within DoD prior to implementation by the

Military Services or agencies.7 New weapons systems and technologies undergo T&E at MRTFBs and

are essential to DoD’s future.8 TRMC cooperates closely with the Deputy Assistant Secretary of Defense

for Developmental Test and Evaluation (DASD[DT&E]), and details personnel to that organization as

supplemental workforce.9

DoD field activities provide, “on a DoD‐wide basis, a supply or service activity common to more than

one Military Department or DoD headquarters function when it is more effective, economical, or

efficient to do so.”10 The Secretary of Defense maintains the authority to establish and continue a field

activity. TRMC is currently the only one of the eight field activities mandated in statute.11  

Conclusions 

New weapons systems and technologies undergo T&E at MRTFBs and are essential to the future of

warfighting.12 TRMC’s primary mission is to enable acquisition programs to execute successfully

through adequate testing supported by the right T&E capabilities at the right time and place.13

Congress should remove the statutory provision that established TRMC to facilitate freedom of action

throughout the Section 901 reorganization of the offices of the USD(AT&L) and enhance the Secretary’s

authority to designate field activities.  

Subrecommendation 22b: Repeal the statutory requirement for Office of Corrosion Policy 

and Oversight, 10 U.S.C. § 2228. 

Background 

In December 2002, the FY 2003 NDAA14 amended Title 10, U.S.C., to add 10 U.S.C. § 2228, which

establishes the Office of Corrosion Policy and Oversight (Corrosion Office).15 Section 2228 states:  

                                                     

7 OUSD(AT&L), submission to 809 Panel, October 13, 2017.   8 DoD, Deputy Assistant Secretary of Defense for Development Test & Evaluation/Director, Test Resource Management Center, accessed 

September 18, 2017, http://www.acq.osd.mil/dte‐trmc/TRMC_1.html.  9 DoD, Developmental Test and Evaluation FY 2016 Annual Report, accessed November 4, 2017, https://www.acq.osd.mil/dte‐

trmc/docs/FY2016_DTE_AnnualReport.pdf.  10 DoD, Agency Strategic Plan Fiscal Years 2015‐2018, accessed November 4, 2018, 

http://dcmo.defense.gov/Portals/47/Documents/Publications/ASP/FY2016_2018ASP.pdf.   11 DoD, Defense Agencies and DoD Field Activities Common Supply or Service Agency Per 10 U.S.C. §191, accessed November 4, 2017, 

http://dcmo.defense.gov/Portals/47/Documents/OSD%20DAFA%20Organization.pdf.   12 DoD, Deputy Assistant Secretary of Defense for Development Test & Evaluation / Director, Test Resource Management Center, accessed 

September 18, 2017, http://www.acq.osd.mil/dte‐trmc/TRMC_1.html.  13 OUSD(AT&L), submission to 809 Panel, October 13, 2017.  14 FY 2003 NDAA, Pub. L. No. 107–314, § 1067 (2002).  15 GAO, Defense Management: DOD Should Enhance Oversight of Equipment‐Related Corrosion Projects, accessed June 9, 2017, 

http://www.gao.gov/assets/660/657498.pdf. Office of Corrosion Policy and Oversight, 10 U.S.C. § 2228. 
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There is an Office of Corrosion Policy and Oversight within the Office of the Under Secretary of Defense

for Acquisition, Technology, and Logistics.

(2) The Office shall be headed by a Director of Corrosion Policy and Oversight, who shall be assigned to

such position by the Under Secretary from among civilian employees of the Department of Defense with

the qualifications described in paragraph (3).16

Congress mandated the Corrosion Office to bolster DoD’s capacity to abate and avoid problems

associated with corrosion of military equipment.17

Findings 

Since the Corrosion Office’s development in 2002, DoD has issued multiple regulations on DoD policy

toward corrosion prevention and mitigation. DoDI 5000.67 closely reflects, at times verbatim, the text in

10 U.S.C. § 2228.  

The House of Representatives version of the FY 2018 NDAA proposed to repeal the statutory

requirement for the Corrosion Office.18 The report of the House Armed Services Committee (HASC) to

accompany the bill notes that the bill “would repeal section 2228 of title 10, United States Code,

requiring that there be an Office of Corrosion Policy and Oversight within [AT&L].”19 The final FY 2018

NDAA instead requested the Secretary of Defense provide a report “(1) evaluating the continued need

for the Office of Corrosion Policy and Oversight; and (2) containing a recommendation regarding

whether to retain or terminate the Office.”20 It also amends the requirements surrounding the corrosion

control and prevention executive at the military departments but does not make changes to the OSD

position and office.21

Conclusions 

Congress should repeal the statutory requirement for the OSD Office of Corrosion Policy and

Oversight in 10 U.S.C. § 2228.  

Subrecommendation 22c: Repeal the statutory requirement for Director for Performance 

Assessment and Root Cause Analysis (PARCA), 10 U.S.C. § 2438. 

Background 

According to 10 U.S.C. § 2438, the Secretary of Defense must “designate a senior official in the Office of

the Secretary of Defense as the principal official of the Department of Defense responsible for

conducting and overseeing performance assessments and root cause analyses for major defense

                                                     

16 Office of Corrosion Policy and Oversight, 10 U.S.C. § 2228.  17 GAO, Defense Management: DOD Should Enhance Oversight of Equipment‐Related Corrosion Projects, GAO‐13‐661, accessed June 9, 

2017, http://www.gao.gov/assets/660/657498.pdf.  18 HASC, Section 902 of H.R. 2810 as passed the House of Representatives on July 14, 2017, accessed October 31, 2017,

https://www.congress.gov/115/bills/hr2810/BILLS‐115hr2810pcs.pdf.   19 HASC, Report of the Committee on H.R. 2810, House Report 115‐200, accessed November 3, 2017, 

https://www.congress.gov/115/crpt/hrpt200/CRPT‐115hrpt200.pdf.  20 House of Representatives, FY 2018 NDAA, Conference Report to Accompany H.R. 2810, accessed January 6, 2018, 

http://docs.house.gov/billsthisweek/20171113/HRPT‐115‐HR2810.pdf.  21 Ibid. 
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acquisition programs.”22 It further stipulates that DoD assign the director “appropriate staff and

resources necessary to carry out the senior official’s function under this section.”23 Congress created

this position through Section 103 of the Weapons System Acquisition Reform Act of 2009 (WSARA).24  

Findings 

WSARA was a direct response to the GAO’s reports that uncovered “significant delays and cost

overruns” for MDAPs.25 A 2009 GAO report showed that cost growth for MDAPs in FY 2009 had

reached $296 billion and that the average “delay in delivering initial capabilities” was 22 months.26  

WSARA defines PARCA’s role as the body responsible for performance assessing MDAPs. PARCA

completes these assessments semiannually to provide the USD(AT&L) with situational awareness of

the portfolio.27 The PARCA director must also uncover “the root causes of cost growth and other

problems on programs that experience a critical Nunn McCurdy cost breach.”28  

In accordance with the FY 2017 NDAA two new positions—the USD(R&E) and the USD(A&S))— will

replace the USD(AT&L).29 This reorganization, set to take effect in February 2018, directly affects the

PARCA office and directorship because the PARCA director currently reports to the USD(AT&L).30

Congress’s statutory mandate for a PARCA director may limit DoD’s organizational flexibility in a

rapidly evolving strategic environment. The proposed restructuring of USD(AT&L) does not currently

include a plan for PARCA.31 Maintaining a statutory requirement for a PARCA director might

unnecessarily preclude appropriate placement within the new organization.  

Conclusions 

The Section 901 report on the forthcoming reforms to USD(AT&L) postpones alignment of the PARCA

office.32 The proposed USD(A&S) organization, which contains the Assistant Secretary for Defense

(Acquisition), does not include the PARCA office and its directorship. According to the report, DoD

“will assess the best placement of the Program Assessment and Root Cause Analysis function within

USD(A&S).”33 Ongoing evaluation of the placement of PARCA provides the opportunity to also

                                                     

22 Performance Assessments and Root Cause Analyses, 10 U.S.C. §2438.   23 Ibid. 

24 Weapon Systems Acquisition Reform Act of 2009, Pub. L. No. 111–23 (2009).  25 GAO, Defense Acquisitions: Assessments of Selected Weapon Programs, GAO‐09‐326SP, accessed August 8, 2017, 

http://www.gao.gov/assets/290/287947.pdf. United States Senate Democrats, S. 454, the Weapons Acquisition Reform Act of 2009, 

accessed August 8, 2017, https://democrats.senate.gov/2009/05/06/s‐454‐the‐weapons‐acquisition‐reform‐act‐of‐2009/#.WYn413eGN‐

V. 

26 Ibid. 

27 “About PARCA,” PARCA, accessed August 31, 2017, http://www.acq.osd.mil/parca/about.shtml.  28 GAO, Weapons Acquisition Reform: Reform Act Is Helping DOD Acquisition Programs Reduce Risk, but Implementation Challenges 

Remain, GAO‐12‐103, accessed August 8, 2017, http://www.gao.gov/assets/660/650908.pdf.   29 Under Secretary of Defense for Research and Engineering, 10 U.S.C. § 133a. Under Secretary of Defense for Acquisition and 

Sustainment, 10 U.S.C. § 133b. 

30 DoD, Report to Congress Restructuring the Department of Defense Acquisition, Technology and Logistics Organization and Chief 

Management Officer Organization, accessed August 8, 2017, https://www.defense.gov/Portals/1/Documents/pubs/Section‐901‐FY‐2017‐

NDAA‐Report.pdf.   31 Ibid.  

32 Ibid. 

33 Ibid.  
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evaluate its tasks and role. Removing the statutory provision does not remove the Secretary’s authority

to continue using PARCA as a conduit to understanding the progress of MDAPS.  

Subrecommendation 22d: Repeal the statutory requirement for Office of Technology 

Transition, 10 U.S.C. § 2515. 

Background 

Congress established the OSD Office of Technology Transition (OTT)34 in the FY 1993 NDAA to track

research and development activities to ensure DoD integrates technology developed for national

security into the private sector where applicable.35  

The provision states that the intent is to “enhance the U.S.’s national technology and industrial base,

reinvestment, and conversion activities.”36 DoD has found additional ways to meet this mandate, and

the establishment of the new USD(R&E) will further fulfill the requirement. In line with Section 901 of

the FY 2017 NDAA,37 the new organization will benefit from increased flexibility by removing 10 U.S.C.

§ 2515.   

Findings 

Since enactment of this provision in 1992, 20 other technology transition offices have emerged in the

Military Services and OSD.38 OTT presumably ceased operations as a separate entity, as there is no

reference to it in the Section 901 report, though the required functions of the provision have been

subsumed under the USD(R&E).39  

The definition of technology transition is also broader than what is encompassed in 10 U.S.C. § 2515.

Technology transition incorporates, but is more than, transitioning technology to the private sector.

DoDD 5000.01 includes a broad definition of technology development and transition that states it shall

include

 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  

                                                     

34 Office of Technology Transition, 10 U.S.C. § 2515. 

35 FY 1993 NDAA, Pub. L. No. 102–484, 106 Stat. 2683 (1992).  36 Office of Technology Transition, 10 U.S.C. § 2515.

37 FY 2017 NDAA, Pub. L. No. 114–328 (2016). 

38 GAO, Technology Transition Programs Support Military Users, but Opportunities Exist to Improve Measurement of Outcomes, accessed 

June 13, 2017, http://www.gao.gov/assets/660/652852.pdf.  39 DoD, Report to Congress Restructuring the Department of Defense Acquisition, Technology and Logistics Organization and Chief 

Management Officer Organization, accessed August 8, 2017, https://www.defense.gov/Portals/1/Documents/pubs/Section‐901‐FY‐2017‐

NDAA‐Report.pdf. 
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 E1.28.4. Enable rapid, successful transition from the S&T base to useful military products.40

Technology transition provides “opportunities to transition technologies from the science and

technology (S&T) environment to a user, such as a weapon system acquisition program or the

warfighter in the field,” and technology transition is not precisely defined.41  

In 2011, Congress removed the required reporting mechanism for OTT as part of its report

downsizing.42 In a 2013 report, GAO identified the 20 technology transition programs managed by DoD

and the Military Departments that provide structured mechanisms and funding to facilitate technology

transition.43 These programs target different areas of technology sharing, such as the Joint Capability

Technology Demonstration, which addresses the joint warfighting needs of combatant commands and,

since 2015, initiates projects in support of the four Defense Emerging and Capability Prototyping focus

areas.44 Foreign Comparative Testing looks at other countries’ technologies and investigates whether

they would be useful for the United States.45  

Conclusions 

To update the provision and appropriately align DoD’s research focus and approach to technology

transition, Congress should eliminate 10 U.S.C. § 2515. This change will provide the Secretary of

Defense with maximum flexibility to meet the technology transition mission as set forth in Section 901.

Removing this provision from the code will support reorganization within AT&L.  

Subrecommendation 22e: Repeal the statutory requirement for Office for Foreign Defense 

Critical Technology Monitoring and Assessment, 10 U.S.C. § 2517. 

Background 

Congress established the Foreign Defense Critical Technology Monitoring and Assessment (FCTMA)

office in the FY 1992 NDAA.46 Originally, the provision for the FCTMA office was contained in

10 U.S.C. § 2525.47 To address concerns related to foreign technology, Congress amended the statutory

requirement for the FCTMA office through the FY 1993 NDAA to contain the provision in 10 U.S.C.

§ 2517.48 It states, “The Secretary of Defense shall establish within the Office of the Assistant Secretary

of Defense for Research and Engineering an office known as the ʺOffice for Foreign Defense Critical

Technology Monitoring and Assessment.”49  

                                                     

40 The Defense Acquisition System, DoDD 5000.01 (2007).   41 GAO, Technology Transition Programs Support Military Users, but Opportunities Exist to Improve Measurement of Outcomes, GAO‐13‐

286, Accessed June 13, 2017, http://www.gao.gov/assets/660/652852.pdf.  42 FY 2012 NDAA, Pub. L. No. 112–81, 125 Stat. 1584 (2011).  43 GAO, Technology Transition Programs Support Military Users, but Opportunities Exist to Improve Measurement of Outcomes, GAO‐13‐

286, Accessed June 13, 2017, http://www.gao.gov/assets/660/652852.pdf.  44 “Joint Capability Technology Demonstration,” Department of Defense Emerging Capability and Prototyping, 

http://www.acq.osd.mil/ecp/PROGRAMS/JCTD.html.  45 “Comparative Technology Office,” Department of Defense Emerging Capability and Prototyping, 

http://www.acq.osd.mil/ecp/PROGRAMS/CTO.html.  46 FY 1992–1993 NDAA, Pub. L. No. 102–190, 105 Stat. 1427–1431 (1991).   47 FY 1992–1993 NDAA, Pub. L. No. 102–190, 105 Stat. 1430 (1991).   48 FY 1993 NDAA, Pub. L. No. 102–‐484, 106 Stat. 2685 (1992).  49 Office for Foreign Defense Critical Technology Monitoring, 10 U.S.C. § 2517. 
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The provision assigns the task “to maintain within the Department of Defense a central library for the

compilation and appropriate dissemination of unclassified and classified information and assessments

regarding significant foreign activities in research, development, and applications of defense critical

technologies.”50 FCTMA’s task is to “perform certain liaison activities,” to publicize information, and to

coordinate with the Department of Commerce “in the dissemination of information and assessments

regarding defense critical technologies having potential commercial uses.”51

Findings 

In 1989, GAO released a report noting that the federal government lacked a central entity for

monitoring foreign dual‐use (i.e., commercial and military) technology.52 A 1990 GAO report reiterated

the 1989 report, stating, “although many DOD organizations produce, collect, store, or distribute

foreign science and technology information ... no central DOD entity coordinates foreign technology

monitoring.”53 One suggestion the GAO report cited was that DoD “should establish a focal point for

coordinating foreign science and technology monitoring programs.”54 The 1990 GAO report briefly

addressed the importance of being able to conduct research on foreign technology development to

maintain U.S. commercial competitiveness and warfighting capabilities.55

The FY 1992 and 1993 NDAA markedly emphasized foreign technology monitoring and assessment.56

The law established other provisions and programs related to foreign critical technology, including an

overseas foreign critical technology monitoring and assessment financial assistance program, a critical

technology application centers assistance program, and a defense dual‐use critical technology

partnership program.57

The mandate for foreign critical technology monitoring has manifested as the Militarily Critical

Technologies Program (MCTP) within DoD.58 The purpose and responsibilities of MCTP largely mirror

those outlined in 10 U.S.C. § 2517.59 A 2016 Inspector General report stated that MCTP’s public

database, the Military Critical Technologies List (MCTL), was out‐of‐date and failed to meet users’

                                                     

50 Ibid. 

51 United States Congress, H.R.2100 – National Defense Authorization Act for Fiscal Years 1992 and 1993, accessed July 17, 2017, 

https://www.congress.gov/bill/102nd‐congress/house‐bill/2100.   52 GAO, Foreign Technology: U.S. Monitoring and Dissemination of the Results of Foreign Research, GAO/NSIAD‐9‐117, accessed July 17, 

2017, http://www.gao.gov/assets/150/148898.pdf. GAO, “Foreign Technologies: Federal Agencies Efforts to Track Developments,” 

accessed July 17, 2017, http://www.gao.gov/assets/220/211477.pdf.  53 GAO, Foreign Technology: U.S. Monitoring and Dissemination of the Results of Foreign Research, GAO/NSIAD‐9‐117, accessed July 17, 

2017, http://www.gao.gov/assets/150/148898.pdf.  54 Ibid. 

55 Ibid. 

56 FY 1992–1993 NDAA, Pub. L. No. 102–190, 105 Stat. 1427–1431 (1991).  57 Ibid. 

58 OSD, Mission Description and Budget Item Justification, accessed August 11, 2017, 

http://www.dtic.mil/descriptivesum/Y2013/OSD/stamped/0605110D8Z_6_PB_2013.pdf.  59 Ibid. 
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needs.60 Due to budget cuts, DoD stopped updating MCTL altogether and removed it from the World

Wide Web.61

Conclusions 

With the Section 901 restructuring of AT&L, the Strategic Intelligence Analysis Cell (SIAC) fulfills the

same mission as the FCTMA office by providing analysis of enemy nations’ capabilities and

vulnerabilities.62 SIAC would assess “potential and emerging threats and/or future opportunities that

warrant action, that (sic) merit investment.”63 In light of the reorganization of AT&L, Congress should

remove the statutory provision at 10 U.S.C. § 2517.  

Subrecommendation 22f: Repeal the statutory requirement at 10 U.S.C. § 204 for a Small 

Business Ombudsman within each defense audit agency. 

Background 

Congress provided for the designation of a Small Business Ombudsman for defense audit agencies

through the FY 2013 NDAA, establishing the position in Pub. L. No. 112–239, 126 Stat. 2064 (2013) and

containing it in 10 U.S.C. § 204.64 The statute states the Secretary of Defense “shall designate a Small

Business Ombudsman within each defense audit agency,” applying to both Defense Contract Audit

Agency (DCAA) and the Defense Contract Management Agency (DCMA). 65

Findings 

The responsibilities of the Small Business Ombudsman include the following:

 Inform each defense audit agency director of small business problems.

 Act as eac defense audit agency’s point of contact for small businesses.  

 Oversee the respective defense audit agency’s “conduct of audits of small businesses.”  

 Ensure the defense audit agency conducts small business audits and responds to small business

concerns in a timely fashion.66

Congressional committee reports and conference reports for the FY 2013 NDAA lack further

explanation of Congress’ decision to create the statutory requirement for small business ombudsmen.

According to DoD’s former Director for the OSBP Andre Gudger, DoD supported the appointment of a

                                                     

60 Assessment of the Department of Defense Militarily Critical Technologies Program (Project No. D2015‐DISPA2‐0175.000), accessed 

September 25, 2017, http://www.dodig.mil/pubs/report_summary.cfm?id=7142.   61 GAO, Protecting Defense Technologies: DOD Assessment Needed to Determine Requirement for Critical Technologies List, GAO‐13‐157,

accessed August 11, 2017, https://www.gao.gov/assets/660/651410.pdf.   62 DoD, Report to Congress Restructuring the Department of Defense Acquisition, Technology and Logistics Organization and Chief 

Management Officer Organization, accessed August 31, 2017, https://www.defense.gov/Portals/1/Documents/pubs/Section‐901‐FY‐

2017‐NDAA‐Report.pdf.   63 Ibid.  

64 Small Business Ombudsman for Defense Audit Agencies, 10 U.S.C. § 204. Pub. L. No. 112‐239, 126 Stat. 2064.  65 Ibid. 

66 Ibid. 
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Small Business Ombudsman to “reduce barriers for small businesses and [to]... strengthen the

partnership between DCAA, DCMA and industry.”67 Others have informed the Section 809 Panel that

ombudsman role is valuable, stating that after establishing the DCAA focal point (which has direct

access to the OSBP Director) and increasing awareness at small business venues, DCAA frequently was

able to address and resolve issues in a timely manner.68  

Conclusions 

Although DoD should retain the Small Business Ombudsman role, eliminating the statutory

requirement at 10 U.S.C. § 204 would allow flexibility should alternative approaches be warranted.

DCAA and DCMA could continue to provide the Small Business Ombudsman role without a statutory

requirement. This recommendation aligns with Section 6, Small Business.   

Subrecommendation 22g: Repeal the statutory requirement for Secretary of Defense to 

designate a competition advocate for the Defense Logistics Agency, 10 U.S.C. § 2318. 

Background 

Pursuant to 10 U.S.C. § 2318, Advocates for Competition, the Secretary of Defense is required to

designate “an officer or employee of the Defense Logistics Agency [DLA] to serve as the advocate for

competition of the agency.”69 Congress provided for this position through Section 1216 of the

Department of Defense Authorization Act, 1985.70

Findings 

In July 1984, prior to the requirement for the designation of an officer or employee to serve as the DLA

competition advocate, the Competition in Contracting Act (CICA) came into effect via the Deficit

Reduction Act.71 The overarching purpose of CICA was to reduce procurement costs and encourage

small business participation by promoting more competition.72 According to GAO, CICA was a

response to excessive sole‐source (or noncompetitive) contract awards.73  

41 U.S.C. § 1705, “requires the head of each executive agency to designate an employee... to serve as an

advocate for competition for the agency and for each procuring activity of the agency.”74 Because DLA

is not an executive agency under 41 U.S.C. § 133, the requirement to designate an advocate for

competition under 41 U.S.C. § 1705 does not apply to DLA. There is an advocate for competition for

                                                     

67 OUSD(AT&L), Small Business Program Works Closely with DCAA and DCMA, accessed July 21, 2017, 

https://www.acq.osd.mil/osbp/docs/Small_Business_DCAA_and_DCMA_Final.pdf.   68 Patrick Fitzgerald, Baker Tilly Virchow Krause, LLP, email to Section 809 Panel, September 26, 2017.  69 Advocates for Competition, 10 U.S.C. § 2318. 

70 FY 1985 NDAA, Pub. L. No. 98–525, 98 Stat. 2593 (1984).  71 Curtis Lee Coy, “The Competition in Contracting Act of 1984,” (master thesis, Naval Postgraduate School, 1986), 

http://www.dtic.mil/dtic/tr/fulltext/u2/a171394.pdf. United States Congress, “H.R.4170 ‐ Deficit Reduction Act of 1984,” accessed 

August 7, 2017, https://www.congress.gov/bill/98th‐congress/house‐bill/4170?q=%7B%22search%22%3A%5B%22PL98‐

369%22%5D%7D&r=1.  72 “The Competition in Contracting Act (CICA),” GSA Interact, accessed August 7, 2017, https://interact.gsa.gov/blog/competition‐

contracting‐act‐cica.  73 GAO, Procurement: Better Compliance With the Competition in Contracting Act Is Needed, accessed August 8, 2017, 

http://www.gao.gov/assets/150/145671.pdf.   74 Advocates for Competition, 41 U.S.C. § 1705. 
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DoD as a whole, but Congress determined that DLA should have its own advocate for competition,

leading to enactment of 10 U.S.C. § 2218(a).75

The central function of all competition advocates is to foster full and open competition in agency

procurement activities.76 In addition to this core duty, the DLA advocate for competition must write an

annual report to DLA’s senior procurement executive, and recommend strategies and targets for

enhancing competition.77 10 U.S.C. § 2218provides that the DLA advocate for competition have the

same advocate for competition responsibilities and functions as provided under 41 U.S.C. § 1705.78

DoD produces and publishes annual competition reports via the Defense Procurement and Acquisition

Policy (DPAP) office. These departmental competition reports comprise the individual competition

reports from the Army, Navy, Air Force, and DLA.  

DLA has its own agencywide directive (DLAD), which further establishes the DLA competition

advocate role. The DLAD reiterates the requirement for a DLA competition advocate, and it reiterates

the responsibilities and duties of the DLA advocate as specified in FAR Part 6.5, Advocates for

Competition, and 41 U.S.C. § 1705.79

Conclusions 

As DoD’s acquisition framework continues to evolve, DoD would benefit from greater flexibility by

eliminating the statutory requirement of the DLA competition advocate in 10 U.S.C. § 2318. The DLAD

demonstrates DLA’s commitment to promoting open competition in DLA procurements.  

Subrecommendation 22h: Repeal the statutory requirement for the Hypersonics 

Development section of Joint Technology Office on Hypersonics, Section 218 of the FY 2007 

NDAA (Pub. L. No. 109–364, 120 Stat. 2126; 10 U.S.C. § 2358 note). 

Background 

Section 218 of the FY 2007 NDAA, (Pub. L. No. 109–364, 120 Stat. 2126; 10 U.S.C. § 2358 note)

established a Joint Technology Office on Hypersonics (JTOH) in DoD that commenced operations in

FY 2007. The statute states the following:  

The Secretary of Defense shall establish within the Office of the Secretary of Defense a joint technology

office on hypersonics. The office shall carry out the program required under subsection (b), and shall have

such other responsibilities relating to hypersonics as the Secretary shall specify.80

                                                     

75 Advocates for Competition, 10 U.S.C. § 2318. 

76 Kate Manuel, CRS, Competition in Federal Contracting: An Overview of the Legal Requirements, accessed August 7, 2017, 

www.dtic.mil/get‐tr‐doc/pdf?AD=ADA497721.    77 Advocates for Competition, 10 U.S.C. §2318. Advocates for Competition, 41 U.S.C. § 1705.  78 Advocates for Competition, 41 U.S.C. § 1705. 

79  “Defense Logistics Agency Directive,” DLA, accessed August 9, 2017, 

http://www.dla.mil/Portals/104/Documents/J7Acquisition/DLAD_Rev_5_and_PGI_PDF_Version_%207‐27‐16.pdf?ver=2016‐07‐28‐

074058‐590.   80 FY 2007 NDAA, Pub. L. No. 109–364, 120 Stat. 2126 (2006). 
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Findings 

Hypersonic weapons are the latest version of precision‐guided munitions. Hypersonic weapons

development is the technology of “high‐precision conventional weapons capable of striking a target

anywhere in the world within one hour’s time.”81

Although Congress prioritized a coordinated strategic vision for hypersonic development by the

mid‐2000s, Russia and China were already years into their hypersonic research and development with

ballistic missile‐launched hypersonic weapons and hypersonic glide vehicles when Congress mandated

JTOH.82 In 2006, hypersonics programs were not integrated or coordinated internally to DoD or with

the ongoing research at NASA.83  

JTOH’s purpose is to coordinate and integrate current and future research, development, tests,

evaluation, and system demonstration programs on hypersonics for defense purposes.84 Congress also

requires JTOH to provide a roadmap for the hypersonic program, coordinated with NASA and the Joint

Staff. This roadmap included mission requirements; short‐, mid‐, and long‐term goals for the office; a

schedule for meeting such goals; and test and evaluation facilities needed. DoD was to submit the

roadmap to Congress every 2 years.85 The section originally placed a sunset deadline on the reporting

requirement to Congress in 2012, but later extended the deadline to 2016.86 Despite Congress’s mandate

for a hypersonic roadmap biannual report, the only readily available report DoD filed was in 2008.   

From the beginning, DoD has met the intent of the code, without maintaining a physical location. As

stated in the 2008 roadmap document, “JTOH is designed to be a lean organization that efficiently

leverages existing management structures and personnel and is operated as a virtual office.” The other

form of reporting to Congress was the biannual roadmaps mandated in subsection (d).  

As a complementary mission, Section 1687 of the FY 2017 NDAA appointed the director of the Missile

Defense Agency (MDA) to serve as the executive agent for Hypersonic Defense Capability

Development.87 The director develops architectures for hypersonic defense capability (to include

detecting and intercepting threats) and establishes a program of record to develop and field a defensive

system to defeat adversaries’ potential hypersonic boost‐glide and maneuvering ballistic missiles.88

In 2016, the Committee on Future Air Force Needs for Defense Against High‐Speed Weapons Systems,

together with the National Academy of Sciences, released an unclassified summary of A Threat to

                                                     

81 Eleni Ekmektsioglou, “Hypersonic Weapons and Escalation Control in East Asia,” Strategic Studies Quarterly, 9, no. 2 (2015): 43‐68.  82 “The Future of Hypersonic Weapons,” Daniel Norton, RAND Corporation, accessed June 20, 2017, 

https://www.rand.org/blog/2016/10/the‐future‐of‐hypersonic‐weapons.html. 83 “Advanced Hypersonic Weapons,” GlobalSecurity.org, accessed June 20, 2017, 

http://www.globalsecurity.org/military/systems////munitions/ahw.htm.  84 Peter Ouzts, “The Joint Technology Office on Hypersonics” (paper, 15th AIAA International Space Planes and Hypersonic Systems and 

Technologies Conference), accessed June 12, 2017, https://arc.aiaa.org/doi/abs/10.2514/6.2008‐2576.  85 FY 2007 NDAA, Pub. L. No. 109–364, 120 Stat. 2126 (2006).  86 FY 2012 NDAA, Pub. L. No. 112–81, 125 Stat. 1343 (2011).  87 FY 2017 NDAA, Pub. L. No. 114–238, 130 Stat. 2629 (2016).  88 Committee on Future Air Force Needs for Defense Against High‐Speed Weapons Systems and Air Force Studies Board, A Threat to 

America’s Global Vigilance, Reach, and Power: High‐speed Maneuvering Weapons, (Washington, DC: The National Academies Press, 

2016), doi: 10.17226/23667. 
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America’s Global Vigilance, Reach, and Power: High‐speed Maneuvering Weapons.

89 This report highlights the

challenge of potential adversaries’ growing capabilities in hypersonic weapons. The committee also

raised concerns that it could “find no formal strategic operational concept or organizational sense of

urgency.”90  

Section 214 of the FY 2018 NDAA changes the name of the office to Joint Hypersonics Transition Office,

“with the responsibility to coordinate and integrate programs, ensure coordination of current and

future programs of the Department of Defense on hypersonics, and approve demonstrations.”91  

Conclusions 

Recognizing that emerging technologies are strategically important to prepare for defensive and

potential adversarial use, DoD needs the freedom of action required to best address challenges

associated with these technologies. The requirement to establish a JTOH as laid out in Pub. L. No. 109–

364, 120 Stat. 2126 and 10 U.S.C. § 2358 note Hypersonics Development is not necessary for DoD’s

handling of this mission set and does not provide additional authorities to the Secretary of Defense.

Congress should eliminate the statutory requirement in an effort to afford the Secretary flexibility to

more appropriately address the mission set, but keep the language from the FY 2017 that appoints the

director of MDA to serve as the executive agent for Hypersonic Defense Capability Development.

Subrecommendation 22i: Repeal the statutory requirement for Improvement in Defense 

Research and Procurement Liaison with Israel, Section 1006 of the FY 1989 NDAA (Pub. L. 

No. 100-456; 10 U.S.C. § 133 note). 

Background 

Section 1006 of the FY 1989 NDAA (Pub. L. No. 100‐456; 10 U.S.C. § 133 note) states, “The Secretary of

Defense, in consultation with the Under Secretary of Defense for Acquisition, shall designate for duty

in Israel an individual or individuals to serve as the primary liaison between the procurement and

research and development activities of the United States Armed Forces and those of the State of

Israel.”92 Currently, the Defense Cooperation in Armaments officer located in the Office of Defense

Cooperation in the U.S. embassy in Israel fulfills this role, with the primary responsibility for

armaments cooperation activities and secondary responsibilities in security assistance programs.93  

Findings 

Israel is the largest recipient of American military aid, and the structures managing that relationship

are longstanding and robust.94 Section 1006 of the FY 1989 NDAA (Pub. L. No.100–456; 10 U.S.C. § 133

note) stems from a 1987 memorandum of understanding (MOU) between the presidents that

institutionalized the political, military, and economic agreements negotiated in the annual aid package

                                                     

89 Ibid. 

90 Ibid. 

91 House of Representatives, FY 2018 NDAA, Conference Report to Accompany H.R. 2810, accessed January 6, 2018, 

http://docs.house.gov/billsthisweek/20171113/HRPT‐115‐HR2810.pdf.  92 Section 1006 of the FY 1989 NDAA (Pub. L. No. 100‐456; 10 U.S.C. § 133 note).  93 OUSDP, email to Section 809 Panel, September 15, 2017.   94 Jason Gewirtz, “Big US military aid package to Israel has strings attached,” CNBC, September 15, 2016, 

https://www.cnbc.com/2016/09/15/big‐us‐military‐aid‐package‐to‐israel‐has‐strings‐attached.html. 
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to Israel.95 The relationship between the United States and Israel established in the MOU further

addressed the principles governing cooperation in research and development, scientist and engineer

exchange, and procurement and logistic support of defense equipment.96  

The earliest MOU describes the unique military relationship between the United States and Israel,

specifically regarding the Defense Procurement and Acquisition Policy (DPAP). The United States has

26 similar DPAP MOUs with nations around the world, yet no other country has a procurement liaison

codified in U.S. law.97  

Conclusions 

The Defense Cooperation in Armaments officer located in the Office of Defense Cooperation fulfills the

mandate of this provision. Congress should repeal the statutory provision at Pub. L. No. 10–456 and

10 U.S.C. § 133 note because it unnecessarily restricts the Secretary’s authority to organize security

cooperation arrangements in a manner appropriate to pursue its current acquisition‐related mission

and limits DoD’s ability to construct a proactive and adaptive organization.

Subrecommendation 22j: Repeal the statutory requirement for Coordination of Human 

Systems Integration Activities Related to Acquisition Programs, Section 231 of the FY 2008 

NDAA (Pub. L. No. 110–181, 10 U.S.C. § 1701 note). 

Background 

Section 231 of the FY 2008 NDAA (Pub. L. No. 110–181, 10 U.S.C. § 1701 note) states:

(a) In General.—The Secretary of Defense, acting through the Under Secretary of Defense for

Acquisition, Technology, and Logistics, shall coordinate and manage human systems integration

activities throughout the acquisition programs of the Department of Defense.

(b) Administration.—In carrying out subsection (a), the Secretary shall designate a senior official to be

responsible for the effort.98

The statute further stipulates this official hold responsibility for coordinating the planning,

management, and execution of human systems integration (HSI) activities and for recommending

resource requirements.99 The Office of the Secretary of Defense Acquisitions Technology and Logistics

(OSD(AT&L)) leads these efforts in the Office of the Director Defense Research and Engineering

                                                     

95 Timothy McNulty, “Strife strains special U.S.‐Israeli kinship,” Chicago Tribune, April 25, 1988, accessed November 27, 2017, 

http://articles.chicagotribune.com/1988‐04‐25/news/8803110673_1_american‐jews‐israel‐jewish‐state.  96 The Memorandum of Understanding Between the Government of the United States of America and the Government of Israel 

Concerning the Principles Governing Mutual Cooperation in Research and Development, Scientist and Engineer Exchange, Procurement 

and Logistic Support of Defense Equipment of December 14, 1987 can be viewed in DoD, Amendment 1 to the Memorandum of 

Understanding Between the Government of the United States of America and the Government of Israel, accessed November 27, 2017, 

https://www.acq.osd.mil/dpap/Docs/mou‐israel.pdf.  97 DoD, Amendment 1 to the Memorandum of Understanding Between the Government of the United States of America and the 

Government of Israel, accessed November 27, 2017, https://www.acq.osd.mil/dpap/Docs/mou‐israel.pdf.  98 Section 231 of FY 2008 NDAA, Pub. L. No. 110–181, 10 U.S.C. § 1701 note.   99 Ibid.  
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(DDR&E) through the directors for Mission Assurance and Human Performance, Training, and

Biosystems.100

Findings 

HSI includes humans in their different roles in the system (e.g., operator, maintainer, trainer, designer);

systems, including hardware, software, and processes (including the acquisition process and the design

process); and integration of these elements to optimize the performance and safety of the whole.101

DDR&E’s FY 2011 Department of Defense Human Systems Integration Management Plan, states:

Systems, composed of hardware and software, enable the ability of humans to perform tasks that

successfully project combat power in difficult and lethal environments. High levels of human effectiveness

are typically required for a system to achieve its desired effectiveness. The synergistic interaction between

the human and the system is key to attaining improvements total system performance and minimizing

total ownership costs.102

Unmanned aerial systems (UASs) serve as one example within DoD. The National Research Council

presented the following in its 2007 report Human‐System Integration in the System Development Process:

A New Look:

UASs are airplanes or helicopters operated remotely by humans on the ground or in some cases from a

moving air, ground, or water vehicle. Until recently the term ‘unmanned aerial vehicle’ (UAV) was used

in the military services in reference to such vehicles as Predators, Global Hawks, Pioneers, Hunters, and

Shadows. The term ‘unmanned aerial system’ acknowledges the fact that the focus is on much more than

a vehicle. The vehicle is only part of a large interconnected system that connects other humans and

machines on the ground and in the air to carry out tasks ranging from UAS maintenance and operation

to data interpretation and sensor operation.103  

Prior to the inclusion of HSI in the FY 2008 NDAA, both the Army and the Navy had active HSI

programs. The Air Force was planning to establish similar programs but without coordination with the

other military branches. The Army’s program, commonly known as MANPRINT (Manpower and

Personnel Integration), has been operating since 1986. The Navy’s system, commonly known as

SEAPRINT (Systems Engineering, Acquisition, and Personnel Integration) was formalized in 2003 to

establish a MANPRINT‐like approach to Navy system design and acquisition.104 The Military Services

had control over all decisions related to development, fielding, staffing, and operation of their new

                                                     

100 DoD, FY 2011 Department of Defense Human Systems Integration Management Plan, accessed November 8, 2017, 

https://www.acq.osd.mil/se/docs/FY11‐DoD‐HSI‐Management‐Plan‐101213.pdf.  101 “Human Systems Integration,” ACQuipedia, accessed August 3, 2017, 

https://dap.dau.mil/acquipedia/Pages/ArticleDetails.aspx?aid=4d39f620‐2f41‐4522‐a1b0‐64958c8aa0eb.  102 DoD, FY 2011 Department of Defense Human Systems Integration Management Plan, accessed November 8, 2017, 

https://www.acq.osd.mil/se/docs/FY11‐DoD‐HSI‐Management‐Plan‐101213.pdf.   103 Richard W. Pew and Anne S. Mavor, Human‐System Integration in the System Development Process: A New Look, (Washington, D.C. 

National Academies Press, 2007), accessed November 27, 2017, https://www.nap.edu/read/11893/chapter/3#18.  104 Department of the Army, Army FY09 Human Systems Integration Plan, accessed August 10, 2017, 

http://www.acq.osd.mil/se/docs/Army‐FY09‐HSI‐Plan.pdf. Jennifer McGovern Narkevicius, An Integrated Process for Incorporating 

Human Models into Systems Engineering, accessed August 10, 2017, http://cc.ist.psu.edu/BRIMS/archives/2005/other/05‐BRIMS‐

086.pdf.  
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systems.

105 The Navy and Air Force closely followed the Army’s blueprint for HSI programs; there was

no formalized coordination among the branches.

In the FY 2008 NDAA, Congress directed the OSD(AT&L) to develop a comprehensive plan for HSI.106

The Office of the Deputy Under Secretary of Defense (Acquisition and Technology) and the Director of

Biological Systems within the Office of the Deputy Under Secretary of Defense (Science and

Technology) jointly submitted the first HSI report to Congress in March 2009. The DoD HSI

Management Plan defines how HSI is administered within DoD and serves as the blueprint for future

activities.

107  

The Human Systems Community of Interest—led by a steering group of six DoD officials representing

all Military Services and OSD—created the recent Human Systems Roadmap for 2016. The purpose of the

roadmap is to “develop and deliver new human‐centered technologies to quantify mission

effectiveness and to select, train, design, protect, and operate for measurably improved mission

effectiveness.”108 The roadmap provides a path forward for the future of HSI through 2022. The

strategies described include advancing HSI throughout DoD to exploit social data to understand

human aspects of military environments and developing strategies for critical stressor mitigation to

ensure warfighter safety and survivability.

Conclusions 

As HSI continues to develop new technologies and systems for DoD, the senior official leading HSI

may need more flexibility within the role to address future concerns. The statute grants no additional

authority to a senior official. Removing Section 231 of the FY 2008 NDAA (Pub. L. No. 110–181 and

10 U.S.C. § 1701 note) will facilitate freedom of action throughout the Section 901 reorganization of t

OUSD(AT&L) and enhance the Secretary’s authority. This change would not eliminate the role, but

eliminate parts of the code that may inhibit flexibility.

Subrecommendation 22k: Repeal the statutory requirement for Focus on Urgent Operational 

Needs and Rapid Acquisition, Section 902 of the FY 2013 NDAA (Pub. L. No. 112–239; 

10 U.S.C. § 2302 note). 

Background 

Congress created a position for a senior official for urgent operational needs and rapid acquisition

through Section 902 of the FY 2013 NDAA (Pub. L. No. 112–239; 10 U.S.C. § 2302 note).109 It states:

Designation of Senior Official Responsible for Focus on Urgent Operational Needs and Rapid

Acquisition.

                                                     

105 Richard W. Pew and Anne S. Mavor, Human‐System Integration in the System Development Process: A New Look, (Washington, D.C. 

National Academies Press, 2007), accessed November 27, 2017, https://www.nap.edu/read/11893/chapter/3#18.  106 FY 2009 NDAA, Pub. L. No. 110–181, 122 Stat. 45 (2008).  107 “INITIATIVES: Human Systems Integration,” Office of the Deputy Assistant Secretary of Defense: Systems Engineering, accessed 

July 27, 2017, http://www.acq.osd.mil/se/initiatives/init_hsi.html.  108 DUSD (S&T), Human Systems Roadmap Review, accessed July 27, 2017, http://www.dtic.mil/ndia/2016/Human/S&TPanel.pdf.  109 Section 902 of the FY 2013 NDAA, Pub. L. No. 112–239; 10 U.S.C. § 2302 note. 
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(1) In general.‐The Secretary of Defense, after consultation with the Secretaries of the military

departments, shall designate a senior official in the Office of the Secretary of Defense as the principal

official of the Department of Defense responsible for leading the Departmentʹs actions on urgent

operational needs and rapid acquisition, in accordance with this section.110

The senior official’s responsibilities include advocating for issues and funding related to rapid response

to the military’s operational needs. The senior official is also responsible for enhancing transparency

concerning DoD’s operational needs. Finally, the senior official tracks the state of, and ensures rapid

responses to, DoD’s most pressing technical or capability deficits, reporting directly to the Secretary of

Defense.111

Findings 

A 2011 GAO report noted that U.S. “forces in Iraq and Afghanistan have faced significant risks of

mission failure and loss of life due to rapidly changing enemy threats.”112 DoD had made multiple

attempts to quickly develop and field new technology for countering emerging and evolving threats in

theater; however, GAO found that at least 31 discrete offices and entities within DoD were responsible

for responding to urgent operational needs and rapid acquisition. According to the report, these efforts

appeared fragmented and potentially resulted in redundancies. GAO recommended DoD designate “a

focal point to lead urgent needs efforts.”113

In the FY 2013 NDAA conference report, members of Congress cited the GAO report as a primary

motive for creating a statutory mandate for a senior official for urgent operational needs and rapid

acquisition. The committee wrote it was concerned about the existence of “multiple funding streams,

lack of coordination, and the need for consolidation as well as improved oversight” and contended that

designating a senior‐level focal point was a necessary step in mitigating this issue.114

There is a director of the Joint Rapid Acquisition Cell (JRAC) within USD(AT&L). The Director and the

Cell exist to “provide a single point of contact in the OSD for tracking the timeliness of immediate war‐

fighter need actions for the senior leadership and facilitating coordination with other government

agencies.”115 The role of senior official for urgent operational needs and rapid acquisition may align

with the purview of this office.

Conclusions 

Although Section 902 of the FY 2013 NDAA (Pub. L. 112–239; 10 U.S.C. § 2302 note) does not specify

who the senior official reports to, the JRAC, in accordance with DoDD 5000.71, falls under the

operational control of the Deputy Secretary of Defense and the administrative control of USD(AT&L).

The 2017 NDAA reorganized the USD(AT&L), into two new positions: the USD(R&E) and the

                                                     

110 Ibid.  111 Ibid.  112 GAO, Warfighter Support: DOD’s Urgent Needs Processes Need a More Comprehensive Approach and Evaluation for Potential 

Consolidation, GAO‐11‐273, accessed July 20, 2017, http://www.gao.gov/assets/320/316068.pdf.  113 Ibid.   114 H.R. Rep. No. 112‐705 (2017) (Conf. Rep. to accompany H.R. 4310).    115 “AT&L Offices,” OSD, accessed August 11, 2017, http://www.acq.osd.mil/atlOffices.html.  
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USD(A&S).116 The Section 901 report aligns the JRAC with the USD(A&S) for administrative control.

Repealing the statutory requirement will afford DoD the flexibility to forge a new and bold path

toward achieving “technological superiority, affordable systems, and well managed business

operations.”117

Subrecommendation 22l: Repeal the statutory requirement for Senior Official for Dual-Use 

Science and Technology Projects, Section 203(c) of the FY 1998 NDAA (Pub. L. No. 105–85; 

10 U.S.C. § 2511 note). 

Background 

Section 203(c) of the FY 1998 NDAA (Pub. L. No. 105–85; 10 U.S.C. § 2511 note) requires the Secretary of

Defense to designate “a senior official in the Office of the Secretary of Defense to carry out

responsibilities for dual‐use projects under this subsection.”118 The subsection refers to the defense

dual‐use critical technology program. The pending Section 901 reorganization affects this senior

official, who must report to the USD(AT&L).119  

The primary responsibility of the senior official for dual‐use programs is to supervise “the

establishment of, and adherence to, procedures for ensuring that dual‐use projects are initiated and

administered effectively.”120 The senior official also ensures the military adopts “commercial

technologies” as appropriate.121 Finally, the senior official coordinates the military departments’ and

defense agencies’ dual‐use efforts “to avoid unnecessary duplication.”122  

Findings 

According to the Senate Armed Services Committee (SASC) report for the FY 1998 NDAA, one of the

primary motives for creating the dual‐use programs senior official position was to help DoD better

facilitate upcoming changes to dual‐use funding. The changes included terminating DoD‐wide funding

by FY 1999 for dual‐use technology projects, and requiring the Military Services to fund dual‐use

programs through their respective science and technology programs, rather than through the OSD.

According to the SASC report, this change left DoD at a “critical turning point” in which DoD needed

to devise a more “specific process to ensure that such a transition will take place, despite the Military

Services’ resistance to dual‐use technology development.”123

Section 203(c) of the FY 1998 NDAA further stipulates that this individual ensure dual‐use projects are

consistent with the joint warfighting science and technology plan referred to in section 270 of the

FY 1997 NDAA (Public Law 104–201; 10 U.S.C. § 2501 note). This document was released in 1998, and

                                                     

116 Under Secretary of Defense for Research and Engineering, 10 U.S.C. § 133a. Under Secretary of Defense for Acquisition and 

Sustainment, 10 U.S.C. § 133b. 

117 DoD, Report to Congress Restructuring the Department of Defense Acquisition, Technology and Logistics Organization and Chief 

Management Officer Organization, accessed August 8, 2017, https://www.defense.gov/Portals/1/Documents/pubs/Section‐901‐FY‐2017‐

NDAA‐Report.pdf.  118 Section 203(c) of the FY 1998 NDAA, Pub. L. No. 105–85; 10 U.S.C. § 2511 note.  119 Ibid.  120 Ibid.  121 Ibid.  122 Ibid.  123 Senate Armed Services Committee, NDAA for FY 1998 Report. 
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appears to have been supplanted in practice by documents such as A 21st Century Science, Technology,

and Innovation Strategy for America’s National Security.

The dual‐use science and technology programs support research and development for those

technologies with dual‐use applications.124 In establishing these programs, the government laid out two

goals:

 Partnering with industry to jointly fund the development of dual‐use technologies needed to

maintain the DoD’s technological superiority on the battlefield and industry’s competitiveness

in the marketplace.

 Making the dual‐use development of technologies with industry a normal way of doing

business in the services.125

These programs appear to be the evolution of the Clinton‐era Technology Reinvestment Project (TRP),

one in a series of programs sponsored by DoD to increase engagement with industry on dual‐use

technologies.126 DoD continues to consider appropriate models for this kind of engagement with

industry to include today’s iterations like DIUx, SOFWERX, and AFwerX. In the intervening years,

DoD has established policies and processes to address the challenges related to dual‐use technology.

DoDI 2040.02 establishes the department’s policy and assigns responsibility for the international

transfer of dual‐use and defense‐related technology, articles, and services.127  

Conclusions 

DoD has found ways to meet the intent of this provision for a Secretary of Defense designated official

since 1998. The provision appears outdated and repealing it would allow DoD to organize

appropriately to the challenge of dual‐use technologies and supporting these dual‐use science and

technology programs, particularly during the Section 901 reorganization. Congress should eliminate

the statutory requirement for a dual‐use programs official contained in Section 203(c) of the FY 1998

NDAA (Pub. L. No. 105–85; 10 U.S.C. § 2511 note).  

Subrecommendation 22m: Repeal the statutory requirement for Executive Agent for Printed 

Circuit Boards, Section 256 of FY 2009 NDAA (Pub. L. No. 110–417; 10 U.S.C. § 2501 note). 

Background 

Congress directed establishment of the executive agent (EA) for printed circuit boards (PrCBs) in

Section 256 of the FY 2009 NDAA, which states, “Not later than 90 days after the date of the enactment

                                                     

124 Defense Dual‐Use Critical Technology Program, 10.U.S.C. § 2511.  125 DoD, A Manager’s Guide to Technology Transition In an Evolutionary Acquisition Environment: A Contact Sport, Workshop Draft, 2002, 

accessed November 9, 2017, http://www.acq.osd.mil/dpap/Docs/RandD%20Text.doc.  126 Jay Stowsky, “The Dual‐Use Dilemma,” Issues in Science and Technology, Volume XIII Issue 2, Winter 1997, accessed November 29, 

2017, http://issues.org/13‐2/stowsky/.   127 International Transfers of Technology, Articles, and Services, DoDI 2040.02 (2014). 
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of this Act, the Secretary of Defense shall designate a senior official of the Department of Defense to act

as the EA for printed circuit board technology.”128  

The EA’s primary duties include ensuring DoD has access to manufacturing capabilities and technical

expertise necessary to meet future military requirements regarding PrCBs and overseeing the supply

chain. The agent assesses the vulnerabilities, trustworthiness, and diversity of the PrCB supply chain.

Section (c) ensures that the Military Departments, Defense Agencies, and other Components of DoD

provide the EA with the appropriate support and resources needed to perform the assigned roles,

responsibilities, and authorities of the EA.129  

DoDD 5101.18E, Executive Agent for Printed Circuit Board and Interconnect Technology, affirms the

position of an EA for PrCB and interconnect technology.130 It designates USD(AT&L) as the principal

staff assistant for PrCB and interconnect technology to oversee the DoD EA for PrCB and Interconnect

Technology.131 DoD has directed the Naval Sea Systems Command to the EA role through its Crane

Division.132

Findings 

PrCBs connect a variety of active components (e.g., microchips and transistors) and passive

components (e.g., capacitors and fuses) into electronic assemblies that control systems.133 Virtually

every electronic device in the marketplace, from military programs to commercial products, uses

PrCBs.  

In a 2005 report on the industry titled Linkages: Manufacturing Trends in Electronics Interconnect

Technology, the National Research Council found that U.S. production of PrCBs had fallen below

10 percent of world output (down from 40 percent or more in the 1980s).134 Although the Buy‐American

Act would not necessarily prevent DoD from buying PrCBs from foreign countries, suitable domestic

supplies of the technology are limited.135  

William Landay testified in a congressional hearing leading up to the FY 2009 NDAA that the Militarily

Critical Technologies Program addresses PrCBs protection.136 Anthony Tether of the Defense Advanced

Research Projects Agency also asserted that DoD had begun a new “TRUST in Integrated Circuits”

program in 2007.137 The goal of the latter program has been to ensure the trustworthiness of PrCBs

                                                     

128 FY 2009 NDAA, Pub. L. No. 110–417, 122 Stat. 4404 (2008).  129 Ibid.  130 DoD Executive Agent for Printed Circuit Board and Interconnect Technology, DoDI 5101.18E (2016).  131 Ibid.  132 Naval Sea Systems Command Warfare Centers: NSWC Crane Division, accessed July 25, 2017, 

http://www.navsea.navy.mil/Home/Warfare‐Centers/NSWC‐Crane/What‐We‐Do/Technical‐Capabilities/Advanced‐Electronics‐Energy‐

Systems/.  133 The National Academies of Science Engineering and Medicine, Linkages: Manufacturing Trends in Electronics Interconnection 

Technology, accessed July 24, 2017, https://www.nap.edu/read/11515/chapter/1.   134 Ibid.   135 Ibid.  136 William Landay and Anthony Tether, Hearing on National Defense Authorization Act for Fiscal Year 2009, Washington, DC, March 13, 

2008. 

137 Ibid. 
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regardless of where they are designed or manufactured. DoD coordinates the two programs, but

administers them under the two separate umbrella organization.

As personal electronic devices become more common, American companies have abandoned the PrCBs

marketplace.138 Lower labor costs allow Asian companies to mass produce less expensive PrCBs

compared to American companies that focused on low‐quantity complex PrCBs.139 A decrease in PrCB

production within the United States has created a supply chain dilemma. DoD has lacked an adequate

network of trustworthy suppliers for the crucial technology while it has invested less in its own R&D

over the past 2 decades.140

Since the Naval Systems Warfare Center (NSWC) became the EA responsible for PrCBs, it has worked

in conjunction with IPC (Association Connecting Electronics Industries) to address PrCB concerns. In a

2016 report, IPC recommended that DoD expand its role in fostering new PrCB design and

manufacturing technology, as well as developing explicit mechanisms to integrate emerging

commercial PrCB technologies into new defense systems.141 Because of the recent incorporation of the

EA into NSWC, the effectiveness of these recommendations in action has not yet been determined.

The purpose of assigning an executive agent is to meet a need when no other means to meet it exists,

when DoD resources need to be focused on a specific area or areas of responsibility to minimize

duplication or redundancy, or when law requires.142  

Conclusions 

Designating a senior official to serve as executive agent limits the Secretary’s flexibility and is overly

prescriptive. Removing the statutory provision designating an executive agent will facilitate freedom of

action throughout the Section 901 reorganization of OUSD(AT&L) and enhance the Secretary’s

authority.

THE REQUIREMENT FOR THE FOLLOWING STATUTORY OFFICE SHOULD BE SUNSET. 

Subrecommendation 22n: Sunset the statutory requirement for Joint Directed Energy 

Transition Office (JDETO), 10 U.S.C. § 219 (10 U.S.C. § 2431 note) in FY 2023. 

Background 

In the 2017 NDAA, Congress mandated the “Secretary of Defense shall designate a senior official

already serving within the Department of Defense as the official with principal responsibility for the

development and demonstration of directed energy weapons for the Department.”143

                                                     

138 Lucintel, Growth Opportunities in the Global Printed Circuit Board Market, accessed July 25, 2017, 

http://www.reportlinker.com/p04804598/Growth‐Opportunities‐in‐the‐Global‐Printed‐Circuit‐Board‐Market.html.  139 Joseph Ladou, “Printed Circuit Board Industry,” International Journal of Hygiene & Environmental Health, (2006).  140 William Landay and Anthony Tether, Hearing on National Defense Authorization Act for Fiscal Year 2009, Washington, DC, March 13, 

2008. 

