Report of the Advisory Panel on 

Streamlining and Codifying 

Acquisition Regulations

Volume 3 of 3

January 2019
   
Report of the Advisory Panel on 

Streamlining and Codifying 

Acquisition Regulations 

Volume 3 of 3 

January 2019 

Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Table of Contents Volume 3 | Page iii 

Table of Contents 

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

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

RECOMMENDATIONS 

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

 Implementation Details 

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

 Implementation Details including proposed changes to DoDD 5000.01 

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

 Implementation Details 

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

 Implementation Details 

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

 Implementation Details 

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

 Implementation Details including a Professional Practice Guide 

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

 Implementation Details 

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

 Implementation Details 

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

 Implementation Details 

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

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

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

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

 Implementation Details 

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

 Implementation Details 

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

 Implementation Details 

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

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

APPENDICES 

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

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

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

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

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

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

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

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

Volume 3 of 3 | January 2019 

Page iv | Volume 3 Table of Contents 

LIST OF FIGURES 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Figure 4-16. Volume of MOCAS Interest Payments to Businesses in FY 2017 ........................ 247 
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Table of Contents Volume 3 | Page v 

LIST OF FIGURES (CONTINUED) 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page vi | Volume 3 Table of Contents 

LIST OF TABLES 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

differ slightly from the data in this report. 
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Table of Contents Volume 3 | Page vii 

PHOTO CREDITS 

All photos from www.defense.gov. 

Page EX-1 Photo by Lance Cpl. Audrey Rampton 

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

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

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

Page 7 Photo by Ashley Keasler 

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

Page 49 Photo by Cpl. Dylan Chagnon 

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

Page 133 Photo by Airman 1st Class Tristan Viglan 

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

Page 173 Photo by Army Spc. Liem Huynh 

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

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

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

Page 319 Photo by Master Sgt. Caycee Watson 

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

Page 389 Photo by Charles Rosemond 

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

Page 453 Photo by Seaman Raymond Maddocks 

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

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

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

Page 499 Photo by Army Sgt. Zackary Nixon 

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

Page 505 Photo by Staff Sgt. Daniel Wetzel 

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

Page 511 Photo by Staff Sgt. Amy Picard 

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

Page 515 Photo by Maj. Thomas Cieslak 

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

Page 523 Photo by 1st Lt. Leland White 

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

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

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

Last Page Photo by Master Sgt. Matt Hecht 

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

 
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Section 6 

Streamlining and Improving Compliance 

In some cases, DoD’s procurement processes and procedures have become 

outdated, creating barriers to entry for prospective industry partners. In other cases, 

compliance has become overzealous and needs to be recalibrated to honor the 

intent of the law in a more efficient way. 

RECOMMENDATIONS

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

chain to decrease cost, prevent delays, remove barriers, and encourage innovation 

available to the Military Services. 

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

requirements documents. 

Recommendations continued on following page.
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RECOMMENDATIONS

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

suppliers by (a) adopting exceptions for DoD to domestic purchasing preference 

requirements for commercial products, and (b) adopting a public interest exception and 

procedures for the Berry Amendment identical to the ones that exist for the Buy 

American Act. 

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

Public Contracts Act, and the Services Contract Act to $2 million. 

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

help guide adjudicative bodies in resolving protests consistent with said purpose and 

establish a standard by which the effectiveness of protests may be measured. 

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

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

decision within 100 days of ordering a procurement be delayed. 

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

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

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

required, a redacted source selection decision document and the technical evaluation of 

the vendor receiving the debriefing. 

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

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

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

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

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

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

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

accounting systems based on seven system criteria. 

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

generally accepted auditing standards. 

 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Streamlining and Improving Compliance Volume 3 | Page 321 

INTRODUCTION 

The U.S. government is not a typical commercial client; complying with its many layers of 

requirements is burdensome for both the government and contractors. Federal procurement law, 

federal acquisition regulations, and DoD’s internal regulations combine to create a labyrinth of 

challenges to the acquisition workforce and to the contracting community. Laws such as the Truth in 

Negotiations Act of 1964, the Contract Disputes Act of 1978, the Competition in Contracting Act of 1984 

(CICA), and the Federal Acquisition Streamlining Act of 1994 were enacted to establish fairness and to 

mitigate risks between the government and industry. In some cases, federal laws promote or protect a 

segment of the industrial base that may be disadvantaged or technologically critical to national 

security. At their heart, federal procurement laws help to establish functional relationships between 

government and industry. 

Unlike the decluttering efforts in other sections of this report, the recommendations in Section 6 do not 

seek to repeal any federal procurement laws. The recommendations in this section acknowledge that 

for DoD to be a better interagency colleague and a better partner with industry, DoD must comply with 

these laws and regulations. In some cases, DoD’s processes and procedures have become outdated, 

creating barriers to entry for prospective industry partners. In other cases, compliance has become 

overzealous and needs to be recalibrated to honor the intent of the law in a more efficient way. The 

recommendations in Section 6 aim to streamline and improve DoD’s execution of compliance. 

This section addresses a variety of topics under the compliance umbrella. Recommendations 62 and 63 

address subcontracting clauses that are flowed down from prime contractors to their suppliers. These 

recommendations seek to streamline the list of mandatory flow down clauses while continuing to 

address supply-chain risk mitigation. Recommendations 64 through 65 focus on socioeconomic policies 

such as domestic purchasing preferences (e.g., the Buy American Act and the Berry Amendment) and 

labor-related laws. In both cases, the Section 809 Panel recommends that the application of these laws 

to DoD be updated to reflect current market realities and cost thresholds. Recommendations 66 

through 69 focus on bid protests in the procurement system. These recommendations clarify the 

purpose of bid protests and establish more streamlined practices for the two main adjudicative bodies, 

the Government Accountability Office (GAO) and the Court of Federal Claims (COFC). 

Recommendation 70 addresses authorizing DoD to develop a replacement approach to the Inventory of 

Contracted Service (ICS). DoD has created “complicated, customized information management systems 

in response to 10 U.S.C. § 2330a,” the statue mandating contractor service data be collected and 

reported. Reducing this zealous practice would reduce burdens on both DoD and contractors. Finally, 

Recommendations 71 through 73 relate to adoption of an Audit Professional Practice Guide, an 

attachment to this section (see Attachment 6-1). 
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RECOMMENDATIONS 62 AND 63 SHARE THE COMMON THEME: 

STREAMLINING THE LIST OF MANDATORY SUBCONTRACTING FLOW DOWN CLAUSES 

WHILE CONTINUING TO ADDRESS SUPPLY-CHAIN RISK MITIGATION 

The FAR, DFARS, and other agency FAR supplements contain hundreds of contract clauses with a 

wide range of applicability based on characteristics of the contract. These clauses are incorporated in 

government contracts to implement laws, regulations, Executive Orders (EOs), and other 

administrative contract requirements to mitigate risks that may or may not be unique to the contract or 

order. In addition to the basic requirements, many contract clauses contain specific provisions 

requiring the contractor to flow down the terms of the clause to its subcontracts. 

DoD attempts to mitigate risks across its supply chain by requiring FAR and DFARS clauses to be 

flowed down to agreements between prime contractors and their subcontractors. In the current 

environment, certain risks are especially sensitive, such as the areas of counterfeit parts, information 

security, and cybersecurity. Vulnerabilities along the supply chain are often difficult to detect and can 

compromise government networks and operations. In 2015, Chinese attackers used a contractor’s 

credentials to install malware on the Office of Personnel Management’s network that remained 

unnoticed in the system 14 months.1 DoD imposes stringent regulations on contractors and 

subcontractors to detect security risks and take mitigating action when necessary. 

FAR and DFARS clauses are generally included in contracts based on the prescriptive language in the 

FAR and DFARS and implemented through the clause logic in the contract writing systems. The 

contract writing system assigns applicability of clauses to each contract based on attributes of the 

procurement (e.g., contract type, award value). The clauses selected by the contract writing system are 

typically listed in the contract, often only by reference with no distinct markings in the prime contract 

to indicate whether the clauses flow down to subcontracts. To determine which contract clauses are 

required to flow down to subcontractors, the prime or upper-tier subcontractor must read the text of 

each clause and determine whether each one is appropriate to flow down to subcontracts on a clauseby-clause basis. Industry representatives told the Section 809 Panel this practice rarely happens because 

the purchasing functions at the higher tiers had such a large volume of transactions that clause-byclause analysis was impractical or that other business reasons made it prudent for them to value having 

consistent terms over tailoring terms for each transaction.2

Furthermore, DFARS 252.244-7001, Contractor Purchasing System Administration, requires that 

contractor purchasing systems “ensure that all applicable purchase orders and subcontracts contain all 

flow down clauses.” Contractors’ proficiency in flowing down the correct contract clauses under the 

correct circumstances is considered by the government to be a critical capability of a contractor’s 

purchasing system and may be evaluated as part of a Contractor Purchasing System Review (CPSR). 

The Defense Contract Management Agency (DCMA) is responsible for conducting CPSRs. Failing a 

 

1

 GAO, Weapon Systems Cybersecurity: DoD Just Beginning to Grapple with Scale of Vulnerabilities, GAO-19-128, accessed October 24, 

2018, https://www.gao.gov/assets/700/694913.pdf. 

2

 Industry representatives said this is particularly relevant when either (a) they have many transactions with the government, and they 

use the same subcontractors to support each, so it’s convenient to have the terms and conditions with “vendor X” always the same or 

(b) when they have many subcontracts/subcontractors on the same effort, and it is more convenient to have the same terms and 

conditions for every subcontractor on the effort. 
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Streamlining and Improving Compliance Volume 3 | Page 323 

DCMA CPSR could negatively affect contractors’ cash flow by requiring contract payments to be 

withheld, or even preventing contractors from securing future government business. 

The FAR and DFARS flow-down clauses introduce numerous terms and conditions with specific 

compliance requirements that are additive to, and inconsistent with, traditional terms and conditions 

used to buy products and services in the commercial market place.3 Most commercial transactions in 

the United States are governed by Uniform Commercial Code. The additional burden of FAR and 

DFARS clauses on commercial products and services purchases is often unnecessary, ineffective, and 

may limit competition to only those contractors that have traditionally sold goods and services to the 

government. Work currently being performed by regulatory task forces within DoD to reduce the 

regulatory burdens placed on contractors should continue in an effort to reduce the burden on the 

entire DoD supply chain.4 In addition, DoD must shift its focus away from creating contract clauses 

that should only apply when DoD is procuring specific products or services, because they end up 

getting overly applied to all fixed price contracts or all contracts over a certain dollar amount, unless 

those clauses relate to managing the risks associated with the transactions. Requirements owners and 

program managers have the requisite expertise to know when, for example FAR 52.246-11, HigherLevel Contract Quality Requirement, would be required in a contract. These clauses could be 

standardized for all information technology procurements or all janitorial services contracts within a 

department or agency. This approach would provide greater discretion than basing inclusion off of 

whether a contracting officer is buying a supply or a service, the contract type being used, or the 

contract dollar value. 

Although the number of FAR and DFARS clauses applicable to DoD contracts is excessive and should 

be reduced, these recommendations do not call for comprehensive elimination of clauses or the flow 

down requirements. There are, however, several areas that should be addressed relative to flow-down 

clauses that will help reduce the burden on prime contractor supply chains and increase the proficiency 

with which clauses are selected for flow down. 

Both government agencies and contractors have struggled to be precise in the inclusion of contract 

clauses in DoD contracts and resultant subcontracts. The complex and ever-changing nature of FAR 

and DFARS flow-down clauses stymy contractor purchasing systems and supply chains, which 

increases costs, creates delays, and may erect barriers that limit innovation available in the supply 

chain. 

 

3

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

November 9, 2018, https://www.gao.gov/assets/690/686012.pdf. 

4

 Enforcing the Regulatory Reform Agenda, Executive Order 13777 (2017), requires Executive Branch departments and agencies to 

appoint a regulatory reform officer to oversee implementation of regulatory reform initiatives and policies and establish a Regulatory 

Reform Task Force to review and evaluate existing regulations and make recommendations to the agency head regarding their repeal, 

replacement, or modification, consistent with applicable law. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Page 324 | Volume 3 Streamlining and Improving Compliance 

RECOMMENDATIONS 

Recommendation 62: Update the FAR and DFARS to reduce burdens on DoD’s 

commercial supply chain to decrease cost, prevent delays, remove barriers, 

and encourage innovation available to the Military Services. 

Problem 

FAR and DFARS contract clauses that are required to be flowed down from prime contractors to 

subcontractors, especially commercial subcontractors, are excessive and create additional burdens on 

DoD’s supply chain, the effects of which increase cost, create delays, create barriers and limit 

innovation available to the Military Services 

Background 

FAR and DFARS clauses applicable to DoD contracts incorporate terms and conditions into agreements 

between DoD and prime contractors that are intended to protect a broad set of government interests. 

Similarly, transactions in the commercial marketplace are governed by terms and conditions 

established between buyers and sellers to protect the parties’ interests. Depending on the industry, the 

goods or services exchanged, and the prime contractor’s leverage over potential subcontractors, terms 

and conditions may be driven by either the buyer or the seller and are often subject to negotiation 

between the parties. The terms and conditions of sale are established to mitigate risk between the 

interested parties and to govern disputes. 

The FAR and DFARS flow down clauses create contract requirements, many of which are unique to 

doing business with the government, that often erect barriers for businesses unfamiliar with the 

government’s unique terms and requirements. In a 2017 report, GAO found that 11 out of 12 selected 

nontraditional companies in its review cited “Government-specific contract terms and conditions” as a 

challenge to doing business with DoD.5 The report also cited certain nontraditional company officials 

who indicated the number of unique clauses and the cost of compliance with the associated 

requirements is a substantial part of the challenge to doing business with the government.6

Discussion 

Because most of the innovative, nontraditional firms DoD says it needs to attract are operating in the 

commercial marketplace, it is appropriate to look at government-unique flow-down clauses that might 

differ from commercial practice. A substantial number of FAR and DFARS clauses either explicitly flow 

down to subcontracts for commercial items or are not explicitly exempt from being flowed down to 

subcontracts for commercial items. 

Currently, there are two primary contract clauses intended to limit the number of additional terms and 

conditions that flow down from prime contract to subcontract. DFARS 252.244-7000, Subcontracts for 

Commercial Items, advises the contractor that it is not required to flow down any DFARS contract 

clause to its subcontracts for commercial items unless so specified in the particular clause. 

 

5

 GAO, Military Acquisitions: DoD is Taking Steps to Address Challenges Faced by Certain Companies, GAO-17-644, 9, accessed 

November 9, 2018, https://www.gao.gov/assets/690/686012.pdf. 

6

 Ibid, 15–16. 
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Volume 3 of 3 | January 2019 

Streamlining and Improving Compliance Volume 3 | Page 325 

FAR 52.244-6, Subcontracts for Commercial Items, instructs prime contractors to limit flowdown to 

19 specified clauses, as applicable, in subcontracts for commercial items. FAR 52.244-6 is prescribed for 

inclusion in solicitations and prime contracts other than those for commercial items. 

Recommendation 2, found in the Volume 1 Report, effectively removes all government commercial 

buying clauses from FAR 52.212-4(r), 52.212-5, and DFARS 212.301 because the statues from which 

those clauses derived did not explicitly state that the statute applied to commercial buying. Based on 

this same analysis, the clauses removed from 52.212-4(r), 52.212-5, and DFARS 212.301 should also be 

removed from FAR 52.244-6 as appropriate and necessary to achieve the intended outcome of 

unencumbering DoD’s access to commercial innovation. In addition to the clauses identified in 52.244-6 

as flowing down to commercial subcontracts, a number of other FAR clauses have been identified as 

flowing down to commercial subcontractors.7 

DFARS 252.244-7000 does not specifically identify the DoD clauses that are required to be flowed down 

to subcontracts for commercial items. The clause instead relies on the prime contractors or higher-tier 

subcontractor to determine flow down applicability on a clause-by-clause basis. As mentioned above, 

the government contracting environment (e.g., fear of negative CPSR findings, high transaction 

volumes, primes’ desire for consistency) leads to prime contractors either taking a very conservative 

approach to tailoring flow downs, or not tailoring at all. These approaches may result in improper 

compliance requirement burdens on the supply chain. Updating DFARS 252.244-7000 to include all of 

the required commercial item flow down provisions, similar to FAR 52.244-6, would provide a single 

point of reference for contractors to determine which clauses flow down. These changes only make a 

positive effect where the prime contractor is entering into subcontracts for commercial products or 

services. 

The Section 809 Panel also addresses these concerns in Recommendation 92 found in this report, and 

the recent actions Congress has taken in Section 849 of the FY 2018 NDAA and Section 839 of the 

FY 2019 NDAA. Those sections of law require a review and report by the FAR and DAR Councils of the 

efficacy of the defense-unique clauses applied to commercial contracts and subcontracts regardless of 

the limitations in 41 U.S.C. § 1906 and 10 U.S.C. § 2375. Relying on the FAR and DAR councils to 

provide that review, without providing additional direction, will not resolve the problems associated 

with the proliferation of government and defense-unique clauses applicable to commercial buying and 

flowed down to commercial subcontracts. 

Conclusions 

For DoD and DoD prime contractors to be able to access innovative commercial solutions, the 

Section 809 Panel’s Recommendations 2 and 92 must be implemented in addition to this 

recommendation. Congress must establish stricter standards that the FAR and DAR Councils must 

follow in determining what government and defense-unique clauses flow down to commercial 

subcontracts associated with noncommercial prime contracts. In addition, the FAR and DAR Councils 

should revise FAR Clause 52.244-6, Subcontracts for Commercial Items, to include only those clauses 

that have been determined necessary for flow down to subcontracts for commercial items based on 

 

7

 See Robert V. Lieg, A Study on the Applicability for Federal Acquisition Regulation (FAR) Clauses to Subcontracts Under Prime Defense 

and NASA Contracts, (Arlington, VA: National Defense Industrial Association, 2017). 
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Congress’s direction. Based on the analysis in the Volume 1 Report, no FAR clauses should flow down to 

subcontracts for commercial items, and 52.244-6 should be updated to reflect the removal of all 

applicable flow downs unless Congress explicitly directs that they flow down. Similarly, for DFARS 

252.244-7000, Subcontracts for Commercial Items, language and flow down requirements should be 

updated and aligned with the structure and content of FAR 52.244-6 to provide a single point of 

reference for defense-unique clauses intended to flow down to subcontracts for commercial items. Any 

clauses added to 52.244-6 or 252.244-7000 should be the only additional terms and conditions necessary 

to protect the government’s interest relative to the relationship between prime contractors and 

subcontractors for the majority of commercial item subcontracts. This recommendation does not 

change prime contractors’ responsibility to evaluate contract risks and include or flow down terms that 

the prime determines are appropriate to allocate or mitigate those risks. 

Implementation 

Legislative Branch 

 Amend 41 U.S.C. § 1906(c) to require the limited number of FAR clauses that flow down to 

commercial subcontracts to be consolidated into one clause and prohibit federal agencies from 

requiring any other FAR clauses be flowed down to commercial subcontracts. 

 Amend 10 U.S.C. § 2375(c) to require the limited number of DFARS clauses that flow down to 

commercial subcontracts to be consolidated into one clause and prohibit DoD from requiring 

any other DFARS clauses be flowed down to commercial subcontracts. 

Executive Branch 

 Strike all mandatory flow-down clauses from FAR 52.244-6 and DFARS 252.244-7000 consistent 

with the Section 809 Panel’s Recommendations 2 and 92, and consolidate all clauses required to 

be flowed down to commercial subcontractors into these two clauses. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 6. 

Implications for Other Agencies 

 Changes to FAR clauses will improve commercial buying across all federal government 

agencies. 

Recommendation 63: Create a policy of mitigating supply chain and 

performance risk through requirements documents. 

Problem 

Supply chain risk issues have grown in importance as the U.S. supply base has grown increasingly 

global. The DFARS system was not designed to develop policy; it was designed to deploy and 

implement policy that has already been developed. 
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Background 

Supply chain risk issues have grown in importance as the U.S. supply base has grown ever more 

global. Even a cursory review of open-source media makes clear that rivals and enemies exploit those 

risks. Vulnerabilities to espionage, attack, and political embarrassment will grow in the future, unless 

the United States develops and rapidly implements effective policy countermeasures. The DFARS 

system was designed to implement policy from statute and originated from DoD or other agencies if 

those policies apply to DoD. The DFARS is an ineffective tool when DoD tries to use it to develop 

solutions. It is slow, and it lies in the jurisdiction of the Defense Pricing and Contracting office under 

USD(A&S), which does not have the expertise or authority to drive change in the technical, 

requirements, and program execution communities. 

Seeking to understand the effects of FAR and DFARS clauses on DoD’s supply chain, the Section 809 

Panel identified more than 160 FAR and DFARS clauses that include subcontract flow down clauses. 

Not all flow down contract clauses are included in every government procurement or apply to every 

subcontract. Yet clauses are more likely to be over applied to prime contracts and subcontracts due to 

the complexity of determining applicability, especially when applicability is based primarily on the 

risks associated with what is being procured and not risks associated with the business arrangement. 

The volume of contract clauses alone creates a real or perceived barrier to entry for new government 

contractors and subcontractors. Many flow down clauses for which applicability is based on the risks 

associated with what is being procured should be addressed in specific contract requirements or 

statements of work. 

Discussion 

Numerous contract clauses address subject matter that should be addressed individually in a contract’s 

statement of work or requirements document as opposed to being included in broadly applied contract 

clauses. The substantial volume of contract clauses flowed to prime contractors and subsequently 

throughout the supply chain, is driven, in part, by over application of clauses for which requirements 

were intended to protect the government’s interest. 

One traditional defense contractor explained that nontraditional companies they seek to subcontract 

with will often be handed a subcontract containing all or most of the 160-plus clauses included in the 

prime contract. This situation occurs because the prime contractor is leery to determine a clause does 

not need to be flowed down. On the receiving end, the nontraditional companies do one of three 

things: (a) accept the business opportunity without fully understanding all of the compliance 

requirements, (b) hire lawyers or consultants who can decipher and explain what they must do to meet 

all the compliance requirements, or (c) they refuse the subcontract. When companies accept the 

subcontracting opportunity without understanding what all of the clauses require, the risks DoD is 

most interested in managing are lost in the sheer volume of clauses. In the other two situations, 

opportunities are lost because only certain small or innovative nontraditional companies will have the 

capital to expend on lawyers or consultants that can interpret what the contract requires. 

Instead of addressing requirements on a contract-by-contract basis, the government has taken a blanket 

approach to requirements, imposing compliance requirements that may not meet the intended purpose 

under the circumstances of the procurement, or may be altogether unnecessary for a particular 

procurement. DoD does not have a system for directing risk mitigation requirements across the 
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enterprise, except through the DFARS. Certain organizations within DoD, like the Air Force Installation 

and Mission Support Center, have developed standardized performance work statements for services 

acquired across the agency. In addition, procurement of certain products has been centralized through 

organizations like the Defense Logistics Agency and Defense Information Systems Agency. These 

organizations have the capacity and experience in developing and implementing policies applicable to 

requirements for the entire enterprise. 

Conclusions 

The panel acknowledges Congress’ ongoing work in this area as a step in the right direction, 

specifically the passage of S. 3085, the Federal Acquisition Supply Chain Security Act of 2018, which 

mandates the creation of a Federal Acquisition Supply Chain Security Council. DoD should develop a 

system for directing risk mitigation requirements across the enterprise outside the DFARS. DoD needs 

a Supply Chain Assurance Council that can bring appropriate technical expertise to bear quickly to 

develop policy solutions. It also needs an execution arm that can deploy policy and oversee its 

implementation. Congress should amend Sec. 807 of the FY 2018 NDAA to incorporate this 

recommendation in its effort to enhance supply chain scrutiny. 

Implementation 

Legislative Branch 

 Amend Section 807 of the FY 2018 NDAA to require DoD implement tools for supply chain risk 

mitigation policies through the requirements generation process rather than through the DAR 

Council process. 

Executive Branch 

 Require the Secretary of Defense develop tools and processes for implementing supply chain 

risk mitigation policies through the requirements generation process rather than through the 

DAR Council process. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 6. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

RECOMMENDATIONS 64 AND 65 SHARE THE COMMON THEME: 

UPDATE APPLICATION OF SOCIOECONOMIC POLICIES AND LABOR-RELATED 

LAWS TO REFLECT CURRENT MARKET REALITIES AND COST THRESHOLDS 

Unlike the private sector, the federal procurement system must integrate a range of socioeconomic 

objectives and policies with the economic trade-offs of cost, schedule, and performance. Socioeconomic 

policies are intended to advance a variety of social and political goals, from standardizing labor and 
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environmental practices to encouraging market participation by small or disadvantaged business 

categories. Socioeconomic policies are created through a series of statutes, EOs, and regulations, many 

of which are decades old. Within DoD acquisition, these policies are implemented through the FAR 

and the DFARS. 

In incorporating socioeconomic provisions into its purchases, the federal procurement system becomes 

less efficient than the private sector. The process is regularly called burdensome and confusing, with 

conflicting regulations, numerous acquisition cost thresholds that trigger the applicability of different 

provisions, and often entirely separate rules for DoD procurements. Overall, the consequences of an 

inefficient federal procurement system are increased costs, delays, and potential exclusions of new, 

innovative entrants. These consequences are typically amplified in DoD acquisition due to sheer 

volume and additional national security implications. Socioeconomic policies have been identified as 

impeding DoD’s ability to field the most innovative technologies to the warfighter in a rapid, costly, 

and efficient manner. 

Despite this argument, there are many social and economic benefits to advancing socioeconomic 

objectives in the federal procurement system. Domestic purchasing preferences may support a degree 

of national industrial capacity that might not survive in the global marketplace. These preferences may 

also contribute to supply chain security for critical technologies. Other policies may advance political 

goals in support of small or otherwise disadvantaged businesses, thereby increasing market 

participation and competition. Finally, labor-related laws and regulations help to ensure that wage and 

safety standards are maintained across the United States. These goals are sustained through the 

purchasing power of the federal government. 

In attempting to balance socioeconomic objectives and efficient purchasing, the Section 809 Panel seeks 

to further refine the way DoD applies socioeconomic policies to its procurements. In all circumstances, 

national security implications drive the recommendations. When socioeconomic policies hamper DoD’s 

ability to procure the most effective warfighting capability, the procuring capability must be 

prioritized. When socioeconomic policies serve national security interests, DoD should update and 

retain them. 

The remaining sections of this paper propose a series of Recommendations more closely aligned to this 

type of socioeconomic policy. The first section addresses domestic purchasing preferences: the Buy 

American Act and the Berry Amendment. Domestic purchasing preferences create a series of costly and 

confusing domestic sourcing requirements which are frequently out of sync with global supply chains 

and market dynamics. For these socioeconomic policies, the panel recommends excepting these 

requirements when DoD is procuring commercial products. Additionally, the panel recommends 

adopting a public interest exception for the Berry Amendment identical to the one that exists for the 

Buy American Act. The second section addresses three labor-related laws. In this category, the panel 

recommends increasing the acquisition thresholds of the Davis–Bacon Act, the Walsh–Healey Public 

Contracts Act (Walsh–Healey Act), and the Services Contracting Act to $2 million to mitigate a large 

portion of the duplicated administrative burden imposed by these obsolete provisions while still 

covering most of the DoD expenditure in this area. 
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RECOMMENDATIONS 

Recommendation 64: Update socioeconomic laws to encourage purchasing from 

nontraditional suppliers by (a) adopting exceptions for DoD to domestic 

purchasing preference requirements for commercial products, and (b) adopting 

a public interest exception and procedures for the Berry Amendment identical 

to the ones that exist for the Buy American Act. 

Problem 

Domestic purchasing preferences—notably the Buy American Act and the Berry Amendment—can 

undermine DoD’s ability to field the most innovative technologies to the warfighter in a rapid, costly, 

and efficient manner.8 Although they are intended to prioritize U.S. manufacturing, domestic 

purchasing preferences often result in premium pricing for products that may not be the most state-ofthe-art items available in the commercial market. Given the diminished capacity of U.S. manufacturing 

in some industrial sectors, supply chain constraints may also affect delivery volumes and schedules. 

Through universal applications of the Buy American Act and the Berry Amendment, DoD is currently 

unable to balance its requirements to both access commercial innovation and to protect critical 

technology. 

Background 

The Buy American Act 

The 1933 Buy American Act (BAA) provides preferential treatment for domestic sources of supplies, 

manufactured goods, and construction material in federal government contracts above the 

micropurchase threshold. BAA imposes a two-part test for a product to be considered a domestic end 

product: 

 The end product must be manufactured in the United States. 

 More than 50 percent of the cost of all the components must be manufactured in the United 

States. 

Exceptions and waivers to BAA exist, which are implemented by FAR 25.103 and FAR 25.401(a)(2). 

Exceptions include public interest considerations, domestic nonavailability, unreasonable cost, and 

products used outside the United States. Waivers to BAA are traditionally granted under authority of 

the Trade Agreements Act and are related to acquisitions under the World Trade Agreement 

Government Procurement Act or any Free Trade Agreement.9 BAA does not apply to services. 

DoD regulations covering BAA are found in DFARS 225 and differ from civilian agencies in several 

ways. DoD may waive BAA for national security purposes through the public interest exception 

procedures established by 10 U.S.C. § 2533 and DFARS Subpart 225.103(a)(ii). DoD also uses a separate, 

 

8

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

10 U.S.C. § 2533a. 

9

 National Security Objectives for National Technology and Industrial Base, 19 U.S.C. § 2501. 
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more stringent pricing evaluation method known as the Balance of Payments Program, implemented 

through DFARS Subpart 225.75, whereas civilian agencies apply between a 6 percent and 12 percent 

price preference to domestic sources. Using the Balance of Payment calculation regulations, DoD’s 

price preference for U.S. products is 50 percent and does not discriminate between large and small 

businesses. Additionally, the FAR Council issued a partial waiver to the two-part test for all 

commercial off-the-shelf (COTS) products. This waiver requires that a COTS item be manufactured in 

the U.S. but does not track the origin of components. An additional exception to BAA exists for all 

commercial information technology (IT) purchases by the federal government.10

The Berry Amendment 

The Berry Amendment requires DoD to purchase domestically grown or sourced food, clothing, fabrics 

(including ballistic fibers), and hand or measuring tools. The Berry Amendment was enacted in 1941 to 

protect the U.S. industrial base during times of war. The Berry Amendment differs from BAA in two 

ways: It applies only to DoD, and it requires items to be 100 percent domestic in origin. 

There are a number of exceptions to the Berry Amendment, which are listed in DFARS 225.7002-2. Most 

notably, exceptions to the Berry Amendment include purchases under the Simplified Acquisition 

Threshold (SAT), items waived through the Domestic Non-Availability Determination (DNAD) 

process, and acquisitions made outside the United States in support of combat operations.11 There is no 

public interest exception to the Berry Amendment. Regulations covering the Berry Amendment are 

found in DFARS 225.7002. Administrative procedures are described in PGI 225.7002-1. 

Discussion 

The negative consequences of domestic purchasing preferences include increased costs, barriers to 

entry for some U.S. business, and disincentives to innovate. Products purchased under both BAA and 

the Berry Amendment can result in premium pricing for DoD. The domestic origin requirements of 

both laws are out of sync with modern, global supply chains. If U.S. commercial companies operate in 

these globalized markets, their products may not be compliant or eligible to compete for federal 

government contracts. Maintaining solely domestic supply sources is not possible or profitable for 

many U.S. companies; thus, the regulations act as a barrier to entry for supplying to DoD. Finally, 

U.S. companies able to meet domestic sourcing requirements can face minimal competition, which can 

directly affect innovation. Although incentives to innovate under domestic purchasing preference are 

mixed, DoD must be able to access the most innovative products in a timely and cost effective manner. 

DoD’s 50-percent price preference for domestic goods under BAA means that U.S. products may be 

49 percent more expensive than the market price and still be considered reasonable. For example, the 

Secretary of Defense released a 1989 report, The Effect of the Buy American Restrictions Affecting Defense 

 

10 Per recurring general provision in the annual General Government Appropriations Act, originally enacted by section 535(a) of the 

Transportation, Treasury, and Independent Agencies Appropriations Act, 2004 (division F of Pub. L. No. 108-199; 118 Stat. 345) and most 

recently enacted by section 615 of the Financial Services and General Government Appropriations Act, 2018 (division E of Pub. L. 

No. 115-141). Because the Commercial IT exception does not currently exist in U.S. Code, the Panel recommends codifying this recurring 

appropriations provision in Title 41 (See, Implementation section). 

11 “Berry Amendment FAQ,” Defense Pricing and Contracting, accessed October 25, 2018, 

https://www.acq.osd.mil/dpap/cpic/ic/berry_amendment_faq.html. 
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Procurement, acknowledging that BAA imposed higher costs on the federal government. In this report 

the Navy noted that as a result of domestic sourcing restrictions, it was spending 30 percent above 

market price in the mooring chain industry and 40 percent above market price in the anchor chain 

industry.12 Furthermore, the 100 percent domestic sourcing requirements of the Berry Amendment 

place a substantial burden on DoD acquisitions of textiles, apparel, and footwear in particular. The 

U.S. textile, apparel, and footwear industry has declined sharply in the last 25 years, leaving a limited 

number of domestic manufacturers and an eroded U.S.-based supply chain.13 DoD must pay premium 

prices for 100 percent U.S. origin products, which often lack genuine competition at some point in the 

supply chain; many components in this industry are single or sole sources. The reduced industrial 

capacity for Berry Amendment-compliant goods may cause delivery delays or other issues. 

BAA and Berry Amendment provisions are increasingly out of step with commercial practices and 

global supply chains across most product categories. The direct result is a reduction in viable suppliers 

and less competition. For example, in a 2002 memorandum to the Defense Acquisition Regulations 

Council, Leslie G. Sarasin of the American Frozen Food Institute stated that, 

“[t]he Berry Amendment required DOD to procure foods, entirely of U.S. origin ingredients. Often, 

DOD was forced to reject multi-ingredient, commercially available food items processed in the United 

States because the domestic origin of all ingredients and components of the product could not be 

demonstrated. This policy put DOD at odds with common commercial practice in the food industry, 

which typically follows U.S. tariff law in determining questions of foreign origin, and limited its access to 

the widest possible selection of products.”14

The overall effect of BAA’s domestic sourcing requirements on innovation is negative, and the effect of 

100 percent domestic sourcing requirements on innovation remains mixed. Critics of domestic 

preferential systems and other protectionist legislation argue that they do not incentivize U.S. firms to 

innovate. The federal government loses out on innovation both from domestic companies lacking the 

incentive to innovate and from foreign businesses not allowed to compete.15 Proponents of the Berry 

Amendment believe that a stable customer base allows U.S. manufacturers to invest in research and 

development—especially for defense-unique goods—knowing that their relationships with DoD are 

long-term. 

Conclusions 

Domestic sourcing preferences add a layer of complication and inefficiency to defense acquisition, but 

also serve broader political and security goals. The national security reasons to retain domestic 

sourcing preferences include protecting the U.S. supply base and its innovations and ensuring the 

 

12 Keith A. Hirschman, The Costs and Benefits of Maintaining the Buy American Act, Naval Postgraduate School Thesis, June 1998, 58, 

accessed October 25, 2018, http://www.dtic.mil/dtic/tr/fulltext/u2/a350159.pdf. 

13 See, for example, Stamen Borisson and Elizabeth Oakes, “Defense Industrial Base Assessment of the U.S. Textiles and Apparel Industry,” 

U.S. Dept. of Commerce, Bureau of Industry and Security, 2017. 

14 Valerie Bailey Grasso, The Berry Amendment: Requiring Defense Procurement to Come from Domestic Sources, Congressional Research 

Service, April 21, 2005, 8, accessed October 25, 2018, http://www.dtic.mil/dtic/tr/fulltext/u2/a462469.pdf. 

15 “Why Restrictions on Domestic Sourcing Hurts the American Government, Jobs and the Economy,” A.R. “Trey” Hodgkins, IT Alliance for 

Public Sector, September 19, 2017, accessed on October 25, 2018, https://itaps.itic.org/news-events/techwonk-blog/why-restrictions-ondomestic-sourcing-hurts-the-american-government-jobs-and-the-economy. 
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security of critical goods and their components. The national security reasons to reject domestic 

sourcing preferences include enabling DoD to access the most advanced technologies in the quickest 

manner at the most reasonable prices and reduced administrative burden. From this national security 

perspective, DoD must strike a balance in achieving these goals. By granting exceptions to domestic 

purchasing preferences for commercial goods, DoD is able to open its market research to certain new, 

innovative products regardless of their origin while still working to protect its defense-unique 

acquisitions. 

Allowing DoD to grant public interest exceptions to the Berry Amendment will ensure that it can 

access advanced, state-of-the-art technology. The public interest exception and procedures to the Buy 

American Act—found in 10 U.S.C. § 2533 and DFARS Subpart 225.103(a)(ii)—should be replicated for 

the Berry Amendment. The program manager or requiring agency should directly contribute to the 

contracting officer’s determination for a public interest exception. 

Implementation 

Legislative Branch 

 Amend 41 U.S.C. § 8302 to include an exception to the Buy American Act for DoD purchases of 

commercial products. 

 Amend 10 U.S.C. § 2335a to include an exception to the Berry Amendment for DoD purchases 

of commercial products. 

 Amend 10 U.S.C. § 2335a to include a public interest exception, identical to the exception 

established under BAA in 41 U.S.C. § 8302 and 10 U.S.C. § 2533. 

 Amend 41 U.S.C. § 8302(b)(2) to codify the commercial IT exception. 

Executive Branch 

 Add an exception for commercial goods to DFARS 225.103 (regarding BAA) and an exception 

for commercial goods for DFARS 225.7002-2 (regarding the Berry Amendment). 

 Add a public interest exception to DFARS 225.7002-2 (regarding the Berry Amendment) to 

mirror the public interest exception found in DFARS 225.103(a)(ii). 

 Modify DFARS references to align with the changes to U.S. Code described under Legislative 

Branch above. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 6. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 
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Recommendation 65: Increase the acquisition thresholds of the Davis–Bacon 

Act, the Walsh–Healey Public Contracts Act, and the Services Contract Act to 

$2 million. 

Problem 

The Davis–Bacon Act, the Walsh–Healey Act, and the Service Contract Act negatively affect defense 

acquisitions in several ways. They impose often-artificially high costs of labor on federal contracts. 

Their duplicative and outdated provisions – namely, their acquisition thresholds – impose heavy 

administrative burdens on DoD and on industry. Because public funding does not dominate total 

U.S. expenditures for the labor categories covered by these laws, a smaller percentage of U.S. workers 

are covered by them than in the 1930s. Because of this, these labor laws also serve as a barrier to entry 

to working for the federal government. Private companies with both commercial and federal clients 

often wish to avoid maintaining two sets of standards for their workforces. Competition for defense 

contracts is thus reduced. 

Background 

The Davis–Bacon Act 

The Davis–Bacon Act16 was originally passed in 1931. As amended, the Davis–Bacon Act requires 

contractors to pay no less than the prevailing wages to various classes of labor employed under 

construction contracts in excess of $2,000. All contracts covering the construction, alteration, and/or 

repair – including painting and decorating – of public buildings or public works in the United States 

are included.17 The Department of Labor (DOL) determines prevailing wages by surveying interested 

third parties. The federal minimum wage is not the same as the prevailing wage. The DOL prevailing 

wage determinations related to the Davis–Bacon Act have been written into 58 other federal program 

statutes.18 Although DOL’s administration of the act has changed over the years, the statute itself has 

remained largely unchanged since 1935. 

The Davis–Bacon Act is implemented through FAR Subpart 22.4 and DFARS Subpart 222.4. In addition 

to the wage rate requirements, FAR Subpart 22.406 requires contractors to maintain detailed payroll 

records for all laborers on federally funded construction projects for 3 years. Contractors and 

subcontractors must submit certified payroll data on a weekly basis, and make payroll records and 

employees available for DOL inspections.19

 

16 Wage Rate Requirements, 41 U.S.C. 31-IV. 

17 Rate of Wages for Laborers and Mechanics, 40 U.S.C. § 3142. 

18 See, Statutes Related to the Davis–Bacon Act Requiring Payment of Wages at Rates Predetermined by the Secretary of Labor, 29 

CFR Part 1, Appendix A. 

19 Davis–Bacon and Related Acts Provisions and Procedures, 29 CFR 5.5(a)(3). 
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The Walsh–Healey Act 

The Walsh–Healey Act was enacted in 1936 to extend the protection of the federal government to 

employees of contractors that furnish materials, supplies, articles, and equipment in any amount 

exceeding $15,000 (the original threshold was $3,000).20 The Walsh–Healey Act requires the following: 

 The contractor must pay its employees not less than the prevailing minimum wages as 

determined by the Secretary of Labor. 

 No employee of the contractor will be permitted to work more than 40 hours per week, unless 

the contractor has otherwise agreed with its employees in accordance with the Fair Labor 

Standards Act. 

 The contractor will not employ males younger than 16, females younger than 18, or convict 

labor. 

 The work will not be performed under conditions that are unsanitary, hazardous, or dangerous 

to the health and safety of the employees.21

In January 2011, the Walsh–Healey Act was recodified as the Public Contracts Act, and its provisions 

were restated as chapter 65 of U.S. Code Title 41.22 For DoD acquisition, the Walsh–Healey Act is 

implemented through FAR Subpart 22.6 and DFARS Subpart 222.6. 

The Walsh–Healey Act delineates several exemptions established by DOL. Most notably, the 

exemptions apply to contracts for items usually purchased on the open market, (i.e., generally available 

commercial items and for contracts for the purchase of perishables, including dairy, livestock, and 

nursery products).23 In addition, DOL’s regulations grant full exemptions from the Walsh–Healey Act to 

the following contract categories: public utility services; materials or supplies manufactured outside the 

United States; purchases against the account of a defaulting contractor where the stipulations of the 

statute were not included in the defaulted contract; and contracts to sales agents or publisher 

representatives for the delivery of newspapers, magazines, or periodicals.24

The Walsh–Healey Act does not apply to personal services or subcontractors. It does apply to the work 

of a substitute manufacturer. If the regular practice in the industry for manufacturers of the final product 

to manufacture subcomponents rather than to purchase them from other firms or to perform certain 

services rather than to have other firms perform these services, the other firms are substitute 

manufacturers and subject to the Walsh–Healey Act. 

 

20 The Walsh–Healey Public Contracts Act, 41 U.S.C. 35. 

21 Ibid.

22 An Act to Enact Certain Laws Relating to Public Contracts as Title 41, United States Code, “Public Contracts,” Pub. L. No. 111-350, 124 

Stat. 3677. 

23 Walsh–Healey Public Contracts Act, Statutory Exemptions, FAR 22.604-1. 

24 Walsh–Healey Public Contracts Act, Regulatory Exemptions, FAR 22.604-2. 
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The Service Contract Act 

The McNamara–O’Hara Service Contract Act25 (SCA) was enacted in 1966 and amended in 1976. SCA 

generally applies to all federal government contracts for service employees with a contract value over 

$2,500 performed in the United States. Examples of covered service contracts include contracts for 

cafeteria or food services, security guard services, washing laundry, custodial and janitorial services, 

dry cleaning services, and computer services. DOL provides locality-based wage determinations on a 

contract-by-contract basis. SCA also has requirements such as recordkeeping and notification 

requirements, as implemented in FAR Subpart 22.10.26 The provisions of SCA apply to contractors and 

subcontractors at all tiers. 

Exemptions from SCA include contracts that are covered by the Davis–Bacon Act or the Public 

Contracts Act; communications services; public utilities; and postal services.27 Additionally, DOL is 

authorized to establish administrative exemptions to SCA for any of the following services: automobile 

maintenance, financial services, conference hosting, transportation, and real estate or relocation.28

Discussion 

The Davis–Bacon Act, the Walsh–Healey Act, and the Service Contract Act affect defense acquisition in 

two significant ways, both of which have been documented for decades. The three labor laws levy high 

wage rates and costs across many labor sectors. They also create an additional layer of administrative 

burden through their recordkeeping requirements, which is often compounded by duplicative 

provisions found in FLSA and the Occupational Safety and Health Act29 (OSHA). Because the 

acquisition thresholds are so low for the application of all three laws to federal contracts, nearly all 

related DoD contracts are subject to these cost and administrative burdens. These thresholds are relics 

that do not reflect current labor market dynamics and the additional labor protections that have been 

enacted. 

Cost Inflation 

Increased labor costs associated with the Davis–Bacon Act have been documented in a series of noted 

studies in the past ten years. A 2008 Beacon Hill Institute paper argues that on average, Davis–Bacon 

Act prevailing wages were found to be 22 percent higher than construction wages reported through the 

Bureau of Labor Statistics for the same general area.30 The increase in labor costs translated to a 

9.9 percent average increase in overall project costs, but in some areas project costs were increased by 

almost 20 percent.31 In 2010, the U.S. Chamber of Commerce recommended repealing the Davis–Bacon 

Act because it inflates federally funded construction costs by as much at 15 percent, costing the tax 

payers more than $1 billion annually, in addition to a $100 million a year in government administrative 

costs. The Chamber argued that repealing the Davis–Bacon Act would create an estimated 31,000 new 

 

25 Required Contract Provisions, Minimum Wages, 41 U.S.C. 351.

26 Labor Standards Clauses for Federal Service Contracts, 29 CFR 4.6(e), (g). 

27 Service Contract Labor Standards, 41 U.S.C. § 6702. 

28 Administrative Limitations, Variances, Tolerances, and Exemptions, 29 CFR 4.123. 

29 Fair Labor Standards Act, 29 U.S.C. § 203. Occupational Safety and Health Act of 1970, 29 U.S.C. 15. 

30 Sarah Glassman, Michael Head, David Tuerck, and Paul Bachman, The Federal Davis–Bacon Act: The Prevailing Mismeasure of Wages,

The Beacon Hill Institute, February 2008, 32, accessed October 25, 2018, 

http://www.beaconhill.org/BHIStudies/PrevWage08/DavisBaconPrevWage080207Final.pdf. 

31 Ibid, 33. 
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construction jobs and remove a barrier that keeps many small and minority-owned firms from 

competing for federal or federally funded contracts.32 Finally, a 1983 Congressional Budget Office 

(CBO) report concluded that compliance with the Davis–Bacon Act increases federal construction costs 

by 3.7 percent.33 Adding to its older estimates in 2013, CBO determined that repeal of the Davis–Bacon 

Act would save $13 billion in discretionary federal government outlays.34

SCA also increases the direct costs of services provided to the federal government. In a 1990 testimony 

before Congress, the General Services Administration (GSA) provided examples of 10 cases where the 

prevailing rates established by DOL were higher than the rates GSA found to be prevailing in the area. 

GSA found that DOL's prevailing rate exceeded the rates in the area by 28 percent to 82 percent.35 

The Walsh–Healey Act does not impose the same potentially inflationary wage rates that are observed 

in the Davis–Bacon Act or the Service Contract Act. Instead, it uses the federal minimum wage 

established by the FLSA. 

Outdated and Burdensome Management 

DoD acquisition is also affected by the three labor laws through the additional burden caused by 

duplicative labor standards requirements and the confusion around their applicability. For example, 

GAO argued that the provisions of the Davis–Bacon Act were rendered moot with the passing of the 

Fair Labor Standards Act of 1961 (FLSA).36 GAO also suggested that Congress should consider 

repealing SCA for a number of similar administrative and financial reasons: 

 Inherent problems exist in its administration. 

 Wage rates and fringe benefits set under it are generally inflationary to the government. 

 Accurate determinations of prevailing wage rates and fringe benefits cannot be made using 

existing data sources. 

 The data needed to accurately determine prevailing wage rates and fringe benefits would be 

very costly to develop. 

 The FLSA and administrative procedures implemented through the federal procurement 

process could provide a measure of wage and benefit protection for employees the act now 

covers.37

 

32 “Davis–Bacon Act,” U.S. Chamber of Commerce, August 4, 2010, accessed October 25, 2018, https://www.uschamber.com/Davis–

Bacon-act. 

33 Congressional Budget Office, Modifying the Davis–Bacon Act: Implications for the Labor Market and the Federal Budget, July 1983, 

accessed October 25, 2018, https://www.cbo.gov/sites/default/files/98th-congress-1983-1984/reports/doc12-entire_0.pdf. 

34 “Options for Reducing the Deficit: Repeal the David-Bacon Act,” Congressional Budget Office, November 13, 2013, accessed 

October 25, 2018, https://www.cbo.gov/budget-options/2013/44791. 

35 See, Paul R. Shlemon, “The Service Contract Act-A Critical Review,” Federal Bar Journal, Vol. 34, No. 3 (Summer 1975), 240–48. 

36 GAO, The Davis–Bacon Act Should Be Repealed, HDR-79-18, April 27, 1979, 24, accessed October 25, 2018, 

https://www.gao.gov/assets/130/126529.pdf. 

37 GAO, The Congress Should Consider Repeal of the Service Contract Act, GAO/HRD-83-4, January 31, 1983, i, accessed October 25, 2018, 

https://www.gao.gov/assets/140/139434.pdf. 
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FLSA and OSHA provisions have subsumed the provisions of the Walsh–Healey Act.38 In addition to 

these duplications, there is a great deal of confusion around the applicability of the act in certain cases. 

An important example of this administrative confusion involves Section 8(a) contractors under the 

Small Business Administration (SBA). Because SBA negotiates these contracts, the Section 8(a) 

companies generally believe themselves to be subcontractors that do not fall under the eligibility of the 

Walsh–Healey Act. A 1981 decision by the U.S. Comptroller General, however, established that 

Section 8(a) companies were, in fact, prime contractors in terms of labor type and that the Public 

Contracts Act did apply to this SBA program.39 In establishing this precedent, the Walsh–Healey Act 

burdens companies of all sizes, disproportionately so for very small businesses. 

Outdated Acquisition Thresholds 

Previous efforts have been made to increase the acquisition thresholds for the three labor laws, which 

are decades old—two are original to their 1930s founding. In 1993, the Section 800 Panel recommended 

raising the threshold for the Davis–Bacon Act to the SAT. This recommendation was primarily 

motivated by a desire to eliminate contracting agency oversight required to ensure contractor 

compliance with the act on small dollar contracts.40 Because the acquisition thresholds for the 

Walsh-Healey Act and SCA are similarly low, the Section 809 Panel recommends substantially raising 

all three thresholds. The motivation remains the same: to reduce the administrative burden for small 

contracts, calculated at modern threshold amounts. 

In conducting analysis for updating the acquisition thresholds for the three labor laws, the Section 809 

Panel sought to balance the total dollar amount obligated by DoD related to these laws with the 

number of low dollar contract actions required to comply. Calculations made using data from the 

Federal Procurement Data System (FPDS) indicate the vast majority of contract actions related to these 

labor provisions fell below the $2 million threshold in FY 2017 (see Figure 6-1).41 In terms of total 

funding, the majority of dollars spent during this time were on contract actions exceeding of $2 million 

(see Figure 6-1). For example, in FY 2017, 94 percent of contract actions related to the Davis–Bacon Act 

were for contracts below the $2 million threshold; yet, only 18 percent of the total dollars spent were for 

contracts less than $2 million. The same is true for the Walsh–Healey Act and SCA. Ninety-nine percent 

of contract actions related to the Walsh–Healey Act fell below the $2 million threshold, but only 

12 percent of the total dollars spent were on contracts below $2 million. Ninety-four percent of contract 

actions related to SCA fell below the $2 million threshold, but only 12 percent of the total dollars spent 

were on contracts below $2 million. Thus, raising the acquisition thresholds would reduce the 

administrative burden on smaller contracts while still covering most of the DoD expenditure in this 

area. 

 

38 For discussion, see, “Walsh–Healey Public Contracts Act,” The Wifcon Forums and Blogs, August 22, 2017, accessed October 25, 2018,

http://www.wifcon.com/discussion/index.php?/topic/4080-Walsh–Healey-public-contracts-act/. 

39 Comptroller General of the United States, Small Business Administration – Request for Advance Decision, File: B-195118, May 22, 1981, 

5, accessed October 25, 2018, https://www.gao.gov/assets/440/432959.pdf. 

40 The Acquisition Law Advisory Panel to the United States Congress, Streamlining Defense Acquisition Laws, Jan. 1993, pp. 4-25 and 4-26. 

41 FDPS data extracted on September 17, 2018. 
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Figure 6-1. DoD Contract Actions for FY 2017 (left) and Dollar Total of DoD Contract Actions for FY 2017 (right) 

Conclusions 

Despite the well-documented cost inflation and administrative burden imposed on defense acquisitions 

by the Davis–Bacon Act, the Walsh–Healey Public Contracts Act, and the Service Contract Act, it is not 

necessary to repeal these laws or to waive their applications to all DoD acquisitions. However, raising 

their acquisition thresholds to $2 million will strike balance between achieving less burdensome 

contract actions and continuing to uphold the intent of these laws for most of DoD’s related 

expenditures. 

Implementation 

Legislative Branch 

 Establish a socioeconomic labor threshold of $2 million for DoD at 10 U.S.C. § 2338a. 

 Apply the socioeconomic labor threshold to the Davis–Bacon Act at 10 U.S.C. § 2338a. 

 Apply the socioeconomic labor threshold to the Walsh–Healey Public Contracts Act at 10 U.S.C. 

§ 2338a. 

 Apply the socioeconomic labor threshold to the Service Contract Act at 10 U.S.C. § 2338a. 

Executive Branch 

 There are no Executive Branch changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 6. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 
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RECOMMENDATIONS 66 THROUGH 69 SHARE THE COMMON THEME: 

CLARIFY THE PURPOSE OF BID PROTESTS AND ESTABLISH MORE 

STREAMLINED PRACTICES FOR THE TWO MAIN ADJUDICATIVE BODIES 

Bid protests have evolved in a piecemeal fashion since the early 20th century into the primary and, at 

times controversial, means of providing transparency and accountability in the federal procurement 

process. The current bid protest system has become an almost inherent element of public procurement 

and has shaped the way international procurement regimes address transparency and accountability—

as evidenced by the challenge procedures in many international treaties, including the North American 

Free Trade Agreement (NAFTA) and the World Trade Organization’s (WTO’s) Agreement on 

Government Procurement (GPA). This development has occurred despite there being no parallel in the 

private sector and the lack of an officially stated purpose for bid protests. 

Although many nations continue to base their challenge system on the U.S. bid protest system, it is 

difficult to determine how effective the U.S. model is at providing transparency and accountability 

relative to the procurement delays and added costs that result from nearly all protests. One certainty is 

that a bid protest, or the threat of a protest, does delay and add costs to DoD procurement, disrupting 

the delivery of needed products and services to warfighters. 

Critics have attacked aspects of the U.S. model, citing issues like inconsistent agency debriefing 

practices and inadequate record production on review. The Senate has weighed in on the matter in its 

FY 2016, FY 2017, and FY 2018 versions of the annual NDAA, attempting to minimize the disruption 

protests have on the procurement system, penalize protestors that file meritless protests, bolster 

debriefing requirements, and gather more information on the perceived two-bite problem. In many 

cases, anecdotal evidence of bid protest process abuse appears to drive many of these legislative 

proposals. 

This paper briefly reviews the evolution of the U.S. bid protest process to provide context for the 

recommendation to establish a purpose statement. The remainder of the recommendations are 

intended to reform the existing bid protest system into something that better achieves the said purpose 

and provides value to the procurement system. These recommendations are informed by the RAND 

study on bid protests directed by Congress in Section 885 of the FY 2017 NDAA, and Section 809 Panel 

stakeholder meetings with members of the private bar and the American Bar Association Public 

Contract Law Section, corporate counsel, agency counsel from across DoD and the interagency 

community, GAO, and the COFC. These recommendations include an expansion Congress’s efforts to 

increase communication with disappointed offerors in the debriefing process. 
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RECOMMENDATIONS 

Recommendation 66: Establish a purpose statement for bid protests in the 

procurement system to help guide adjudicative bodies in resolving protests 

consistent with said purpose and establish a standard by which the 

effectiveness of protests may be measured. 

Problem 

Currently none of the statutes governing the protest process, nor those waiving sovereign immunity 

and allowing protests, discuss a purpose for protests as part of the procurement process. The current 

lack of an established purpose, makes it difficult to evaluate the effectiveness of the current protest 

process and produces reform efforts intent on resolving discreet perceived problems rather than 

ensuring the process achieves the desired outcome.42 Protest reform efforts are difficult enough in that 

they must balance two competing policy goals: “(1) ensuring accountability in the procurement process 

while at the same time (2) expeditiously resolving protests.”43 

Professors Ralph Nash and John Cibinic raised the issue of a lack of a congressionally stated purpose 

for protests shortly after the adoption of CICA and codification of the GAO’s bid protest jurisdiction:44

before legislation is adopted it must be determined what purpose is to be served by an award protest 

system: Should its purpose be to grant monetary and injunctive relief to disappointed parties as a matter 

of right, or should it be primarily a technique for review of agency compliance with statutes and 

regulations?”45

Nash and Cibinic’s concern focuses on a desire for CICA to provide adequate guidance to GAO and 

potential protest litigants as to the purpose of protests, rather than providing a standard to gauge 

reform efforts. The adjudicative bodies responsible for deciding protests and those who participate in 

filing and defending protests could also benefit from congressional direction as to the purpose of bid 

protests in the federal procurement system. 

Background 

A bid protest is defined as a written objection to the following: 

1) A solicitation or other request by a Federal agency for offers for a contract for the procurement of 

property or services. 

2) The cancellation of such a solicitation or other request. 

3) An award or proposed award of such a contract. 

 

42 See, for example, the “loser pays” provision Sec. 827 of the FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

43 Raymond M. Saunders and Patrick Butler, “A Timely Reform: Impose Timeliness Rules for Filing Bid Protests at the Court of Federal 

Claims,” Public Contract Law Journal, Vol.39, No. 3 (2010), 539. 

44 Competition in Contracting Act of 1984, Pub. L. No. 98-369 §§ 2701-2753 (1984). 

45 Ralph C. Nash and John Cibinic, Award Protests: The Tunnel at the End of the Light, Nash & Cibinic Report, 1 No. 3 Nash & Cibinic 

Rep. ¶ 25 (March 1987). 
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4) A termination or cancellation of an award of such a contract, if the written objection contains an 

allegation that the termination or cancellation is based in whole or in part on improprieties concerning 

the award of the contract. 

5) Conversion of a function that is being performed by Federal employees to private sector performance. 46

An interested party, with respect to a contract or a solicitation is “an actual or prospective bidder or 

offeror whose direct economic interest would be affected by the award of the contract or by the failure 

to award the contract.”47

Prior to Congress granting interested parties authority to challenge agency decisions related to 

procurement actions in court, Justice Hugo Black opined the following in Perkins v. Lukens Steel: 

Like private individuals and businesses, the Government enjoys the unrestricted power to produce its 

own supplies, to determine those with whom it will deal, and to fix the terms and conditions on which it 

will make needed purchases. Acting through its agents as it must of necessity, the Government may for 

the purpose of keeping its own house in order lay down guide posts by which its agents are to proceed in 

the procurement of supplies, and which create duties to the Government alone.48 [emphasis added] 

Clearly the Court believed that the longstanding purpose of government procurement law was to 

protect the procurement process and was not intended to provide benefit to individual litigants. The 

right to challenge government procurement actions has been granted to private litigants by Congress 

since the Court’s decision in Perkins v. Lukens Steel, which is discussed as part of the narrative for 

Recommendation 67. Congress, in the legislation passed subsequent to the Court’s decision in Perkins,

did not indicate whether that right to challenge government procurement was for protecting the 

procurement system or making aggrieved litigants whole.49 

Discussion 

Although Congress has not legislated the purpose for bid protests at GAO or COFC, the conference 

report for CICA states: 

The conferees believe that a strong enforcement mechanism is necessary to insure that the mandate for 

competition is enforced and that vendors wrongly excluded from competing for government contracts 

receive equitable relief. To accomplish this, the conference...codifies and strengthens the bid protest 

function currently in operation at the General Accounting Office (GAO).50 

 

46 Definitions, 31 U.S.C. § 3551(1). FAR 33.101 contains the same definition except that it does not include the fifth basis for protests. 