141 David Bergman, NSWC Crane Microelectronics Integrity Meeting, Association Connecting Electronics Industries. 142 DoD Executive Agent, DoDD 5101.1 (2003).   143 FY 2017 NDAA, Pub. L. No. 114–328, 130 Stat. 2054 (2016). 
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Congress also redesignated the High Energy Laser Joint Technology Office (HEL‐JTO) as the Joint

Directed Energy Transition Office (JDETO) in the FY 2017 NDAA.144 The provision stipulates, “The

High Energy Laser Joint Technology Office of the Department of Defense is hereby re‐designated as the

‘Joint Directed Energy Transition Office’...and shall report to the official designated under subsection

(a)(1).”145 The FY 2018 NDAA stipulates that the USD(R&E) will be designated in this role.146  

Through the FY 2000 NDAA, Congress called on the DoD to assemble a master plan for laser weapons

development.147 The resulting High Energy Laser Executive Review Panel issued a report in March

2000 titled, the Department of Defense Laser Master Plan. The review panel’s plan recommended DoD

“implement a new management structure for HEL technologies.”148 Congress accepted the HEL Panel’s

recommendations in the FY 2001 NDAA, and DoD established HEL‐JTO in June 2000 to implement the

master plan.149

Findings 

There was a marked emphasis on laser technology in the FY 2000 NDAA. In addition to mandating

DoD devise a master plan for laser technology, it also called for a space‐based laser program and

discussed “criteria for progression of airborne laser program[s].”150 The emphasis on directed energy

weapons in the FY 2000 NDAA may have stemmed from preceding laser weapons research and

development efforts, including the Strategic Defense Initiative of the 1980s.151  

The recommendation to redesignate the HEL‐JTO as the JDETO originally appeared in the Directed

Energy Weapon Systems Acquisition Act of 2016.152 The body of the Act appears in the FY 2017 NDAA

and in 10 U.S.C. § 2431 note.153 Part (a) of the note mandates the Secretary of Defense select a senior

official to lead JDETO.154

Inadequate directed energy weapons acquisitions precipitated HEL‐JTO’s redesignation and

appointment of a senior official. According to a Senate committee report for the FY 2016 NDAA,

members of Congress expressed concern over the fact that although DoD has invested more than

$6 billion in directed energy technology since 1960, DoD’s “directed energy initiatives [have not been]

resourced at levels necessary to transition them to full‐scale acquisition programs.”155 The conference

report for the FY 2017 NDAA further explained that the purpose of HEL‐JTO’s redesignation and the

                                                     

144 Ibid.  145 Ibid.  146 House of Representatives, FY 2018 NDAA, Conference Report to Accompany H.R. 2810, accessed January 6, 2018, 

http://docs.house.gov/billsthisweek/20171113/HRPT‐115‐HR2810.pdf.  147 FY 2000 NDAA, Pub. L. No. 106–65, 113 Stat. 554 (1999).  148 High Energy Laser Executive Review Panel, Department of Defense Laser Master Plan, accessed June 29, 2017, 

http://www.wslfweb.org/docs/MasterLaserPlan.pdf.   149 GPO, Department of Defense Initiatives on High Energy Lasers Have Been Responsive to Congressional Direction, accessed June 29, 

2017, https://www.gpo.gov/fdsys/pkg/GAOREPORTS‐GAO‐05‐545R/html/GAOREPORTS‐GAO‐05‐545R.htm.   150 FY 2000 NDAA, Pub. L. No. 106–65, 113 Stat. 540 (1999).  151 Don D. Seeley and John M. Slater, “High Energy Laser Joint Technology Office: A Mission Overview” (paper, Optical Science and

Technology, the SPIE 49th Annual Meeting, Denver, CO, October 18, 2004).   152 Directed Energy Weapon Systems Acquisition Act of 2016, S.R. 2778, 114th Cong. (2016).  153 FY 2017 NDAA, Pub. L. No. 114–328, 130 Stat. 2054 (2016).   154 Weapons Development and Procurement Schedules, 10 U.S.C. §2431, notes (a) and (b).   155 SACS, National Defense Authorization Act for Fiscal Year 2017, S. Rep. 114‐255 (2016) (Committee Rep.). 
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statutory requirement for a senior official to lead the JDETO is to give the Secretary of Defense “rapid

acquisition authority” toward “speed[ing] the development and deployment of operational directed

energy capabilities.”156

Conclusions 

It is unlikely that removing the statutory requirement for JDETO would curtail DoD’s renewed

directed energy efforts, yet Congress only recently reestablished JDETO for FY 2017. Because

reestablishment of JDETO was so recent, and in an effort to provide future flexibility should the nature

of the requirement for this designated official shift, Congress should amend the clause to sunset in

5 years (2023). Such action should both fulfill congressional direction to focus on research and

development and provide flexibility in the future to appropriately align DoD’s research focus as it

evolves. Section 215 of the FY 2018 NDAA adds a new prototyping and demonstration program to

Section 219 as a new subsection (c). The Section 809 Panel had not evaluated that new program, and the

recommendation for a sunset provision for Section 219 does not encompass the new subsection (c).

Congress, in reviewing the recommendations to sunset the other portions of Section 219, should

include a sunset provision for the new subsection (c).

Implementation 

Legislative Branch 

 Repeal the statutory requirement for Department of Defense Test Resource Management

Center, 10 U.S.C. § 196.  

 Repeal the statutory requirement for Office of Corrosion Policy and Oversight, 10 U.S.C. § 2228.

 Repeal the statutory requirement for Director for Performance Assessment and Root Cause

Analysis (PARCA), 10 U.S.C. § 2438.

 Repeal the statutory requirement for Office of Technology Transition, 10 U.S.C. § 2515.  

 Repeal the statutory requirement for Office for Foreign Defense Critical Technology Monitoring

and Assessment, 10 U.S.C. § 2517.

 Repeal the statutory requirement at 10 U.S.C. § 204 for a Small Business Ombudsman within

each defense audit agency.  

 Repeal the statutory requirement for Secretary of Defense to designate a competition advocate

for the Defense Logistics Agency, 10 U.S.C. § 2318.

 Repeal the statutory requirement for the Hypersonics Development section of Joint Technology

Office on Hypersonics, Section 218 of the FY 2007 NDAA (Pub. L. No. 109–364, 120 Stat. 2126;

10 U.S.C. § 2358 note).

 Repeal the statutory requirement for Improvement in Defense Research and Procurement

Liaison with Israel, Section 1006 of the FY 1989 NDAA (Pub. L. No. 100–456; 10 U.S.C. § 133

note).

 Repeal the statutory requirement for Coordination of Human Systems Integration Activities

Related to Acquisition Programs, Section 231 of the FY 2008 NDAA (Pub. L. No.110–181,

10 U.S.C. § 1701 note).   

                                                     

156 House of Representatives, FY 2018 NDAA, Conference Report to Accompany H.R. 2810, accessed January 6, 2018, 

http://docs.house.gov/billsthisweek/20171113/HRPT‐115‐HR2810.pdf. 
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 Repeal the statutory requirement for Focus on Urgent Operational Needs and Rapid

Acquisition, Section 902 of the FY 2013 NDAA (Pub. L. No. 112–239; 10 U.S.C. § 2302 note).

 Repeal the statutory requirement for Senior Official for Dual‐Use Science and Technology

Projects, Section 203(c) of the FY 1998 NDAA (Pub. L. No. 105–85; 10 U.S.C. § 2511 note).  

 Repeal the statutory requirement for Executive Agent for Printed Circuit Boards, Section 256 of

FY 2009 NDAA (Pub. L. No. 110–417; 10 U.S.C. § 2501 note).  

 Sunset the statutory requirement for Joint Directed Energy Transition Office (JDETO), 10 U.S.C.

§ 219 (10 U.S.C. § 2431 note) in FY 2023.

Executive Branch 

 No Executive Branch changes are required.

Note: Recommended draft legislative text and sections can be found in the Implementation Details 

subsection at the end of Section 7. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

   
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THIS PAGE INTENTIONALLY LEFT BLANK
Section 7 

Statutory Offices and Designated Officials

Implementation Details 

Recommendation 22 

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[NOTE: The draft legislative text below is followed by a “Sections Affected” 

display, showing the text of each provision of law affected by the draft 

legislative text below.]

1 SEC. ___. REPEAL OF STATUTORY REQUIREMENT FOR CERTAIN POSITIONS 

2 OR OFFICES IN THE DEPARTMENT OF DEFENSE ESTABLISHED OR 

3 REQUIRED BY LAW. 

4 (a) REPEAL OF STATUTORY REQUIREMENT FOR DOD TEST RESOURCE MANAGEMENT 

5 CENTER.— 

6 (1) REPEAL.—Section 196 of title 10, United States Code, as amended by section 

7 222 of the National Defense Authorization Act for Fiscal Year 2018, is repealed. 

8 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of subchapter 

9 I of chapter 8 of such title is amended by striking the item relating to section 196. 

10 (b) REPEAL OF STATUTORY REQUIREMENT FOR DIRECTOR OF CORROSION POLICY AND 

11 OVERSIGHT.— 

12 (1) REPEAL.— 

13 (A) IN GENERAL.—Section 2228 of title 10, United States Code, is 

14 repealed. 

15 (B) CLERICAL AMENDMENT.—The table of sections at the beginning of 

16 chapter 131 of such title is amended by striking the item relating to section 2228.

17 (2) OFFICE OF THE SECRETARY OF DEFENSE.—Paragraph (9) of section 131(b) of 

18 such title, as redesignated by section 910(c)(1)(A) of the National Defense Authorization 

19 Act for Fiscal Year 2018, is amended by striking subparagraph (H). 

20 (c) REPEAL OF STATUTORY REQUIREMENT FOR DIRECTOR OF THE OFFICE OF 

21 PERFORMANCE ASSESSMENT AND ROOT CAUSE ANALYSIS.— 
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1 (1) REPEAL.— 

2 (A) IN GENERAL.—Section 2438 of title 10, United States Code, is 

3 repealed.

4 (B) CLERICAL AMENDMENT.—The table of sections at the beginning of 

5 chapter 144 of such title is amended by striking the item relating to section 2438.

6 (2) OFFICE OF THE SECRETARY OF DEFENSE.—Section 131(b)(9) of such title is 

7 amended by striking subparagraph (I). 

8 (d) REPEAL OF STATUTORY REQUIREMENT FOR OFFICE OF TECHNOLOGY TRANSITION.— 

9 (1) REPEAL.—Section 2515 of title 10, United States Code, is repealed. 

10 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of subchapter 

11 III of chapter 148 of such title is amended by striking the item relating to section 2515. 

12 (e) REPEAL OF STATUTORY REQUIREMENT FOR OFFICE FOR FOREIGN DEFENSE CRITICAL 

13 TECHNOLOGY MONITORING AND ASSESSMENT.— 

14 (1) REPEAL.—Section 2517 of title 10, United States Code, is repealed. 

15 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of subchapter 

16 III of chapter 148 of such title is amended by striking the item relating to section 2517. 

17 (f) REPEAL OF STATUTORY REQUIREMENT FOR SMALL BUSINESS OMBUDSMAN FOR DCAA

18 AND DCMA.— 

19 (1) REPEAL.—Section 204 of title 10, United States Code, is repealed. 

20 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of subchapter 

21 II of chapter 8 of such title is amended by striking the item relating to section 204.

22 (g) REPEAL OF STATUTORY REQUIREMENT FOR DLA ADVOCATE FOR COMPETITION.— 

23 (1) REPEAL.—Section 2318 of title 10, United States Code, is amended— 

24 (A) by striking subsection (a); and 
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1 (B) by striking “(b)” before “Each advocate”. 

2 (2) TECHNICAL AMENDMENTS.—Such section is further amended— 

3 (A) by striking “advocate for completion of” and inserting “advocate for 

4 competition designated pursuant to section 1705(a) of title 41 for; and

5 (B) by striking “a grade GS–16 or above under the General Schedule (or 

6 in a comparable or higher position under another schedule)” and inserting “in a 

7 position classified above GS-15 pursuant to section 5108 of title 5”. 

8 (h) REPEAL OF STATUTORY REQUIREMENT FOR JOINT HYPERSONICS TRANSITION

9 OFFICE.—Section 218 of the John Warner National Defense Authorization Act for Fiscal Year 

10 2007 (Public Law 109–364; 10 U.S.C. 2358 note), as most recently amended by section 214(b) 

11 of the National Defense Authorization Act for Fiscal Year 2018, is repealed.

12 (i) SUNSET FOR STATUTORY DESIGNATION OF USD(R&E) AS SENIOR DOD OFFICIAL WITH 

13 PRINCIPAL RESPONSIBILITY FOR DIRECTED ENERGY WEAPONS.—Section 219 of the National 

14 Defense Authorization Act for Fiscal Year 2017 (Public Law 114-328; 10 U.S.C. 2431 note), as 

15 amended by section 215 of the National Defense Authorization Act for Fiscal Year 2018, is

16 amended by adding at the end the following new subsection: 

17 “(d) SUNSET.—The provisions of subsection (a) and of paragraphs (2) and (3) of 

18 subsection (b) shall cease to be in effect as of September 30, 2022.”. 

19 (j) REPEAL OF STATUTORY REQUIREMENT FOR DESIGNATION OF INDIVIDUAL TO SERVE AS 

20 PRIMARY LIAISON BETWEEN THE PROCUREMENT AND RESEARCH AND DEVELOPMENT ACTIVITIES 

21 OF THE UNITED STATES ARMED FORCES AND THOSE OF THE STATE OF ISRAEL.—Section 1006 of 

22 the National Defense Authorization Act, Fiscal Year 1989 (Public Law 100-456; 10 U.S.C. 133 

23 note) is repealed. 
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1 (k) REPEAL OF STATUTORY REQUIREMENT FOR DESIGNATION OF SENIOR OFFICIAL TO 

2 COORDINATE AND MANAGE HUMAN SYSTEMS INTEGRATION ACTIVITIES RELATED TO 

3 ACQUISITION PROGRAMS.—Section 231 of the National Defense Authorization Act for Fiscal 

4 Year 2008 (Public Law 110-181; 10 U.S.C. 1701 note) is amended— 

5 (1) by striking “(a) IN GENERAL.—”; and

6 (2) by striking subsections (b), (c), and (d). 

7 (l) REPEAL OF STATUTORY REQUIREMENT FOR DESIGNATION OF SENIOR OFFICIAL 

8 RESPONSIBLE FOR FOCUS ON URGENT OPERATIONAL NEEDS AND RAPID ACQUISITION.—Section 

9 902 of the National Defense Authorization Act for Fiscal Year 2013 (Public Law 112-239; 10 

10 U.S.C. 2302 note) is repealed.

11 (m) REPEAL OF STATUTORY REQUIREMENT FOR DESIGNATION OF SENIOR OFFICIAL 

12 RESPONSIBLE FOR DUAL-USE PROJECTS UNDER DUAL-USE SCIENCE AND TECHNOLOGY 

13 PROGRAM.—Section 203 of the National Defense Authorization Act for Fiscal Year 1998 (Public 

14 Law 105-85; 10 U.S.C. 2511 note) is amended by striking subsection (c). 

15 (n) REPEAL OF STATUTORY REQUIREMENT FOR DESIGNATION OF SENIOR OFFICIAL AS 

16 EXECUTIVE AGENT FOR PRINTED CIRCUIT BOARD TECHNOLOGY.—Section 256 of the National 

17 Defense Authorization Act for Fiscal Year 2009 (Public Law 110-417; 10 U.S.C. 2501 note) is 

18 repealed.

—————— 

SECTIONS AFFECTED BY THE PROPOSAL TO REPEAL 

CERTAIN STATUTORY OFFICES AND POSITIONS
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[Matter proposed to be deleted is shown in stricken through text; matter to be 

inserted is shown in bold italic. Letters in yellow text (viz, A.) correlate to the corresponding 

subsection designations in the accompanying legislative text (viz, (a)] 

[Text shown as current law incorporates amendments from the FY2018 NDAA 

conference report, as passed the House on Nov. 15, 2017 (H. Rpt. 115-404)] 

TITLE 10, UNITED STATES CODE

A. § 196. Department of Defense Test Resource Management Center

(a) ESTABLISHMENT AS DEPARTMENT OF DEFENSE FIELD ACTIVITY.—The Secretary of Defense 

shall establish within the Department of Defense under section 191 of this title a Department of 

Defense Test Resource Management Center (hereinafter in this section referred to as the 

“Center”). The Secretary shall designate the Center as a Department of Defense Field Activity.

(b) DIRECTOR AND DEPUTY DIRECTOR.—(1) At the head of the Center shall be a Director, 

selected by the Secretary from among individuals who have substantial experience in the field of 

test and evaluation. 

(2) There shall be a Deputy Director of the Center, selected by the Secretary from among 

individuals who have substantial experience in the field of test and evaluation. The Deputy 

Director shall act for, and exercise the powers of, the Director when the Director is disabled or 

the position of Director is vacant. 

(c) DUTIES OF DIRECTOR.—(1) The Director shall have the following duties: 

(A) To review and provide oversight of proposed Department of Defense budgets and 

expenditures for— 

(i) the test and evaluation facilities and resources of the Major Range and Test Facility 

Base of the Department of Defense; and

(ii) all other test and evaluation facilities and resources within and outside of the 

Department of Defense, other than budgets and expenditures for activities described in 

section 139(j) of this title.

(B) To review proposed significant changes to the test and evaluation facilities and resources 

of the Major Range and Test Facility Base, including with respect to the expansion, divestment, 

consolidation, or curtailment of activities, before they are implemented by the Secretaries of the 

military departments or the heads of the Defense Agencies with test and evaluation 

responsibilities and advise the Secretary of Defense and the Under Secretary of Acquisition, 

Technology, and Logistics of the impact of such changes on the adequacy of such test and 

evaluation facilities and resources to meet the test and evaluation requirements of the 

Department.

(C) To complete and maintain the strategic plan required by subsection (d). 

(D) To review proposed budgets under subsection (e) and submit reports and certifications 

required by such subsection. 

(E) To administer the Central Test and Evaluation Investment Program and the program of 

the Department of Defense for test and evaluation science and technology.
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(2) The Director shall have access to such records and data of the Department of Defense 

(including the appropriate records and data of each military department and Defense Agency) 

that are necessary in order to carry out the duties of the Director under this section. 

(d) STRATEGIC PLAN FOR DEPARTMENT OF DEFENSE TEST AND EVALUATION RESOURCES.—(1) 

Not less often than once every two fiscal years, the Director, in coordination with the Director of 

Operational Test and Evaluation, the Secretaries of the military departments, and the heads of 

Defense Agencies with test and evaluation responsibilities, shall complete a strategic plan 

reflecting the needs of the Department of Defense with respect to test and evaluation facilities 

and resources, including modeling and simulation capabilities. Each such strategic plan shall 

cover the period of ten fiscal years beginning with the fiscal year in which the plan is submitted 

under paragraph (3). The strategic plan shall be based on a comprehensive review of the test and 

evaluation requirements of the Department and the adequacy of the test and evaluation facilities 

and resources of the Department to meet those requirements.

(2) The strategic plan shall include the following: 

(A) An assessment of the test and evaluation requirements of the Department for the period 

covered by the plan.

(B) An identification of performance measures associated with the successful achievement 

of test and evaluation objectives for the period covered by the plan.

(C) An assessment of the test and evaluation facilities and resources that will be needed to 

meet such requirements and satisfy such performance measures.

(D) An assessment of the current state of the test and evaluation facilities and resources of 

the Department.

(E) An assessment of plans and business case analyses supporting any significant 

modification of the test and evaluation facilities and resources of the Department projected, 

proposed, or recommended by the Secretary of a military department or the head of a Defense 

Agency for such period, including with respect to the expansion, divestment, consolidation, or 

curtailment of activities.

(F) An itemization of acquisitions, upgrades, and improvements necessary to ensure that the 

test and evaluation facilities and resources of the Department are adequate to meet such 

requirements and satisfy such performance measures.

(G) An assessment of the budgetary resources necessary to implement such acquisitions, 

upgrades, and improvements. 

(3) Upon completing a strategic plan under paragraph (1), the Director shall submit to the 

Secretary of Defense a report on that plan. The report shall include the plan and a description of 

the review on which the plan is based. 

(4) Not later than 60 days after the date on which the report is submitted under paragraph (3), 

the Secretary of Defense shall transmit to the Committee on Armed Services and Committee on 

Appropriations of the Senate and the Committee on Armed Services and Committee on 

Appropriations of the House of Representatives the report, together with any comments with 

respect to the report that the Secretary considers appropriate. 

(e) CERTIFICATION OF BUDGETS.—(1) The Secretary of Defense, acting through the Under 

Secretary of Defense (Comptroller), shall require that the Secretary of each military department 

and the head of each Defense Agency with test and evaluation responsibilities transmit such 

Secretary's or Defense Agency head’s proposed budget for test and evaluation activities,
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including modeling and simulation capabilities, for a fiscal year and for the period covered by 

the future-years defense program submitted to Congress under section 221 of this title for that 

fiscal year to the Director of the Center for review under paragraph (2) before submitting such 

proposed budget to the Under Secretary of Defense (Comptroller). 

(2)(A) The Director of the Center shall review each proposed budget transmitted under 

paragraph (1) and shall, not later than January 31 of the year preceding the fiscal year for which 

such budgets are proposed, submit to the Secretary of Defense a report containing the comments 

of the Director with respect to all such proposed budgets, together with the certification of the 

Director as to whether such proposed budgets are adequate. 

(B) The Director shall also submit, together with such report and such certification, an 

additional certification as to whether such proposed budgets provide balanced support for such 

strategic plan.

(3) The Secretary of Defense shall, not later than March 31 of the year preceding the fiscal 

year for which such budgets are proposed, submit to Congress a report on those proposed 

budgets which the Director has not certified under paragraph (2)(A) to be adequate. The report 

shall include the following matters:

(A) A discussion of the actions that the Secretary proposes to take, together with any 

recommended legislation that the Secretary considers appropriate, to address the inadequacy 

of the proposed budgets. 

(B) Any additional comments that the Secretary considers appropriate regarding the 

inadequacy of the proposed budgets. 

(f) APPROVAL OF CERTAIN MODIFICATIONS.—(1) The Secretary of a military department or the 

head of a Defense Agency with test and evaluation responsibilities may not implement a 

projected, proposed, or recommended significant modification of the test and evaluation facilities 

and resources of the Department, including with respect to the expansion, divestment, 

consolidation, or curtailment of activities, until— 

 (A) the Secretary or the head, as the case may be, submits to the Director a business case 

analysis for such modification; and 

 (B) the Director reviews such analysis and approves such modification. 

(g) SUPERVISION OF DIRECTOR BY UNDER SECRETARY.—The Director of the Center shall be 

subject to the supervision of the Under Secretary of Defense for Acquisition, Technology, and 

Logistics. The Director shall report directly to the Under Secretary, without the interposition of 

any other supervising official. 

(h) ADMINISTRATIVE SUPPORT OF CENTER.—The Secretary of Defense shall provide the 

Director with administrative support adequate for carrying out the Director's responsibilities 

under this section. The Secretary shall provide the support out of the headquarters activities of 

the Department or any other activities that the Secretary considers appropriate.

(i) DEFINITION.—In this section, the term “Major Range and Test Facility Base” means the test 

and evaluation facilities and resources that are designated by the Secretary of Defense as 

facilities and resources comprising the Major Range and Test Facility Base.

————— 
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B. § 2228. Office of Corrosion Policy and Oversight 

(a) OFFICE AND DIRECTOR.—(1) There is an Office of Corrosion Policy and Oversight within 

the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics. 

(2) The Office shall be headed by a Director of Corrosion Policy and Oversight, who shall be 

assigned to such position by the Under Secretary from among civilian employees of the 

Department of Defense with the qualifications described in paragraph (3). The Director is 

responsible in the Department of Defense to the Secretary of Defense (after the Under Secretary 

of Defense for Acquisition, Technology, and Logistics) for the prevention and mitigation of 

corrosion of the military equipment and infrastructure of the Department of Defense. The 

Director shall report directly to the Under Secretary.

(3) In order to qualify to be assigned to the position of Director, an individual shall— 

(A) have management expertise in, and professional experience with, corrosion project and 

policy implementation, including an understanding of the effects of corrosion policies on 

infrastructure; research, development, test, and evaluation; and maintenance; and 

(B) have an understanding of Department of Defense budget formulation and execution, 

policy formulation, and planning and program requirements. 

(4) The Secretary of Defense shall designate the position of Director as a critical acquisition 

position under section 1733(b)(1)(C) of this title. 

(b) DUTIES.—(1) The Director of Corrosion Policy and Oversight (in this section referred to as 

the “Director”) shall oversee and coordinate efforts throughout the Department of Defense to 

prevent and mitigate corrosion of the military equipment and infrastructure of the Department. 

The duties under this paragraph shall include the duties specified in paragraphs (2) through (5). 

(2) The Director shall develop and recommend any policy guidance on the prevention and 

mitigation of corrosion to be issued by the Secretary of Defense. 

(3) The Director shall review the programs and funding levels proposed by the Secretary of 

each military department during the annual internal Department of Defense budget review 

process as those programs and funding proposals relate to programs and funding for the 

prevention and mitigation of corrosion and shall submit to the Secretary of Defense 

recommendations regarding those programs and proposed funding levels. 

(4) The Director shall provide oversight and coordination of the efforts within the Department 

of Defense to prevent or mitigate corrosion during— 

(A) the design, acquisition, and maintenance of military equipment; and 

(B) the design, construction, and maintenance of infrastructure. 

(5) The Director shall monitor acquisition practices within the Department of Defense— 

(A) to ensure that the use of corrosion prevention technologies and the application of 

corrosion prevention treatments are fully considered during research and development in the 

acquisition process; and 

(B) to ensure that, to the extent determined appropriate for each acquisition program, such 

technologies and treatments are incorporated into that program, particularly during the 

engineering and design phases of the acquisition process. 

(c) ADDITIONAL AUTHORITIES FOR DIRECTOR.—The Director is authorized to— 
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(1) develop, update, and coordinate corrosion training with the Defense Acquisition 

University; 

(2) participate in the process within the Department of Defense for the development of 

relevant directives and instructions; and 

(3) interact directly with the corrosion prevention industry, trade associations, other 

government corrosion prevention agencies, academic research and educational institutions, 

and scientific organizations engaged in corrosion prevention, including the National Academy 

of Sciences.

(d) LONG-TERM STRATEGY.—(1) The Secretary of Defense shall develop and implement a 

long-term strategy to reduce corrosion and the effects of corrosion on the military equipment and 

infrastructure of the Department of Defense.

(2) The strategy under paragraph (1) shall include the following: 

(A) Expansion of the emphasis on corrosion prevention and mitigation within the 

Department of Defense to include coverage of infrastructure.

(B) Application uniformly throughout the Department of Defense of requirements and 

criteria for the testing and certification of new corrosion-prevention technologies for 

equipment and infrastructure with similar characteristics, similar missions, or similar operating 

environments. 

(C) Implementation of programs, including supporting databases, to ensure that a focused 

and coordinated approach is taken throughout the Department of Defense to collect, review, 

validate, and distribute information on proven methods and products that are relevant to the 

prevention of corrosion of military equipment and infrastructure. 

(D) Establishment of a coordinated research and development program for the prevention 

and mitigation of corrosion for new and existing military equipment and infrastructure that 

includes a plan to transition new corrosion prevention technologies into operational systems, 

including through the establishment of memoranda of agreement, joint funding agreements, 

public-private partnerships, university research and education centers, and other cooperative 

research agreements.

(3) The strategy shall include, for the matters specified in paragraph (2), the following: 

(A) Policy guidance.

(B) Performance measures and milestones.

(C) An assessment of the necessary personnel and funding necessary to accomplish the 

long-term strategy.

(e) REPORT.—(1) For each budget for a fiscal year, beginning with the budget for fiscal year 

2009 and ending with the budget for fiscal year 2022, the Secretary of Defense shall submit, with 

the defense budget materials, a report on the following: 

(A) Funding requirements for the long-term strategy developed under subsection (d). 

(B) The estimated composite return on investment achieved by implementing the strategy, 

and documented in the assessments by the Department of Defense of completed corrosion 

projects and activities.

(C) The funds requested in the budget compared to the funding requirements. 

(D) If the full amount of funding requirements is not requested in the budget, the reasons for 

not including the full amount and a description of the impact on readiness, logistics, and safety 

of not fully funding required corrosion prevention and mitigation activities. 
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(E) For the fiscal year preceding the fiscal year covered by the report, the amount of funds 

requested in the budget for each project or activity described in subsection (d) compared to the 

funding requirements for the project or activity. 

(F) For the fiscal year preceding the fiscal year covered by the report, a description of the 

specific amount of funds used for military corrosion projects, the Technical Corrosion 

Collaboration program, and other corrosion-related activities.

(2)(A) Each report under this section shall include, in an annex to the report, a summary of the 

most recent report required by subparagraph (B). 

(B) Not later than December 31 of each year, through December 31, 2020, the corrosion 

control and prevention executive of a military department shall submit to the Director of 

Corrosion Policy and Oversight a report containing recommendations pertaining to the corrosion 

control and prevention program of the military department. Such report shall include 

recommendations for the funding levels necessary for the executive to carry out the duties of the 

executive under this section. The report required under this subparagraph shall— 

(i) provide a summary of key accomplishments, goals, and objectives of the corrosion 

control and prevention program of the military department; and 

(ii) include the performance measures used to ensure that the corrosion control and 

prevention program achieved the goals and objectives described in clause (i). 

(f) DEFINITIONS.—In this section: 

(1) The term “corrosion” means the deterioration of a material or its properties due to a 

reaction of that material with its chemical environment.

(2) The term “military equipment” includes all weapon systems, weapon platforms, 

vehicles, and munitions of the Department of Defense, and the components of such items. 

(3) The term “infrastructure” includes all buildings, structures, airfields, port facilities, 

surface and subterranean utility systems, heating and cooling systems, fuel tanks, pavements, 

and bridges. 

(4) The term “budget”, with respect to a fiscal year, means the budget for that fiscal year 

that is submitted to Congress by the President under section 1105(a) of title 31. 

(5) The term “defense budget materials”, with respect to a fiscal year, means the materials 

submitted to Congress by the Secretary of Defense in support of the budget for that fiscal year. 

———— 

§ 131. Office of the Secretary of Defense

[Section shown as in effect as of Feb. 1, 2018] 

(a) There is in the Department of Defense an Office of the Secretary of Defense. The function 

of the Office is to assist the Secretary of Defense in carrying out the Secretary's duties and 

responsibilities and to carry out such other duties as may be prescribed by law. 

(b) The Office of the Secretary of Defense is composed of the following:

(1) The Deputy Secretary of Defense.

(2) The Chief Management Officer of the Department of Defense.

(3) The Under Secretaries of Defense, as follows:

(A) The Under Secretary of Defense for Research and Engineering.

(B) The Under Secretary of Defense for Acquisition and Sustainment. 
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(C) The Under Secretary of Defense for Policy.

(D) The Under Secretary of Defense (Comptroller).

(E) The Under Secretary of Defense for Personnel and Readiness.

(F) The Under Secretary of Defense for Intelligence.

(4) The Deputy Chief Management Officer of the Department of Defense.

(5) Other officers who are appointed by the President, by and with the advice and consent of 

the Senate, and who report directly to the Secretary and Deputy Secretary without intervening 

authority, as follows: 

(A) The Director of Cost Assessment and Program Evaluation. 

(B) The Director of Operational Test and Evaluation. 

(C) The General Counsel of the Department of Defense.

(D) The Inspector General of the Department of Defense.

(6) The Chief Information Officer of the Department of Defense. 

(7) The Deputy Under Secretaries of Defense.

(8) The Assistant Secretaries of Defense.

(9) Other officials provided for by law, as follows: 

(A) The two Deputy Directors within the Office of the Director of Cost Assessment and 

Program Evaluation under section 139a(c) of this title. 

(B) The Deputy Assistant Secretary of Defense for Developmental Test and Evaluation 

appointed pursuant to section 139b(a) of this title. 

(C) The Deputy Assistant Secretary of Defense for Systems Engineering appointed 

pursuant to section 139b(b) of this title. 

(D) The Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base 

Policy appointed pursuant to section 139c of this title. 

(E) The Director of Small Business Programs appointed pursuant to section 144 of this 

title.

(F) The official designated under section 1501(a) of this title to have responsibility for 

Department of Defense matters relating to missing persons as set forth in section 1501 of 

this title.

(G) The Director of Military Family Readiness Policy under section 1781 of this title.

(H) The Director of the Office of Corrosion Policy and Oversight assigned pursuant 

to section 2228(a) of this title. 

(I) The official designated under section 2438(a) of this title to have responsibility 

for conducting and overseeing performance assessments and root cause analyses for 

major defense acquisition programs.

(10) Such other offices and officials as may be established by law or the Secretary of 

Defense may establish or designate in the Office.

******* 

————— 

C. § 2438. Performance assessments and root cause analyses 

(a) DESIGNATION OF SENIOR OFFICIAL RESPONSIBILITY FOR PERFORMANCE ASSESSMENTS AND 

ROOT CAUSE ANALYSES.— 
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(1) IN GENERAL.—The Secretary of Defense shall designate a senior official in the Office of 

the Secretary of Defense as the principal official of the Department of Defense responsible for 

conducting and overseeing performance assessments and root cause analyses for major 

defense acquisition programs. 

(2) NO PROGRAM EXECUTION RESPONSIBILITY.—The Secretary shall ensure that the senior 

official designated under paragraph (1) is not responsible for program execution. 

(3) STAFF AND RESOURCES.—The Secretary shall assign to the senior official designated 

under paragraph (1) appropriate staff and resources necessary to carry out the senior official's 

function under this section.

(b) RESPONSIBILITIES.—The senior official designated under subsection (a) shall be 

responsible for the following: 

(1) Carrying out performance assessments of major defense acquisition programs in 

accordance with the requirements of subsection (c) periodically or when requested by the 

Secretary of Defense, the Under Secretary of Defense for Acquisition, Technology and 

Logistics, the Secretary of a military department, or the head of a Defense Agency.

(2) Conducting root cause analyses for major defense acquisition programs in accordance 

with the requirements of subsection (d) when required by section 2433a(a)(1) of this title, or 

when requested by the Secretary of Defense, the Under Secretary of Defense for Acquisition, 

Technology and Logistics, the Secretary of a military department, or the head of a Defense 

Agency. 

(3) Issuing policies, procedures, and guidance governing the conduct of performance 

assessments and root cause analyses by the military departments and the Defense Agencies.

(4) Evaluating the utility of performance metrics used to measure the cost, schedule, and 

performance of major defense acquisition programs, and making such recommendations to the 

Secretary of Defense as the official considers appropriate to improve such metrics.

(5) Advising acquisition officials on performance issues regarding a major defense 

acquisition program that may arise— 

(A) before certification under section 2433a of this title; 

(B) before entry into full-rate production; or 

(C) in the course of consideration of any decision to request authorization of a multiyear 

procurement contract for the program. 

(c) PERFORMANCE ASSESSMENTS.—For purposes of this section, a performance assessment 

with respect to a major defense acquisition program is an evaluation of the following:

(1) The cost, schedule, and performance of the program, relative to current metrics, 

including performance requirements and baseline descriptions. 

(2) The extent to which the level of program cost, schedule, and performance predicted 

relative to such metrics is likely to result in the timely delivery of a level of capability to the 

warfighter that is consistent with the level of resources to be expended and provides superior 

value to alternative approaches that may be available to meet the same military requirement.

(d) ROOT CAUSE ANALYSES.—For purposes of this section and section 2433a of this title, a 

root cause analysis with respect to a major defense acquisition program is an assessment of the 

underlying cause or causes of shortcomings in cost, schedule, or performance of the program, 

including the role, if any, of— 
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(1) unrealistic performance expectations;

(2) unrealistic baseline estimates for cost or schedule;

(3) immature technologies or excessive manufacturing or integration risk; 

(4) unanticipated design, engineering, manufacturing, or technology integration issues 

arising during program performance;

(5) changes in procurement quantities; 

(6) inadequate program funding or funding instability; 

(7) poor performance by government or contractor personnel responsible for program 

management; or

(8) any other matters.

(e) SUPPORT OF APPLICABLE CAPABILITIES AND EXPERTISE.—The Secretary of Defense shall 

ensure that the senior official designated under subsection (a) has the support of other 

Department of Defense officials with relevant capabilities and expertise needed to carry out the 

requirements of this section. 

————— 

D. § 2515. Office of Technology Transition 

(a) ESTABLISHMENT.—The Secretary of Defense shall establish within the Office of the 

Secretary of Defense an Office of Technology Transition.

(b) PURPOSE.—The purpose of the office shall be to ensure, to the maximum extent 

practicable, that technology developed for national security purposes is integrated into the 

private sector of the United States in order to enhance national technology and industrial base, 

reinvestment, and conversion activities consistent with the objectives set forth in section 2501(a) 

of this title.

(c) DUTIES.—The head of the office shall ensure that the office— 

(1) monitors all research and development activities that are carried out by or for the 

military departments and Defense Agencies;

(2) identifies all such research and development activities that use technologies, or result in 

technological advancements, having potential nondefense commercial applications; 

(3) serves as a clearinghouse for, coordinates, and otherwise actively facilitates the 

transition of such technologies and technological advancements from the Department of 

Defense to the private sector;

(4) conducts its activities in consultation and coordination with the Department of Energy 

and the Department of Commerce; and

(5) provides private firms with assistance to resolve problems associated with security 

clearances, proprietary rights, and other legal considerations involved in such a transition of 

technology. 

————— 

E. § 2517. Office for Foreign Defense Critical Technology Monitoring and Assessment
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(a) IN GENERAL.—The Secretary of Defense shall establish within the Office of the Assistant 

Secretary of Defense for Research and Engineering an office known as the "Office for Foreign 

Defense Critical Technology Monitoring and Assessment" (hereinafter in this section referred to 

as the "Office").

(b) RELATIONSHIP TO DEPARTMENT OF COMMERCE.—The head of the Office shall consult 

closely with appropriate officials of the Department of Commerce in order— 

(1) to minimize the duplication of any effort of the Department of Commerce by the 

Department of Defense regarding the monitoring of foreign activities related to defense critical 

technologies that have potential commercial uses; and

(2) to ensure that the Office is effectively utilized to disseminate information to users of 

such information within the Federal Government.

(c) RESPONSIBILITIES.—The Office shall have the following responsibilities:

(1) To maintain within the Department of Defense a central library for the compilation and 

appropriate dissemination of unclassified and classified information and assessments 

regarding significant foreign activities in research, development, and applications of defense 

critical technologies.

(2) To establish and maintain— 

(A) a widely accessible unclassified data base of information and assessments regarding 

foreign science and technology activities that involve defense critical technologies, 

including, especially, activities in Europe and in Pacific Rim countries; and 

(B) a classified data base of information and assessments regarding such activities.

(3) To perform liaison activities among the military departments, Defense Agencies, and 

other appropriate elements of the Department of Defense, with appropriate agencies and 

offices of the Department of Commerce and the Department of State, and with other 

departments and agencies of the Federal Government in order to ensure that significant 

activities in research, development, and applications of defense critical technologies are 

identified, monitored, and assessed by an appropriate department or agency of the Federal 

Government. 

(4) To ensure the maximum practicable public availability of information and assessments 

contained in the unclassified data bases established pursuant to paragraph (2)— 

(A) by limiting, to the maximum practicable extent, restrictive classification of such 

information and assessments; and 

(B) by disseminating to the National Technical Information Service of the Department of 

Commerce information and assessments regarding defense critical technologies having 

potential commercial uses.

(5) To disseminate through the National Technical Information Service of the Department 

of Commerce unclassified information and assessments regarding defense critical technologies 

having potential commercial uses so that such information and assessments may be further 

disseminated within the Federal Government and to the private sector. 

————— 

F. § 204. Small Business Ombudsman for defense audit agencies
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(a) SMALL BUSINESS OMBUDSMAN.—The Secretary of Defense shall designate within each 

defense audit agency an official as the Small Business Ombudsman to have the duties described 

in subsection (b) and such other responsibilities as may be determined by the Secretary. 

(b) DUTIES.—The Small Business Ombudsman of a defense audit agency shall— 

(1) advise the Director of the defense audit agency on policy issues related to small business 

concerns;

(2) serve as the defense audit agency's primary point of contact and source of information 

for small business concerns; 

(3) collect and monitor relevant data regarding the defense audit agency's conduct of audits 

of small business concerns, including— 

(A) data regarding the timeliness of audit closeouts for small business concerns; and 

(B) data regarding the responsiveness of the defense audit agency to issues or other 

matters raised by small business concerns; and

(4) make recommendations to the Director regarding policies, processes, and procedures 

related to the timeliness of audits of small business concerns and the responsiveness of the 

defense audit agency to issues or other matters raised by small business concerns.

(c) AUDIT INDEPENDENCE.—The Small Business Ombudsman of a defense audit agency shall 

be segregated from ongoing audits in the field and shall not engage in activities with regard to 

particular audits that could compromise the independence of the defense audit agency or 

undermine compliance with applicable audit standards. 

(d) DEFENSE AUDIT AGENCY DEFINED.—In this section, the term “defense audit agency” 

means the Defense Contract Audit Agency and the Defense Contract Management Agency.

—————— 

G. § 2318. Advocates for competition

(a)(1) In addition to the advocates for competition established or designated pursuant to 

section 1705(a) of title 41, the Secretary of Defense shall designate an officer or employee of the 

Defense Logistics Agency to serve as the advocate for competition of the agency.

(2) The advocate for competition of the Defense Logistics Agency shall carry out the 

responsibilities and functions provided for in subsection (b) and (c) of section 1705 of title 41. 

(b) Each advocate for competition designated pursuant to section 1705(a) of title 41 of for an 

agency named in section 2303(a) of this title shall be a general or flag officer if a member of the 

armed forces or a grade GS–16 or above under the General Schedule (or in a comparable or 

higher position under another schedule) in a position classified above GS-15 pursuant to section 

5108 of title 5, if a civilian employee and shall be designated to serve for a minimum of two 

years.

[Drafter note: Below is a possible alternative restatement of current subsection (b) for clarity – 

intended to be nonsubstantive] 
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(a) REQUIRED PERSONNEL LEVEL.—Each advocate for competition described in subsection 

(c) shall be a member of the armed forces who is a general or flag officer or a civilian 

employee who is in a position classified above GS-15 pursuant to section 5108 of title 5. 

(b) REQUIRED PERIOD OF DESIGNATION.—Each advocate for competition described in 

subsection (c) shall be designated to serve for a minimum of two years. 

(c) COVERED ADVOCATES FOR COMPETITION.—Subsections (a) and (b) apply to an advocate 

for competition designated pursuant to section 1705(a) of title 41 for an agency named in 

section 2303(a) of this title. 

————— 

PROVISIONS OF ANNUAL NATIONAL DEFENSE 

AUTHORIZATION ACTS

Section 218 of the FY 2007 NDAA (Public Law 109–364; 10 U.S.C. 2358 note)

H. SEC. 218. HYPERSONICS DEVELOPMENT.

(a) ESTABLISHMENT OF JOINT HYPERSONICS TRANSITION OFFICE.—The Secretary of 

Defense shall establish within the Office of the Secretary of Defense a Joint Hypersonics 

Transition Office (in this section referred to as the ‘Office’). The Office shall carry out the 

program required under subsection (b), and shall have such other responsibilities relating to 

hypersonics as the Secretary shall specify.

 

(b) PROGRAM ON HYPERSONICS.—The Office shall carry out a program for the 

development of hypersonics for defense purposes. 

(c) RESPONSIBILITIES.—In carrying out the program required by subsection (b), the Office 

shall do the following: 

 (1) Expedite testing, evaluation, and acquisition of hypersonic weapon systems to 

meet the stated needs of the warfighter, including flight testing, ground-based-testing, and 

underwater launch testing. 

(2) Coordinate and integrate current and future research, development, test, and 

evaluation programs and system demonstration programs of the Department of Defense 

on hypersonics. 

(3) Undertake appropriate actions to ensure— 

(A) close and continuous integration of the programs on hypersonics of 

the military departments and the Defense Agencies with the programs on 

hypersonics across the Federal Government and with appropriate private sector 

and foreign organizations; and 

(B) that both foundational research and developmental and operational testing 

resources are adequate and well funded, and that facilities are made available in a timely 

manner to support hypersonics research, demonstration programs, and system 

development. 
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(4) Approve prototyping demonstration programs on hypersonic systems to speed 

the maturation and deployment of the systems to the warfighter. 

(5) Ensure that any demonstration program on hypersonic systems that is carried 

out in any year after its approval under paragraph (3) is carried out only if certified under 

subsection (e) as being consistent with the roadmap under subsection (d). 

(6) Develop strategies and roadmaps for hypersonic technologies to transition to 

operational capabilities for the warfighter.

(7) Coordinate with relevant stakeholders and agencies to support United States 

technological advantage in developing hypersonics. 

(d) ROADMAP.— 

(1) ROADMAP REQUIRED.—The Office shall develop, and every two years revise, a 

roadmap for the hypersonics programs of the Department of Defense.

(2) COORDINATION.—The roadmap shall be developed and revised under 

paragraph (1) in coordination with the Joint Staff and in consultation with the National 

Aeronautics and Space Administration.

(3) ELEMENTS.—The roadmap shall include the following matters:

(A) Anticipated or potential mission requirements for hypersonics. 

(B) Short-term, mid-term, and long-term goals for the Department of 

Defense on hypersonics, which shall be consistent with the missions and 

anticipated requirements of the Department over the applicable period. 

 (C) A schedule for meeting such goals, including— 

 (i) the activities and funding anticipated to be required for 

meeting such goals; and

(ii) the activities of the National Aeronautics and Space 

Administration to be leveraged by the Department to meet such goals.

(D) The test and evaluation facilities required to support the activities 

identified in subparagraph (C), along with the schedule and funding required to 

upgrade those facilities, as necessary.

 (E) Acquisition transition plans for hypersonics. 

(e) ANNUAL REVIEW AND CERTIFICATION OF FUNDING.— 

(1) ANNUAL REVIEW.—The Office shall conduct on an annual basis a review 

of— 

 (A) the funding available for research, development, test, and evaluation 

and demonstration programs within the Department of Defense for hypersonics, 

in order to determine whether or not such funding is consistent with the roadmap 

developed under subsection (d); and 

 (B) the hypersonics demonstration programs of the Department, in order 

to determine whether or not such programs avoid duplication of effort and support 

the goals of the Department in a manner consistent with the roadmap developed 

under subsection (d).

(2) CERTIFICATION.—The Office shall, as a result of each review under 

paragraph (1), certify to the Secretary whether or not the funding and programs subject 

to such review are consistent with the roadmap developed under subsection (d). 
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(3) TERMINATION.—The requirements of this subsection shall terminate after 

the submittal to Congress of the budget for fiscal year 2016 pursuant to section 1105 of 

title 31, United States Code.

—————

Section 219 of the FY 2017 NDAA (Public Law 114-328; 10 U.S.C. 2431 note)

I. SEC. 219. DESIGNATION OF DEPARTMENT OF DEFENSE SENIOR OFFICIAL 

WITH PRINCIPAL RESPONSIBILITY FOR DIRECTED ENERGY 

WEAPONS.

(a) DESIGNATION OF SENIOR OFFICIAL.— 

 (1) IN GENERAL.—The Under Secretary of Defense for Research and 

Engineering shall serve as the official with principal responsibility for the development 

and demonstration of directed energy weapons for the Department. 

(2) DEVELOPMENT OF STRATEGIC PLAN.— 

 (A) IN GENERAL.—The senior official designated under paragraph (1) 

shall develop a detailed strategic plan to develop, mature, and transition directed 

energy technologies to acquisition programs of record. 

 (B) ROADMAP.—Such strategic plan shall include a strategic roadmap 

for the development and fielding of directed energy weapons and key enabling 

capabilities for the Department, identifying and coordinating efforts across 

military departments to achieve overall joint mission effectiveness.

(3) ACCELERATION OF DEVELOPMENT AND FIELDING OF DIRECTED ENERGY 

WEAPONS CAPABILITIES.— 

(A) IN GENERAL.—To the degree practicable, the senior official designated 

under paragraph (1) shall use the flexibility of the policies of the Department in 

effect on the day before the date of the enactment of this Act [Dec. 23, 2016], or 

any successor policies, to accelerate the development and fielding of directed 

energy capabilities.

(B) ENGAGEMENT.—The Secretary shall use the flexibility of the policies 

of the Department in effect on the day before the date of the enactment of this 

Act, or any successor policies, to ensure engagement with defense and private 

industries, research universities, and unaffiliated, nonprofit research institutions. 

(4) ADVICE FOR EXERCISES AND DEMONSTRATIONS.—The senior official 

designated under paragraph (1) shall, to the degree practicable, provide technical advice 

and support to entities in the Department of Defense and the military departments 

conducting exercises or demonstrations with the purpose of improving the capabilities of 

or operational viability of technical capabilities supporting directed energy weapons, 

including supporting military utility assessments of the relevant cost and benefits of 

directed energy weapon systems.

(5) SUPPORT FOR DEVELOPMENT OF REQUIREMENTS.—The senior official 

designated under paragraph (1) shall coordinate with the military departments, Defense 

Agencies, and the Joint Directed Energy Transition Office to define requirements for 

directed energy capabilities that address the highest priority warfighting capability gaps 

of the Department. 
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(6) AVAILABILITY OF INFORMATION.—The Secretary of Defense shall ensure that 

the senior official designated under paragraph (1) has access to such information on 

programs and activities of the military departments and other defense agencies as the 

Secretary considers appropriate to coordinate departmental directed energy efforts.

(b) JOINT DIRECTED ENERGY TRANSITION OFFICE.— 

(1) REDESIGNATION.—The High Energy Laser Joint Technology Office of the 

Department of Defense is hereby redesignated as the ``Joint Directed Energy Transition 

Office'' (in this subsection referred to as the ``Office''), and shall report to the official 

designated under subsection (a)(1).

(2) ADDITIONAL FUNCTIONS.—In addition to the functions and duties of the Office 

in effect on the day before the date of the enactment of this Act, the Office shall assist the 

senior official designated under paragraph (1) of subsection (a) in carrying out paragraphs 

(2) through (5) of such subsection. 

(3) FUNDING.—The Secretary may make available such funds to the Office for 

basic research, applied research, advanced technology development, prototyping, studies 

and analyses, and organizational support as the Secretary considers appropriate to support 

the efficient and effective development of directed energy systems and technologies and 

transition of those systems and technologies into acquisition programs or operational use. 

(c) PROTOTYPING AND DEMONSTRATION PROGRAM.— 

(1) ESTABLISHMENT.—The Secretary of Defense, acting through the Under 

Secretary, shall establish a program on the prototyping and demonstration of directed 

energy weapon systems to build and maintain the military superiority of the United States 

by— 

(A) accelerating, when feasible, the fielding of directed energy weapon 

prototypes that would help counter technological advantages of potential 

adversaries of the United

States; and 

(B) supporting the military departments, the combatant commanders, and 

other relevant defense agencies and entities in developing prototypes and 

demonstrating operational utility of high energy lasers and high powered 

microwave weapon systems.

(2) GUIDELINES.—(A) Not later than 180 days after the date of the enactment of 

the National Defense Authorization Act for Fiscal Year 2018, the Under Secretary shall 

issue guidelines for the operation of the program established under paragraph (1), 

including the following: 

(i) Criteria required for an application for funding by a military 

department, defense agency or entity, or a combatant command. 

(ii) The priorities, based on validated requirements or capability gaps, for 

fielding prototype directed energy weapon system technologies developed by 

research funding of the Department or industry. 

(iii) Criteria for evaluation of an application for funding or changes to 

policies or acquisition and business practices by such a department, agency, or 

command for purposes of improving the effectiveness and efficiency of the 

program. 
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(B) Funding for a military department, defense agency, or combatant command 

under the program established under paragraph (1) may only be available for advanced 

technology development, prototyping, and demonstrations in which the Department of 

Defense maintains management of the technical baseline and a primary emphasis on 

technology transition and evaluating military utility to enhance the likelihood that the 

particular directed energy weapon system will meet the Department end user’s need. 

(3) APPLICATIONS FOR FUNDING.—(A) Not less frequently than once each year, 

the Under Secretary shall solicit from the heads of the military departments, the defense 

agencies, and the combatant commands applications for funding under the program 

established under paragraph (1) to be used to enter into contracts, cooperative 

agreements, or other transaction agreements entered into pursuant to section 2371b of 

title 10, United States Code, with appropriate entities for the prototyping or 

commercialization of technologies.

(B) Nothing in this section shall be construed to require any official of the 

Department of Defense to provide funding under the program to any congressional 

earmark as defined pursuant to clause 9 of rule XXI of the Rules of the House of 

Representatives or any congressionally directed spending item as defined pursuant to 

paragraph 5 of rule XLIV of the Standing Rules of the Senate. 

(4) FUNDING.—(A) Except as provided in subparagraph (B) and subject to the 

availability of appropriations for such purpose, of the funds authorized to be appropriated 

by the National Defense Authorization Act for Fiscal Year 2018 or otherwise made 

available for fiscal year 2018 for research, development, test, and evaluation, defensewide, up to $100,000,000 may be available to the Under Secretary to allocate to the 

military departments, the defense agencies, and the combatant commands to carry out the 

program established under paragraph (1). 

(B) Not more than half of the amounts made available under subparagraph (A) 

may be allocated as described in such paragraph until the Under Secretary— 

(i) develops the strategic plan required by subsection (a)(2)(A); and 

(ii) submits such strategic plan to the congressional defense committees.

(5) UNDER SECRETARY DEFINED.—In this subsection, the term “Under Secretary” 

means the Under Secretary of Defense for Research and Engineering in the Under 

Secretary’s capacity as the official with principal responsibility for the development and 

demonstration of directed energy weapons pursuant to subsection (a)(1). 

(d) SUNSET.—The provisions of subsection (a) and of paragraphs (2) and (3) of 

subsection (b) shall cease to be in effect as of September 30, 2022. 

————— 

Section 1006 of the FY 1989 NDAA (Public Law 100-456; 10 U.S.C. 133 note)

J. SEC. 1006. IMPROVEMENT IN DEFENSE RESEARCH AND PROCUREMENT 

LIAISON WITH ISRAEL

The Secretary of Defense, in consultation with the Under Secretary of Defense for 

Acquisition [now the Under Secretary of Defense for Acquisition, Technology, and Logistics], 

shall designate for duty in Israel an individual or individuals to serve as the primary liaison 
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between the procurement and research and development activities of the United States Armed 

Forces and those of the State of Israel.

————— 

Section 231 of the FY 2008 NDAA (Public Law 110-181; 10 U.S.C. 1701note)

K. SEC. 231. COORDINATION OF HUMAN SYSTEMS INTEGRATION ACTIVITIES 

RELATED TO ACQUISITION PROGRAMS.

(a) IN GENERAL.—The Secretary of Defense, acting through the Under Secretary of 

Defense for Acquisition, Technology, and Logistics, shall coordinate and manage human 

systems integration activities throughout the acquisition programs of the Department of Defense. 

(b) ADMINISTRATION.—In carrying out subsection (a), the Secretary shall designate a 

senior official to be responsible for the effort. 

(c) RESPONSIBILITIES.—In carrying out this section, the senior official designated in 

subsection (b) shall— 

(1) coordinate the planning, management, and execution of such activities; and 

(2) identify and recommend, as appropriate, resource requirements for human 

systems integration activities.

(d) DESIGNATION.—The designation required by subsection (b) shall be made not later 

than 60 days after the date of the enactment of this Act [Jan. 28, 2008]. 

————— 

Section 902 of the FY 2013 NDAA (Public Law 112-239; 10 U.S.C. 2302 note)

L. SEC. 902. REQUIREMENT FOR FOCUS ON URGENT OPERATIONAL NEEDS 

AND RAPID ACQUISITION.

(a) DESIGNATION OF SENIOR OFFICIAL RESPONSIBLE FOR FOCUS ON URGENT 

OPERATIONAL NEEDS AND RAPID ACQUISITION.— 

 (1) IN GENERAL.—The Secretary of Defense, after consultation with the 

Secretaries of the military departments, shall designate a senior official in the Office of 

the Secretary of Defense as the principal official of the Department of Defense 

responsible for leading the Department's actions on urgent operational needs and rapid 

acquisition, in accordance with this section. 

 (2) STAFF AND RESOURCES.—The Secretary shall assign to the senior official 

designated under paragraph (1) appropriate staff and resources necessary to carry out the 

official's functions under this section. 

(b) RESPONSIBILITIES.—The senior official designated under subsection (a) shall be 

responsible for the following: 
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 (1) Acting as an advocate within the Department of Defense for issues related to 

the Department's ability to rapidly respond to urgent operational needs, including 

programs funded and carried out by the military departments. 

 (2) Improving visibility of urgent operational needs throughout the Department, 

including across the military departments, the Defense Agencies, and all other entities 

and processes in the Department that address urgent operational needs. 

 (3) Ensuring that tools and mechanisms are used to track, monitor, and manage 

the status of urgent operational needs within the Department, from validation through 

procurement and fielding, including a formal feedback mechanism for the Armed Forces 

to provide information on how well fielded solutions are meeting urgent operational 

needs.

(c) URGENT OPERATIONAL NEEDS DEFINED.—In this section, the term “urgent 

operational needs” means capabilities that are determined by the Secretary of Defense, pursuant 

to the review process required by section 804(b) of the Ike Skelton National Defense 

Authorization Act for Fiscal Year 2011 (10 U.S.C. 2302 note), to be suitable for rapid fielding in 

response to urgent operational needs. 

————— 

Section 203 of the FY 1998 NDAA (Public Law 105-85; 10 U.S.C. 2511 note)

M. SEC. 203. DUAL-USE SCIENCE AND TECHNOLOGY PROGRAM.

(a) FUNDING 1998.—*** 

(b) GOALS.—(1) Subject to paragraph (3), it shall be the objective of the Secretary of 

each military department to obligate for dual-use projects in each fiscal year referred to in 

paragraph (2), out of the total amount authorized to be appropriated for such fiscal year for the 

applied research programs of the military department, the percent of such amount that is 

specified for that fiscal year in paragraph (2).

(2) The objectives for fiscal years under paragraph (1) are as follows: 

(A) For fiscal year 1998, 5 percent. 

(B) For fiscal year 1999, 7 percent.

(C) For fiscal year 2000, 10 percent. 

(D) For fiscal year 2001, 15 percent. 

(3) The Secretary of Defense may establish for a military department for a fiscal year an 

objective different from the objective set forth in paragraph (2) if the Secretary— 

(A) determines that compelling national security considerations require the 

establishment of the different objective; and

(B) notifies Congress of the determination and the reasons for the determination. 

(c) DESIGNATION OF OFFICIAL FOR DUAL-USE PROGRAMS.—(1) The Secretary of Defense 

shall designate a senior official in the Office of the Secretary of Defense to carry out 

responsibilities for dual-use projects under this subsection. The designated official shall report 

directly to the Under Secretary of Defense for Acquisition, Technology, and Logistics. 
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(2) The primary responsibilities of the designated official shall include developing policy 

and overseeing the establishment of, and adherence to, procedures for ensuring that dual-use 

projects are initiated and administered effectively and that applicable commercial technologies 

are integrated into current and future military systems.

(3) In carrying out the responsibilities, the designated official shall ensure that— 

(A) dual-use projects are consistent with the joint warfighting science and 

technology plan referred to in section 270 of the National Defense Authorization Act for 

Fiscal Year 1997 (Public Law 104–201; 10 U.S.C. 2501 note); and 

(B) the dual-use projects of the military departments and defense agencies of the 

Department of Defense are coordinated and avoid unnecessary duplication. 

(d) FINANCIAL COMMITMENT OF NON-FEDERAL GOVERNMENT PARTICIPANTS.—The total 

amount of funds provided by a military department for a dual-use project entered into by the 

Secretary of that department shall not exceed 50 percent of the total cost of the project. In the 

case of a dual-use project initiated after the date of the enactment of this Act [Nov. 18, 1997], the 

Secretary may consider in-kind contributions by non-Federal participants only to the extent such 

contributions constitute 50 percent or less of the share of the project costs by such participants.

(e) USE OF COMPETITIVE PROCEDURES.—Funds obligated for a dual-use project may be 

counted toward meeting an objective under subsection (a) only if the funds are obligated for a 

contract, grant, cooperative agreement, or other transaction that was entered into through the use 

of competitive procedures. 