47 Definitions, 31 U.S.C. § 3551(2). 

48 Perkins v. Lukens Steel, Inc., 310 U.S. 113, 128 (April 29, 1940), accessed November 9, 2018, 

https://supreme.justia.com/cases/federal/us/310/113/.

49 See the Contract Disputes Act of 1978, Pub. L. No. 95-563 (1978), the Competition in Contracting Act of 1984, Pub. L. No. 98-369 

§§ 2701-2753 (1984), and the Administrative Disputes Resolution Act of 1996, Pub. L. No. 104-320 (1996). The conference report to the 

Competition in Contracting Act indicates that Congress intended to override Justice Black’s opinion. 

50 H.Report 98-861, Deficit Reduction Act of 1984, Conference Report to accompany H.R. 4170, Section 2751–Procurement Protest 

System, 1435, accessed November 9, 2018, https://www.finance.senate.gov/imo/media/doc/Conf-98-861.pdf. 
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Congress has emphasized the desire to resolve protests in an expeditious manner. For example, 

31 U.S.C. § 3554(a)(1) states, “the Comptroller General shall provide for the inexpensive and 

expeditious resolution of protests” and 28 U.S.C. § 1491(b)(3) requires COFC to “give due regard to the 

interests of national defense and national security and the need for expeditious resolution of the 

action.” 

The Executive Order (EO) that establishes agency protests also provides insight into the purpose for 

agency protests. The EO establishes agency level protests to “ensure effective and efficient expenditure 

of public funds.” 51 In the absence of a clearly articulated purpose for protests, stakeholders across the 

acquisition community express differing opinions. Those opinions center primarily on ensuring 

transparency and accountability, but also include ensuring fairness and providing offerors who feel 

they have been harmed by an agency’s action a means to seek redress. In addition, various 

international free-trade agreements the United States has acceded to and existing model public 

procurement codes published by the United Nations and the American Bar Association (ABA) provide 

insight into what the purpose of protests should be. 

The United States has entered into multiple international free-trade agreements that obligate it to 

maintain a challenge or review process. Challenge and review are the terms of art the rest of the world uses 

to describe protests. For instance, NAFTA52 states: “In order to promote fair, open and impartial 

procurement procedures, each Party shall adopt and maintain bid challenge procedures for 

procurement.”53 This statement articulates a fairly clear purpose for the challenge/protest process: to 

promote fair, open, and impartial procurement procedures. The recently negotiated United States–

Mexico–Canada Agreement similarly requires an independent domestic review authority to “review, in 

a non-discriminatory, timely, transparent and effective manner, a challenge or complaint...by a 

supplier.”54 

Similar to the trade agreements, but not binding on the government, are the model procurement codes 

developed by groups of international and domestic experts. These model procurement codes may be 

useful in defining a purpose for the protest process and the goals it should be tailored to achieve. 

Two model procurement codes—the United Nations Commission on International Trade Law 

(UNCITRAL) and the ABA Model Procurement Code for State and Local Governments—recommend 

adopting a challenge/protest process and provide insight into the purpose of a protest or challenge 

system. Of note is that these procurement codes were modelled in whole or in part on the U.S. public 

procurement process. 

 

51 Executive Order 12979 of October 25, 1995, Agency Procurement Protests, Fed. Reg. Vol. 60, No. 208 (Oct. 27, 1995). 

52 North American Free Trade Agreement, as approved by Congress in the North American Free Trade Agreement Implementation Act of 

1993 (Pub. L. No. 103-182) (19 U.S.C. § 3301 note). 

53 North American Free Trade Agreement, Section C, Article 1017: Bid Challenge, accessed November 26, 2018, https://www.nafta-secalena.org/Home/Texts-of-the-Agreement/North-American-Free-Trade-Agreement?mvid=2#A1016. 

54 United-States-Mexico-Canada Agreement, Chapter 13: Government Procurement, Article 13.18(1), 13-21, accessed November 26, 

2018, https://ustr.gov/sites/default/files/files/agreements/FTA/USMCA/13%20Government%20Procurement.pdf. 
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UNCITRAL provides for protests/challenges. The enactment guide provides the following purpose for 

challenges/protests: 

A key feature of an effective procurement system is the existence of mechanisms to monitor that the 

system’s rules are followed and to enforce them if necessary. Such mechanisms include not only audits 

and investigations, and prosecutions for criminal offences, but also challenge procedures, in which 

suppliers and contractors are given the right to challenge decisions and actions of the procuring entity 

that they allege are not in compliance with the rules contained in the applicable procurement 

legislation.”55

ABA Model Procurement Code for State and Local Governments provides a similar rationale for the 

purpose of protests, arguing for adoption of the private Attorneys General concept. The commentary to 

the authorizing language for protests states, 

(1) It is essential that bidders, offerors, and contractors have confidence in the procedures for soliciting 

and awarding contracts. This can best be assured by allowing an aggrieved person to protest the 

solicitation, award, or related decision.56

Under this theory, aggrieved private entities with an interest in a given procurement are recognized as 

being well situated to identify and raise alleged violations of procurement laws and regulations. 

Conclusions 

The Section 809 Panel gathered data from representatives of academia, industry, the private bar, COFC, 

and GAO. The panel interviewed the procurement executives and members of the offices of general 

counsel for the Military Services on the issue of protests. Additionally, practitioners in the acquisition 

community at all levels, from both industry and government, participated in stakeholder meetings, 

providing input to the panel. 

A consistent theme of the arguments in favor of a robust protest process is the need for the government 

to have a means of checking its own performance to ensure compliance with law and regulation and to 

protect public funds. A vocal minority were also concerned about protecting the rights of disappointed 

offerors. What Congress, the Executive Branch, UNCITRAL, and ABA have said regarding the purpose 

of protests indicates that the purpose for granting aggrieved persons the ability to protest is to ensure 

the procurement process remains effective and efficient while maintaining the confidence of 

participants in the system. 

Because there is no corollary for protests in the private sector, there is no guidance to draw on in 

determining a purpose for protests. While there is no general consensus as to the purpose of protests, 

the vast majority agree that there is a need for a protest process to protect the integrity of DoD’s 

procurement system. Congress should adopt the following purpose statement in Title 10, and it may be 

 

55 United Nations Commission on International Trade Law, Guide to Enactment of the UNCITRAL Model Law on Public Procurement,

UNCITRAL (2014), accessed November 26, 2018, http://www.uncitral.org/pdf/english/texts/procurem/ml-procurement-2011/GuideEnactment-Model-Law-Public-Procurement-e.pdf. 

56 Model Procurement Code for State and Local Governments, §9-101, ABA (2000). 
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worthwhile to incorporate a tailored version of this purpose statement in Titles 28 and 31, for bid 

protests: 

The purpose of Congress in providing for review of procurement action of the Department of Defense 

through the procurement protest system under subchapter V of chapter 35 of title 31 and through causes 

of action under section 1491(b) of title 28 was to enhance confidence in the Department of Defense 

contracting process by providing a means, based on protests or actions filed by interested parties, for 

violations of procurement statutes and regulations in a timely, transparent, and effective manner; and a 

means for timely, transparent, and effective resolution of any such violation. 

Implementation 

Legislative Branch 

 Amend Title 10 to include the following purpose statement for bid protests: 

 The purpose of Congress in providing for review of procurement actions of DoD through 

the procurement protest system under subchapter V of chapter 35 of title 31 and through 

causes of action under section 1491(b) of title 28 is to enhance confidence in the Department 

of Defense contracting process by providing 

o a means, based on protests or actions filed by interested parties, for violations of 

procurement statutes and regulations in a timely, transparent, and effective manner; and 

o a means for timely, transparent, and effective resolution of any such violation. 

Executive Branch 

 Incorporate a modified version of the above statutory purpose statement for protests into 

DFARS 233.102. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 6. 

Implications for Other Agencies 

 This purpose statement would govern protests filed in response to procurement decisions made 

by all federal government agencies. 

Recommendation 67: Reduce potential bid protest processing time by 

eliminating the opportunity to file a protest with the COFC after filing at the 

GAO and require the COFC to issue a decision within 100 days of ordering a 

procurement be delayed. 

Problem 

Currently, the U.S. bid protest system allows for challenges in the procuring agency, GAO, and COFC. 

The system is further bifurcated into preaward and postaward challenges of procurement decisions. 
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Complicating matters, challengers that lose at the agency level may bring the same, or a more refined 

protest to GAO or COFC. Challengers that lose at GAO may bring the same protest to COFC. This 

possibility creates potential for the agency to have to relitigate the same protest at three different 

levels—agency, GAO, and then COFC. Relitigating a protest at COFC after an unsuccessful protest 

outcome at GAO is what is often referred to as two bites. Only once COFC rules is a record created that 

may be subject to appellate review by the United States Court of Appeals for the Federal Circuit at the 

request of either party. 

Allowing protestors to litigate a protest at GAO and, if not satisfied with the GAO decision, file the 

same or a refined version of the protest at COFC undermines one of the critical aspects of GAO’s 

jurisdictional mandate: “providing for the inexpensive and expeditious resolution of protests.”57 In the 

current system, GAO cannot conclusively resolve a protest. The option remains to relitigate that very 

same protest at COFC. For GAO to achieve its statutory purpose, the opportunity for a second protest 

opportunity at COFC must be eliminated. 

Background 

What appears to be the first protest was filed by an attorney on behalf of the English Construction 

Company at GAO, which at that time was the General Accounting Office.58 The attorney seeking relief 

at GAO from irregularities in the bidding process wrote: 

It is respectfully protested that not only is the acceptance of the Sloan Dickinson Corporation’s bid 

without authority of law but results in such unfair and unequal treatment of all the other bidders as to 

present a situation where without a doubt all bids should be rejected and the work re-advertised in the 

interest of the Government and for the protection of the rights of contractors in general.59

Prior to the English Construction Company case, the term protest was often used by litigants filing 

actions in the United States Court of Claims. As early as 1889 the Court recognized that a claimant had 

“protested against the contract being awarded” and “at the time the bids were opened plaintiff 

protested to the Architect against the award to any one (sic) but his associate.”60 In this particular case, 

the claimant was not arguing that the government violated certain procurement rules, but that the 

award violated the claimant’s patent rights. The court dismissed the claim because there was no actual 

or implied contract between the claimant and the government. 

In the English Construction Company protest, the disappointed bidder also did not have a contract 

with the government. The GAO solicitor, or general counsel, ultimately concluded that the GAO had 

the authority to decide protests filed by disappointed bidders but dismissed the protest finding no 

violation of law.61 This case marks the first time that an adjudicative body of the federal government 

exercised jurisdiction over an alleged violation of procurement rules filed by a party that did not have a 

 

57 Decisions on Protests, 31 U.S.C. § 3554(a)(1). 

58 Daniel I Gordon, In the Beginning: The Earliest Bid Protests Filed with the US General Accounting Office, 13 Public Procurement Law 

Review 147, 154 (2004). 

59 Ibid, 155. 

60 Schillinger v. United States, 24 Ct. Cl. 278 at 287 (Ct. Cl. Mar. 18, 1889). 

61 Daniel I Gordon, In the Beginning: The Earliest Bid Protests Filed with the US General Accounting Office, 13 Public Procurement Law 

Review 147, 156 (2004). 
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contractual relationship with the government. Less than 2 years later GAO published its first written 

bid protest decision.62 

To decide the first bid protest, the Comptroller General, determined GAO had jurisdiction by virtue of 

GAO’s authority to give advance decisions to certifying and disbursing officers on the legality of 

payments. Bid protest authority was not codified until, as part of the Debt Reduction Act of 1984, 

Congress passed the CICA. 63 Subsection D of CICA specifically provided for the Procurement Protest 

System now codified at 31 USC § 3551, et. seq. 

The Comptroller General is charged with “providing for the inexpensive and expeditious resolution of 

protests” filed at GAO and to issue final decisions within 100 days after the protest is submitted.64 To be 

eligible for a stay of award or stay of performance, a postaward bid protests must be filed with GAO no 

later than 10 days after the date of contract award, or 5 days after the date of a required debriefing, 

whichever is later.65 GAO will consider a protest timely if it is filed within 10 days after the protestor 

knew or should have known of the basis for the protest.66 In reviewing protests of agency procurement 

decisions, GAO is limited to whether the “agency’s judgement was reasonable and consistent with the 

stated evaluation criteria and applicable procurement statutes and regulations” and whether the 

agency’s action was prejudicial to the protestor.67 Although bid protests originated at GAO, bidders 

may now file a bid protest at any or potentially all of three options: the agency, GAO, and COFC. 

The agency forum, detailed in FAR 33.103, implementing EO 12979, provides that an interested party 

may file a protest with the contracting officer and request an independent review of its protest at one 

level above the contracting officer. 68 The FAR states that the “agency should provide for inexpensive, 

informal, procedurally simple, and expeditious resolution of protests.”69 Preaward protests must be 

filed before bid opening and in all other cases the protest must be filed within 10 days after the basis of 

a protest is known or should have been known.70 Most often this would be 10 days after the contract 

award. 

COFC was first established as the Court of Claims in 1855 and was responsible for resolving claims 

during the Civil War. COFC jurisdiction was subsequently expanded by the Tucker Act of 1887, as later 

amended in 1996 by the Administrative Disputes Resolution Act (ADRA). 71 The Tucker Act provides 

 

62 Ibid, 162. 

63 Pub. L. No. 98-369, Title VII, 98 Stat. 1175 (1984). 

64 Decisions on Protests, 31 U.S.C. § 3554(a)(1). Congress also directed the Comptroller General utilize an express option when 

appropriate, that would resolve protests within 65 days after filing. Agencies are required to file an agency report with the relevant 

portions of the administrative record for the procurement in response to a protest within 30 days. 

65 Review of Protests; Effect on Contracts Pending Decision, 31 U.S.C. § 3553(d)(4). 

66 4 CFR § 21.2(a)(1). 

67 Ostrom Painting & Sandblasting, Inc., B-285244 (Comp. Gen. Jul. 18, 2000). 

68 “Interested party for the purpose of filing a protest” as defined at FAR 33.101 means “an actual or prospective offeror whose direct 

economic interest would be affected by the award of a contract or by the failure to award a contract.” The same definition is used in 

31 U.S.C. § 3551(2)(A). FAR 33.103(d)(4). 

69 FAR 33.103(c). 

70 FAR 33.103(d)(4). 

71 28 U.S.C. § 1491. See also what is described as the “Little Tucker Act” at 28 U.S.C. § 1346, which appears to give concurrent jurisdiction 

to contract related claims under $10,000 to both the COFC and the District Courts. However, pursuant to § 1356(A)(2) the “Little Tucker 

Act” does not apply to contracts subject to the Contracts Dispute Act found in 41 U.S.C. §§ 7104 and 7107. 
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COFC jurisdiction over claims against the United States founded on, among other things, “any express 

or implied contract with the United States.” This authority was initially viewed as limited to contract 

disputes. Later the Court recognized jurisdiction over implied in-fact contracts for which the United 

States is obligated to fully and fairly consider the proposals of offerors, effectively adopting jurisdiction 

over protests. The ADRA amended the Tucker Act to provide COFC exclusive jurisdiction, resting 

jurisdiction away from the district courts, over preaward and postaward bid protests. District Court 

jurisdiction is often referred to as Scanwell jurisdiction, as it arose out of the decision of the Court of 

Appeals for the D.C. Circuit in Scanwell Laboratories v. Shaffer. Scanwell jurisdiction was based on the 

Court’s finding that the Administrative Procedures Act gave disappointed offerors standing to 

challenge contract awards.72 The exclusive jurisdiction of COFC became effective on January 1, 2001.73 

COFC requires a more formal legal process than GAO, although GAO has developed its own set of 

formal practices over the years. Protests before COFC more closely resemble litigation in the district 

courts with many of the associated rules of procedure. COFC requires protestors, for example, to be 

represented by counsel.74 Some argue that the additional procedures at COFC and the requirement for 

representation account for the fact that more than 95 percent of DoD protests are filed at GAO.75

Additional key differences between GAO and COFC include agency representation by the Department 

of Justice at COFC and the remedies that can be granted. Perhaps most significant is that COFC is 

authorized to review “any alleged violation of statute or regulation in connection with a procurement 

or a proposed procurement.”

76 COFC and the United States Court of Appeals for the Federal Circuit 

have interpreted the “in connection with” phrase to be “very sweeping in scope.”77 Its review is 

therefore potentially more expansive and less predictable than GAO’s. 

Some might argue that a positive result of COFC’s broader jurisdictional scope is that the court may, 

and recently has, reviewed agency decisions related to requirements development. The injunction 

COFC issued as a result of a 2014 SpaceX protest ultimately led to mediation between the U.S .Air 

Force and SpaceX, resulting in a delay in competing space launch requirements while SpaceX was 

becoming certified for national security launches. 78 The injunction was not issued because of a violation 

of procurement laws, but because COFC found that the contract awardee’s source of supply may have 

been restricted by EO.79 In the Palantir case, the Court ruled the U.S. Army violated a procurement 

 

72 Scanwell Laboratories v. Shaffer, 424 F.2d 859, 861-873 (D.C. Cir. 1970). 

73 Pub. L. No. 104-320 §§ 12(a) and (d), 110 Stat. 3874 (1996). The ADRA provided a sunset provision which terminated the district courts 

on January 1, 2001 unless Congress acted to extend that date. Congress did not take such action. 

74 See RCFC 83.1. COFC allows pro se representation of individuals or families, but corporations and partnerships must be represented by 

counsel. The Department of Justice (DoJ) represents DoD at COFC. 

75 RAND reported that from 2008-2016 11,459 protests actions were filed at GAO while only 475 were filed at COFC. Mark V. Arena et al., 

Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 35, accessed November 9, 2018, 

https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 

76 There can be significant differences in the interests of DoJ and the interests of DoD in given protest. These differences manifest 

themselves in more adversarial proceeding before COFC than before GAO.Space Exploration Technologies Corps. v. US, No. 14-354C, 

Order to Grant Temporary Injunction (April 30, 2014), accessed November 26, 2018, https://ecf.cofc.uscourts.gov/cgibin/show_public_doc?2014cv0354-0-0. 

77 Ibid. 

78 SpaceX Gets Air Force Certification to Compete for Military Launches, nbcnews.com (26 May 2015). 

https://www.nbcnews.com/science/space/spacex-gets-air-force-certification-compete-military-launches-n364986. 

79 Space Exploration Technologies Corps. v. US, No. 14-354C, Order to Grant Temporary Injunction (April 30, 2014), accessed 

November 26, 2018, https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2014cv0354-0-0. 
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statute by refusing to consider commercially available solutions, such as Palantir’s, in procuring a 

software solution.80 The Palantir ruling came after Palantir had unsuccessfully protested the 

procurement before GAO.81 On its review, COFC set the conditions for agencies to seek broader 

competition, which should result in substantial benefits to the government, including access to better 

technology and lower prices.82 It should be noted that not all share the view that COFC’s review in 

these two cases was ideal, even though, at least in the case of SpaceX, COFC’s decision appears to have 

resulted in savings for the taxpayer and increased capability for DoD.83

According to presentations made by GAO and COFC to the Section 809 Panel, in FY 2017 there were 

2,596 bid protests filed at GAO governmentwide, with 55 percent being defense-related, and 132 bid 

protests cases were filed at COFC. 

Figure 6-2. DoD Procurement Protests at GAO, FYs 1989-201684

 

80 Palantir USG, Inc. v. US, No. 16-748C (Nov 3, 2016), accessed November 26, 2018, https://ecf.cofc.uscourts.gov/cgibin/show_public_doc?2016cv0784-113-0. 

81 Ibid. 

82 In March of 2017, Palantir filed a GAO protest of a similar Navy software procurement and the Navy chose to withdraw the solicitation 

and “re-examine the procurement record and its acquisition approach.” Lizette Chapman, Palantir Wins Bid Protest Against Navy Over 

Contract Bid Request, Bloomberg.com (March 28, 2017), accessed November 26, 2018, 

https://www.bloomberg.com/news/articles/2017-03-29/palantir-wins-protest-against-navy-over-contract-bid-request. 

83 Those who do not share the view, believe that it is not COFC’s role to second-guess DoD’s requirements determinations but only to 

determine if DoD followed applicable procurement law and did not act arbitrarily or capriciously in acquiring the products and services 

that meet those requirements. 

84 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 30, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 
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Regarding GAO protests, Section 885 of the FY 2017 NDAA directed RAND to create a report, Assessing 

Bid Protests of the U.S. Department of Defense Procurements Identifying Issues, Trends and Drivers, which 

shows that between FY 2008 and FY 2016, protesters initiated 21,186 actions at GAO.85 “Protest actions 

associated with DoD agencies accounted for roughly 60 percent of the total protest actions over this 

period.”86 The number of protests filed at GAO has risen slightly since 2007, but according to 

Figure 6-2, protest numbers are still lower today than they were in the early 1990s. 

Among the 11,459 protest actions related to the 7,368 DoD procurements RAND analyzed, 26.9 percent 

were preaward protests. Among the approximately 8,376 postaward protests, DoD issued a stay 

override in only 1.2 percent of the cases.87 Of all GAO protests, 21.2 percent result in a decision by 

GAO, with only 2.6 percent of the protests being sustained.88 Approximately 38 percent of Do- related 

protests result in corrective action.89 GAO combines these two numbers into an effectiveness rate of 

41 percent and argues that because this rate has held rather steady since 2009, it is reasonable to 

conclude that claims of frivolous protests accounting for the recent increase in protests is overblown.90

With regard to the timeliness at both GAO and COFC, the RAND report included a compilation of data 

on the time it took both GAO and COFC to render decisions. 

RAND found that 50 percent of all GAO protests are resolved within 30 days and 70 percent within 

60 days. If a protest goes to a decision, however, GAO takes almost the full 100 days to either sustain or 

deny the protest.91 If DoD takes corrective action, it typically does so prior to submitting the agency 

report.92 See Figure 6-3. 

GAO, as part of the Legislative Branch, is only authorized to make recommendations to the Executive 

Branch agency to remedy a violation of procurement laws or regulations.93 The executive agency has 

discretion whether it follows those recommendations, but from FY 2014 through FY 2017, only twice 

did an agency choose not to follow a GAO recommendation resulting from a sustained protest.94 Any 

of the parties to a protest may seek reconsideration of an adverse GAO decision; however, GAO’s 

decisions are not binding on the agency, so there is no path to an appellate review at a court.95

 

85 The RAND study analyzed protest “actions.” Multiple protest actions may be filed related to one procurement. Mark V. Arena et al., 

Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 27-28, accessed November 9, 

2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 

86 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 29-30, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 

87 Ibid, 35. 

88 Ibid, 37. 

89 Ibid. 

90 Ibid. 

91 Ibid, 44. 

92 Ibid. 

93 31 U.S.C. § 3554(b)-(c). 

94 See GAO Bid Protest Annual Report to Congress for Fiscal Years 2014-2017 available at https://www.gao.gov/legal/bidprotests/reference-materials#annual_reports. 

95 4 CFR § 21.14. 
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Figure 6-3. Days to Close a Protest Action at GAO, FYs 2008-201696

Once a preaward protest is filed with GAO, the contracting officer may not make a contract award for 

that procurement while the protest is pending.97 If a postaward protest is filed within a certain 

timeframe, the contracting officer must suspend contract performance while the protest is pending.98

This delay in awarding or performance of a procurement under protest is known as a CICA stay. It is 

important to note that the stay may be overridden by the head of the procuring activity based on 

certain written findings. To award a contract when a procurement is subject to a preaward protest, the 

head of the procuring activity must make a written finding that “urgent and compelling circumstances 

which significantly affect the interests of the United States will not permit waiting for the decision of 

the Comptroller General.”99 The head of the procuring activity may authorize performance of a contract 

subject to a postaward protest under the same rationale, or by finding that “performance of the contract 

is in the best interests of the United States.”100 

The CICA stay does not apply to agency-level protests, but FAR 33.103 prohibits the award of a 

contract while a preaward protest is pending and requires the contracting officer to suspend 

performance of a contract while a postaward protest is pending.101 As an exception, the agency may 

determine that there are urgent and compelling reasons for making award or that it is otherwise in the 

 

96 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 44, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 

97 31 U.S.C. § 3553(c)(1). 

98 31 U.S.C. § 3553(d)(3). 

99 31 U.S.C. § 3353(c)(2). 

100 31 U.S.C. §§ 3553(d)(3)(C). 

101 See FAR 33.103(f)(1) and (3). 
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best interests of the government to proceed.102 Agency processes may vary in how the at least one level 

above the contracting officer standard of review is applied, but almost all agencies require that legal 

counsel assess any final decision in response to the agency protest to ensure the legal sufficiency of the 

decision, even though not required by the EO or the FAR. 

The CICA stay does not apply to protests filed at COFC; instead plaintiffs (protestors) must seek a 

preliminary injunction to prevent the contract from being awarded or the contract performance from 

beginning or continuing.103 In practice, the need for a stay is often agreed to by the parties at the outset 

of the litigation and does not require a formal motion. 

Regarding COFC protests, the RAND study shows that between January 2008 and May 2017protestors 

filed 475 cases related to DoD procurements.104 These bid protests make up approximately 20 percent of 

the court’s docket.105 Of the 475 case filed, only 9 percent were sustained, and RAND found that the 

sustain rate at COFC has been falling since 2008.106 As RAND points out, this situation could suggest 

that “protestors are being less selective in the cases they bring to COFC.”107 The parties appealed to the 

Federal Circuit in 12 percent of the cases.108

Timelines at COFC have been improving over the last few years, with the court issuing a decision 

within 133 days, on average, of the protester filing the complaint.109 Yet in the 10-year period, COFC 

took more than 450 days to close approximately 20 cases.110 See Figure 6-4. 

The time it takes the government to file the complete administrative record with the Court can drive 

the timeline at COFC. The government took an average of 37 days to file the administrative record with 

COFC, but in at least one case, it took more than 350 days to file the complete administrative record.111

Some of COFC’s extended timelines can be linked directly to the agency’s inability to provide the 

administrative record in a timely fashion. 

 

102 FAR 33.103(F)(1) 

103 Michael J. Shcaengold, T. Michael Guiffre Elizabeth M. Gill, Choice of Forum for Federal Government Contract Bid Protests, 18 Fed. 

Circuit B.J. 243, 310-311 (2009). 

104 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 47, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 

105 Ibid, 48. 

106 Ibid, 55. In FY 2008 almost 20 percent of the cases heard by COFC were sustained, but in FYs 2012 and 2014-2016, 6 percent or less of 

protests were sustained. In 2013 there as a spike up to almost 15 percent, but the overall trend is clearly down. 

107 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 54, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 

108 Ibid. 

109 Ibid, 57. 

110 Ibid, 58. 

111 Ibid, 58. 
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Figure 6-4. Number of Days to Close Cases with the COFC, CYs 2008-2017112

Discussion 

Agency attorneys expressed concern to the Section 809 Panel over the opportunity for a protestor to 

litigate a protest at GAO and then relitigate that protest at COFC. There is nothing to prevent a 

protestor from filing a protest with GAO, getting an unfavorable result, and filing the same or a refined 

version of protest at COFC with the expectation of a different result. The circumstances that create this 

opportunity for two-bites include GAO being a legislative body, not a court, and a lack of timeliness 

rules for filing postaward protests at COFC other than the 6-year Tucker Act statute of limitations.113

RAND concluded that an increase in the number of cases filed at COFC that reference GAO 

“suggests—but does not prove—that a large fraction of cases at COFC were filed previously at GAO, 

where the protester did not achieve the outcome it wanted.”114 The data RAND relies on shows an 

increase in the percentage of cases filed at COFC that referenced GAO from less than 20 percent in 2008 

to almost 70 percent in 2016.115 A reference to GAO in a bid protest filed at COFC, however, does not 

mean the protest was previously adjudicated at GAO. It is just as likely that cases filed at COFC more 

often references previous GAO opinion(s) in support of the protestor’s position as GAO has developed 

a robust body of published opinions that COFC might find persuasive. 

 

112 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 58, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 

113 Blue and Gold Fleet L.P. v. United States, 492 F.3d 1308, 1315 (Fed. Cir. 2007) effectively applied GAO pre-award protest timeliness 

rules to pre-award protests filed at COFC. COFC also applies the doctrine of latches and dismisses postaward protests that are filed so 

long after an award that the Government would be prejudiced in mounting a defense. 

114 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 53, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 

115 Ibid. 
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Because GAO opinions are nonbinding recommendations, they cannot be appealed directly to a court 

of law, and COFC is not obligated to follow or provide any deference to GAO opinions.116 COFC 

requires the agency to produce a more substantial record, and will review the agency’s actions and not 

the propriety of GAO’s previous analysis and recommendation. For years DoD has proposed 

legislation that would eliminate the opportunity for protestors to relitigate at COFC by applying 

timeliness rules for filing bid protests at COFC patterned after those established for GAO.117 

Section 822 of the FY 2019 NDAA directed DoD to spend 18 months studying the number of protests 

filed at both GAO and COFC and the details associated with those cases to include the extent of the 

procurement delay resulting from each protest. The DoD legislative proposal that resulted in this 

legislation lists a number of cases for which a protest was adjudicated by GAO, then the protestor filed 

suit at COFC delaying each procurement by between 12 months and nearly 24 months.118 In each case, 

the eventual outcome after months of litigation was the same as the outcome determined by GAO.119

This recommendation is patterned after the DoD proposal, which was not intended to result in a study. 

The two-bite process is not expeditious, is costly to all parties involved, and in each of the cases 

presented in the DoD proposal provided no added value to the system by way of additional 

accountability. 

Conclusions 

An 18-month study is unnecessary to understand that expeditious resolution of a protest cannot 

happen at GAO if that resolution can be relitigated at a separate forum that is not obligated to give any 

deference to GAO’s findings. Applying timeliness rules to COFC for filing of DoD postaward protests 

that mirror those that apply to GAO and codifying the preaward timeliness rules currently based on 

case law, would require protestors to file protests at COFC in a timelier manner and ensure that GAO 

remains available as an expeditious means of resolving protests. This recommendation would expand 

on the existing statutory mandate for COFC to “give due regard to the interests of national security and 

need for expeditious resolution” of actions.120 In addition, applying GAO’s protest resolution timeliness 

rules to the Court for rendering judgement on a procurement related action, will ensure the Court 

meets its mandate for expeditious resolution, but only when the Court has ordered a procurement be 

stayed pending resolution of the action. This approach allows the Court to focus resources on resolving 

those cases for which performance has been stayed while allowing for longer timelines for cases not 

subject to an ordered delay. 