(f) REPORT.—(1) Not later than March 1 of each of 1998, 1999, and 2000, the Secretary 

of Defense shall submit a report to the congressional defense committees [Committees on Armed 

Services and Appropriations of Senate and House of Representatives] on the progress made by 

the Department of Defense in meeting the objectives set forth in subsection (b) during the 

preceding fiscal year.

 (2) The report for a fiscal year shall contain, at a minimum, the following: 

(A) The aggregate value of all contracts, grants, cooperative agreements, or other 

transactions entered into during the fiscal year for which funding is counted toward 

meeting an objective under this section, expressed in relationship to the total amount 

appropriated for the applied research programs in the Department of Defense for that 

fiscal year.

(B) For each military department, the value of all contracts, grants, cooperative 

agreements, or other transactions entered into during the fiscal year for which funding is 

counted toward meeting an objective under this section, expressed in relationship to the 

total amount appropriated for the applied research program of the military department for 

that fiscal year.

(C) A summary of the cost-sharing arrangements in dual-use projects that were 

initiated during the fiscal year and are counted toward reaching an objective under this 

section.

(D) A description of the regulations, directives, or other procedures that have been 

issued by the Secretary of Defense or the Secretary of a military department to increase 

the percentage of the total value of the dual-use projects undertaken to meet or exceed an 

objective under this section. 
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(E) Any recommended legislation to facilitate achievement of objectives under 

this section.

(g) COMMERCIAL OPERATIONS AND SUPPORT SAVINGS INITIATIVE.—(1) The Secretary of 

Defense shall establish a Commercial Operations and Support Savings Initiative (in this 

subsection referred to as the 'Initiative') to develop commercial products and processes that the 

military departments can incorporate into operational military systems to reduce costs of 

operations and support. 

(2) Of the amounts authorized to be appropriated by section 201, $50,000,000 is 

authorized for the Initiative.

(3) Projects and participants in the Initiative shall be selected through the use of 

competitive procedures.

(4) The budget submitted to Congress by the President for fiscal year 1999 and each 

fiscal year thereafter pursuant to section 1105(a) of title 31, United States Code, shall set forth 

separately the funding request for the Initiative. 

(h) REPEAL OF SUPERSEDED AUTHORITY.—[Repealed section 203 of Pub. L. 104–201, 

110 Stat. 2451] 

(i) DEFINITIONS.—In this section: 

(1) The term “applied research program” means a program of a military 

department which is funded under the 6.2 Research, Development, Test and Evaluation 

account of that department. 

(2) The term “dual-use project” means a project under a program of a military 

department or a defense agency under which research or development of a dual-use 

technology is carried out and the costs of which are shared by the Department of Defense 

and non-Government entities. 

————— 

Section 256 of the FY 2009 NDAA (Public Law 110-417; 10 U.S.C. 2501 note)

N. SEC. 256. EXECUTIVE AGENT FOR PRINTED CIRCUIT BOARD TECHNOLOGY.

(a) EXECUTIVE AGENT.—Not later than 90 days after the date of the enactment of this 

Act [Oct.14, 2008], the Secretary of Defense shall designate a senior official of the Department 

of Defense to act as the executive agent for printed circuit board technology. 

(b) ROLES, RESPONSIBILITIES, AND AUTHORITIES.— 

(1) ESTABLISHMENT.—Not later than one year after the date of the enactment of 

this Act [Oct.14, 2008], and in accordance with Directive 5101.1, the Secretary of 

Defense shall prescribe the roles, responsibilities, and authorities of the executive agent 

designated under subsection (a). 

(2) SPECIFICATION.—The roles and responsibilities of the executive agent 

designated under subsection (a) shall include each of the following: 

 (A) Development and maintenance of a printed circuit board and 

interconnect technology roadmap that ensures that the Department of Defense has 
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access to the manufacturing capabilities and technical expertise necessary to meet 

future military requirements regarding such technology. 

(B) Development of recommended funding strategies necessary to meet 

the requirements of the roadmap developed under subparagraph (A). 

 (C) Assessment of the vulnerabilities, trustworthiness, and diversity of the 

printed circuit board supply chain, including the development of trustworthiness 

requirements for printed circuit boards used in defense systems, and to develop 

strategies to address matters that are identified as a result of such assessment. 

(D) Such other roles and responsibilities as the Secretary of Defense 

considers appropriate. 

(c) SUPPORT WITHIN DEPARTMENT OF DEFENSE.—In accordance with Directive 5101.1, 

the Secretary of Defense shall ensure that the military departments, Defense Agencies, and other 

components of the Department of Defense provide the executive agent designated under 

subsection (a) with the appropriate support and resources needed to perform the roles, 

responsibilities, and authorities of the executive agent. 

(d) DEFINITIONS.—In this section: 

(1) The term “Directive 5101.1” means Department of Defense Directive 5101.1, 

or any successor directive relating to the responsibilities of an executive agent of the 

Department of Defense.

(2) The term “executive agent” has the meaning given the term ``DoD Executive 

Agent'' in Directive 5101.1. 

————— 
   
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Section 8 

Statutory Reporting Requirements 

Balances statutory reporting requirements with costs and benefits of the individual reports. 

RECOMMENDATIONS

Rec. 23: Establish a permanent, automatic 5‐year sunset provision for DoD

congressional reporting requirements.  

Rec. 24: Repeal, preserve, or maintain various DoD congressional reporting

requirements.

24a: Repeal the statutory requirement for the Defense Test Resource Management

Center biennial strategic and budget reports, 10 U.S.C. § 196(d) and (e).

24b: Repeal the statutory requirement for the Ballistic Missile Defense Programs

annual budget justification reports, 10 U.S.C. § 223a(a).

Recommendations continued on following page.
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Page 224   |   Volume 1    Statutory Reporting Requirements

RECOMMENDATIONS 

24c: Repeal the statutory requirement for the Programs for Combating Terrorism:

Annual budget overview report, 10 U.S.C. § 229.

24d: Repeal the statutory requirement for the Annual Long‐Term Plan for the

Procurement of Aircraft for the Navy and the Air annual strategic plan, 10 U.S.C.

§ 231a.  

24e: Repeal the statutory requirement for the Cyber Mission Forces annual budget

overview report, 10 U.S.C. § 238(a).

24f: Repeal the statutory requirement for the Corrosion Control and Prevention

annual budget and policy report, 10 U.S.C. § 2228(e).

24g: Repeal the statutory requirement for the Major Satellite Acquisition Programs

annual integration report, 10 U.S.C. § 2275.

24h: Repeal the statutory requirement for the Commercial Space Activities annual

Cooperation with DoD report, 10 U.S.C. § 2276(e).

24i: Repeal the statutory requirement for the Depot‐Level Maintenance overview

report, 10 U.S.C. § 2466(d).

24j: Repeal the statutory requirement for the Covered Naval Vessels Repair Work in

Foreign Shipyards annual report, 10 U.S.C. § 7310(c).

24k: Repeal the statutory requirement for the Reserve Component Equipment annual

procurement report, 10 U.S.C. § 10543(a).

24l: Repeal the statutory requirement for the Reserve Components annual

procurement threshold report, 10 U.S.C. § 10543(c).

24m: Repeal the statutory requirement for the Missile Defense Agency annual

overview report, FY 2002 NDAA, 232(h)(3).

24n: Repeal the statutory requirement for the Ford‐Class Aircraft Carrier annual cost

estimate report, FY 2007 NDAA, 122(d)(1).

24o: Repeal the statutory requirement for the Carriage by Vessel annual Repair Work

in Foreign Shipyards report, FY 2007 NDAA, 1017(e).

24p: Repeal the statutory requirement for the Bandwidth Capacity annual overview

report, FY 2009 NDAA, 1047(d)(2).

24q: Repeal the statutory requirement for the Afghanistan Infrastructure Fund

annual overview report, FY 2011 NDAA, 1217(i).

Recommendations continued on following page.
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Statutory Reporting Requirements    Volume 1   |   Page 225

RECOMMENDATIONS 

24r: Repeal the statutory requirement for the MDAP Testing and Evaluation annual

justification of progress report, FY 2013 NDAA, 904(h)(1) and (2).

24s: Repeal the statutory requirement for the Ticonderoga‐Class Cruisers and Dock

Landing Ships annual modernization report, FY 2015 NDAA, 1026(d).

24t: Repeal the statutory requirement for the Ballistic Missile Defense Systems annual

preproduction assessment reports, FY 2015 NDAA, 1662(c)(2) and (d)(2).

24u: Preserve the statutory requirement for the Director of Operational Test and

Evaluation annual overview report, 10 U.S.C. § 139(h).  

24v: Preserve the statutory requirement for Naval Vessel Construction annual

strategic plan report, 10 U.S.C. § 231.  

24w: Preserve the statutory requirement for the Director of Operational Test and

Evaluation annual program report, 10 U.S.C. § 2399(g).  

24x: Terminate in 2021 the statutory requirement for the Ballistic Missile Defense

Programs annual acquisition baselines report, 10 U.S.C. § 225(c).  

24y: Terminate in 2021 the statutory requirement for Depot‐Level Maintenance

biennial capability requirements report, 10 U.S.C. § 2464(d).

24z: Terminate in 2021 the statutory requirement for the National Technology and

Industrial Base annual policy overview report, 10 U.S.C. § 2504.

24aa: Terminate in 2021 the statutory requirement for the Distribution of Chemical

and Biological Agents to Non‐Federal Entities annual overview report, FY 2008

NDAA, 1034(d).

24ab: Terminate in 2021 the statutory requirement for the Research and Development

in Defense Laboratories annual funding report, FY 2009 NDAA, 219(c).

   
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INTRODUCTION 

Excess reporting requirements can impose costs on DoD that outweigh the specific benefits of each

individual report. The FY 2016 NDAA instructed DoD to submit a list to Congress of all congressional

reporting requirements imposed through NDAAs as of April 1, 2015. According to the statute, DoD’s

obligation to submit any such report would automatically terminate 2 years after the date of enactment.

In the FY 2017 NDAA, Congress modified the process by dividing all of the reporting requirements

into three groups: a large group that would still terminate at the original termination date on

November 25, 2017; a second large group that would terminate several years later on December 31,

2021; and a small group that were permanently exempted from termination.  

The Section 809 Panel identified 28 reporting requirements that are related to defense acquisition in the

group of reports set to terminate in December 2021 and performed analysis to help Congress formulate

its final decisions regarding each report. After analyzing the history and implementation of each report,

the panel recommends the immediate repeal of 20 reporting requirements; the preservation of three

reporting requirements; and the maintenance of the December 2021 termination date for five reporting

requirements. The Section 809 Panel also endorses the intent behind recent use of sunset dates by

Congress to assess DoD reporting requirements and recommends the creation of an automatic sunset

provision for all new and existing DoD reporting requirements.  

Panel Recommendation  Number of Reporting Requirements 

Repeal  20 

Preserve  3 

Maintain December 2021 Status Quo  5 

Total  28 
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RECOMMENDATIONS 

Recommendation 23: Establish a permanent, automatic 5-year sunset provision 

for DoD congressional reporting requirements. 

Problem 

As a result of the recurring problem posed by excessive congressional reporting requirements directed

at DoD, as well as Congress’s struggle to restrain the growth of reporting requirements over time, the

notion of an automatic sunset has periodically entered the debate. Advocates for greater discipline in

the imposition of reporting requirements have argued that automatic sunsets can be an effective means

to encourage Congress to regularly assess the value of a report.

Background 

The Clinton Administration’s 1993 Streamlining Management Control study recommended the adoption

of an automatic sunset provision for all new reporting requirements that would “ensure that the

burdens of congressionally mandated reports are controlled.”1 Acting along similar lines, Congress

passed the Federal Reports Elimination and Sunset Act of 1995 (FRESA), which instituted a catch‐all

sunset provision that terminated the legal requirements for all existing periodic reports 4 years after the

date of enactment.2 According to the Congressional Research Service, “many periodic reporting

requirements appear to have been eliminated” by FRESA.3 Between 1999 and 2008, Congress

repeatedly saved certain reporting requirements from the sunset, including the entire category of

reports concerning federal budgetary matters.4 Elimination of numerous reporting requirements due to

the FRESA sunset—along with Congress’s unwillingness to allow the sunset to take full effect—

demonstrated both the potential of sunset provisions and their dependence on congressional support.  

Findings 

A sunset created by Congress will always be susceptible to the decisions of a later Congress. Inevitably,

sunset provisions are only as strong as the congressional will to uphold them. Yet an automatic sunset

for reporting requirements is still a useful tool for maintaining congressional discipline. A sunset forces

Congress to make an active decision to explicitly reauthorize a reporting requirement, prevents the

unwitting growth of reports, and imposes an evaluation of costs and benefits for determining the

necessity of a report. Moreover, Congress has already shifted toward this position in recent years by

including sunset provisions in new reporting requirements with increasing frequency. The panel

endorses the direction of recent congressional policy and aims to build on Congress’s actions. The

panel’s proposed sunset provision is an attempt to bolster Congress’s efforts and ensure that a similar

standard is applied broadly across all relevant DoD reporting requirements.    

                                                     

1 White House Office of the Vice President, Streamlining Management Control – Part 2, September 1993, accessed August 7, 2017, 

https://clintonwhitehouse6.archives.gov/1994/06/1994‐06‐30‐npr‐report‐on‐streamlining‐management‐control‐part‐a.html.  2 Congressional Research Service, Reexamination of Agency Reporting Requirements: Annual Process Under the GPRA Modernization Act 

of 2010 (GPRAMA), May 29, 2013, accessed August 4, 2017, https://fas.org/sgp/crs/misc/R42490.pdf.   3 Ibid.  

4 Ibid.  
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Conclusions 

In support of the goals above, the structure of a sunset is important. Rather than the one‐time sunset of

FRESA, a permanent, recurring sunset provides a more effective mechanism for restraint. Every

congressional reporting requirement for DoD should be justified at regular intervals to ensure that it

remains of adequate value to merit the cost in time and resources. An automatic 5‐year sunset—

commencing in January 2022 for existing DoD reporting requirements, encompassing all new reporting

requirements, and repeating every 5 years for each report—would provide a long‐term answer to the

growth of reporting requirements. The sunset would establish a permanent mechanism to impede the

continuation of unnecessary or obsolete congressional reports.  

Implementation 

Legislative Branch 

 Establish a permanent, automatic 5‐year sunset provision for congressional reporting

requirements directed to DoD.  

 Begin the 5‐year period in January 2022 for existing reports, after the expiration of the current

December 2021 termination deadline. Begin the 5‐year period immediately for all new reporting

requirements created after the date of the sunset provision’s enactment. All new and existing

DoD reporting requirements would subsequently terminate automatically at the end of their

respective 5‐year periods unless specifically reauthorized by Congress.  

 Direct DoD to provide an annual list to Congress of all reporting requirements set to terminate

during the upcoming year.  

 Subject all reporting requirements recommended to be made permanent to the automatic sunset

(see Recommendation 24).  

Executive Branch 

 No Executive Branch changes are required.

Note: Draft legislative text and sections affected display can be found in the Implementation Details 

subsection at the end of Section 8. 

Implications for Other Agencies 

 There are no cross‐agency implications for this recommendation.

   
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Recommendation 24: Repeal, preserve, or maintain various DoD congressional 

reporting requirements. 

Problem 

For more than 40 years, Congress, DoD, oversight agencies, and external analysts have endorsed efforts

to eliminate existing reporting requirements and restrain the growth of future requirements.

Acquisition leaders have charged that reporting requirements distract offices from their primary

missions. Researchers have argued complying with reporting requirements is costly. Oversight

agencies indicate that reporting requirements frequently become duplicative. Congress itself has

acknowledged that many reporting requirements become obsolete over time. Overall, the current

system of defense acquisition reporting requirements lacks the needed coherence or consistency to

achieve its policy aims.  

Despite widespread support for reporting requirement reform, remedies have repeatedly failed. The

difficulty of measuring the costs and benefits of specific reporting requirements inhibits reform. So

does the nature of the identified reports, which may address commendable aims when considered in

isolation, but which create broader problems when considered as a whole because of the collective

burden they create.  

Background 

The difficulties for executive branch agencies that arise from congressional reporting requirements are

unintended consequences of congressional oversight. Reporting requirements can provide crucial

context for drafting legislation, inform congressional efforts to ensure agencies fulfill statutory

directives, and assist Congress in monitoring internal functioning of the executive branch.5Reporting

requirements can also burden resources of the targeted agency and become duplicative or obsolete over

time,6 creating tension between congressional oversight and the executive focus on core agency

missions.  

Balancing these necessary, but differing, aims has been the goal of a number of previous efforts to

improve the reporting requirements framework. As early as 1978, GAO indicated the total number of

recurring reports had increased from 377 to 759 between 1920 and 1970, yet acknowledged it was

unable to provide Congress with “an accurate cost assessment for reports preparation” because agency

cost data contained “wide variances in both dollars and staffing for very similar reports.”7 Unease

regarding reporting requirements animated five distinct legislative efforts to modify and eliminate

entire blocs of reports during the 1980s and 1990s, as well as a 1993 study from the Clinton

Administration that castigated the reporting requirements system for imposing more than $100 million

in annual costs in the service of reports that frequently “seem to have little intrinsic value.”8 Congress

                                                     

5 Ibid.  

6 GAO, Congressional Reports: OMB and Other Agency Reporting Requirements, August 1992, accessed August 4, 2017, 

http://www.gao.gov/assets/90/89386.pdf. Congressional Research Service, Reexamination of Agency Reporting Requirements: Annual 

Process Under the GPRA Modernization Act of 2010 (GPRAMA), May 29, 2013, accessed August 4, 2017, 

https://fas.org/sgp/crs/misc/R42490.pdf.    7 GAO, Statistics on Congressional Reporting Requirements, July 25, 1978, accessed August 4, 2017, 

https://www.gao.gov/assets/130/123963.pdf.   8 White House Office of the Vice President, Streamlining Management Control – Part 2, September 1993, accessed August 7, 2017, 

https://clintonwhitehouse6.archives.gov/1994/06/1994‐06‐30‐npr‐report‐on‐streamlining‐management‐control‐part‐a.html. 
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acted on four separate occasions in the 1990s and 2000s to alter the structural dynamics that had

undermined previous reform initiatives.9 Despite these efforts, the challenge posed by reporting

requirements has persisted through the present day.  

DoD has been a central actor in the broader reporting requirements dilemma. The previously

mentioned 1993 study from the Clinton Administration amassed data on reporting requirements for

selected agencies and noted that DoD was obligated to submit more reports to Congress than any other

federal agency, other than the presidency itself.10 In 2003, DoD proposed to eliminate or modify

183 DoD‐specific congressional reporting requirements, but Congress largely rejected the proposal due

to the department’s inability to “demonstrate that the costs of these reports were higher than the

perceived benefits.” 11 As recently as 2013, an Office of Management and Budget (OMB) proposal to

eliminate or modify hundreds of mandatory plans and reports across the executive branch featured

more proposals regarding DoD requirements than any other government entity.12

The defense‐specific aspect of the reporting requirements problem induced Congress to pursue a

defense‐specific solution. Section 1080 of the FY 2016 NDAA declared that DoD must submit a list to

Congress of all congressional reporting requirements imposed on the department by any NDAA as of

April 1, 2015.13 According to the statute, DoD’s obligation regarding each report included on the list

would terminate 2 years after the enactment date.14 Congress hoped to reduce the reporting burden on

DoD in one sweeping action. In accordance with Section 1080, DoD submitted the list to Congress on

March 10, 2016.15 Subsequently, Congress modified the termination provision through Section 1061 of

the FY 2017 NDAA, which delayed the termination date for a select group of the reports listed by DoD

until December 31, 2021.16 In doing so, Congress distinguished between reports that would be allowed

to terminate according to the original timeline—concluding on November 25, 2017—and reports that

would remain mandatory for another five years. On January 18, 2017, DoD submitted an updated list to

Congress that encompassed all of the reports still designated for termination in November 2017.17

                                                     

Congressional Research Service, Reexamination of Agency Reporting Requirements: Annual Process Under the GPRA Modernization Act of 

2010 (GPRAMA), May 29, 2013, accessed August 4, 2017, https://fas.org/sgp/crs/misc/R42490.pdf. Congress enacted legislation targeting 

groups of reporting requirements in 1980, 1982, 1986, 1995 and 1998.   9 Congressional Research Service, Reexamination of Agency Reporting Requirements: Annual Process Under the GPRA Modernization Act 

of 2010 (GPRAMA), May 29, 2013, accessed August 4, 2017, https://fas.org/sgp/crs/misc/R42490.pdf. The laws were the Government 

Management Reform Act of 1994, the Federal Reports Elimination and Sunset Act of 1995, the Reports Consolidation Act of 2000, and the 

GPRA Modernization Act of 2010.  

10 White House Office of the Vice President, Streamlining Management Control – Part 2, September 1993, accessed August 7, 2017, 

https://clintonwhitehouse6.archives.gov/1994/06/1994‐06‐30‐npr‐report‐on‐streamlining‐management‐control‐part‐a.html.   11 RAND National Defense Research Institute, Measuring the Statutory and Regulatory Constraints on DoD Acquisition, 2006, accessed 

August 7, 2017, https://www.rand.org/content/dam/rand/pubs/technical_reports/2006/RAND_TR347.pdf.   12 Congressional Research Service, Reexamination of Agency Reporting Requirements: Annual Process Under the GPRA Modernization Act 

of 2010 (GPRAMA), May 29, 2013, accessed August 4, 2017, https://fas.org/sgp/crs/misc/R42490.pdf.   13 FY 2016 NDAA, Pub. L. No. 114‐92, 129 Stat. 1000 (2015).   14 Ibid.  

15 Office of the Assistant Secretary of Defense for Legislative Affairs, Letter to Congress, FY17 NDAA (P.L. 114‐328), section 1061(k) DoD 

Report, January 18, 2017.   16 FY 2017 NDAA, Pub. L. No. 114‐328 (2015). Section 1061 also removed several reporting requirements from the termination schedule 

entirely, thereby preserving them indefinitely.  

17 Office of the Assistant Secretary of Defense for Legislative Affairs, Letter to Congress, FY17 NDAA (P.L. 114‐328), section 1061(k) DoD 

Report, January 18, 2017.  
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Those reports have now terminated. The reports extended for another 5 years by Section 1061 remain

set to terminate in December 2021.  

Congress’s rationale for its latest effort to eliminate DoD reporting requirements is consistent with its

longstanding views on the dangers of an excessive reporting burden. In the conference report for the

FY 2016 NDAA, the HASC and SASC agreed that “excessive reporting” placed a burden on DoD and

needed to be balanced against “the importance and value of reports from the Department of Defense as

a key enabler of effective oversight.”18

A broad consensus exists among defense stakeholders that the current level of reporting requirements

hampers DoD’s ability to effectively direct resources to core objectives. Despite the consensus,

however, the problem has proven resistant to easy solutions. The fundamental reason for its

persistence is the tension between the legitimate needs of congressional oversight and the desires of

defense agencies to focus on their primary mission functions. Even taking these factors into account,

credible attempts to improve the situation have been stymied by a more parochial issue: a lack of

convincing case‐by‐case arguments for the elimination of reporting requirements. As discussed above,

federal agencies have long struggled to calculate the costs of reporting requirements in a broadly

applicable manner.  

In the absence of such cost estimates, the next step must be to analyze the merits of individual

reporting requirements to justify their elimination or modification. It is in this regard that many

previous efforts have fallen short. The Clinton Administration’s 1993 study concluded that “an

essential factor in the elimination of reports has been the provision of convincing reasons.”19 The study

cited a failed 1986 congressional effort to reduce reporting requirements, for which Congress

“eliminated 71 percent of the reports whose elimination agencies had adequately justified” but only

eliminated 10 percent of the reports “when agencies did not provide adequate justification.”20 Due to

the lack of adequate justification for most reporting requirements, only 23 reports were eliminated out

of a total of 240 recommendations; a subsequent GAO report blamed “inadequate justification of

reports proposed for elimination” as a factor in the broader failure of the effort.21 In 2003, DoD’s

proposed elimination of reporting requirements was similarly undermined by its inability to convince

Congress on the merits of the reports at issue.22

The success of reporting requirements reform efforts hinges on the quality of the analysis. The

Section 809 Panel focused its analysis on reports that affect the defense acquisition system, using the

ongoing congressional effort under Section 1080 of the FY 2016 NDAA and Section 1061 of the FY 2017

NDAA as a starting point. The panel determined which reports should be categorized as defense

                                                     

18 FY 2016 NDAA, Pub. L. No. 114‐92, Joint Explanatory Statement of the Committee of Conference, 

https://www.gpo.gov/fdsys/pkg/CPRT‐114JPRT97637/pdf/CPRT‐114JPRT97637.pdf.    19 White House Office of the Vice President, Streamlining Management Control – Part 2, September 1993, accessed August 7, 2017, 

https://clintonwhitehouse6.archives.gov/1994/06/1994‐06‐30‐npr‐report‐on‐streamlining‐management‐control‐part‐a.html.   20 Ibid.  

21 Ibid.  

22 RAND National Defense Research Institute, Measuring the Statutory and Regulatory Constraints on DoD Acquisition, 2006, accessed 

August 7, 2017, https://www.rand.org/content/dam/rand/pubs/technical_reports/2006/RAND_TR347.pdf.  
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acquisition reports and performed a case‐by‐case analysis of existing acquisition reporting requirements

to improve the short‐term reporting environment.  

Case‐by‐Case Reporting Requirements 

Twenty‐nine reporting requirements related to defense acquisition (See Table 8‐1 below) terminated on

or before November 25, 2017, as a result of congressional actions in the FY 2016 and FY 2017 NDAAs.

Because these reports were due to sunset before publication of this report, the Section 809 Panel did not

consider them in its analysis, but it does support the congressional action to terminate them.  

Table 8‐1. Reporting Requirement Set to Sunset by November 25, 2017 

U.S.C. Title or Statute  Summary  Frequency 

10 U.S.C. § 235  Procurement of Contract Services: Specification of Amounts 

Requested in Budget  Annual 

10 U.S.C. § 1705(f)  Department of Defense Acquisition Workforce Development Fund  Annual 

10 U.S.C. § 1722b(c)  Career Development for Civilian and Military Personnel in the 

Acquisition Workforce  Biennial 

10 U.S.C. § 2537(b)  Improved National Defense Control of Technology Diversions 

Overseas  Annual 

10 U.S.C. § 2306b(l)(4)  Reporting Requirements Relating to Multiyear Contracts – Annual 

Report  Annual 

10 U.S.C. § 2330a(c)  Inventories and Reviews of Contracts for Services  Annual 

10 U.S.C. § 2410i(c), second 

sentence 

Prohibition on Contracting with Entities that Comply with the 

Secondary Arab Boycott of Israel – Waiver Authority  Annual 

10 U.S.C. § 2445b  Cost, Schedule, and Performance Information of Major Automated 

Information System Programs  Annual 

10 U.S.C. § 2506(b)  DoD Technology and Industrial Base Policy Guidance  Annual 

10 U.S.C. § 2861(d)  Authority to Carry out Military Construction Projects in Connection 

with Industrial Facility Investment Program  Annual 

10 U.S.C. § 2866(b)(3)  Use of Financial Incentives and Water Cost Savings  Annual 

10 U.S.C. §2912(d)  Availability and Use of Energy Cost Savings  Annual 

Pub. L. No. 101‐189; 103 Stat. 

1394 211(e) (FY 1990‐1991 NDAA)  Balanced Technology Initiative Program  Annual 

Pub. L. No. 107‐107 346(b) (115 

Stat. 1062) (FY 2002 NDAA) 

Development of Army Workload and Performance System and 

Wholesale Logistics Modernization Program  Annual 

10 U.S.C. § 817(d) (2306 note) 

(FY 2003 NDAA) 

Grants of Exceptions to Costs or Pricing Data Certification 

Requirements and Waivers of Cost Accounting Standards  Annual 

Pub. L. No. 109‐163 123(d)(1) 

(119 Stat. 3157 (FY 2006 NDAA)  Cost Limitation for Next‐General Destroyer Program  Annual 

Pub. L. No. 109‐163 218(c)(3) 

(119 Stat. 3172) (FY 2006 NDAA) 

Requirements for Development of Tactical Radio Communications 

Systems  Annual 

 Pub. L. No. 110‐181 328(b)(1) 

(10 U.S.C. § 4544 note) (FY 2008 

NDAA) 

Extension of Authority for Army Industrial Facilities to Engage in 

Cooperative Activities with Non‐Army Entities  Annual 

Pub. L. No. 110‐181 330(e) 

(122 Stat. 68) (FY 2008 NDAA) 

Pilot Program for Availability of Working‐Capital Funds for Certain 

Product Improvements  Annual 

Pub. L. No. 110‐181 845 (5 U.S.C. 

App. 5 note) (FY 2008 NDAA)   Disclosure of Government Contractor Audit Findings  Semi‐Annual 

Pub. L. No. 111‐84 121(e) (123 

Stat. 2212) (FY 2010 NDAA)  Littoral Combat Ship Procurement  Annual 
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U.S.C. Title or Statute  Summary  Frequency 

Pub. L. No. 111‐383 243(c) 

(10 U.S.C. § 2358 note) (FY 2011 

NDAA) 

Pilot Program to Include Technology Protection Features During 

Research and Development of Defense Systems  Annual 

Pub. L. No. 111‐383 866(d)(1) 

(10 U.S.C. § 2302 note) (FY 2011 

NDAA) 

Pilot Program on Acquisition of Military Purpose Non‐Developmental 

Items  Annual 

Pub. L. No. 112‐239) 126(b) 

(126 Stat. 1657) (FY 2013 NDAA) 

Designation of Mission Modules of the Littoral Combat Ship as a

Major Defense Acquisition Program  Quarterly 

Pub. L. No. 112‐239) 144(c) 

(126 Stat. 1663) (FY 2013 NDAA) 

Treatment of Certain Programs for the F‐22A Raptor Aircraft as Major 

Defense Acquisition Program  Annual 

Pub. L. No. 112‐239 865 (126 Stat. 

1861) (FY 2013 NDAA)  Reports on Use Indemnification Agreements  Annual 

Pub. L. No. 112‐239 1276(e) 

(10 U.S.C. § 2350c note) (FY 2013 

NDAA) 

DoD Participation on Multilateral Exchange of Air Transportation and 

Air Refueling Services (ATARES)  Annual 

Pub. L. No. 113‐66 1611(d) 

(127 Stat. 947) (FY 2014 NDAA)  Advancing Small Business Growth  Annual 

Pub. L. No. 113‐291 232(e) 

(10 U.S.C. § 2358 note) (FY 2015 

NDAA) 

Pilot Program on Assignment to Defense Advanced Research Projects 

Agency of Private Sector Personnel with Critical Research and 

Development Expertise 

Annual 

Also as a result of congressional actions in the FY 2016 and FY 2017 NDAAs, there are currently

28 reporting requirements related to defense acquisition that are set to terminate on December 31, 2021.

The Section 809 Panel conducted assessments of each report to inform its recommendations, which are

included below. Although the Section 809 Panel recommends eliminating the majority of the reporting

requirements, it also recommends maintaining some on a short‐term basis for further examination and

preserving others in a manner consistent with Recommendation 23 of this report.  
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THE FOLLOWING STATUTORY REPORTING REQUIREMENTS SHOULD BE REPEALED. 

Subrecommendation 24a: Repeal the statutory requirement for the Defense Test Resource 

Management Center biennial strategic and budget reports, 10 U.S.C. § 196(d) and (e). 

Background 

Congress established the reporting requirements for defense test and evaluation facilities and resources

in 10 U.S.C. § 196(d) and (e). The FY 2003 NDAA added 10 U.S.C. § 196, which created the Test

Resource Management Center (TRMC) and established its requirements.23 Section 196(d)(3) requires the

director of the center to submit a report to the Secretary of Defense that includes a strategic plan for test

and evaluation facilities and resources, as well as a description of the review on which the plan is

based.24 The director of the center must develop the strategic plan by coordinating with the Director of

Operational Test and Evaluation (DOT&E), secretaries of the Military Services, and heads of Defense

Agencies with test and evaluation responsibilities.25 The strategic plan must cover 10 fiscal years, and it

must be submitted at least once every 2 years. The review on which the plan is based must assess the

adequacy of the test and evaluation facilities and resources to meet the Department’s test and

evaluation requirements.26 Section 196(d)(4) requires that, within 60 days of receiving the report, the

Secretary must transmit the report to Congress.27 Additionally, Section 196(e)(2) requires the director of

the center to submit a report to the Secretary on the proposed budgets for test and evaluation facilities

and resources, along with certifications as to whether the proposed budgets are adequate and provide

support for the strategic plan.28 Section 196(e)(3) requires the Secretary to submit a report to Congress

that addresses any proposed budgets that the director did not certify as adequate. The deadlines for the

budget reports from DOT&E and the Secretary are, respectively, January 31 and March 31 of the

preceding fiscal year.29   

Findings 

The reporting requirements at 10 U.S.C. § 196(d) and (e) were implemented to promote a long‐term,

strategic planning process for test and evaluation facilities and resources, and to provide Congress with

better oversight of the process. The primary function of TRMC is to oversee funding and maintenance

for the test ranges that constitute DoD’s Major Range and Test Facility Base (MRTFB).30 The strategic

plan and budget reports analyze how well the budgeted resources meet DoD’s stated objectives

regarding MRTFB. The Military Services responded to the creation of the TRMC and corresponding

budgetary mandates by increasing their range operating budgets, which climbed by more than

50 percent in FY 2006 and remained at heightened levels through at least FY 2011.31 TRMC reporting

requirements overlap substantially with DOT&E’s annual report at 10 U.S.C. §139(h), which calls on

DOT&E to detail “resources and facilities available for operational test and evaluation and levels of

                                                     

23 FY 2003 NDAA, Pub. L. No. 107‐314, 116 Stat. 2487 (2002).  24 Ibid.  

25 Ibid.  

26 Ibid.  

27 Ibid.  

28 Ibid.  

29 Ibid.  

30 GAO, Weapons Acquisition Reform: Actions Needed to Address Systems Engineering and Developmental Testing Challenges, September 

2011, accessed July 13, 2017, http://www.gao.gov/assets/330/323377.pdf.   31 Ibid.  
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funding made available for operational test and evaluation activities.”32 Because TRMC and DOT&E

are required to coordinate their findings in these areas, the report at 10 U.S.C. § 139(h) is sufficient to

disclose the necessary information to Congress without any redundancy.  

Conclusions 

TRMC reporting requirements at 10 U.S.C. § 196(d) and (e) are redundant to a larger and more

influential report at 10 U.S.C. § 139(h). TRMC is required to work with DOT&E on the relevant

findings, and DOT&E discloses its own findings separately to Congress. This arrangement is

unnecessary and duplicative. Congressional oversight of test and evaluation facilities and resources

would be better served by ensuring both offices coordinate properly on the findings contained within

DOT&E’s annual report. Congress repeal this reporting requirement.

The Test Resource Management Center dissented from the Section 809 Panel’s

recommendation. TRMC argued that although a ‘slight overlap’ existed between the

DOT&E report at 10 U.S.C. § 139(h) and the TRMC reports at 10 U.S.C. § 196(d) and (e),

the TRMC reports possessed a “broader focus” that was crucial to ensuring adequate

resources for DoD’s testing infrastructure.33 After receiving this comment, the

Section 809 Panel opted not to alter its recommendation, taking the position that the

reports at 10 U.S.C. § 196(d) and (e) do not offer enough value on their own to justify

their continuation, in light of the existence of the DOT&E report.

Subrecommendation 24b: Repeal the statutory requirement for the Ballistic Missile Defense 

Programs annual budget justification reports, 10 U.S.C. § 223a(a). 

Background 

10 U.S.C. § 223a(a) establishes a reporting requirement for DoD’s early‐stage ballistic missile

procurement process. The reporting requirement was initially imposed in the FY 2004 NDAA, which

created 10 U.S.C, § 223a.34 The original statutory language of Section 223a included paragraph (a),

directing the Secretary to report to Congress regarding three distinct procurement elements of DoD’s

ballistic missile defense system programs: (a) the “production rate capabilities” of all intended

production facilities in a ballistic missile defense program; (b) the “potential date of availability” for the

initial fielding of each element in a ballistic missile defense program; and (c) the “estimated date on

which the administration of the acquisition of that element [of a ballistic missile defense program] is to

be transferred” from the Missile Defense Agency (MDA) to a military department.35 The requirements

applied to “each ballistic missile defense system element” under the authority of MDA, and they were

specifically targeted at the early stages of a ballistic missile program, when the agency was still

“engaged in planning for production and initial fielding.”36 The statute required the Sec Def to submit

the information to Congress on an annual basis, as a part of the DoD’s budget justification materials

that accompany DoD’s proposed annual budget.37 There have been no subsequent amendments to the

                                                     

32 Director of Operational Test and Evaluation, 10 U.S.C. § 139.  33 Test Resource Management Center, email to Section 809 Panel staff, November 13, 2017.  34 FY 2004 NDAA, Pub. L. No. 108‐136, 117 Stat. 1420 (2003).   35 Ibid.  

36 Ibid.  

37 Ibid.  
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report requirement, and 10 U.S.C. § 223a(a) remains unchanged from the original statute.38 As such, the

report is still required annually.     

Findings 

In January 2002, Secretary of Defense Donald Rumsfeld issued a memorandum that exempted DoD’s

missile defense programs from the reporting requirements for major defense acquisition programs

(MDAPs).39 In May 2002, DoD broadened the scope of classification regarding missile defense

programs, rendering previously public information such as developmental test details newly

classified.40 The classification decision sparked criticism from members of Congress and congressional

staffers, who charged that the Bush Administration was inhibiting the ability of the House and Senate

Armed Service Committees to fulfill their proper roles overseeing the ballistic missile defense

program.41 In response, Congress passed 10 U.S.C. § 223a(a) in the FY 2004 NDAA, compelling DoD to

provide budget justification materials to Congress regarding early‐stage procurement targets and

projections.42 More than 13 years later, the broad case for congressional oversight still exists due to

continuing flaws in early‐stage ballistic missile planning; a May 2015 GAO report concluded that

several ballistic missile defense programs were “pursuing high‐risk approaches” that failed to adhere

to best practices and risked “cost growth and schedule delays” in acquisition outcomes. The specific

report at 10 U.S.C. § 223a(a)—created due to discrete political circumstances—is not unique in pursuing

that goal, and overlaps with several other reports promoting the same end. The redundant nature of

the reports suggests that streamlining can occur without a loss in oversight.   

Conclusions 

Transparency in early‐stage ballistic missile procurement is an important element of proper oversight,

yet the information contained within the reporting requirement at 10 U.S.C. § 223a(a) overlaps with

other ballistic missile reporting requirements, notably the report in 10 U.S.C. § 225(c) and sections 232

and 1662 of the FY 2002 NDAA and FY 2015 NDAA, respectively. All of these reports focus on early‐

stage developments within ballistic missile programs. Moreover, the report at 10 U.S.C. § 223a(a)

justifies budgetary requests, which already contain information relating to relevant programs. The

report is redundant and does not offer enough value on its own to justify its continuation.  

The Missile Defense Agency concurred with the Section 809 Panel’s recommendation.43    

                                                     

38 Ballistic Missile Defense Programs: Procurement, 10 U.S.C. § 223a.    39 Congressional Research Service, Missile Defense: The Current Debate, July 19, 2005, accessed June 1, 2017, 

https://fas.org/sgp/crs/weapons/RL31111.pdf.   40 Ibid.  

41 David Ruppe, “Bush Administration Thwarting Scrutiny of Missile Defense, Hill Critics Say,” Global Security Newswire, January 7, 2004, 

http://www.nti.org/gsn/article/bush‐administration‐thwarting‐scrutiny‐of‐missile‐defense‐hill‐critics‐say/.   42 Ibid.  

43 Missile Defense Agency, phone call with Section 809 Panel staff, November 29, 2017.  
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Subrecommendation 24c: Repeal the statutory requirement for the Programs for Combating 

Terrorism: Annual budget overview report, 10 U.S.C. § 229. 

Background 

Congress established the reporting requirement at 10 U.S.C. § 229 to more accurately assess the total

cost of combating terrorism, which was defined by DoD in 1994 as encompassing “actions, including

AT [antiterrorism] and CT [counterterrorism], taken to oppose terrorism through the entire threat

spectrum.”44 10 U.S.C. § 229 establishes a requirement for the Secretary to submit a consolidated budget

justification display that includes “all programs and activities of the Department of Defense combating

terrorism program.” The report is intended to support the President’s annual budget for DoD and must

be submitted in classified and unclassified form. The FY 2000 NDAA added 10 U.S.C. § 229, and the

reporting requirements largely existed in their current form in the original provision.45 Congress

mandated that the report include the amount requested for each program element, project, and

initiative to support the combating terrorism program, as well as a rationale for each funding level

request.46 The report must also provide a summary of estimated expenditures for the current year, the

budget year, and through the completion of the current 5‐year defense plan for the combating terrorism

program.47 The only substantive amendment to section 229 occurred in the FY 2016 NDAA, when

previously required semiannual reports on the combating terrorism program were eliminated.48 In all

other respects, the reporting requirement as it currently stands in section 229 has existed since the

FY 2000 NDAA.49

Findings 

In 1997, GAO reported that federal funding for combating terrorism was “unknown and difficult to

determine,” and recommended a review of cost data reports on an annual basis.50 Since the

requirement was enacted, GAO has issued multiple reports regarding the continuing weakness of

federal funding data for combating terrorism. In 2002, GAO reported there were several difficulties in

collecting and analyzing the data due to the various types of missions involved (e.g., intelligence, law

enforcement) and the fact that funds for combating terrorism were often embedded in appropriation

accounts that include other activities.51 In 2006, GAO specifically addressed DoD funding data for the

War on Terror, determining the data to be unreliable.52 GAO has recommended that the Secretary take

steps to ensure the reported costs for combating terrorism are reliable and to establish a methodology

to determine how funding is apportioned for the War on Terror, but it is unclear whether DoD has

achieved any improvements. The report includes data based on a distinction among antiterrorism,

counterterrorism, and combatting terrorism that was conceived before the terrorist attacks of September

                                                     

44 DoD Combatting Terrorism Program Procedures, DoDI 2000.14 (1994).   45 FY 2000 NDAA, Pub. L. No. 106‐65, 113 Stat. 727 (1999).   46 Ibid.  

47 Ibid.  

48 FY 2016 NDAA, Pub. L. No. 114‐92, 129 Stat. 977 (2015).    49 Programs for Combating Terrorism: Display of Budget Information, 10 U.S.C. §229.  50 GAO, Combating Terrorism: Spending on Government wide Programs Requires Better Management and Coordination, December 1997, 

accessed July 25, 2017, http://www.gao.gov/assets/230/224961.pdf.   51 GAO, Combating Terrorism: Funding Data Reported to Congress Should Be Improved, November 2002, accessed July 25, 2017, 

http://www.gao.gov/assets/80/79348.pdf.     52 GAO, Global War on Terrorism: DoD Needs to Improve the Reliability of Cost Data and Provide Additional Guidance to Control Costs, 

September 2005, accessed July 25, 2017, http://www.gao.gov/new.items/d05882.pdf.  
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11, 2001, which could explain why DoD has struggled to generate the specific data called for by the

report. The report may reflect an outdated, pre‐9/11 perspective.  

Conclusions 

The combating terrorism reporting requirement at 10 U.S.C. § 229 appears to be an obsolete inheritance

from a pre‐9/11 approach to terrorism. Congress created the report to provide better insight into the

total cost of DoD’s combatting terrorism program, but the structure of that program has undermined

the report’s ability to facilitate improved congressional oversight of DoD’s response to the terrorist

threat. The report predates the War on Terror and the vast transformation in DoD policy that has

occurred since 2001. The report’s outdated approach has made it difficult for DoD to properly comply.

In recognition of these facts, Congress acted in the FY 2016 NDAA to repeal related semiannual reports

on the combatting terrorism program. That decision is merited, and further action to repeal the annual

report as well should take place. For the reasons stated above, the Section 809 Panel recommends that

Congress repeal this reporting requirement.  

The Section 809 Panel did not receive comments from DoD regarding this

recommendation.   

Subrecommendation 24d: Repeal the statutory requirement for the Annual Long-Term Plan 

for the Procurement of Aircraft for the Navy and the Air annual strategic plan, 10 U.S.C. 

§ 231a. 

Background 

10 U.S.C. § 231a establishes a reporting requirement for long‐term aircraft procurement in support of

U.S. strategic planning. The reporting requirement was initially imposed in the FY 2009 NDAA, which

created Title 10 U.S.C. § 10 231a.53 The original statutory language of section 231a directed the Secretary

to submit an annual report to Congress regarding the integration of long‐term aircraft procurement for

the Navy and the Air Force into the broader strategic outline of U.S. defense policy.54 The statute

required the report, titled Annual Aircraft Procurement Plan, to describe “a plan for the procurement of

the aircraft specified in subsection (b) for the Department of the Navy and the Department of the Air

Force” to a 30‐year time horizon.55 The report would contain a detailed procurement program, as well

as projected funding levels and an assessment of whether the “combined aircraft forces” of the Navy

and the Air Force satisfied America’s national security requirements.56 The report was also statutorily

obligated to support the framework outlined by the official National Security Strategy Report or the

Quadrennial Defense Review.

57 If DoD concluded that the budget for a given fiscal year failed to provide

the necessary funding to maintain aircraft procurement in accordance with the report, the statute

further required that the report must specify “the risks associated with the reduced force structure of

aircraft that will result from funding aircraft procurement at such level.”58 Subsequent amendments

have expanded the scope of the Annual Aircraft Procurement Plan by broadening its analysis to include

                                                     

53 FY 2009 NDAA, Pub. L. No. 110‐417, 122 Stat. 4379 (2008).    54 Ibid.  

55 Ibid.  

56 Ibid.  

57 Ibid.  

58 Ibid.  
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Army aircraft and mandating detailed explanations and justifications for the cost estimates provided.59

The original components of the plan remain in statutory effect.

Findings 

Congress modeled the aircraft procurement reporting requirement at 10 U.S.C. § 231a upon the

preexisting 30‐year naval construction report at 10 U.S.C. § 231. The reports were formulated with

nearly identical statutory language. The Annual Aircraft Procurement Plan was intended to inform

Congress regarding the “cumulative long‐term effects of annual appropriation decisions,” expose any

shortfalls between long‐term aircraft objectives and short‐term budgets, and compel DoD to articulate

its guiding assumptions about the evolution of America’s airpower capabilities.60 Nearly from the very

beginning, however, the 30‐year aircraft procurement reports have struggled to achieve consistency

due to the structural unpredictability of the aerospace industry. The first two reports, submitted by

DoD alongside the FY 2011 and FY 2012 budget requests, provided only 10 years of programmatic

detail due to “long‐term uncertainties in requirements and technology.”61 A 2011 CBO analysis

concluded that the reports would be more informative for Congress if DoD provided a greater level of

detail concerning “the expected inventory of each type of aircraft over the span covered,” as well as the

underlying assumptions for each type of aircraft. DoD experienced difficulty in attempting to

rationalize that information.62 DoD neglected to submit a report altogether in the FY 2015 budget cycle,

and recent reports have failed to clarify the impact of the sequestration caps established by the Budget

Control Act of 2011 on the department’s projected aircraft procurement.63 DoD’s ability to implement

the reporting requirement has been undermined by aerospace structural factors, such as the likelihood

of rapid technological shifts and the unpredictable evolution of the department’s requirements. These

inherent forces within the aerospace sector have proven difficult to adapt to an annual report.  

Conclusions 

The long‐term aircraft procurement reporting requirement at 10 U.S.C. § 231a is modeled on a similar

report for naval vessels at 10 U.S.C. § 231. The naval vessel report has proven to be an asset for both

DoD and Congress; the aircraft procurement report has not experienced similar success. The differing

structural realities of the naval vessel and aircraft procurement sectors have affected the utility of the

respective reports, and the aircraft procurement report has been troubled from the start. Rapid shifts

and enduring volatility in the aerospace sector render it ill‐suited for consistent projections on such a

long time horizon. DoD has struggled to comply with the reporting mandate, failing to achieve its

objectives in multiple reports and failing to submit a report altogether in FY 2015. The goal of the report

is admirable, but the nature of the underlying information appears to render it impracticable.  

The Section 809 Panel did not receive comments from DoD regarding this

recommendation.  

                                                     

59 Budgeting for Life‐Cycle Cost of Aircraft for the Navy, Army, and Air Force: Annual Plan and Certification, 10 U.S.C. § 231a.   60 Congressional Budget Office, The Value of 30‐Year Defense Procurement Plans for Congressional Oversight and Decisionmaking, 

June 1, 2011, accessed June 12, 2017, https://www.cbo.gov/sites/default/files/112th‐congress‐2011‐2012/reports/06‐01‐

dodtestimony.pdf.   61 Ibid.  

62 Ibid.  

63 Mackenzie Eaglen, “Pentagon’s Aviation Plan Headed for a Dead Stick Landing,” American Enterprise Institute, May 31, 2015, accessed 

June 12, 2017, https://www.aei.org/publication/pentagon‐aviation‐report‐dead‐stick‐landing/.  
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Subrecommendation 24e: Repeal the statutory requirement for the Cyber Mission Forces 

annual budget overview report, 10 U.S.C. § 238(a). 

Background 

10 U.S.C. § 238(a) establishes a reporting requirement for the Secretary to submit a budget justification

display that includes “a major force program category for the five‐year defense plan of the Department

of Defense for the training, manning, and equipping of the cyber mission forces.”64 The reports are also

obligated to detail the program elements for cyber mission forces.65 The FY 2015 NDAA added

10 U.S.C. § 238 to better account for cyber mission forces.66 The provision required the Secretary to

submit the first budget justification report to Congress starting with the budget materials for FY 2017,

and to submit reports thereafter for each fiscal year.67 The reporting requirement at section 238(a) has

not been amended since the FY 2015 NDAA.68

Findings 

The DoD 2015 Cyber Strategy outlined five strategic goals for its cyber operations, including to “build

and maintain ready forces and capabilities to conduct cyberspace operations.”69 The preparation

process for the FY 2017 defense budget request included determining and outlining the costs for the

Cyber Mission Force, which comprises 133 teams, to ensure that it would be fully operational by the

end of FY 2018.70 Because the reporting requirement was implemented for the first time in FY 2017,

little analysis has been conducted of the report itself.

Conclusions 

Congress created the cyber mission forces reporting requirement at 10 U.S.C. § 238(a) in the FY 2015

NDAA. The report is intended to promote congressional oversight of DoD’s Cyber Mission Force,

which is not scheduled to be fully operational until the end of FY 2018. Because the report has only

been in effect for 1 fiscal year, it is difficult to evaluate its relative merits; however, it appears the goals

of the Cyber Mission Force would be better served by withdrawing the report until DoD has had the

necessary time to implement its cyber strategy. After DoD has initiated the program, Congress could

determine whether the burden of a reporting requirement is justified. But it is unclear if the report is

necessary at the present time, and therefore difficult to validate its costs.  

The Office of the USD(AT&L) dissented from the Section 809 Panel’s recommendation.

DoD argued that due to the challenging nature of the current budgetary environment,

the report served a useful purpose by providing an opportunity to tell Congress “a clear

and unambiguous story regarding how much we are spending to man, train and equip

the CMF.”71 The panel opted not to alter its recommendation. A reporting requirement is

                                                     

64 FY 2015 NDAA, Pub. L. No. 113‐291, 128 Stat. 3638 (2014).   65 Ibid.  

66 Ibid.  

67 Ibid.  

68 Cyber Mission Forces: Program Elements, 10 U.S.C. § 238.   69 DoD, DoD Cyber Strategy, April 2015, accessed July 25, 2017, https://www.defense.gov/Portals/1/features/2015/0415_cyber‐

strategy/Final_2015_DoD_CYBER_STRATEGY_for_web.pdf   70 Under Secretary of Defense (Comptroller)/Chief Financial Officer, FY 2017 Defense Budget Overview, January 2019, accessed July 25, 

2017, http://comptroller.defense.gov/Portals/45/Documents/defbudget/fy2017/FY2017_Budget_Request_Overview_Book.pdf   71 Office of the Under Secretary of Defense for AT&L, ASD(A), email to Section 809 Panel staff, November 8, 2017.  
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an unwieldy instrument for congressional outreach, the report is not necessary to build

congressional support for the CMF, and other avenues are available to encourage

support for the CMF without the corresponding costs of the report.    

Subrecommendation 24f: Repeal the statutory requirement for the Corrosion Control and 

Prevention annual budget and policy report, 10 U.S.C. § 2228(e). 

Background 

10 U.S.C. § 2228(e) establishes a reporting requirement for implementing DoD’s long‐term strategy to

reduce corrosion in military equipment and infrastructure. The reporting requirement was initially

imposed in the FY 2008 NDAA, which added a new paragraph (e) to the existing Section 2228 that

governed DoD’s Office of Corrosion Policy and Oversight.72 Congress had previously empowered the

office to “oversee and coordinate efforts throughout the Department of Defense to prevent and mitigate

corrosion of the military equipment and infrastructure of the Department” through the development of

anticorrosion policies and programs.73 The office also possessed responsibility for monitoring DoD

acquisition practices to ensure that corrosion prevention technologies were properly integrated into the

acquisition process, and for developing a long‐term strategy to mitigate the effect of corrosion across

the department.74 The FY 2008 NDAA required the Secretary to disclose the funding requirements and

an estimated return on investment (ROI) for the implementation of the office’s long‐term anticorrosion

strategy, as well as provide a comparison with the actual funds requested in DoD’s annual budget and

a justification for any shortfall between required and requested funds.75 It also required the

Comptroller General to submit a second report to Congress that assessed DoD’s budget submission for

anticorrosion policy, as well as the department’s own anticorrosion report.76 Congress subsequently

altered the reporting requirement to encompass a greater level of detail and replaced the Comptroller

General’s role with a different requirement that the “corrosion control and prevention executive of a

military department” submit annual reports to the Director of Corrosion Policy and Oversight that

provided “recommendations pertaining to the corrosion control and prevention program of the

military department.”77 The most recent change occurred in the FY 2017 NDAA, in which Congress

amended the provision to establish an end date for the reporting requirement upon the submission of

the FY 2022 budget.78  

Findings 

The reporting requirement at 10 U.S.C. § 2228(e) arose due to the severity of the corrosion problem

confronting the Defense Department. Corrosion costs DoD tens of billions of dollars annually; in 2010,

the department estimated that the annual cost of equipment and infrastructure corrosion was

$22.9 billion.79 The Office of Corrosion Policy and Oversight was created to develop policies that would

reduce corrosion and coordinate the implementation of those policies throughout DoD. A 2013 GAO

                                                     

72 FY 2008 NDAA, Pub. L. No. 110‐181, 122 Stat. 79 (2008).   73 Office of Corrosion Policy and Oversight, 10 U.S.C. § 2228.   74 Ibid.  

75 FY 2008 NDAA, Pub. L. No. 110‐181, 122 Stat. 79 (2008).   76 Ibid.  

77 Office of Corrosion Policy and Oversight, 10 U.S.C. § 2228.   78 FY 2017 NDAA, Pub. L. No. 114‐328, 130 Stat. 2376 (2016).   79 GAO, Defense Management: The Department of Defense’s Fiscal Year 2012 Corrosion Prevention and Control Budget Request, April 13, 

2011, accessed July 14, 2017, http://www.gao.gov/assets/100/97425.pdf.  
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report concluded that DoD’s anticorrosion efforts were inadequate, both in terms of the quality of the

annual reports and the department’s ability to implement the recommendations of the reports.80 For

example, GAO stated that the military departments “did not always collect required information”

regarding ROI for corrosion projects, and that they were “unable to determine whether projects had

achieved their estimated ROI” as a result.81 DoD’s own internal estimates indicated that the annual cost

of corrosion remained essentially unchanged 7 years after the office was created, totaling $23.4 billion

annually through FY 2013.82 The inadequate quality of the reports posed an obstacle to congressional

oversight. Due to these shortcomings, it appears congressional support for the Office of Corrosion

Policy and Oversight itself is declining. In its version of the FY 2018 NDAA, the House of

Representatives voted to repeal 10 U.S.C. § 2228 and eliminate the USD(AT&L) office entirely, but

require the Military Services to oversee their own anti‐corrosion policy efforts.83 The final version of the

NDAA preserved the office but mandated a one‐time report from the Secretary to evaluate “the

continued need for the Office of Corrosion Policy and Oversight,” as well as to recommend “whether to

retain or terminate the Office.”84 The provision sends a clear signal regarding congressional

unhappiness with DoD’s current anticorrosion framework. Congress’s decision to set a separate

termination date for the reporting requirement in conjunction with the submission of the FY 2022

budget suggests that Congress views the current report at 10 U.S.C. § 2228(e) with similar skepticism.85

Conclusions 

In its recent actions, Congress has already signaled that the corrosion control reporting requirement at

10 U.S.C. § 2228(e) is likely to be eliminated over the next several years. In the FY 2017 NDAA,

Congress specifically voted to establish an end date for the report alongside the FY 2022 budget. In the

FY 2018 NDAA, Congress expressed skepticism about the very existence of the Office of Corrosion

Policy and Oversight. The report does not appear to have assisted in mitigating the problem of

corrosion within DoD, as the costs of corrosion have remained largely unchanged since its creation.  

The Office of Corrosion Policy and Oversight dissented from the Section 809 Panel’s

recommendation. The office defended the report’s value in providing Congress with “an

accounting of corrosion prevention and mitigation,” while highlighting DoD’s

“corrosion cost avoidance.”86 After receiving this comment, the panel opted not to alter

its recommendation because the comment did not directly address the concerns raised

by the panel’s analysis.

                                                     

80 GAO, Defense Management: DOD Should Enhance Oversight of Equipment‐Related Corrosion Projects, September 2013, accessed 

July 14, 2017, http://www.gao.gov/assets/660/657498.pdf.   81 Ibid.  