Protestors would be able to make the choice of protest forum based on the perceived advantages and 

disadvantages of the different options, and nothing would prevent a protestor from first filing a protest 

with the agency. The lack of the option to appeal a GAO decision to a court is a consideration that may 

influence certain protestors to file at COFC rather than GAO, but most of the stakeholders the Section 

809 Panel heard from agreed that the vast majority of protestors would choose the more affordable, 

 

116 See Raymond M. Saunders and Patrick Butler, Article, A Timely Reform: Impose Timeliness Rules for Filing Bid Protests at the Court of 

Federal Claims, 39 Pub. Cont. L.J. 539, 553 (Spring 2010). 

117 DoD Legislative Proposal, Sec. ___. Timeliness Rules for Filing Bid Protests at the United States Court of Federal Claims, April 3, 2018, 

accessed November 27, 2018, http://ogc.osd.mil/olc/docs/3April2018.pdf, filename: Bid Protest.pdf. 

118 Ibid, 4. 

119 Ibid, 4-5. 

120 28 U.S.C. § 1491(b)(3). 
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predictable, and efficient GAO forum. This recommendation protects the rights of protestors to choose 

the forum that will hear their protest, eliminates the potential for extraordinary delays that result from 

relitigating protests at separate forums, and ensures GAO achieves its statutory purpose. 

Implementation 

Legislative Branch 

 Amend 28 U.S.C. § 1491(b)(3) to place protest filing timeliness rules on COFC that mirror those 

established for filing protests at GAO and prevent procurements protested at GAO to later be 

the subject of an action at the COFC. 

 Amend 31 U.S.C. § 3556 to ensure protests may be filed at either GAO or COFC, but not both. 

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 6. 

Implications for Other Agencies 

 These changes only apply to DoD protests, but could be expanded to cover protests of national 

security related procurements at federal government agencies. 

Recommendation 68: Limit the jurisdiction of GAO and COFC to only those 

protests of procurements with a value that exceeds, or are expected to 

exceed, $75,000. 

Problem 

Proponents of the U.S. bid protest model have defended the system as necessary for ensuring fairness, 

accountability, and transparency in government procurement. They point to the relatively small 

number of protests that are filed each year and the relative speed with which the vast majority are 

adjudicated, to argue that the existing process is not overly burdensome. Even the limited number of 

protests filed each year, however, cost taxpayers, DoD, and contractors who file protests substantial 

amounts of time and resources and more importantly slow delivery of technology and lethality to the 

warfighter. When costly protests are filed in conjunction with relatively small-value contract awards, it 

brings into question whether the value of the transparency and accountability is worth it. 

Background 

RAND found in its analysis of DoD protests filed at GAO and COFC that a nontrivial number of 

protests filed are related to contract actions valued at less than $100,000.121 A little more than 10 percent 

 

121 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 59, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 
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of the procurements that were subject to a protest at GAO were valued at less than $100,000 and 

approximately 4 percent of the procurements subject to protest at COFC were valued at less than 

$100,000.122 RAND questions “whether the costs to the government to adjudicate these protests [at 

GAO and COFC] exceeds the value of the procurement themselves and thus are not cost-effective.”123 

RAND’s report does not make many substantive recommendations, but one recommendation is to 

“consider implementing an expeditious process for adjudicating bid protests of procurements valued 

under $0.1 Million.”124 The recommendation suggests potentially having COFC rule from the bench or 

GAO require alternative dispute resolution (ADR) for all smaller-value protests.125 RAND suggests 

restricting such smaller-value protests to the agency level as another potential option but describes it as 

“perhaps less desirable...from a fairness perspective.”126 Ultimately RAND’s recommendation is to 

“come up with a quick way to resolve these cases commensurate with their value while preserving the 

right to an independent protest.”127

As discussed above, the United States is signatory to a number of multilateral and bilateral trade 

agreements that require the signatories to maintain certain public procurement processes, including 

a protest/challenge process. The WTO’s 1994 GPA requires parties to provide a process for suppliers 

who have, or have had, an interest in a procurement to challenge alleged breaches of the Agreement. 128

The revised GPA has a similar requirement.129 The United States is among 47 nations that are parties to 

the revised GPA. In addition, many of the multiple bilateral free-trade agreements to which the United 

States is a party contain similar provisions. These provisions require a challenge process, but all have 

applicability thresholds for which the requirements of the agreement do not apply to procurements 

valued below that threshold.130 FAR 25.204 contains a table depicting all of the thresholds associated 

 

122 Ibid, 52. 

123 Ibid, 71. 

124 Ibid. 

125 Ibid. 

126 Ibid. 

127 Ibid, xviii. 

128 Agreement on Government Procurement, World Trade Organization, as approved by Congress in the Uruguay Round Agreements Act 

(Pub. L. No. 103-465). Agreement on Government Procurement, Article XX: Challenge Procedures, paragraph 2, 26, World Trade 

Organization (1994), accessed November 27, 2018, https://www.wto.org/english/docs_e/legal_e/gpr-94_e.pdf. 

129 See Revised Agreement on Government Procurement, Article XVIII: Domestic Review Procedures, paragraph 1, 23, World Trade 

Organization, accessed November 27, 2018, https://www.wto.org/english/docs_e/legal_e/rev-gpr-94_01_e.pdf. 

130 See for example: United States-Australia Free Trade Agreement, as approved by Congress in the United States-Australia Free Trade 

Agreement Implementation Act (Pub. L. No. 108-286) (19 U.S.C. 3805 note); United States-Bahrain Free Trade Agreement, as approved by 

Congress in the United States-Bahrain Free Trade Agreement Implementation Act (Pub. L. No. 109-169) (19 U.S.C. 3805 note); Dominican 

Republic-Central America-United States Free Trade Agreement, as approved by Congress in the Dominican Republic-Central AmericaUnited States Free Trade Agreement Implementation Act (Pub. L. No. 109-53) (19 U.S.C. 4001 note); United States-Chile Free Trade 

Agreement, as approved by Congress in the United States-Chile Free Trade Agreement Implementation Act of 1993 (Pub. L. No. 108-77); 

United States–Colombia Trade Promotion Agreement Implementation Act (Pub. L. No. 112-42) (19 U.S.C. 3805 note); U.S.-Israel Free 

Trade Area Agreement, as approved by Congress in the United States-Israel Free Trade Area Implementation Act of 1985 (19 U.S.C. 2112 

note); United States–Korea Free Trade Agreement Implementation Act (Pub. L. No. 112-41) (19 U.S.C. 3805); United States-Morocco Free 

Trade Agreement, as approved by Congress in the United States-Morocco Free Trade Agreement Implementation Act (Pub. L. No. 108-

302) (19 U.S.C. 3805 note); United States-Oman Free Trade Agreement, as approved by Congress in the United States-Oman Free Trade 

Agreement Implementation Act (Pub. L. No. 109-283) (19 U.S.C. 3805 note); United States-Peru Trade Promotion Agreement, as 

approved by Congress in the United States-Peru Trade Promotion Agreement Implementation Act (Pub. L. No. 110-138) (19 U.S.C. 3805 

note); United States-Panama Trade Promotion Agreement Implementation Act (Pub. L. No. 112-43) (19 U.S.C. 3805 note); and United 

States-Singapore Free Trade Agreement, as approved by Congress in the United States-Singapore Free Trade Agreement Implementation 

Act (Pub. L. No. 108-78) (19 U.S.C. 3805 note). 
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with each of the free trade agreements. A number of agreements that require a protest process apply to 

all supply and service contracts valued above $80,317.131 This threshold is the lowest above which the 

United States must provide a process for challenging decisions of procurement officials. 

Discussion 

Agencies face protests of procurements at GAO that are at times valued just over the micro-purchase 

threshold and must litigate at COFC procurements valued well below $100,000. One recent example of 

a GAO protest was based on an $8,000 contract award. It is difficult to understand how the value, in 

terms of transparency, outweighs the cost of resolving them. Congress, in Section 822(d) of the FY 2019 

NDAA attempted to address this problem by directing the Secretary of Defense to develop a policy for 

expeditiously resolving protests related to contracts valued less than $100,000, but this policy could 

only affect agency-level protests. Legislative changes to GAO and COFC’s jurisdiction are necessary to 

ensure this policy is effective. 

The first two potential changes proposed by RAND, to mandate ADR at GAO and for COFC to issue 

bench rulings for protests of small-value contracts would be challenging to implement, would still 

sacrifice transparency if written opinions were not issued, and could still be very costly for all parties. 

RAND’s final suggestion, to restrict protests below a certain dollar threshold to the agency level, could 

be implemented immediately, would enable the policy resulting from Section 822(d) to be effective, and 

would make it less likely that the agencies would spend more taxpayer dollars processing and 

defending a protest than a procurement is worth. 

Conclusions 

Congress should limit the jurisdiction of GAO and COFC to protests of DoD procurements valued 

above $75,000 or expected to be valued above $75,000. This threshold is consistent with the Section 809 

Panel’s recommendation for raising the public advertising threshold discussed in the Volume 2 Report, 

and ensures that the U.S. protest process remains consistent with existing free trade agreement 

obligations.132 This threshold is below the value RAND used for its analysis and will likely effect an 

even smaller percentage of protests than the percentage identified by RAND; however, it would 

prevent future protests of $8,000 procurements at GAO or COFC which consume time, resources, and 

taxpayer dollars that could be reinvested in delivering capability to warfighters. 

Implementation 

Legislative Branch 

 Amend 31 U.S.C. § 3552 and 28 U.S.C. § 1491 to limit the jurisdiction of GAO and COFC to postaward protests of procurements valued above $75,000 and preaward protests of procurements 

with an expected value above $75,000. 

 

131 See FAR 25.402. 

132 Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, Section 3: 

Simplified Commercial Source Selection, 107-109 (2018).The Panel is not commenting on whether an agency-level protest meets the 

requirements found in the various free trade agreements, though it appears that an agency-level protest would most likely satisfy those 

requirements. 
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Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 6. 

Implications for Other Agencies 

 This change only applies to DoD but could be expanded to apply to all federal government 

agencies. 

Recommendation 69: Provide as part of a debriefing, in all procurements where 

a debriefing is required, a redacted source selection decision document and 

the technical evaluation of the vendor receiving the debriefing. 

Problem 

Despite the Office of Management and Budget’s (OMB’s) Myth-busting 3 memo, which explains how 

meaningful debriefings can mitigate the risk of protest, many DoD contracting agencies do not consider 

debriefings as a means of avoiding protests.133 This perception results in debriefings that many industry 

and private bar stakeholders described as adversarial, incomplete, and insufficient for informing 

unsuccessful offerors of the government’s rationale for making an award. The presumption across 

much of DoD appears to be that the more information that is provided at a debriefing, the more likely a 

disappointed offeror will use the information to file a protest. 

Background 

The Federal Acquisition Streamlining Act of 1994 created the requirement for debriefings.134

Debriefings are currently required under FAR Part 15 for competitive negotiated procurements and 

FAR 16.5 for all task or delivery orders valued in excess of $5.5 million.135 Section 818 of the FY 2018 

NDAA expanded the requirement for a written or oral debriefing to all DoD contract awards and task 

or delivery orders valued at or above $10 million. 136 

The Section 809 Panel found, similar to what was presented in the RAND report, that the quality and 

timeliness of debriefings varies across DoD. Even the debriefings that complied with FAR 15.505 often 

provided insufficient information for bidders to determine if their proposals had been properly 

evaluated.137 Some are provided promptly on request and are complete in terms of explaining to 

offerors why they lost, or why they won a contract award. Many in industry, and the private Bar, 

 

133 OMB Memorandum, “Myth-busting 3”: Further Improving Industry Communication with Effective Debriefings, January 5, 2017, 

accessed November 7, 2018, https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/procurement/memo/mythbusting_3_further_improving_industry_communications_with_effectiv....pdf. 

134 Section 1014 of the Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103-355 (1994). The requirement for DoD is now codified 

in 10 U.S.C. §§ 2305(b)(5) and (b)(6). 

135 See Postaward Debriefing of Offerors, FAR 15.506. Section 818(a)(2) of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

136 Section 818 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

137 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 22, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 
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report that timely and complete debriefings provide them with the information they need to improve 

future proposals. Debriefings also help companies determine if the government followed its procedures 

and the governing laws and regulations in making the award determination so they can decide 

whether to file a protest. 

In Section 818 of the FY 2018 NDAA, Congress also created the requirement for DoD to provide a 

redacted source selection decision document as part of debriefings for all contract awards in excess of 

$100 million, and, when requested by nontraditional or small businesses, for all contract awards in 

excess of $10 million.138 

Discussion 

In some cases, industry and the private Bar report that they file protests so they can get the information 

they need to understand why they lost the contract award. Based on the small number of protests that 

are actually filed, RAND’s finding that “[t]he bottom line is that too little information or debriefings 

that are evasive or adversarial will lead to a bid protest in most cases,” may be a bit of hyperbole.139

Corporate counsel informed the Section 809 Panel that in many cases bid and proposal teams within 

companies that find themselves on the losing end of an award decision often lobby corporate 

leadership to file a protest, especially when the company was the incumbent. The fullness of the 

debriefing was often a critical element of the decision-making process. An evasive or confrontational 

debriefing only reinforced the bid and proposal team’s assumption that the government made the 

wrong decision or could not adequately support its decision. Yet in the reportedly rare case in which 

DoD provided a redacted source selection decision document or other meaningful information, the 

corporate counsel was able to explain to senior leadership within the company why it lost a potential 

contract and that a protest would be a waste of time and resources. 

It appears that the fear of protests drives the debriefing to be less complete, as opposed to more 

complete, and agency counsel may end up controlling the actual debriefing. Often times the presence 

of counsel at a debriefing can send the wrong message to the various parties. Contracting officers 

reportedly have a tendency to become adversarial if corporate or outside counsel accompany a 

contractor to a debriefing. At the same time the bidder’s decision to have counsel present at the 

debriefing may be to gain enough information to explain to a bid and proposal team why a protest 

would not be in the best interest of the contractor. This proposal will not provide the same level of 

transparency as some of the enhanced debriefing procedures that allow outside counsel are provided 

access to the evaluation of the successful offeror. Yet, the combination of a redacted source selection 

decision document and the technical evaluation of the contractor requesting the debriefing, should 

provide disappointed offerors with adequate information to improve future proposals and understand 

the rationale behind DoD’s award decision. 

Conclusions 

Congress should expand the Section 818 requirement to provide a redacted source selection decision 

document as part of a debriefing for all situations in which a debriefing is required and to also provide 

 

138 Section 818(a)(1) of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

139 Mark V. Arena et al., Assessing Bid Protests of U.S. Department of Defense Procurements, RAND Corporation, December 2017, 23, 

accessed November 9, 2018, https://www.rand.org/content/dam/rand/pubs/research_reports/RR2300/RR2356/RAND_RR2356.pdf. 
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the technical evaluation documentation of the vendor requesting the debriefing. Providing this 

additional transparency should minimize the likelihood contractors will file protests because of a lack 

of information. Providing this additional information may create more work for contracting officers, 

but in addition to decreasing the number of protests, it should also increase the quality of future 

proposals, and help recalibrate DoD contracting activities’ understanding of the value of a more 

fulsome debriefing. 

Implementation 

Legislative Branch 

 Amend Section 818(a)(1) of the FY 2018 NDAA to eliminate the thresholds and include the 

requirement to provide the technical evaluation of the vendor requesting the debriefing. 

Executive Branch 

 Amend DFARS 215 to include the debriefing requirements included in the amended 

Section 818(a)(1) of the FY 2018 NDAA. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 6. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

RECOMMENDATION 70 IS A STAND-ALONE RECOMMENDATION WITH THE THEME: 

REDUCING THE BURDEN OF MANDATED COLLECTION AND REPORTING OF 

CONTRACTED SERVICE DATA 

Recommendation 70: Authorize DoD to develop a replacement approach to the 

inventory of contracted services requirement under 10 U.S.C. § 2330a. 

Problem 

Congressional staffers and senior DoD leaders indicate that spreadsheets produced in compliance with 

the ICS requirement add little or no value to DoD decision-making processes.140 One senior DoD 

acquisition official described the ICS requirements as “a waste of time.”141 Another senior official, when 

addressing how to improve the requirements, said, “kill them all.”142 Program office and contracting 

personnel indicate the requirement adds substantial bureaucratic complexities to the acquisition 

process.143 According to private-sector contractors who must collect and report data, the requirement 

creates additional work that adds to administrative overhead. One technical specialist for a defense 

 

140 DoD officials, interviews with Section 809 Panel, May 2018. 

141 Ibid. 

142 Ibid. 

143 Military department program managers and other acquisition staff, interviews with Section 809 Panel, May 2018. 
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contractor estimated that his company spent about three workdays per year complying with service 

contract reporting requirements. He described the requirements as “an unfunded mandate” and “an 

onerous thing that I don’t get anything out of.”144

DoD has set up complicated, customized information management systems in response to 10 U.S.C. 

§ 2330a. Congress should allow DoD to report on the information it collects on services contracts, 

without requiring DoD to maintain unique IT systems to collect specific data elements. DoD should 

center its services contracts reporting on broad, strategic purposes; objectives; and key performance 

results of the contracts being assessed. 

Background 

ICS is essentially a count of contractor full-time equivalents (FTEs), as well as several other data 

points.145 The term, under 10 U.S.C. § 2330a(c)(2)(E), refers to “number of contractor employees, 

expressed as full-time equivalents for direct labor, using direct labor hours and associated cost data 

collected from contractors (except that estimates may be used where such data is not available and 

cannot reasonably be made available in a timely manner for the purpose of the inventory).” Most ICS 

data on contractor labor hours and costs are collected directly from vendors via the Contractor 

Manpower Reporting Applications (CMRAs). The Military Service CMRAs are more modernized 

versions of the original Army CMRA, which dates back to the initial establishment of the Army’s 

system for tracking contractor manpower. Four separate data systems have been developed in DoD—in 

addition to the Army’s they included one for the Navy, one for the Air Force, and one for other DoD 

components. There has been discussion of an enterprisewide CMRA to serve as a common IT system 

for collecting ICS data on contracts throughout DoD.146 Other ICS data are extrapolated using service 

contract obligation data from FPDS. 

DoD vendors report service contract information to the CMRAs, which in turn feed into ICS. The 

physical ICS consists of very large compressed files posted to Defense Procurement and Acquisition 

Policy’s website. The compressed files contain Excel spreadsheets with thousands of line items 

displaying a mixture of vendor-reported and FPDS-derived contractor full-time equivalents (CFTEs). 

As of March 2018, the most recent uploaded version of ICS was the 66 MB (compressed) FY 2016 

version. Ideally, Congress and other stakeholders use ICS for analysis and oversight. Like all other data 

collection and reporting processes, ICS costs time and money, including up-front investments in 

developing policy and new or modified IT systems. Costs also include the ongoing data entry and 

other administrative work by acquisition professionals and vendor employees. 

Observers have questioned whether the ICS data collection process is useful.147 At the congressional 

level, direct feedback from staffers indicates that ICS does not aid in the legislative or oversight process. 

The authors of a 2017 study interviewed 11 congressional staffers from both chambers and both major 

parties, and found that all of them “indicated disappointment with DoD’s actions and deliverables with 

 

144 Technical specialist for medium-sized DoD contractor, phone interview with Section 809 Panel, May 2018. 

145 ICS is required under 10 U.S.C. § 2330a. 

146 See GAO, DoD Inventory of Contracted Services: Timely Decisions and Further Actions Needed to Address Long-Standing Issues, 

GAO-17-17, October 2016, accessed March 23, 2018, https://www.gao.gov/assets/690/680709.pdf. 

147 One senior official said that ICS’s “intent is good” but the “execution is incredibly poor, in fact so much that it’s a waste of time.” 

Acquisition official, discussion with Section 809 Panel, May 2018. 
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respect to the inventory.”148 For vendors, the time spent meeting ICS reporting requirements may 

constitute a substantial impediment to the service contracting process. In the acquisition and 

contracting community, this additional time spent on vendor compliance may mean longer timeframes 

and higher costs. 

ICS is built largely using data from the CMRAs, the stated purpose of which is to achieve the following: 

 Understand workforce composition to allow for “more informed decisions on workforce 

staffing and funding decisions.” 

 Improve workforce oversight to “avoid duplication of effort or shifting of in-house reductions 

to contract.” 

 “Better account for and explain the total workforce.”149

CMRA data-entry work is performed by vendors, not DoD acquisition personnel. To ensure the 

collection of FTE data for the CMRA, DoD contracting officers must require vendors to agree to enter 

information into the system via the Internet.150

Legislative History 

In the FY 2002 NDAA, Congress directed DoD to create a “data collection system to provide 

management information with regard to each purchase of services.”151 This requirement was arguably 

already being met at the time through the DD-350 contract data reporting system and its successor, 

FPDS. 

Many of the current ICS requirements date back to the early 2000s and the Iraq War. Citing 

congressional staffers, researchers have noted that “the impetus for the ICS requirement sprung from 

concern over DoD contractor activities early in Operation Iraqi Freedom,” adding that ICS was a 

“direct outgrowth of security contractor issues and well-publicized events.”152

 

148 See Nancy Young Moore et al., A Review of Alternative Methods to Inventory Contracted Services in the Department of Defense, RAND 

Corporation (2017): 17, doi: 10.7249/RR1704. 

149 “Enterprise Contractor Manpower Reporting Application: ECMRA Overview,” DoD, accessed March 19, 2018, 

https://www.ecmra.mil/help/help.html. 

150 Enterprise-wide Contractor Manpower Reporting Application (ECMRA) clause inclusion requirements vary by DoD component. Army 

regulations state that contracting officers “shall ensure that the requirement to report contractor manpower is included in all contracts, 

task/delivery orders and modifications” (AFARS Subpart 5137.91). Navy and Marine Corps regulations require a standard EMCRA clause 

to be inserted into all service contracts, but exempt IT service contracts from this requirement (NMCARS 5237.102-90). Neither the Air 

Force FAR Supplement’s chapter on service contracting (AFFARS Part 5337) nor Air Force Instruction 63-138, “Acquisition of Services” (as 

published May 11, 2017) require contracting officers to include mandatory ECMRA clauses in their contracts. Defense Information 

Systems Agency (DISA) regulations require contracting officers to require vendors to report data to the ECMRA “for all contracts and 

orders for services and supplies” (DARS 37.102-90). 

151 Section 801(c) of FY 2002 NDAA, Pub. L. No. 107-107 (2001). 

152 Researchers quoted a congressional staffer’s explanation that “during the war in Iraq, when services contracting went through the 

ceiling in terms of expenditures, and issues with security firms arose... The committee wanted visibility on what we’re spending money 

on, where we’re spending it, and what kinds of functions are being performed.” See Nancy Young Moore et al., A Review of Alternative 

Methods to Inventory Contracted Services in the Department of Defense, RAND Corporation (2017): 18, doi: 10.7249/RR1704 
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In 2005 the Secretary of the Army announced “an Army initiative to obtain better visibility of the 

contractor service workforce.”153 The Army was already in the process of developing the CMRA, a 

system for tracking several data elements present in FPDS as well as direct labor hours, which are not 

reported to FPDS. 

In the FY 2008 NDAA, Congress added requirements for DoD to create “inventories and reviews for 

contracts of services” and make them available to the public as well as Congress.154 The FY 2011 NDAA 

provided $4 million for the Air Force and Navy to use the Army’s CMRA, “modified as appropriate for 

Service-specific requirements, for documenting the number of full-time contractor employees (or its 

equivalent).”155

The FY 2012 NDAA changed data collection requirements and also mandated aggregate caps on 

service contract spending based on data collection.156 The FY 2014 and FY 2015 NDAAs extended those 

measures for subsequent years.157 The Senate Armed Services Committee (SASC), in which the 

provision originated, justified the caps on service contracts spending by noting, 

Expected savings from the reduction in staff augmentation services and the civilian workforce freeze 

could easily be lost if other categories of services contracts are permitted to grow without limitation so 

that spending can shift to these contracts. Over the last decade, DOD spending for contract services has 

more than doubled, from $72.0 billion in fiscal year 2000 to more than $150.0 billion.158

The FY 2017 NDAA eliminated earlier requirements that ICS be made publicly available and that the 

DoD Inspector General and GAO each issue annual reports assessing ICS’s accuracy and use in 

strategic planning. The law also raised the threshold above which DoD must report ICS data on service 

contracts, from the simplified acquisition threshold to a flat $3 million.159

The FY 2018 NDAA added a new section to U.S. Code immediately preceding the ICS section of 

Title 10.160 Among other provisions, the section required that DoD ensure “appropriate and sufficiently 

detailed data are collected and analyzed to support the validation of requirements for services contracts 

and inform the planning, programming, budgeting, and execution process of the Department of 

 

153 Assistant Secretary of the Army – Manpower and Reserve Affairs, Department of the Army memo, Accounting for Contract Services,

January 7, 2005, accessed February 28, 2018, http://www.asamra.army.mil/scra/documents/SA%20Memo%2007JAN05%20-

%20Accounting%20for%20Contract%20Services.pdf. 

154 Section 807 of FY 2008 NDAA, Pub. L. No. 110-181 (2008). 

155 Section 8108 of the Department of Defense and Full-Year Continuing Appropriations Act, 2011, Pub. L. No. 112-10 (2011). 

156 Sections 808 and 936 of the FY 2012 NDAA, Pub. L. No. 112-81 (2011). Section 808 of the FY 2012 NDAA mandated that “the total 

amount obligated by the Department of Defense for contract services in fiscal year 2012 or 2013 may not exceed the total amount 

requested for the Department for contract services in the budget of the President for fiscal year 2010.” Section 936 modified data 

collection requirements under 10 U.S.C. § 2330a. 

157 Section 951 of FY 2014 NDAA, Pub. L. No. 113-66 (2013). 

158 Senate Armed Services Committee report to S. 1253, National Defense Authorization Act for Fiscal Year 2012, (S.Rept. 112-26, see 

Section 823 of the Senate bill), June 22, 2011, accessed April 12, 2018, https://www.congress.gov/congressional-report/112thcongress/senate-report/26/1. 

159 Section 812 of FY 2017 NDAA, Pub. L. No. 114-328 (2016). At the time, the simplified acquisition threshold varied based on acquisition 

type but was generally $150,000. 

160 10 U.S.C. § 2329. 
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Defense.”161 The FY 2019 NDAA added clarification to the ICS statute to include applicability to 

contracts for services “closely associated with inherently governmental functions.”162

The House-passed version of the bill would have substantially expanded the required applicability of 

ICS.163 Instead of requiring ICS data collection for purchases of services in excess of $3 million, the 

provision would have required ICS data collection for purchases of services in excess of the simplified 

acquisition threshold.164 It would also have required DoD to collect data on all nine service contract 

acquisition portfolio groups defined by Defense Pricing and Contracting, rather than just four of them. 

These provisions would have reversed changes made under the FY 2017 defense authorization.165 The 

changes were not, however, adopted in the bill conference report.

Current Law and Regulation 

As of 2018, Title 10 requires DoD to “establish a data collection system to provide management 

information with regard to each purchase of services by a military department or Defense Agency.”166

This requirement explicitly applies to logistics management services, knowledge-based services, and 

electronics and communications services.167 For both IT service contracts and other service contract 

inventories, data are uploaded to a public DoD website. 168 These provisions apply to all contracts for 

services as defined under the product and service code system. 

Within 90 days of an inventory filing, each DoD component head is required to review and verify the 

required certifications.169 Effective starting in FY 2022, DoD is required to submit annual information to 

Congress on service contracting that “clearly and separately identifies the amount requested for each 

category of services to be procured.”170

ICS is completely separate from the Synchronized Predeployment and Operational Tracker system 

used to track operational support contractors that accompany U.S. forces during overseas 

deployments.171 For this reason, modifying ICS and CMRA data-collection processes would not affect 

the military’s ability to track support contractors operating overseas. 

 

161 Section 851 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

162 Section 819 of Conference Report to Accompany H.R. 5515, John S. McCain National Defense Authorization Act for Fiscal Year 2019,

July 2018, accessed July 26, 2018, https://docs.house.gov/billsthisweek/20180723/CRPT-115hrpt863.pdf. 

163 H.R. 5515, John S. McCain National Defense Authorization Act for Fiscal Year 2019, accessed June 6, 2018, 

https://www.congress.gov/bill/115th-congress/house-bill/5515/text. 

164 Although the simplified acquisition threshold was raised to $250,000 in the FY 2018 NDAA, the change had not been incorporated into 

the FAR at the time the House passed the FY 2019 NDAA. At the time of House passage in May 2018, the standard threshold was still 

listed in regulation as $150,000. See Section 805 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

165 See Section 812 of FY 2017 NDAA, Pub. L. No. 114-328 (2016). 

166 10 U.S.C. § 2330a(a). 

167 Ibid. 

168 Section 813 of FY 2015 NDAA, Pub. L. No. 113-291 (2014). “Inventory of Services Contracts,” Defense Procurement and Acquisition 

Policy, accessed February 20, 2018, https://www.acq.osd.mil/dpap/cpic/cp/inventory_of_services_contracts.html. 

169 10 U.S.C. § 2330a(d)(2). 

170 10 U.S.C. § 2329(b). 

171 See Office of the Assistant Secretary of Defense for Logistics & Materiel Readiness, Synchronized Predeployment and Operational 

Tracker – Enterprise Suite, accessed June 12, 2018, https://www.acq.osd.mil/log/ps/.spot.html/Info_Sheet_SPOT-ES_FINAL.pdf. 
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Civilian Agency ICS Equivalent 

In the FY 2010 omnibus appropriations law, Congress required civilian agencies to collect and report 

data on service contracts in a way that mirrored practices in DoD.172 Agencies were required to collect 

data “for each service contract” on the following: 

 Descriptions of services purchased and their roles in achieving agency objectives. 

 Offices administering and sponsoring the contract. 

 Funding sources and dollar amounts obligated. 

 Dollar amounts invoiced. 

 Contract types and dates of award. 

 Contractor names and locations of contract performance. 