82 Joint Technology Exchange Group, Topic: Corrosion Prevention and Repair, March 30, 2015, accessed July 14, 2017, 

http://jteg.ncms.org/wp‐content/gallery/20150330_Corrosion/JTEG%20Corrosion%20Forum%20%28Combined%29%20pdf.pdf.   83 National Defense Authorization Act for Fiscal Year 2018, House of Representatives, H.R. 2810, Sections 902 and 903 (2017), 

https://www.congress.gov/congressional‐report/115th‐congress/house‐report/404/1?overview=closed.    84 FY 2018 NDAA, Pub. L. No. 115‐91 (2017) 

85 FY 2017 NDAA, Pub. L. No. 114‐328, 130 Stat. 2376 (2016).   86 Office of Corrosion Policy and Oversight, email to Section 809 Panel staff, November 11, 2017.  
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Subrecommendation 24g: Repeal the statutory requirement for the Major Satellite 

Acquisition Programs annual integration report, 10 U.S.C. § 2275. 

Background 

10 U.S.C. § 2275 establishes a reporting requirement for the integration of acquisition and delivery

schedules within major satellite acquisition programs (MSAP). The reporting requirement was initially

imposed in the FY 2013 NDAA, which created a new section 2275 of Title 10.87 The original statutory

language of section 2275 directed the USD(AT&L) to submit reports to Congress disclosing the total

funding for all MSAPs, as well as the extent to which the schedules for the acquisition and delivery of

capabilities had been integrated for each program.88 The statute compelled a unique report for each

MSAP. In addition to certain cost and capability requirements, the reports were required to assess

whether the MSAP was a nonintegrated program due to a failure to integrate “the schedules for the

acquisition and the delivery of the capabilities of the segments for the program.”89 If such a

nonintegrated designation was declared for any MSAP by the USD(AT&L), the statute called for a

second phase of reporting requirements to enhance congressional oversight over the program. The

USD(AT&L) was obligated to evaluate the impact of the program’s nonintegration on its mission and

describe the actions being enacted to achieve full integration.90 The USD(AT&L) was also obligated to

submit annual update reports to Congress on the integration status of each nonintegrated MSAP until

the program had achieved integration, or until 5 years had passed, after which the reporting

requirement for the program would terminate but an automatic GAO review of the program would be

triggered.91 There have been no subsequent amendments to the report requirement, and 10 U.S.C.

§ 2275 remains unchanged.92    

Findings 

The reporting requirement at 10 U.S.C. § 2275 stemmed from longstanding concerns regarding the

impact of flawed integration strategies on the cost and schedule objectives of major satellite acquisition

programs. In 2007, the Air Force’s Space and Missile Systems Center reconstituted a program

management assistance group that was charged with improving persistent system integration

difficulties.93 As a consequence, Congress sought to improve integration strategies for MSAPs by

passing 10 U.S.C. § 2275 in the FY 2013 NDAA, which required DoD to craft broad outlines for the

integration of acquisition and delivery schedules and strengthened congressional oversight over the

process.94 Congress acted in the belief that a more intensive effort to monitor major satellite acquisition

schedules would prompt DoD to strengthen its own synchronization efforts.95 The effort has had mixed

results. A RAND study published in 2015 concluded that integration difficulties continue to be one of

                                                     

87 FY 2013 NDAA, Pub. L. No. 112‐239, 126 Stat. 1870 (2013).   88 Ibid.  

89 Ibid.  

90 Ibid.  

91 Ibid.  

92 Reports on Integration of Acquisition and Capability Delivery Schedules for Segments of Major Satellite Acquisition Programs and 

Funding for Such Programs, 10 U.S.C. § 2275. The provision was modified by a technical amendment in December 2014, but no 

substantive alteration occurred.   

93 GAO, Space Acquisitions: DOD Faces Challenges in Fully Realizing Benefits of Satellite Acquisition Improvements, March 21, 2012, 

accessed June 1, 2017, http://www.gao.gov/assets/590/589487.pdf.   94 GAO, Space Acquisitions: DOD Is Overcoming Long‐Standing Problems, but Faces Challenges to Ensuring Its Investments Are Optimized, 

April 24, 2013, accessed June 1, 2017, https://www.gao.gov/assets/660/654137.pdf.   95 Ibid.  
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the primary causes of cost growth and schedule delays in MSAP’s.96 A GAO report from 2015 noted

that a combination of congressional and DoD efforts had led to notable improvements in MSAP

performance in recent years.97 The nature of DoD’s major satellite programs is evolving in a manner

that could reduce vulnerability to integration problems in the near future because most of them have

advanced to their mature phases of acquisition, in which cost and schedule problems are diminished.98

Concerns over MSAP program integration that prompted the reports at 10 U.S.C. § 2275 in the first

place may not be representative of the main issues that will confront MSAPs in the years to come. For

those MSAP programs that still remain in the early stages, improvements in DoD’s oversight of MSAPs

could make the problems addressed by the report less pressing in the years to come.     

Conclusions 

The MSAP reporting requirement at 10 U.S.C. § 2275 is outdated in its focus on program integration.

Congress imposed the report to address flawed MSAP integration strategies that were driving up costs

and causing schedule delays in the early stages, but the maturation of most MSAP programs to mature

phases of acquisition has reduced the risk caused by those problems. Furthermore, the report has

contributed to improvements in early‐stage MSAP performance, which diminishes the need for the

report among those MSAP programs that have not yet matured. In effect, the report at 10 U.S.C. § 2275

is outmoded because it is directed at a problem that no longer undermines MSAP performance to the

extent that it did several years prior.  

The Office of the USD(AT&L) concurred with the Section 809 Panel’s recommendation.99   

Subrecommendation 24h: Repeal the statutory requirement for the Commercial Space 

Activities annual Cooperation with DoD report, 10 U.S.C. § 2276(e). 

Background 

10 U.S.C. § 2276(e) establishes a reporting requirement for DoD’s cooperation with the commercial

space industry. The reporting requirement was initially imposed in the FY 2013 NDAA, which created

10 U.S.C. § 2276.100 The statutory language of section 2276 included paragraph (e), which directed the

Secretary to submit an annual report to Congress regarding the funds, services and infrastructure that

were impacted by any collaboration between DoD and private sector companies in the commercial

space sector.101 Section 2276, as a whole, authorized DoD to approve use of its space transportation

infrastructure by private sector companies, in exchange for payments or services, to reduce the upkeep

costs for that infrastructure and enhance public‐private cooperation.102 The reporting requirement

encompassed any aspect of DoD space infrastructure that had been subject to private‐sector use

through the authority, as well as any funds that DoD had secured in exchange for providing use of the

                                                     

96 RAND, National Defense Research Institute, Acquisition of Space Systems: Past Problems and Future Challenges, Volume 7, 2015, 

accessed June 1, 2017, http://www.acq.osd.mil/parca/docs/2015‐rand‐MG1171z7.pdf.   97 GAO, Space Acquisitions: Some Programs Have Overcome Past Problems, but Challenges and Uncertainty Remain for the Future, 

April 29, 2015, accessed June 2, 2017, http://www.gao.gov/assets/670/669930.pdf.   98 Ibid.  

99 Office of the Under Secretary of Defense for AT&L, ASD(A), email to Section 809 Panel staff, November 8, 2017.  100 FY 2013 NDAA, Pub. L. No. 112‐239, 126 Stat. 1872 (2013).   101 Ibid.   102 Ibid.  
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infrastructure.103 The statute required the Secretary to submit the report to Congress by January 31 of

each year.104 There have been no subsequent amendments to the report requirement, and 10 U.S.C.

§ 2276(e) remains unchanged in its current form from the original statute.105

Findings 

The reporting requirement at 10 U.S.C. § 2276(e) emanated from the novel approach of using space

infrastructure that was sanctioned by Congress with the passage of the FY 2013 NDAA. Section 2276

permitted DoD to receive payments and services from commercial companies in exchange for granting

them the right to use the department’s space infrastructure for their own launch purposes.106 At the

time, NASA itself did not possess a similar authority.107 Advocates for the initiative touted the potential

for lower costs and greater efficiencies in maintaining DoD’s space infrastructure, without any risk of

compromising the department’s asset ownership and with flexibility in modifying its assets for future

purposes.108 Advocates also believed that the initiative could benefit the commercial space industry and

support the National Space Policy as a whole through a more effective use of national resources and

enhanced public‐private partnerships.109 Given the innovative nature of the new authority, the

reporting requirement at 10 U.S.C. § 2276(e) likely served as a means for Congress to assess its merits as

it was implemented. For example, Congress specified in an accompanying statement to the FY 2013

NDAA that the authority was “intended for those commercial entities who already operate at

Department of Defense sites or will be required to operate there due to the nature of the mission they

are conducting,” and the report would have served as a tool to ensure DoD was properly observing

congressional intent.110 In practice, the authority does not appear relevant due to the lack of interest

expressed by the commercial space sector. For example, a U.S. Air Force presentation in May 2014

noted that “no private sector entity has expressed interest in leveraging this provision.” There is no

indication that demand has increased in subsequent years.111  

Conclusions 

The commercial space reporting requirement at 10 U.S.C. § 2276(e) lacks a compelling rationale due to

DoD’s minimal use of the underlying space infrastructure authority. Congress created the report to

ensure transparency during the development of an innovative new process, through which DoD was

authorized to allow private‐sector companies to use the department’s space transportation

                                                     

103 Ibid.   104 Ibid.   105 Commercial Space Launch Cooperation, 10 U.S.C. § 2276.   106 U.S. Air Force, Title 10 USC, Sec 2276: Commercial Space Launch Cooperation, May 2014, accessed June 5, 2017, 

https://www.faa.gov/about/office_org/headquarters_offices/ast/advisory_committee/meeting_news/media/2014/may/20_Title_10_US

C_CSLC_May_2014.pdf.   107 Dan Leone, “NASA Wants More Spaceport Infrastructure Opened to Private Sector,” Space News, July 3, 2013, accessed January 5, 

2018, http://spacenews.com/36111nasa‐wants‐more‐spaceport‐infrastructure‐opened‐to‐private‐sector/.   108 U.S. Air Force, Title 10 USC, Sec 2276: Commercial Space Launch Cooperation, May 2014, accessed June 5, 2017, 

https://www.faa.gov/about/office_org/headquarters_offices/ast/advisory_committee/meeting_news/media/2014/may/20_Title_10_US

C_CSLC_May_2014.pdf.   109 Ibid.   110 FY 2013 NDAA, Pub. L. No. 112‐239, Joint Explanatory Statement of the Committee of Conference, 

https://www.ngaus.org/sites/default/files/NDAA%20Conference%20Report.pdf.   111 U.S. Air Force, Title 10 USC, Sec 2276: Commercial Space Launch Cooperation, May 2014, accessed June 5, 2017, 

https://www.faa.gov/about/office_org/headquarters_offices/ast/advisory_committee/meeting_news/media/2014/may/20_Title_10_US

C_CSLC_May_2014.pdf.  
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infrastructure in exchange for payments or services that could reduce upkeep costs for the

infrastructure. The need for congressional oversight was rooted in the program’s novelty. There is little

evidence that DoD has used the authority to an extent that could justify an annual report on its

operation. As long as the authority remains little‐used, the report lacks sufficient justification to remain

in existence. If DoD does begin to use the authority with greater frequency, Congress can scrutinize the

authority’s early performance and determine whether a new reporting requirement is necessary.  

The Section 809 Panel did not receive comments from DoD regarding this

recommendation.   

Subrecommendation 24i: Repeal the statutory requirement for the Depot-Level 

Maintenance overview report, 10 U.S.C. § 2466(d). 

Background 

10 U.S.C. § 2466(d) establishes a reporting requirement for the Secretary to submit to Congress the

percentage of funds expended in the preceding fiscal year, projected for the current fiscal year, and

projected for the subsequent fiscal year for performance of depot‐level maintenance. The report is due

within 90 days after the submission of the President’s budget. The reporting requirement was initially

imposed in the FY 1998 NDAA, which used a previously‐mandated, one‐time report as a model for the

permanent report.112 The initial version of the report only encompassed funds expended during the

preceding fiscal year, but subsequent amendments broadened the report to current and ensuing fiscal

years as well. The report encompasses each of the Armed Forces other than the Coast Guard, as well as

each Defense Agency.113  

Findings 

GAO has reviewed and written extensively on the depot‐level maintenance reports at 10 U.S.C.

§ 2466(d), highlighting the continuing errors, omissions, and weaknesses in the data reported. Starting

from 1999, the data collected were so error‐prone and inadequate that GAO “could not determine

whether the military services were in compliance with the 50‐percent ceiling,” which imposed a

50 percent cap on the annual percentage of depot funds that could be spent on contracting.114 In the

same report, GAO stated that it did not believe that DoD’s projections of future depot maintenance

expenditures for FYs 2000–2004 were “reasonably accurate.”115 In 2003, GAO released another report

that discussed the many deficiencies in the reported data, resulting in a recommendation to streamline

multiple reports into a single report that covered only a 3‐year period (prior year, current year, and

budget year) and to extend the deadline for the report to April 1 of each year.116 Despite the adoption of

some recommendations, GAO was still unable to validate DoD’s compliance with the 50‐percent ceiling

                                                     

112 FY 1998 NDAA, Pub. L. No. 105‐85, 111 Stat. 1695 (1997)   113 Limitations on the Performance of Depot‐Level Maintenance of Materiel, 10 U.S.C. § 2466.  114 GAO, Depot Maintenance: Action Needed to Avoid Exceeding Ceiling on Contract Workloads, August 2000, accessed June 29, 2017, 

http://www.gao.gov/assets/230/229470.pdf.  115 Ibid.   116 GAO, Depot Maintenance: DoD’s 50‐50 Reporting Should Be Streamlined, September 2003, accessed June 29, 2017, 

http://www.gao.gov/assets/230/229470.pdf. 
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or to determine its reported projections to be reasonably accurate due to persistently unreliable data.117

In 2005, GAO also noted that the reports did not provide analyses of annual changes, long‐term trends,

or methodologies used to prepare projections, which limited the reports’ usefulness for Congress to

exercise its oversight role.118 Seven years later, in the FY 2012 NDAA, Congress created a depot

maintenance reporting requirement at 10 U.S.C. § 2464(d) that addressed some of these concerns by

adopting a broader and longer‐term perspective on depot policy and mandating more detailed

justifications from DoD concerning projected shortfalls. The Section 809 Panel has recommended that

this requirement at 10 U.S.C. § 2464(d) be maintained.  

Conclusions 

Depot maintenance funding is a crucial matter, yet the reporting requirement at 10 U.S.C. § 2466(d) is

not the best mechanism to ensure the existence of proper transparency and oversight. Inaccurate data

has undermined the report’s value; the information submitted by DoD to Congress for many years was

flawed to such a large extent that analysts were unable to use it in the service of even basic conclusions.

The report’s narrow focus on funding has limited its utility to address broader issues of depot

maintenance, which may have contributed to the creation of a related report at 10 U.S.C. § 2464(d) that

has proven to be considerably more effective as a source of data for congressional oversight since its

creation in the FY 2012 NDAA. The broader mandate of 10 U.S.C. § 2464(d) and its greater success with

data collection has created a redundancy of effort for the report at 10 U.S.C. § 2466(d). For the reasons

stated above, the Section 809 Panel recommends that Congress repeal this reporting requirement.

The Office of the Assistant Secretary of Defense for Logistics and Material Readiness

(L&MR) dissented from the Section 809 Panel’s recommendation. L&MR argued that the

reports at 10 U.S.C. § 2464(d) and 10 U.S.C. § 2466(d) are “complementary,” and that the

former focuses on establishing the proper “organic capabilities” for depot maintenance

while the latter focuses on ensuring sufficient resource commitment to sustain “core

[depot] capabilities.”119 After receiving this comment, the panel opted not to alter its

recommendation in the belief that the report at 10 U.S.C. § 2464(d) is a more effective

vehicle for congressional oversight of depot maintenance policies than the report at

10 U.S.C. § 2466(d). The extent to which the two reports may be complementary does not

outweigh the issues of data quality and redundancy that lessen the value of the report at

10 U.S.C. § 2466(d).

Subrecommendation 24j: Repeal the statutory requirement for the Covered Naval Vessels 

Repair Work in Foreign Shipyards annual report, 10 U.S.C. § 7310(c). 

Background 

10 U.S.C. § 7310(c) establishes a reporting requirement for DoD’s use of foreign shipyards in the repair

and maintenance of covered naval vessels. The reporting requirement was initially imposed in the

                                                     

117 GAO, Depot Maintenance: Actions Needed to Provide More Consistent Funding Allocation Data to Congress, November 2006, accessed 

June 29, 2017, http://www.gao.gov/assets/260/254047.pdf.   118 GAO, Depot Maintenance: Persistent Deficiencies Limit Accuracy and Usefulness of DoD’s Funding Allocation Data Reported to 

Congress, November 2005, accessed June 29, 2017, http://www.gao.gov/assets/250/248595.pdf.   119 Office of the Assistant Secretary of Defense for Logistics & Material Readiness, email to Section 809 Panel staff, November 8, 2017.  
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FY 2009 NDAA, which amended the existing 10 U.S.C. § 7310.120 The underlying text of the section was

already in place by enactment of the FY 2009 NDAA, namely stating that naval vessels based out of

homeports in the United States were prohibited from being “overhauled, repaired, or maintained in a

shipyard outside the United States or Guam, other than in the case of voyage repairs.”121 Furthermore,

naval vessels based out of homeports overseas were prohibited from receiving repair work in those

shipyards for a period of 15 months before any planned reassignment to a shipyard in the United

States, and naval vessels based in U.S. homeports were required to receive repair work in those

shipyards for a period of 15 months before any planned reassignment to a homeport overseas.122 Upon

its creation, the reporting requirement in paragraph (c) provided an overview of the number of naval

vessels that fell within the section’s authority. Congress mandated that the Secretary of the Navy

submit the report annually, and that each report detail “all repairs and maintenance performed on any

covered naval vessel that has undergone work for the repair of the vessel in any shipyard outside the

United States or Guam.”123 Each report was to assess the previous fiscal year, rather than the fiscal year

in which it was being submitted.124 Congress determined a precise set of criteria that were required for

incorporation into each report, including the percentage of the Navy’s annual ship repair budget that

was dedicated to the repair of covered vessels in foreign shipyards; the legal justification for the use of

foreign shipyards; the name and class of any vessel, and the category of repair undertaken in any

foreign shipyard; the location of any foreign shipyard used for repairs; details regarding the duration,

cost, and schedule of any repairs in a foreign shipyard; and the nature of the contract for any repairs

performed in a foreign shipyard.125 The reporting requirement has not been amended since the FY 2009

NDAA.126  

Findings 

Along with a related report in section 1017(e) of the FY 2007 NDAA, the reporting requirement in

10 U.S.C. § 7310(c) constitutes another aspect of Congress’s longstanding commitment to support the

domestic shipbuilding industry. Section 7310 is one of several legislative initiatives undertaken by

Congress to bolster domestic shipyards, including the Jones Act (which mandates domestic ownership

of all domestic maritime shipping), 10 U.S.C. § 7309, and 14 U.S.C. § 665.127 The reporting requirement,

implemented at the end of 2008, further strengthened congressional ability to monitor DoD’s use of

foreign shipyards for repairs on naval vessels. There is little evidence, however, to support the notion

that naval vessels seeking repairs in foreign shipyards represent a practical problem for naval

operations, which raises the question as to whether domestic factors are outweighing military

considerations in the operation of the reporting requirement. The issue of naval repairs in foreign

shipyards appears to have more salience as a domestic matter than as a military concern.  

                                                     

120 FY 2009 NDAA, Pub. L. No. 110‐417, 122 Stat. 4584 (2008).   121 Overhaul, Repair, Etc. of Vessels in Foreign Shipyards: Restrictions, 10 U.S.C. § 7310.   122 Ibid.   123 FY 2009 NDAA, Pub. L. No. 110‐417, 122 Stat. 4584 (2008).   124 Ibid.   125 Ibid.   126 Overhaul, Repair, Etc. of Vessels in Foreign Shipyards: Restrictions, 10 U.S.C. § 7310.   127 National Defense University, Shipbuilding Industry 2011, Spring 2011, accessed June 19, 2017, 

http://es.ndu.edu/Portals/75/Documents/industry‐study/reports/2011/icaf‐is‐report‐shipbuilding‐2011.pdf.  
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Conclusions 

The foreign shipyard repair and maintenance reporting requirement at 10 U.S.C. § 7310(c) lacks a

compelling policy rationale. Federal support for the domestic shipbuilding sector is a longstanding

national policy; however, the reporting requirement itself has only existed since 2009, marking it as a

recent supplement to a policy framework that had existed for many decades prior. The report is not

justified as a useful tool for naval repairs oversight, which is ostensibly the subject of the report. The

report’s inadequate justification and limited policy effect render it difficult to support on substantive

grounds.  

The Section 809 Panel did not receive comments from DoD regarding this

recommendation.     

Subrecommendation 24k: Repeal the statutory requirement for the Reserve Component 

Equipment annual procurement report, 10 U.S.C. § 10543(a). 

Background 

10 U.S.C. § 10543(a) establishes a reporting requirement for the proposed expenditures and

appropriations supporting the major procurement activities of the Reserve Components of the armed

forces. The reporting requirement was initially imposed in the FY 1997 NDAA, which created 10 U.S.C.

§ 10543.128 The provision required the Secretary to disclose to Congress “the estimated expenditures

and the proposed appropriations” underlying equipment and military construction procurement for

“each of the Reserve Components of the armed forces.”129 The report was due to be completed annually

and submitted as a part of the annual future‐years defense program report under 10 U.S.C. § 221.130

Although Congress has subsequently broadened the scope of section 10543 as a whole, the reporting

requirement in paragraph (a) has not been amended since the FY 1997 NDAA.131

Findings 

The reporting requirement at 10 U.S.C. § 10543(a) arose due to congressional concerns over inadequate

equipment provisions for the National Guard and Reserve Components. As early as 1983, the Army

recognized the need to enhance reserve readiness by establishing the Minimum Essential Equipment

for Training program, which intended to “identify, by unit, specific types and quantities of equipment

that were critical to training in Reserve Component units and to give those units priority.”132 The

initiative failed due to poor management, however, and Congress increasingly took notice in the early

1990’s due to fears that “shortages of essential equipment continue to hamper Army National Guard

and Army Reserve efforts to conduct effective training.”133

Amidst ongoing DoD struggles to properly equip the Reserve Components, Congress mandated the

annual report on Reserve Component equipment and military construction in 1996 as part of its effort

                                                     

128 FY 1997 NDAA, Pub. L. No. 104‐201, 110 Stat. 2699 (1996).   129 Ibid.   130 Ibid.   131 National Guard and Reserve Component Equipment Procurement and Military Construction Funding: Inclusion in Future‐Years 

Defense Program, 10 U.S.C. § 10543. 

132 GAO, Army Reserve Components: Minimum Essential Equipment for Training Has Not Been Effectively Managed, May 1990, accessed 

June 20, 2017, http://www.gao.gov/assets/220/212554.pdf.   133 Ibid.  
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to ensure that the reserves received adequate funding to maintain a proper degree of readiness.134 The

effect of the report in the intervening 2 decades is questionable. The policy dilemma remains acute: As

recently as March 2017, the Army’s deputy chief of staff for operations (G‐3) acknowledged to

Congress that reserve readiness remained problematic due to shortfalls in personnel, training and

equipment.135 Nevertheless, the report itself is made redundant by 10 U.S.C. § 10541 (National Guard

and Reserve Component Equipment: Annual Report to Congress), which requires a comprehensive

submission to Congress regarding numerous facets of equipment procurement for the National Guard

and the Reserve Components.136  

The information provided by the report at 10 U.S.C. § 10543(a) is already contained within the larger

report at 10 U.S.C. § 10541, which was first created in 1990 and predates the later report by half a

decade.137 A 2007 analysis by the Federal Research Division of the Library of Congress cited the report

at 10 U.S.C. § 10541 repeatedly as the primary source for Reserve Component funding data, without

mentioning the separate report at 10 U.S.C. § 10543(a).138 The relationship between the two reports

indicates that the report at 10543(a) has not fulfilled its original purpose.  

Conclusions 

The Reserve Component equipment procurement reporting requirement at 10 U.S.C. § 10543(a) is made

redundant by 10 U.S.C. § 10541, which represents the paramount source of congressional oversight for

Reserve Component and National Guard readiness. This redundancy deprives the report at 10 U.S.C.

§ 10543(a) of much of its potential value. Reserve Component equipment readiness remains an

important issue, but a duplicative report can distract from proper congressional oversight as much as it

can inform. In light of its overlapping condition, the limited benefits of the report do not justify its

continuation.  

The Office of the Under Secretary of Defense for Personnel and Readiness concurred

with the Section 809 Panel’s recommendation.139    

Subrecommendation 24l: Repeal the statutory requirement for the Reserve Components 

annual procurement threshold report, 10 U.S.C. § 10543(c). 

Background 

The reporting requirement established by 10 U.S.C. § 10543(c) is closely related to the reporting

requirement at 10 U.S.C. § 10543(a), discussed above. Paragraph (a) of section 10543 requires that DoD

detail the estimated expenditures and proposed appropriations for Reserve Components in regards to

equipment procurement and military construction, and paragraph (c) creates a conditional report for

                                                     

134 RAND, Equipping the Reserve Components of the Armed Services, 1997, accessed June 20, 2017, 

https://www.rand.org/content/dam/rand/pubs/documented_briefings/2005/DB209.pdf.    135 Charlsy Panzino, “3‐Star: More Training Days for the Guard as the Army Struggles with Readiness,” Army Times, March 8, 2017, 

accessed January 5, 2018, https://www.armytimes.com/articles/3‐star‐more‐training‐days‐for‐the‐guard‐as‐the‐army‐struggles‐with‐

readiness.   136 National Guard and Reserve Component Equipment: Annual Report to Congress, 10 U.S.C. § 10541.   137 FY 1991 NDAA, Pub. L. No. 101‐510, 104 Stat. 1714 (1990).    138 Federal Research Division, Funding for Reserve Component Equipment: An Analysis of the Budget Process, November 2007, accessed 

June 20, 2017, https://www.loc.gov/rr/frd/pdf‐files/CNGR_Funding‐Equipment.pdf.   139 Office of the Under Secretary of Defense for Personnel and Readiness, email to Section 809 Panel staff, November 29, 2017.  
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DoD in the event that the department’s funding request for equipment procurement and military

construction falls short of a congressionally‐mandated threshold. The reporting requirement in

paragraph (c) was imposed in the FY 1998 NDAA as an amendment to the existing section 10543,

which had been created the previous year.140 The statute asserted that DoD must aggregate its annual

funding requests for Reserve Component equipment procurement and military construction, and then

determine whether the aggregate request equaled at least 90 percent of the “average authorized

amount applicable for that fiscal year.”141 If the aggregate request failed to meet the 90 percent

threshold, the Secretary was obligated to submit a report to Congress that specified “the additional

items of equipment that would be procured, and the additional military construction projects that

would be carried out” if the funding request was elevated to the 90 percent threshold.142 In the FY 2012

NDAA, Congress amended the reporting requirement to allow more time for the Secretary to complete

the report by extending the period from 15 days to 90 days after the submission of the presidential

budget.143 No other amendments to the provision have occurred since the FY 1998 NDAA.144

Findings 

The reporting requirement at 10 U.S.C. § 10543(c) is linked to the Reserve Component equipment

procurement report at 10 U.S.C. § 10543(a). The report at 10 U.S.C. § 10543(c) is conditional in nature—

triggered by a failure to meet a funding threshold rather than a simple annual disclosure of data—yet it

is still inherently derived from the information produced in paragraph (a) of section 10543. As a result,

arguments regarding the efficacy of the annual report must also be considered in assessing the

conditional report. The two reports should be considered in tandem, and the redundancy of the report

in paragraph (a) affects the utility of the report in paragraph (c) as well.

Conclusions 

The Reserve Component reporting requirement at 10 U.S.C. § 10543(c) should be repealed for reason

similar to those justifying repeal of the report at 10 U.S.C. § 10543(a). The report arises on a provisional

basis if DoD’s annual funding requests for Reserve Component equipment procurement and military

construction fall short of a designated threshold. That threshold is linked to information collected to

satisfy the obligation of 10 U.S.C. § 10543(a); however, as detailed above, the data provided by

10 U.S.C. § 10543(a) is duplicative with the primary Reserve Component report at 10 U.S.C. § 10541.

Even though the two reports emphasize different elements of the issue for Congress, their value is

mutually undermined by redundancy with 10 U.S.C. § 10541. The report’s utility is too limited to

justify its continuation.  

The Office of the Under Secretary of Defense for Personnel and Readiness concurred

with the Section 809 Panel’s recommendation.145  

                                                     

140 FY 1998 NDAA, Pub. L. No. 105‐85, 111 Stat. 1872 (1997).   141 Ibid.   142 Ibid.   143 FY 2012 NDAA, Pub. L. No. 112‐81, 125 Stat. 1587 (2011).   144 National Guard and Reserve Component Equipment Procurement and Military Construction Funding: Inclusion in Future‐Years 

Defense Program, 10 U.S.C. § 10543.  

145 Office of the Under Secretary of Defense for Personnel and Readiness, email to Section 809 Panel staff, November 29, 2017.  
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Subrecommendation 24m: Repeal the statutory requirement for the Missile Defense Agency 

annual overview report, FY 2002 NDAA, 232(h)(3). 

Background 

Section 232(h)(3) of the FY 2002 NDAA establishes an annual reporting requirement for the MDA test

program. In its original form, section 232 – which is classified as a note under 10 U.S.C. § 2431 –

required the DOT&E to “assess the adequacy and sufficiency of the Ballistic Missile Defense

Organization test program” for the preceding fiscal year.146 Congress also required the official to

submit a report by February 15 of each year that summarized the results of the assessment.147 The

reporting requirement was amended in the FY 2009 NDAA in order to broaden the scope of the report

by compelling the DOT&E to consider “the operational effectiveness, suitability, and survivability of

the ballistic missile defense system, and its elements, that have been fielded or tested before the end of

the fiscal year.”148 Thus, the annual report to Congress encompassed both a review of each year’s

Ballistic Missile Defense Organization test program (later amended to the MDA test program) and an

analysis of any ballistic missile programs that were fielded or tested that year. The substantive

components of the reporting requirement have not been amended since the FY 2009 NDAA.149   

Findings 

Section 232(h) originated during a period of reorganization and expansion in DoD’s ballistic missile

defense program. MDA emerged in its contemporary form in 2002, during a period in which the

administration of President George W. Bush signaled a strong commitment to increased funding for

missile defense programs.150 The reporting requirement at section 232(h)(3) was likely intended to

compel further transparency from MDA and enhance the ability of Congress to exercise an appropriate

level of oversight. Fifteen years later, however, the MDA test program remains flawed. A GAO report

from April 2016 determined that the test program was prone to “constant alterations,” which rendered

it difficult to “assess individual element and BMDS developmental progress and to trace the costs

associated with each test.”151 GAO offered a similarly critical perspective in May 2017, asserting that

MDA’s test program lacked an adequate degree of “traceability and insight” and suggesting that MDA

undertake to improve the test program’s consistency, scheduling, cost estimates and funding

disclosures.152 MDA’s test program is thus likely to remain a source of concern in the near future.

Conclusions 

The reporting requirement imposed in section 232(h)(3) of the FY 2002 NDAA does not provide enough

value to justify its perpetuation. The requirement overlaps with other missile defense reporting

requirements, such as 10 U.S.C. § 223a(a) and 10 U.S.C. § 225(c), as well as section 1662 of the FY 2015

NDAA, in that each possesses a focus on early‐stage developments within the ballistic missile program.

                                                     

146 FY 2002 NDAA, Pub. L. No. 107‐107, 115 Stat. 1039 (2001).   147 Ibid.   148 FY 2009 NDAA, Pub. L. No. 110‐417, 122 Stat. 4390 (2008).   149 Weapons Development and Procurement Schedules, 10 U.S.C. § 2431.  150 GAO, Defense Acquisitions: Missile Defense Agency’s Flexibility Reduces Transparency of Program Cost, April 30, 2007, accessed 

June 23, 2017, https://www.gpo.gov/fdsys/pkg/GAOREPORTS‐GAO‐07‐799T/html/GAOREPORTS‐GAO‐07‐799T.htm.   151 GAO, Missile Defense: Ballistic Missile Defense System Testing Delays Affect Delivery of Capabilities, April 28, 2016, accessed June 23, 

2017, http://www.gao.gov/assets/680/676855.pdf.   152 GAO, Missile Defense: Some Progress Delivering Capabilities, but Challenges with Testing Transparency and Requirements 

Development Need to be Addressed, May 2017, accessed June 23, 2017, http://www.gao.gov/assets/690/684963.pdf.  
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Further, the report has demonstrated little success at improving outcomes in the MDA testing program

in the 15 years since it was created. The report’s duplicative information and inability to support MDA

in achieving its goals of timeliness, transparency, and traceability supports the case for the

requirement’s repeal.  

MDA concurred with the Section 809 Panel’s recommendation.153 DOT&E dissented

from the recommendation. The office acknowledged that the report contained “some

similarities in report content” with the other MDA reports, but argued that the report

focused to a greater extent on the “adequacy of the MDA test program” than the other

reports. The panel opted not to alter its recommendation in the belief that redundancy in

report content between this report and the other MDA reports outweighs the report’s

value in terms of enhanced oversight.154      

Subrecommendation 24n: Repeal the statutory requirement for the Ford-Class Aircraft 

Carrier annual cost estimate report, FY 2007 NDAA, 122(d)(1). 

Background 

Section 122(d)(1) of the FY 2007 NDAA establishes a reporting requirement for deviations from the

Navy’s cost estimates regarding its Ford‐Class aircraft carrier program. Section 122 implemented a

framework for Navy procurement on the Ford‐Class program by mandating that the lead ship could

not exceed $10.5 billion in procurement funds, and all follow‐on ships could not exceed $8.1 billion in

procurement funds.155 The provision did authorize adjustments in the procurement budget for several

specified reasons, such as inflation, outfitting, and post‐delivery costs, the application of new

technologies, nonrecurring design and engineering costs, and safety deficiencies.156 The provision also

imposed conditions on the technology justification, namely that cost adjustments for new technologies

were only warranted if the technologies were projected to decrease life‐cycle costs or respond to

emerging threats that undermined American national security.157 In paragraph (d)(1) of the provision,

Congress directed the Secretary of the Navy to submit an annual report detailing “any change in the

amount” of the procurement budget for a Ford‐Class aircraft carrier under any of the official

justifications.158 The reporting requirement has not been amended since the FY 2007 NDAA.

Findings 

Despite the best efforts of Congress, the Ford‐Class aircraft carrier program has been plagued with cost

overruns in the decade since the passage of the FY 2007 NDAA. In June 2017, GAO reported that the

lead ship CVN‐78 had experienced 23 percent cost growth to an estimated $12.9 billion, more than

$2 billion in excess of the original congressional ceiling.159 At the same time, CVN‐78 was expected to

possess reduced capability at delivery despite the enormous additional funding that had been directed

                                                     

153 Missile Defense Agency, phone call with Section 809 Panel staff, November 29, 2017.   154 DOT&E, email to Section 809 Panel staff, December 8, 2017.   155 FY 2007 NDAA, Pub. L. No. 109‐364, 120 Stat. 2105 (2006).   156 Ibid.   157 Ibid.   158 Ibid.   159 GAO, Ford‐Class Aircraft Carrier: Follow‐On Ships Need More Frequent and Accurate Cost Estimates to Avoid Pitfalls of Lead Ship, 

June 2017, accessed June 27, 2017, https://www.gao.gov/assets/690/685241.pdf.  
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into its procurement.160 Follow‐on ships in the Ford‐Class program have not proven immune from

similar cost failings; the next ship, CVN‐79, is now projected to cost $11.4 billion, more than $3 billion

higher than the original congressional ceiling.161 GAO remains doubtful that the underlying cost

problems in the Ford‐Class program have been properly remedied. In the same report, GAO argued

that “the cost estimate for the second Ford‐Class aircraft carrier, CVN 79, is not reliable and does not

address lessons learned from the performance of the lead ship, CVN 78.”162 GAO’s analysis

demonstrates the intense oversight directed at the Ford‐Class program independently of the reporting

requirement at section 122(d)(1). In the past 10 years, GAO has conducted multiple assessments of the

Ford‐Class program’s budgetary development at the behest of Congress, publishing reports in 2007,

2013, 2014, 2015, and 2017.163 Furthermore, the CRS wrote a report on the history and status of the Ford‐

Class program in August 2017 and the SASC conducted a hearing on the Ford‐Class program in

October 2015.164 The program’s size and importance for the Navy’s future has produced a level of

intensive oversight that extends far beyond what the reporting requirement can provide. The report

itself is thus a marginal factor and subsequently of little value in congressional oversight of the Ford‐

Class program.   

Conclusions 

In recent years, separate oversight mechanisms have overtaken the Ford‐Class aircraft carrier reporting

requirement that was imposed in section 122(d)(1) of the FY 2007 NDAA. The need for vigilant

congressional oversight of the Ford‐Class program has not diminished, but the report itself is now a

peripheral component of oversight efforts led by congressional committees and offices such as GAO

and CRS. As a result of the intense scrutiny that the Ford‐Class program is likely to operate under for at

least the near‐term, the reporting requirement has become largely redundant to other oversight efforts.

The Navy’s Office of Legislative Affairs concurred with the Section 809 Panel’s

recommendation.165   

Subrecommendation 24o: Repeal the statutory requirement for the Carriage by Vessel 

annual Repair Work in Foreign Shipyards report, FY 2007 NDAA, 1017(e). 

Background 

Section 1017(e) of the FY 2007 NDAA establishes a reporting requirement for covered vessels that

undergo repair work at foreign shipyards. Section 1017 created a new provision that is classified as a

note under 10 U.S.C. § 2631.166 The statutory language of section 1017 identified the objective of the

provision as the maintenance of the national defense industrial base.167 To accomplish that aim,

Congress directed the Secretary to create an “acquisition policy” with a new criterion for “obtaining

                                                     

160 Ibid.   161 Ibid.   162 Ibid.   163 Ibid.   164 Congressional Research Service, Navy Ford (CVN‐78) Class Aircraft Carrier Program: Background and Issues for Congress, August 2017, 

accessed October 26, 2017, https://fas.org/sgp/crs/weapons/RS20643.pdf.   165 Department of the Navy, Office of Legislative Affairs, email to Section 809 Panel staff, December 14, 2017.   166 Supplies: Preference to United States Vessels, 10 U.S.C. § 2631.   167 FY 2007 NDAA, Pub. L. No. 109‐364, 120 Stat. 2379 (2006).  
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carriage by vessel of cargo.”168 The new criterion would require the consideration of “the extent to

which an offeror of such carriage had overhaul, repair, and maintenance work for covered vessels of

the offeror performed in shipyards located in the United States.”169 By this means, Congress directed

DoD to evaluate whether any company seeking a contract to deliver supplies to the department by ship

also utilized foreign shipyards for any repair or maintenance work on its fleet. The reporting

requirement at paragraph (e) instructed DoD to provide an annual overview to Congress regarding any

contractor to which the new acquisition policy applied, as well as the details of the contractor’s repair

work in foreign shipyards.170 The reporting requirement has not been amended since the FY 2007

NDAA.171  

Findings 

Similar to a related report at 10 U.S.C. § 7310(c), the report required by Section 1017(e) arose out of

Congress’s longstanding support for the use of domestic shipyards in the defense acquisition system. 172

Section 1017 of the FY 2007 NDAA broadened this support into a new aspect of the defense acquisition

system by requiring DoD to evaluate whether offerors used foreign or domestic shipyards for repair

and maintenance work on their covered vessels. Analogous to 10 U.S.C. § 7310(c), the report’s policy

rationale is limited and appears to be primarily rooted in domestic, rather than military, concerns.

Furthermore, the effect of the report on DoD’s supply system since its implementation is unclear.  

Conclusions 

In a similar fashion to the reporting requirement at 10 U.S.C. § 7310(c), the carriage by vessel reporting

requirement that was imposed in section 1017(e) of the FY 2007 NDAA lacks a compelling policy

justification. The report is aimed at bolstering the domestic shipbuilding sector by increasing the

scrutiny on contractors using foreign shipyards, but there is little evidence that the issue is

substantively important to DoD’s operations or that the report has even had a discernible impact. The

inadequate policy justification for the report argues against its continuation.  

The Section 809 Panel did not receive comments from DoD regarding this

recommendation.      

Subrecommendation 24p: Repeal the statutory requirement for the Bandwidth Capacity 

annual overview report, FY 2009 NDAA, 1047(d)(2). 

Background 

Section 1047(d)(2) of the FY 2009 NDAA establishes a reporting requirement in regards to the

bandwidth requirements for MDAPs. Section 1047 required the Secretary and the Director of National

Intelligence (DNI) to conduct an expansive joint review of the near, mid‐ and long‐range bandwidth

requirements for the military and intelligence communities.173 Congress mandated that the review

encompass existing bandwidth capacities, projected bandwidth capacities, possible technological

                                                     

168 Ibid.  169 Ibid.   170 Ibid.   171 Supplies: Preference to United States Vessels, 10 U.S.C. § 2631.   172 National Defense University, Shipbuilding Industry 2016, Spring 2016, accessed June 6, 2017, 

http://es.ndu.edu/Portals/75/Documents/industry‐study/reports/2016/es‐is‐report‐shipbuilding‐2016.pdf.   173 FY 2009 NDAA, Pub. L. No. 110‐417, 122 Stat. 4602 (2008).  
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developments that could impact bandwidth capacities, and strategies to mitigate shortfalls and meet

anticipated costs for bandwidth capacities for both communities.174 Congress also established a 1‐year

deadline, after the date of enactment, for the Secretary and DNI to submit a report to Congress

detailing the conclusions of the report.175 Finally, Congress directed the two officials to establish a

review process to guarantee that all MDAPs would enjoy the necessary bandwidth capacity in the

future, as a part of the Milestone B or Key Decision Point B approval process.176 One year later, with the

initial deadline having passed, Congress amended Section 1047 to eliminate the language referring to

the one‐time report.177 In its place, Congress established a new annual report to detail the conclusions

that the Secretary and the DNI had reached concerning the bandwidth requirements needed to support

MDAPs in the previous fiscal year.178 The reporting requirement has not been amended again since the

FY 2010 NDAA.179

Findings 

The reporting requirement at Section 1047(d)(2) was intended to facilitate congressional oversight of

DoD’s bandwidth acquisition system. In the years preceding the FY 2009 NDAA, DoD received

criticism for possessing a bandwidth acquisition structure that moved too slowly, lacked flexibility, and

imposed unnecessary costs.180 Despite the report, bandwidth acquisition remained troublesome for

DoD in the aftermath of the FY 2009 NDAA. A GAO report in July 2015 concluded that DoD’s

bandwidth acquisition system was still “fragmented and inefficient,” resulting in a constant struggle to

ensure that bandwidth requirements were achieved.181 GAO also criticized DoD for lacking the

necessary data to craft long‐term procurement decisions regarding bandwidth, and for failing to

overcome a decentralized system of bandwidth procurement.182 GAO’s critical assessment highlighted

the continuing difficulties confronting DoD’s attempts to ensure long‐term bandwidth support for

major programs, which was the central subject of the reporting requirement. Additionally, DoD did act

in September 2016 to improve the quality of bandwidth capacity planning through updated guidance

(DoDI 8420.02), yet the reporting requirement did not play a direct role in that process and is not well‐

positioned to convey the impact of any changes to Congress.183   

Conclusions 

The reporting requirement’s lack of success is rooted in its makeshift origin and ineffective

configuration. The report was initially intended to be a 1‐year report before it was made permanent in

the FY 2010 NDAA. The contemporary permanent report is overly broad and poorly targeted to

address the policy problem. The report imposes joint responsibility for bandwidth oversight onto the

Secretary and the DNI; such responsibility is ill‐suited for offices at that level, which are not ideal

sources for the detailed oversight required by the report. As a result, the report fails to properly direct

                                                     

174 Ibid.   175 Ibid.   176 Ibid.   177 FY 2010 NDAA, Pub. L. No. 111‐84, 123 Stat. 2449 (2009).   178 Ibid.   179 Major Defense Acquisition Programs: Certification Required Before Milestone B Approval, 10 U.S.C. § 2366b.   180 GAO, Defense Satellite Communications: DOD Needs Additional Information to Improve Procurements, July 2015, accessed June 27, 

2017, https://www.gao.gov/assets/680/671484.pdf.   181 Ibid.   182 Ibid.   183 DoD Satellite Communications (SATCOM), DoDI 8420.02 (2016).  
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its focus to generating the necessary data from DoD’s existing decentralized bandwidth system. The

report has outlived whatever initial usefulness it may have possessed, and its imperfect structure

undermines its utility to Congress and reduces the likelihood that tangible improvements in

bandwidth acquisition would arise from congressional oversight of its data.  

The office of the DoD Chief Information Officer concurred with the Section 809 Panel’s

recommendation.184   

Subrecommendation 24q: Repeal the statutory requirement for the Afghanistan 

Infrastructure Fund annual overview report, FY 2011 NDAA, 1217(i). 

Background 

Section 1217(i) of the FY 2011 NDAA establishes a reporting requirement in regards to a joint program

between DoD and the State Department to fund infrastructure projects in Afghanistan as a part of the

broader U.S. counterinsurgency strategy. Section 1217 created a new authority that is classified as a

note under 22 U.S.C. 7513.185 The statutory language of Section 1217 granted far‐reaching authority to a

joint DoD–State Department “Afghanistan Infrastructure Fund” to develop infrastructure projects—

described only as “water, power, and transportation projects; and other projects in support of the

counterinsurgency strategy in Afghanistan”—using up to $400 million in funds for the first fiscal year

of the program.186 Congress directed the Secretary to provide notification at least 30 days before using

any funds under the new program authority, explaining why the designated infrastructure project

would be sustainable and justifying the project’s counterinsurgency rationale.187 The reporting

requirement at paragraph (i) was intended to provide a general overview of the program by detailing

the “allocation and use of funds” under the program, as well as a “description of each project” funded

through the program authority.188 The reporting requirement, which was directed to the Secretary “in

coordination with the Secretary of State,” was automatically triggered for each fiscal year “in which

funds are obligated, expended, or transferred under the program.”189 Subsequent amendments

extended the funding authority through FY 2014 and imposed limitations on the total amount of

funding that could be utilized by DoD and State before submitting further justification to Congress.190

The reporting requirement itself has not been amended since its creation in the FY 2011 NDAA.191

Findings 

Section 1217 was intended to further strengthen America’s counterinsurgency strategy in Afghanistan

by funding “high‐priority, large‐scale infrastructure projects in support of the civil‐military campaign

in Afghanistan.”192 Within several years, the program authorized by Section 1217 appears to have

exhausted its congressional support. The most recent amendment to Section 1217 occurred in the

                                                     

184 DoD Chief Information Officer, email to Section 809 Panel staff, December 5, 2017.   185 Authorization of Assistance, 22 U.S.C. § 7513.   186 FY 2011 NDAA, Pub. L. No. 111‐383, 124 Stat. 4393 (2011).   187 Ibid.   188 Ibid.   189 Ibid.   190 Authorization of Assistance, 10 U.S.C. § 7513.  191 Ibid.   192 FY 2011 NDAA, Pub. L. No. 111‐383, Joint Explanatory Statement of the Committees on Armed Services of the U.S. Senate and House 

of Representatives, http://www.wifcon.com/dodauth11/hr6523_explan.pdf.  
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FY 2014 NDAA, in which funding authority for the Afghanistan Infrastructure Fund was authorized

through FY 2014 at a lower level of funding ($250 million, as compared to $350 million in FY 2013 and

the original $400 million in FY 2011).193 Congress opted not to provide any further funding authority to

the Section 1217 program after FY 2014. Congress also approved two additional requirements that

signaled its intention to end the program as a source of funding for new infrastructure projects after

FY 2014: (a) a new requirement upon the Secretary to assess whether the Afghan National Security

Forces were capable of providing security for infrastructure projects funded through the program in

FY 2014194 and (b) a mandate that the Secretary consult with the Secretary of State and the USAID

Administrator to draft a plan “for the transition to the Government of Afghanistan, or a utility entity

owned by the Government of Afghanistan, of the project management of projects funded with amounts

authorized by this Act for the Afghanistan Infrastructure Fund.”195 Congress also articulated the

contours of the plan, namely a description of all projects that would transition to Afghan control and an

assessment of the ongoing costs to the Afghan government and the United States of managing the

projects, as well as the capability of the Afghan government to manage the projects successfully.196

Congress effectively required DoD to submit a plan for the termination of the direct American role in

funding and maintaining infrastructure projects through the Afghanistan Infrastructure Fund. The

statutory language articulated in the FY 2014 NDAA remains in effect, which indicates that the fund no

longer possesses the authority to support new projects.

Conclusions 

As the Afghanistan Infrastructure Fund nears its end, the reporting requirement for the program that

was imposed in Section 1217(i) of the FY 2011 NDAA has lost its purpose. Congress created the report

to facilitate its oversight of the program, but the fund has lacked the authority to finance new projects

since the end of FY 2014. Congress’s decision to halt funding authority and instruct DoD to prepare for

the transition of infrastructure projects funded through the program to Afghan control signals that the

program is effectively defunct. In light of this, the oversight afforded by the report is no longer

necessary.  

The Section 809 Panel did not receive comments from DoD regarding this

recommendation.    

Subrecommendation 24r: Repeal the statutory requirement for the MDAP Testing and 

Evaluation annual justification of progress report, FY 2013 NDAA, 904(h)(1) and (2). 

Background 

Paragraphs (1) and (2) of Section 904(h) of the FY 2013 NDAA establish a reporting requirement to

detail MDAPs that proceed to testing and evaluation despite internal DoD objections. The statutory

language, which is classified as a note under 10 U.S.C. § 133, directed the USD(AT&L) to submit an

annual report to Congress that describes every instance in which an MDAP moved forward in the

testing and evaluation process over departmental objections. Congress specified that each report must

consist of two components: a record of every MDAP that “proceeded to implement a test and

                                                     

193 FY 2014 NDAA, Pub. L. No. 113‐66, 127 Stat. 907 (2013).   194 Ibid.   195 Ibid.   196 Ibid.  
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evaluation master plan” despite the Deputy Assistant Secretary of Defense for Developmental Test and

Evaluation’s [DASD(DT&E)] finding of disapproval for the plan; and a record of every MDAP that

“proceeded to initial operational testing and evaluation” despite the same official’s determination that

the program was not yet ready for operational testing.197 For both categories, Congress mandated that

the report explain the causes of the internal objections, the rationale behind DoD’s decision to proceed

with the program regardless, and the actions taken by DoD to address the internal concerns while

moving forward with testing and evaluation.198 Congress required the USD(AT&L) to submit the

annual reports within 60 days of the end of each fiscal year.199 Congress also specified that the reports

were only due between fiscal years 2013 and 2018, establishing a 5‐year timeline without any reference

to subsequent reporting requirements after fiscal year 2018.200 The reporting requirement in paragraphs

(1) and (2) has not been amended since the FY 2013 NDAA.201

Findings 

Section 904(h) of the FY 2013 NDAA was intended to address congressional discontent over the role of

the DASD(DT&E) within DoD’s testing and evaluation process. Congress established the position in

the FY 2009 NDAA for the purpose of strengthening the role of testing and evaluation in developing

major weapons systems.202 Within 4 years, however, Congress concluded that DoD had failed to

properly integrate the position into its internal structure. In a Joint Explanatory Statement that

accompanied the FY 2013 NDAA, Congress criticized DoD for failing to provide the necessary

resources, staff, and access to the position, as well as failing to ensure that the deputy assistant

secretary was fully assimilated into the department’s testing and evaluation process.203 Congress also

expressed concern that DoD had failed to give “adequate attention to shortcomings identified by

DASD(DT&E) in developmental testing.”204 This final objection was addressed in paragraphs (1) and

(2) of Section 904(h), which compelled DoD to submit a report to Congress disclosing any instance in

which the testing and evaluation process for an MDAP moved forward over the objections of the

DASD(DT&E).205 The reporting requirement was designed to assist the DASD(DT&E) in fully

integrating the oversight role that Congress had originally envisioned. It was also created with a 5‐year

sunset, indicating that Congress may have believed that a reporting requirement instituted for

bureaucratic reasons did not necessarily need to become a permanent fixture of congressional

oversight.

Conclusions 

The reporting requirement imposed by Congress in section 904(h)(1) of the FY 2013 NDAA is nearing

the end of its designated lifespan. Congress established that the report would sunset in FY 2018,

suggesting that Congress always intended for the report to serve a specific, short‐term purpose in

assessing DoD’s integration of the DASD(DT&E) into its broader testing and evaluation process. The

                                                     

197 FY 2013 NDAA, Pub. L. No. 112‐239, 126 Stat. 1868 (2013).   198 Ibid.  199 Ibid.   200 Ibid.   201 Under Secretary of Defense for Acquisition, Technology, and Logistics, 10 U.S.C. § 133.   202 FY 2013 NDAA, Pub. L. No. 112‐239, Joint Explanatory Statement of the Committee of Conference, 

https://www.ngaus.org/sites/default/files/NDAA%20Conference%20Report.pdf.    203 Ibid.   204 Ibid.   205 Ibid.  
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original congressional timeframe is appropriate, and the report does not need to be extended beyond

its current 5‐year window. The report’s sunset date offers a useful moment to evaluate the issue once

again without reflexively extending the report’s existence.  

The Section 809 Panel did not receive comments from DoD regarding this

recommendation.    

Subrecommendation 24s: Repeal the statutory requirement for the Ticonderoga-Class 

Cruisers and Dock Landing Ships annual modernization report, FY 2015 NDAA, 1026(d). 

Background 

Paragraph (d) of Section 1026 of the FY 2015 NDAA established a reporting requirement to bolster

congressional oversight of the Navy’s modernization of Ticonderoga‐Class cruisers and dock landing

ships. Section 1026 authorized the Navy to use funds from the Ship, Modernization, Operations, and

Sustainment Fund (SMOSF) to modernize eleven Ticonderoga‐Class cruisers and three Ticonderoga‐

class dock landing ships.206 The provision also detailed a series of requirements and limitations that the

Navy was required to obey over the course of the modernization.207 To ensure that the modernization

process adhered to congressional directives, Congress imposed a reporting requirement in paragraph

(d) of Section 1026. The requirement directed the Secretary of the Navy to submit annual reports

assessing the status of modernization efforts during each fiscal year that Ticonderoga‐Class

modernization was taking place.208 Congress specified a number of obligatory components for each

report, including an overview of “the status of modernization efforts, including availability schedules,

equipment procurement schedules, and by‐fiscal year funding requirements;” a description of vessel

readiness and operational status while undergoing modernization; a material condition assessment for

each vessel undergoing modernization; lists of rotatable pool equipment across the entire class, as well

as lists of non‐rotatable pool equipment that had been removed from each vessel and justifications for

the removal; and per‐vessel cost projection statements illustrating the estimated obligations for the

remainder of the modernization, as compared to remaining funds in the SMOSF.209 As a further

consequence of the reports, Congress required the Secretary of the Navy to disclose any “material

deviations” from projected per‐vessel modernization costs within 30 days.210 The reporting

requirements in paragraph (d) have not been amended since the FY 2015 NDAA.

Findings 

Section 1026 of the FY 2015 NDAA represented an effort on the part of Congress to thwart the Navy’s

potential decommissioning of a number of Ticonderoga‐Class cruisers and dock landing ships. The

dispute was rooted in the spending restrictions of the Budget Control Act of 2011, which prompted the

Navy to announce that it would decommission seven Ticonderoga‐class cruisers and two amphibious

vessels to save $6 billion through FY 2017.211 In the face of congressional opposition to the proposal, the

                                                     

206 FY 2015 NDAA, Pub. L. No. 113‐291, 128 Stat. 3490 (2014).   207 Ibid.   208 Ibid.   209 Ibid.   210 Ibid.   211 GAO, Military Capabilities: Navy Should Reevaluate Its Plan to Decommission the USS Port Royal, April 2014, accessed July 24, 2017, 

http://www.gao.gov/assets/670/662376.pdf.  
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Navy changed course and offered a revised plan to temporarily inactivate 11 of its 22 Ticonderoga‐

Class cruisers in order to modernize the ships.212 Congress remained skeptical, however, and feared

that the Navy could use a temporary inactivation as a pretext for a permanent decommissioning.213

Congress responded by imposing constraints on the Navy’s modernization process for the

Ticonderoga‐class vessels through Section 1026, which ensured that modernization would proceed on a

regular schedule without compromising the ability of the ships to rejoin the active fleet at any time.214

Congress signaled its intent with clarity in the conference report accompanying the FY 2015 NDAA,

declaring that “we also expect the Secretary [of the Navy] to ensure that these ships are maintained in

the inventory until the end [sic] their expected service lives, excluding time spent in a phased

modernization status.”215 The reporting requirement itself was designed to provide Congress with the

necessary information to ensure that the Navy was properly implementing the modernization in line

with congressional intent; however, circumstances have changed since 2015. The Trump

Administration’s stated goal to dramatically expand the size of the Navy has led naval officials to

explore potential options for integrating the Ticonderoga‐Class vessels back into the active fleet for a

longer period of time.216 The direction of the Ticonderoga‐Class program has shifted away from a clash

between Congress and the Navy over the future of the program, and appears likely to return to a

consensus in favor of an extended role in the active fleet.  

Conclusions 

Congress imposed the Ticonderoga‐Class modernization reporting requirement in Section 1026(d) of

the FY 2015 NDAA in response to circumstances that have changed. The report represented part of a

congressional effort to ensure that the Navy did not decommission a series of Ticonderoga‐Class

cruisers and dock landing ships under the pretext of temporary inactivation and modernization. At

present, however, the Trump Administration is seeking expansion of the active fleet and as a result, the

Navy appears less likely to pursue Ticonderoga‐Class decommissioning. The report is outdated in light

of this expansion.  

The Navy’s Office of Legislative Affairs concurred with the Section 809 Panel’s

recommendation.217

Subrecommendation 24t: Repeal the statutory requirement for the Ballistic Missile Defense 

Systems annual preproduction assessment reports, FY 2015 NDAA, 1662(c)(2) and (d)(2). 

Background 

Paragraphs (c)(2) and (d)(2) of Section 1662 of the FY 2015 NDAA establish two reporting requirements

to facilitate congressional oversight of DoD’s missile defense systems prior to production and

                                                     

212 Defense News, “US Navy’s Cruiser Problem – Service Struggles Over Modernization, Replacements,” July 7, 2014, accessed July 28, 

2018, http://www.defensenews.com/pentagon/2014/07/07/us‐navy‐s‐cruiser‐problem‐service‐struggles‐over‐modernization‐

replacements/.   213 Ibid.   214 FY 2015 NDAA, Pub. L. No. 113‐291, Joint Explanatory Statement of the Committee of Conference, https://www.armed‐

services.senate.gov/imo/media/doc/113‐S1847‐JES.pdf.   215 Ibid.   216 Breaking Defense, “More Maintenance $$ Gets Navy to 355 Ships Sooner: NAVSEA,” June 1, 2017, accessed January 5, 2018, 

https://breakingdefense.com/2017/06/more‐maintenance‐gets‐navy‐to‐355‐ships‐sooner‐navsea/.   217 Department of the Navy, Office of Legislative Affairs, email to Section 809 Panel staff, December 14, 2017.  
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deployment. The statutory language, which is classified as a note under 10 U.S.C. § 2431, sought to

strengthen DoD’s testing and assessment procedures for ballistic missile defense systems by requiring

“sufficient and operationally realistic testing” for each system before a final decision to approve

production and deployment.218 To support that goal, the provision required that the Secretary receive

two additional assessments before advancing the production and deployment of ballistic missile

systems. Congress assigned the first assessment to the DOT&E, with a mandate to consider “the

sufficiency, adequacy, and results of the testing of each covered system, including an assessment of

whether the covered system will be sufficiently effective, suitable, and survivable when needed.”219 The

second assessment was assigned to the Commander of the United States Strategic Command, with a

mandate to perform “a military utility assessment of the operational utility of each covered system.”220

In both instances, Congress also created a reporting requirement for the DOT&E and the Commander

of the U.S. Strategic Command to submit a summary of their assessments to Congress after submitting

the assessments to the Secretary.221 These reporting requirements in paragraphs (c)(2) and (d)(2) have

not been amended since the FY 2015 NDAA.222

Findings 

Congress hoped the required assessments in paragraphs (c) and (d) of Section 1662, as well as the fact

that the Secretary was obligated to review them before advancing to the production phase, would

impose further discipline on DoD’s missile defense programs by facilitating a more judicious decision‐

making process from testing and evaluation to production and deployment.223 The reason for the

provision was congressional unease with the pace of DoD’s progression from ballistic missile

development and testing to production, which had sparked concerns in multiple programs. For

example, a GAO report in February 2016 asserted that DoD’s progress with its homeland missile

defense program relied upon “a highly optimistic, aggressive schedule that overlaps development and

testing with production activities, compromises reliability, extends risk to the warfighter, and risks the

efficacy of flight testing.”224 The report followed a previous GAO analysis in April 2014, in which the

agency concluded that DoD’s ground‐based midcourse defense system suffered from “major

disruptions” due to a series of test failures that occurred “in conjunction with a highly concurrent

development, production, and fielding strategy.”225 GAO also identified further risk in DoD’s

Redesigned Kill Vehicle program, which proposed to “[align] production decisions with flight

testing.”226 GAO noted that it had issued recommendations to DoD revolving around “including

sufficient schedule and resource margin in its test plan, and aligning production decisions with flight

testing.”227 The agency also noted that DoD had largely concurred with the recommendations and

                                                     

218 FY 2015 NDAA, Pub. L. No. 113‐291, 128 Stat. 3657 (2014).   219 Ibid.   220 Ibid.   221 Ibid.   222 Weapons Development and Procurement Schedules, 10 U.S.C. § 2431.   223 FY 2015 NDAA, Pub. L. No. 113‐291, Joint Explanatory Statement of the Committee of Conference, https://www.armed‐

services.senate.gov/imo/media/doc/113‐S1847‐JES.pdf.   224 GAO, Missile Defense: Assessment of DoD’s Reports on Status of Efforts and Options for Improving Homeland Missile Defense, 

February 17, 2016, accessed June 22, 2017, http://www.gao.gov/assets/680/675263.pdf.   225 Ibid.    226 Ibid.    227 Ibid.  
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pledged to implement them.228 DoD had yet to implement several of these crucial recommendations by

February 2016.229 As recently as May 2017, GAO concluded again that “the [ballistic missile defense]

program is still operating at a self‐imposed fast pace, as production and fielding of assets occurs

despite the inability to thoroughly validate them due to testing delays.”230 DoD’s willingness to proceed

with the production and deployment of ballistic missile systems before achieving testing goals

continues to pose challenges for the department.

Conclusions 

The ballistic missile preproduction reporting requirement that was imposed in Section 1662(c)(2) and

(d)(2) of the FY 2015 NDAA is too limited and duplicative to truly address the problem. The provision

merely requires the Secretary to review the reports from DOT&E and Strategic Command, with no

imperative to adhere to their suggestions before advancing to production and deployment. The

provision is also redundant with previously existing ballistic missile reporting requirements,

particularly the reports at 10 U.S.C. § 223a(a) and 10 U.S.C. § 225(c), as well as Section 232 of the

FY 2002 NDAA. All of the reports focus on early‐stage developments within ballistic missile programs.

GAO analysis offers little evidence to support the idea that DoD has improved its processes in the

period since the report was imposed. The duplicative nature and limited effect of the report fail to

justify its continuation.  

MDA concurred with the Section 809 Panel’s recommendation,231 but DOT&E dissented.

DOT&E acknowledged that the Section 1662 (c)(2) report contained “some similarities in

report content” with the other MDA reports, but argued that the report was uniquely

“event‐driven” in terms of acquisition milestones. The panel opted not to alter its

recommendation in the belief that the redundancy in report content between this report

and the other MDA reports outweighs the report’s value in terms of enhanced

oversight.232      

   

                                                     

228 Ibid.    229 Ibid.    230 GAO, Missile Defense: Some Progress Delivering Capabilities, But Challenges with Testing Transparency and Requirements 

Development Need to be Addressed, May 2017, accessed June 22, 2017, http://www.gao.gov/assets/690/684963.pdf.    231 Missile Defense Agency, phone call with 809 Panel Staff, November 29, 2017.   232 DOT&E, email to Section 809 Panel staff, December 8, 2017.  
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THE PANEL RECOMMENDS THE FOLLOWING STATUTORY REPORTING REQUIREMENTS 

BE PRESERVED SUBJECT TO THE EVERY 5 YEARS SUNSET REVIEW 

DESCRIBED IN RECOMMENDATION 23. 

Subrecommendation 24u: Preserve the statutory requirement for the Director of 

Operational Test and Evaluation annual overview report, 10 U.S.C. § 139(h). 

Background 

10 U.S.C. § 139(h) establishes a reporting requirement for DoD’s operational test and evaluation (T&E)

activities. The reporting requirement was initially imposed in the FY 1984 NDAA, which created a new

section 136a of Title 10 that later became section 139.233 The original statutory language of section 139

established DOT&E to serve as the “principal adviser to the Secretary of Defense on operational test

and evaluation” within DoD.234 The position was charged with overseeing all of DoD’ operational T&E

processes, as well as coordinating operational testing between agencies and evaluating the results of all

operational tests.235 Additionally, the statute directed DOT&E to submit an annual report to Congress

that provided a comprehensive summary of DoD’s operational T&E activities for each fiscal year.236 In

the subsequent 3 decades, the statutory basis for the position was subject to a large number of

amendments, and the reporting requirement was expanded as well to encompass any waivers or

deviations from testing and evaluation requirements that may have occurred in a given year.237

According to the current provision, the annual reports are due no later than January 31 of each year.238

Findings 

Congress created the DOT&E position during a period of budget growth for DoD’s research budget.

Funding for DoD’s RDT&E program surged in the 1980s as a result of the Reagan Administration’s

military build‐up, nearly doubling between FY 1980 and FY 1987.239 The reporting requirement likely

constituted an effort on the part of Congress to enhance oversight of DoD’s T&E budget, in accordance

with its larger funding commitment. In the subsequent 30 years, DoD’s RDT&E budget declined during

the 1990’s, surged after the September 11, 2001 terrorist attacks, and then declined once more to a stable

level at about $65 billion annually after FY 2013.240 Amidst these cycles, DOT&E has evolved into a

crucial component of DoD’s T&E process. A 2015 GAO report concluded that less than 10 percent of all

programs under the position’s jurisdiction between FY 2010 and FY 2014 were the subject of

“significant disputes” with the Military Services, and that the position possessed “valid and

substantive operational test‐related concerns for each program reviewed.”241 GAO also detailed that

disputes between DOT&E and the Military Services were resolved to DOT&E’s satisfaction, and that

                                                     

233 Section 1211, Department of Defense Authorization Act, 1984, Pub. L. No. 98‐94, 97 Stat. 684 (1983).   234 Ibid.   235 Ibid.   236 Ibid.   237 Director of Operational Test and Evaluation, 10 U.S.C. § 139.    238 Ibid.   239 Congressional Research Service, Defense Research: A Primer on the Department of Defense’s Research, Development, Test and 

Evaluation (RDT&E) Program, July 14, 1999, accessed June 8, 2017, https://www.hsdl.org/?view&did=451511.   240 Congressional Research Service, Department of Defense Research, Development, Test, and Evaluation (RDT&E): Appropriations 

Structure, December 13, 2016, accessed June 8, 2017, https://fas.org/sgp/crs/natsec/R44711.pdf.   241 Government Accountability Office, DOD Operational Testing: Oversight Has Resulted in Few Significant Disputes and Limited Program 

Cost and Schedule Increases, June 2015, accessed June 8, 2017, http://www.gao.gov/assets/680/670565.pdf.  
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those resolutions caused “limited cost and schedule impacts to the programs.”242 GAO opted not to

make any recommendations regarding DOT&E’s oversight performance, indicating that the agency

was satisfied with the position’s role and authority.243

Conclusions 

The operational T&E reporting requirement at 10 U.S.C. § 139(h) is critical for the ability DOT&E to

fulfill the office’s mission. The position occupies an important role in DoD’s coordination efforts

throughout its test and evaluation budget, and the report itself is a central aspect of the office’s

functions. In recent years, DOT&E has made strides in terms of producing greater discipline and

efficiency in program T&E activities. The issue remains a priority for DoD, and the existence of the

report assists with both the office’s internal success and the ability of Congress to exercise proper

oversight.  

DOT&E concurred with the Section 809 Panel’s recommendation.244  

Subrecommendation 24v: Preserve the statutory requirement for Naval Vessel Construction 

annual strategic plan report, 10 U.S.C. § 231. 

Background 

10 U.S.C. § 231 establishes a reporting requirement for long‐term naval vessel construction in support

of U.S. strategic planning. The reporting requirement was initially imposed in the FY 2003 NDAA,

which created 10 U.S.C. § 231.245 The original statutory language of section 231 directed the Secretary to

submit an annual report to Congress regarding the integration of long‐range naval vessel construction

into the broader strategic outline of U.S. defense policy.246 The statute required the report, titled Annual

Naval Vessel Construction Plan, to describe “a plan for the construction of combatant and support vessels

for the Navy” to a 30‐year time horizon.247 The report would contain a detailed construction program,

as well as the projected funding levels and procurement strategies necessary to achieve the program.248

The report was also statutorily obligated to support the framework outlined by the official national

security strategy report or the Quadrennial Defense Review.

249 If DoD concluded that the budget for a

given fiscal year failed to provide the necessary funding to maintain naval vessel construction in

accordance with the long‐range construction report, the statute further required that the report must

specify “the risks associated with the reduced force structure of naval vessels that will result from

funding naval vessel construction at such level.”250 Subsequent amendments have added further

elements to the Annual Naval Vessel Construction Plan, such as an estimated total cost of construction

                                                     

242 Ibid.   243 Ibid.   244 Director of Operational Test and Evaluation, email to Section 809 Panel staff, November 28, 2017.   245 FY 2003 NDAA, Pub. L. No. 107‐314, 116 Stat. 2639 (2002).   246 Ibid.   247 Ibid.   248 Ibid.   249 Ibid.   250 Ibid.  
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for each vessel and a requirement for CBO evaluation of the plan.251 The original components of the

plan remain in statutory effect.  

Findings 

The reporting requirement at 10 U.S.C. § 231 originated at the start of the 21st Century. Its precursor

was a one‐time provision in the FY 2000 NDAA, which required DoD to submit a 30‐year naval

construction plan in 2000.252 That plan was the first 30‐year overview to be produced by DoD. Although

similar plans were not submitted in 2001 or 2002, the process resumed with the permanent statutory

requirement that was approved in the FY 2003 NDAA and codified at 10 U.S.C. § 231.253 After altering

the requirement in the FY 2011 NDAA to request quadrennial reports, Congress reversed course the

following year and reaffirmed its desire for annual reports.254 That congressional decision reflected a

general recognition of the report’s positive contribution to long‐range naval planning.255 For example,

the most recent report highlighted the challenge in joining short‐term budgetary realities to long‐range

strategic planning. The Congressional Research Service estimated that, according to the long‐range

naval construction plan submitted by the Secretary alongside DoD’s proposed FY 2018 budget, the

Navy would need to add more than 50 additional ships to the plan to achieve the broader fleet goal and

maintain it through the 30‐year period.256 The cost of achieving this objective would range between $4.6

billion and $5.1 billion annually in additional shipbuilding funds over the course of the entire 30‐year

period.257 The analysis was made possible by the report, to the benefit of both congressional leaders and

DoD, which can now engage with Congress to reconcile the department’s plans with congressional

intent. Such a process demonstrates the value of the report, operating as intended.  

Conclusions 

The naval vessel construction reporting requirement at 10 U.S.C. § 231 has proven its value since its

implementation in 2003. The report is well‐designed to provide Congress with the information that it

needs to make long‐term budgetary judgments regarding naval construction programs. The report also

bolsters DoD’s strategic framework for naval planning. In slightly over a decade, the report has

performed admirably and earned broad support from stakeholders. The report offers demonstrated

benefits and should be preserved.

The Navy’s Office of Legislative Affairs concurred with the Section 809 Panel’s

recommendation.258

                                                     

251 Budgeting for Construction of Naval Vessels: Annual Plan and Certification, 10 U.S.C. § 231.   252 Congressional Research Service, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress, June 7, 2017, 

accessed June 9, 2017, https://fas.org/sgp/crs/weapons/RL32665.pdf.   253 Ibid.   254 Ibid.   255 Mackenzie Eaglen, “Pentagon’s Aviation Plan Headed for a Dead Stick Landing,” American Enterprise Institute, May 31, 2015, accessed 

June 12, 2017, https://www.aei.org/publication/pentagon‐aviation‐report‐dead‐stick‐landing/.   256 Congressional Research Service, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress, June 7, 2017, 

accessed June 9, 2017, https://fas.org/sgp/crs/weapons/RL32665.pdf.    257 Ibid.   258 Department of the Navy, Office of Legislative Affairs, email to Section 809 Panel staff, December 14, 2017.  
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Subrecommendation 24w: Preserve the statutory requirement for the Director of 

Operational Test and Evaluation annual program report, 10 U.S.C. § 2399(g). 

Background 

10 U.S.C. § 2399(g) establishes a reporting requirement that is connected to a larger reporting

requirement at 10 U.S.C. § 139(h). The reporting requirement at 10 U.S.C. § 139(h) directed DOT&E to

submit an annual report to Congress that provided a comprehensive summary of DoD’s operational

test and evaluation activities for each fiscal year.259 The reporting requirement at 10 U.S.C. § 2399(g)

created an additional component of that annual report by requiring DOT&E to include greater detail

about each program described within the report. The separate reporting requirement was initially

imposed in the FY 1990–1991 NDAA, which created 10 U.S.C. § 2399.260 As a part of the section, which

governed the progression of new programs in the framework of operational T&E procedures, a new

paragraph (g) was created that added a further obligation to the annual report of section 139(h).261

DOT&E would subsequently be required to detail “the status of test and evaluation activities” for each

program in the report, and to compare that status with the previously‐approved program master

plan.262 The director was also required to note the existence of any waivers that had been granted in

accordance with the test and evaluation procedures of the program.263 There were no successive

amendments to the report requirement, and 10 U.S.C. § 2399(g) remains unchanged in its current form

from the original statute.

Findings 

Due to the fact that 10 U.S.C. § 2399(g) establishes a reporting requirement within the annual report

imposed by 10 U.S.C. § 139(h), any evaluation of Section 2399(g) should take place within the context of

the report in Section 139(h). The success of that broader report establishes the credibility of 10 U.S.C.

§ 2399(g) and suggests that the two reports should be viewed together as a positive element in the T&E

process.  

Conclusions 

The operational T&E reporting requirement at 10 U.S.C. § 2399(g) modifies the broader report at

10 U.S.C. § 139(h). By requiring additional information in the underlying report, Section 2399(g) serves

less as its own reporting requirement than as an appendage to an existing report with a record of

success. The reporting requirement at 10 U.S.C. § 2399(g) should be considered in tandem with the

primary report in Section 139, and Congress should preserve this reporting requirement.

DOT&E concurred with the Section 809 Panel’s recommendation.264   

                                                     

259 Section 1211FY 1984 NDAA, Pub. L. No. 98‐94, 97 Stat. 684 (1983).   260 Section 802, FYs 1990‐1991 NDAA, Pub. L. No. 101‐189, 103 Stat. 1485 (1989).   261 Ibid.   262 Ibid.   263 Ibid.   264 Director of Operational Test and Evaluation, email to Section 809 Panel staff, November 28, 2017.  
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THE FOLLOWING STATUTORY REPORTING REQUIREMENTS SHOULD BE 

MAINTAINED UNDER THE CURRENT 2021 TERMINATION DATE. 

Subrecommendation 24x: Terminate in 2021 the statutory requirement for the Ballistic 

Missile Defense Programs annual acquisition baselines report, 10 U.S.C. § 225(c). 

Background 

10 U.S.C. § 225(c) establishes a reporting requirement for DoD “acquisition baselines” regarding

ballistic missile defense programs. The reporting requirement was initially imposed in the FY 2012

NDAA, which created a new 10 U.S.C. § 225.265 The original statutory language of Section 225 included

paragraph (c), which directed the MDA director to submit annual reports to Congress regarding

“acquisition baselines” that had been created and defined by paragraphs (a) and (b) of the same

section.266 The acquisition baselines represented broad frameworks outlining the acquisition paths for

program and major subprogram elements of ballistic missile defense systems. As established by the

statute, the baselines detailed comprehensive schedules, technical descriptions of capabilities and

requirements, cost estimates, and test baselines.267 MDA was obligated to submit its annual report to

Congress by February 15 of each year, with the first report presenting each acquisition baseline and all

subsequent reports providing updates concerning any new acquisition baselines and any changes to

existing acquisition baselines.268 There have been no subsequent amendments to the report

requirement, and 10 U.S.C. § 225(c) remains unchanged in its current form from the original statute.269    

Findings 

The reporting requirement at 10 U.S.C. § 225(c) arose due to congressional concern that MDA

possessed excessive flexibility during the early stages of ballistic missile acquisition planning and

production. As a part of the MDA’s creation in its contemporary form in 2002, the agency received an

unusually large degree of latitude in its acquisition policies to emphasize speed over traditional

oversight and deliver missile defense programs on an expedited schedule.270 The purpose of this

increased latitude was to accelerate the pace of ballistic missile programs by deferring traditional

acquisition oversight until the programs had advanced to such an extent that they were suitable for

transition to a military service.271 Congressional anxiety later emerged, however, regarding the lack of

accountability in early‐stage ballistic missile acquisition policies.272 Congress acted to remedy the

perceived lack of oversight by enacting 10 U.S.C. § 225(c) in the FY 2012 NDAA, which imposed a more

stringent framework on the MDA’s ballistic missile program acquisition policies and required their

disclosure to Congress.273 Since the advent of the report, acquisition oversight and transparency have

improved for the MDA’s ballistic missile programs and subprograms. In May 2017, GAO noted that a

combination of congressional and agency actions had introduced greater accountability into the early‐

                                                     

265 FY 2012 NDAA, Pub. L. No. 112‐81, 125 Stat. 1337 (2011).   266 Ibid.   267 Ibid.   268 Ibid.   269 Acquisition Accountability Reports on the Ballistic Missile Defense System, 10 U.S.C. § 225.   270 Government Accountability Office, Missile Defense: Some Progress Delivering Capabilities, but Challenges with Testing Transparency 

and Requirements Development Need to Be Addressed, May 2017, accessed June 1, 2017, https://www.gao.gov/assets/690/684963.pdf.   271 Ibid.   272 Ibid.   273 Ibid.  
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stage acquisition process.274 GAO also stated that the agency had failed to adopt all of its

recommendations, and that its current approach to acquisition failed to strike the proper balance

between “timeliness, affordability, reliability, and effectiveness.”275

Conclusions 

The ballistic missile acquisition baseline reporting requirement at 10 U.S.C. § 225(c) appears to help

address an important congressional concern. The report has proven valuable in supporting

congressional efforts to enhance the transparency of the MDA’s early‐stage ballistic missile acquisition

policies. Those efforts have achieved some initial successes (although more remains to be done). The

report also overlaps with several other reports, specifically 10 U.S.C. § 223a(a), Section 232 of the

FY 2002 NDAA, and Section 1662 of the FY 2015 NDAA, all of which focus on different elements of the

early‐stage ballistic missile acquisition process. Unlike those reports, the acquisition baselines

contained within 10 U.S.C. § 225(c) adopt a comprehensive perspective and are directed at MDA itself,

rather than instructing other offices to evaluate specific aspects of MDA programs. The report covers a

range of areas and provides MDA’s perspective directly to Congress. 10 U.S.C. § 225(c) is better suited

than its overlapping reports to serve as a core MDA report in enhancing congressional oversight. The

report’s success thus far and its comprehensive scope both serve to support its continuation to solidify

recent improvements. The reporting requirement is justified at present and should be maintained

through its scheduled termination date in 2021, when it can be further evaluated based upon MDA’s

ballistic missile acquisition performance at that time.

MDA concurred with the Section 809 Panel’s recommendation.276   

Subrecommendation 24y: Terminate in 2021 the statutory requirement for Depot-Level 

Maintenance biennial capability requirements report, 10 U.S.C. § 2464(d). 

Background 

10 U.S.C. § 2464(d) establishes a reporting requirement for the Secretary to submit to Congress an

assessment of depot‐level maintenance and repair capability requirements for each armed service. The

reports are prepared every 2 years, and each report evaluates depot‐level capability requirements for

the following fiscal year. The reporting requirement was initially imposed in the FY 2012 NDAA,

which created a new paragraph (e) of Section 2464.277 The new statutory text directed the Secretary to

submit a biennial report to Congress identifying “the core depot‐level maintenance and repair

capability requirements and sustaining workloads” for each of the armed forces except for the Coast

Guard.278 Congress also directed the report to describe “the corresponding workloads necessary to

sustain core depot‐level maintenance and repair capability requirements,” as well as “a detailed

rationale for the shortfall and a plan either to correct, or mitigate, the effects of the shortfall” in any

situation where “core depot‐level maintenance and repair capability requirements exceed or are

expected to exceed sustaining workloads.”279 The reporting requirement has not been amended since its

                                                     

274 Ibid.    275 Ibid.    276 Missile Defense Agency, phone call with Section 809 Panel staff, November 29, 2017.   277 FY 2012 NDAA, Pub. L. No. 112‐81, 125 Stat. 1368 (2011).   278 Ibid.   279 Ibid.  
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creation in the FY 2012 NDAA, although it was shifted to a new position as paragraph (d) of

Section 2464 in the FY 2013 NDAA.280

Findings 

The reporting requirement at 10 U.S.C. § 2464(d) arose because Congress was determined to preserve

the effectiveness of military depots. Since 1984, Congress has mandated that DoD maintain a “core

depot‐level maintenance and repair capability” that cannot be contracted out to private contractors.281

DoD is also required to ensure that military depots receive the necessary assignment of workload to

ensure that capabilities are preserved during peacetime and prepared for unexpected mobilizations or

emergencies.282 The reporting requirement at 10 U.S.C. § 2464(d) was designed to provide Congress

with the necessary information to exercise proper oversight of DoD’s depot‐maintenance policies.

Unlike a related report at 10 U.S.C. § 2466(d), which focuses primarily on funding levels, the report at

10 U.S.C. § 2464(d) adopts a broader approach and evaluates capability requirements, workload

shortfalls, and remedial policies. Since the report’s inception, DoD has struggled to comply with the

requirements established by Congress. Although the reports have partially complied by providing

adequate data regarding depot‐level maintenance requirements and the planned workload to meet the

requirements, they have consistently failed to offer “required information on the rationale” for

workload shortfalls that would prevent the department from meeting core depot requirements.283 DoD

has described its depot‐level maintenance capability requirements properly, but it has neglected to

explain the reasons underlying its inability to provide sufficient resources to meet those requirements.

This element is a core aspect of the requirement, because it is fundamental to determining the

effectiveness of DoD’s depot maintenance policies. GAO discovered data errors in DoD’s 2014 report

that prompted a call for more “accurate and complete” reports in the future.284 In its evaluation of

DoD’s 2016 biennial report, GAO identified the same problems: only partial compliance with the three

core components of the report; inaccurate information for the Missile Defense Agency’s depot‐level

maintenance capability requirements; and flawed guidance to reporting agencies that undermined

their ability to provide the Secretary with accurate information for the report.285 GAO recommended

that Congress expand the scope of the information subject to the reporting requirement, and that DoD

update DoDI 4151.20 to enhance the quality of the information being supplied by reporting agencies.286  

Conclusions 

Despite its flaws, the depot maintenance and repair capability reporting requirement at 10 U.S.C.

§ 2464(d) serves a useful purpose. Depot maintenance is a vital issue, and the report has strengthened

congressional oversight over DoD’s depot‐level planning with the information that DoD has been able

to successfully disclose. While the report has failed to achieve all of its aims—particularly in its attempt

to require DoD to properly justify workload shortfalls regarding depot maintenance—the need for an

improved DoD response to the report is more compelling than the argument for repeal. As long as the

                                                     

280 FY 2013 NDAA, Pub. L. No. 112‐239, 126 Stat. 1695 (2013), http://uscode.house.gov/statviewer.htm?volume=126&page=1694#.   281 GAO, Depot Maintenance: Improvements to DOD’s Biennial Core Report Could Better Inform Oversight and Funding Decisions, 

November 2016, accessed July 24, 2017, http://www.gao.gov/assets/690/681260.pdf.   282 Ibid.   283 Ibid.   284 Ibid.   285 Ibid.   286 Ibid.  
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report can demonstrably deliver greater transparency for DoD depot maintenance policy, its

continuation can be justified through its 2021 termination date. Additionally, the report at 10 U.S.C.

§ 2464(d) has proven to be more successful than its related and overlapping report at 10 U.S.C.

§ 2466(d), which focuses more narrowly on depot funding and experienced even more grave flaws in

the integrity of its data.287  

The Office of the Assistant Secretary of Defense for Logistics & Material Readiness

concurred with the Section 809 Panel’s recommendation.288  

Subrecommendation 24z: Terminate in 2021 the statutory requirement for the National 

Technology and Industrial Base annual policy overview report, 10 U.S.C. § 2504. 

Background 

10 U.S.C. § 2504 establishes a reporting requirement for DoD’s strategy to maintain the nation’s

technology and industrial base. The reporting requirement was initially imposed in the FY 1997

NDAA, which created a new 10 U.S.C § 2504.289 The original statutory language of Section 2504

directed the Secretary to submit an annual report to Congress describing DoD’s departmental

guidance, selected assessments, and programs in support of the national security strategy for the

national technology and industrial base.290 An amendment in the FY 2013 NDAA added a component

that required DoD to prepare a description of the “mitigation strategies” and other policies that it

planned to implement in order to eliminate vulnerabilities within the national technology and

industrial base.291 10 U.S.C. § 2504 has not been subject to any further amendment since the FY 2013

NDAA.292

Findings 

The reporting requirement at 10 U.S.C. § 2504 is rooted in the same unease over the health of America’s

defense industrial base that has concerned policymakers since the end of the Cold War.293 Although

DoD supported the post‐Cold War consolidation of the defense industrial base for much of the 1990’s,

the rapid contraction and transformation of the sector eventually sparked anxiety among defense

officials and members of Congress.294 By 1997, both Congress and DoD signaled increasing alarm that

the capabilities of the defense industrial base could be weakened by the ongoing evolution of the

defense sector.295 The reporting requirement at 10 U.S.C. § 2504 likely gained support in this context as

Congress sought to assess DoD’s ongoing strategy to safeguard the defense industrial base. The

FY 2013 NDAA amendment, which compelled DoD to provide even more information in the report,

                                                     

287 GAO, Depot Maintenance: Persistent Deficiencies Limit Accuracy and Usefulness of DoD’s Funding Allocation Data Reported to 

Congress, November 2005, accessed June 29, 2017, http://www.gao.gov/assets/250/248595.pdf.   288 Office of the Assistant Secretary of Defense for Logistics & Material Readiness, email to 809 Panel Staff, November 8, 2017.  289 FY 1997 NDAA, Pub. L. No. 104‐201, 110 Stat. 2614 (1996).   290 Ibid.   291 FY 2013 NDAA, Pub. L. No. 112‐239, 126 Stat. 2063 (2013).    292 Annual Report to Congress, 10 U.S.C. § 2504.    293 For the remainder of this analysis, the terms “national technology and industrial base” and “defense industrial base” will be used 

interchangeably. Congressional Research Service, Defense Primer: U.S. Defense Industrial Base, December 14, 2016, accessed June 6, 

2017, https://fas.org/sgp/crs/natsec/IF10548.pdf.   294 Kenneth Flamm, “Post‐Cold War Policy and the U.S. Defense Industrial Base,” The Bridge, 35, no. 1 (2005), 5‐12, accessed January 5, 

2018, https://www.nae.edu/File.aspx?id=7297&v=d611c600.   295 Ibid.  
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arrived in a similar context. The defense industrial base confronted the twin challenges of declining

defense spending and the budgetary constraint of sequestration due to the Budget Control Act of

2011.296 The amendment also required DoD to develop a national security strategy for the national

technology and industrial base, reflecting congressional intent to adopt an even more assertive

oversight posture in regards to the defense industrial base.297 Several years later, the broader conditions

surrounding the defense sector remain volatile. The Trump Administration has endorsed a sizeable

increase in the defense budget and calls to end the sequestration caps on defense spending are growing

among members of Congress.298 The defense industrial base reporting requirement is designed to

ensure that DoD possesses a strategy to navigate this uncertainty in the defense sector, and that

Congress is capable of evaluating the strategy’s reliability.    

Conclusions 

Congress created the reporting requirement at 10 U.S.C. § 2504 in order to address a critical policy

dilemma that remains ongoing: the post‐Cold War decline of America’s traditional defense industrial

base. The transformation of the defense industrial sector shows no signs of abating, and both Congress

and DoD are correct to use the report as one tool for adjusting to the uncertainty of the sector. The

report serves an important purpose and should maintain the December 2021 termination date for the

reporting requirement.

The Office of Manufacturing and Industrial Base Policy dissented from the Section 809

Panel’s recommendation. MIBP agreed with the reasoning in regard to the report, but

the office requested that the reporting requirement be made permanent, rather than

maintained through December 2021.299 After receiving this comment, the Section 809

Panel opted not to alter its recommendation in the belief that further review of the

report’s efficacy in 2021 will be a valuable means to assess its ongoing usefulness to the

department.  

In Section 6 of this report, the Section 809 Panel has articulated its own perspective on

the reporting requirement’s proper role regarding the defense industrial base and

proposed amendments to the report at 10 U.S.C. § 2504.   

Subrecommendation 24aa: Terminate in 2021 the statutory requirement for the Distribution 

of Chemical and Biological Agents to Non-Federal Entities annual overview report, FY 2008 

NDAA, 1034(d). 

Background 

Section 1034(d) of the FY 2008 NDAA establishes a reporting requirement regarding DoD’s distribution

of chemical agents to nonfederal entities for purposes of scientific testing. Section 1034 authorized the

                                                     

296 Congressional Research Service, Defense Primer: U.S. Defense Industrial Base, December 14, 2016, accessed June 6, 2017, 

https://fas.org/sgp/crs/natsec/IF10548.pdf.   297 FY 2013 NDAA, Pub. L. No. 112‐239, Joint Explanatory Statement of the Committee of Conference, 

https://www.ngaus.org/sites/default/files/NDAA%20Conference%20Report.pdf.   298 Joe Gould, “Hawkish Lawmakers Frustrated by Budget Caps Press for Repeal,” Defense News, May 15, 2017, accessed January 5, 2018, 

http://www.defensenews.com/articles/hawkish‐lawmakers‐frustrated‐by‐budget‐caps‐press‐for‐repeal.   299 Office of Manufacturing and Industrial Base Policy, email to Section 809 Panel staff, November 9, 2017.  
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Secretary to provide “small quantities of a toxic chemical or precursor” to states, municipalities or

private organizations in order to promote the “development or testing, in the United States, of material

that is designed to be used for protective purposes.”300 Congress instructed the Secretary to estimate the

cost of the distribution and receive an advance payment from the entity before allowing the transaction

to proceed.301 In paragraph (d) of the provision, Congress created an annual reporting requirement for

the Secretary to disclose each instance in which the chemical distribution authority was used during

the previous calendar year.302 Specifically, Congress required the report to include “a description of

each use of the authority and [to] specify what material was made available and to whom it was made

available.”303 The reporting requirement was amended and broadened in the FY 2017 NDAA to include

“any biological select agent or toxin for the development or testing of any biodefense technology.”304 As

a result, the Secretary was required to disclose identical information for any distribution of biological

agents as had previously been required for chemical agents.305 The amendment also declared that the

reporting requirement would terminate on January 31, 2021.306

Findings 

The reporting requirement at Section 1034(d) was not present in the first version of the provision.

Although the House version of the FY 2008 NDAA contained the authority for the Secretary to provide

“small quantities of toxic chemicals” to nonfederal entities, negotiations with the Senate yielded the

reporting requirement as an addition to the House language.307 Thus, from the very inception of the

provision, Congress actively decided that a reporting requirement was necessary to ensure proper

oversight of DoD’s use of the authority. Biological agents were incorporated into the section 1034

authority at the end of 2016 due to longstanding congressional concerns that DoD was failing to

“successfully develop medical countermeasures to respond to biological incidents,” which produced a

series of critical hearings and a congressionally mandated GAO report to review DoD’s biological

countermeasures.308 However, the FY 2017 NDAA simultaneously broadened the reporting

requirement in Paragraph (d) to include biological agents and created a sunset date for the requirement

after four years. Although congressional intent regarding the reporting requirement is uncertain, it is

plausible that Congress sought to delay a final decision on the report to evaluate DoD’s use of its

newfound authority for biological agents.

Conclusions 

The chemical and biological agent reporting requirement that was imposed in Section 1034(d) of the

FY 2008 NDAA enhances congressional oversight on an issue of the utmost importance. It is evident

that DoD’s distribution of chemical or biological agents to other entities for testing must be transparent

to ensure that the system is not vulnerable to errors of judgment or ineptitude. Congress is correct to

                                                     

300 FY 2008 NDAA, Pub. L. No. 110‐181, 122 Stat. 308 (2008).   301 Ibid.   302 Ibid.   303 Ibid.  304 FY 2017 NDAA, Pub. L. No. 114‐328, 130 Stat. 2393 (2016).   305 Ibid.   306 Ibid.   307 FY 2008 NDAA, Pub. L. No. 110‐181, Joint Explanatory Statement of the Committee on Conference, 

https://www.gsa.gov/portal/mediaId/184487/fileName/National_Defense_Authorization_Act_2008.action.   308 GAO, Biological Defense: DOD Has Strengthened Coordination on Medical Countermeasures but Can Improve Its Process for Threat 

Prioritization, May 2014, accessed June 27, 2017, https://www.gao.gov/assets/670/663212.pdf.  
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assert its prerogatives and scrutinize DoD’s use of such a sensitive authority. The objective of the

reporting requirement is justified on substantive grounds. In the FY 2017 NDAA, Congress instituted

its own, separate termination date in January 2021 for this reporting requirement. The Section 809 Panel

supports the implied congressional intent to evaluate the reporting requirement through 2021 before

making a final determination regarding its permanence.  

The Office of the Assistant Secretary of Defense for Nuclear, Chemical and Biological

Defense Programs concurred with the Section 809 Panel’s recommendation.309    

Subrecommendation 24ab: Terminate in 2021 the statutory requirement for the Research 

and Development in Defense Laboratories annual funding report, FY 2009 NDAA, 219(c). 

Background 

Section 219(c) of the FY 2009 NDAA establishes a reporting requirement in regards to additional

funding for research and development in defense laboratories. Section 219 permitted the Secretary to

authorize the directors of defense laboratories to use “an amount of funds equal to not more than three

percent of all funds available to the defense laboratory” in order to promote research and development

in their laboratories.310 Congress granted the new funding authority in support of three agendas: basic

and applied research for military missions; the “transition of technologies” from the laboratory to

operational use; and laboratory workforce development activities.311 Congress also directed the

Secretary to submit an annual report that would encompass six distinct elements: a description of the

mechanisms that DoD established to distribute funding to defense laboratories, the total amount of

funding distributed to each laboratory, a description of the investments made by each laboratory using

funds authorized by the provision, an analysis of any improvements in laboratory performance as a

result of the additional funding, an assessment of whether the research conducted with funds under

the authority had contributed to the development of “needed military capabilities,” and any proposals

to modify DoD’s distribution mechanisms to enhance the impact of funding under the authority.312 In

its original form, the entire provision was set to expire on October 1, 2013.313 Subsequent amendments

made the authority under the provision permanent, permitted the use of funding for “minor military

construction of the laboratory infrastructure,” altered the funding amount from a ceiling of 3 percent of

laboratory funds to a range of 2 to 4 percent, and allowed laboratory directors to charge fees in certain

circumstances in order to obtain funds.314 The scope of the reporting requirement itself was simplified

in the FY 2010 NDAA to include merely “a report on the use of the authority under subsection (a)

during the preceding year.”315

Findings 

Since its approval, Section 219 has become an important mechanism for DoD funding of certain types

of laboratory research. Section 219 is one of two programs available to DoD to fund defense laboratory‐

                                                     

309 OASD(NCB‐CB), email to Section 809 Panel staff, November 8, 2017.   310 FY 2009 NDAA, Pub. L. No. 110‐417, 122 Stat. 4389 (2008).   311 Ibid.   312 Ibid.   313 Ibid.   314 Research and Development Projects, 10 U.S.C. § 2358  315 FY 2010 NDAA, Pub. L. No. 111‐84, 123 Stat. 2660 (2009).  
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initiated research, alongside the In‐House Laboratory Independent Research program.316 In September

2016, the Acting Director of the U.S. Army Research Laboratory (ARL) testified before Congress that

the Section 219 authority provided the ARL with “an agile and fast capability to maximize our potential

for the discovery, innovation and transition of leading‐edge foundational research in support of

strategic land‐power dominance.”317 He asserted that the ARL “benefited greatly” from the authority,

which supported the maintenance of “world‐class laboratories” and offered the ability to “attract, train,

and then retain the best and brightest engineers and scientists our country has to offer.”318 At the same

hearing, the Acting Director of Research at the U.S. Naval Research Laboratory (NRL) echoed the

ARL’s sentiments, declaring that the NRL “fully supports” the use of Section 219 authority for minor

construction.319 In all likelihood, these positive assessments bolstered congressional support for the

authority, contributing to Congress’s decision to increase the ceiling on Section 219 funds from

3 percent to 4 percent of a defense laboratory’s budget in the FY 2017 NDAA.320 The provision appears

to be functioning as intended, and recent congressional actions and DoD statements indicate that it

remains popular among stakeholders.

Conclusions 

The defense laboratories reporting requirement that was imposed in Section 219(c) of the FY 2009

NDAA concerns a funding authority that has rapidly gained popularity among stakeholders. The

laboratories themselves have expressed support for the authority and Congress has imposed a

minimum annual funding level, as well as a range for annual funding subject to the discretion of the

services. Despite its popularity, the existence of an annual funding range does suggest the need for a

degree of congressional oversight to ensure that funding decisions are aligned rationally with

department priorities. For these reasons, the status quo should be maintained regarding the

2021 termination date. At that point, Congress can evaluate the operation of the funding authority and

assess whether continued oversight is necessary, or whether the program is working well enough to be

released from the need for a report.

The Section 809 Panel did not receive comments from DoD regarding this

recommendation.     

                                                     

316 GAO, Federal Research: Information on DOE’s Laboratory‐Directed Research and Development Program, April 2016, accessed June 27, 

2017, http://www.gao.gov/assets/680/676432.pdf.   317 Philip Perconti, Testimony Before the Emerging Threats and Capabilities Subcommittee of the House Armed Services Committee, 

September 28, 2016, accessed January 5, 2018, http://www.defenseinnovationmarketplace.mil/resources/HHRG‐114‐AS26‐Wstate‐

PercontiP‐20160928.pdf.   318 Ibid.    319 Edward R. Franchi, Testimony Before the Emerging Threats and Capabilities Subcommittee of the House Armed Services Committee, 

September 28, 2016, accessed January 5, 2018, http://www.defenseinnovationmarketplace.mil/resources/HHRG‐114‐AS26‐Wstate‐

FranchiE‐20160928.pdf.   320 FY 2017 NDAA, Pub. L. No. 114‐328, 130 Stat. 2047 (2016).  
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Implementation 

Legislative Branch 

 Immediately repeal the following 20 reporting requirements:  

 10 U.S.C. §§ 196(d) and (e)

 10 U.S.C. § 223a(a)

 10 U.S.C. § 229

 10 U.S.C. § 231a

 10 U.S.C. § 238(a)

 10 U.S.C. § 2228(e)

 10 U.S.C. § 2275

 10 U.S.C. § 2276(e)

 10 U.S.C. § 2466(d)

 10 U.S.C. § 7310(c)

 10 U.S.C. § 10543(a)

 10 U.S.C. § 10543(c)

 FY 2002 NDAA, 232(h)(3)  

 FY 2007 NDAA, 122(d)(1)  

 FY 2007 NDAA, 1017(e)  

 FY 2009 NDAA, 1047(d)  

 FY 2011 NDAA, 1217(i)  

 FY 2013 NDAA, 904(h)  

 FY 2015 NDAA, 1026(d)  

 FY 2015 NDAA, 1662(c)(2) and (d)(2)  

 Preserve the following three reporting requirements (subject to the every 5 years sunset review

described in Recommendation 23):

 10 U.S.C. § 139(h)

 10 U.S.C. § 231

 10 U.S.C. § 2399(g)  

 Maintain the following five reporting requirements through the current December 2021

termination deadline:

 10 U.S.C. § 225(c)

 10 U.S.C. § 2464(d)  

 10 U.S.C. § 2504

 FY 2008 NDAA, 1034(d)  

 FY 2009 NDAA, 219(c)
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Executive Branch 

 No Executive Branch changes are required.

Note: Recommended draft legislative text and sections affected can be found in the Implementation 

Details subsection at the end of Section 8. 

Implications for Other Agencies

 There are no cross-agency implications for this recommendation.

   
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THIS PAGE INTENTIONALLY LEFT BLANK
Section 8 

Statutory Reporting Requirements

Implementation Details 

Recommendations 23 and 24

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LEGISLATIVE PROVISIONS — 809 PANEL 

RECOMMENDATIONS RELATING TO TERMINATION OF 

REPORTING REQUIREMENTS

[NOTE: The draft legislative text below is followed by a “Sections Affected” 

display, showing the text of each provision of law affected by the draft 

legislative text below.]

1 TITLE V—REPORTING REQUIREMENTS

Sec. 501. Automatic sunset for future statutory reporting requirements. 

Sec. 502. Repeal of certain Department of Defense reporting requirements that otherwise terminate as of 

December 31, 2021. 

Sec. 503. Delay in sunset provision for certain Department of Defense reporting requirements that 

otherwise terminate as of December 31, 2021. 

Sec. 504. Sunset of certain reporting requirements currently applicable to Department of Defense.

Sec. 505. Annual notification to Congress of expiring reporting requirements. 

2 SEC. 501. AUTOMATIC SUNSET FOR FUTURE STATUTORY REPORTING 

3 REQUIREMENTS.

4 (a) IN GENERAL.—Chapter 23 of title 10, United States Code, is amended by inserting 

5 after section 480 the following new section: 

6 “§ 480a. Reports to Congress: termination of indefinite-duration reports after five years

7 “(a) IN GENERAL.—Any provision of law enacted after the date of the enactment of this 

8 section that includes an indefinite-duration report requirement shall cease to be effective, with 

9 respect to that requirement, five years after the date of the enactment of that provision of law 

10 unless that provision of law expressly states that this section is inapplicable to that requirement 

11 or that provision of law. 

12 “(b) INDEFINITE-DURATION REPORT REQUIREMENT DEFINED.—In this section, the term 

13 ‘indefinite-duration report requirement’ means a requirement in any provision of law for the 

14 Secretary of Defense (or any other officer or employee of the Department of Defense) to submit 

15 to Congress (or any committee of Congress) a periodic report for which the law does not— 
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1 “(1) state a specific period of time as the period during which that report is 

2 required to be submitted or that provision of law is in effect; or 

3 “(2) state a specific termination date for the requirement to submit the report or 

4 for that provision of law. 

5 “(c) PERIODIC REPORT DEFINED.—In this section, the term ‘periodic report’ means a 

6 report required to be submitted on an annual, semiannual, or other regular periodic basis.”. 

7 (b) CLERICAL AMENDMENT.—The table of sections at the beginning of such chapter is 

8 amended by inserting after the item relating to section 480 the following new item:

“480a. Reports to Congress: termination of indefinite-duration reports after five years.”.

9 SEC. 502. REPEAL OF CERTAIN DEPARTMENT OF DEFENSE REPORTING 

10 REQUIREMENTS THAT OTHERWISE TERMINATE AS OF 

11 DECEMBER 31, 2021. 

12 (a) TITLE 10, UNITED STATES CODE.—Title 10, United States Code, is amended as 

13 follows: 

14 (1) SECTION 196.—Section 196, relating to the Department of Defense Test 

15 Resource Management Center, is amended by striking subsections (d) and (e)(3). 

16 (2) SECTION 223a.—Section 223a, relating to budget justification materials for 

17 ballistic missile defense programs, is amended by striking subsection (a).

18 (3) SECTION 229.— 

19 (A) Section 229, relating to the display of budget information for programs 

20 for combating terrorism, is repealed.

21 (B) The table of sections at the beginning of chapter 9 is amended by 

22 striking the item relating to section 229.

23 (4) SECTION 231a.— 
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1 (A) Section 231a, relating to budgeting for life-cycle costs of aircraft for 

2 the Navy, Army, and Air Force, is repealed. 

3 (B) The table of sections at the beginning of chapter 9 is amended by 

4 striking the item relating to section 231a.

5 (5) SECTION 238.— 

6 (A) Section 238, relating to program elements for the cyber mission 

7 forces, is repealed.

8 (B) The table of sections at the beginning of chapter 9 is amended by 

9 striking the item relating to section 238.

10 (6) SECTION 2228.—Section 2228, relating to funding for the long-term strategy 

11 to reduce corrosion and the effects of corrosion on the military equipment and 

12 infrastructure of the Department of Defense, is amended by striking subsection (e). 

13 (7) SECTION 2275.— 

14 (A) Section 2275, relating to reports on integration of acquisition and 

15 capability delivery schedules for segments of major satellite acquisition programs 

16 and funding for such programs, is repealed.

17 (B) The table of sections at the beginning of chapter 135 is amended by 

18 striking the item relating to section 2275. 

19 (8) Section 2276.—Section 2276, relating to commercial space launch 

20 cooperation, is amended by striking subsection (e).

21 (9) Section 2466.—Section 2466, relating to depot-level maintenance and repair 

22 workloads, is amended by striking subsection (d). 
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1 (10) Section 7310.—Section 7310, relating to report on repair of certain vessels in 

2 foreign shipyards, is amended by striking subsection (c). 

3 (11) Section 10543.—Section 10543, relating to National Guard and reserve 

4 component equipment procurement and military construction funding, is amended by 

5 striking subsections (a) and (c). 

6 (b) NDAA FOR FY 2002.— Section 232(h) of the National Defense Authorization Act for 

7 Fiscal Year 2002 (Public Law 107-107; 10 U.S.C. 2431 note), relating to an annual report on 

8 assessment of the adequacy and sufficiency of the Missile Defense Agency test program, is 

9 amended by striking paragraph (3). 

10 (c) NDAA FOR FY 2007.—The John Warner National Defense Authorization Act for 

11 Fiscal Year 2007 (Public Law 109-364) is amended as follows: 

12 (1) Section 122 (120 Stat. 2104), as amended by section 121 of the National 

13 Defense Authorization Act for Fiscal Year 2014 (Public Law 113–66; 127 Stat. 691), 

14 relating to the CVN-78 class aircraft carrier program, is amended by striking paragraph 

15 (1) of subsection (f).

16 (2) Section 1017 (120 Stat. 2379), relating to obtaining carriage by vessel, is 

17 amended by striking subsection (e).

18 (d) NDAA FOR FY 2009.—Section 1047(d) of the Duncan Hunter National Defense 

19 Authorization Act for Fiscal Year 2009 (Public Law 110-417; 10 U.S.C. 2366b note), relating to 

20 reports on bandwidth requirements for major defense acquisition programs, is amended by 

21 striking paragraph (2). 

22 (e) NDAA FOR FY 2011.—Section 1217 of the Ike Skelton National Defense 

23 Authorization Act for Fiscal Year 2011 (Public Law 111-383; 22 U.S.C. 7513 note), relating to 
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1 authority to establish a program to develop and carry out infrastructure projects in Afghanistan, 

2 is amended by striking subsection (i). 

3 (f) NDAA FOR FY 2013.—Section 904(h) of the National Defense Authorization Act for 

4 Fiscal Year 2013 (Public Law 112-239; 10 U.S.C. 133 note), relating to recommendations of the 

5 Deputy Assistant Secretary of Defense for Developmental Test and Evaluation, is amended by 

6 striking paragraphs (1) and (2). 

7 (g) NDAA FOR FY 2015.—The Carl Levin and Howard P. “Buck” McKeon National 

8 Defense Authorization Act for Fiscal Year 2015 (Public Law 113-291) is amended as follows: 

9 (1) Section 1026(d) (128 Stat. 3490), relating to availability of funds for 

10 retirement of inactivation of Ticonderoga-class cruisers or dock landing ships, is 

11 amended by striking paragraph (1). 

12 (2) Section 1662 (10 U.S.C. 2431 note), relating to testing and assessment of 

13 missile defense systems prior to production and deployment, is amended by 

14 striking subsections (c)(2) and (d)(2). 

15 (h) CONFORMING AMENDMENTS.— 

16 (1) SECTION 1061.—Section 1061 of the National Defense Authorization Act for 

17 Fiscal Year 2017 (Public Law 114-328; 10 U.S.C. 111 note) is amended— 

18 (A) in subsection (c), by striking paragraphs (11), (12), (14), (16), (17), 

19 (36), (40), (41), (46), (59), and (63); 

20 (B) in subsection (d), by striking paragraphs (3) and (16); 

21 (C) in subsection (f), by striking paragraph (2); 

22 (D) in subsection (g), by striking paragraph (3); and 

23 (E) in subsection (i), by striking paragraphs (8), (13), (15), and (24). 
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1 (2) SECTION 1080.—Section 1080 of the National Defense Authorization Act for 

2 Fiscal Year 2016 (Public Law 114-92; 10 U.S.C. 111 note) is repealed. 

3 SEC. 503. DELAY IN SUNSET PROVISION FOR CERTAIN DEPARTMENT OF 

4 DEFENSE REPORTING REQUIREMENTS THAT OTHERWISE 

5 TERMINATE AS OF DECEMBER 31, 2021. 

6 The reporting requirements under each of the following provisions of law (which 

7 otherwise cease to be in effect as of December 31, 2021, pursuant to section 1061 of the National 

8 Defense Authorization Act for Fiscal Year 2017 (Public Law 114-328; 10 U.S.C. 111 note)), 

9 shall remain in effect until December 31, 2023, and shall no longer be required to be submitted 

10 to Congress after that date: 

11 (1) Sections 139(h) and 2399(g) of title 10, United States Code, relating to the 

12 annual report by the Director of Operational Test and Evaluation of the Department of 

13 Defense.

14 (2) Section 231, relating to an annual naval vessel construction plan. 

15 SEC. 504. SUNSET OF CERTAIN REPORTING REQUIREMENTS CURRENTLY 

16 APPLICABLE TO DEPARTMENT OF DEFENSE.

17 (a) IN GENERAL.—This section provides for the termination of certain statutory reporting 

18 requirements that are applicable to the Department of Defense as of the date of the enactment of 

19 this Act. 

20 (b) FISCAL YEAR 2018 SECTION 1051 REPORT LIST.— 

21 (1) FIVE-YEAR SUNSET.—Any reporting requirement described in paragraph (2) 

22 shall cease to be in effect as of December 31, 2023. 
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1 (2) COVERED REPORTING REQUIREMENTS.—Paragraph (1) applies to each 

2 requirement to submit a report that is included on the list submitted by the Secretary of 

3 Defense to the Committees on Armed Services of the Senate and House of 

4 Representatives pursuant to section 1051(y) of the National Defense Authorization Act 

5 for Fiscal Year 2018 (Public Law 115-91). 

6 (c) REPORTS CURRENTLY SPECIFIED FOR TERMINATION EFFECTIVE DECEMBER 31,

7 2021.— 

8 (1) FURTHER FIVE-YEAR SUNSET.—Any reporting requirement described in 

9 paragraph (2) that is in effect on January 1, 2022, shall cease to be in effect as of 

10 December 31, 2026. 

11 (2) COVERED REPORTING REQUIREMENTS.—Paragraph (1) applies to the reporting 

12 requirements specified in the following provisions of law: 

13 (A) SECTION 1061.—Subsections (c) through (i) of section 1061 of the 

14 National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-328; 

15 10 U.S.C. 111 note), as in effect on the day after the date of the enactment of this 

16 Act.

17 (B) SECTION 1051.—Subsection (x) of section 1051 of the National 

18 Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91; 10 U.S.C. 

19 113 note). 

20 SEC. 505. ANNUAL NOTIFICATION TO CONGRESS OF EXPIRING REPORTING 

21 REQUIREMENTS.

22 (a) IN GENERAL.—Chapter 23 of title 10, United States Code, is amended by inserting 

23 after section 480a, as added by section 501(a), the following new section: 
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1 “§ 480b. Reports to Congress: annual notification of expiring provisions

2 “Not later than February 1 each year, the Secretary of Defense shall submit to the 

3 Committees on Armed Services of the Senate and House of Representatives a list setting forth 

4 each statutory reporting requirement applicable to the Department of Defense that by law will 

5 terminate during (or at the end of) the year during which the report is submitted.”.

6 (b) CLERICAL AMENDMENT.—The table of sections at the beginning of such chapter is 

7 amended by inserting after the item relating to section 480a, as added by section 501(b), the 

8 following new item:

“480b. Reports to Congress: annual notification of expiring provisions.”.

——————— 

SECTIONS AFFECTED BY THE PROPOSAL 

[The material below shows changes proposed to be made by the proposal 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. (Where an amendment in the proposal 

would add a full new section to existing law, the text of that proposed new section is NOT 

set forth below since it is set out in full in the legislative text above.)] 

[NOTE: Text shown as current law incorporates amendments made by the National 

Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91, enacted Dec. 12, 2017] 

TITLE 10, UNITED STATES CODE

§196. Department of Defense Test Resource Management Center

(a) ESTABLISHMENT AS DEPARTMENT OF DEFENSE FIELD ACTIVITY.—The Secretary of Defense shall 

establish within the Department of Defense under section 191 of this title a Department of Defense Test Resource 

Management Center (hereinafter in this section referred to as the “Center”). The Secretary shall designate the Center 

as a Department of Defense Field Activity.

(b) DIRECTOR AND DEPUTY DIRECTOR.—(1) At the head of the Center shall be a Director, selected by the 

Secretary from among individuals who have substantial experience in the field of test and evaluation. 

(2) There shall be a Deputy Director of the Center, selected by the Secretary from among individuals who 

have substantial experience in the field of test and evaluation. The Deputy Director shall act for, and exercise the 

powers of, the Director when the Director is disabled or the position of Director is vacant.

(c) DUTIES OF DIRECTOR.—***

******
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(d) STRATEGIC PLAN FOR DEPARTMENT OF DEFENSE TEST AND EVALUATION RESOURCES.—(1) Not less 

often than once every two fiscal years, the Director, in coordination with the Director of Operational Test and 

Evaluation, the Secretaries of the military departments, and the heads of Defense Agencies with test and evaluation 

responsibilities, shall complete a strategic plan reflecting the needs of the Department of Defense with respect to test 

and evaluation facilities and resources. Each such strategic plan shall cover the period of ten fiscal years beginning 

with the fiscal year in which the plan is submitted under paragraph (3). The strategic plan shall be based on a 

comprehensive review of the test and evaluation requirements of the Department and the adequacy of the test and 

evaluation facilities and resources of the Department to meet those requirements.

(2) The strategic plan shall include the following:

(A) An assessment of the test and evaluation requirements of the Department for the period 

covered by the plan.

(B) An identification of performance measures associated with the successful achievement of test 

and evaluation objectives for the period covered by the plan.

(C) An assessment of the test and evaluation facilities and resources that will be needed to meet 

such requirements and satisfy such performance measures.

(D) An assessment of the current state of the test and evaluation facilities and resources of the 

Department.

(E) An assessment of plans and business case analyses supporting any significant modification of 

the test and evaluation facilities and resources of the Department projected, proposed, or recommended by 

the Secretary of a military department or the head of a Defense Agency for such period, including with 

respect to the expansion, divestment, consolidation, or curtailment of activities.

(F) An itemization of acquisitions, upgrades, and improvements necessary to ensure that the test 

and evaluation facilities and resources of the Department are adequate to meet such requirements and 

satisfy such performance measures.

(G) An assessment of the budgetary resources necessary to implement such acquisitions, upgrades, 

and improvements.

(3) Upon completing a strategic plan under paragraph (1), the Director shall submit to the Secretary of 

Defense a report on that plan. The report shall include the plan and a description of the review on which the plan is 

based.

(4) Not later than 60 days after the date on which the report is submitted under paragraph (3), the Secretary 

of Defense shall transmit to the Committee on Armed Services and Committee on Appropriations of the Senate and 

the Committee on Armed Services and Committee on Appropriations of the House of Representatives the report, 

together with any comments with respect to the report that the Secretary considers appropriate.