 Numbers and work locations of contractor and subcontractor employees, expressed as full-time 

equivalents for direct labor. 

 Whether contracts were for personal services. 

 Whether contracts were awarded on a noncompetitive basis. 

There was no explicit requirement in law that civilian agencies build or deploy data collection systems 

akin to DoD’s CMRA systems, or that they require vendors to enter employee data into such systems. 

OMB was tasked with developing and disseminating implementation guidance to executive agencies. 

A 2010 memorandum noted that the majority of data elements required under the law were already 

reported and available via FPDS. OMB recognized that three required data elements were not available 

in FPDS: number of contractor employees, total dollar amount invoiced for services, and descriptions 

of the role services play in achieving agency objectives. The memorandum added that “separate efforts 

are being pursued to facilitate a standard, government-wide data collection process for this information 

so that it may be incorporated into agency inventories beginning in FY 2011.”173

A 2012 GAO report analyzed developments since the FY 2010 appropriations enactment, and 

concluded that agencies “did not fully comply with statutory requirements” on service contract 

inventories.174 GAO noted that complying with these requirements would necessitate developing new 

 

172 Section 743 of the Consolidated Appropriations Act, 2010, Pub. L. No. 111-117 (2009). 

173 OMB Memorandum, Service Contract Inventories, November 5, 2010, accessed May 15, 2018, 

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/procurement/memo/service-contract-inventories-guidance11052010.pdf. 

174 GAO, Civilian Service Contract Inventories: Opportunities Exist to Improve Agency Reporting and Review Efforts, GAO-12-1007,

September 2012, accessed May 15, 2018, https://www.gao.gov/assets/650/648939.pdf. 
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mandatory contract clause language, which would require contractors to conduct additional data 

collection and reporting via existing IT systems.175

In FY 2014, a rule was finalized requiring agencies to add two new contract clauses to contracts above a 

set threshold (as of 2018 the threshold was set at $500,000).176 These clauses require contractors to 

collect and report the following to a centralized database: (a) contract identification numbers, (b) dollar 

amounts invoiced, (c) direct labor hours, and (d) related subcontractor data.177

Discussion 

To assess whether the ICS data collection process is useful, the intended purposes of ICS must be 

established. Congress has provided indications of ICS’s intended purposes in committee reports, 

hearings, and congressionally requested GAO reports. 

Congressional Intent 

The SASC has stated that the main purpose for the original 2002 provisions was because DoD 

has never conducted a comprehensive spending analysis of its services contracts and has made little effort 

to leverage its buying power, improve the performance of its services contractors, rationalize its supplier 

base, or otherwise ensure that its dollars are well spent.178

SASC also stated that DoD’s professional, administrative, and support service contracts showed “an 

almost complete failure to comply with basic contracting requirements” and had “barely begun to 

implement requirements for performance-based services contracting.”179

In a committee report on the FY 2008 provisions that formally established the ICS reporting process, 

SASC provided the following as justification: 

[T]he Department's expenditures for contract services have nearly doubled, but DOD still has not 

conducted a comprehensive analysis of its spending on these services. The specific criteria and timelines 

established in this provision for the inventory and review of activities performed by contractors would 

ensure that such analyses are conducted.180

 

175 Ibid, 8. 

176 Federal Acquisition Regulation; Service Contracts Reporting Requirements, Fed. Reg. 78 FR 80369 (Dec. 31, 2013). 

177 FAR 4.17 establishes thresholds and requires contracting officers to include mandatory data collection clauses in service contracts. FAR 

52.204-14 requires contractors to collect and enter data on service contracts. FAR 52.204-15 requires contractors to collect and enter 

data on indefinite-delivery service contracts. 

178 Senate Armed Services Committee, National Defense Authorization Act for Fiscal Year 2002 Report, S. Rept. 107-62, September 12, 

2001, accessed March 20, 2018, https://www.congress.gov/107/crpt/srpt62/CRPT-107srpt62.pdf. 

179 Ibid. 

180 Senate Armed Services Committee, National Defense Authorization Act for Fiscal Year 2008 Report, S. Rept. 110-77, June 5, 2007, 

accessed March 20, 2018, https://www.congress.gov/110/crpt/srpt77/CRPT-110srpt77.pdf. 
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At the time the ICS data collection infrastructure was being built, it appears that the congressional 

intent mainly fell into three categories: improve buying power, improve service contractor 

performance, and increase DoD transparency to allow for better oversight.181

The House Armed Services Committee’s Subcommittee on Readiness has also shown a recurring 

interest in ICS. Subcommittee Ranking Member Madeleine Bordallo clarified in 2012 that an accurate 

and useful ICS was “imperative” prior to “any further arbitrary cuts in the civilian workforce.”182

Ranking Member Bordallo also questioned U.S. Transportation Command’s Gen. William Fraser on 

DoD’s use of ICS to “insource contracted work more cost-effectively performed by civilians.”183 In 2014, 

Ranking Member Bordallo characterized ICS as “integral to the implementation of a robust total force 

management policy.”184

Defense appropriators have also shown an interest in ICS. House Appropriations Committee’s defense 

subcommittee Ranking Member Pete Visclosky has noted that having a “reliable and comprehensive” 

knowledge of service contracts is important to “help identify and control those costs as we do already 

with the costs of civilian employees.”185

In the Operation and Maintenance (O&M) title of the FY 2010 NDAA, Congress penalized all DoD 

components excluding the Department of the Army for their reported failure to comply with ICS 

requirements.186 Non-Army O&M accounts were reduced by a total of $550 million. The House 

Appropriations Committee stated that this reduction was “directly attributed to the negligence of the 

Departments of the Navy and the Air Force, and the Defense Components to comply” with ICS 

requirements under 10 U.S.C. § 2330a.187

Committee report language for the FY 2017 NDAA provides additional clarification on why ICS exists. 

The Senate committee’s report for the bill stated that its intended ICS modifications were designed to 

“clarify the applicability of the contractor inventory requirement to staff augmentation contracts and to 

reduce data collection and unnecessary reporting requirements.”188 The Senate intent was not to catalog 

 

181 Data collection infrastructure consists of the original Army CMRA, the component-specific CMRAs, and the associated rules, policies, 

and processes. 

182 GPO, Civilian Workforce Requirements—Now and Across the Future Years Defense Program, Hearing before the Subcommittee on 

Readiness of the Committee on Armed Services, House of Representatives, July 26, 2012, 4, accessed March 20, 2018, 

https://www.gpo.gov/fdsys/pkg/CHRG-112hhrg75669/pdf/CHRG-112hhrg75669.pdf. 

183 GPO, Hearing on National Defense Authorization Act for Fiscal Year 2013 and Oversight of Previously Authorized Programs before the 

Committee on Armed Services, House of Representatives, March 7, 2012, 135, accessed March 20, 2018, 

https://www.gpo.gov/fdsys/pkg/CHRG-112hhrg73438/pdf/CHRG-112hhrg73438.pdf. 

184 GPO, Defense Reform: Empowering Success in Acquisition, Committee on Armed Services, House of Representatives, July 10, 2014, 29, 

accessed March 20, 2018, https://www.gpo.gov/fdsys/pkg/CHRG-113hhrg89508/pdf/CHRG-113hhrg89508.pdf. 

185 GPO, Department of Defense Appropriations for 2016, Hearings before a Subcommittee of the Committee of Appropriations, House of 

Representatives, 340-341, accessed March 20, 2018, https://www.gpo.gov/fdsys/pkg/CHRG-114hhrg97457/pdf/CHRG114hhrg97457.pdf. 

186 Department of Defense Appropriations Act, 2010, Pub. L. No. 111-118 (2009). 

187 House of Representatives, Report of the Committee on Appropriations to Accompany H.R. 3326, July 24, 2009, accessed April 30, 2018, 

https://www.congress.gov/111/crpt/hrpt230/CRPT-111hrpt230.pdf. 

188 Senate Armed Services Committee, Report to Accompany S. 2943, National Defense Authorization Act for Fiscal Year 2017,

S.Rept. 114-255, accessed April 2, 2018, https://www.congress.gov/114/crpt/srpt255/CRPT-114srpt255.pdf. 
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the granular details of every single DoD service contract, but rather to provide Congress with a clearer 

view of the use of contractors for staff augmentation. 

The conference report joint explanatory statement for the FY 2017 NDAA added, 

The conferees direct the Secretary of the military department or the head of the Defense Agency to focus 

on the 17 Product Service Codes identified by the Office of Federal Procurement Policy and the 

Government Accountability Office in report GAO–16–46 as high risk for including services that are 

closely associated with inherently governmental functions.189

As of 2017, it appears that at least part of the rationale for ICS was to ensure congressional notification 

in the event that contractors were performing inherently governmental functions.190

Intent Behind ICS Within DoD 

Many DoD and Military Service offices, particularly in the Department of the Army, were involved in 

the initial establishment of the policies and IT systems used to implement ICS. There were several 

reasons why these offices had an interest in creating a well-functioning ICS. One of the most important 

was the hope that a fully developed ICS would enable more effective total force management 

throughout DoD. 

Total Force Management 

Total force management (TFM) is defined in statute as, “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.”191 TFM has been a matter of concern to both DoD and Congress 

since at least the 1970s.192 The basic idea of TFM is that DoD should understand the different costs 

structures associated with different combinations of personnel categories. This understanding will, in 

theory, allow DoD to run more efficiently across the entire enterprise. 

As a core part of TFM, the Under Secretary of Defense for Personnel and Readiness “establishes policy, 

assigns responsibilities, and prescribes procedures for determining the appropriate mix of manpower 

(military and DoD civilian) and private sector support.”193 Figure 6-5 displays GAO’s assessment of 

enterprisewide distribution of military, civilian, and contractor personnel in DoD. 

 

189 GPO, National Defense Authorization Act for Fiscal Year 2017, Conference Report to accompany S. 2943, Rept. 114-840, accessed 

April 2, 2018, https://www.congress.gov/114/crpt/hrpt840/CRPT-114hrpt840.pdf. The joint explanatory statement references an OMB 

memo from 2010 and GAO report from 2015, both of which list product service codes focused on administrative support services and IT 

services. See OMB memorandum, Service Contract Inventories, November 5, 2010, accessed April 2, 2018, 

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/procurement/memo/service-contract-inventories-guidance11052010.pdf. GAO, DoD Inventory of Contracted Services: Actions Needed to Help Ensure Inventory Data Are Complete and Accurate, 

GAO-16-46, November 2015, accessed April 2, 2018, https://www.gao.gov/assets/680/673731.pdf. 

190 The term “inherently governmental” is defined with extensive examples in FAR Subpart 7.5. In addition to ICS, FPDS reports 

information on whether each reported contract action is considered inherently governmental. 

191 Total Force Management (TFM) definition from 10 U.S.C. § 129a(a). 10 U.S.C. § 129 and 10 U.S.C. § 2463 also contain TFM-related 

provisions. 

192 See GAO, DOD ‘Total Force Management’ – Fact or Rhetoric?, January 24, 1979, accessed August 22, 2018, 

https://www.gao.gov/assets/130/125320.pdf. 

193 Policy and Procedures for Determining Workforce Mix, DoDI 1100.22 (2017). 
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Figure 6-5. Distribution of DoD Workforce194

Some DoD stakeholders consider TFM one of the main purposes for ICS data collection requirements. 

GAO reported in 2016 that a potential policy revision, proposed by the Under Secretary of Defense for 

Personnel and Readiness, would “explicitly require use of the inventory to inform budgeting and total 

force management decisions.”195

Using bulk services contract data to inform strategic-level decision making would require relatively 

advanced analytical capabilities. For this reason, usefully applying ICS to TFM decisions might require 

DoD to further develop its data analytics workforce. 

Performance-Based Service Contracting 

Congress has explicitly directed that federal procurement regulations, including those applicable to 

DoD, do the following: 

Establish a preference for use of contracts and task orders for the purchase of services in the following 

order of precedence: 

(1) A performance-based contract or performance-based task order that contains firm fixed prices for the 

specific tasks to be performed. 

(2) Any other performance-based contract or performance-based task order. 

 

194 GAO, Civilian and Contractor Workforces: DOD's Cost Comparisons Addressed Most Report Elements but Excluded Some Costs, 

GAO-18-399, April 2018, accessed August 22, 2018, https://www.gao.gov/assets/700/691305.pdf. 

195 GAO, DOD Inventory of Contracted Services: Timely Decisions and Further Actions Needed to Address Long-Standing Issues, GAO-17-17, 

October 2016, 33, accessed August 22, 2018, https://www.gao.gov/assets/690/680709.pdf. The policy in question had not yet been 

revised as of late 2018. See Guidance for Manpower Management, DoDD 1100.4 (2005). 
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(3) Any contract or task order that is not a performance-based contract or a performance-based task 

order.196

Performance based is defined in law as setting forth contract requirements “in clear, specific, and 

objective terms with measurable outcomes.”197 Congress has given DoD an explicit mandate to 

prioritize measuring the quality of outcomes associated with service contracts. 

Summary of Intent Behind ICS 

Congress has consistently conveyed two major goals behind ICS: improving services acquisition 

strategy in DoD and improving oversight. The reality of ICS, however, shows that it has not met either 

of these goals and has imposed substantial costs and administrative burdens on the defense acquisition 

system. Like many other data collection and reporting requirements, ICS has ultimately manifested 

itself as a legal compliance requirement rather than a strategic decision-making tool. 

GAO Assessments 

Several years’ worth of GAO analyses show DoD has seen mixed success and limited utility in its 

collection of ICS data.198 GAO reported in 2015 that DoD’s ICS data collection process suffered from a 

lack of documentation that resulted in “inventory review processes incorrectly reporting” contract 

data.199 The report recommended that DoD “focus increased attention on contracts more likely to 

include services closely associated with inherently governmental functions during the review 

process.”200 DoD was devoting too much of its administrative bandwidth to collecting ICS data on 

contracts unlikely to include inherently governmental services. 

At a hearing on the FY 2016 NDAA, defense officials discussed the technical challenges of developing 

IT infrastructure to implement ICS. Then-Air Force Assistant Secretary for Acquisition William 

LaPlante said at a hearing on the FY 2016 NDAA, 

The primary difference in our system versus the Army’s system is the maturity of the data and the 

enabling processes and procedures. The Army’s reporting system is more robust since they have been 

using it for years. The Air Force, DoD fourth estate, and Navy applications have been able to incorporate 

many of the Army’s lessons learned, but are still not 100 percent fully implemented primarily due to 

contractor reporting ‘ramp-up.’201

 

196 See 10 U.S.C. § 2302 note, Improvements in Procurements of Services. This section of U.S. Code originated in Section 821 

(Improvements in Procurements of Services) of FY 2001 NDAA, Pub. L. No. 106-398 (2000). Amendments were added in Section 1431 

(Additional Incentive for Use of Performance-Based Contracting for Services) of FY 2004 NDAA, Pub. L. No. 108-136 (2003). 

197 10 U.S.C. § 2302 note. 

198 See, for example, GAO, Defense Acquisitions: Continued Management Attention Needed to Enhance Use and Review of DOD’s 

Inventory of Contracted Services, GAO-13-491, May 2013, accessed March 1, 2018, https://www.gao.gov/assets/660/654814.pdf. 

199 GAO, DoD Inventory of Contracted Services: Actions Needed to Help Ensure Inventory Data Are Complete and Accurate, GAO-16-46,

November 2015, accessed February 28, 2018, https://www.gao.gov/assets/680/673731.pdf. 

200 Ibid. 

201 GPO, Department of Defense Authorization for Appropriations for Fiscal Year 2016 and the Future Years Defense Program, Hearing 

before the Committee on Armed Services, United States Senate, April 22, 2015, accessed March 20, 2018, 

https://www.gpo.gov/fdsys/pkg/CHRG-114shrg99481/pdf/CHRG-114shrg99481.pdf. 
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Then-Army Assistant Secretary for Acquisition, Logistics, and Technology Heidi Shyu added to 

Assistant Secretary LaPlante’s comments by listing some of the major technical costs to implementing 

ICS. 

First, the Department lacks sufficient dedicated resources to successfully manage a common reporting 

application. To remedy this, representatives from the Army and other military departments are currently 

working with the Acting Assistant Secretary of Defense (Readiness and Force Management) to redefine 

and re-scope the missions, functions, organizational placement and composition of the Total Force 

Management Support Office (TFMSO). Second, the Department lacks a methodology to consistently 

identify Closely Associated with Inherently Governmental (CAIG) functions. Some of the inventory 

review processes may not be sufficient to accurately identify CAIG functions. Consistent methodologies 

must be established across the Department of Defense as an initial step in developing and applying a 

common reporting application.202

Even assuming perfect success at solving the technological challenges in ICS data collection, getting 

vendors to report information to CMRA systems poses a separate challenge. In 2014, DoD proposed an 

acquisition rule that would have added a new, mandatory contract clause to defense service contract 

regulations.203 The new clause would have required the entry of ICS data on prime contracts and 

subcontracts into CMRAs, but it was not finalized and was withdrawn in December 2016.204

In October 2016, GAO reiterated past recommendations on ICS. The report pointed out that although 

the Army’s contractor manpower data software was completed and functional, DoD lacked an 

enterprisewide system and associated business processes. GAO reported that DoD was considering the 

development and deployment of an enterprisewide CMRA, but awaiting the results of a study by the 

RAND National Defense Research Institute.205

 

 

202 Ibid. 

203 Defense Federal Acquisition Regulation Supplement: Service Contract Reporting (DFARS Case 2012-D051), Fed. Reg. 79 FR 32522 

(Jun. 5, 2014). 

204 Timetable information from OMB, Office of Information and Regulatory Affairs, Regulation Identifier Number (RIN) 0750-AI24, 

withdrawn December 28, 2016, accessed March 20, 2018, https://www.reginfo.gov. 

205 GAO, DoD Inventory of Contracted Services: Timely Decisions and Further Actions Needed to Address Long-Standing Issues, GAO-17-17,

October 2016, accessed March 1, 2018, https://www.gao.gov/assets/690/680709.pdf. 
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GAO’s Standing Recommendations on ICS 

GAO reports list several open recommendations related to ICS, some of which are described as not implemented and 

others partially implemented. They include the following: 

 “Provide updated information in certification letters on how [military departments] resolved the instances of 

contractors performing inherently governmental functions or unauthorized personal services in prior inventory 

reviews.”206

 “Revise annual inventory review guidance to clearly identify the basis for selecting contracts to review and to 

provide approaches the components may use to conduct inventory reviews that ensure the nature of how the 

contract is being performed is adequately considered. If DOD intends for components to review less than 100 

percent of its contracts, then the guidance should clearly identify the basis for selecting which contracted functions 

should be reviewed.”207

 “Approve a plan of action, with timeframes and milestones, for rolling out and supporting a department-wide data 

collection system as soon as practicable after December 1, 2014. Should a decision be made to use or develop a 

system other than the Enterprise-wide Contractor Manpower Reporting Application system currently being 

fielded, document the rationale for doing so and ensure that the new approach will provide data that satisfies the 

statutory requirements for the inventory.”208

 “Identify an accountable official within the departments with responsibility for leading and coordinating efforts 

across their manpower, budgeting, and acquisition functional communities and, as appropriate, revise guidance, 

develop plans and enforcement mechanisms, and establish processes.”209

 “Provide clear instructions, in a timely manner, on how the services requirements review boards are to identify 

whether contract activities include closely associated with inherently governmental functions.”210

 “Require acquisition officials to document, prior to contract award, whether the proposed contract action includes 

activities that are closely associated with inherently governmental functions.”211

 “Ensure that military departments and defense agencies review, at a minimum, those contracts within the product 

service codes identified as requiring heightened management attention and as more likely to include closely 

associated with inherently governmental functions.”212

 “Clearly identify the longer term relationships between the support office, military departments, and other 

stakeholders.”213

A March 2018 GAO report cited manpower officials who noted some benefits of ICS, crediting it with 

helping them to analyze cost factors as well as respond to questions from Congress and DoD 

 

206 Ibid, 29. 

207 Ibid. 30. 

208 Ibid. 

209 Ibid. 

210 Ibid. 

211 Ibid. 

212 Ibid, 31. 

213 Ibid. 
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leadership. Officials also, however, noted that ICS was in many cases “too outdated to help inform 

strategic decisions.”214 The report cited the Air Force as an example of relatively low strategic utility: 

Under the program objective memorandum (POM) process, the Air Force identifies future budget 

requests and workforce needs 2 years before the beginning of a fiscal year, whereas the most recent 

inventory data available may already be 2 years old when that process starts. To illustrate the issue, the 

officials noted that they were already planning for the 2020 POM in early fiscal year 2018, although the 

fiscal year 2016 inventory was not yet available. As a result, if the Air Force were to use inventory data 

to plan for the 2020 POM, they would have to rely on fiscal year 2015 inventory data.215

Utility of ICS to Policymakers 

The RAND study, released in 2017, represents one of the most comprehensive and up-to-date 

assessments of ICS reporting requirements. The authors concluded that ICS, in general, “falls short of 

meeting the needs of Congress and DoD.”216

The authors interviewed both congressional staffers and DoD personnel to hear their perceptions of the 

usefulness of ICS. Congressional staffers stated that the ICS format is “not useful and hinders 

assessment of the data.”217 The data reporting was described as “too detailed and would be more useful 

if it were synthesized before reporting.”218 The congressional intent behind 10 U.S.C. § 2330a appears 

not to have been a collection of detailed data at the transaction level, but rather an analysis of DoD’s 

service contracts at the aggregate level. 

The data that would be needed for such an analysis is already reported to existing systems by all 

Military Services and Defense Agencies. For the purpose of service contract data analysis, the 

ICS IT systems akin to the Army’s CMRA and its successors may be unnecessary. A short annual report 

providing an overview of DoD service contracts could be completed solely with currently-available 

non-ICS, non-CMRA tools and data systems. Historically, however, Congress has regularly expressed 

the view that existing data reporting systems are inadequate. 

Redundant Data Collection 

Redundancies in service contract data collection have spurred complaints from both acquisition 

personnel and DoD contractors. Many of the data elements collected via ICS processes are already 

available in FPDS and the System for Award Management (SAM, a governmentwide repository of 

contractor company information). 

The 2017 RAND report on ICS noted government requirements for vendors to “enter a significant 

amount of overlapping data into CMRA and SAM.”219 The report also noted that each one of the 

 

214 GAO, DOD Contracted Services: Long-Standing Issues Remain about Using Inventory for Management Decisions, GAO-18-330,

March 2018, accessed April 2, 2018, https://www.gao.gov/assets/700/690954.pdf. 

215 Ibid. 

216 Nancy Young Moore et al., A Review of Alternative Methods to Inventory Contracted Services in the Department of Defense, RAND 

Corporation (2017), doi: 10.7249/RR1704. 

217 Ibid, xiv. 

218 Ibid. 

219 Ibid, 40. 
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customized, component-specific versions of CMRA has “its own login information and password, with 

various inconsistencies across the systems.”220

A 2017 GAO report reviewed the quality of DoD’s ICS data on personal services contracts. The report 

noted that relevant ICS data is also reported in FPDS, but found that discrepancies between the two 

information collection processes showed an “absence of accurate data.”221

Underlying Data Incompatibility 

In addition to the problem of collecting redundant data in multiple systems, CMRAs have an 

underlying data architecture that is incompatible with preexisting contracting data systems. CMRA is 

designed to collect data on contract performance, specifically the number of full-time equivalents, 

whereas FPDS and related systems are designed to collect data on contract actions. This distinction 

may appear to be a subtle; however, from a data science perspective it results in a need for customized 

interfaces and human specialists to convert from one data architecture into another. 

Assuming there is a net benefit to ensuring collection of accurate data on the number of people 

associated with service contracts, the solution may be to add data elements and/or machine-to-machine 

interfaces to existing IT systems rather than implementing ICS through the development of new 

IT systems. 

Conclusions 

ICS, although designed with the good intention of enabling strategic decision making in DoD’s 

acquisition of services, has not achieved this goal. ICS and the IT systems that enable it are focused 

largely on legal compliance, not utility or accuracy.222

ICS does not appear to add substantial value, but it does impose costs. The development and continued 

maintenance of CMRA systems, like for any business software system, require time and money. ICS 

compels acquisition professionals to dedicate time that would otherwise be used for more directly 

acquisition-related tasks. Vendors must also allocate limited resources to calculating and entering data 

on contractor FTEs. This effort indirectly increases contract costs to the government. 

Although the costs imposed by ICS data collection are potentially nontrivial, there is little value added 

from a large spreadsheet of raw data. The data collection process may, in fact, reduce value by 

diverting high-level attention away from what really matters. The focus on how many people work on 

a given contract, rather than the performance of the contract, may lead to a reduction in strategic 

thinking about how to get more value out of services contracts. One expert said that in focusing largely 

on numbers of people, Congress has for years been “asking the wrong question.”223

 

220 Ibid. 

221 GAO, Federal Contracting: Improvements Needed in How Some Agencies Report Personal Services Contracts, GAO-17-610, July 2017, 

accessed March 20, 2018, https://www.gao.gov/assets/690/686179.pdf. 

222 One acquisition professional, discussing ICS and CMRA systems, said, “Is the data useful? My guess is it isn’t... We were living just fine 

before it, we’d be living just fine without it.” Air Force contracting officer, discussion with Section 809 Panel, April 2018. 

223 Military department acquisition official, discussion with Section 809 Panel, August 2018. 
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DoD should provide Congress and other oversight bodies with more intelligible and useful 

information on services contracts. Congress should direct DoD to develop and propose a Services 

Contracting Reporting and Analysis System as a replacement for the existing ICS requirements. The 

proposal should include suggested statutory authorization language, a funding requirements estimate, 

and policy implementation language, including addressing contractor reporting requirements. It 

should be specifically designed to support and integrate with DoD’s total workforce management 

system and acquisition requirements development processes. 

Implementation 

Legislative Branch 

 Direct DoD to develop and propose a Services Contracting Reporting and Analysis System as a 

replacement for the existing ICS requirements. 

 Direct DoD to develop proposed statutory authorization language, a funding requirements 

estimate, and proposed policy implementation language, including addressing contractor 

reporting requirements, for the new system. 

Executive Branch 

 Comply with the new requirement by developing suggested statutory authorization language, a 

funding requirements estimate, and policy implementation language for a new Services 

Contracting Reporting and Analysis System. 

 Design the new system specifically to support and integrate with DoD’s total workforce 

management system and acquisition requirements development processes. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 6. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

RECOMMENDATIONS 71 THROUGH 73 SHARE THE COMMON THEME: 

ADOPTION OF AN AUDIT PROFESSIONAL PRACTICE GUIDE 

Recommendation 71: Adopt a professional practice guide to support the 

contract audit practice of DoD and the independent public accountants DoD 

may use to meet its contract audit needs, and direct DoD to establish a working 

group to maintain and update the guide. 

Problem 

DCAA provides professional services and skilled advice to DoD contracting officers. With the 

introduction of independent public accountants (IPAs) into these oversight functions, the quality and 
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consistency of advice contracting officers receive will depend on the quality and consistency of how 

oversight professionals interpret and apply foundational standards that guide their work. 

Background 

Although professional standards are common in the auditing profession, none of them have been 

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. 

Discussion 

Because professional standards generally establish principles rather than rules, they are subject to 

interpretation. DoD’s oversight professionals will benefit from a uniform, collaborative interpretation 

of certain professional standards as they apply to government contract oversight. Without a 

professional practice guide (PPG), 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 importance that require a collaborative interpretation on how to apply the 

standards in the contract oversight environment include (among many others) materiality, risk, 

internal controls, independence, objectivity, sufficient evidence, and reliance on the work of others. 

Conclusions 

The Section 809 Panel’s Volume 1 Report concluded that a PPG would be beneficial and supplemental to 

existing guidance for professionals involved in the business of government contract auditing. As 

written by the Section 809 Panel, the PPG (see Attachment 6-1) provides information on how to 

interpret and apply specific auditing concepts for government contract audits to assist government 

auditors, private-sector auditors, contracting officers, and other stakeholders involved in the audit 

process. Although these concepts are established in auditing literature, the PPG focuses on how the 

concepts can be applied for the unique purpose of federal government contract oversight. A working 

group of subject-matter experts in contract auditing developed the guide for the panel. The team 

included members from key stakeholder communities, including Section 809 Panel representatives, 

DCAA, GAO, AICPA, DCMA, and industry. Members of the team worked collaboratively to consider 

and address concerns that have been raised by Congress and others. 

The PPG provides the requisite guidance to address Congress’s direction to the Section 809 Panel in the 

FY 2018 NDAA, Section 803, with respect to numeric materiality. The PPG sets forth clear materiality 

guidelines that help oversight professionals plan their work and provide 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 

the contracting officer’s role is to manage DoD’s risk, rather than avoid it. The cost of DoD’s oversight, 

including adverse effects on the timeliness of decision making, must be balanced with expected 

benefits of that oversight. The Cost Accounting Standards (CAS) Board’s administrative regulations 

establish a variety of qualitative materiality considerations appropriate for and applicable to any 

business decision affecting contract costs/prices. 
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Besides materiality, the PPG addresses an internal controls framework for audits of contractor 

accounting systems. As discussed below, adoption of the internal controls framework for review of 

accounting systems requires amendments to statute and the DFARs, and the Section 809 Panel provides 

the appropriate language in support of the amendments. 

In the Section 809 Panel’s Volume 1 Report, Recommendation 14 provided for DCAA to incentivize 

contractor compliance and manage risk efficiently through robust risk assessment. The PPG provides a 

risk model that should be employed by DCAA. Although, DCAA has historically used a risk-based 

approach to determine which contractors are subject to incurred cost audits, as part of the PPG 

working group, DCAA has embraced an expanded risk model to include additional risk factors that 

further refine and improve the process. 

The Volume 1 Report noted that 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 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. To accomplish the 

desired outcome of both the federal government’s internal control framework and the FAR’s Guiding 

Principles, it is important to recognize DCAA’s role in developing and embracing the enhanced risk 

model. 

Implementation 

Legislative Branch 

 Direct DoD to adopt the PPG as guidance in support of DoD’s contract audit practice and the 

practice of IPAs that the Department may use in support of its contract audit needs. In adopting 

the PPG, the Congress should ensure that DoD establishes a collaborative process for future 

maintenance of the guide to include changes to the guide. Specifically, direct the Secretary of 

Defense to charter a PPG working group (PPGWG), chaired by DCAA/DCMA for the purpose 

of ensuring the same collaborative process is used for changes to the guide as was established 

by the Section 809 Panel. As part of this direction, the PPG does not take the place of federal 

regulations or auditing standards. Direct the Secretary of Defense to charter a working group 

similar to the Section 809 Panel, that is exempt from FACA, although the proceedings and 

decisions of the panel would be posted on the DCAA website. 

Executive Branch 

 Adopt the PPG as guidance in support of DoD’s contract audit practice and the practice of IPAs 

that the Department may use in support of its contract audit needs. In doing so, the Secretary of 

Defense should charter a PPGWG, chaired by DCAA/DCMA for the purpose of ensuring the 

same collaborative process is used for changes to the guide as was established by the 

Section 809 Panel. The process should ensure that the PPG stays current with changes in the 

practice and that changes to the guide are considered collaboratively by a group of experts in 
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the field of contract auditing. Specifically, the Section 809 Panel recommends the following 

approach to long-term support of the PPG. 

 The Secretary of Defense should charter a PPGWG with five permanent representatives: 

o A representative of the DCAA appointed by the Director of DCAA. 

o A representative of the DCMA appointed by the Director of DCMA. 

o A representative of the U.S. GAO appointed by the Comptroller General of the United 

States. 

o A representative of industry nominated by CODSIA and agreed on by a majority of the 

representatives from DCAA, DCMA, and GAO. 

o A representative from the American Institute of Certified Public Accountants and 

agreed on by a majority of the representatives from DCAA, DCMA, and GAO. 

 Rotate the committee chair position biennially between DCAA and DCMA. The chair is 

responsible for scheduling and recording proceedings and decisions made by working group 

members. The committee members do not have terms but changes to membership on the 

committee should be re-assessed by the collective members on an annual basis. The appointees 

from the DCAA, DCMA, GAO, and AICPA will be automatically removed from the working 

group should they leave their organizations. The working group will meet not less than semiannually and otherwise as determined necessary by the members of the committee. The 

working group shall have an indefinite termination date. 

 Administer the PPG at DCAA as follows: 

 Self-initiate minor revisions due to spelling and grammatical errors. 

 Make substantive changes as agreed on by a majority of the PPG working group members. 

 Maintain the most recent version of the PPG on the DCAA public website. 

 Adopt substantive revisions based on a majority vote of working group members. Substantive 

revisions are defined as changes to the guides meaning, adding new context to existing concepts 

in the guide or adding or deleting information in the guide. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 6. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 
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Recommendation 72: Replace 18 system criteria from DFARS 252.242-7006, 

Accounting System Administration, with an internal control audit to assess the 

adequacy of contractors’ accounting systems based on seven system criteria. 

Problem 

DoD is not obtaining timely assurance that internal controls for defense contractors’ accounting 

systems are properly designed and functioning.224 Ensuring effective internal controls is one of the most 

efficient ways to protect the government’s interest, reduce risk, and improve performance. 

Background 

Accounting business systems make up much of the business systems in DoD’s Contractor Business 

Analysis Repository (CBAR). In addition to being the most prevalent contractor system, it is a critical 

system for ensuring the government’s interests are protected when doing business through flexibly 

priced contracts. 

FAR 16.301-3, Limitations, recognizes the criticality of the accounting system by requiring contractors 

to maintain an adequate accounting system for determining cost applicable to contracts awarded on the 

basis of cost.In addition, FAR subpart 32.5, Progress Payments Based on Costs, and FAR 32.503, Post 

Award Matters, contain multiple provisions requiring an adequate accounting system and controls. 

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. 

To do business with the government, contractors must demonstrate capability to meet the requirements 

outlined in the Standard Form 1408, Pre-Award Survey of a Prospective Contractor Accounting 

System. This preaward system review should not be confused with the reviews required by the 

DFARS Business System rule that tests the design and capability of the system, as well as whether 

controls are in place and functioning properly. 

Discussion 

In its Volume 1 Report, the Section 809 Panel recommended that DoD replace the system criteria in 

DFARS 252.242-7006, Accounting System Administration, with an internal control audit to assess the 

adequacy of contractors’ accounting systems. The panel chartered a working group to develop a PPG 

and asked the working group to review and refine the panel’s previously recommended accounting 

system criteria and the internal controls framework for assessment of contractor accounting systems. 

Conclusions 

As recommended in the Section 809 Panel’s original recommendation in its Volume 1 Report, DoD 

should embrace an internal control framework for accounting system audits and has refined the 

framework necessary to implement the recommendation. An internal control audit framework based 

on a body of professional standards developed to address SOX 404(b) serves as a foundation to help 

meet the government’s objectives to obtain assurance that contractors have effective internal controls 

 

224 DCAA, email to Section 809 Panel Staff, December 18, 2017. The email indicated that DCAA completed eight accounting system audits 

in FY 2016. 
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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. 

Using the private-sector-established internal control audit framework will resolve a consistent 

complaint expressed in Section 809 Panel meetings with stakeholders that the DFARS accounting 

system criteria were not objective and measurable because of the current terminology used in the 

business system rule. Internal control audits should be performed as the basis for assessing the 

adequacy of defense contractors’ accounting systems because these audits provide the following: 

 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 also satisfy the requirement at Section 893 (a) of the FY 2017 

NDAA to develop “clear and specific business system requirements that are identifiable and made 

publicly available.”225

Implementation 

Legislative Branch 

 There are no statutory changes required for this recommendation. 

Executive Branch 

 Amend the DFARs to replace the system criteria from DFARS 252.242-7006, Accounting System 

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

accounting systems. 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 

provide reasonable assurance of the following: 

 Direct costs and indirect costs are classified in accordance with contract terms, FAR, Cost 

Accounting Standards (CAS) and other regulations, as applicable. 

 Direct costs are identified and accumulated by contract in accordance with contract terms, 

FAR, CAS and other regulations, as applicable. 

 Methods are established to accumulate and allocate indirect costs to contracts in accordance 

with contract terms, FAR, CAS and other regulations, as applicable. 

 

225 Section 893 of FY 2017 NDAA, Pub. L. No. 114–AS328 (2016). 
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 General ledger control accounts accurately reflect all transactions recorded in subsidiary 

ledgers and/or other information systems that either integrate or interface with the general 

ledger including, but not limited to, timekeeping, labor cost distribution, fixed assets, 

accounts payable, project costs, and inventory. 

 Adjustments to the general ledger, subsidiary ledgers, or other information systems bearing 

on the determination of contract costs (e.g. adjusting journal entries, reclassification journal 

entries, cost transfers, etc.) are done for reasons that do not violate contract terms, FAR, 

CAS, and other regulations, as applicable. 

 Identification and treatment of unallowable costs are accomplished in accordance with 

contract terms, FAR, CAS, and other regulations, as applicable. 

 Billings are prepared in accordance with contract terms, FAR, CAS, and other regulations, as 

applicable. 

Note: Draft regulatory text can be found in the Implementation Details subsection at the end of Section 6. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

Recommendation 73: Revise the definition of business system deficiencies to 

more closely align with generally accepted auditing standards. 

Problem 

The definition of the term significant deficiency for contractor business systems in Section 893 of the 

FY 2011 NDAA and the DFARS does not align with generally accepted auditing standards for 

evaluating and reporting on internal control deficiencies. This lack of consistency creates confusion 

regarding the identification, severity, meaning, and resolution of deficiencies. 

Background 

The FY 2011 NDAA and DFARS definition for significant deficiency describes it as materially affecting 

DoD officials’ and contractor’s ability to rely on information produced by the business system that is 

needed for management purposes. The term in generally accepted auditing standards for a deficiency 

of this severity, that is, a deficiency that is material, is material weakness. Generally accepted auditing 

standards also use the term significant deficiency, but to describe a deficiency that is less severe than a 

material weakness. The use of the same term to mean different levels of severity of a deficiency creates 

confusion about the meaning of significant deficiency among contractors, independent public 

accountants performing SOX 404(b) audits, government auditors, and the acquisition community. 

The FY 2011 NDAA and the DFARS regulations provide for only a significant deficiency, but in reality, 

the contractor business system could have a number of deficiencies that range from trivial to severe. 

Reporting deficiencies by different levels of severity, and in a manner that aligns with established 

auditing standards, will allow contracting officers to make informed decisions on the acceptability of 

the business system 
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Discussion

The FY 2011 NDAA, Section 893, and DFARS 252.242-7005, Contractor Business Systems, define 

significant deficiency as “a shortcoming in the system that materially affects the ability of officials of the 

Department of Defense and the contractor to rely on information produced by the system that is 

needed for management purposes.” The term and its definition are mismatched relative to generally 

accepted auditing standards, which have a two-tiered approach to evaluating and reporting business 

system deficiencies. As shown here, the statutory and regulatory definition above better aligns with the 

private-sector, Public Company Accounting Oversight Board, GAO Yellow Book, and Securities and 

Exchange Commission definitions of material weakness: 

Material weakness. A deficiency, or a combination of deficiencies, in internal control over financial 

reporting, such that there is a reasonable possibility that a material misstatement of the entity's financial 

statements will not be prevented, or detected and corrected, on a timely basis. A reasonable possibility 

exists when the likelihood of an event occurring is either reasonably possible, meaning the chance of the 

future event occurring is more than remote but less than likely, or is probable. 

Significant deficiency. A deficiency, or a combination of deficiencies, in internal control over financial 

reporting that is less severe than a material weakness yet important enough to merit attention by those 

charged with governance. (AICPA, Professional Standards, AU-C section 265, Communicating Internal 

Control Related Matters Identified in an Audit) 

Financial statement audits and examination engagements conducted in accordance with GAO, 

Government Auditing Standards 2018 Revision, (paragraphs 6.29 and 7.42), refers to use of the terms 

material weakness reporting on internal control deficiencies. The paragraph also references the AICPA, 

Professional Standards, AU-C section 265, for consistent use of the terminology. 

Conclusions 

The definition for system deficiencies in the FY 2011 NDAA, Section 893, and DFARS regulation 

require revision to be more consistent with the definitions in generally accepted auditing standards 

that apply to different types of engagements (e.g., inspection, attestation, and performance). 

Statutory Revision 

In the FY 2011 NDAA, Section 893, the term significant deficiency and its definition need to be stricken 

and replaced with the term material weakness and its definition as follows: 

 Material Weakness: A deficiency, or combination of deficiencies, in internal control over risks 

related to Government contract compliances or other shortcomings in the system, such that 

there is a reasonable possibility that a material noncompliance will not be prevented, or 

detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood of 

an event occurring is either reasonably possible, meaning the chance of the future event 

occurring is more than remote but less than likely, or is probable. 
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DFARS Revision 

In the DFARS regulations (e.g., Accounting System Administration 252.242-7006, Contractor Business 

Systems 252.242-7005), the term significant deficiency and its definition should be stricken and replaced 

with the term material weakness and its definition. Additionally, the regulations should include new 

terms and their respective definitions for significant deficiency and other deficiency. 

The definition of material weakness, significant deficiency, and other deficiency is applicable to any 

type of engagement (e.g., attestation, inspection) that is designed to test internal controls or compliance 

with a specific criterion. For an audit or inspection designed to test compliance with specific criteria, a 

deficiency can occur due to either internal control defect or a system shortcoming. A shortcoming in 

this regard would occur if a business system lacks a capability or element of functionality required by 

the system criteria. The revised DFARS language for business system deficiencies is as follows: 

 Material Weakness: A deficiency, or combination of deficiencies, in internal control over risks 

related to Government contract compliances or other shortcomings in the system, such that 

there is a reasonable possibility that a material noncompliance will not be prevented, or 

detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood of 

an event occurring is either reasonably possible, meaning the chance of the future event 

occurring is more than remote but less than likely, or is probable. 

 Significant Deficiency: A deficiency, or combination of deficiencies, in internal control over risks 

related to Government contract compliance or other shortcomings in the system that is less 

severe than a material weakness yet important enough to merit the attention of those charged 

with governance. 

 Other Deficiency: A deficiency, or combination of deficiencies, in internal control over 

Government contract compliance or other shortcomings in the system that have a clearly trivial, 

or inconsequential, effect on the ability of the business system to prevent or detect and correct, 

material noncompliances on a timely basis. 

The other deficiency definition acknowledges the possibility that a business system deficiency, or 

combination of systems deficiencies, may have a clearly trivial effect on the quality of information 

produced by the contractor’s business systems. Clearly trivial represents the inverse of material whether 

judged by any criteria of size, nature, or circumstances. Other deficiencies will not impact the audit 

opinion or conclusions and will not be included in the audit report. These deficiencies may be 

communicated to the contracting officer using email or other method of communication. 

The revisions introduce new terms, such as material noncompliance and misstatement and a new 

definitions for acceptable contractor business system that are not currently in the DFARS but are 

important to understanding the revised business system deficiency definitions. As a result, and in 

conjunction with the revised DFARS deficiency definitions, the following definitions should be added 

to the DFARS to enhance understanding and provide clarity to stakeholders: 

 Material Noncompliance: A misstatement in the information provided to the Government 

(e.g., billings, incurred cost submissions, pricing proposals, etc.) that will materially influence, 
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and may adversely impact the economic or management decisions of the users of the 

information. 

 Misstatement: Information provided to the Government does not comply with contract terms 

and applicable federal regulations such as the Federal Acquisition Regulations (FAR) and Cost 

Accounting Standards (CAS). 

 Acceptable Contractor Business System: Contractor business systems that comply with the 

criteria of applicable business system clauses and does not contain a material weakness that 

would affect the ability of officials of the Department of Defense to rely on information 

produced by the business system that is needed for management purposes. 

Implementation 

Legislative Branch 

 Revise and replace the definition for significant deficiency in Section 893 of the FY 2011 NDAA, 

Section 893, with the new definitions of material weakness. 

 Define material weakness as a deficiency, or combination of deficiencies, in internal control over 

risks related to government contract compliances or other shortcomings in the business system, 

such that there is a reasonable possibility that a material noncompliance will not be prevented, 

or detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood 

of an event occurring is either reasonably possible, meaning the chance of the future event 

occurring is more than remote but less than likely, or is probable. 

Executive Branch 

 Revise the Business System DFARS sections (for all systems with the significant deficiency 

defined) to replace the term significant deficiency with the new definitions of material weakness, 

significant deficiency, and other deficiency as follows: 

 Significant Deficiency: A deficiency, or combination of deficiencies, in internal control over 

risk related to Government contract compliance or other shortcomings in the business 

system that is less severe than a material weakness yet important enough to merit the 

attention of those charged with governance. 

 Other Deficiency: A deficiency, or combination of deficiencies, in internal control over 

Government contract compliance or other shortcomings in the business system that have a 

clearly trivial, or inconsequential, effect on the ability of the business system to prevent or 

detect and correct, material noncompliances on a timely basis. 

 Define material weakness as a deficiency, or combination of deficiencies, in internal control over 

risks related to Government contract compliances or other shortcomings in the business system, 

such that there is a reasonable possibility that a material noncompliance will not be prevented, 

or detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood 

of an event occurring is either reasonably possible, meaning the chance of the future event 

occurring is more than remote but less than likely, or is probable. 
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Streamlining and Improving Compliance Volume 3 | Page 385 

 Revise the Business System DFARS sections (for all systems) to include the definitions: 

 Material Noncompliance: A misstatement in the information provided to the Government 

(e.g. billings, incurred cost submissions, pricing proposals, etc.) that will materially 

influence, and may adversely impact the economic or management decisions of the users of 

the information. 

 Misstatement: Information provided to the Government does not comply with contract 

terms and applicable federal regulations such as the Federal Acquisition Regulations (FAR) 

and Cost Accounting Standards (CAS). 

 Acceptable Contractor Business System (DFARS Revision): Means contractor business 

systems that complies with the criteria of applicable business system clauses and does not 

contain a material weakness that would affect the ability of officials of the Department of 

Defense to rely on information produced by the system that is needed for management 

purposes. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 6. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

 
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THIS PAGE INTENTIONALLY LEFT BLANK 
Department of Defense

Professional 

Practice Guide 

Audits and Oversight of 

Defense Contractor Costs and 

Internal Controls 

FIRST EDITION 

January 2019
THIS PAGE IS INTENTIONALLY LEFT BLANK 
DoD Professional Practice Guide January 2019 

iii 

Table of Contents 

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

Maintenance ..................................................................................................... 1

Overview ......................................................................................................... 2

CHAPTER 1: RISK ASSESSMENT ......................................................................... 4

The Need for Risk Assessment ............................................................................... 4

Risk Assessment Framework ................................................................................. 4

CHAPTER 2: MATERIALITY IN AUDITS OF INCURRED COSTS ....................................... 6

Materiality and Significance in Incurred Cost Audits .................................................... 6

Compatibility of Commercially Accepted Standards for Risk and Materiality ....................... 7

Materiality in the Context of Contract Cost Audits ...................................................... 7

Definitions ....................................................................................................... 8

Engagement Materiality Framework ...................................................................... 10

CHAPTER 3: AUDITS OF INTERNAL CONTROL OVER GOVERNMENT CONTRACT 

COMPLIANCE ............................................................................................. 21

Government Perspective on the Importance of Internal Controls .................................. 21

Defining Internal Controls .................................................................................. 21

Internal Control Frameworks............................................................................... 22

Concept of Reasonable Assurance ......................................................................... 23

Contractor Internal Controls ............................................................................... 23

Hierarchy of Internal Control Deficiencies .............................................................. 30

Reporting Requirements for Internal Control Deficiencies ........................................... 32

APPENDIX A: CONSIDERATION OF MATERIALITY AND INDIRECT COSTS ........................ 34

APPENDIX B: TOTAL SUBJECT MATTER ............................................................. 38

 
January 2019 DoD Professional Practice Guide 

iv 

LIST OF FIGURES 

Figure 1. Illustrative Basic Quantified Materiality Calculation .............................................. 12

Figure 2. Calculated Adjusted Materiality Illustration ....................................................... 16

Figure 3. Application of Materiality at Lower Levels of Cost ................................................ 17

Figure 4. Evaluating a Business Process and Identifying Internal Controls ................................ 24

Figure 5. Example with Indirect Costs .......................................................................... 35

LIST OF TABLES 

Table 1. Risk Assessment Framework ............................................................................. 5

Table 2. Audit Terminology ........................................................................................ 8

Table 3. Engagement Materiality Framework .................................................................. 10

Table 4. Incurred Cost Audit Proposals Subject Matter ...................................................... 11

Table 5. Comparison of Quantified Materiality to Cost Elements........................................... 13

Table 6. Justifications for Degrees of Adjustment to the Quantified Materiality ........................ 15

Table 7. Application of Materiality at Lower Levels of Cost ................................................. 16

Table 8. Examples of Qualitative Considerations Unique to Incurred Costs Audits ...................... 19

Table 9. Interrelationships among Objective, Accounting System Criteria, and Risk of Not 

Achieving Objective ........................................................................................... 26

Table 10. Comparison of Costs Allocated to Flexibly Priced Government Contracts .................... 35

Table 11. Revised Materiality Calculations..................................................................... 36

Table 12. Materiality Adjusted by 20 Percent ................................................................. 36

Table 13. Comparison of Adjusted Materiality to Accounts in Overhead Cost Pool ...................... 36
DoD Professional Practice Guide January 2019 

1 

INTRODUCTION 

The Section 809 Panel developed this Professional Practice Guide (PPG) as a supplement to existing 

guidance for professionals involved in Department of Defense (DoD) procurement contract auditing. A 

Section 809 Panel working group collaboratively developed this guide to provide additional 

information regarding how to interpret and apply specific auditing concepts for government contract 

audits to assist auditors, contracting officers, and other stakeholders involved in the audit process. It is 

intended to assist professionals with delivering high quality, consistent financial audit and advisory 

services to contracting officers. 

Independent public accountants (IPAs) and other qualified professional services firms play an 

increasingly important role in the government’s oversight of federal government contractors. Although 

professional standards are common across the auditing profession—applicable to both public and 

private organizations—these standards were not developed or interpreted for the unique purpose of 

federal government contract oversight. To address this need, the Section 809 Panel assembled a 

working group of subject matter experts in the fields of contract auditing and compliance, professional 

standards, and audit resolution. The Section 809 Panel wishes to thank the working group members for 

their dedication and generous contribution of time and energy toward the development of the guide. 

The working group consisted of representatives from the following organizations. 

 Defense Contract Audit Agency 

 Defense Contract Management Agency 

 US Government Accountability Office 

 American Institute of Certified Public Accountants 

 Aerospace Industries Association 

 Baker Tilly Virchow Krause, LLP 

The working group evaluated a variety of professional standards to identify concepts that may benefit 

from collaborative interpretation as they apply in a contract oversight environment, including risk, 

materiality, audits of internal controls, independence, objectivity, sufficient evidence, and reliance on 

the work of others. Given the Section 809 Panel’s limited statutory term, the working group prioritized 

its work to focus on risk, materiality, and audits of internal controls. Accordingly, these three concepts 

are addressed in this first edition of the PPG. 

Although these concepts are well established in auditing literature, this guide focuses on how the 

concepts should be used for the purpose of federal government contract oversight. It describes how 

these concepts are to be applied in the context of government contract audits and provides practical 

examples and best practices to help auditors perform audits. 

Maintenance 

The Section 809 Panel recommends the Secretary of Defense charter and reconstitute a Professional 

Practice Guide Working Group, chaired by both DCAA and DCMA on a biennial rotation, to ensure 

the same collaborative process is used for changes and additions to the PPG as was established by the 

Section 809 Panel. The process should ensure that the PPG remains current and that additional topical 

areas are considered collaboratively by a diverse group of experts in the field of contract auditing and 

compliance. Specifically, the Section 809 Panel recommends that the Working Group should have five 

permanent representatives, including a representative from each of the following: 
January 2019 DoD Professional Practice Guide 

2 

 Defense Contract Audit Agency (DCAA), appointed by the director of DCAA. 

 Defense Contract Management Agency (DCMA), appointed by the director of DCMA. 

 Government Accountability Office (GAO), appointed by the Comptroller General of the United 

States. 

 Industry, nominated by Council of Defense and Space Industry Associations (CODSIA) and agreed 

on by a majority of the representatives from DCAA, DCMA, and GAO. 

 American Institute of Certified Public Accountants, agreed on by a majority of the 

representatives from DCAA, DCMA, and GAO. 

The chair of the Working Group (i.e., either DCAA or DCMA, biennially) is responsible for scheduling 

and recording proceedings and decisions made by Working Group. The Working Group members do 

not have terms, but membership may be assessed annually by the collective members and changes 

made based on this assessment. The appointees from DCAA, DCMA, GAO, and AICPA will be 

automatically removed from the Working Group should they leave their respective organizations. The 

Working Group will meet not less than semi-annually and otherwise as determined necessary by the 

members. The Working Group shall have an indefinite termination date. 

The PPG will be made available to the public in the Guidance section of DCAA’s website. New Editions 

of the PPG will be announced internally within DCAA by a Memorandum for Regional Directors, a 

copy of which will also be published promptly on DCAA’s website. 

Overview 

The PPG provides information on how to interpret and apply specific auditing concepts to audits of 

government contract costs and compliance-related internal controls. This guide will assist government 

auditors, private-sector auditors, contracting officers, contractors, and other stakeholders better 

understand the audit process. 

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 reasonably ensure DoD’s contractors comply with a variety of contract 

requirements. These contract requirements allow DoD’s procuring and administrative contracting 

officers to exercise good stewardship of taxpayer dollars, as well as deliver timely, high-quality goods 

and services to warfighters and accomplish other operations critical to DoD’s mission. 

The PPG recognizes, in Chapter 1, that a more robust risk assessment process will allow DoD to deploy 

its limited resources more effectively. The PPG further recognizes, in Chapter 2, that DoD can deploy 

its resources more efficiently, without harming effectiveness, through a common understanding of 

materiality. Finally, in Chapter 3, the PPG recognizes that a common framework will streamline and 

bring consistency to DoD’s audits of contractor systems of internal control over government contract 

compliance. 
DoD Professional Practice Guide January 2019 

3 

This guide recognizes that systems of internal control are not expected to provide absolute assurance 

that specified objectives are met. The costs of attaining absolute assurance are generally greater than 

the benefits attained from such assurance, and there are inherent limitations in any system of internal 

control due to factors such as human error and the uncertainty inherent in judgment. This first edition 

of the PPG focuses on this axiom with respect to both DoD’s system of acquisition internal control and 

contractors’ systems of internal control over government contract compliance. 

Chapter 1, Incurred Cost Risk Assessment, establishes guidance that DCAA will use to focus its limited 

resources when auditing costs incurred by contractors on flexibly priced defense contracts. This chapter 

implicitly acknowledges that (a) DCAA is an important element of DoD’s system of acquisition internal 

controls, (b) DCAA does not have sufficient resources to audit every DoD contractor, and (c) adding 

more oversight resources would likely produce diminishing returns relative to the increased cost. The 

risk assessment process also incentivizes larger contractors to achieve or maintain compliant cost 

accounting and effective accounting system internal controls, such that they can reduce their assessed 

risk profile and, thus, audit frequency. 

Chapter 2, Engagement Materiality Framework, addresses Congress’s direction to the Section 809 Panel 

in the FY 2018 NDAA, Section 803, with respect to numeric materiality for audits of incurred cost. This 

chapter sets forth clear materiality guidelines that help oversight professionals plan their work and 

provide 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 the contracting officer’s role is to manage DoD’s risk, rather than avoid 

risk. The cost of DoD oversight, including adverse effects on timeliness of decision making, must be 

balanced with expected benefits of that oversight. Guidance in this chapter should be used in 

conjunction with the Cost Accounting Standards Board’s (CASB’s) administrative regulations (48 CFR 

9903.305) that establish a variety of materiality considerations appropriate for any DoD business 

decision concerning contract costs/prices. 

Chapter 3, Audits of Internal Controls over Government Contract Compliance, introduces a body of 

professional standards based on an internal control audit framework and developed to address the 

requirements of Sarbanes-Oxley Act (SOX) Section 404(b). This framework serves as the means by 

which DoD will obtain reasonable assurance that contractors have effective internal controls over their 

business systems as they relate to government contract compliance. Internal control audits will be the 

basis for assessing adequacy of defense contractor accounting systems. These audits are well 

established and understood by the auditing profession. They will also provide more useful, relevant 

information to the acquisition team, contracting officers, and contractors. 

References to the Government Auditing Standards 2018 Revision in this guide refer to attestation 

engagements and performance audits performed once the 2018 revision becomes effective. For 

attestation engagements, it is for periods ending on or after June 30, 2020. For performance audits, it is 

for audits beginning on or after July 1, 2019. For all engagements performed prior to the respective 

effective dates of the 2018 revision, the auditor should refer to the 2011 revision of the Government 

Auditing Standards. 
January 2019 DoD Professional Practice Guide 

4 

CHAPTER 1: RISK ASSESSMENT 

The Need for Risk Assessment 

DoD’s system of acquisition internal controls is subject to the same economic constraints as those faced 

in other government agencies, organizations, and corporations. Increasing resources become necessary 

to achieve desired risk levels approaching zero (i.e., absolute risk avoidance). 

DCAA serves many roles within DoD’s system of acquisition internal controls. Chief among them is 

DCAA’s role as auditor of costs incurred by, and reimbursed to, commercial companies that perform 

flexibly-priced defense procurement contracts. DoD cannot reimburse commercial companies for their 

contract performance costs unless they comply with contract terms and conditions. 

Each year, thousands of commercial companies incur costs while performing flexibly-priced defense 

contracts. Accordingly, this Chapter establishes a risk assessment framework intended to focus 

DCAA’s finite resources such that DoD’s risk is appropriately managed. 

Risk Assessment Framework 

The foundation for this risk assessment framework rests on the materiality concepts introduced in 

Chapter 2 of the PPG, insofar as it aligns increasing risk levels with the annual costs incurred by 

contractor business units (as represented on annual final indirect cost rate proposals, also referred to as 

incurred cost proposals (ICPs)). As annual costs increase, so does the likelihood of being audited. 

The risk assessment framework also takes into consideration several qualitative factors that may either 

increase or decrease the likelihood of being selected for audit. The risk assessment framework provides 

incentives for contractors to achieve or maintain compliant cost accounting and internal controls over 

government contract compliance. It also provides disincentives for those contractors who have not. 

The risk assessment framework provides for three levels, or strata of risk: low, medium, and high. 

These levels are based on a contractor business unit’s Auditable Dollar Volume1 (ADV). Within each 

risk strata, contractor ICPs fall within specified ranges of ADV and may be selected for audit based on 

the stratum’s criteria. Each stratum is also affected by specific risk questions that affect the frequency of 

the contractor being audited. This aligns audit frequency with the performance of the contractor with 

regards to the history of questioned costs and status of business systems. The questions differ for each 

stratum but relate to the following risk factors: 

 The significance of historic questioned costs. 

 The existence of specific Department concerns. 

 The status of the business systems. 

 The existence of uncorrected system deficiencies (if any). 

 The existence of significant accounting or organizational changes (e.g., merger). 

For contractors with final indirect cost rate proposals for which total incurred cost on DoD flexibly 

priced contracts is equal to or greater than $1 Billion of ADV, DoD will conduct an audit regardless of 

the above factors. For all other final indirect cost rate proposals, the frequency of audit should decrease 

 

1ADV is the sum of all of the costs on flexibly-priced contracts for a contractor during a given fiscal year 
DoD Professional Practice Guide January 2019 

5 

provided the risk factors are met. The risk assessment framework is provided below and available on 

the DCAA website. 

Table 1. Risk Assessment Framework 

Low Risk Strata Medium Risk Strata High Risk Strata 

< 100M $100M-$500M > $500M 

Sampling 

Notes 

N/A $100M–$250M: Audit every 5th year if not 

selected during sampling process 

> $250M–$500M: Audit every 4th year if 

not selected during sampling process. 

$1B or more: Audit

> $500M–<$1B, if the answer to each of 

the question below is No, the contactor’s 

ICP will move to the medium risk category 

with the possibility of being sampled for 

audit in that year. 

Must be audited every other year. 

Risk 

Assessment 

Protocol 

For contractors with < $5M ADV, answer 

questions 1 and 2 below. 