(e) CERTIFICATION OF BUDGETS.—(1) The Secretary of Defense, acting through the Under Secretary of 

Defense (Comptroller), shall require that the Secretary of each military department and the head of each Defense 

Agency with test and evaluation responsibilities transmit such Secretary's or Defense Agency head's proposed 

budget for test and evaluation activities for a fiscal year and for the period covered by the future-years defense 

program submitted to Congress under section 221 of this title for that fiscal year to the Director of the Center for 

review under paragraph (2) before submitting such proposed budget to the Under Secretary of Defense 

(Comptroller).

(2)(A) The Director of the Center shall review each proposed budget transmitted under paragraph (1) and 

shall, not later than January 31 of the year preceding the fiscal year for which such budgets are proposed, submit to 

the Secretary of Defense a report containing the comments of the Director with respect to all such proposed budgets, 

together with the certification of the Director as to whether such proposed budgets are adequate.

(B) The Director shall also submit, together with such report and such certification, an additional 

certification as to whether such proposed budgets provide balanced support for such strategic plan.

(3) The Secretary of Defense shall, not later than March 31 of the year preceding the fiscal year for which 

such budgets are proposed, submit to Congress a report on those proposed budgets which the Director has not 

certified under paragraph (2)(A) to be adequate. The report shall include the following matters:

(A) A discussion of the actions that the Secretary proposes to take, together with any 

recommended legislation that the Secretary considers appropriate, to address the inadequacy of the 

proposed budgets.

(B) Any additional comments that the Secretary considers appropriate regarding the inadequacy of 

the proposed budgets.
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(f) ***

******

§223a. Ballistic missile defense programs: procurement

(a) BUDGET JUSTIFICATION MATERIALS.—In the budget justification materials submitted to Congress in 

support of the Department of Defense budget for any fiscal year (as submitted with the budget of the President under 

section 1105(a) of title 31), the Secretary of Defense shall specify, for each ballistic missile defense system element 

for which the Missile Defense Agency is engaged in planning for production and initial fielding, the following 

information:

(1) The production rate capabilities of the production facilities planned to be used for production 

of that element.

(2) The potential date of availability of that element for initial fielding.

(3) The estimated date on which the administration of the acquisition of that element is to be 

transferred from the Director of the Missile Defense Agency to the Secretary of a military department.

(b) ***

******

§ 229. Programs for combating terrorism: display of budget information

(a) SUBMISSION WITH ANNUAL BUDGET JUSTIFICATION DOCUMENTS.—The Secretary of Defense shall 

submit to Congress, as a part of the documentation that supports the President's annual budget for the Department of 

Defense, a consolidated budget justification display, in classified and unclassified form, that includes all programs 

and activities of the Department of Defense combating terrorism program.

(b) REQUIREMENTS FOR BUDGET DISPLAY.—The budget display under subsection (a) shall include- 

(1) the amount requested, by appropriation and functional area, for each of the program elements, 

projects, and initiatives that support the Department of Defense combating terrorism program, with 

supporting narrative descriptions and rationale for the funding levels requested; and

(2) a summary, to the program element and project level of detail, of estimated expenditures for 

the current year, funds requested for the budget year, and budget estimates through the completion of the 

current future-years defense plan for the Department of Defense combating terrorism program.

(c) EXPLANATION OF INCONSISTENCIES.—As part of the budget display under subsection (a) for any fiscal 

year, the Secretary shall identify and explain- 

(1) any inconsistencies between (A) the information submitted under subsection (b) for that fiscal 

year, and (B) the information provided to the Director of the Office of Management and Budget in support 

of the annual report of the President to Congress on funding for executive branch counterterrorism and 

antiterrorism programs and activities for that fiscal year in accordance with section 1051(b) of the National 

Defense Authorization Act for Fiscal Year 1998 (31 U.S.C. 1113 note); and

(2) any inconsistencies between (A) the execution, during the previous fiscal year and the current 

fiscal year, of programs and activities of the Department of Defense combating terrorism program, and (B) 

the funding and specification for such programs and activities for those fiscal years in the manner provided 

by Congress (both in statutes and in relevant legislative history).

(d) DEPARTMENT OF DEFENSE COMBATING TERRORISM PROGRAM.—In this section, the term "Department 

of Defense combating terrorism program" means the programs, projects, and activities of the Department of Defense 

related to combating terrorism inside and outside the United States.

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§231a. Budgeting for life-cycle cost of aircraft for the Navy, Army, and Air Force: annual plan and 

certification
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(a) ANNUAL AIRCRAFT PROCUREMENT PLAN AND CERTIFICATION.—Not later than 45 days after the date on 

which the President submits to Congress the budget for a fiscal year, the Secretary of Defense shall submit to the 

congressional defense committees- 

(1) a plan for the procurement of the aircraft specified in subsection (b) for the Department of the 

Navy, the Department of the Army, and the Department of the Air Force developed in accordance with this 

section; and

(2) a certification by the Secretary that both the budget for such fiscal year and the future-years 

defense program submitted to Congress in relation to such budget under section 221 of this title provide for 

funding of the procurement of aircraft at a level that is sufficient for the procurement of the aircraft 

provided for in the plan under paragraph (1) on the schedule provided in the plan.

(b) COVERED AIRCRAFT.—The aircraft specified in this subsection are the aircraft as follows:

(1) Fighter aircraft.

(2) Attack aircraft.

(3) Bomber aircraft.

(4) Intertheater lift aircraft.

(5) Intratheater lift aircraft.

(6) Intelligence, surveillance, and reconnaissance aircraft.

(7) Tanker aircraft.

(8) Remotely piloted aircraft.

(9) Rotary-wing aircraft.

(10) Operational support and executive lift aircraft.

(11) Any other major support aircraft designated by the Secretary of Defense for purposes of this 

section.

(c) ANNUAL AIRCRAFT PROCUREMENT PLAN.—(1) The annual aircraft procurement plan developed for a 

fiscal year for purposes of subsection (a)(1) should be designed so that the aviation force provided for under the plan 

is capable of supporting the national military strategy of the United States as set forth in the most recent national 

security strategy report of the President under section 108 of the National Security Act of 1947 (50 U.S.C. 3043), 

except that, if at the time the plan is submitted with the defense budget materials for that fiscal year, a national 

security strategy report required under such section 108 has not been submitted to Congress as required by 

paragraph (2) or paragraph (3), if applicable, of subsection (a) of such section, then the plan should be designed so 

that the aviation force provided for under the plan is capable of supporting the aviation force structure recommended 

in the report of the most recent Quadrennial Defense Review.

(2) Each annual aircraft procurement plan shall include the following:

(A) A detailed program for the procurement of the aircraft specified in subsection (b) for each of 

the Department of the Navy, the Department of the Army, and the Department of the Air Force over the 

next 30 fiscal years.

(B) A description of the necessary aviation force structure to meet the requirements of the national 

military strategy of the United States or the most recent Quadrennial Defense Review, whichever is 

applicable under paragraph (1).

(C) The estimated levels of annual investment funding necessary to carry out each aircraft 

program, together with a discussion of the procurement strategies on which such estimated levels of annual 

investment funding are based, set forth in aggregate for the Department of Defense and in aggregate for 

each military department.

(D) The estimated level of annual funding necessary to operate, maintain, sustain, and support 

each aircraft program throughout the life-cycle of the program, set forth in aggregate for the Department of 

Defense and in aggregate for each military department.

(E) For each of the cost estimates required by subparagraphs (C) and (D)- 

(i) a description of whether the cost estimate is derived from the cost estimate position of 

the military department or derived from the cost estimate position of the Cost Analysis and 

Program Evaluation office of the Secretary of Defense;

(ii) if the cost estimate position of the military department and the cost estimate position 

of the Cost Analysis and Program Evaluation office differ by more than .5 percent for any aircraft 

program, an annotated cost estimate difference and sufficient rationale to explain the difference; 

and
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(iii) the confidence or certainty level associated with the cost estimate for each aircraft 

program.

(F) An assessment by the Secretary of Defense of the extent to which the combined aircraft forces 

of the Department of the Navy, the Department of the Army, and the Department of the Air Force meet the 

national security requirements of the United States.

(3) For any cost estimate required by paragraph (2)(C) or (D), for any aircraft program for which 

the Secretary is required to include in a report under section 2432 of this title, the source of the cost 

information used to prepare the annual aircraft plan, shall be sourced from the Selected Acquisition Report 

data that the Secretary plans to submit to the congressional defense committees in accordance with 

subsection (f) of that section for the year for which the annual aircraft plan is prepared.

(4) The annual aircraft procurement plan shall be submitted in unclassified form and shall contain 

a classified annex.

(d) ASSESSMENT WHEN AIRCRAFT PROCUREMENT BUDGET IS INSUFFICIENT TO MEET APPLICABLE 

REQUIREMENTS.—If the budget for a fiscal year provides for funding of the procurement of aircraft for either the 

Department of the Navy, the Department of the Army, or the Department of the Air Force at a level that is not 

sufficient to sustain the aviation force structure specified in the aircraft procurement plan for such Department for 

that fiscal year under subsection (a), the Secretary shall include with the defense budget materials for that fiscal year 

an assessment that describes and discusses the risks associated with the reduced force structure of aircraft that will 

result from funding aircraft procurement at such level. Such assessment shall be coordinated in advance with the 

commanders of the combatant commands.

(e) DEFINITIONS.—In this section:

(1) The term "budget", with respect to a fiscal year, means the budget for that fiscal year that is 

submitted to Congress by the President under section 1105(a) of title 31.

(2) The term "Quadrennial Defense Review" means the review of the defense programs and 

policies of the United States that is carried out every 4 years under section 118 1 of this title.

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§238. Cyber mission forces: program elements

(a) BUDGET JUSTIFICATION DISPLAY.—The Secretary of Defense shall submit to Congress, as a part of the 

defense budget materials for fiscal year 2017 and each fiscal year thereafter, a budget justification display that 

includes- 

(1) a major force program category for the five-year defense plan of the Department of Defense 

for the training, manning, and equipping of the cyber mission forces; and

(2) program elements for the cyber mission forces.

(b) WAIVER.—The Secretary may waive the requirement under subsection (a) for fiscal year 2017 if the 

Secretary- 

(1) determines the Secretary is unable to comply with such requirement for fiscal year 2017; and

(2) establishes a plan to implement the requirement for fiscal year 2018.

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§2228. Office of Corrosion Policy and Oversight

(a) ***

(e) REPORT.—(1) For each budget for a fiscal year, beginning with the budget for fiscal year 2009 and 

ending with the budget for fiscal year 2022, the Secretary of Defense shall submit, with the defense budget 

materials, a report on the following:

(A) Funding requirements for the long-term strategy developed under subsection (d).
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(B) The estimated composite return on investment achieved by implementing the strategy, and 

documented in the assessments by the Department of Defense of completed corrosion projects and 

activities.

(C) For the fiscal year covered by the report and the preceding fiscal year, the funds requested in 

the budget compared to the funding requirements.

(D) If the full amount of funding requirements is not requested in the budget, the reasons for not 

including the full amount and a description of the impact on readiness, logistics, and safety of not fully 

funding required corrosion prevention and mitigation activities.

(E) For the fiscal year preceding the fiscal year covered by the report, the amount of funds 

requested in the budget for each project or activity described in subsection (d) compared to the funding 

requirements for the project or activity.

(F) For the fiscal year preceding the fiscal year covered by the report, a description of the specific 

amount of funds used for military corrosion projects, the Technical Corrosion Collaboration program, and 

other corrosion-related activities.

(2)(A) Each report under this section shall include, in an annex to the report, a summary of the most recent 

report required by subparagraph (B).

(B) Not later than December 31 of each year, through December 31, 2020, the corrosion control and 

prevention executive of a military department shall submit to the Director of Corrosion Policy and Oversight a 

report containing recommendations pertaining to the corrosion control and prevention program of the military 

department. Such report shall include recommendations for the funding levels necessary for the executive to carry 

out the duties of the executive under this section. The report required under this subparagraph shall- 

(i) provide a summary of key accomplishments, goals, and objectives of the corrosion control and 

prevention program of the military department; and

(ii) include the performance measures used to ensure that the corrosion control and prevention 

program achieved the goals and objectives described in clause (i).

(f) ***

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§2275. Reports on integration of acquisition and capability delivery schedules for segments of major satellite 

acquisition programs and funding for such programs

(a) REPORTS REQUIRED.—The Under Secretary of Defense for Acquisition, Technology, and Logistics shall 

submit to the congressional defense committees a report on each major satellite acquisition program in accordance 

with subsection (d) that assesses- 

(1) the integration of the schedules for the acquisition and the delivery of the capabilities of the 

segments for the program; and

(2) funding for the program.

(b) ELEMENTS.—Each report required by subsection (a) with respect to a major satellite acquisition 

program shall include the following:

(1) The amount of funding approved for the program and for each segment of the program that is 

necessary for full operational capability of the program.

(2) The dates by which the program and each segment of the program is anticipated to reach initial 

and full operational capability.

(3) A description of the intended primary capabilities and key performance parameters of the 

program.

(4) An assessment of the extent to which the schedules for the acquisition and the delivery of the 

capabilities of the segments for the program or any related program referred to in paragraph (1) are 

integrated.

(5) If the Under Secretary determines pursuant to the assessment under paragraph (4) that the 

program is a non-integrated program, an identification of- 

(A) the impact on the mission of the program of having the delivery of the segment 

capabilities of the program more than one year apart;
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(B) the measures the Under Secretary is taking or is planning to take to improve the 

integration of the acquisition and delivery schedules of the segment capabilities; and

(C) the risks and challenges that impede the ability of the Department of Defense to fully 

integrate those schedules.

(c) CONSIDERATION BY MILESTONE DECISION AUTHORITY.—The Milestone Decision Authority shall 

include the report required by subsection (a) with respect to a major satellite acquisition program as part of the 

documentation used to approve the acquisition of the program.

(d) SUBMITTAL OF REPORTS.—(1) In the case of a major satellite acquisition program initiated before 

January 2, 2013, the Under Secretary shall submit the report required by subsection (a) with respect to the program 

not later than one year after such date of enactment.1 

(2) In the case of a major satellite acquisition program initiated on or after January 2, 2013, the Under 

Secretary shall submit the report required by subsection (a) with respect to the program at the time of the Milestone 

B approval of the program.

(e) NOTIFICATION TO CONGRESS OF NON-INTEGRATED ACQUISITION AND CAPABILITY DELIVERY 

SCHEDULES.—If, after submitting the report required by subsection (a) with respect to a major satellite acquisition 

program, the Under Secretary determines that the program is a non-integrated program, the Under Secretary shall, 

not later than 30 days after making that determination, submit to the congressional defense committees a report- 

(1) notifying the committees of that determination; and

(2) identifying- 

(A) the impact on the mission of the program of having the delivery of the segment 

capabilities of the program more than one year apart;

(B) the measures the Under Secretary is taking or is planning to take to improve the 

integration of the acquisition and delivery schedules of the segment capabilities; and

(C) the risks and challenges that impede the ability of the Department of Defense to fully 

integrate those schedules.

(f) ANNUAL UPDATES FOR NON-INTEGRATED PROGRAMS.— 

(1) REQUIREMENT.—For each major satellite acquisition program that the Under Secretary has 

determined under subsection (b)(5) or subsection (e) is a non-integrated program, the Under Secretary shall 

annually submit to Congress, at the same time the budget of the President for a fiscal year is submitted 

under section 1105 of title 31, an update to the report required by subsection (a) for such program.

(2) TERMINATION OF REQUIREMENT.—The requirement to submit an annual report update for a 

program under paragraph (1) shall terminate on the date on which the Under Secretary submits to the 

congressional defense committees notice that the Under Secretary has determined that such program is no 

longer a non-integrated program, or on the date that is five years after the date on which the initial report 

update required under paragraph (1) is submitted, whichever is earlier.

(3) GAO REVIEW OF CERTAIN NON-INTEGRATED PROGRAMS.—If at the time of the termination of 

the requirement to annually update a report for a program under paragraph (1) the Under Secretary has not 

provided notice to the congressional defense committees that the Under Secretary has determined that the 

program is no longer a non-integrated program, the Comptroller General shall conduct a review of such 

program and submit the results of such review to the congressional defense committees.

(g) DEFINITIONS.—In this section:

(1) SEGMENTS.—The term "segments", with respect to a major satellite acquisition program, refers 

to any satellites acquired under the program and the ground equipment and user terminals necessary to fully 

exploit the capabilities provided by those satellites.

(2) MAJOR SATELLITE ACQUISITION PROGRAM.—The term "major satellite acquisition program" 

means a major defense acquisition program (as defined in section 2430 of this title) for the acquisition of a 

satellite.

(3) MILESTONE B APPROVAL.—The term "Milestone B approval" has the meaning given that term 

in section 2366(e)(7) of this title.

(4) NON-INTEGRATED PROGRAM.—The term "non-integrated program" means a program with 

respect to which the schedules for the acquisition and the delivery of the capabilities of the segments for the 
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program, or a related program that is necessary for the operational capability of the program, provide for 

the acquisition or the delivery of the capabilities of at least two of the three segments for the program or 

related program more than one year apart.

§2276. Commercial space launch cooperation

(a) AUTHORITY.—The Secretary of Defense may take such actions as the Secretary considers to be in the 

best interest of the Federal Government to- 

(1) maximize the use of the capacity of the space transportation infrastructure of the Department 

of Defense by the private sector in the United States;

(2) maximize the effectiveness and efficiency of the space transportation infrastructure of the 

Department of Defense;

(3) reduce the cost of services provided by the Department of Defense related to space 

transportation infrastructure at launch support facilities and space recovery support facilities;

(4) encourage commercial space activities by enabling investment by covered entities in the space 

transportation infrastructure of the Department of Defense; and

(5) foster cooperation between the Department of Defense and covered entities.

(b) AUTHORITY FOR CONTRACTS AND OTHER AGREEMENTS RELATING TO SPACE TRANSPORTATION 

INFRASTRUCTURE.—The Secretary of Defense- 

(1) may enter into an agreement with a covered entity to provide the covered entity with support 

and services related to the space transportation infrastructure of the Department of Defense; and

(2) upon the request of such covered entity, may include such support and services in the space 

launch and reentry range support requirements of the Department of Defense if- 

(A) the Secretary determines that the inclusion of such support and services in such 

requirements- 

(i) is in the best interest of the Federal Government;

(ii) does not interfere with the requirements of the Department of Defense; and

(iii) does not compete with the commercial space activities of other covered 

entities, unless that competition is in the national security interests of the United States; 

and

(B) any commercial requirement included in the agreement has full non-Federal funding 

before the execution of the agreement.

(c) CONTRIBUTIONS.— 

(1) IN GENERAL.—The Secretary of Defense may enter into an agreement with a covered entity on 

a cooperative and voluntary basis to accept contributions of funds, services, and equipment to carry out this 

section.

(2) USE OF CONTRIBUTIONS.—Any funds, services, or equipment accepted by the Secretary under 

this subsection- 

(A) may be used only for the objectives specified in this section in accordance with terms 

of use set forth in the agreement entered into under this subsection; and

(B) shall be managed by the Secretary in accordance with regulations of the Department 

of Defense.

(3) REQUIREMENTS WITH RESPECT TO AGREEMENTS.—An agreement entered into with a covered 

entity under this subsection- 

(A) shall address the terms of use, ownership, and disposition of the funds, services, or 

equipment contributed pursuant to the agreement; and

(B) shall include a provision that the covered entity will not recover the costs of its 

contribution through any other agreement with the United States.

(d) DEFENSE COOPERATION SPACE LAUNCH ACCOUNT.— 

(1) ESTABLISHMENT.—There is established in the Treasury of the United States a special account 

to be known as the "Defense Cooperation Space Launch Account".

(2) CREDITING OF FUNDS.—Funds received by the Secretary of Defense under subsection (c) shall 

be credited to the Defense Cooperation Space Launch Account.
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(3) USE OF FUNDS.—Funds deposited in the Defense Cooperation Space Launch Account under 

paragraph (2) are authorized to be appropriated and shall be available for obligation only to the extent 

provided in advance in an appropriation Act for costs incurred by the Department of Defense in carrying 

out subsection (b). Funds in the Account shall remain available until expended.

(e) ANNUAL REPORT.—Not later than January 31 of each year, the Secretary of Defense shall submit to the 

congressional defense committees a report on the funds, services, and equipment accepted and used by the Secretary 

under this section during the preceding fiscal year.

(f) REGULATIONS.—The Secretary of Defense shall prescribe regulations to carry out this section.

(g) DEFINITIONS.—In this section:

(1) COVERED ENTITY.—The term "covered entity" means a non-Federal entity that- 

(A) is organized under the laws of the United States or of any jurisdiction within the 

United States; and

(B) is engaged in commercial space activities.

(2) LAUNCH SUPPORT FACILITIES.—The term "launch support facilities" has the meaning given the 

term in section 50501(7) of title 51.

(3) SPACE RECOVERY SUPPORT FACILITIES.—The term "space recovery support facilities" has the 

meaning given the term in section 50501(11) of title 51.

(4) SPACE TRANSPORTATION INFRASTRUCTURE.—The term "space transportation infrastructure" 

has the meaning given that term in section 50501(12) of title 51. 

******

§2466. Limitations on the performance of depot-level maintenance of materiel

(a) PERCENTAGE LIMITATION.—Not more than 50 percent of the funds made available in a fiscal year to a 

military department or a Defense Agency for depot-level maintenance and repair workload may be used to contract 

for the performance by non-Federal Government personnel of such workload for the military department or the 

Defense Agency. Any such funds that are not used for such a contract shall be used for the performance of depotlevel maintenance and repair workload by employees of the Department of Defense.

(b) WAIVER OF LIMITATION.—The Secretary of Defense may waive the limitation in subsection (a) for a 

fiscal year if- 

(1) the Secretary determines that the waiver is necessary for reasons of national security; and

(2) the Secretary submits to Congress a notification of the waiver together with the reasons for the 

waiver.

(c) PROHIBITION ON DELEGATION OF WAIVER AUTHORITY.—The authority to grant a waiver under 

subsection (b) may not be delegated. 

(d) ANNUAL REPORT.—(1) Not later than 90 days after the date on which the budget of the President for a 

fiscal year is submitted to Congress pursuant to section 1105 of title 31, the Secretary of Defense shall submit to 

Congress a report identifying, for each of the armed forces (other than the Coast Guard) and each Defense Agency, 

the percentage of the funds referred to in subsection (a) that was expended during the preceding fiscal year, and are 

projected to be expended during the current fiscal year and the ensuing fiscal year, for performance of depot-level 

maintenance and repair workloads by the public and private sectors.

(2) Each report required under paragraph (1) shall include as a separate item any expenditure covered by 

section 2474(f) of this title that was made during the fiscal year covered by the report and shall specify the amount 

and nature of each such expenditure.

******

§7310. Overhaul, repair, etc. of vessels in foreign shipyards: restrictions
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(a) VESSELS WITH HOMEPORT IN UNITED STATES OR GUAM.—A naval vessel (or any other vessel under the 

jurisdiction of the Secretary of the Navy) the homeport of which is in the United States or Guam may not be 

overhauled, repaired, or maintained in a shipyard outside the United States or Guam, other than in the case of 

voyage repairs.

(b) VESSEL CHANGING HOMEPORTS.—(1) In the case of a naval vessel the homeport of which is not in the 

United States (or a territory of the United States), the Secretary of the Navy may not during the 15-month period 

preceding the planned reassignment of the vessel to a homeport in the United States (or a territory of the United 

States) begin any work for the overhaul, repair, or maintenance of the vessel that is scheduled to be for a period of 

more than six months.

(2) In the case of a naval vessel the homeport of which is in the United States (or a territory of the United 

States), the Secretary of the Navy shall during the 15-month period preceding the planned reassignment of the vessel 

to a homeport not in the United States (or a territory of the United States) perform in the United States (or a territory 

of the United States) any work for the overhaul, repair, or maintenance of the vessel that is scheduled- 

(A) to begin during the 15-month period; and

(B) to be for a period of more than six months.

(c) REPORT.—(1) The Secretary of the Navy shall submit to Congress each year, at the time that the 

President's budget is submitted to Congress that year under section 1105(a) of title 31, a report listing all repairs and 

maintenance performed on any covered naval vessel that has undergone work for the repair of the vessel in any 

shipyard outside the United States or Guam (in this section referred to as a "foreign shipyard") during the fiscal year 

preceding the fiscal year in which the report is submitted.

(2) The report shall include the percentage of the annual ship repair budget of the Navy that was spent on 

repair of covered naval vessels in foreign shipyards during the fiscal year covered by the report.

(3) Except as provided in paragraph (4), the report also shall include the following with respect to each 

covered naval vessel:

(A) The justification under law and operational justification for the repair in a foreign shipyard.

(B) The name and class of vessel repaired.

(C) The category of repair and whether the repair qualified as voyage repair as defined in 

Commander Military Sealift Command Instruction 4700.15C (September 13, 2007) or Joint Fleet 

Maintenance Manual (Commander Fleet Forces Command Instruction 4790.3 Revision A, Change 7), 

Volume III. Scheduled availabilities are to be considered as a composite and reported as a single entity 

without individual repair and maintenance items listed separately.

(D) The shipyard where the repair work was carried out.

(E) The number of days the vessel was in port for repair.

(F) The cost of the repair and the amount (if any) that the cost of the repair was less than or greater 

than the cost of the repair provided for in the contract.

(G) The schedule for repair, the amount of work accomplished (stated in terms of work days), 

whether the repair was accomplished on schedule, and, if not so accomplished, the reason for the schedule 

over-run.

(H) The homeport or location of the vessel prior to its voyage for repair.

(I) Whether the repair was performed under a contract awarded through the use of competitive 

procedures or procedures other than competitive procedures.

(4) In the case of a covered vessel described in subparagraph (C) of paragraph (5), the report shall not be 

required to include the information described in subparagraphs (A), (E), (F), (G), and (I) of paragraph (3).

(5) In this subsection, the term "covered naval vessel" means any of the following:

(A) A naval vessel.

(B) Any other vessel under the jurisdiction of the Secretary of the Navy.

(C) A vessel not described in subparagraph (A) or (B) that is operated pursuant to a contract 

entered into by the Secretary of the Navy and the Maritime Administration or the United States 

Transportation Command in support of Department of Defense operations.

******

§10543. National Guard and reserve component equipment procurement and military construction funding: 

inclusion in future-years defense program
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(a) IN GENERAL.—The Secretary of Defense shall specify in each future-years defense program submitted 

to Congress under section 221 of this title the estimated expenditures and the proposed appropriations, for each 

fiscal year of the period covered by that program, for the procurement of equipment and for military construction for 

each of the reserve components of the armed forces.

(b) ASSOCIATED ANNEXES.—The associated annexes of the future-years defense program shall specify, at 

the same level of detail as is set forth in the annexes for the active components, the amount requested for--

(1) procurement of each item of equipment to be procured for each reserve component; and

(2) each military construction project to be carried out for each reserve component, together with 

the location of the project.

(c) REPORT.—(1) If the aggregate of the amounts specified in paragraphs (1) and (2) of subsection (b) for a 

fiscal year is less than the amount equal to 90 percent of the average authorized amount applicable for that fiscal 

year under paragraph (2), the Secretary of Defense shall submit to Congress a report specifying for each reserve 

component the additional items of equipment that would be procured, and the additional military construction 

projects that would be carried out, if that aggregate amount were an amount equal to such average authorized 

amount. The report shall be at the same level of detail as is required by subsection (b). 

(2) In this subsection, the term "average authorized amount", with respect to a fiscal year, means the 

average of- 

(A) the aggregate of the amounts authorized to be appropriated for the preceding fiscal year for the 

procurement of items of equipment, and for military construction, for the reserve components; and

(B) the aggregate of the amounts authorized to be appropriated for the fiscal year preceding the 

fiscal year referred to in subparagraph (A) for the procurement of items of equipment, and for military 

construction, for the reserve components.

(3) A report required under paragraph (1) for a fiscal year shall be submitted not later than 90 days after the 

date on which the President submits to Congress the budget for such fiscal year under section 1105(a) of title 31.

*****

NATIONAL DEFENSE AUTHORIZATION ACTS

National Defense Authorization Act for Fiscal Year 2002 (Public Law 107-107) 

SEC. 232. [10 U.S.C. 2431 note] MISSILE DEFENSE AGENCY TEST PROGRAM.

(a) ***

*****

(h) ANNUAL OT&E ASSESSMENT AND CHARACTERIZATION OF CERTAIN BALLISTIC MISSILE DEFENSE 

MATTERS.—(1) The Director of Operational Test and Evaluation shall each year assess the adequacy and sufficiency 

of the Missile Defense Agency test program during the preceding fiscal year.

(2) The Director of Operational Test and Evaluation shall also each year characterize the operational 

effectiveness, suitability, and survivability of the ballistic missile defense system, and its elements, that have been 

fielded or tested before the end of the preceding fiscal year.

(3) Not later than February 15 each year the Director shall submit to the congressional defense committees 

a report on the assessment under paragraph (1) and the characterization under paragraph (2) with respect to the 

preceding fiscal year.

*****

John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-

364) 
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SEC. 122. ADHERENCE TO NAVY COST ESTIMATES FOR CVN–78 CLASS OF AIRCRAFT 

CARRIERS.

(a) ***

(f) REQUIREMENTS FOR CVN–79.— 

(1) QUARTERLY COST ESTIMATE.—The Secretary of the Navy shall submit to the congressional 

defense committees on a quarterly basis a report setting forth the most current cost estimate for the aircraft 

carrier designated as CVN–79 (as estimated by the program manager). Each cost estimate shall include the 

current percentage of completion of the program, the total costs incurred, and an estimate of costs at 

completion for ship construction, Government-furnished equipment, and engineering and support costs.

*****

SEC. 1017. OBTAINING CARRIAGE BY VESSEL: CRITERION REGARDINGOVERHAUL, REPAIR, 

AND MAINTENANCE OF VESSELS IN THE UNITED STATES.

(a) ***

*****

(e) ANNUAL REPORT.—The Secretary, acting through the United States Transportation Command, shall 

annually submit to the Committees on Armed Services of the Senate and the House of Representatives a report 

regarding overhaul, repair, and maintenance performed on covered vessels of each offeror of carriage to which the 

acquisition policy applies.

*****

Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 (Public Law 110-

417) 

SEC. 1047. [10 U.S.C. 2366b note] FORMAL REVIEW PROCESS FOR BANDWIDTH REQUIREMENTS.

(a) ***

(d) ***

(2) REPORTS.—Not later than January 1 of each year, the Secretary of Defense and the Director of

National Intelligence shall each submit to the congressional defense committees [Committees on Armed 

Services and Appropriations of the Senate and the House of Representatives], the Select Committee on 

Intelligence of the Senate, and the Permanent Select Committee on Intelligence of the House of 

Representatives a report on any determinations made under paragraph (1) with respect to meeting the 

bandwidth requirements for major defense acquisition programs and major system acquisition programs 

during the preceding fiscal year.

*****

Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (Public Law 111-383)

SEC. 1217. [22 U.S.C. 7513 note] AUTHORITY TO ESTABLISH A PROGRAM TO DEVELOP AND 

CARRY OUT INFRASTRUCTURE PROJECTS IN AFGHANISTAN. 

(a) ***

*****

(i) REPORTS.— 
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(1) REPORT REQUIRED.—Not later than 30 days after the end of each fiscal year in which funds are 

obligated, expended, or transferred under the program authorized under subsection (a), the Secretary of 

Defense, in coordination with the Secretary of State, shall submit to the appropriate congressional 

committees a report regarding implementation of the program during such fiscal year.

(2) MATTERS TO BE INCLUDED.—The report required under paragraph (1) shall include the 

following:

(A) The allocation and use of funds under the program during the fiscal year.

(B) A description of each project for which funds were expended or transferred during 

the fiscal year.

*****

National Defense Authorization Act for Fiscal Year 2013 (Public Law 112-239) 

SEC. 904. ***

******

(h) [10 U.S.C. 133 note ] REPORTS TO CONGRESS ON FAILURE TO COMPLY WITH RECOMMENDATIONS.— 

(1) REPORT REQUIRED.—Not later than 60 days after the end of each fiscal year, from fiscal year 

2013 through fiscal year 2018, the Under Secretary of Defense for Acquisition, Technology, and Logistics 

shall submit to the congressional defense committees [Committees on Armed Services and Appropriations 

of the Senate and the House of Representatives] a report on each case in which a major defense acquisition 

program, in the preceding fiscal year— 

(A) proceeded to implement a test and evaluation master plan notwithstanding a decision 

of the Deputy Assistant Secretary of Defense for Developmental Test and Evaluation to 

disapprove the developmental test and evaluation plan within that plan in accordance with former 

section 139b(a)(5)(B) of title 10, United States Code; or

(B) proceeded to initial operational testing and evaluation notwithstanding a 

determination by the Deputy Assistant Secretary of Defense for Developmental Test and 

Evaluation on the basis of an assessment of operational test readiness that the program is not ready 

for operational testing.

(2) MATTERS COVERED.— 

(A) For each program covered by paragraph (1)(A), the report shall include the following:

(i) A description of the specific aspects of the developmental test and evaluation plan that 

the Deputy Assistant Secretary determined to be inadequate.

(ii) An explanation of the reasons why the program disregarded the Deputy Assistant

Secretary's recommendations with regard to those aspects of the developmental test and evaluation 

plan.

(iii) The steps taken to address those aspects of the developmental test and evaluation 

plan and address the concerns of the Deputy Assistant Secretary. 

(B) For each program covered by paragraph (1)(B), the report shall include the following:

(i) An explanation of the reasons why the program proceeded to initial operational testing 

and evaluation notwithstanding the findings of the assessment of operational test readiness.

(ii) A description of the aspects of the approved testing and evaluation master plan that 

had to be set aside to enable the program to proceed to initial operational testing and evaluation.

(iii) A description of how the program addressed the specific areas of concern raised in 

the assessment of operational test readiness.

(iv) A statement of whether initial operational testing and evaluation identified any 

significant shortcomings in the program.

*****

Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal 

Year 2015 (Public Law 113-291) 
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Volume 1 of 3 | January 2018

SEC. 1026. AVAILABILITY OF FUNDS FOR RETIREMENT OR INACTIVATION OF TICONDEROGA 

CLASS CRUISERS OR DOCK LANDING SHIPS. 

(a) ***

*****

(d) REPORTS.— 

(1) IN GENERAL.—At the same time as the submittal to Congress of the budget of the President 

under section 1105 of title 31, United States, for each fiscal year during which activities under the 

modernization of vessels will be carried out under this section, the Secretary of the Navy shall submit to the 

congressional defense committees a written report on the status of the modernization of vessels under this 

section. 

*****

SEC. 1662. [10 U.S.C. 2431 note] TESTING AND ASSESSMENT OF MISSILE DEFENSE SYSTEMS 

PRIOR TO PRODUCTION AND DEPLOYMENT.

(a) ***

*****

(c) ASSESSMENT BY DIRECTOR OF OPERATIONAL TEST AND EVALUATION.—The Director of Operational 

Test and Evaluation shall- 

(1) provide to the Secretary the assessment of the Director, based on the available test data, of the 

sufficiency, adequacy, and results of the testing of each covered system, including an assessment of 

whether the covered system will be sufficiently effective, suitable, and survivable when needed; and

(2) submit to the congressional defense committees [Committees on Armed Services and 

Appropriations of the Senate and the House of Representatives] a written summary of such assessment. 

(d) ASSESSMENT BY COMMANDER OF UNITED STATES STRATEGIC COMMAND.—The Commander of the 

United States Strategic Command shall- 

(1) provide to the Secretary a military utility assessment of the operational utility of each covered 

system; and

(2) not later than 30 days after providing such assessment to the Secretary, submit to the 

congressional defense committees a written summary of such assessment. 

*****

National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-328) 

SEC. 1061. [10 USC 111 note] TEMPORARY CONTINUATION OF CERTAIN DEPARTMENT OF 

DEFENSE REPORTING REQUIREMENTS.

 

 (a) EXCEPTIONS TO REPORTS TERMINATION PROVISION.—Section 1080 of the National Defense 

Authorization Act for Fiscal Year 2016 (Public Law 114-92; 129 Stat. 1000; 10 U.S.C. 111 note) does not apply to 

any report required to be submitted to Congress by the Department of Defense, or by any officer, official, 

component, or element of the Department, pursuant 

to a provision of law specified in this section, notwithstanding the enactment of the reporting requirement by an 

annual national defense authorization Act or the inclusion of the report in the list of reports prepared by the 

Secretary of Defense pursuant to subsection (c) of such section 1080.

(b) FINAL TERMINATION DATE FOR SUBMITTAL OF EXEMPTED REPORTS.— 

(1) IN GENERAL.—Except as provided in paragraph (2), each report required pursuant to a 

provision of law specified in this section that is still required to be submitted to Congress as of December 

31, 2021, shall no longer be required to be submitted to Congress after that date.
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(2) REPORTS EXEMPTED FROM TERMINATION.—The termination dates specified in paragraph (1) 

and section 1080 of the National Defense Authorization Act for Fiscal Year 2016 do not apply to the 

following:

(A) The submission of the reports on the National Military Strategy and Risk 

Assessment under section 153(b)(3) of title 10, United States Code.

(B) The submission of the future-years defense program (including associated annexes) 

under section 221 of title 10, United States Code.

(C) The submission of the future-years mission budget for the military programs of the 

Department of Defense under section 221 of such title.

(D) The submission of audits of contracting compliance by the Inspector General of the 

Department of Defense under section 1601(b) of the National Defense Authorization Act for 

Fiscal Year 2014 (Public Law 113-66; 10 U.S.C. 2533a note).

(c) REPORTS REQUIRED BY TITLE 10, UNITED STATES CODE.—Subject to subsection (b), subsection (a) 

applies to reporting requirements contained in the following sections of title 10, United States Code:

(1) Section 113(i).

(2) Section 117(e).

(3) [Section] 118a(d).

(4) Section 119(a) and (b).

(5) Section 127b(f).

(6) Section 139(h).

(7) [Former] Section 139b(d).

(8) Sections [sic] 153(c).

(9) Section 171a(e) and (g)(2).

(10) Section 179(f).

(11) Section 196(d)(1), (d)(4), and (e)(3).

(12) Section 223a(a).

(13) Section 225(c)[.]

(14) Section 229.

(15) Section 231.

(16) Section 231a.

(17) Section 238.

(18) Section 341(f) of title 10, United States Code, as amended by section 1246 of this Act.

(19) Section 401(d).

(20) Section 407(d).

(21) Section 481a(c).

(22) Section 482(a).

(23) Section 488.

(24) Section 494(b).

(25) Section 526(j).

(26) Section 946(c) (Article 146 of the Uniform Code of Military Justice).

(27) Section 981(c).

(28) Section 1116(d).

(29) Section 1566(c)(3).

(30) Section 1557(e).

(31) Section 1781a(e).

(32) Section 1781c(h) [now 1781c(g)].

(33) Section 2011(e) [now 322(e)].

(34) Section 2166(i) [now 343(i)].

(35) Section 2218(h).

(36) Section 2228(e).

(37) Section 2229(d).

(38) Section 2229a.

(39) Section 2249c(c) [now 345(c)].

(40) Section 2275.

(41) Section 2276(e).
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Volume 1 of 3 | January 2018

(42) Section 2367(d).

(43) Section 2399(g).

(44) Section 2445b.

(45) Section 2464(d).

(46) Section 2466(d).

(47) Section 2504.

(48) Section 2561(c).

(49) Section 2684a(g).

(50) Section 2687a.

(51) Section 2711.

(52) Sections [sic] 2884(b) and (c).

(53) Section 2911(a) and (b)(3).

(54) Section 2925.

(55) Section 2926(c)(4).

(56) Section 4361(d)(4)(B).

(57) Section 4721(e).

(58) Section 6980(d)(4)(B).

(59) Section 7310(c).

(60) Section 9361(d)(4)(B).

(61) Section 10216(c).

(62) Section 10541.

(63) Section 10543.

(64) Section 10504(b).

(65) Section 235.

(66) Section 115a.

(67) Section 2193b(g).

(d) REPORTS REQUIRED BY NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2015.—Subject to 

subsection (b), subsection (a) applies to reporting requirements contained in the following sections of the Carl Levin 

and Howard P. ``Buck'' McKeon National Defense Authorization Act for Fiscal Year 2015 (Public Law 113-291):

(1) Section 546(d) (10 U.S.C. 1561 note).

(2) Section 1003[A] (10 U.S.C. 221 note).

(3) Section 1026(d) (128 Stat. 3490).

(4) Section 1055 (128 Stat. 3498).

(5) Section 1204(b) (10 U.S.C. 2249e note) [now 10 U.S.C. 362 note]. 

(6) Section 1205(e) (128 Stat. 3537).

(7) Section 1206(e) (10 U.S.C. 2282 note).

(8) Section 1211 (128 Stat. 3544).

(9) Section 1225 (128 Stat. 3550).

(10) Section 1235 (128 Stat. 3558).

(11) Section 1245 (128 Stat. 3566).

(12) Section 1253(b) (22 U.S.C. 2151 note).

(13) Section 1275(b) (128 Stat. 3591).

(14) Section 1343 (128 Stat. 3605; 50 U.S.C. 3743).

(15) Section 1650 (128 Stat. 3653).

(16) Section 1662(c)(2) and (d)(2) (128 Stat. 3657; 10 U.S.C. 2431 note).

(17) Section 2821(a)(3) (10 U.S.C. 2687 note).

(18) Section 1209(d) (128 Stat. 3542).

(e) REPORTS REQUIRED BY NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2014.—Subject to 

subsection (b), subsection (a) applies to reporting requirements contained in the following sections of the National 

Defense Authorization Act for Fiscal Year 2014 (Public Law 113-66):

(1) Section 704(e) (10 U.S.C. 1074 note).

(2) Sections [sic] 713(f), (g), and (h) (10 U.S.C. 1071 note).

(3) Section 904(d)(2) (10 U.S.C. 111 note).

(4) [Former] Section 1205(f)(3) ([Former] 32 U.S.C. 107 note).
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(f) REPORTS REQUIRED BY NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2013.—Subject to 

subsection (b), subsection (a) applies to reporting requirements contained in the following sections of the National 

Defense Authorization Act for Fiscal Year 2013 (Public Law 112-239):

(1) Section 524(c)(2) (10 U.S.C. 1222 note).

(2) Section 904(h)(1) and (2) (10 U.S.C. 133 note).

(3) Section 1009 (126 Stat. 1906).

(4) Section 1023 (126 Stat. 1911).

(5) Section 1052(b)(4) (126 Stat. 1936; 49 U.S.C. 40101 note).

(g) REPORTS REQUIRED BY NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2011.—Subject to 

subsection (b), subsection (a) applies to reporting requirements contained in the following sections of the Ike 

Skelton National Defense Authorization Act for Fiscal Year 2011 (Public Law 111-383):

(1) Section 123 (10 U.S.C. 167 note).

(2) Section 1216(c) (124 Stat. 4392).

(3) Section 1217(i) (22 U.S.C. 7513 note).

(4) Section 1631(d) (10 U.S.C. 1561 note).

(h) REPORTS REQUIRED BY NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2010.—Subject to 

subsection (b), subsection (a) applies to reporting requirements contained in the following sections of the National 

Defense Authorization Act for Fiscal Year 2010 (Public Law 111-84):

(1) Section 711(d) (10 U.S.C. 1071 note).

(2) Section 1003(b) (10 U.S.C. 2222 note).

(3) Section 1244(d) (22 U.S.C. 1928 note).

(4) Section 1245 (123 Stat. 2542) [10 U.S.C. 113 note]. 

(5) Section 1806 (10 U.S.C. 948a note).

(i) REPORTS REQUIRED BY OTHER LAWS.—Subject to subsection (b), subsection (a) applies to reporting 

requirements contained in the following provisions of law:

(1) Sections [sic] 1412(i) and (j) of the National Defense Authorization Act, 1986 [probably 

should be “Department of Defense Authorization Act, 1986”] (50 U.S.C. 1521), as amended by section 

1421 of the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (Public Law 111-383).

(2) Section 1703 of the National Defense Authorization Act for Fiscal Year 1994 (50 U.S.C. 

1523).

(3) Section 717(c) of the National Defense Authorization Act for Fiscal Year 1996 (Public Law 

104-106; 10 U.S.C. 1073 note).

(4) Section 234 of the National Defense Authorization Act for Fiscal Year 1998 (50 U.S.C. 2367).

(5) Section 1309(c) of the National Defense Authorization Act for Fiscal Year 1998 (Public Law 

105-85; 10 U.S.C. 113 note).

(6) Section 1237(b)(2) of the [Strom Thurmond] National Defense Authorization Act for Fiscal 

Year 1999 (Public Law 105-261; 50 U.S.C. 1701 note).

(7) Section 1202 of the National Defense Authorization Act for Fiscal Year 2000 (Public Law 

106-65; 10 U.S.C. 113 note).

(8) Section 232(h)(2) [probably should be "232(h)(3)"] of the National Defense Authorization Act 

for Fiscal Year 2002 (Public Law 107-107; 10 U.S.C. 2431 note).

(9) Section 366(a)(5) and (c)(2) of the Bob Stump National Defense Authorization Act for Fiscal 

Year 2003 (Public Law 107-314; 10 U.S.C. 113 note).

(10) Section 1208(f) of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 

2005 (Public Law 108-375; 118 Stat. 2086).

(11) Section 1208(d) of the National Defense Authorization Act for [Fiscal Year] 2006 (Public 

Law 109-163; 119 Stat. 3459).

(12) Section 1405(d) of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 

109-163; 10 U.S.C. 801 note).

(13) Section 122(f)(1) of the John Warner National Defense Authorization Act for Fiscal Year 

2007 (Public Law 109-364; 120 Stat. 2104).
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(14) Section 721 of the John Warner National Defense Authorization Act for Fiscal Year 2007 

(Public Law 109-364; 120 Stat. 2294).

(15) Section 1017(e) of the John Warner National Defense Authorization Act for Fiscal Year 2007 

(Public Law 109-364; 10 U.S.C. 2631 note).

(16) Section 1517(f) of the John Warner National Defense Authorization Act for Fiscal Year 2007 

(Public Law 109-364; 120 Stat. 2443).

(17) Section 911(f)(2) of the National Defense Authorization Act for Fiscal Year 2008 (Public 

Law 110-181; 10 U.S.C. 2271 note).

(18) Section 1034(d) of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 

110-181; 122 Stat. 309) [10 U.S.C. 272 note].

(19) Section 1107(d) of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 

110-181; 122 Stat. 358) [10 U.S.C. 2358 note].

(20) Section 1233(f) of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 

110-181; 122 Stat. 393).

(21) Section 1234(e) of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 

110-181; 122 Stat. 394).

(22) Section 219(c) of the Duncan Hunter National Defense Authorization Act for Fiscal Year 

2009 (Public Law 110-417; 10 U.S.C. 2358 note).

(23) Section 533(i) of the Duncan Hunter National Defense Authorization Act for Fiscal Year 

2009 (Public Law 110–417; 10 U.S.C. prec. 701 note). 

(24) Section 1047(d)(2) of the Duncan Hunter National Defense Authorization Act for Fiscal Year 

2009 (Public Law 110-417; 10 U.S.C. 2366b note).

(25) Section 1201(b)(1) of the National Defense Authorization Act for Fiscal Year 2012 (Public 

Law 112-81; 125 Stat. 1619).

(26) Section 1236 of the National Defense Authorization Act for Fiscal Year 2012 (Public Law 

112-81; 125 Stat. 1641).

(27) Section 103A(b)(3) of the Sikes Act (16 U.S.C. 670c-1(b)(3)).

(28) Section 1511(h) of the Armed Forces Retirement Home Act of 1991 (24 U.S.C. 411(h)).

(29) Section 901(f) [now 901(g)] of the Office of National Drug Control Policy Reauthorization 

Act of 2006 (Public Law 109-469; 32 U.S.C. 112 note), as added by section 1008 of the National Defense 

Authorization Act for Fiscal Year 2013 (Public Law 112-239).

(30) Section 14 of the Strategic and Critical Materials Stock Piling Act (50 U.S.C. 98h-5).

(31) Section 105A(b) of the Uniformed and Overseas Citizens Absentee Voting Act (52 U.S.C. 

20308(b)), as added by section 586 of the National Defense Authorization Act for Fiscal Year 2010 (Public 

Law 111-84).

(32) Section 112(f) of title 32, United States Code.

(33) Section 310b(i)(2) [probably should be "301b(i)(2)"] of title 37, United States Code.

(34) Section 509(k) of title 32, United States Code.

(35) Section 1022(c) of the National Defense Authorization Act for 2004 (Public Law 108–136; 

10 U.S.C. 371 note).

(j) CONFORMING AMENDMENT.—Section 1080(a) of the National Defense Authorization Act for Fiscal 

Year 2016 (Public Law 114-92; 129 Stat. 1000; 10 U.S.C. 111 note) is amended— 

(1) by striking ``on the date that is two years after the date of the enactment of this Act'' and 

inserting ``November 25, 2017''; and

(2) by striking ``effective''.

(k) REPORT TO CONGRESS.—Not later than February 1, 2017, the Secretary of Defense shall submit to the 

congressional defense committees a report that includes each of the following:

(1) A list of all reports that are required to be submitted to Congress as of the date of the 

enactment of this Act [Dec. 23, 2016] that will no longer be required to be submitted to Congress as of 

November 25, 2017.

(2) For each such report, a citation to the provision of law under which the report is or was 

required to be submitted.

*****
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3 | January 2018

National Defense Authorization Act for Fiscal Year 2016 (Public Law 114-328)

SEC. 1080. [10 USC 111 note] TERMINATION OF REQUIREMENT FOR SUBMITTAL TO CONGRESS 

OF REPORTS REQUIRED OF DEPARTMENT OF DEFENSE BY STATUTE.

 (a) TERMINATION.--Effective November 25, 2017, each report described in subsection (b) that is still 

required to be submitted to Congress as of such date shall no longer be required to be submitted to Congress.

 (b) COVERED REPORTS.--A report described in this subsection is a report that is required to be submitted 

to Congress by the Department of Defense, or by any officer, official, component, or element of the Department, by 

any annual national defense authorization Act as of April 1, 2015.

 (c) REPORT TO CONGRESS.--Not later than February 1, 2016, the Secretary of Defense shall submit to the 

congressional defense committees a report that includes each of the following:

(1) A list of all reports described in subsection (b).

(2) For each such report, a citation to the provision of law under which the report is required to be 

submitted.

(3) Draft legislation that would repeal each such report.

————— 
Volume 1   |   Page 279

Conclusion 

The Section 809 Panel’s work provides a unique opportunity to reform DoD’s acquisition system in

conjunction with ongoing efforts—particularly the realignment of USD(AT&L), the work of the DFAR

regulatory reform task force, and the initiatives in the Military Departments. The Section 809 Panel will

continue to coordinate closely with these efforts and others that may arise in the coming months.

There is currently a rare alignment of will and ability that make it possible to make substantial shifts in

defense acquisition policy. As commissioners of the Section 809 Panel stated to the House Armed

Services Committee when submitting the Interim Report in May 2017, “[DoD] must be agile enough to

respond to rapidly evolving threats and fast enough to develop and deliver new capabilities within the

arc of emerging threats. Let’s design for the 22nd century in the beginning of the 21st.”  

The Section 809 Panel has challenged itself to think boldly as it sets in place a framework for systemic

transformation of the dynamic defense marketplace that will match effort to task, and will help ensure

processes, oversight, and regulations are suited to the complexity and risk required by the situation

and applicable solution. This approach, which builds on what is good and right in the current system,

is dynamic enough to make simple acquisitions easier and complex acquisitions smarter. The

Section 809 Panel’s continued efforts will complement the framework by removing as many of the

smaller regulatory and statutory obstacles as possible.  

DoD is tasked with meeting strategic challenges and routine responsibilities. To support its mission

and address those challenges and responsibilities, DoD makes purchases that range from ball‐point

pens to ballistic missiles. Despite the differences between buying major systems and ordinary items or
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Volume 1 of 3     |     January 2018

Page 280   |   Volume 1    Conclusion

short‐term and long‐term investments, DoD acquires everything it purchases using a similar process

modelled after one that is most appropriate for high‐dollar‐value systems.  

Defending the nation is priority one. To achieve that objective, myriad other missions exist within

DoD—the most essential of which is supporting its warfighters—and all rely on a smoothly functioning

acquisition system. It is shortsighted to look solely at major weapons systems and other high‐dollar

buys, when even the most mundane purchases are, at some level, mission essential. Congress charged

the Section 809 Panel with making recommendations to streamline the acquisition process across the

entire DoD enterprise—for the archaeologist at the Defense POW/MIA Accounting Agency, the cyber

operator at 24th Air Force, the administrative professional in the Pentagon, the student at Naval

Postgraduate School, and the Ranger in Afghanistan.  

The Section 809 Panel enlisted the assistance of Institute for Defense Analysis (IDA) to evaluate past

acquisition reform effort reports. IDA’s research shows that in no less than eight reports since 1969,

unstable requirements were cited as a root cause of acquisition challenges and failures. The system

requires stable requirements to solicit proposals; however, as the threat and demand evolve, new ideas

are sparked and innovations appear. It is time to build a system that honors both the nature of the

mission and the needs of those who must implement it. It is time to recognize that DoD must do

business in a far more dynamic marketplace.  

In today’s acquisition system, risk is equated with dollar value, when risk might be driven by time,

design, or environment. The Section 809 Panel’s recommendations recognize that buying high dollar‐

amounts of low‐risk, readily‐available items should not have the same approval processes as required

for purchasing a unique, customized requirement. Future Section 809 Panel reports will recommend

shifts to address this reality and emphasize collaborative problem solving, improve responsiveness,

increase transparency, value time, and allow for appropriate tradeoffs between dollars spent and risk

taken.  

These shifts are only part of the solution. The other part comes from an engaged community—buyers

and sellers, program managers, contracting officers and contractors, government, academia, and

industry. To ensure successful implementation, the entire acquisition community needs to partner in

different ways. Recognizing that vague recommendations are not actionable, the Section 809 Panel aims

to find the statutes and regulations that need improvement and provide specific language that details

how to create an environment that fosters mission achievement.  

This Volume 1 Report of the Section 809 Panel is part of a larger whole. Two additional volumes will be

published in June 2018 and January 2019 respectively. The Section 809 Panel’s Interim Report, published

in May 2017, addressed a number of small issues that strain the system when aggregated—proving that

bold does not always need to be big. The Section 809 Panel continues to seek out other

recommendations in an effort to streamline the system and develop a new framework for the dynamic

defense marketplace. Future volumes will elaborate on the themes above, as well as include

recommendations on workforce hiring authorities, development, and retention, use of workforce

development funds, replicating the shared characteristics of successful programs, and budget

challenges.  
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Volume 1 of 3     |     January 2018

Conclusion    Volume 1   |   Page 281

The initial recommendations in this volume seek to make selling commercial items to the federal

government as simple as possible and bring clarity to the definitions of personal and nonpersonal

services. In alignment with DoD’s strategy, these recommendations support better use of small

businesses to increase DoD’s lethality, technological dominance, and the maintenance of that technical

dominance, along with putting business experts in charge of business systems. As USD(AT&L) begins

its reorganization, the Section 809 Panel seeks to increase the Secretary’s organizational flexibility and

eliminate reporting requirements.  

Though the Section 809 Panel is at the midpoint of its tenure, this submission to Congress is but the

beginning of the panel’s recommendations. The Section 809 Panel continues to seek public input to

support the work of developing a responsive, adaptive, cost‐effective approach to DoD acquisition that

is bold, agile, simple, and effective.

   
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List of Section 809 Panel Recommendations Volume 1 | Page 283/284

List of Section 809 Panel Recommendations

INTERIM REPORT – MAY 2017 

# Recommendation Page Status

IR-1 Affirm agency mission as the primary goal of DoD acquisition (“Mission First”). 2 Sec. 801 of FY 2018 NDAA directed DFARS be revised to include 

certain statements of purpose.

IR-2 Increase contract time for fuel storage from 20 years to 30 years. 5 Enacted as Sec. 881 of the FY 2018 NDAA in the form 

recommended by the Panel.

IR-3 Eliminate the requirement for contractors to use recycled paper. 10 Recommendation for executive branch action and not addressed 

in the FY 2018 NDAA. 

IR-4 Eliminate FAR section on texting while driving. (FAR Clause 52.223-18) 17 Recommendation for executive branch action and not addressed 

in the FY 2018 NDAA.

IR-5 Eliminate the requirement to accept and dispense dollar coins at government business operations. 22 Enacted as Sec. 885.

The final text was the language recommended by the Panel, with 

the addition of a “conforming amendment” and a “technical 

amendment.”

VOLUME 1 – JANUARY 2018 

# Recommendations Page

1 Revise definitions related to commercial buying to simplify their application and eliminate inconsistency. 18

2 Minimize government-unique terms applicable to commercial buying. 32

3 Align and clarify FAR commercial termination language. 44

4 Revise DFARS sections related to rights in technical data policy for commercial products. 46

5 Align DCAA’s mission statement to focus on its primary customer, the contracting officer. 64

6 Revise the elements of DCAA’s annual report to Congress to incorporate multiple key metrics. 67

7 Provide flexibility to contracting officers and auditors to use audit and advisory services when appropriate. 70

7a Prior to requesting field pricing/audit assistance, contracting officers should consider other available internal resources and tailor their request for assistance to the maximum extent possible. 71

7b Define the term audit. 72

7c DCAA should use the full range of audit and nonaudit services available. 72

7d Direct a review of the roles of DCAA and DCMA to ensure appropriate alignment and eliminate redundancies. 74

8 Establish statutory time limits for defense oversight activities. 76

9 Permit DCAA to use IPAs to manage resources to meet time limits. 80

10 Replace system criteria from DFARS 252.242-7006, Accounting System Administration, with an internal control audit to assess the adequacy of contractors’ accounting systems. 82

11 Develop a Professional Practice Guide for DoD’s oversight of contractor costs and business systems. 87

12 Require DCAA to obtain peer review from a qualified external organization. 91

13 Increase coverage of the effectiveness of contractor internal control audits by leveraging IPAs. 93

14 Incentivize contractor compliance and manage risk efficiently through robust risk assessment. 95

15 Clarify and streamline the definition of and requirements for an adequate incurred cost proposal to refocus the purpose of DoD’s oversight. 100

16 Combine authority for requirements, resources, and acquisition in a single, empowered entity to govern DBS portfolios separate from the existing acquisition chain of command. 111

17 Eliminate separate requirement for annual IRB certification of DBS investments. 130
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# Recommendations Page

18 Fund DBSs in a way that allows for commonly accepted software development approaches. 137

19 Eliminate the Earned Value Management mandate for software programs using Agile methods. 151

20 Clarify the definitions of personal and nonpersonal services and incorporate in the DFARS a description of supervisory responsibilities for service contracts. 159

21 Refocus DoD's small business policies and programs to prioritize mission and advance warfighting capabilities and capacities. 169

21a Establish the infrastructure necessary to create and execute a DoD small business strategy, ensuring alignment of DoD’s small business programs with the agency’s critical needs. 192

21b Build on the successes of the SBIR/STTR and RIF programs. 193

21c Enable innovation in the acquisition system and among industry partners. 194

22 Eliminate, or sunset within 5 years, the statutory requirement for certain acquisition-related offices and Secretary of Defense designated officials to increase flexibility and/or reduce 

redundancy.