For contractors with $5M to <$100M 

ADV, answer all three questions below. 

1) Assess the risk of incurred cost 

proposal using the questions (below). 

2) If risk assessment identifies no areas 

of concern, the incurred cost proposal 

placed into sampling strata for chance 

of being selected. 

3) If risk assessment identifies area of 

concern, the incurred cost proposal 

will be audited. 

For contractors with $100M–$250M in 

ADV, was a determination letter used to 

close the prior four contractor fiscal 

years? (A YES response indicates proposal 

must be audited regardless of initial risk.) 

For contractors with > $250M–$500M in 

ADV, was a determination letter used to 

close the prior three contractor fiscal 

years? (A YES response indicates proposal 

must be audited regardless of initial risk.) 

1) Assess the risk of incurred cost 

proposal using the six questions 

(below). 

2) If risk assessment identifies no areas 

of concern, the incurred cost 

proposal placed into sampling strata 

for chance of being selected. 

3) If risk assessment identifies area of 

concern, the incurred cost proposal 

will be audited. 

For contractors with > $500M and <$1B in 

ADV, was a determination letter used to 

close the prior contractor fiscal year? (A 

YES response indicates proposal must be 

audited regardless of initial risk.) 

For contractors with $1B or more in ADV, 

an audit must be conducted every 

contractor fiscal year. 

1) Assess the risk of incurred cost 

proposal using the six questions 

below. 

2) If risk assessment identifies no areas 

of concern, the incurred cost 

proposal placed into sampling strata 

for chance of being selected. 

3) If risk assessment identifies area of 

concern, the incurred cost proposal 

will be audited. 

Risk 

Assessment 

Results 

ICPs with ADV <5M placed in low risk 

strata sampling universe for sampling if 

the answers to questions 1 and 2 below 

are NO. Note: The regional Audit 

Manager must approve the performance 

of an audit. 

ICPs with ADV $5M – <100$M in low risk 

strata sampling universe if the answers to 

all the questions below are No. 

ICPs with ADV of $100M–$500M placed in 

medium risk sampling universe for 

sampling if the answers to all six 

questions below are NO. 

ICPs with ADV of > $500M–$1B placed in 

medium risk sampling universe for 

sampling if the answers to all six 

questions below are NO. 

Question 1 Are there significant Questioned costs in 

the last completed incurred cost audit? 

Are there significant Questioned costs in 

the last completed incurred cost audit? 

Are there significant Questioned costs in 

the last completed incurred cost audit? 

Question 2 

Are there any Department concerns from 

the DCMA, COR, PCOs, or DCAA, etc. with 

a significant impact on this ICP? 

Are there any Department concerns from 

the DCMA, COR, PCOs, or DCAA, etc. with 

a significant impact on this ICP? 

Are there any Department concerns from 

the DCMA, COR, PCOs, or DCAA, etc. with 

a significant impact on this ICP? 

Question 3 

Does the contractor have a preaward 

accounting system survey that resulted in 

an unacceptable opinion, or a 

disapproved accounting system due to a 

postaward accounting system audit? 

Does the contractor have a preaward 

accounting system survey that resulted in 

an unacceptable opinion, or a 

disapproved accounting system due to a 

postaward accounting system audit? 

Does the contractor have a preaward 

accounting system survey that resulted in 

an unacceptable opinion, or a 

disapproved accounting system due to a 

postaward accounting system audit? 

Question 4 

N/A Does the contractor have any business 

system deficiencies relevant to incurred 

costs for the year subject to audit? 

Does the contractor have any business 

system deficiencies relevant to incurred 

costs for the year subject to audit? 

Question 5 

N/A Does the contractor have any significant 

account practice changes in the year 

subject to audit? 

Does the contractor have any significant 

account practice changes in the year 

subject to audit? 

Question 6 

N/A Has the contractor experienced 

significant organizational changes in the 

year subject to audit? 

Has the contractor experienced 

significant organizational changes in the 

year subject to audit? 
January 2019 DoD Professional Practice Guide 

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CHAPTER 2: MATERIALITY IN AUDITS OF INCURRED COSTS 

This chapter presents guidelines and a framework for determining materiality for use in audits of 

incurred costs. However, this framework and the recommended materiality thresholds are not a 

substitute for professional judgment. 

Materiality and Significance in Incurred Cost Audits 

The term incurred cost audit means an audit of charges to the government by a contractor under a 

flexibility priced contract.2 These charges are reported annually by contractor business units, in a final 

indirect cost rate proposal (also referred to as an incurred cost proposal), as required by FAR 52.216-7. 

This proposal represents the subject matter of the incurred cost audit. The risk to the government and 

others who rely on this information is that amounts are materially misstated due to contractors’ 

noncompliance with contract terms or federal regulations. If the incurred cost proposal is not 

materially compliant and complete, it could adversely affect decision making by those who use the 

information. 

The objectives of an incurred cost audit are to (a) provide assurance that contractors’ incurred cost 

proposals can be relied on to settle final indirect cost rates and (b) communicate any misstatements that 

may affect contract cost reimbursements. Contract costs that do not comply with contract terms, federal 

regulations, or agreements are referred to in audits of contract costs as misstatements. An incurred cost 

audit is designed to identify material (or significant, as explained below) misstatements, based on both 

quantitative considerations (amount) and qualitative considerations (nature). 

A material misstatement, as used throughout this guide, means misstatements, including omissions, 

individually or in the aggregate, that could reasonably be expected to influence relevant decisions of 

intended users that are made based on the subject matter. Materiality, by definition, is more than just a 

number and is considered in the context of qualitative factors and, when applicable, quantitative 

factors. The relative importance of qualitative factors and quantitative factors when considering 

materiality in a particular engagement is a matter for the practitioner's professional judgment.3 

Audits of incurred costs can be performed using standards for performance audits (GAO, Government 

Auditing Standards 2018 revision), and standards for attestation examination engagements (AICPA, 

Professional Standards, Statements on Standards for Attestation Engagements). The definition of 

materiality is drawn from the attestation examination standards but is not limited to only these types of 

engagements. For the remainder of this document use of materiality is based on this definition. The 

Government Auditing Standards define significance for performance audits (FY 2018 Yellow Book, 

paragraph 8.15) as 

The relative importance of a matter within the context in which it is being considered, including 

quantitative and qualitative factors. Such factors include the magnitude of the matter in relation to the 

subject matter of the audit, the nature and effect of the matter, the relevance of the matter, the needs and 

interests of an objective third party with knowledge of the relevant information, and the matter’s effect on 

the audited program or activity. Professional judgment assists auditors when evaluating the significance 

 

2

 The term ‘flexibly priced contract’ has the meaning given the term ‘flexibly-priced contracts and subcontracts’ in part 30 of the 

Federal Acquisition Regulation (section 30.001 of title 48, Code of Federal Regulations).

3

 Paragraph A15 of AT-C section 205, Examination Engagements (AICPA, Professional Standards, AT-C sec. 205) 
DoD Professional Practice Guide January 2019 

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of matters within the context of the audit objectives. In the performance audit requirements, the term 

significant is comparable to the term material as used in the context of financial statement engagements. 

The definition of significant for performance audits is similar to the definition of materiality for 

attestation examination engagements. For purposes of this document, these terms may be used 

interchangeably. 

Both the terms materiality and significance refer to characteristics of the subject matter that are 

important, or relevant, to the users of the information. The terms significant cost element or significant 

account in this chapter refer to items that require further evaluation, and possibly testing, due to the 

potential of material misstatements based on quantified materiality, qualitative characteristics, other 

risk factors, variability, or stated concerns of the contracting officer. During the planning and fieldwork 

phase of the audit, significance is used in the context of a potential risk of misstatement (quantitative or 

qualitative) in a cost element or account that is more than clearly trivial. During the reporting phase of 

the audit, material or significant misstatements will affect the auditor’s opinion or conclusion. 

Compatibility of Commercially Accepted Standards for Risk and Materiality 

The commercial concepts of risk and materiality are compatible with the objectives of contract cost 

auditing. They represent auditors’ professional responsibility to determine what matters (i.e., the risk 

that costs do not comply with contract terms and federal regulations) and how much matters (i.e., 

materiality) in the context of a particular audit. What and how much matters depends on the use of the 

audited information. 

With respect to financial statement audits of for-profit companies, the owners, potential investors, and 

banks use audited financial information to make investment and lending decisions. With respect to 

contract cost audits, contracting officers use audited financial information to negotiate contract prices, 

reimburse contract costs, and evaluate a contractors’ compliance with contract terms. To ensure the 

integrity of information on which economic decisions will be made, organizations (in the context of 

financial statements of for-profit companies) and contracting officers (in the context of procurement 

contracts) use auditors to provide assurance on that information. 

Commercial standards of risk and materiality conceptually apply to contract cost audits, yet the 

process in which they are applied is viewed through the lens of contracting officers and their 

responsibility to expend public funds fairly and reasonably. Auditors’ evaluation of what matters (i.e., 

risk or significance) is made in the context of the engagement type and contracting officers’ (or other 

government customers’) needs. The auditors’ assessment of what matters is also a necessary 

precondition to determining how much matters (i.e., materiality). 

Materiality in the Context of Contract Cost Audits 

The concepts of materiality and significance expressly acknowledge that some degree of imperfection is 

acceptable to the users of financial information. This point is emphasized throughout the commercial 

and government auditing standards, regulations for the oversight of financial markets, FAR and the 

Cost Accounting Standards (CAS). This chapter discusses materiality, consistent with commercial 

standards, as a guide to help auditors when performing audits of incurred contract costs. 
January 2019 DoD Professional Practice Guide 

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Materiality, in the context of contract costs, represents the government’s acknowledgement, consistent 

with the Federal Acquisition System’s Guiding Principles, that there is an acceptable level of 

imprecision when determining or settling fair and reasonable contract prices. Material misstatements, 

individually or in aggregate, would reasonably be expected to influence the economic decisions of the 

government.4 Immaterial misstatements would not adversely affect the economic decisions of the 

government as a buyer of goods and services in the commercial marketplace. 

Commercial standards of risk and materiality provide for both qualitative and quantitative

considerations. In the context of government contract costs, an auditor is concerned with both the 

nature (i.e., quality) and the amount (i.e., quantity) of a cost. 

Audits of incurred contract costs generally focus on cost allowability and the completeness of 

contractors’ cost representations. Contract cost auditors evaluate contractors’ cost accounting and 

presentation for compliance with contract terms, FAR Part 31 cost principles (and CAS, as applicable), 

and other agreements between contractors and the government (e.g., advance agreements). Auditors 

are encouraged to discuss quantitative and qualitative materiality considerations with contracting 

officers or other government customers to obtain their perspectives on what is important to them. For 

example, auditors may be informed by contracting officers of the importance of a certain aspect of the 

information, such as a cost element or account, which auditors may take into consideration in their 

determination of materiality. 

Definitions 

For the purposes of this PPG, the terms below are defined as follows: 

Table 2. Audit Terminology 

Term Definition 

Total Subject 

Matter 

Amount

The incurred cost claimed on flexibly priced contracts during the fiscal year. It includes different 

categories of contract cost such as labor, materials, other direct costs, indirect costs, and is adjusted 

for certain types of contracts and activity such as commercial contracts. The FY 2018 NDAA, Section 

803, defines incurred cost audit as an audit of charges to the government by a contractor under a 

flexibly priced contract. See Appendix B for additional information.

Accounts Records used to group same or similar types of financial transactions during a fiscal period. An expense 

account’s balance at the end of a fiscal period reflects the total dollar amount of transactions recorded 

to that account. For example, a labor expense account will include individual transactions associated 

with amounts paid to employees.

Cost Element Represents the summation of accounts of a similar character and type that is included in the total 

subject matter. For example, the direct materials cost element is comprised of all material costs on 

government contracts, and may include, for example, accounts for direct purchases, allocations from 

company owned inventory, and allocations for material factors. The cost element is similar to a line 

item in financial statements.

 

4

 The FY2018 NDAA, Section 803, defines numeric materiality standard as “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.” 
DoD Professional Practice Guide January 2019 

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Term Definition 

Significant 

Cost Element 

or Account

Represents a cost element or account that requires further evaluation and testing due to quantified 

materiality, qualitative characteristics, other risk factors, variability, or stated concerns of the 

contracting officer, and is applicable to any type of engagement performed. Significance is relevant in 

the planning and reporting phases of the audit.

Materiality In general, misstatements, including omissions, are considered to be material if, individually or in the 

aggregate, they could reasonably be expected to influence relevant decisions of intended users that 

are made based on the subject matter. Materiality is considered in the context of qualitative factors 

and, when applicable, quantitative factors. The relative importance of qualitative factors and 

quantitative factors when considering materiality in a particular engagement is a matter for the 

practitioner's professional judgment.5

Quantified 

Materiality

The numeric representation of materiality that is calculated based on the total audit subject matter. It 

is used in planning to identify significant cost elements. Quantified materiality is similar to planning 

materiality used in financial statement audits.

Adjusted 

Materiality

The amount or amounts set by the auditor at less than quantified materiality to reduce to an 

appropriately low level the probability that the aggregate of uncorrected and undetected 

misstatements exceeds materiality for the incurred cost proposal, taken as a whole. It also refers to 

the amount or amounts set by the auditor at less than the materiality level or levels for particular 

classes of transactions, account balances, or disclosures. Adjusted materiality is similar to performance 

materiality used in financial statement audits.

Quantitative 

Materiality 

Factors

Quantitative factors relate to the magnitude of misstatements or questioned costs relative to the 

reported amounts for those aspects of the subject matter, if any, which are expressed numerically or 

otherwise related to the numeric values.6

Qualitative 

Materiality 

Factors

Risk and qualitative materiality factors are understood in the context of the subject matter as relating 

to, or measured by, the quality of subject matter rather than its quantity. Qualitative materiality 

factors can include whether the misstatement affects compliance with laws or regulations, the result 

of an intentional act (i.e., fraud), and importance to the users of the information regardless of dollar 

amount.7 For planning purposes, the auditor may design audit procedures to address risk of potential 

material noncompliance related to these qualitative factors. For reporting purposes, and after 

completion of fieldwork, the actual misstatements should be evaluated for significance based on these 

qualitative factors in addition to quantitative factors.

Nominal 

Reporting 

Amount

The nominal reporting amount is an amount at which any adjustment (misstatements or 

noncompliance) taken individually would be immaterial regardless of other factors. It is used during 

the reporting of results to determine the impact of certain qualitative amounts that are significant 

based on nature but so small in value they are still considered immaterial. Regardless, although not 

included in the audit report, these items are separately communicated to the contracting officer in a 

summary of misstatements. The nominal reporting amount is similar to the nominal amount used in 

financial statement audits. 

Misstatement When the contract costs that are billed, or reported, to the government do not comply with contract 

terms and federal regulations such as FAR and CAS. The primary source of misstatements for incurred 

cost audits is cost type (FAR 31.205), contract clauses, cost reasonableness, and cost allocation (FAR 

31.201 to 31.204 or CAS if applicable). When a misstatement is identified, it is typically referred to as a 

noncompliance that can be measured as a dollar amount of questioned contract costs. 

 

5

 Paragraph A15 of AT-C section 205 

6

 Paragraph A19 of AT-C section 205 

7

 Paragraph A18 of AT-C section 205 
January 2019 DoD Professional Practice Guide 

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Engagement Materiality Framework 

The Engagement Materiality Framework describes the process for calculating and using materiality 

throughout the audit process and is organized by phases of the audit, as follows: 

Table 3. Engagement Materiality Framework 

Audit Phase Engagement Materiality Framework Step 

Planning 1) Calculate quantified materiality 

Planning 2) Identify significant cost elements 

Planning 

3) Identify significant accounts within significant cost elements 

4) Consider the use of adjusted material in sampling and tolerable error 

5) Determine the nature, timing, and extent of audit procedures on significant cost elements 

and accounts considering risk and materiality. 

Fieldwork 6) Perform testing procedures and document results. 

Conclusion and 

Reporting 

7) Evaluate misstatements based on quantitative and qualitative materiality characteristics. 

8) Report or communicate misstatements, in compliance with Government Auditing Standards. 

Step 1: Calculate Quantified Materiality 

Quantified materiality relates to the magnitude of misstatements relative to reported amounts for those 

aspects of the subject matter, if any, that are expressed numerically or otherwise related to numeric 

values. Use of quantified materiality is appropriate for audits of incurred cost because the total subject 

matter can be measured as a numeric value. Quantified materiality is used in the planning phase of the 

audit to identify significant cost elements and affects use of adjusted materiality during fieldwork 

(Engagement Materiality Framework Step 3). The process to calculate qualified materiality includes the 

following: 

 Define Total Audit Subject Matter: The audit subject matter is expressed numerically, and for 

purposes of the materiality calculation, includes the total subject matter upon which an auditor 

will be expressing an opinion and providing assurance. 

 Calculate Quantified Materiality: Quantified materiality is based on auditor judgment and is 

influenced by industry benchmarks, reasonableness, and the needs of the users of the 

information. It represents the amount, or percentage, of the Total Audit Subject Matter that can 

be misstated and influence the decisions of those who use the information. 

Commercially accepted practices for determining quantitative materiality involve the application of 

percentages to elements of financial information. For example, a financial statement auditor may use 

5 percent of net income, or 0.5 percent of net assets, as a benchmark for quantitative materiality. If net 

income is $1,000,000, then, in an auditor’s judgement, misstatements of more than $50,000 (5 percent) 

individually, or in the aggregate, would likely influence the economic decisions of financial statement 

users. If net income is $100,000,000, then misstatements of more than $500,000 (5 percent) individually, 

or in the aggregate, would likely influence the economic decisions of financial statement users. 
DoD Professional Practice Guide January 2019 

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As the examples above show, commercially accepted materiality benchmarks tend to maintain their 

proportionality as financial values increase. This proportionality occurs because financial statement 

users need assurance that the financial statements fairly represent a company’s financial position in 

accordance with GAAP. It is not necessarily the dollar value of misstatements that matters to financial 

statement users; rather, it is whether the financial statements fairly represent the company’s 

performance within an acceptable margin of imperfection. 

Recommended materiality thresholds are provided below that are consistent with industry norms and 

acceptable for use in incurred cost audits. The practical application of quantified materiality is not 

limited to these thresholds as auditor judgment with consideration of qualitative factors, risk, and 

variability have an impact. 

The materiality thresholds recommended below adjust (by algebraic equation) downward as the 

amount of cost subject to audit increases. Because contract audits involve contractors’ costs that may be 

reimbursed with public funds, applying a static benchmark could produce unacceptably large 

materiality thresholds. For example, 5 percent of $100,000 (or $5,000) is perceived much differently than 

that same percentage applied to $1,000,000,000 (or $50,000,000). In this instance, it would be more 

appropriate to use a threshold of 0.5 percent for $1,000,000,000 because the resulting materiality 

threshold of $5,000,000 is more aligned with the government’s economic decision-making 

responsibility. 

Recommended Materiality Thresholds for Incurred Cost Audits 

Table 4. Incurred Cost Audit Proposals Subject Matter 

Subject Matter Cost $100K $1M $10M $100M $500M $1B > $1B 

Materiality Amount $5,000 $28,117 $158,686 $889,140 $2,973,018 $5,000,000 Varies 

Materiality Percentage 5% 2.81% 1.58% 0.89% 0.59% 0.50% 0.50% 

For Incurred Cost Proposal Audit Subject Matter from $1 to $1,000,000,000 use: 

 Materiality Threshold = $5,000 x ((Total Subject Matter / $100,000) ^ .75) 

For Incurred Cost Proposal Audit Subject Matter greater than $1,000,000,000 use: 

 Materiality Threshold percentage of 0.50 percent 

Quantified materiality does not change due to the type of engagement performed (e.g., examination or 

performance audit). Professional judgments about quantitative materiality are made in light of contract 

dollars subject to audit (i.e., engagement subject matter) and are not affected by the level of assurance. 

Materiality is based on the needs of those who use the information irrespective of the type of 

engagement performed. 

The application of quantified materiality neither limits auditor judgment nor places restrictions on 

what an auditor can test based solely on dollar value. Rather, the quantified materiality amount is 
January 2019 DoD Professional Practice Guide 

12 

intended to create a consistent threshold that helps an auditor calibrate the nature, timing, and extent 

of audit procedures relative to the unique risks and qualitative considerations of each engagement. It is 

considered in the context of qualitative factors and, when applicable, quantitative factors. The relative 

importance of qualitative factors and quantitative factors when considering materiality in a particular 

engagement is a matter of the practitioner’s professional judgment.8

The example below illustrates a basic quantified materiality calculation. The total subject matter 

represents all costs for flexibly priced contracts (i.e., engagement subject matter), whether direct or 

indirect, of $200,500. The total subject matter is then multiplied by the quantified materiality formula to 

compute the materiality amount used during the audit. 

Figure 1. Illustrative Basic Quantified Materiality Calculation 

$8,425 = $5,000 x (($200,500/$100,000) ^.75) 

The quantified materiality amount is $8,425, which is 4.2% of the total 

engagement subject matter ($8,425/$200,500).

Incurred Cost Submission: Total 

Direct Labor $100,000 

Direct Materials $50,000 

Other Direct Costs $10,000 

Overhead $20,000 

G&A Expense $20,500 

Total Subject Matter (a) $200,500 

Materiality Threshold (b) 4.2% 

Materiality (c) $8,425 

Step 2: Identify Significant Cost Elements 

A significant cost element is identified by quantified materiality, qualitative materiality characteristics, 

and other risk factors. The process for determining a significant cost element is as follows: 

 Quantified Materiality: The auditor should identify all cost elements equal to or greater than 

quantified materiality as significant. 

 Risk and Qualitative Factors: The auditor should consider risk and qualitative factors for all 

cost elements less than quantified materiality. Cost elements may still be considered significant 

and subject to testing procedures based on risk factors and qualitative characteristics such as a 

 

8

 Statements on Standards for Attestation Engagements (SSAE) Number 18; AT-C 205.A15. 
DoD Professional Practice Guide January 2019 

13 

history of identified misstatements, nature of particular costs, and needs of the users of the 

audited information. 

 Variability: The auditor may use judgment and incorporate variability, or unpredictability, in 

the selection of cost elements to test. For example, an auditor has elected to not test a cost 

element for the last 2 years due to an immaterial balance. In the current year, and to ensure 

variability and unpredictability in the testing approach, the auditor may select the cost element 

for testing. This prevents a pattern from forming and discourages the contractor from recording 

misstatements in cost elements that have a history of not being tested. 

The following example compares the quantified materiality amount of $134,200 to the cost elements 

within the subject matter. The materiality amount was calculated by including the total subject matter 

of $8,036,024 in the materiality threshold equation. The associated materiality threshold percentage is 

1.67 percent ($134,200/$8,036,024). In the example, an auditor would identify the cost elements of direct 

labor, direct materials, subcontracts, overhead, and general and administrative costs as significant 

based on quantified materiality. 

Table 5. Comparison of Quantified Materiality to Cost Elements 

Cost Element Amount 

> Materiality of 

$134,200 

Direct Labor $2,441,657 YES

Travel $54,092 NO

Direct Materials $188,716 YES

ODC $11,175 NO

Subcontracts $3,329,051 YES

Indirect Overhead $1,138,408 YES

G&A (Value Added) $872,925 YES

Total Subject Matter $8,036,024

Materiality Threshold 1.67%

Materiality $134,200

A YES in the table above means that the cost element is significant and should be further evaluated at 

the account level, but it does not automatically mean the entire amount will be tested. An auditor is 

responsible for auditing significant costs elements based on materiality or other factors, but the nature, 

timing, and extent of audit procedures may vary based on auditor judgment. 
January 2019 DoD Professional Practice Guide 

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The cost elements that are less than the quantified materiality amount may be tested due to qualitative 

materiality characteristics, other risk factors, or if, in an auditor’s judgment, they may contain 

immaterial misstatements that could be material in the aggregate. The following examples illustrate an 

auditor’s potential qualitative considerations relative to the travel cost element, which is less than the 

quantified materiality amount. In this example, the auditor did not identify qualitative or risk concerns 

for the ODC cost element, which is also less than the quantified materiality amount: 

 The contractor’s travel cost element has a history of misstatements, which have been 

investigated in the past, and is a stated concern of the contracting officer. If the user of the 

information (i.e. the contracting officer) considers a particular cost element to be significant 

based on qualitative facts and circumstances, then an auditor may evaluate it at the account 

level in the same manner as any other significant cost element. 

 The contractor’s travel cost element has no history of misstatements, and the contracting officer 

did not express any concerns in this area. However, the travel cost element was not tested in the 

prior 2 years. The auditor could test the travel cost element to ensure variability and 

unpredictability in the audit approach, regardless of whether the risk and qualitative 

characteristics indicate no testing may be appropriate. 

The body of work necessary to support the opinion, or audit conclusions, is generally met with the 

testing of cost elements and accounts with values greater than materiality or adjusted materiality. The 

use of qualitative or other risk factors to identify significant cost elements should be based on actual, 

objective, and measurable facts and circumstances such as history of questioned costs, and needs of the 

users of the audited information. Absent these objective factors, the auditor is expected to adhere to 

materiality thresholds. The auditor should document the justification for deviating from the materiality 

thresholds. See Appendix A for unique considerations regarding indirect costs. 

Step 3: Identify Significant Accounts 

A significant account is identified by adjusted materiality (as explained below), qualitative materiality 

characteristics, and other risk factors. The process for identifying significant accounts is as follows: 

(1) Adjusted materiality: The auditor should identify all accounts equal to or greater than adjusted 

materiality as significant. 

(2) Risk and Qualitative Factors: The auditor should consider qualitative factors for all account 

balances less than adjusted materiality. Accounts may still be considered significant and subject 

to testing procedures based on risk and qualitative factors such as a history of misstatements, 

sensitivity, and needs of the users of the audited information. 

(3) Variability: The auditor should incorporate an element of variability in the selection of 

accounts to test. For example, an auditor elected not to test an account for the last 2 years due to 

an immaterial balance. In the current year, and to ensure variability and unpredictability of the 

testing approach, an auditor may select the account for testing. This prevents a pattern from 

forming and discourages the contractor from recording misstatements in accounts that have a 

history of not being tested. 
DoD Professional Practice Guide January 2019 

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An auditor will use adjusted materiality to identify significant accounts subject to audit evaluation. 

Quantified materiality represents the total amount the subject matter can be misstated without 

misleading the users of the information. Adjusted materiality is less than quantified materiality. Unless 

quantified materiality is adjusted at the account level, an auditor would have limited ability to identify 

immaterial misstatements that, in the aggregate, become material or are material by their nature even if 

immaterial in amount. 

Adjusted materiality is used at a more discrete level in the books and records and is applied to accounts 

that make up the cost elements. For purposes of selecting accounts for audit testing, adjusted 

materiality can be stated as 20 percent to 80 percent of quantified materiality based on audit risk, the 

nature (or sensitivity) of transactions relative to specific cost allowability criteria, other substantive 

procedures performed (i.e., whether controls are tested), and the needs of the users of audited 

information. 

The following are key concepts with the application of adjusted materiality: 

 Adjusted materiality is applied to the accounts within significant cost elements. 

 Once an account is selected, an auditor will test the transactions that sum to the account 

balance. 

 Adjusted materiality is determined separately for each significant cost element. 

See Appendix A for guidance on how to calculate adjusted materiality for indirect costs where the 

government’s participation is less than 100 percent. 

Adjusted materiality can be used as tolerable error (or tolerable misstatement) for the purpose of 

statistical sample selection (see the Step 4, Engagement Materiality Framework). The following table 

provides examples of justifications for degrees of adjustment to the quantified materiality for the 

purpose of calculating adjusted materiality: 

Table 6. Justifications for Degrees of Adjustment to the Quantified Materiality 

Percent Adjustment Examples 

(80%) 

Reduction in Quantified 

Materiality 

 The cost element has a history of material misstatements in multiple accounts. 

 The contractor is unwilling to correct prior-year material misstatements in subsequent 

proposals. 

 The contractor is currently in litigation for historical costs in the same cost element and 

accounts. 

 The contracting officer has significant concerns regarding the cost element that increase the 

sensitivity and importance. 

(50%) 

Reduction in Quantified 

Materiality 

 The cost element and multiple accounts have a history of material misstatements. 

 Management is responsive with correcting misstatements in subsequent proposals. 

 The contracting officer has concerns regarding the cost element that increase the sensitivity 

and importance. 

(20%) 

Reduction in Quantified 

Materiality 

 The cost element and accounts have limited to no instances of historical material 

misstatements on an aggregated basis. 

 The reduction is to reduce to an appropriately low level the probability that the aggregate of 

uncorrected and undetected misstatements exceeds total quantified materiality. 
January 2019 DoD Professional Practice Guide 

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The following example illustrates how to calculate adjusted materiality: Based on professional 

judgment, an auditor elects to reduce the quantified materiality by 20 percent (see Figure 2). If the 

adjusted materiality is reduced by 20 percent, the remainder represents 80% of the quantified 

materiality amount (100 percent - 80 percent = 20 percent reduction). The adjustment materiality is 

calculated by multiplying the quantified materiality of $1,025 by 80 percent (100 percent - 20 percent), 

for an adjusted materiality amount of $820. 

Figure 2. Calculated Adjusted Materiality Illustration 

Quantified Materiality $1,025 

Adjustment (less): (20 percent)

Adjusted Materiality: $820 

Use of materiality to identify significant amounts becomes more relevant at the account level in the 

books and records, which make up cost elements. The higher the level aggregation of costs, the more 

likely that the cost will be selected. 

The table below illustrates the practical application of materiality at lower levels of cost in the books or 

records, or at the account level. The quantified materiality is compared to the cost elements rather than 

the account level (as indicated by N/A), whereas adjusted materiality is compared at the account level 

(as indicated by N/A at the cost element level). Please note that, even if the direct material cost element 

is greater than quantified materiality, it may not be necessary to test each account in the cost element. 

Application of adjusted materiality at the account level identifies three of the six accounts as being 

material and, thus, needing to be tested. The body of work necessary to support an audit is generally 

met when an auditor tests cost elements and accounts with values greater than quantified or adjusted 

materiality. Cost elements and accounts with balances below adjusted materiality (i.e., those with a NO

response below) may still be subject to testing based on an auditor’s judgment, risk factors, qualitative 

factors, or variability. 