199

22a Repeal the statutory requirement for Department of Defense Test Resource Management Center, 10 U.S.C. § 196. 199

22b Repeal the statutory requirement for Office of Corrosion Policy and Oversight, 10 U.S.C. § 2228. 200

22c Repeal the statutory requirement for Director for Performance Assessment and Root Cause Analysis (PARCA), 10 U.S.C. § 2438. 201

22d Repeal the statutory requirement for Office of Technology Transition, 10 U.S.C. § 2515. 203

22e Repeal the statutory requirement for Office for Foreign Defense Critical Technology Monitoring and Assessment, 10 U.S.C. § 2517. 204

22f Repeal the statutory requirement at 10 U.S.C. § 204 for a Small Business Ombudsman within each defense audit agency. 206

22g Repeal the statutory requirement for Secretary of Defense to designate a competition advocate for the Defense Logistics Agency, 10 U.S.C. § 2318. 207

22h Repeal the statutory requirement for the Hypersonics Development section of Joint Technology Office on Hypersonics, Section 218 of the FY 2007 NDAA (Pub. L. No. 109–364, 120 Stat. 2126; 

10 U.S.C. § 2358 note).

208

22i Repeal the statutory requirement for Improvement in Defense Research and Procurement Liaison with Israel, Section 1006 of the FY 1989 NDAA (Pub. L. No. 100-456; 10 U.S.C. § 133 note). 210

22j Repeal the statutory requirement for Coordination of Human Systems Integration Activities Related to Acquisition Programs, Section 231 of the FY 2008 NDAA (Pub. L. No. 110–181, 10 U.S.C. 

§ 1701 note). 

211

22k Repeal the statutory requirement for Focus on Urgent Operational Needs and Rapid Acquisition, Section 902 of the FY 2013 NDAA (Pub. L. No. 112–239; 10 U.S.C. § 2302 note). 213

22l Repeal the statutory requirement for Senior Official for Dual-Use Science and Technology Projects, Section 203(c) of the FY 1998 NDAA (Pub. L. No. 105–85; 10 U.S.C. § 2511 note). 215

22m Repeal the statutory requirement for Executive Agent for Printed Circuit Boards, Section 256 of FY 2009 NDAA (Pub. L. No. 110–417; 10 U.S.C. § 2501 note). 216

22n Sunset the statutory requirement for Joint Directed Energy Transition Office (JDETO), 10 U.S.C. § 219 (10 U.S.C. § 2431 note) in FY 2023. 218

23 Establish a permanent, automatic 5-year sunset provision for DoD congressional reporting requirements. 227

24 Repeal, preserve, or maintain various DoD congressional reporting requirements. 229

24a Repeal the statutory requirement for the Defense Test Resource Management Center biennial strategic and budget reports, 10 U.S.C. § 196(d) and (e). 234

24b Repeal the statutory requirement for the Ballistic Missile Defense Programs annual budget justification reports, 10 U.S.C. § 223a(a). 235

24c Repeal the statutory requirement for the Programs for Combating Terrorism: Annual budget overview report, 10 U.S.C. § 229. 237

24d Repeal the statutory requirement for the Annual Long-Term Plan for the Procurement of Aircraft for the Navy and the Air annual strategic plan, 10 U.S.C. § 231a. 238

24e Repeal the statutory requirement for the Cyber Mission Forces annual budget overview report, 10 U.S.C. § 238(a). 240

24f Repeal the statutory requirement for the Corrosion Control and Prevention annual budget and policy report, 10 U.S.C. § 2228(e). 241

24g Repeal the statutory requirement for the Major Satellite Acquisition Programs annual integration report, 10 U.S.C. § 2275. 243

24h Repeal the statutory requirement for the Commercial Space Activities annual Cooperation with DoD report, 10 U.S.C. § 2276(e). 244

24i Repeal the statutory requirement for the Depot-Level Maintenance overview report, 10 U.S.C. § 2466(d). 246

24j Repeal the statutory requirement for the Covered Naval Vessels Repair Work in Foreign Shipyards annual report, 10 U.S.C. § 7310(c). 247

24k Repeal the statutory requirement for the Reserve Component Equipment annual procurement report, 10 U.S.C. § 10543(a). 249

24l Repeal the statutory requirement for the Reserve Components annual procurement threshold report, 10 U.S.C. § 10543(c). 250

24m Repeal the statutory requirement for the Missile Defense Agency annual overview report, FY 2002 NDAA, 232(h)(3). 252

24n Repeal the statutory requirement for the Ford-Class Aircraft Carrier annual cost estimate report, FY 2007 NDAA, 122(d)(1). 253

24o Repeal the statutory requirement for the Carriage by Vessel annual Repair Work in Foreign Shipyards report, FY 2007 NDAA, 1017(e). 254

24p Repeal the statutory requirement for the Bandwidth Capacity annual overview report, FY 2009 NDAA, 1047(d)(2). 255

24q Repeal the statutory requirement for the Afghanistan Infrastructure Fund annual overview report, FY 2011 NDAA, 1217(i). 257
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# Recommendations Page

24r Repeal the statutory requirement for the MDAP Testing and Evaluation annual justification of progress report, FY 2013 NDAA, 904(h)(1) and (2). 258

24s Repeal the statutory requirement for the Ticonderoga-Class Cruisers and Dock Landing Ships annual modernization report, FY 2015 NDAA, 1026(d). 260

24t Repeal the statutory requirement for the Ballistic Missile Defense Systems annual preproduction assessment reports, FY 2015 NDAA, 1662(c)(2) and (d)(2). 261

24u Preserve the statutory requirement for the Director of Operational Test and Evaluation annual overview report, 10 U.S.C. § 139(h). 264

24v Preserve the statutory requirement for Naval Vessel Construction annual strategic plan report, 10 U.S.C. § 231. 265

24w Preserve the statutory requirement for the Director of Operational Test and Evaluation annual program report, 10 U.S.C. § 2399(g). 267

24x Terminate in 2021 the statutory requirement for the Ballistic Missile Defense Programs annual acquisition baselines report, 10 U.S.C. § 225(c). 268

24y Terminate in 2021 the statutory requirement for Depot-Level Maintenance biennial capability requirements report, 10 U.S.C. § 2464(d). 269

24z Terminate in 2021 the statutory requirement for the National Technology and Industrial Base annual policy overview report, 10 U.S.C. § 2504. 271

24aa Terminate in 2021 the statutory requirement for the Distribution of Chemical and Biological Agents to Non-Federal Entities annual overview report, FY 2008 NDAA, 1034(d). 272

24ab Terminate in 2021 the statutory requirement for the Research and Development in Defense Laboratories annual funding report, FY 2009 NDAA, 219(c). 274

Volume 1   |   Page A‐1

Appendices 

Appendix A: Enabling Legislation ................................................................... A-3 

Appendix B: Panel Activities ......................................................................... A-5 

Appendix C: Panel Teams ........................................................................... A-15 

Appendix D: Communication with the Panel .................................................... A-17 

Appendix E: Professional Staff ..................................................................... A-19 

Appendix F: Supplemental Tables for Section 1 – Commercial Buying ..................... A-21 

Appendix G: Acronym List ........................................................................... A-69 

   
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Appendices    Volume 1   |   Page A‐3

APPENDIX A: ENABLING LEGISLATION 

Section 809 of the National Defense Authorization Act for

Fiscal Year 2016 (Public Law 114‐92), As Amended

(Amended by sec. 863(d) of the NDAA for Fiscal Year 2017 (P. L. 114‐328) and  

secs. 803(c) & 883 of the NDAA for Fiscal Year 2018 (P. L. 115‐91))  

SEC. 809. ADVISORY PANEL ON STREAMLINING AND CODIFYING ACQUISITION

REGULATIONS.

(a) ESTABLISHMENT.—The Secretary of Defense shall establish an independent advisory panel on

streamlining acquisition regulations. The panel shall be supported by the Defense Acquisition

University and the National Defense University, including administrative support.

(b) MEMBERSHIP.—The panel shall be composed of at least nine individuals who are recognized

experts in acquisition and procurement policy. In making appointments to the advisory panel, the

Under Secretary shall ensure that the members of the panel reflect diverse experiences in the public

and private sectors.

(c) DUTIES.—The panel shall—

(1) review the acquisition regulations applicable to the Department of Defense with a

view toward streamlining and improving the efficiency and effectiveness of the defense

acquisition process and maintaining defense technology advantage; and

(2) make any recommendations for the amendment or repeal of such regulations that the

panel considers necessary, as a result of such review, to—

(A) establish and administer appropriate buyer and seller relationships in the

procurement system;

(B) improve the functioning of the acquisition system;

(C) ensure the continuing financial and ethical integrity of defense procurement

programs;

(D) protect the best interests of the Department of Defense;  

(E) improve the efficiency of the contract auditing process, including through the

development of risk‐based materiality standards; and

(F) eliminate any regulations that are unnecessary for the purposes described in

subparagraphs (A) through (E).

(d) ADMINISTRATIVE MATTERS.—

(1) IN GENERAL.—The Secretary of Defense shall provide the advisory panel established

pursuant to subsection (a) with timely access to appropriate information, data, resources,

analysis, and logistics support so that the advisory panel may conduct a thorough and

independent assessment as required under such subsection.

(2) INAPPLICABILITY OF FACA.—The requirements of the Federal Advisory Committee Act

(5 U.S.C. App.) shall not apply to the advisory panel established pursuant to subsection (a).

(3) AUTHORITIES.—The panel shall have the authorities provided in section 3161 of

title 5, United States Code.

(e) REPORT.—
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(1) PANEL REPORT.—Not later than January 15, 2019, the panel shall transmit a final

report to the Secretary of Defense and the congressional defense committees.

(2) ELEMENTS.—The final report shall contain a detailed statement of the findings and

conclusions of the panel, including—

(A) a history of each current acquisition regulation and a recommendation as to

whether the regulation and related law (if applicable) should be retained, modified, or

repealed; and

(B) such additional recommendations for legislation as the panel considers

appropriate.

(3) INTERIM REPORTS.—(A) Not later than 6 months and 18 months after the date of the

enactment of this Act, the Secretary of Defense shall submit a report to or brief the congressional

defense committees on the interim findings of the panel with respect to the elements set forth in

paragraph (2).

(B) The panel shall provide regular updates to the Secretary of Defense for purposes of

providing the interim reports required under this paragraph.

(4) FINAL REPORT.—Not later than 60 days after receiving the final report of the advisory

panel, the Secretary of Defense shall transmit such comments as the Secretary determines

appropriate, to the congressional defense committees.

(f) DEFENSE ACQUISITION WORKFORCE DEVELOPMENT FUND SUPPORT.—The  

Secretary of Defense may use amounts available in the Department of Defense Acquisition Workforce

Development Fund established under section 1705 of title 10, United States Code, to support activities

of the advisory panel under this section.

(g) TERMINATION OF PANEL.—The advisory panel shall terminate 180 days after the date on

which the final report of the panel is transmitted pursuant to subsection (e)(1).

————— 

The joint statement of managers on the conference report on the FY 2018 NDAA (at page 888 of House

Report 115‐404) provides the following:

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ 

      The conferees recognize the importance of the work of the Advisory Panel, established by the

Congress, which is aimed at streamlining and improving the Department of Defense’s

acquisition processes to ensure the Department’s continued technological advantages. Therefore, the

conferees agree that the Advisory Panel’s work should be extended. The Advisory Panel

shall provide its recommendations to the Committees on Armed Services of the Senate and the House

of Representatives using a phased approached. The recommendations shall be delivered in

January 2018, June 2018, and January 2019. Each report shall contain a roughly equal number of

recommendations to avoid an oversized final deliverable.

      The conferees also note that the panel’s projected total cost will be nearly $15.0 million for expenses,

salaries, and other items given the extension authorized in this provision. Given this expenditure and

the importance of acquisition reform, the conferees expect the Panel will make significant efforts to

deliver actionable recommendations to both the Congress and Executive Branch, and provide

supporting analyses and consultation to inform review and potential implementation of such

recommendations.

‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐    
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APPENDIX B: PANEL ACTIVITIES 

Monthly Full-Panel Meetings 

September 20‐21, 2016 

Identifying the “Big Rocks” to Improving 

Defense Acquisition and Maintaining Defense 

Technology Advantage 

 BG David Ehrhart, USAF (Ret.), Lockheed Martin Corp. 

 Susan Warshaw Ebner, ABA Public Contract Law 

AIA Perspectives   Jason Timm, Aerospace Industries Association 

Updating the Regulatory Source Code   Andrew Hunter, Center for Strategic and International 

Studies 

Acquisition Transformation Project, 

Acquisition of the Future (AOF) 

 Ann‐Marie Johnson, ASI Government 

 Dina Jeffers, Deputy Secretary of the Army, Procurement 

 Kymm McCabe, Deloitte Consulting 

OFPP Priorities and Category Management   Anne Rung, OFPP, OMB 

Perspectives on Acquisition Reform, Lessons 

Learned from Research 

 Dan Chenok, IBM Center for Business of Government 

Acquisition Reform to Enable Military 

Effectiveness 

 Lou Kratz, Lockheed Martin Corp. 

Industry Roundtable (cohosted by U.S. 

Chamber of Commerce and Professional 

Services Council) 

 Christian Zur, U.S. Chamber of Commerce 

 Scott Amey, Project on Government Oversight 

 Brian Collins and Susan Maybaumwisniewski, Business 

Executives for National Security (BENS) 

 Roger Waldron and Mandy Smithberger, Center for 

Defense Information  

November 15‐16, 2016 

Expert Presentations to the Panel   Chris Gunderson, U.S. Air Force 

 Louis Kratz, Lockheed Martin Corp. 

 Wendy Ginsberg, Congressional Research Service 

December 14, 2016 

Expert Presentations to the Panel   Soraya Correa, U.S. Department of Homeland Security 

 Paul Francis, Government Accountability Office 

January 24‐25, 2017 

Major Defense Acquisition Programs   Lt Gen Christopher C. Bogdan, F‐35 Executive Officer 

 VADM David Johnson, Principal Military Deputy 

 Frank Kendall, Former USD(AT&L) 

 Gary Bliss, OUSD(AT&L) 
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February 21‐22, 2017 

Geopolitical Threat Environment   Heather Conley and Melissa Dalton, Center for Strategic 

and International Studies (CSIS) 

 Ben FitzGerald, Center for a New American Security (CNAS) 

 Lt Gen Anthony Ierardi, Joint Chiefs of Staff, J8 

Acquisition of Services in DoD   Ken Brennan, Defense Procurement and Acquisition Policy 

(DPAP) 

 James Meade, Naval Air Systems Command (NAVAIR) 

 Dan Helfrich, Deloitte Consulting LLP 

March 21‐22, 2017 

Commercial Buying   James Steggall and Joseph Fengler, AIA 

 Janice Muskopf, AFMC 

 Jon Etherton. Etherton & Associates 

 Paul Milenkowic, ACC‐NJ, Picatinny Arsenal 

 Bill McNally, NASA 

 Tyler Merkeley, HHS, BARDA 

 Tim Applegate and Scott Ulrey, DARPA 

April 25‐26, 2017 

Expert Panel: The Effects of Socio‐Economic 

Policies on Defense Acquisitions 

 James Galvin, PhD, DoD Small Business Programs 

 Kenneth Dodds, U.S. Small Business Administration 

 Donna Huneycutt, Wittenberg Weiner Consulting 

 Burt Ford, Lockheed Martin Corp. 

Building a National Security Marketplace for 

Rapid Technology Discovery and Acquisition 

 Tim Greeff, NSTXL 

Imagining a Post‐Barriers World   Meagan Metzger, DCode42 

May 23‐24, 2017 

Former Navy Secretary Perspective   The Honorable John Lehman, former Secretary of the Navy 

SOF AT&L “Pain Points”   James “Hondo” Geurts, SOCOM AT&L 

June 20‐21, 2017 

SMC’s Acquisition Challenges: PM, 

Contracting, and Budgeting Perspectives 

 Barbara Baker, SMC/PID, ACE Chief 

 Col Tom Hoskins, USAF 

 Mike Wood, SMC 

Cyber Acquisition Challenges   John Metzger, IOC PEO C4I, SPAWARSYSCOM 

SSC Pacific’s Views on Acquisition   Sharon Pritchard and Scott Crellin, SSC‐Pacific 

Improving the Speed and Impact of 

Acquisitions 

 Eric Patten, President/CEO, Ocean Aero 

Venture Capital in the Defense Space   James Cross, Vice President, Franklin Equity Group 

Access to Emerging Tech and Innovation   VADM Ted Branch, USN (ret), President, Drone Aviator 

Workforce Strategy and Tools   Tracy Price, CEO, QMerit 

July 18‐19, 2017 

Perspectives from Congress   Ben FitzGerald and Arun Seraphin, SASC 

 Doug Bush and Alexis Lasselle Ross, PhD, HASC 
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August 22‐23, 2017 

Regulatory Updates   Joo Chung, DCMO 

 Linda Neilson, DPAP 

September 12‐13, 2017 

Deliberations for Volume 1 Report   Internal Volume 1 Report Discussion and Voting 

October 17‐18, 2017 

Deliberations for Volume 1 Report   Internal Volume 1 Report Discussion and Voting 

November 14‐15, 2017 

Deliberations for Volume 1 Report   Internal Volume 1 Report Discussion and Voting 

December 12‐13, 2017 

Deliberations for Volume 1 Report   Internal Volume 1 Report Discussion and Voting 

January 23‐24, 2018 

Deliberations for Volume 2 Report   Internal Volume 2 Report Discussion and Voting 

Space Related Acquisition   Col Norm Dozier, SMC Comptroller  

 Michael Wood, Chief of the Financial Analysis Division 

 Lisa Dybvad, Senior Consultant to FM 

 Theresa Humphrey, Senior Consultant FM 
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Semimonthly Stakeholder Meetings 

January 12, 2017 

Thinking Holistically and Broadly About the Panel 

Mandate 

 Stan Soloway, Celero Strategies 

State of Defense IT Acquisition Reform   John Weiler, IT Acquisition Advisory Council 

(IT‐AAC)  

 Marvin Langston, Langston Associates, LLC 

PSC Research on DoD Task Order Awards Made 

Under IDIQ Contracts 

 Alan Chvotkin and Matthew Taylor, Professional 

Services Council (PSC)  

IDIQ Discussion   Jeff Koses, GSA, Office of Government‐wide Policy  

 Roger Waldron, Coalition for Government 

Procurement 

January 26, 2017 

Commercial Subcontract Flowdown; Simplified 

Acquisition Procedures 

 Ron Smith, Ronald Smith Contracts 

Acquisition Reform and Successful Programs   Jeff Wieringa, Navy International Programs Office 

(NIPO) 

February 23, 2017 

Security Cooperation Reforms and the Impact of FY17 

NDAA 

 VADM Joseph Rixey, Defense Security Cooperation 

Agency 

DoD’s Use of Project Structure   Mike Morgan, Charles Mahon, and John 

Driessnack, Project Management Institute  

Successful Acquisition and Fielding of Software in the 

DoD: Impediments and Improvements 

 Matt Chandler, Palantir Technologies 

Acquisition Workforce Study   Rene Thomas‐Rizzo, Human Capital Initiatives, 

OUSD (AT&L) 

March 9, 2017 

Technology: How to Use and Buy More Effectively   Kenneth Allen, Jennifer Napper, and Lou 

Kerestesy, ACT‐IAC  

Doing Business with DoD: Small Business Perspective   Bryson Bort, Grimm 

Strategies for Contracting Digital Services   David Zvenyach, GSA, 18F 

March 23, 2017 

Challenges Related to Government Practices for 

Commercial Items and Services Acquisitions 

 Danielle Berti and Stephanie Gilson, Johnson & 

Johnson  

The State of Public Procurement Metrics   Raj Sharma, Public Spend Forum 

Organizational Culture and the Panel’s Mission   Lou Kerestesy, Gov Innovation 

Acquisition of the Future (AOF) Model   Stan Soloway, Celero Strategies  

 Kymm McCabe, Deloitte 

DoD Acquisition   Mike Morgan, Charles Mahon, and John 

Driessnack, Project Management Institute  
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April 13, 2017 

Software Concerns in DoD Acquisition: The 

Opportunity Presented by Agile Development 

 Eileen Wrubel and Alyssa Le Sage, Software 

Engineering Institute, CMU  

Cloud and IT Acquisition Policy: Recommendations 

and Next Steps 

 Richard Beutel, Cyrrus Analytics 

Optimizing Acquisition: Procurement Transformation 

and Category Management 

 David Shields and Anne Laurent, ASI Government  

April 27, 2017 

Regulations and Laws that Add Unnecessary 

Bureaucratic Obstacles to DoD Acquisitions 

 Barbara Kinosky, Esq., Centre Law and Consulting 

The Highly Regulated Federal Purchasing System: 

Implications and Alternatives 

 Richard Dunn, Strategic Institute for Innovation in 

Government Contracting 

 David Rothzeid, DIUx 

Commercial Buying   Shay Assad, Defense Procurement and Acquisition 

Policy 

May 25, 2017 

Research Findings: NAICS Cyber Security 

Requirements and Mid‐Tier Companies 

 Leslie Lewis, PhD, Independent Consultant 

Findings and Recommendations Related to Reduced 

Acquisition Opportunities for Mid‐Sized and Small 

Businesses 

 John Gilligan, Coalition for Competition 

 Jim Neu, Coalition for Competition 

June 8, 2017 

MIBP’s Industry Data Analytics and Work with OSD 

Small Business Office 

 Dr. Jerry McGinn, Acting DASD for Manufacturing 

and Industrial Base Policy 

The Impact of Defense Regulations on Suppliers of 

Commercial Items to DoD 

 Eric Roegner, EVP and Group President, Arconic 

Global Rolled Products and President, Arconic 

Defense 

June 22, 2017 

Rental Services for COTS Test and Measurement 

Equipment 

 Tony Ricotta, Director, Strategic Services, 

Aerospace & Defense Electro Rent Corporation 

Barriers to Entry into the Defense Market   Darryl Anunciado, President/CEO, Action Drone 

Barriers to Entry Roundtable   Lou Kelly, Director, San Diego Regional Innovation 

Cluster 

 Rebecca Unitec, Fuse Integration 

 Scott Velazquez, Innovation Digital 

 Gary Abramov, Pacific Blue Innovations 

 Jim Winso, Spectral Labs 

August 24, 2017 

Protests and Modernizing CICA   Ralph Nash, Professor Emeritus of Law, The 

George Washington University 

Unique Perspectives and Challenges in Selling in the 

Federal Marketplace 

 Wyn Elder, Director, Strategic Initiatives and 

Business Development, U.S. Government, Apple 

Positive Features of FY18 NDAA and Impediments to 

Reform 

 John Anderson, Legislative Representative, 

American Federation of Government Employees 
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September 14, 2017 

Mission Engineering   James Moreland, Jr., PhD, Deputy Director, Naval 

Warfare OUSD ATL/Tactical Warfare Systems 

Using Data Analytics to Enhance Decision‐making in 

DoD Procurement 

 Eric Heffernan and Christine Kettler, Grant 

Thornton 

NASA iTech   Kira Blackwell, NASA HQ, Innovation Program 

Executive, Office of the Chief Technologist 

September 28, 2017 

IDIQ Contracts, SWACs, and MACs   Richard Ginman, former Director, DPAP 

Measurement, Workforce Competencies, and 

Procurement Technology 

 Raj Sharma, Chairman, Public Spend Forum 

Recommendations to the Section 809 Panel   Roger Waldron, Coalition for Government 

Procurement 

January 11, 2018 

Improving Services Acquisition   Ronda Schrenk, Senior Policy Advisor, Intelligence 

and National Security Alliance (INSA)  

 Ellen McCarthy, Chair, INSA Acquisition 

Management Council, Noblis‐NSP 

 Howard Weitzner, Vice Chair, INSA Acquisition 

Management Council, Managing Director, 

U.S. Federal, Accenture Federal Services 

Other Transaction Agreements:  

An Enabler for Space Launch 

 Gary Kyle, President, Persistent Agility, Inc. 

 Ron Poussard, Applied Federal Contract Associates 

Rapid Acquisition   Tonico Beope, Director of Contracting, Air Force 

Special Access Programs, SAF/AQ 

The Future Impact of Cloud Computing on Acquisition   Jay Huie, Director, GSA TTS Secure Cloud Portfolio 

 John Hamilton, FedRAMP PM for Operations 

 Evan Issacs, FedRAMP PMO Support 
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Team Meetings/Interviews 

 (ISC)^2

 Action Drone

 Aerospace Industries Association

 AFCEA

 Air Force Materiel Command

 Allen Federal Business Partners

 Amazon Business, Public Policy, and

Web Services

 American Federation of Government

Employees

 ANG Budget Division Chief

 Anser

 Apple, Inc.

 Arconic Defense

 Arlluk Technology Solutions

 Army Cyber Institute (ACI)

 U.S. Army Tank‐automotive and

Armaments Command (TACOM)

 ASN (RDA), DASN Unmanned

 Arnold & Porter Kaye Scholer LLP

 Ausco, Inc.  

 BAE

 Bain Capital

 Baker Tilly

 Berkley Research Group LLC

 BMNT Partners

 Boeing

 Booz Allen Hamilton

 Boston Engineering

 Buchanan & Edwards

 Catalytic

 Carnegie Mellon University, Software

Engineering Institute

 Celero Strategies LLC

 Coalition for Competition

 Coalition for Government Procurement

 Cohen Mohr LLP

 Covington & Burling LLP

 Cpacket Networks

 Crowell & Moring LLP

 Center for Strategic and Budgetary

Assessments (CSBA)

 Cyber Security Strategies, LLC

 Cymmetria

 Defense Advanced Research Projects

Agency (DARPA), Contracts

Management Office

 DART

 DASD, Manufacturing and Industrial

Base Policy

 Defense Acquisition University

 DCode42

 Defense Contract Management Agency

 Defense Entrepreneurs Forum

 Defense Technical Information Center

(DTIC)

 Defense Logistics Agency

 Defensewerx

 Deloitte

 Department of Commerce

 Department of Energy  

 Dewberry

 DFJ Venture

 Department of Health and Human

Services (DHHS), Biomedical Advanced

Research and Development Authority

(BARDA)

 Direct Steel LLC

 Defense Innovation Unit Experimental

(DIUx)

 Doolittle Institute, Inc.

 Dozuki

 Draper

 Defense Systems Management College

(DSMC)

 Electro Rent Corporation

 Ernst & Young

 Etherton & Associates

 EWA

 Federal Aviation Administration (FAA)

 ForgeRock

 Fortney & Scott LLC

 Frankel PLLC

 Fuse Integration

 GAO, Acquisitions and Sourcing

Management Office
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

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 General Dynamics

 General Electric

 Grant Thornton

 Grey Aviation Advisors & Solutions

 GSE Dynamics

 Hacking4Defense

 Harvard Kennedy School of Business

 HeartFlow

 Heritage Foundation

 Hogan Lovells LLP

 Holland & Knight LLP

 Headquarters, Department of the Army

(HQDA), Deputy Assistant Secretary for

Procurement (DASA P)

 InfoReliance Corporation

 Information Systems Asset Management

 Information Systems Security

Association  

 Innovation Digital

 Integrated Dual Use Commercial

Companies (IDCC)

 Invensense

 IT Alliance for Public Sector (ITAPS)

 Jenner & Block LLP

 JLT Specialty USA

 Johnson & Johnson, Government

Business Compliance

 Jones Day

 Latham & Watkins LLP  

 Leidos

 LMI

 Lockheed Martin

 Mayer Brown LLP  

 Microsoft

 Mead & Hunt

 Miles and Stockbridge P.C.

 Ministry of Finance Kyrgyz Republic

 MITRE

 Morrison & Foerster LLP

 MVM, Inc.

 National Aeronautics and Space

Administration (NASA), Contracts and

Grants Policy and Office of Procurement

 NASA, Office of the Chief Technologist

 National Defense University

 NGC

 National Oceanic and Atmospheric

Administration (NOAA)

 NRI Secure Technologies

 National Security Technology

Accelerator (NSTXL)

 Nyotron

 Office of the Assistant Secretary of the

Navy, Financial Management and

Comptroller (OASN(FM&C)), FMB

 ODG

 U.S. Office of Management and Budget

(OMB), Office of Federal Procurement

Policy (OFPP)

 Omera Khan

 Office of the Chief of Naval Operations

(OPNAV), N9

 Office of the Secretary of Defense –

Comptroller

 OUSD(AT&L), Tactical Warfare Systems

 Pacific Architects and Engineers, Inc.

 Pacific Blue Innovations

 Perkins Coie LLP  

 Phillips Screw Company

 Precision Gear

 Prevalent

 PricewaterhouseCoopers

 Procurement Technical Assistance

Center – Illinois, Maryland, and Virginia

 Professional Services Council

 Progressive Industries, Inc.

 Public Spend Forum

 Qualcomm Institute

 QCWare

 Raytheon

 Rogers Joseph OʹDonnell, P.C.

 San Diego Regional Innovation Cluster

 Sandia National Laboratories

 SBDC Florida

 Section 813 Panel

 Senator Collins Staff

 Sevatec

 Sheffield Asset Management
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Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐13

 Software Engineering Institute

 SOS International LLC

 Sourcing Outcomes and Solutions LLC

 SpaceX

 Spectral Labs

 SS8

 Steptoe & Johnson LLP

 Symantec

 Telefonica

 The ELOCEN Group

 UI LABS

 U.S. Air Force, Acquisition Law and

Litigation Directorate

 U.S. Army Contracting Command

 U.S. Army Corps of Engineers

 United Technologies

 University of Illinois at Urbana‐

Champaign; School of Information

Sciences

 University of San Diego

 OUSD(AT&L), Defense Procurement

Acquisition Policy (DPAP)

 United States Special Operations

Command (USSOCOM)

 Varonis

 Vencore

 ViaStat

 Wiley Rein LLP  

 Wing Venture Capital

 Wittenberg‐Weiner Consulting

 Woods Peacock

 Yaniv Strategies
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐14   |   Volume 1    Appendices

Team Travel/Site Visits 

 Boston, MA

 Chicago, IL

 Detroit Arsenal, MI

 Eglin AFB, FL

 Huntsville, AL

 Letterkenny Army Depot, PA

 Los Angeles, CA

 Mechanicsburg, PA NAS Patuxent River, MD

 San Diego, CA

 San Francisco, CA

 Seattle, WA

 Tampa, FL

 Tucson, AZ

 Wright‐Patterson AFB, Ohio
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐15

APPENDIX C: PANEL TEAMS 

FAR to Statute Baseline 

FAR to Statute Baseline is reviewing how statutes, regulations, or procedures should 

be written to take into account the threat and business environments that exist 

today. The team is systematically reviewing the FAR and identifying the statutory 

basis for regulations when they exist, as well as listing regulations that could 

potentially be deleted. 

Streamlined Procurement Process 

Streamlined Procurement Process is researching options for substantially streamlining 

noncomplex acquisitions less than $15 million. Although the current acquisition 

system generally treats $1 million contracts the same as $1 billion contracts, the team 

is considering ways to enable DoD to meet its acquisition needs for smaller contracts 

more efficiently and effectively. 

Commercial Buying 

Commercial Buying is focused on simplifying DoD’s commercial buying practices. 

Simplification will enable greater access to companies not currently selling to DoD 

and to be more adaptable and agile in its acquisition process. 

Barriers to Entry 

Barriers to Entry is focused on evaluating and removing regulatory, cultural, or 

bureaucratic barriers to entering the DoD marketplace. Removing barriers to entry 

will attract companies interested in conducting business with DoD that have not 

previously entered the DoD marketplace. 

Characteristics of Successful Programs 

Characteristics of Successful Programs is identifying the attributes and qualities 

common to successful programs, with an eye toward identifying techniques, tools, 

and practices that can be widely employed. The team will make recommendations for 

best practices, regulations, and statutes. 
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Page A‐16   |   Volume 1    Appendices

IT Acquisition 

IT Acquisition is investigating how to best streamline the information technology (IT) 

acquisition process as DoD modernizes its use of IT, with a specific focus on defense 

business systems and IT services. The ultimate goal is to increase use of commercial 

best practices and business processes, delivering capability faster and keeping DoD’s 

technology current and supportable. 

Budget 

Budget is considering the broader budgeting process in DoD. The team aims to arrive 

at recommendations that will optimize budgeting policy and processes to maintain 

military technological superiority through the efficient flow of resources in the 

acquisition system. 

Streamlining Regulations 

Streamlining Regulations is identifying regulations pertaining to defense acquisition 

that are no longer necessary. The team is packaging together comprehensive ideas 

that would substantially streamline the acquisition process. 

Cost Accounting Standards 

Cost Accounting Standards is reviewing the administrative and accounting 

requirements of cost accounting standards (CAS), along with exemptions from CAS 

and thresholds for applying CAS to contracts. The team will make recommendations 

aimed, broadly, at streamlining requirements.

Workforce 

Workforce is looking at statutory and regulatory reform that would foster a culture of 

authority and accountability in the acquisition process, enabling the workforce to 

serve the mission free of unnecessary obstacles. Defense acquisition is a human 

activity dependent on the judgments and decisions of people operating in the real 

world. 

Statutory Reorganization 

The statutory reorganization effort will propose a reorganization and consolidation of 

the acquisition‐related provisions of title 10, U.S. Code, and other related provisions 

of law to provide a more cohesive and coherent structure for defense acquisition 

statutes within title 10. Nonsubstantive revisions will be made to improve readability 

and achieve greater internal consistency and, where possible, revisions will be made 

to achieve greater consistency with parallel provisions in title 41. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐17

APPENDIX D: COMMUNICATION WITH THE PANEL 

Website 

The Section 809 Panel seeks feedback from diverse stakeholders interested in issues related to defense

acquisition, including DoD officials, members of the DoD acquisition workforce at all levels, service

members, industry officials from small and large businesses, and U.S. citizens.

The panel offers multiple avenues for offering feedback on its website at section809panel.org.

Stakeholders can submit general comments and questions about the Section 809 Panel by choosing the

General Comments option under the Contact Us tab. Stakeholders who would like to suggest

recommendations for the panel can do so by choosing the Recommendations option under the Contact Us

tab.  

Members of the public and media may attend the open sessions at Section 809 Panel meetings.

To inquire about attending meetings, contact Jennifer McKinney at jennifer.mckinney@dau.mil.  

Daily Media Clips 

Each business day, the Section 809 Panel

publishes news clips that highlight current

articles related to defense acquisition. Those

interested in receiving the daily media clips via

email should contact Katie Cook at katie.cook@dau.mil.

Social Media 

For information related specifically to the panel, stakeholders can follow the Section 809

Panel on Twitter (@Section809Panel) and connect on LinkedIn (Section 809 Panel).

Public Information 

Organizations interested in hosting panel members for speaking engagements and media outlets

interested in publishing or broadcasting items about the commission should contact Shayne Martin at

shayne.martin@dau.mil.

50 Worst! 

The Section 809 Panel requests input in an effort to compile the 50 worst

acquisition rules, regulations, or policies that warrant serious study,

revision, or possible removal. Members of the public or media may submit

recommendations through the 50 Worst! tab at section809panel.org/50worst.  

Section 809 Panel Forums and Town Hall Meetings 

The Section 809 Panel holds periodic public forums, industry days, and town hall meetings, providing

the opportunity for stakeholders to engage directly with commissioners and receive up‐to‐date

information on potential panel recommendations. Visit the panel’s website at section809panel.org for

more information.  
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐18   |   Volume 1    Appendices

Bold Bites Podcast 

The Section 809 Panel produces a monthly podcast called Bold Bites. Commissioners and

professional staff speak about their latest research, recommendations, and meetings. To

listen, go to section809panel.org/media/bold‐bites‐podcast/.  

Federal Register 

The Section 809 Panel publishes periodic notices in the Federal Register soliciting feedback from

stakeholders. To review these notices, please visit the Federal Register or

section809panel.org/media/news‐releases/.  
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐19

APPENDIX E: PROFESSIONAL STAFF 

Michael D. Madsen, Col, USAF (ret)

Executive Director

Lawrence A. Asch

Professional Staff Member

Sharon D. Bickford

Professional Staff Member

Katie A. Cook

Professional Staff Member

Robert W. Cover, II

Legislative Counsel

COL Harry R. Culclasure, USA

Professional Staff Member

Herb L. Fenster

Outside Counsel

Karen S. Fischetti

Professional Staff Member

Paula B. Frankel

Professional Staff Member

Shirley J. Franko

Professional Staff Member

MG Theodore C. Harrison, USA

Professional Staff Member

Darren S. Harvey

Professional Staff Member

Alison M. Hawks, PhD

Deputy Research Director

Jeremy H. Hayes

Professional Staff Member

George C. Hill

Professional Staff Member

E. Sanderson Hoe

Outside Counsel

Dina T. Jeffers, CPCM

Professional Staff Member

Michelle VJ Johnson, PhD

Professional Staff Member

LTC Thomas D. Kelley, USA

Professional Staff Member

Lt Col Sam C. Kidd, USAF

General Counsel

Jarrett M. Lane

Professional Staff Member

Wendy J. LaRue, PhD

Communications Director

Caitlin J. Letle

Professional Staff Member

Shayne L. Martin

Public and Legislative Affairs  

Jennifer E. McKinney

Professional Staff Member

Gabriel M. Nelson

Professional Staff Member

Elizabeth B. Oakes

Professional Staff Member

Hannah H. Oh

Professional Staff Member

Lauren Peel, Esq

Professional Staff Member  

D. Ryan Polk

Professional Staff Member

Joshua T. Schneider

Professional Staff Member

Jeanette M. Snyder

Professional Staff Member

Jennifer R. Sullivan

Professional Staff Member

Jennifer M. Taylor

Professional Staff Member

Nicolas Tsiopanas

Professional Staff Member

Eric A. Valle

Professional Staff Member

Christopher P. Veith, Esq

Research Director

   
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐20   |   Volume 1    Appendices

Former Professional Staff Members 

CAPT John Bailey, USN Marvin T. Baugh, Col, USAF (ret) Jack Chutchian

Professional Staff Member Chief of Staff Intern

Patricia Donahoe Claire M. Grady Harry P. Hallock

Intern Commissioner Commissioner

John Haskell, PhD CDR Michele LaPorte, USN Michael McLendon

Research Director Professional Staff Professional Staff Member

Martha L. Milan Lucas C. Radice Melissa D. Rider

Professional Staff Intern Professional Staff Member

Moshe Schwartz

Executive Director

Major Contributors to this Report 

Brent Calhoun   Patrick Fitzgerald

Partner, Baker Tilley   Director, Baker Tilley
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐21

APPENDIX F: SUPPLEMENTAL TABLES FOR SECTION 1 – COMMERCIAL BUYING 

Table F-1. Clauses with Unique Relief for COTS Items .................................................................. A-22 

Table F-2. Commercial Item Citations That Do Not Incorporate the Primary Definition at Title 41 ............. A-28 

Table F-3. FAR/DFARS Definitions for the Term Subcontract .......................................................... A-29 

Table F-4. FAR/DFARS Definitions for the Term Subcontractor ....................................................... A-34 

Table F-5. FAR and DFARS Clauses Based on Statute That Meet the 41 U.S.C. §§ 1906/1907 Criteria, 

But Are Not Recommended for Applicability to Procurements of Commercial Products or Services ....... A-39 

Table F-6. FAR and DFARS Clauses Based on Statutes That Do Not Meet the 41 U.S.C. §§ 1906 and 

1907 Criteria, and Are Not Recommended for Applicability to Procurements of Commercial 

Products or Services ..................................................................................................... A-41

Table F-7. FAR and DFARS Clauses Derived from Executive Orders and Agency Regulations That Are Not 

Recommended to Apply to Procurements of Commercial Items .................................................. A-60 

Table F-8. FAR Clauses Recommended for Relocation to FAR 52.212-4 or Part 12 ................................. A-66 

   
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Table F‐1. Clauses with Unique Relief for COTS Items 

FAR/DFARS  Title  Basis  COTS Context  Recommendation 

4.1902 

52.204‐21 

Basic Safeguards of 

Covered Contractor 

Information 

Systems 

E.O. 13556 

COTS exemption by 

FAR Council 

determination (81 

FR 30439) 

Applies to 

subcontractors, 

including 

commercial items, 

other than COTS 

items

Revise exception to 

other than 

commercial 

products or services

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 

9.405‐2 

52.209‐6 

Restrictions of 

subcontracting 

Protecting the 

Government’s 

Interests when 

Subcontracting with 

Contractors 

Debarred, 

Suspended, or 

Proposed for 

Debarment 

COTS exemption by 

Section 815, FY10 

NDAA 

Clause includes 

definition of COTS;  

Contractor shall not 

enter into a 

subcontract 

>$35,000 (other 

than a subcontract 

for COTS) with a 

subcontractor that 

has been debarred, 

suspended, or 

proposed for 

debarment 

Delete definition of 

COTS in clause; 

Revise exception to 

other than a 

subcontract for 

commercial 

products or services

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 

22.1701 

22.1705 

52.222‐50 

52.222‐56 

Combating 

trafficking in 

persons 

Combating 

Trafficking in 

Persons 

Certification 

Regarding 

Trafficking in 

Persons Compliance 

Plan 

Section 1703, FY13 

NDAA 

COTS exemption by 

FAR Council (80 FR 

4967) 

See FAR 12.505(c) 

Clause includes 

definition of COTS 

Requires a 

certification and a 

compliance plan if 

for supplies other 

than COTS acquired 

outside the US; 

clause also applies 

to subcontractors 

(other than for 

COTS

Delete definition of 

COTS 

Revise exception to 

“other than 

commercial 

products” 

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 
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Appendices    Volume 1   |   Page A‐23

FAR/DFARS  Title  Basis  COTS Context  Recommendation 

22.1803 

52.222‐54 

Employment 

Eligibility 

Verification 

E.O. 12989 

COTS exemption by 

FAR Council (73 FR 

67651) 

Clause includes 

definition of COTS 

Clause applies to 

“commercial or 

noncommercial 

services (except for 

commercial services 

that are part of the 

purchase of a COTS 

item (or an item 

that would be a 

COTS item, but for 

minor 

modifications), 

performed by the 

COTS provider, and 

are normally 

provided for that 

COTS item)” 

Delete definition of 

COTS in clause 

Revise applicability 

to noncommercial 

services

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 

23.406 

52.223‐9 

Use of recovered 

materials 

Estimate of 

Percentage of 

Recovered Material 

Content for EPA‐

Designated Items 

41 U.S.C. § 6962 

(c)(3)(A) 

COTS exemption by 

OFPP memo 

2/14/08 

See FAR 12.505(b) 

Insert provision 

“Recovered 

Material 

Certificate” and 

clause “Estimate of 

Percentage of 

Recovered Material 

Content for EPA‐

Designated Items, 

except in contracts 

for COTS

Revise exception to 

“contracts for 

commercial 

products” 

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 
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FAR/DFARS  Title  Basis  COTS Context  Recommendation 

25.001 

25.003 

25.100 

25.200 

52.225‐1 

52.225‐3 

52.225‐9 

52.225‐11 

Foreign Acquisitions 

Buy American – 

Supplies 

Buy American – 

Free Trade 

Agreement – Israeli 

Trade Act 

Buy American Act – 

Construction 

Materials 

Buy American Act – 

Construction 

Materials under 

TAA 

41 U.S.C. Chap 83 

COTS exemption by 

OFPP memo 

2/14/08 

See FAR 12.505(a) 

Waives Domestic 

End Item 

component test for 

COTS items and 

construction 

materials 

Clauses include 

COTS definition 

Waives Domestic 

End Item 

component test for 

COTS items and 

construction 

materials 

Waive component 

test for commercial 

products

Delete definition of 

COTS 

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 

252.225‐7000 

252.225‐7001 

Buy American –

Balance of 

Payments Program 

Certificate 

Buy American and 

Balance of Payment 

Program ‐  Basic  

41 U.S.C. Chap 83 

COTS exemption by 

OFPP memo 

2/14/08 

74 FR 2422 

Waives component 

test for COTS

Includes definition 

of COTS 

Waives domestic 

end product 

component test for 

COTS  

Revise waiver to 

cover commercial 

products 

Delete definition of 

COTS 

Revise waiver to 

cover commercial 

products 

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 
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Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐25

FAR/DFARS  Title  Basis  COTS Context  Recommendation 

225.7003  Restrictions on the 

acquisition of 

specialty metals 

COTS exemption by 

10 U.S.C. § 2533b 

See DFARS 212.570 

Automotive item

does not include a 

commercially‐

available off‐the‐

shelf vehicle

Revise to 

automotive item

does not include a 

vehicle acquired as 

a commercial 

product 

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or 

services. 

225.7003 

252.225‐7009 

Restrictions on the 

acquisition of 

specialty metals 

Restriction on the 

Acquisition of 

Certain Articles 

Containing Specialty 

Metals 

COTS exemption by 

10 U.S.C. § 2533b 

See DFARS 212.570 

Restrictions of 

225.7003‐2 do not 

apply to COTS 

items containing 

specialty metals... 

Clause includes 

definition of COTS 

Restrictions in 

paragraph (b) of 

this clause do not 

apply to 

“commercially 

available off‐the‐

shelf items...” 

Revise to –

restrictions of 

225.7003‐2 do not 

apply to 

commercial 

products containing 

specialty metals... 

Delete definition of 

COTS 

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 
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FAR/DFARS  Title  Basis  COTS Context  Recommendation 

227.7103‐13 

252.227‐7037 

Government right 

to review, verify, 

challenge, and 

validate asserted 

restrictions 

Validation of 

Restrictive Markings 

on Technical Data 

COTS exemption by 

10 U.S.C. § 2321 

Presumption 

regarding 

developed 

exclusively at 

private expense 

applies to COTS and 

COTS with 

customary or minor 

modifications

See Panel 

recommendation 3‐

1 and 3‐4; revise to 

reference definition 

of commercial 

product at 41 U.S.C. 

§ 103 

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 

234.7002  Acquisition of Major 

Weapon Systems as 

Commercial Items 

COTS exemption by 

10 U.S.C. § 2379 

A subsystem of a 

major weapon 

system (other than 

a COTS item) may 

be treated and 

acquired as a 

commercial item 

under certain 

conditions 

(including a 

determination by 

the CO that the 

item is a 

commercial item 

A component or 

spare part (other 

than a COTS item) 

may be treated as a 

commercial item 

under certain 

conditions 

(including a 

determination by 

the CO that the 

item is a 

commercial item. 

Delete both 

reference to COTS; 

provides no relief 

for COTS (still 

requires 

commercial item 

determination and 

support for pricing) 
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Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐27

FAR/DFARS  Title  Basis  COTS Context  Recommendation 

204.7304(c) 

252.204‐7012 

Safeguarding 

Covered Defense 

Information and 

Cyber Incident 

Reporting 

Section 941, FY13 

NDAA; Section 

1632, FY15 NDAA 

COTS exemption by 

DPAP (81 FR 72986) 

Include the clause 

at 252.204‐7012 in 

all contracts, 

including contracts 

for commercial 

items, except for 

COTS

Revised to “Include 

the clause at 

252.204‐7012 in all 

contracts, except 

contracts for 

commercial items” 

See 

Recommendation 

3‐2 regarding 

applicability of this 

clause to 

commercial 

products or services 
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Table F‐2. Commercial Item Citations That Do Not Incorporate the Primary Definition at Title 41 

Citation  Chapter  Title  Is there a 

Definition? 

Location of 

Definition  Context for Definition 

FY 2015 NDAA, 

Section 843(2) 

(10 U.S.C 

§ 2302 note) 

137  Prohibition on 

Contracting with 

the Enemy 

No  N/A  N/A 

FY 2016 NDAA, 

Section 856 

(10 U.S.C 

§ 2377 note) 

140  Limitation on 

Conversion of 

Procurements 

from Commercial 

Acquisition 

Procedures 

Yes  FAR Part 12  Text references “commercial 

acquisition procedures under 

Part 12 of the Federal 

Acquisition Regulation” 

10 U.S.C 

§ 2451(d) 

145  Defense Supply 

Management 

No  N/A  N/A 

10 U.S.C. 

§2464(a)(3) 

146  Core Logistics 

Capabilities 

Yes  10 U.S.C 

§ 2464(a)(5) 

Text references 10 U.S.C 

§ 2464(a)(5), which defines 

commercial items as 

“commercial items that have 

been sold or leased in 

substantial quantities to the 

general public and are 

purchased without 

modification in the same 

form that they are sold in the 

commercial marketplace, or 

with minor modifications to 

meet Federal Government 

requirements.” 

10 U.S.C 

§ 2533a(i) 

148  Requirement to 

Buy Certain 

Articles from 

American 

Sources; 

Exceptions 

No  N/A  N/A 

10 U.S.C 

§ 2533b(h) 

148  Requirement to 

Buy Strategic 

Materials Critical 

to National 

Security from 

American 

Sources; 

Exceptions 

No  N/A  N/A 
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Appendices    Volume 1   |   Page A‐29

Table F‐3. FAR/DFARS Definitions for the Term Subcontract.

Provision  Definition and Recommendation 

FAR 3.502‐1, Other Improper Business Practices, 

Subcontractor Kickbacks 

Subcontract means a contract or contractual action entered 

into by a prime contractor or subcontractor for the purpose 

of obtaining supplies, materials, equipment, or services of 

any kind under a prime contract. 

Note: This definition is based on 41 U.S.C. § 8701. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 3.901, Whistleblower Protections for Contractor 

Employees, Definitions 

Subcontract means any contract as defined in subpart 2.1 

entered into by a subcontractor to furnish supplies or 

services for performance of a prime contract or a 

subcontract. It includes but is not limited to purchase orders,

and changes and modifications to purchase orders. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 3.1001, Contractor Code of Business Ethics and 

Conduct 

Subcontract means any contract entered into by a 

subcontractor to furnish supplies or services for performance 

of a prime contract or a subcontract. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 4.1701, Service Contracts Inventory, Definitions  First‐tier subcontract means a subcontract awarded directly 

by the prime contractor for the purpose of acquiring supplies 

or services (including construction) for performance of a 

prime contract. It does not include the contractor’s supplier 

agreements with vendors, such as long‐term arrangements 

for materials or supplies that benefit multiple contracts 

and/or the costs of which are normally applied to a 

contractor’s general and administrative expenses or indirect 

costs. 

Recommendation: Delete all text after definition of first‐

tier; defer to definition in FAR Subpart 2.101 for the balance 

of the definition. 

FAR 12.001, Acquisition of Commercial Items—General, 

Definition 

(Applies to Multiple Clauses) 

Subcontract, as used in this part, includes, but is not limited 

to, a transfer of commercial items between divisions, 

subsidiaries, or affiliates of a contractor or subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 
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Page A‐30   |   Volume 1    Appendices

Provision  Definition and Recommendation 

FAR 15.401, Contract Pricing, Definitions  Subcontract, except as used in 15.407‐2, also includes a 

transfer of commercial items between divisions, subsidiaries, 

or affiliates of a contractor or a subcontractor, 10 U.S.C. 

§ 2306a(h)(2) and 41 U.S.C. § 3501(a)(3)). 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 19.701, Small Business Subcontracting Program, 

Definitions 

Subcontract, means any agreement, other than one involving 

an employer‐employee relationship) entered into by a 

Government prime contractor or subcontractor calling for 

supplies and/or services required for performance of the 

contract, contract modification, or subcontract. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101....... 

FAR 22.801, Equal Employment Opportunity, Definitions  Subcontract, means any agreement or arrangement between 

a contractor and any person, in which the parties do not 

stand in the relationship of an employer and an employee)— 

(1) For the purchase, sale, or use of personal property or 

nonpersonal services that, in whole or in part, are necessary 

to the performance of any one or more contracts; or 

(2) Under which any portion of the contractor’s obligation 

under any one or more contracts is performed, undertaken, 

or assumed. 

Note: EO 11246 does not include a definition of subcontract.

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 22.1702, Combatting Trafficking in Persons, 

Definitions 

Subcontract means any contract entered into by a 

subcontractor to furnish supplies or services for performance 

of a prime contract or a subcontract. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 22.1801, Employment Eligibility Verification, 

Definitions 

Subcontract means any contract, as defined in 2.101, entered 

into by a subcontractor to furnish supplies or services for 

performance of a prime contract or a subcontract. It includes 

but is not limited to purchase orders, and changes and 

modifications to purchase orders. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 
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Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐31

Provision  Definition and Recommendation 

FAR 44.101, Subcontracting Policies and Procedures, 

Definitions 

Subcontract means any contract as defined in Subpart 2.1 

entered into by a subcontractor to furnish supplies or 

services for performance of a prime contract or a 

subcontract. It includes but is not limited to purchase orders,

and changes and modifications to purchase orders. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 44.401, Subcontracts for Commercial Items and 

Commercial Components, Applicability 

For the purpose of this subpart, the term subcontract has the 

same meaning as defined in Part 12. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.203‐7, Anti‐Kickback Procedures 

(Prescribed by FAR 3.502‐3) 

Subcontract, as used in this clause, means a contract or 

contractual action entered into by a prime Contractor or 

subcontractor for the purpose of obtaining supplies, 

materials, equipment, or services of any kind under a prime 

contract. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.203‐13, Contractor Code of Business Ethics and 

Conduct 

(Prescribed by FAR 3.1004(a)) 

Subcontract means any contract entered into by a 

subcontractor to furnish supplies or services for performance 

of a prime contract or a subcontract. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.203‐18, Prohibition on Requiring Certain Internal 

Confidentiality Agreements or Statements 

(Prescribed by FAR 3.909‐3(a)) 

Subcontract as used in this provision, are defined in the 

clause at 52.203‐19, Prohibition on Requiring Certain Internal 

Confidentiality Agreements or Statements. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101.

FAR 52.203‐19, Prohibition on Requiring Certain Internal 

Confidentiality Agreements or Statements 

(Prescribed by FAR 3.909‐3(b)) 

Subcontract means any contract as defined in subpart 2.1 

entered into by a subcontractor to furnish supplies or 

services for performance of a prime contract or a 

subcontract. It includes but is not limited to purchase orders,

and changes and modifications to purchase orders. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 
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Volume 1 of 3     |     January 2018

Page A‐32   |   Volume 1    Appendices

Provision  Definition and Recommendation 

FAR 52.204‐10, Reporting Executive Compensation and 

First‐Tier Subcontract Awards 

(Prescribed by FAR 4.1403(a)) 

First‐tier subcontract means a subcontract awarded directly 

by the prime Contractor for the purpose of acquiring supplies 

or services (including construction) for performance of a 

prime contract. It does not include the Contractor’s supplier 

agreements with vendors, such as long‐term arrangements 

for materials or supplies that benefit multiple contracts 

and/or the costs of which are normally applied to a 

Contractor’s general and administrative expenses or indirect 

costs. 

Recommendation: Delete all text after definition of first‐

tier; defer to definition in FAR Subpart 2.101 for the balance 

of the definition. 

FAR 52.204‐14, Service Contract Reporting Requirements 

(Prescribed by FAR 4.1403(a)) 

First‐tier subcontract means a subcontract awarded directly 

by the prime Contractor for the purpose of acquiring supplies 

or services (including construction) for performance of a 

prime contract. It does not include the Contractor’s supplier 

agreements with vendors, such as long‐term arrangements 

for materials or supplies that benefit multiple contracts 

and/or the costs of which are normally applied to a 

Contractor’s general and administrative expenses or indirect 

costs. 

Recommendation: Delete all text after definition of first‐

tier; defer to definition in FAR Subpart 2.101 for the balance 

of the definition. 

FAR 52.204‐15, Service Contract Reporting Requirements 

for Indefinite‐Delivery Contracts 

(Prescribed by FAR 4.1705(b)) 

First‐tier subcontract means a subcontract awarded directly 

by the prime Contractor for the purpose of acquiring supplies 

or services (including construction) for performance of a 

prime contract. It does not include the Contractor’s supplier 

agreements with vendors, such as long‐term arrangements 

for materials or supplies that benefit multiple contracts 

and/or the costs of which are normally applied to a 

Contractor’s general and administrative expenses or indirect 

costs. 

Recommendation: Delete all text after definition of first‐

tier; defer to definition in FAR Subpart 2.101 for the balance 

of the definition. 
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Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐33

Provision  Definition and Recommendation 

FAR 52.212‐4, Contract Terms and Conditions—

Commercial Items 

(Alternate I) 

(Prescribed by FAR 12.301(b)(3)) 

Subcontract means any contract, as defined in FAR subpart 

2.1, entered into with a subcontractor to furnish supplies or 

services for performance of the prime contract or a 

subcontract including transfers between divisions, 

subsidiaries, or affiliates of a contractor or subcontractor. It 

includes, but is not limited to, purchase orders, and changes 

and modifications to purchase orders. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.215‐23, Limitations on Pass‐Through Charges 

(Prescribed by FAR 15.408(n)(2)) 

Subcontract means any contract, as defined in FAR 2.101, 

entered into by a subcontractor to furnish supplies or 

services for performance of the contract or a subcontract. It 

includes but is not limited to purchase orders, and changes 

and modifications to purchase orders. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.219‐9, Small Business Subcontracting Plan 

(Prescribed by FAR 19.708(b)) 

Subcontract means any agreement, other than one involving 

an employer‐employee relationship) entered into by a 

Federal Government prime Contractor or subcontractor 

calling for supplies or services required for performance of 

the contract or subcontract. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.222‐50, Combating Trafficking in Persons 

(Prescribed by FAR 22.1705(a)(1)) 

Subcontract means any contract entered into by a 

subcontractor to furnish supplies or services for performance 

of a prime contract or a subcontract. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.222‐54, Employment Eligibility Verification 

(Prescribed by FAR 22.1803) 

Subcontract means any contract, as defined in 2.101, entered 

into by a subcontractor to furnish supplies or services for 

performance of a prime contract or a subcontract. It includes 

but is not limited to purchase orders, and changes and 

modifications to purchase orders. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 
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Page A‐34   |   Volume 1    Appendices

Provision  Definition and Recommendation 

FAR 52.244‐2, Notification of Changes 

(Prescribed by FAR 44.204(a)(1)) 

Subcontract means any contract, as defined in FAR Subpart 

2.1, entered into by a subcontractor to furnish supplies or 

services for performance of the prime contract or a 

subcontract. It includes, but is not limited to, purchase 

orders, and changes and modifications to purchase orders. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.244‐6, Subcontracts for Commercial Items 

(Prescribed by FAR 44.403) 

Subcontract includes a transfer of commercial items between 

divisions, subsidiaries, or affiliates of the Contractor or 

subcontractor at any tier. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

DFARS 252.222‐7006, Restrictions on the Use of 

Mandatory Arbitration Agreements 

(Prescribed by DFARS 222.7405) 

Subcontract means any contract, as defined in Federal 

Acquisition Regulation subpart 2.1, to furnish supplies or 

services for performance of this contract or a higher‐tier 

subcontract thereunder. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐35

Table F‐4. FAR/DFARS Definitions for the Term Subcontractor.

Provision  Definition and Recommendation 

FAR 2.101, Definitions  Small business subcontractor means a concern that 

does not exceed the size standard for the North 

American Industry Classification Systems code that the 

prime contractor determines best describes the 

product or service being acquired by the subcontract. 

Recommendation:  No change. 

FAR 3.502‐1, Other Improper Business Practices, 

Subcontractor Kickbacks 

Subcontractor, for purposes of this subpart, includes 

any person who offers to furnish or furnishes general 

supplies to the prime contractor or a higher tier 

subcontractor. 

Recommendation:  Delete and amend text as 

indicated; retain unique component of the definition. 

FAR 3.901 Whistleblower Protections for 

Contractor Employees, Definitions 

Subcontractor means any supplier, distributor, vendor, 

or firm (including a consultant) that furnishes supplies 

or services to or for a prime contractor or another 

subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 3.1001, Contractor Code of Business Ethics and 

Conduct 

Subcontractor means any supplier, distributor, 

vendor, or firm that furnished supplies or services to 

or for a prime contractor or another subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 22.801, Equal Employment Opportunity, 

Definitions 

Subcontractor, for purposes of this subpart, includes 

any person who holds, or has held, a subcontract 

subject to E.O. 11246. The term “first‐tier 

subcontractor” means a subcontractor holding a 

subcontract with a prime contractor. 

Recommendation:  Delete and amend text as 

indicated; retain unique component of the definition. 

FAR 22.1001, Service Contract Labor Standards, 

Definitions 

Contractor includes a subcontractor at any tier whose 

subcontract is subject to the provisions of the statute. 

Recommendation:  No change. 
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Page A‐36   |   Volume 1    Appendices

Provision  Definition and Recommendation 

FAR 22.1702, Combatting Trafficking in Persons, 

Definitions 

Subcontractor means any supplier, distributor, vendor, 

or firm that furnishes supplies or services to or for a 

prime contractor or another subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 22.1801, Employment Eligibility Verification, 

Definitions 

Subcontractor means any supplier, distributor, 

vendor, or firm that furnishes supplies or services to or 

for a prime contractor or another subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 44.101, Subcontracting Policies and Procedures, 

Definitions 

Subcontractor means any supplier, distributor, 

vendor, or firm that furnishes supplies or services to or 

for a prime contractor or another subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 46.101, Quality Assurance, Definitions  Subcontractor (see 44.101). 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.203‐7, Anti‐Kickback Procedures 

(Prescribed by FAR 3.502‐3) 

Subcontractor,” for purposes of this clause, includes 

any person who offers to furnish or furnishes general 

supplies to the prime Contractor or a higher tier 

subcontractor. 

Recommendation:  Delete and amend text as 

indicated; retain unique component of the definition. 

FAR 52.203‐13, Contractor Code of Business Ethics and 

Conduct 

(Prescribed by FAR 3.1004(a)) 

Subcontractor means any supplier, distributor, 

vendor, or firm that furnished supplies or services to 

or for a prime contractor or another subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101.  

FAR 52.203‐18, Prohibition on Requiring Certain 

Internal Confidentiality Agreements or Statements 

(Prescribed by FAR 3.909‐3(a)) 

Subcontractor as used in this provision, are defined in 

the clause at 52.203‐19, Prohibition on Requiring 

Certain Internal Confidentiality Agreements or 

Statements. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐37

Provision  Definition and Recommendation 

FAR 52.203‐19, Prohibition on Requiring Certain 

Internal Confidentiality Agreements or Statements 

(Prescribed by FAR 3.909‐3(b)) 

Subcontractor means any supplier, distributor, 

vendor, or firm (including a consultant) that furnishes 

supplies or services to or for a prime contractor or 

another subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.215‐23, Limitations on Pass‐Through Charges 

(Prescribed by FAR 15.408(n)(2)) 

Subcontractor, as defined in FAR 44.101, means any 

supplier, distributor, vendor, or firm that furnishes 

supplies or services to or for a prime Contractor or 

another subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.222‐50, Combating Trafficking in Persons 

(Prescribed by FAR 22.1705(a)(1)) 

Subcontractor means any supplier, distributor, vendor, 

or firm that furnishes supplies or services to or for a 

prime contractor or another subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.222‐54, Employment Eligibility Verification 

(Prescribed by FAR 22.1803) 

Subcontractor means any supplier, distributor, vendor, 

or firm that furnishes supplies or services to or for a 

prime Contractor or another subcontractor. 

Recommendation: Delete; defer to definition in 

FAR Subpart 2.101. 

FAR 52.232‐27, Prompt Payment for Construction 

Contracts 

(Prescribed by FAR 32.908(b)) 

Third‐party deficiency reports—Withholding from 

subcontractor. If a Contractor, after making payment 

to a first‐tier subcontractor, receives from a supplier 

or subcontractor of the first‐tier subcontractor 

(hereafter referred to as a second‐tier subcontractor). 

Recommendation:  No change. 
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Page A‐38   |   Volume 1    Appendices

Provision  Term  Definition 

DFARS 252.209‐7008, 

Notice of Prohibition 

Relating to 

Organizational 

Conflict of Interest—

Major Defense 

Acquisition Program 

(Prescribed by DFARS 

209.571‐8(a)) 

Major 

subcontractor 

Major subcontractor is defined in the clause at 252.209‐7009, 

Organizational Conflict of Interest—Major Defense Acquisition Program. 

Recommendation:  No change. 

DFARS 252.209‐7009, 

Organizational 

Conflict of Interest—

Major Defense 

Acquisition Program 

(Prescribed by DFARS 

209.571‐8(b)) 

Major 

subcontractor 

Major subcontractor, as used in this clause, means a subcontractor that is 

awarded a subcontract that equals or exceeds— (i) Both the certified cost 

or pricing data threshold and 10 percent of the value of the contract 

under which the subcontracts are awarded; or (ii) $55 million. 

Recommendation:  No change. 

DFARS 252.246‐7003,  

Notification of 

Potential Safety 

Issues 

(Prescribed by DFARS 

246.371(a)) 

Subcontractor  Subcontractor means any supplier, distributor, vendor, or firm that 

furnishes supplies or services to or for the Contractor or another 

subcontractor under this contract. 

Recommendation: Delete; defer to definition in FAR Subpart 2.101. 

DFARS 252.247‐7023, 

Transportation of 

Supplies by Sea 

(Including Alternates 

I and II) 

(Prescribed by DFARS 

247.574(b)) 

Subcontractor  Subcontractor means a supplier, materialman, distributor, or vendor at 

any level below the prime contractor whose contractual obligation to 

perform results from, or is conditioned upon, award of the prime contract 

and who is performing any part of the work or other requirement of the 

prime contract. 

Recommendation: Delete; defer to definition in FAR Subpart 2.101. 

   
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐39

Table F‐5. FAR and DFARS Clauses Based on Statute That Meet the 41 U.S.C. §§ 1906/1907 Criteria,  

But Are Not Recommended for Applicability to Procurements of Commercial Products or Services 

 Table F‐5 lists the FAR and DFARS clauses1 that are based on statute and

 Satisfy one of the following criteria prescribed in 41 U.S.C. §§ 1906, 1907 and 10 U.S.C.

§ 2375:2

o Provides for civil or criminal penalties;   

o Specifically refers to 41 U.S.C. §§ 1906, 1907 or 10 U.S.C. § 2375 and provides that,

notwithstanding 41 U.S.C. §§ 1906, 1907 or 10 U.S.C. § 2375, it is applicable to contracts

for the procurement of commercial items;3 and

o Requires that certain articles be bought from American sources pursuant to 10 U.S.C.

§ 2533a, or requires that strategic materials critical to national security be bought from

American sources pursuant to 10 U.S.C. § 2533b.4

 The Section 809 Panel recommends these clauses be revised to exempt contracts for commercial

items because these clauses:

 Impose a cost or administrative burden on suppliers that is not otherwise typical in

commercial transactions;  

 Impose requirements unique to a government procurement that are already sufficiently

addressed in requirements applicable to the general commercial marketplace;  

 Focus on the supplier’s business practices and systems rather than the product or service

being procured; and  

 Otherwise unnecessarily placing commercial suppliers at risk and thereby limiting the

federal government’s access to the commercial sector.  

 The Section 809 Panel recommends the clauses in Table F‐5 be removed from DFARS 212.301.

 6 clauses (0 FAR and 6 DFARS)

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.225‐7008  Restriction on 

Acquisition of 

Specialty Metals  

10 U.S.C. § 2533b 

Statute 

specifically refers 

to 41 U.S.C. 

§§ 1906 and 

1907. 

Applicable to 

specialty metals 

procured as an end 

item. 

Remove from 

DFARS 212.301. 

                                                     

1 Lists of clauses based on FAR 52.212‐4 (January 2017), FAR 52.212‐5 (November 2017), and DFARS 212.301 (December 2017).  2 41 U.S.C.  1906 and 1907 (formerly sections 34 and 35 of the OFPP Act, codified at 41 U.S.C. § 430 and 431) 3 See 41 U.S.C. § 1906. 41 U.S.C. § 1907, and 10 U.S.C. § 2375 

4 See 10 U.S.C. § 2375 
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FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.225‐7009  Restriction on 

Acquisition of 

Certain Articles 

Containing 

Specialty Metals  

10 U.S.C. § 2533b 

Statute 

specifically refers 

to 41 U.S.C. 

§§ 1906 and 

1907. 

Generally, only 

applicable to 

weapon systems 

and components. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7010  Commercial 

Derivative 

Military Article – 

Specialty Metals 

Compliance 

Certificate  

10 U.S.C. § 2533b 

Statute 

specifically refers 

to 41 U.S.C. 

§§ 1906 and 

1907. 

Generally, only 

applicable to 

weapon systems 

and components . 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7012  Preference for 

Certain Domestic 

Commodities 

10 U.S.C. § 2533a 

DAC 91‐9 

Statute 

specifically refers 

41 U.S.C. § 1906 

Berry Amendment  Remove from 

DFARS 212.301. 

DFARS  252.225‐715  Restriction on 

Acquisition of 

Hand or 

Measuring Tools 

10 U.S.C. § 2533a 

DAC 91‐9 

Statute 

specifically refers 

to 41 U.S.C. 

§ 1906. 

Berry Amendment  Remove from 

DFARS 212.301. 

DFARS  252.226‐7001  Utilization of 

Indian 

Organizations, 

Indian‐Owned 

Economic 

Enterprises, and 

Native Hawaiian 

Small Business 

Concerns 

Section 8021 of 

FY 2017 DoD 

Appropriations 

Act 

Statute 

specifically refers 

to 41 U.S.C. 

§ 1906. 

Incentive payments 

to utilize certain 

subcontractors 

would be 

inconsistent with 

procurement from 

the commercial 

marketplace. 

Remove from 

DFARS 212.301. 

   
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐41

Table F‐6. FAR and DFARS Clauses Based on Statutes That Do Not Meet the 41 U.S.C. §§ 1906 and 1907 

Criteria, and Are Not Recommended for Applicability to Procurements of Commercial Products or Services 

 Table F‐6 lists the FAR and DFARS clauses that are based on statute, but do not satisfy the

criteria identified for clauses in 41 U.S.C. §§ 1906, 1907 and 10 U.S.C. § 2375.  These clauses do

not:

 Provide for civil or criminal penalties;   

 Specifically refer to 41 U.S.C. §§§ 1906, 1907 or 10 U.S.C. § 2375 and provides that,

notwithstanding 41 U.S.C. §§§ 1906, 1907 or 10 U.S.C. § 2375, it is applicable to contracts for

the procurement of commercial items5; and

 Require that certain articles be bought from American sources pursuant to 10 U.S.C. § 2533a,

or requires that strategic materials critical to national security be bought from American

sources pursuant to 10 U.S.C. § 2533b6.

 The Section 809 Panel recommends the clauses in Table F‐6 be removed from FAR 52.212‐4 (r),

52.212‐5 and DFARS 212.301.  

 109 clauses (54 FAR and 55 DFARS)

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.203‐3  Gratuities   10 U.S.C. § 2207 

No FAR Council 

Determination  

Prescribed for 

commercial items 

procured by DoD in 

DFARS 212.301. 

Remove from 

DFARS 212.301. 

FAR  52.203‐6  Restrictions on 

Subcontractor 

Sales to the 

Government  

10 U.S.C. § 2402 

FAC 90‐32 

Alternate I for 

commercial products 

only require Federal 

Gov’t not be treated 

differently.   

Remove from 

FAR 52.212‐5. 

FAR   52.203‐13  Contractor Code 

of Business 

Ethics and 

Conduct 

41 U.S.C. § 3509 

Mandated by the 

“Close the 

Contractor Fraud 

Loophole Act”; 

but neither Act 

specifically refers 

to 41 U.S.C. 

§§ 1906, 1907. 

Requires commercial 

supplier to have a 

written code of 

business ethics and 

conduct and make it 

available to each 

employee.   

Remove from 

FAR 52.212‐5. 

                                                     

5 See 41 U.S.C. § 1906. 41 U.S.C. § 1907, and 10 U.S.C. § 2375 

6 See 10 U.S.C. § 2375 
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Page A‐42   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.203‐15  Whistleblower 

Protections 

Under the 

American 

Recovery and 

Reinvestment 

Act 

Section 1553, 

Pub L. 111‐5  

FAR Council 

determination – 

Best Interest of 

the Government

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.203‐19  Prohibition on 

Requiring 

Internal 

Confidentiality 

Agreements or 

Statements 

Section 743, 

Division E, Title 

VII, 2015 Appro. 

Act  

FAR Council 

determination – 

Best Interest of 

the Government

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.204‐10  Reporting 

Executive 

Compensation 

and First‐Tier 

Subcontract 

Awards 

31 U.S.C. 6101 

Note  

FAR Council 

determination – 

Best Interest of 

the Government

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.204‐14  Service Contract 

Reporting 

Requirements 

Section 743, 

Division C, Pub L. 

111‐117 

FAR Council 

determination – 

Best Interest of 

the Government

  Remove from 

FAR 52.212‐5. 

FAR  52.204‐15  Service Contract 

Reporting 

Requirements 

for Indefinite‐

Delivery 

Contracts 

Section 743, 

Division C, Pub L. 

111‐117 

FAR Council 

determination – 

Best Interest of 

the Government

  Remove from 

FAR 52.212‐5. 
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Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐43

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.209‐6  Protecting the 

Government’s 

Interest When 

Subcontracting 

with Contractors 

Debarred, 

Suspended, or 

Proposed for 

Debarment 

31 U.S.C. § 6101 

note 

Statute does not 

specifically refer 

to 41 U.S.C. 

§§ 1906, 1907. 

Only applies to first 

tier subcontractors of 

commercial item 

suppliers, and does 

not apply to any COTS 

subcontractors.  

However, it places 

unique administrative 

requirement on the 

supplier’s purchasing 

organization with 

regard to validating its 

existing supply chain 

against the GSA 

debarred/suspended 

list. 

Remove from 

FAR 52.212‐5. 

FAR  52.209‐9  Updates of 

Publicly Available 

Information 

Regarding 

Responsibility 

Matters 

41 U.S.C. § 2313 

No FAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.209‐10  Prohibition on 

Contracting with 

Inverted 

Domestic 

Corporations  

Section 743, 

Division D, 2009 

Appro. Act  

FAR Council 

determination – 

“Best Interest of 

the Government” 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.212‐4 (r)  Limitations on 

the use of 

appropriated 

funds to 

influence certain 

Federal contracts  

31 U.S.C. § 1352 

No FAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐4 

(r). 

FAR  52.212‐4 (r)  Officials not to 

benefit  

18 U.S.C. § 431 

No FAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐4 

(r). 

FAR  52.212‐4 (r)  Contract Work 

Hours and Safety 

Standards 

40 U.S.C. Chap 37 

No FAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐4 

(r). 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐44   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.212‐4 (r)   Kickbacks  41 U.S.C. Chap 87 

No FAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐4 

(r). 

FAR  52.212‐4 (r)  Whistleblower 

protections 

41 U.S.C. § 4712 

and 10 U.S.C. 

§ 2409 

No FAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐4 

(r). 

FAR  52.212‐4 (r)  Fly American  49 U.S.C. § 40118 

No FAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐4 

(r). 

FAR  52.212‐4 (r)  Procurement 

integrity 

41 U.S.C. Chap 21 

No FAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐4 

(r). 

FAR  52.219‐3  Notice of 

HUBZone Set‐

Aside or Sole‐

Source Award 

15 U.S.C. § 657a  

No FAR Council 

Determination 

Notice  Remove from 

FAR 52.212‐5. 

FAR  52.219‐4  Notice of Price 

Evaluation 

Preference for 

HUBZone Small 

Business 

Concerns 

15 U.S.C. § 657a 

No FAR Council 

Determination 

Notice  Remove from 

FAR 52.212‐5. 

FAR  52.219‐6  Notice of Total 

Small Business 

Set‐Aside  

15 U.S.C. § 631 

No FAR Council 

Determination 

Notice  Remove from 

FAR 52.212‐5. 

FAR  52.219‐7  Notice of Partial 

Small Business 

Set‐Aside  

15 U.S.C. § 631 

No FAR Council 

Determination 

Notice  Remove from 

FAR 52.212‐5. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐45

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.219‐8  Utilization of 

Small Business 

Concerns  

15 U.S.C. § 631 

FAC 90‐32 

Burden is imposed on 

supplier’s existing 

purchasing system. 

Commercial suppliers 

must categorize all 

existing and new 

suppliers by business 

size and maintain data 

currency. Supplier 

must agree to 

participate in any SBA 

compliance review.  

Not appropriate when 

supply base is already 

established. 

Remove from 

FAR 52.212‐5. 

FAR  52.219‐9  Small Business 

Subcontracting 

Plan  

15 U.S.C. § 631 

FAC 90‐32 

Burden is imposed on 

supplier’s existing 

purchasing system. 

Commercial suppliers 

must prepare a 

prescribed 15 

element commercial 

subcontracting plan 

on its already planned 

subcontracting; 

requires categorizing 

all existing and new 

suppliers by business 

size and preparing 

periodic reporting on 

subcontracting. Not 

appropriate when 

supply base is already 

established. 

Essentially a data 

collection and 

reporting 

requirement with 

little impact on the 

product or service.  

Remove from 

FAR 52.212‐5. 

FAR  52.219‐13  Notice of Set‐

Aside of Orders 

15 U.S.C. § 644(r) 

No FAR Council 

Determination 

Notice  Remove from 

FAR 52.212‐5. 

FAR  52.219‐14  Limitations on 

Subcontracting  

15 U.S.C. § 631 

FAC 90‐32 

Only applies if the 

procurement is a 

small business set‐

asides 

Remove from 

FAR 52.212‐5. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐46   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.219‐16  Liquidated 

Damages – 

Subcontracting 

Plan 

(15 U.S.C. 

§ 637(d)(4)(F)(i)) 

No FAR Council 

Determination 

Associated with 

subcontracting plan 

(also removed) 

Remove from 

FAR 52.212‐5. 

FAR  52.219‐27  Notice of 

Service‐Disabled 

Veteran‐Owned 

Small Business 

Set‐Aside 

15 U.S.C. § 631 

No FAR Council 

Determination 

Notice  Remove from 

FAR 52.212‐5. 

FAR  52.219‐28  Post Award Small 

Business 

Program 

Representation 

15 U.S.C. 

§ 632(a)(2) 

No FAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.219‐29  Notice of Set‐

Aside for, or Sole 

Source Award to, 

Economically 

Disadvantaged 

Women‐Owned 

Small Business 

Concerns 

15 U.S.C. 

§ 637(m) 

No FAR Council 

Determination  

Notice  Remove from 

FAR 52.212‐5. 

FAR  52.219‐30  Notice of Set‐

Aside for, or Sole 

Source Award to, 

Women‐Owned 

Small Business 

Concerns Eligible 

Under the 

Women‐Owned 

Small Business 

Program 

15 U.S.C. 

§ 637(m) 

No FAR Council 

Determination 

Notice  Remove from 

FAR 52.212‐5. 

FAR  52.222‐35  Equal 

Opportunity for 

Veterans  

38 U.S.C. Chap 42 

FAC 90‐32 

Refers back to equal 

opportunity clause; 

flows down to 

subcontractors. 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐36  Equal 

Opportunity for 

Workers with 

Disabilities  

29 U.S.C. § 793 

FAC 90‐32  

Refers back to equal 

opportunity clause; 

Flows down to 

subcontractors.  

Remove from 

FAR 52.212‐5. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐47

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.222‐37  Employment 

Reports on 

Veterans  

38 U.S.C. Chap 42 

FAC 90‐32  

Requires commercial 

supplier to collect 

military service‐

related data on its 

current and future 

employees; requires 

reporting of data; 

requirements flow 

down to 

subcontractors. 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐41  Service Contract 

Labor Standards  

41 U.S.C. Chap 67 

FAC 90‐32  

Only applies to certain 

services; commercial 

services may be 

exempted under 

specific 

circumstances. 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐42  Statement of 

Equivalent Rates 

for Federal Hires  

41 U.S.C. Chap 67 

FAC 90‐32  

Only applies to certain 

services; commercial 

services may be 

exempted under 

specific 

circumstances. 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐43  Fair Labor 

Standards Act 

and Service 

Contract Labor 

Standards – Price 

Adjustment 

(Multiple Year 

and Option 

Contracts)  

41 U.S.C. Chap 67 

FAC 90‐32  

Only applies to certain 

services; commercial 

services may be 

exempted under 

specific circumstance. 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐44  Fair Labor 

Standards Act 

and Service 

Contract Labor 

Standards – Price 

Adjustment  

41 U.S.C. Chap 67  

FAC 90‐32 

Only applies to certain 

services; commercial 

services may be 

exempted under 

specific 

circumstances. 

Remove from 

FAR 52.212‐5. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐48   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.222‐51  Exemption from 

Application of 

the Service 

Contract Labor 

Standards to 

Contracts for 

Maintenance, 

Calibration, or 

Repair of Certain 

Equipment – 

Requirements 

41 U.S.C. Chap 67 

Associated with 

FAR 52.222‐41  

No FAR Council 

determination 

Only applies when 

contracting officer 

determines SCA does 

not apply to 

commercial services 

(FAR 22.1003‐4(c)). 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐53  Exemption from 

Application of 

the Service 

Contract Labor 

Standards to 

Contracts for 

Certain Services 

– Requirements  

41 U.S.C. Chap 67 

Associated with 

FAR 52.222‐41  

No FAR Council 

determination 

Only applies when 

contracting officer 

determines SCA does 

not apply to 

commercial services 

(FAR 22.1003‐4(d)). 

Remove from 

FAR 52.212‐5. 

FAR  52.223‐9  Estimate of 

Percentage of 

Recovered 

Material Content 

for EPA‐

Designated Items 

42 U.S.C. 

§ 6962(c)(3)(A)(ii) 

No FAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.223‐15  Energy Efficiency 

in Energy‐

Consuming 

Products 

42 U.S.C. § 8259b 

No FAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.224‐3  Privacy Training   5 U.S.C. § 552a 

No FAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907.  

Applied to CI 

contracts where 

contractor has access 

to “system of 

records.” Does not 

apply to COTS.   

Remove from 

FAR 52.212‐5. 

FAR  52.225‐1  Buy American –

Supplies  

41 U.S.C. Chap 83  

FAC 90‐32 

Statute 

specifically refers 

to 41 U.S.C. § 431  

Clause provides 

waiver of component 

test for COTS 

products (per 

41 U.S.C. § 431). 

Remove from 

FAR 52.212‐5. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐49

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.225‐3  Buy American –

Free Trade 

Agreements – 

Israeli Trade Act  

41 U.S.C. Chap 83 

Replaced Free 

Trade Agreement 

clauses in FAC 

90‐32 

Statute 

specifically refers 

to 41 U.S.C. 

§ 1907 . 

Clause provides 

waiver of component 

test for COTS 

products (per 

41 U.S.C. § 1907).  

Remove from 

FAR 52.212‐5. 

FAR  52.225‐5  Trade 

Agreements  

19 U.S.C. Chap 25 

Replaced 52.225‐

9 from FAC 90‐32 

  Remove from 

FAR 52.212‐5. 

FAR  52.225‐26  Contractors 

Performing 

Private Security 

Functions 

Outside the 

United States 

10 U.S.C. § 2302 

Note 

FAR Council 

determination – 

“Best Interest of 

the Government” 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.226‐4  Notice of 

Disaster or 

Emergency Area 

Set‐Aside 

42 U.S.C. § 5150 

No FAR Council 

Determination  

Notice  Remove from 

FAR 52.212‐5. 

FAR  52.226‐5  Restrictions on 

Subcontracting 

Outside Disaster 

or Emergency 

Area 

42 U.S.C. § 5150 

No FAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.226‐6  Promoting 

Excess Food 

Donation to 

Nonprofit 

Organizations 

42 U.S.C. § 1792 

No FAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.237‐11  Accepting and 

Dispensing of $1 

Coin 

31 U.S.C. 

§ 5112(p)(1) 

No FAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐50   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.239‐1  Privacy or 

Security 

Safeguards 

5 U.S.C. § 552a 

No FAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR  52.242‐5  Payments to 

Small Business 

Subcontractors 

15 U.S.C. 

§ 637(d) (3) 

FAR Council 

Determination ‐ 

Best Interest of 

the Government 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

FAR 52.212‐5. 

FAR   52.247‐64  Preference for 

Privately‐Owned 

U.S.‐Flag 

Commercial 

Vessels  

46 U.S.C. § 1241 

FAC 90‐32 

Requirements 

generally do not apply 

to commercial items.  

Unique requirements 

should not apply to 

supplier’s supply 

chain.. 

Remove from 

FAR 52.212‐5. 

DFARS  252.203‐7000  Requirements 

Relating to 

Compensation of 

Former DoD 

Officials  

Section 847 of FY 

2008 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.203‐7003  Agency Office of 

the Inspector 

General  

41 U.S.C. § 3509  

Specifically refers 

to commercial 

items, but does 

not refer to 

41 U.S.C. 

§§ 1906, 1907. 

Provides contractor 

with information 

related to DFARS 

252.203‐13 . 

Remove from 

DFARS 212.301. 

DFARS  252.203‐7005  Representation 

Relating to 

Compensation of 

Former DoD 

Officials  

Section 847 of FY 

2008 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.204‐7008  Compliance with 

Safeguarding 

Covered Defense 

Information 

Controls  

Section 941 of FY 

2013 NDAA; 

Section 1632 of 

FY 2015 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐51

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.204‐7009  Limitations on 

the Use or 

Disclosure of 

Third Party 

Contractor 

Information  

Section 941 of FY 

2013 NDAA; 

Section 1632 of 

FY 2015 NDAA) 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.204‐7012  Safeguarding 

Covered Defense 

Information and 

Cyber Incident 

Reporting  

Section 941 of FY 

2013 NDAA; 

Section 1632 of 

FY 2015 NDAA 

No DAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.204‐7013  Limitations on 

the Use or 

Disclosure of 

Information by 

Litigation 

Support 

Solicitation 

Offerors  

Section 802 of FY 

2012 NDAA 

DAR Council 

Determination – 

Best Interest of 

the Government 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.204‐7014  Limitations on 

the Use or 

Disclosure of 

Information by 

Litigation 

Support 

Contractors  

Section 802 of FY 

2012 NDAA  

DAR Council 

Determination – 

Best Interest of 

the Government 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.204‐7015  Notice of 

Authorized 

Disclosure of 

Information to 

Litigation 

Support 

Contractors  

Section 802 of FY 

2012 NDAA 

DAR Council 

Determination – 

Best Interest of 

the Government  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.205‐7000  Provision of 

Information to 

Cooperative 

Agreement 

Holders 

10 U.S.C. § 2416 

DAC 91‐9 

Commercial suppliers 

should not be 

required to provide 

information to 

cooperative 

agreement holders.   

Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐52   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.219‐7000  Advancing Small 

Business Growth  

Section 1611 of 

FY 2014 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.219‐7003   Small Business 

Subcontracting 

Plan (DoD 

Contracts) 

15 U.S.C. § 631 

DAC 91‐9 

Rational in 52.219‐9 

applies to this clause 

also. 

Remove from 

DFARS 212.301. 

DFARS  252.219‐7004  Small Business 

Subcontracting 

Plan (Test 

Program) 

Section 821, 

FY2015 NDAA; 

Section 872, FY16 

NDAA 

No DAR Council 

Determination 

Test program; 

alternative approach 

to 252.219‐7003. Only 

applies to contractors 

participating in this 

test program; not 

applicable to 

commercial plans. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7000  Buy American –

Balance of 

Payments 

Program 

Certificate 

41 U.S.C. Chap 83 

No DAR Council 

Determination 

Certificate associated 

with 252.225‐7001. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7001  Buy American 

and Balance of 

Payments 

Program 

41 U.S.C. Chap 83 

DAC 91‐9 

Statute 

specifically refers 

to 41 U.S.C. 

§ 1907  

Clause for DoD use; 

clause provides 

waiver of component 

test for COTS 

products (per 

41 U.S.C. § 1907). 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7006  Acquisition of 

the American 

Flag  

Section 8123 of 

FY 2014 DoD 

Appropriations 

Act; Section 8119 

of FY 2015 DoD 

Appropriations 

Act  

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐53

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.225‐7016  Restriction on 

Acquisition of 

Ball and Roller 

Bearings  

Section 8064 of 

DoD 

Appropriations 

Act for FY 2001  

No FAR Council 

determination 

Statute provides that 

it does not apply to 

commercial 

components; Only 

applies to ball and 

roller bearings 

procured as an end 

item. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7017  Photovoltaic 

Devices  

Section 846 of FY 

2011 NDAA 

No DAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7018  Photovoltaic 

Devices – 

Certificate  

Section 846 of FY 

2011 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7020  Trade 

Agreements 

Certificate 

19 U.S.C. Chap 

245 

No DAR Council 

Determination 

Certificate associated 

with 252.225‐7021. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7021  Trade 

Agreements 

19 U.S.C. Chap 25 

DAC 91‐9 

No DAR Council 

Determination 

Clause for DoD use.  Remove from 

DFARS 212.301. 

DFARS  252.225‐7023  Preference for 

Products or 

Services from 

Afghanistan  

Section 886 and 

892 of FY 2008 

NDAA 

 No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7024  Requirements 

for Products or 

Services from 

Afghanistan  

Section 886 and 

892 of FY 2008 

NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐54   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.225‐7026  Acquisition 

Related to 

Products or 

Services from 

Afghanistan  

Section 886 and 

892 of FY 2008 

NDAA 

 No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7029  Acquisition of 

Uniform 

Components for 

Afghan Military 

or Afghan 

National Police  

Section 826 and 

842 of FY 2013 

NDAA 

 No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7031  Secondary Arab 

Boycott of Israel 

10 U.S.C. § 2410i 

No DAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7035  Buy American –

Free Trade 

Agreements – 

Balance of 

Payments 

Program 

Certificate 

41 U.S.C. Chap 83 

No DAR Council 

Determination 

Certificate associated 

with 252.225‐7036. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7036  Buy American –

Free Trade 

Agreements – 

Balance of 

Payments 

Program 

41 U.S.C. Chap 83 

DAC 91‐9 

Statute 

specifically refers 

to 41 U.S.C. 

§ 1907.  

Clause for DoD use; 

provides component 

test waiver for COTS.  

Remove from 

DFARS 212.301. 

DFARS  252.225‐7037  Evaluation of 

Offers for Air 

Circuit Breakers 

10 U.S.C. § 2534 

No DAR Council 

Determination 

Offeror information 

associated with 

252.225‐7038. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7038  Restriction on 

Acquisition of Air 

Circuit Breakers 

10 U.S.C. § 2534 

DAC 91‐9 

  Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐55

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.225‐7039  Defense 

Contractors 

Performing 

Private Security 

Functions 

Outside the 

United States  

Section 862 of FY 

2008 NDAA; 

Section 853 of FY 

2009 NDAA; 

Sections 831 and 

832 of FY 2011 

NDAA 

No DAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7049  Prohibition on 

Acquisition of 

Commercial 

Satellite Services 

from Certain 

Foreign Entities  

Section 1602 of 

FY 2014 NDAA 

DAR Council 

Determination – 

Best Interest of 

the Government 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7050  Disclosure of 

Ownership or 

Control by the 

Government of a 

Country that is a 

State Sponsor of 

Terrorism 

10 U.S.C. § 2327 

No DAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.227‐7013  Rights in 

Technical Data – 

Noncommercial 

Items 

10 U.S.C. § 2320 

No DAR Council 

Determination 

Applicable to non‐

commercial items. 

Remove from 

DFARS 212.301. 

DFARS  252.227‐7015  Technical Data –

Commercial 

Items 

10 U.S.C. § 2320 

DAC 91‐9 

Clause should be 

rescinded. Clause 

goes beyond the 

intent of FASA and is 

not representative of 

commercial practice 

and represents a 

disincentive for 

commercial firms to 

do business with the 

federal government. 

Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐56   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS   252.227‐7037  Validation of 

Restrictive 

Markings on 

Technical Data 

10 U.S.C. § 2321 

DAC 91‐9 

Clause should be 

rescinded. Clause 

goes beyond the 

intent of FASA and is 

not representative of 

commercial practice 

and represents a 

disincentive for 

commercial firms to 

do business with the 

federal government. 

Remove from 

DFARS 212.301. 

DFARS  252.232‐7003  Electronic 

Submission of 

Payment 

Requests  

Section 1008 of 

FY 2001 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.232‐7010  Levies on 

Contract 

Payments  

Section 887 of PL 

108‐357 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.232‐7011  Payments in 

Support of 

Emergencies and 

Contingency 

Operations  

31 U.S.C. Chap 39 

(Prompt Payment 

Act) 

No DAR Council 

Determination 

Clause is used in 

conjunction with FAR 

52.212‐4.  Suspends 

Prompt Payment Act 

in declared 

emergency to allow 

faster payments. 

Beneficial to support 

of emergency 

response. 

Remove from 

DFARS 212.301. 

DFARS  252.237‐7010  Prohibition on 

Interrogation of 

Detainees by 

Contractor 

Personnel  

Section 1038 of 

FY 2010 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.237‐7019  Training for 

Contractor 

Personnel 

Interacting with 

Detainees  

Section 1092 of 

FY 2005 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐57

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.239‐7009  Representation 

of Use of Cloud 

Computing  

Section 941 of FY 

2013 NDAA; 

Section 1632 of 

FY 2015 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.239‐7010  Cloud Computing 

Services  

Section 941 of FY 

2013 NDAA; 

Section 1632 of 

FY 2015 NDAA 

No DAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.239‐7017  Notice of Supply 

Chain Risk  

Section 806 of FY 

2011 NDAA; 

Section 806 of FY 

2013 NDAA 

DAR Council 

Determination – 

Best Interest of 

the Government 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.239‐7018  Supply Chain Risk   Section 806 of FY 

2011 NDAA; 

Section 806 of FY 

2013 NDAA 

DAR Council 

Determination – 

Best Interest of 

the Government 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.246‐7003  Notification of 

Potential Safety 

Issues  

Section 8143 of 

FY 2004 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.246‐7004  Safety of 

Facilities, 

Infrastructure, 

and Equipment 

for Military 

Operations  

Section 807 of FY 

2010 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 
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Volume 1 of 3     |     January 2018

Page A‐58   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.246‐7008  Sources of 

Electronic Parts  

Section 818 of FY 

2012NDAA & 

Section 817 of FY 

2015 NDAA 

No DAR Council 

determination 

  Remove from 

DFARS 212.301. 

DFARS  252.247‐7003  Pass‐Through of 

Motor Carriage 

Fuel Surcharge 

Adjustment to 

the Cost Bearer  

Section 884 of FY 

2009 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS  252.247‐7022  Representation 

of Extent of 

Transportation 

by Sea 

10 U.S.C. § 2631  

No DAR Council 

Determination 

Representation 

associated with 

252.247‐7024 

Remove from 

DFARS 212.301. 

DFARS  252.247‐7023  Transportation 

of Supplies by 

Sea  

10 U.S.C. § 2631 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

DFARS   252.247‐7024  Notification of 

Transportation 

of Supplies by 

Sea 

46 U.S.C. § 1241 

DAC 91‐9  

Requirements 

generally do not apply 

to commercial items.  

Unique requirements 

should not apply to 

supplier’s supply 

chain. 

Remove from 

DFARS 212.301. 

DFARS  252.247‐7025  Reflagging or 

Repair Work  

Section 315 of FY 

1994 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301 

DFARS  252.247‐7026  Evaluation 

Preference for 

Use of Domestic 

Shipyards – 

Applicable to 

Acquisition of 

Carriage by 

Vessel for DoD 

Cargo in the 

Coastwise or 

Noncontiguous 

Trade  

Section 1017 of 

FY 2007 NDAA 

No DAR Council 

Determination  

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐59

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.247‐7027  Riding Gang 

Member 

Requirements  

Section 3504 of 

FY 2009 NDAA 

No DAR Council 

Determination 

Statute makes no 

mention of 41 U.S.C. 

§ 1906 or § 1907. 

Remove from 

DFARS 212.301. 

   
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐60   |   Volume 1    Appendices

Table F‐7. FAR and DFARS Clauses Derived from Executive Orders and Agency Regulations  

That Are Not Recommended to Apply to Procurements of Commercial Items 

 Table F‐7 lists FAR and DFARS clauses that are derived from an executive order or an agency

regulation, but do not:

 Specifically refer to 41 U.S.C. § 1906 or § 1907/10 U.S.C. § 2375 and provides that,

notwithstanding 41 U.S.C. § 1906 or § 1907/10 U.S.C. § 2375, it is applicable to contracts for the

procurement of commercial items7

;  

 Require that certain articles be bought from American sources pursuant to 10 U.S.C. § 2533a, or

requires that strategic materials critical to national security be bought from American sources

pursuant to 10 U.S.C. § 2533b8

; or

 Otherwise specifically state that it must be applicable to procurements of commercial items.

 The Section 809 Panel recommends that these clauses in Table F‐7 be removed from FAR 52.212‐

5 and DFARS 212.301.  

 43 clauses (19 FAR and 24 DFARS)

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.222‐3  Convict Labor   E.O. 11755 

FAC 90‐32 

EO does not 

mention CI or 

COTS. 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐17  Non‐displacement of 

Qualified Workers 

E.O. 13495 

No FAR Council 

Determination 

EO does not 

mention CI or 

COTS. 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐19  Child Labor –

Cooperation with 

Authorities and 

Remedies 

E.O. 13126 

No FAR Council 

Determination 

EO does not 

mention CI or 

COTS. 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐21  Prohibition of 

Segregated Facilities 

E.O. 11246 

No FAR Council 

Determination 

Statute makes no 

mention of 

41 U.S.C. § 1906 or 

§ 1907. 

Remove from 

FAR 52.212‐5. 

                                                     

7 See 41 U.S.C. § 1906. 41 U.S.C. § 1907, and 10 U.S.C. § 2375 

8 See 10 U.S.C. § 2375 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐61

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.222‐26  Equal Opportunity   E.O. 11246 

FAC 90‐32 

Clause’s primary 

focus largely 

duplicates existing 

law generally 

applicable to US 

businesses.  

Creates unique 

data collection and 

reporting 

requirements; 

results in periodic 

OFCCP audits; 

requires flow 

down to 

subcontractors. 

Requirements are 

generally 

applicable to US 

companies; flows 

down to 

subcontractors.  

Remove from 

FAR 52.212‐5. 

FAR  52.222‐40  Notification of 

Employee Rights 

Under the National 

Labor Relations Act 

E.O. 13496 

No FAR Council 

Determination 

EO does not 

mention CI or 

COTS. 

Remove from 

FAR 52.212‐5. 

FAR   52.222‐50  Combatting 

Trafficking in Persons 

22 U.S.C. Chap  

78/E.O. 13627 

FAR Council 

determination – 

Best Interest of 

the Government  

Statute does not 

mention CI or 

COTS.  FAR clause 

based on E.O.; EO 

does not mention 

CI or COTS. 

 Rule applies to 

COTS except for 

compliance plan 

and certification. 

Remove from 

FAR 52.212‐5. 

FAR  52.222‐54  Employment 

Eligibility Verification 

E.O. 12989 

FAR Council 

determination ‐ 

Best Interest of 

the Government 

E.O. does not 

mention CI or 

COTS; rule 

exempts COTS and 

COTS with minor 

mods, but not 

commercial items.

Remove from 

FAR 52.212‐5. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Page A‐62   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.222‐55  Minimum Wages 

Under Executive 

Order 13658 

E.O. 13658 

No FAR Council 

Determination 

E.O. does not 

mention CI or 

COTS. 

Remove from 

FAR 52.212‐5. 

FAR   52.222‐62  Paid Sick Leave Under 

Executive Order 

13706 

E.O. 13706 

FAR Council 

Determination ‐ 

Best Interest of 

the Government 

EO does not 

mention CI or 

COTS. 

Remove from 

FAR 52.212‐5. 

FAR  52.223‐11  Ozone‐Depleting 

Substances and High 

Global Warming 

Potential 

Hydrofluorocarbons 

E.O. 13693 

No FAR Council 

Determination 

EO does not 

mention CI or 

COTS. 

Remove from 

FAR 52.212‐5. 

FAR  52.223‐12  Maintenance, 

Service, Repair, or 

Disposal of 

Refrigeration 

Equipment and Air 

Conditioners  

E.O. 13693 

No FAR Council 

Determination 

EO does not 

mention CI or 

COTS.   

Remove from 

FAR 52.212‐5. 

FAR  52.223‐13  Acquisition of EPEAT‐

Registered Imaging 

Equipment 

E.O. 13423, 

13514 

No FAR Council 

Determination 

EO does not 

mention CI or 

COTS.  

Remove from 

FAR 52.212‐5. 

FAR  52.223‐14  Acquisition of EPEAT‐

Registered 

Televisions 

E.O. 13423, 

13514 

No FAR Council 

Determination 

EO does not 

mention CI or 

COTS.  

Remove from 

FAR 52.212‐5. 

FAR  52.223‐16  Acquisition of EPEAT‐

Registered Personal 

Computer Products 

E.O.s 13423, 

13514 

No FAR Council 

Determination 

E.O. does not 

mention CI or 

COTS.   

Remove from 

FAR 52.212‐5. 

FAR  52.223‐18  Encouraging 

Contractor Policies to 

Ban Text Messaging 

While Driving 

E.O. 13513 

No FAR Council 

Determination 

E.O. does not 

mention CI or 

COTS.   

Remove from 

FAR 52.212‐5. 
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Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐63

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.223‐20  Aerosols  E.O. 13693 

No FAR Council 

Determination 

E.O. does not 

mention CI or 

COTS.   

Remove from 

FAR 52.212‐5. 

FAR  52.223‐21  Foams  E.O. 13696 

No FAR Council 

Determination  

E.O. does not 

mention CI or 

COTS.   

Remove from 

FAR 52.212‐5. 

FAR  52.225‐13  Restrictions on 

Certain Foreign 

Purchases 

Various E.O.s 

No FAR Council 

Determination 

E.O.s does not 

mention CI or 

COTS.   

Remove from 

FAR 52.212‐5. 

DFARS  252.204‐7011  Alternative Line Item 

Structure  

Defense Finance 

and Accounting 

System working 

group process 

reviews 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.211‐7003  Item Unique 

Identification and 

Valuation  

DoD regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.211‐7006  Passive Radio 

Frequency 

Identification  

DoD Plan for 

Supplier 

Implementation 

of RFID 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.211‐7007  Reporting of 

Government‐

Furnished Property  

Regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.211‐7008  Use of Government‐

Assigned Serial 

Numbers  

Regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 
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Volume 1 of 3     |     January 2018

Page A‐64   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.213‐7000  Notice to Prospective 

Suppliers on Use of 

Past Performance 

Information Retrieval 

System – Statistical 

Reporting in Past 

Performance 

Evaluations  

Regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.215‐7003  Requirement for 

Submission of Data 

Other than Certified 

Cost or Pricing Data – 

Canadian Commercial 

Corporation  

Regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.215‐7004  Requirement for 

Submission of Data 

Other than Certified 

Cost or Pricing Data – 

Modifications – 

Canadian Commercial 

Corporation  

Regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.215‐7007  Notice of Intent to 

Resolicit  

Under Secretary 

of Defense, 

AT&L, 11/3/10 

Memo 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.215‐7008  Only One Offer   Under Secretary 

of Defense, 

AT&L, 11/3/10 

Memo 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301 

DFARS  252.222‐7007  Representation 

Regarding 

Combatting 

Trafficking in Persons  

E.O. 13627 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐65

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.223‐7008  Prohibition of 

Hexavalent 

Chromium  

Under Secretary 

of Defense, 

AT&L, 4/8/09 

Memo 

No DAR Council 

Determination 

  Remove from 

DFARS 

212.301.. 

DFARS  252.225‐7027  Restriction on 

Contingent Fees for 

Foreign Military Sales 

Regulation  

DAC 91‐9 

Contingent fees as 

an “allowable 

cost” is 

inconsistent with 

commercial 

product pricing. 

Remove from 

DFARS 212.301. 

DFARS   252.225‐7028  Exclusionary Policies 

and Practices of 

Foreign Governments 

Regulation  

DAC 91‐9 

Imposition of 

exclusionary 

polices is 

inconsistent with 

sales of 

commercial 

products and the 

suppliers existing 

supply chain. 

Remove from 

DFARS 212.301. 

DFARS  252.225‐7040  Contractor Personnel 

Authorized to 

Accompany U.S. 

Armed Forces 

Deployed Outside the 

United States  

DoD Instruction 

3020.41 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.225‐7043  Antiterrorism/Force 

Prevention Policy for 

Defense Contractors 

Outside the United 

States  

Regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.229‐7014  Taxes – Foreign 

Contracts in 

Afghanistan  

Security and 

Defense 

Cooperation 

Agreement 

Between Islamic 

Republic of 

Afghanistan and 

U.S. 

DAR Council 

Determination – 

Best Interest of 

the Government 

  Remove from 

DFARS 212.301 
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Page A‐66   |   Volume 1    Appendices

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

DFARS  252.229‐7015  Taxes – Foreign 

Contracts in 

Afghanistan (North 

Atlantic Treaty 

Organization Status 

of Forces Agreement)  

Security and 

Defense 

Cooperation 

Agreement 

Between Islamic 

Republic of 

Afghanistan and 

U.S. 

DAR Council 

Determination – 

Best Interest of 

the Government  

  Remove from 

DFARS 212.301. 

DFARS  252.232‐7006  Wide Area Workflow 

Payment Instructions  

Regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS   252.232‐7009  Mandatory Payment 

by Government‐wide 

Commercial Purchase 

Card  

Principal Deputy 

Undersecretary 

of Defense for 

Acquisition and 

Technology, 

10/2/98 Memo 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.232‐7014  Notification of 

Payment in Local 

Currency 

(Afghanistan) 

Regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.243‐7002  Requests for 

Equitable Adjustment 

Regulation  

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 

DFARS  252.244‐7000  Subcontracts for 

Commercial Items  

Regulation  

DAC 91‐9  

No longer 

necessary.  Clauses 

specifically state if 

the requirement 

flows down. 

Remove from 

DFARS 212.301. 

DFARS  252.247‐7028  Application for U.S. 

Government Shipping 

Documentation / 

Instruction  

Regulation 

No DAR Council 

Determination 

  Remove from 

DFARS 212.301. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐67

Table F‐8. FAR Clauses Recommended for Relocation to FAR 52.212‐4 or Part 12 

 Table F‐8 lists FAR clauses that the Panel recommends be relocated to 52.212‐4 or Part 12.

 7 FAR clauses

FAR/DFARS  Clause  Title  Basis  Comments  Recommended 

Action 

FAR  52.232‐29  Terms for Financing of 

Purchases of 

Commercial Items  

Regulation 

FASA 

Optional term that 

may be used if 

commercial 

financing will be 

used. 

Move to FAR 

52.212‐4. 

FAR  52.232‐30  Installment Payments 

for Commercial Items  

Regulation 

FASA 

Optional term that 

may be used if 

commercial 

financing will be 

used. 

Move to FAR 

52.212‐4. 

FAR  52.232‐33  Payment by Electronic 

Funds Transfer – 

System for Award 

Management 

31 U.S.C. § 3332 

FAR Council 

Determination ‐

Best Interest of 

the Government 

Administrative; 

Similar in intent to 

existing FAR 

52.212‐4(g)(3), 

Electronic Funds 

Transfer (EFT). 

Move to FAR 

52.212‐4. 

FAR  52.232‐34  Payment by Electronic 

Funds Transfer – 

Other than System for 

Award Management 

31 U.S.C. § 3332 

FAR Council 

Determination ‐ 

Best Interest of 

the Government 

Administrative; 

Similar in intent to 

existing FAR 

52.212‐4(g)(3), 

Electronic Funds 

Transfer (EFT). 

Move to FAR 

52.212‐4. 

FAR  52.232‐36  Payment by Third 

Party 

31 U.S.C. § 3332 

FAR Council 

Determination ‐ 

Best Interest of 

the Government 

Administrative; 

Similar in intent to 

existing FAR 

52.212‐4(g)(3), 

Electronic Funds 

Transfer (EFT). 

Move to FAR 

52.212‐4. 

FAR  52.233‐3  Protest After Award   31 U.S.C. § 1558 

FAC 90‐32  

Advises contractor 

regarding protest 

procedure. 

Move to FAR 

52.212‐4. 

FAR  52.233‐4  Applicable Law for 

Breach of Contract 

Claim 

Regulation  Notice regarding 

applicable law for 

breach of contract. 

Move to FAR 

52.212‐4. 

   
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Appendices    Volume 1   |   Page A‐69

APPENDIX G: ACRONYM LIST 

Acronym/Term Definition

A&AS Advisory and Assistance Services

ACAT Acquisition Category  

ADV Auditable Dollar Value

AFWay Air Force Way system

AICPA American Institute of Certified Public Accountants

AMC Army Materiel Command  

ARL U.S. Army Research Laboratory

ATP Authority to Proceed

BAA Broad Agency Announcement

BCAC Business Capability Acquisition Cycle  

BCL Business Capability Lifecycle  

BEA Business Enterprise Architecture  

BMA Business Mission Area  

BMMP Business Management Modernization Program  

BPR Business Process Reengineering  

BTA Business Transformation Agency  

CAAS Contracted Advisory and Assistance Services

CAS Cost Accounting Standards

CASB CAS Board

CBO Congressional Budget Office

CCA Clinger–Cohen Act  

CICA Competition in Contracting Act

CIO Chief Information Officer

CMF Cyber Mission Force

CMO Chief Management Officer

CO Contracting Officer

CON‐IT Contracting‐Information Technology

COSO Committee of Sponsoring Organizations

COTR Contracting Officer Technical Representative

COTS Commercially Available Off‐The‐Shelf

CPI Cost Performance Index

CRAG Contractor Risk Assessment Guide

DASD Deputy Assistant Secretary of Defense

DASD (MIBP) Deputy Assistant Secretary of Defense for Manufacturing and Industrial Base

Policy
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Page A‐70   |   Volume 1    Appendices

Acronym/Term Definition

DASD(C3CB) Deputy Assistant Secretary of Defense, Command, Control, and  

Communication (C3), Cyber, and Business Systems

DASD(DT&E) Deputy Assistant Secretary of Defense for Development Test and Evaluation

DAU Defense Acquisition University

DBB Defense Business Board

DBC Defense Business Council  

DBS Defense Business System   

DBSAE Defense Business Systems Acquisition Executive  

DBSMC Defense Business Systems Management Committee  

DCAA Defense Contract Audit Agency

DCAM Defense Contract Audit Manual

DCAS Defense Contract Administration Service

DCMA Defense Contract Management Agency

DCMO Deputy Chief Management Officer  

DDR&E Director Defense Research and Engineering

DevOps Development Operations

DFAR Defense Federal Acquisition Regulation

DFARS DFAR Supplement

DISA Defense Information Systems Agency

DITIP DoD IT Investment Portal

DITPR DoD Information Technology Portfolio Repository

DIUx Defense Innovation Unit Experimental

DLA Defense Logistics Agency

DLAD DLA Directive

DNI Director of National Intelligence

DoD Department of Defense

DODD DoD Directive

DoDI DoD Instruction

DoDIG Department of Defense Inspector General

DOE Department of Energy

DOT&E Director of Operational Test and Evaluation

DPAP Defense Procurement and Acquisition Policy

DSMC Defense System Management College

EC&P Emerging Capability and Prototyping

ERP Enterprise Resource Planning  

EVM Earned Value Management
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Acronym/Term Definition

FAR Federal Acquisition Regulation

FARA Federal Acquisition Reform Act of 1995

FASA Federal Acquisition Streamlining Act of 1994

FCTMA Foreign Defense Critical Technology Monitoring and Assessment

FMMP Financial Management Modernization Program

FMR Financial Management Regulation  

FPDS Federal Procurement Data System

FRESA Federal Reports Elimination and Sunset Act of 1995

FS Functional Strategies

FY Fiscal Year  

FYDP Future Years Defense Program  

GAGAS Generally Accepted Government Auditing Standards

GAO Government Accountability Office

GFEBS General Fund Enterprise Business System  

HASC House Armed Services Committee

HEL‐JTO High Energy Laser Joint Technology Office

HSI Human Systems Integration

IBF Integrated Business Framework

ICAT Integrated Cost Analysis Team

ICE Incurred Cost Electronic

ICFR Internal Controls over Financial Reports

I‐Corps Innovation Corps

IDIQ Indefinite Delivery, Indefinite Quantity

IG Inspector General

IPA Independent Public Accountant

IPPS‐A Integrated Personnel and Pay System for the Army  

IRB Investment Review Board  

IT Information Technology

J&A Justification and Approval

JDETO Joint Directed Energy Transition Office

JTOH Joint Technology Office on Hypersonics

KBS Knowledge‐Based Services

LMP Logistics Modernization Program  

MANPRINT Manpower and Personnel Integration

MC4 Medical Communications for Combat Casualty Care

MCTL Military Critical Technologies List
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

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Page A‐72   |   Volume 1    Appendices

Acronym/Term Definition

MCTP Militarily Critical Technologies Program

MDA Milestone Decision Authority  

MDA Missile Defense Agency

MDAP Major Defense Acquisition Program

MDD Materiel Development Decision

MIBP Manufacturing and Industrial Base Policy

MOU Memorandum of Understanding

MRTFB Major Range and Test Facility Base

MSAP Major Satellite Acquisition Program

NAICS North American Industry Classification System  

NASA National Aeronautics and Space Administration

NDAA National Defense Authorization Act

NRL U.S. Naval Research Laboratory

NSF National Science Foundation

NSWC Naval Systems Warfare Center

O&M Operations and Maintenance  

OEP Organizational Execution Plan

OFPP Office of Federal Procurement Policy

OMB Office of Management and Budget

OSBP Office of Small Business Programs

OSD Office of the Secretary of Defense

OTA Other Transaction Authority

OTT Office of Technology Transition

P2P Procure to Pay

PARCA (Office of) Performance Assessments and Root Cause Analysis

PARCA Program Assessment and Root Cause Analysis

PE/BLI Program Element/Budget Line Item

PM Program Manager  

PMI Project Management Institute

POM Program Objective Memorandum  

PPBE Planning, Programming, Budgeting, and Execution  

PrCB Printed Circuit Boards

PSC Product Service Code

PTAC Procurement Technical Assistance Center

PTAP Procurement Technical Assistance Program

QDR Quadrennial Defense Review
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 1 of 3     |     January 2018

Appendices    Volume 1   |   Page A‐73

Acronym/Term Definition

QSM Quantitative Software Management (a software company)

R&D Research and Development

R/R&D Research/Research and Development

RCAS Reserve Component Automation System

RDT&E Research, Development, Test and Evaluation  

RICEFW Reports, Interfaces, Conversions, Extensions, Forms, and Workflows  

RIF Rapid Innovation Fund

ROI Return on Investment

S&T Science and Technology

SAM Service Acquisition Mall

SAP A software company

SASC Senate Armed Services Committee

SBA Small Business Administration

SBDC Small Business Development Center

SBIR Small Business Innovation Research

S‐CAT Service Acquisition Category

SEAPRINT Systems Engineering, Acquisition, and Personnel Integration

SOX Sarbanes–Oxley Act

SPI Schedule Performance Index

STTR Small Business Technology Transfer

T&E Test and Evaluation

TINA Truth in Negotiation Act

TMIP‐J Theater Medical Information Program‐Joint

TRMC Test Resource Management Center

TRP Technology Reinvestment Program

U.S.C. United States Code

UAS Unmanned Aerial System

UAV Unmanned Aerial Vehicle

USD(A&S) Under Secretary of Defense for Acquisition and Sustainment

USD(AT&L) Under Secretary of Defense for Acquisition, Technology and Logistics

USD(R&E) Under Secretary of Defense for Research and Engineering

USSOCOM U.S. Special Operations Command

WSARA Weapons System Acquisition Reform Act

   
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