Table 7. Application of Materiality at Lower Levels of Cost 

Category Description Amount > Materiality 

$1,025 

> Adjusted Materiality 

$820 

Subcontracts Cost Element $750 NO N/A 

Direct Materials Cost Element $5,000 YES N/A 

Direct Materials Acct X1 Account $850 N/A YES 

Direct Materials Acct X2 Account $450 N/A NO 

Direct Materials Acct X3 Account $980 N/A YES 

Direct Materials Acct X4 Account $500 N/A NO 

Direct Materials Acct X5 Account $350 N/A NO 

Direct Materials Acct X6 Account $1,870 N/A YES 
DoD Professional Practice Guide January 2019 

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Think of it as follows: 

Figure 3. Application of Materiality at Lower Levels of Cost 

An auditor may combine accounts of the same or substantially similar nature when applying adjusted 

materiality. For example, a contractor records engineering labor in separate general ledger accounts by 

project, but the combination of these accounts results in a homogenous amount that is subject to the 

same audit criteria. Although the contractor separated these like costs into separate accounts for 

operational or cost accounting purposes, an auditor may combine them for assessing adjusted 

materiality and testing purposes if that approach makes sense for the audit. 

Step 4: Statistical Sampling and Consideration of Tolerable Error Based on Adjusted Materiality 

An auditor may use adjusted materiality when determining the tolerable misstatement (or tolerable 

error) for statistical sample size determination. 

An incurred cost audit cannot be completed effectively and efficiently by testing 100 percent of all 

transactions in the subject matter. For this reason, the auditing profession uses statistical sampling to 

test a representative portion of a transaction population that is sufficient to determine whether the total 

population is fairly stated. 

Although statistical sampling techniques are outside the scope of the document, an important element 

of statistical sampling is tolerable misstatement. Tolerable misstatement represents the total amount of 

error an auditor is willing to accept in the statistical sample. When auditors use statistical sampling, 

they are incorporating materiality into the audit. See the AICPA Statistical Sampling guide for 

additional information. 

There is an interrelationship between adjusted materiality, tolerable misstatement, and audit sampling. 

By using adjusted materiality (converted to a percentage of the transaction population value) as 

tolerable misstatement, statistical sample sizes will be commensurate with the size of the population in 

relation to the overall subject matter, audit risk, and materiality. The higher the tolerable misstatement, 

the lower the sample size. 

In practice, an auditor will remove transactions greater than adjusted materiality from the population 

and test 100 percent of these amounts separately. The remainder of the transactions within the 

COST ELEMENTS

ACCOUNTS

TOTAL SUBJECT MATTER

Quantified 

Materiality 

Adjusted 

Materiality 

Quantified 

Materiality 
January 2019 DoD Professional Practice Guide 

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population would then be subject to the statistical sampling process. If the value of the remaining 

population (after removing transactions with values greater than adjusted materiality) is less than 

adjusted materiality, then an auditor may judge it immaterial and forego further statistical sampling. 

Generally, when the remaining population has an aggregate value greater than adjusted materiality, 

the transactions will be subjected to audit procedures. This process accounts for the aggregated nature 

of misstatements to the overall assessment of adjusted materiality. 

Steps 5 and 6: Determine the Nature, Timing, and Extent of Audit Procedures; Perform Audit 

Procedures; Document Results 

These steps represent the planning process and fieldwork related to the nature, timing, and extent of 

audit procedures based on the risk of material misstatement and the Audit Risk Model (inherent risk, 

control risk, and detection risk), if applicable. The concepts of quantified materiality and adjusted 

materiality should be considered, as set forth in this chapter, in this part of the audit process. 

The auditor should document the basis for materiality and the method of determining materiality. 

Step 7: Reporting Audit Results 

An auditor can use quantified materiality as a guide for determining the existence of one or more 

material misstatements when forming an audit opinion, or audit conclusion, on the subject matter. An 

auditor will summarize all misstatements and compare them individually, and in the aggregate, to 

quantified materiality. 

For example, in the instances of an attestation engagement if the aggregate amount of identified 

misstatements is less than quantified materiality, then an auditor may issue an unqualified opinion 

provided, however, that no quantitatively immaterial misstatements are qualitatively material. If the 

aggregate of all misstatements is greater than quantified materiality, or if one or more misstatements 

are qualitatively material, an auditor will issue a qualified or adverse opinion, as applicable. This same 

process can be used to evaluate scope limitations and disclaimer of opinion. 

A few key points for attestation engagements include the following: 

 If misstatements individually or in the aggregate exceed quantified materiality, they will result 

in a qualified opinion, but not necessarily an adverse opinion. An adverse opinion is 

appropriate if material misstatements are so pervasive that the subject matter, taken as a whole, 

is not reliable. 

 The dollar value of some misstatements may be greater than the value of the underlying 

misstated transaction. For example, a misstated direct labor cost may draw allocable indirect 

costs. In this instance, an auditor should evaluate the fully-absorbed value of the misstatement 

relative to quantified materiality. 

 The dollar value of some misstatements may be less than the value of the underlying misstated 

transaction. Indirect cost misstatements should be adjusted for participation percentages to 

normalize the amount to account for the proportion of the cost that is allocated to a contractor’s 

work outside of the engagement subject matter. For example, an auditor identifies a $500,000 

misstatement in an indirect cost pool with a government participation percentage of 20 percent. 
DoD Professional Practice Guide January 2019 

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The actual effect of the misstatement on the engagement subject matter (i.e., indirect costs 

allocated to the government contracts) is $100,000 ($500,000 * 20 percent). In this instance, an 

auditor should evaluate the value of the indirect cost misstatement, after adjustment for 

government participation, relative to quantified materiality. 

 Although qualitative factors are discussed below, it is important to emphasize that some 

misstatements may be considered material and affect the audit opinion regardless of dollar 

value. 

Quantified materiality is based on the presumption that misstatements, individually or in the 

aggregate, that exceed that amount would influence the judgment of a reasonable person using the 

audited financial information with knowledge of the uncorrected misstatements. 

An auditor’s assessment of materiality requires consideration of both quantitative and qualitative 

factors in the context of the total mix of information available to the users of the audited financial 

information. As a result, qualitative factors, such as the existence of expressly unallowable costs or 

evidence of irregularities, could be material facts within the total mix of information regardless of dollar 

value. 

The following table sets forth examples of qualitative considerations unique to incurred costs audits 

that may result in quantitatively immaterial misstatements being considered material and, in turn, 

affect the audit opinion or audit conclusion. The information below is intended to be illustrative of 

relevant qualitative factors, rather than exhaustive. 

Table 8. Examples of Qualitative Considerations Unique to Incurred Costs Audits 

Qualitative Factor Explanation 

Expressly 

Unallowable 

Indirect Costs 

According to FAR 52.242-3, the inclusion of expressly unallowable indirect costs, when 

identified, explicitly contradicts the contract terms and subjects the contractor to penalties. 

The pervasive existence of this form of misstatement creates a higher level of sensitivity and 

risk when reporting audit results. The determination of a material misstatement is at the 

auditor’s judgment, but generally these misstatements should be evaluated for materiality 

with less emphasis on the quantified materiality. 

Specific Contract 

Terms 

The audit criteria applicable to audits of incurred costs represent contract terms that 

incorporate specific elements of the FAR, CAS, and so forth. In addition to these regulations, 

certain contracts may have unique clauses, such as cost limitations on certain activities and 

the disallowance of certain types of costs such as overtime. Because these unique clauses 

establish the specific desires of a particular government customer, quantitatively immaterial 

but pervasive misstatements in this regard may be viewed as material to that customer. 

Other relevant qualitative factors may relate to the audit subject matter and the needs of the acquisition 

community. For example, a contractor may have significant restructuring costs, purchase accounting 

for an acquisition, overseas operations, or other issues that have qualitative considerations that differ 

from the ones identified above but are just as relevant. The nominal reporting amount can be 

considered for reporting misstatements due to qualitative factors. 
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Step 8: Report or Communicate Misstatements 

The auditor should report or communicate, as appropriate, both material and immaterial 

misstatements to the contracting officer in accordance with Government Auditing Standards (FY 2018 

Yellow Book, paragraphs 7.46 and 9.38): 

When auditors detect instances of noncompliance with provisions of laws, regulations, contracts, and 

grant agreements that do not warrant the attention of those charged with governance, the auditors’ 

determination of whether and how to communicate such instances to audited entity officials is a matter of 

professional judgment. 

For incurred cost audits, the need for communicating immaterial information is important because it 

can result in the transfer of funds between the contractor and government. For example, $5,000 of 

questioned direct cost not only may impact the audit opinion or conclusion, but also represents an 

amount that may be recovered by the government. These amounts should be communicated to the 

contracting officer to facilitate appropriate disposition. 
DoD Professional Practice Guide January 2019 

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CHAPTER 3: AUDITS OF INTERNAL CONTROL OVER GOVERNMENT CONTRACT 

COMPLIANCE 

Government Perspective on the Importance of Internal Controls 

For government officials to manage programs and contracts effectively, they must be able to rely on 

information produced by the contractor. The ability of contractors to produce materially accurate 

information depends on the design and operating effectiveness of their business system internal 

controls. Without internal controls, it could be difficult for contractors to produce reliable and timely 

information. Although no internal control system can provide absolute assurance that the information 

will never include material errors or misstatements, an effective system of internal controls over 

contractor business systems can substantially reduce the risk of error and misstatements. 

Obtaining timely assurance that contractors have effective internal controls is an essential component 

of all cost-effective compliance frameworks. Consideration of how recently a business system audit was 

performed and the results is a critical part of the DoD’s own system of acquisition internal controls. 

Effective contractor internal controls permit most additional audits and reviews to be performed more 

efficiently and timely. Obtaining assurance about internal controls effectiveness is one of the most 

efficient ways to protect the Government’s interest, reduce risk, and improve timeliness. 

Defining Internal Controls 

Internal controls are the responsibility of the contractor. The auditor will test the internal controls and 

provide an opinion, or conclusion, on whether they are suitably designed and operating effectively. 

Internal controls are defined as a process, affected by the entity’s board of directors, management, and 

other personnel designed to provide reasonable assurance regarding the achievement of objectives 

relating to operations, reporting, and compliance.9 This definition emphasizes the achievement of 

objectives. For companies or organizations with Government contracts, the objective is to bill, or report, 

contract costs in compliance with contract terms and federal regulations. The relationship between 

objective, risks, and internal controls is as follows: 

 An objective defines what the contractor wants to achieve, 

 A risk represents a situation, circumstance, or event that the contractor wants to avoid (i.e., an 

occurrence that results from not achieving the objective), and 

 Internal control activities are procedural steps designed and performed to prevent, or detect 

and correct, the occurrence of a risk such that the objective is achieved. 

An internal control framework should generally address five components: control environment, risk 

assessment, control activities, information and communication, and monitoring activities. However, the 

extent of implementation by the contractor is dependent on size and complexity and is explained in 

greater detail in the subsection on Internal Controls Frameworks. These components are introduced in 

the Committee of Sponsoring Organizations (COSO) of the Treadway Commission Internal Control—

 

9 The Committee of Sponsoring Organizations (COSO) of the Treadway Commission Internal Control—Integrated Framework (May 2013) 
January 2019 DoD Professional Practice Guide 

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Integrated Framework (May 2013) framework and have been recognized and accepted by the AICPA, 

and the Government Accountability Office. 

The only way to determine if internal controls are suitably designed and operating effectively is to test 

them. It is not appropriate to presume that a contractor has effective internal controls based on the 

results of audits that do not test internal controls. The existence of a material misstatement in an audit 

of contract costs does indicate an internal control deficiency. However, the converse is not true. The 

absence of a material misstatement does not provide the requisite assurance regarding the effectiveness 

of a contractor’s systems and internal controls. The severity of an internal control deficiency is 

determined by assessing the likelihood that it will result in a material misstatement and is not 

contingent on whether a material misstatement has occurred. While the contractor may bill or report 

costs that comply with contract terms in any one period, if the contractor’s internal controls are 

ineffective, the internal controls cannot provide reasonable assurance that a material mistake, fraud, or 

management override will be prevented or detected and corrected timely. An accounting system that 

lacks effective internal controls has a greater likelihood of billing or reporting costs that are not 

compliant with contract terms and federal regulations. 

Internal Control Frameworks 

The type of internal control framework and the extent of adoption is at the discretion of the contractor. 

The Committee of Sponsoring Organizations (COSO) of the Treadway Commission has developed an 

Internal Control—Integrated Framework (May 2013) which has gained broad acceptance in the private 

sector and is widely used around the world. 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. 

An internal controls framework assists management, board of directors, external stakeholders, and 

others interacting with the entity in their respective duties regarding internal control without being 

overly prescriptive. It does so by providing both understanding of what constitutes a system of internal 

control and insight into when internal control is being applied effectively10. For accounting system 

audits related to government contract costs, the auditor does not test the internal controls framework, 

but rather, tests the internal controls. Regardless, it is important to acknowledge the fact that the 

internal controls and framework are, by definition, inter-related and a poorly implemented framework 

may result in ineffective internal controls. 

Whether or not a contractor adopts an internal control framework often relates to a contractor’s size 

and complexity. Contractors design and implement control activities relative to their own risks, size, 

complexity and other relevant factors. For example, a large public company may have adopted an 

internal control framework (e.g. COSO) to define and meet its control objectives. In contrast, a smaller 

company with less complex operations may not be aware of formal internal control frameworks, but 

nevertheless have internal controls commensurate with its size, complexity, and other relevant factors. 

Auditors are encouraged to understand the contractor’s business, the environment in which it operates, 

the software systems it uses for accounting purposes, how accounting-related business processes are 

 

10 COSO Internal Control – Integrated Framework, Executive Summary, May 2013 
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performed, and the contractor’s employees either responsible for or participating in those processes. 

This chapter creates no requirement that the contractor adopt the COSO or any other internal controls 

framework. 

For every contractor, regardless of size, each component of an internal control framework (e.g. control 

environment, risk assessment, control activities, etc.) will likely be reflected in the manner by which 

management runs its business (regardless of whether or not management has consciously or formally 

adopted an internal control framework). Because every business is unique, the auditor should 

approach an internal control audit using an internal control framework as a means to understand each 

contractor’s unique accounting system controls. Auditors should not expect contractor internal controls 

to function identically or even at the same level for every company.11 

Concept of Reasonable Assurance 

The contractor is responsible for designing and operating effective business processes and internal 

controls to, provide reasonable assurance that the cost information is reliable and complies with 

contract terms and federal regulations, as applicable. The concept of “reasonable assurance” recognizes 

that the cost of achieving greater assurance will, at some point, exceed the benefit of the higher 

assurance. This concept is acknowledged in the Federal Acquisition Regulation Guiding Principles12. 

The concept of reasonable assurance as it relates to systems of internal control also recognizes that it is 

not possible to declare with absolute certainty that an error or misstatement will not occur. For 

example, the system is operated by people and people inevitably make mistakes, systems breakdown, 

and organizations change. In addition, intentional misconduct, like fraud and collusion, can prevent 

controls from working as intended regardless of how well the controls were designed. 

 For the auditor, evaluating whether or not a contractor’s accounting system internal controls provide 

reasonable assurance is inherently dependent on each contractor’s unique facts and circumstances. In 

this regard, Public Company Accounting Oversight Board’s (PCAOB) definition of reasonable 

assurance is instructive. In the context of an internal control audit over financial reporting, reasonable 

assurance means that there is a remote likelihood that material misstatements will not be prevented or 

detected and corrected on a timely basis. Although not absolute assurance, reasonable assurance is, 

nevertheless, a high level of assurance. This concept can be applied to audits of contractor accounting 

system internal controls relative to the criteria contained in DFARS 252.242-7006, Accounting System 

Administration. 

Contractor Internal Controls 

The internal controls and business processes are the responsibility of the contractor. This section is 

designed to provide information on certain aspects of the contractor’s internal controls and the scaling 

of risk. 

The objective of the accounting system is to record, accumulate, and summarize financial transactions 

related to financial reporting, performance reporting, and government contracts (i.e. costs comply with 

 

11 COSO Internal Control over Financial Reporting – Guidance for Smaller Public Companies, dated June 2006 

12 FAR 1.102-2(c)(2), “To achieve efficient operations, the [Federal Acquisition] System must shift its focus from “risk avoidance” to one of 

“risk management.” The cost to the taxpayer of attempting to eliminate all risk is prohibitive.” 
January 2019 DoD Professional Practice Guide 

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contract terms and federal regulations). This objective statement is broad and refers to the entire 

accounting system. The accounting system includes many different types of costs (e.g. labor, materials) 

that represent different operational activities and distinct business processes. For example, the business 

processes and internal controls for labor cost are different when compared to other cost elements such 

as travel. 

Contractor Objectives and Business Processes 

The contractor will design and implement business processes that achieve operational and financial 

objectives. The accounting system, as defined at DFARS 252.242-7006, is the collection of 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. 

The accounting system should be designed to meet the contractor’s objectives and incorporate the 

necessary internal control activities to reasonably assure that those objectives are met. Whether the 

contractors accounting system is already established, or is in the process of being newly implemented, 

the following diagram illustrates how to evaluate a business process and identify its internal controls. 

Figure 4. Evaluating a Business Process and Identifying Internal Controls 

 Objectives: Through business process walkthroughs and inquiries, the auditor identifies the 

contractor’s objectives related to operations, reporting (e.g., financial statements, incurred cost 

proposals) and compliance. The overall objective for government contracts is for costs to be 

billed, or reported, to the government in compliance with contract terms and federal 

regulations. 

 Risk Assessment: The process for identifying and analyzing risks forms the basis for 

determining how risks should be managed to achieve the entity’s objectives.13 The risk 

assessment process consists of 

 considering the business processes, or how things are done, 

 identifying the risks that the objective will not be achieved, 

 estimating the significance of the risks, 

 assessing the likelihood of the risks occurring, and 

 

13 Risk Assessment definition from the Committee of Sponsoring Organizations of the Treadway Commission (COSO), Internal Control – 

Integrated Framework (2013). 

Risk Assessment

Internal Control

Activities

Objectives
DoD Professional Practice Guide January 2019 

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 deciding what actions to implement to address those risks. 

 Internal Control Activities: The contractor will implement internal control activities based on 

the risk assessment and business process to mitigate the risk of not meeting the objectives. 

Contractor Objectives for Government Contracts and Scaling of Risk 

In simplified terms, risk is the inverse of an objective. The following are the different categories of risk 

from the perspective of the accounting system: 

 Accounting System Criteria and Risk: The Accounting System Criteria represents the overall 

objectives of an accounting system. The associated risk, or the potential for not meeting these 

objectives, is global across the entire contractor for government contracts and applicable to 

every cost element billed or reported to the Government. 

 Process Objectives and Risks: Process risks are defined at the process level. They are based on 

the Accounting System Criteria but defined in the context of the costs and business process. 

The Accounting System Criteria are the benchmarks used to measure whether the objective has been 

achieved. If the system has implemented internal controls that mitigate the risks of the Accounting 

System Criteria not being met, the contractor and the government can state the system was suitably 

designed to mitigate the risks of noncompliance with the overall objective. 

The following table shows the interrelationship among the objective, Accounting System Criteria, and 

the risks of not achieving the objective: 

 
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Table 9. Interrelationships among Objective, Accounting System Criteria, and Risk of Not Achieving Objective 

Accounting System Criteria Risk 

(1) Classification of direct costs and indirect costs in 

accordance with contract terms, FAR, CAS and other 

regulations, as applicable. 

Contract costs are not properly classified as direct and 

indirect in accordance with contract terms, FAR, CAS, and 

other regulations, as applicable. 

(2) Identification and accumulation of direct costs by 

contract in accordance with contract terms, FAR, CAS and 

other regulations, as applicable. 

Direct contract costs are not identified and accumulated 

to the correct contract in accordance with contract terms, 

FAR, CAS, and other regulations, as applicable. 

(3) Methods to accumulate and allocate indirect costs to 

contracts in accordance with contract terms, FAR, CAS and 

other regulations, as applicable. 

Indirect costs are not accumulated and allocated to 

contracts in accordance with contract terms, FAR, CAS, 

and other regulations, as applicable. 

(4) General ledger control accounts that accurately reflect 

all transactions recorded in subsidiary ledgers or other 

information systems that either integrate or interface with 

the general ledger including, but not limited to, 

timekeeping, labor cost distribution, fixed assets, accounts 

payable, project costs, and inventory. 

The general ledger does not reflect transactions recorded 

in subsidiary ledgers or other information systems that 

integrate or interact with the general ledger. 

(5) Adjustments to the general ledger, subsidiary ledgers, 

or other information systems bearing upon the 

determination of contract costs (e.g. adjusting journal 

entries, reclassification journal entries, cost transfers, etc.) 

for reasons that do not violate contract terms, FAR, CAS, 

and other regulations, as applicable. 

Adjustments made to the general ledger from whatever 

source violate contract terms, FAR, CAS, or other 

regulations, as applicable. 

(6) Identification and treatment of unallowable costs in 

accordance with contract terms, FAR, CAS and other 

regulations, as applicable. 

Unallowable costs are not identified in the accounting 

system and not properly resolved in accordance with 

contract terms, FAR, CAS, or other regulations, as 

applicable. 

(7) Billings prepared in accordance with contract terms, 

FAR, CAS and other regulations, as applicable. 

Billings are not prepared in accordance with contract 

terms, FAR, CAS, or other regulations, as applicable. 

Objective: The contractor bills and reports costs that comply with contract terms and government regulations such as 

FAR and the CAS, if applicable.

To implement internal control activities, the risks must be defined and understood in the context of the 

business processes and costs. Business processes and internal controls are designed to mitigate the risks 

of noncompliance with the Accounting System Criteria. The level and nature of the documentation will 

vary based on the size of the contractor and the complexity of the control. 

Contractor Risk Assessment and Internal Control Activities 

This section refers to contractors’ assessment of risk and the implementation of internal controls for 

their own processes. The auditors’ risk assessment process, performed as part of the internal controls 

audit, is different and discussed in a section below. 

Contractors are responsible for assessing risk and implementing internal controls to address those 

risks. The risk assessment links global risks of not meeting the Accounting System Criteria to business 

processes, process risk, and internal control activities. If contractors have documented risk assessment 
DoD Professional Practice Guide January 2019 

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to meet the criteria of the accounting system, this may be useful to the auditor and should be requested. 

The risk assessment process, formality, and its associated documentation is at the discretion of the 

contractor. It is possible for a contractor to have effective internal controls without formally 

documenting a risk assessment. 

A common method used in the risk assessment process is to ask the question, What can go wrong? in the 

context of the government risks and the accounting system. The basis for this question is the inherent in 

the Accounting System Criteria for government contract risk. When contractors design the business 

process, this question may be asked, and the internal control activities designed to mitigate the risk. 

Likewise, auditors will follow a similar process when evaluating design of contractors’ internal 

controls, but it is important to make the distinction that business processes and internal controls are the 

sole responsibility of contractors. Auditors’ role is to evaluate the effectiveness of contractors’ internal 

controls in mitigating the risks. The internal controls audit is a useful tool for the contractor in 

determining whether the internal controls are sufficient. 

An internal control activity is defined as an action established through policies and procedures that 

helps ensure management’s goal of achieving its objectives and mitigating the risks is attained. 

There are different types of internal control activities: 

 Manual internal control activities are performed by the contractor personnel using the software 

application or on hard copy documents; for example, the review and sign-off of a journal entry. 

 Automated internal control activities are imbedded in software applications used to process 

business transactions. For example, the feature in the timekeeping system that limits the charge 

codes to certain personnel based on work location and position title. 

 Manual and automated internal control activities can be either preventative or detective in 

design and operation. 

 Information Technology General Computer Controls, which apply to many applications affect 

compliance with the Accounting System Criteria and internal controls. 

 If contractors outsource a significant business process, such as processing payroll or another 

service, the internal controls over this service should be evaluated as part of the overall internal 

controls assessment. 

 Entity-level controls function at higher levels in the organization; are generally not process or 

cost element specific; and include controls over the control environment, monitoring, and 

controls over management control. For example, a business unit general manager reviews 

actual indirect cost rates compared to provisional indirect rates. 

 Process-level internal control activities are designed and placed in operation at the business 

process and cost element level. For example, the review and approval of a timesheet is a process 

level internal control for the labor cost element. 
January 2019 DoD Professional Practice Guide 

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Auditors and Testing of Internal Controls 

The objective of an internal controls audit of the accounting system is to determine if internal controls 

are effective in mitigating the risk of the noncompliance with contact terms and federal regulations. 

The audit subject matter is the contractor internal controls related to government contract risk and the 

audit criteria is defined by the Accounting System criteria. 

The definition of the accounting system is broad and includes all costs that are recorded, accumulated, 

and reported (i.e. billed to government contracts) by the contractor, but this does not mean the auditor 

must test every aspect of the contractor accounting system: 

 The auditor should focus on the government contract compliance risks (i.e., Accounting System 

Criteria). 

 The auditor should focus on testing the internal controls related to material, or significant, cost 

elements. 

 The auditor should test the internal controls that are the most effective at mitigating the risks of 

noncompliance. These are generally referred to as key internal controls. 

Additionally, considering internal control in the context of a comprehensive internal control 

framework, such as Standards for Internal Control in the Federal Government or COSO Internal 

Control—Integrated Framework can help auditors to determine whether underlying internal control 

deficiencies exist as the root cause of findings.14

During the planning phase of the audit, the auditor should obtain an understanding of the significant 

cost elements billed, or reported, through the accounting system and associated contractor business 

processes and internal controls. The auditor should request the contractor risk assessment (if available) 

and discuss with the contractor. Significant cost elements are determined based on dollar value 

(quantitative), qualitative characteristics, or importance to the contracting officer. 

The contractors accounting system and business processes may be complex. The top-down approach 

can be used in the planning phase of the audit to align auditors’ efforts with significant costs to the 

government. The approach begins with the identification of significant cost elements in the contractor 

billing or final indirect cost rate proposal (e.g., incurred cost proposal). For each significant cost 

element, auditors focus on the entity-level controls and works down to the accounts, business 

processes, and process-level controls. The auditor verifies his or her understanding of the risks and 

business processes to address the risk of material noncompliance. This process is a holistic approach to 

internal controls in which auditors focus on the total process and other mitigating controls. It also 

allows for auditors to consider the materiality of the cost element and potential error when determining 

the severity of the internal control deficiency. 

For a cost element, auditors obtain an understanding of the process and internal control activities by 

performing a walkthrough which traces the transactions through the accounting system. This 

 

14 GAO, Auditing Standards revision 2018, paragraph 8.130. 
DoD Professional Practice Guide January 2019 

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walkthrough includes noting the reason for an action to record the cost, performance of the action that 

creates the costs, a description of how the action and the associated cost is tracked, and the internal 

control activities. The walkthrough is typically performed in the planning phase of the audit and is 

documented in a sequential order from the initial transactions to the accumulation of the cost on the 

books and records and can include multiple policies and procedures. 

Not all internal controls are equal in importance. Auditors should identify key internal controls for 

each cost element and associated business process. Key internal controls are the primary means for 

providing reasonable assurance that contract costs comply with contract terms and federal regulations. 

If the key internal controls are designed and functioning, then the risks should be mitigated. In 

contrast, if the key internal controls are not functioning, then the compensating internal controls should 

be tested to ensure the risk is mitigated (mitigating internal controls). Every business process will have 

key and non-key internal controls. From an audit perspective, it is generally acceptable to only test key 

internal controls if the key controls are suitably designed and functioning. 

Auditors should develop audit procedures to test the design and functioning (referred to as operating 

effectiveness in the attestation standards) of internal controls aligned with each of the accounting 

system criteria: 

 Internal Control Design: The auditor should test the design effectiveness of controls by 

determining whether the contractor’s controls, if they were operated as designed by persons 

possessing the necessary authority and competence to perform the control effectively, would 

satisfy the company's control objectives and effectively prevent or detect errors or fraud that 

could result in material noncompliance. 

 Procedures auditors perform to test design effectiveness include a mix of inquiry of 

appropriate personnel, observation of the company's operations, and inspection of relevant 

documentation. Walkthroughs that include these procedures ordinarily are sufficient to 

evaluate design effectiveness.

 Internal Control Operation: Auditors should test the operating effectiveness of a control by 

determining whether the control is operating as designed and whether the person performing 

the control possesses the necessary authority and competence to perform the control effectively. 

 A smaller, less complex contractor might achieve its control objectives in a different manner 

from a larger, more complex organization. For example, a smaller, less complex contractor 

might have fewer employees in the accounting function, limiting opportunities to segregate 

duties and leading the company to implement alternative controls to achieve its control 

objectives. In such circumstances, auditors should evaluate whether those alternative 

controls are effective. 

 In some situations, particularly in smaller companies, a company might use a third party to 

provide assistance with certain financial reporting functions. When assessing the 

competence of personnel responsible for a company's financial reporting and associated 

controls, the auditor may take into account the combined competence of company personnel 

and other parties that assist with functions related to government contract costs. 
January 2019 DoD Professional Practice Guide 

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 Procedures auditors perform to test operating effectiveness include a mix of inquiry of 

appropriate personnel, observation of the company’s operations, inspection of relevant 

documentation, and reperformance of the control. 

Contractor may have internal controls tested by different auditors during the year, such as financial 

statement auditors, internal auditors, and government auditors. The auditor performing the business 

system audit (the primary auditor) may use the work of other auditors; doing so can increase audit 

efficiency, and may reduce the contractor compliance burden, but has limitations. The primary auditor 

has the sole responsibility for the opinion, or conclusion expressed, and that responsibility is not 

reduced by using the work of other auditors. The primary auditor should determine that the work 

performed by others is sufficient and appropriate for use in the audit. The other auditors must be 

independent of the subject matter, competent, and objective. The mere fact that other auditors 

performed internal control testing does not automatically imply that the work can be used by the 

primary auditor. See the AICPA Professional Standards, Standards on Attestation Engagements, and 

GAO, Government Auditing Standards 2018 revision, for additional information on using the work of 

others. 

Hierarchy of Internal Control Deficiencies 

A deficiency in internal control exists when the design or operation of a control does not allow 

management or employees, in the normal course of performing their assigned functions, to prevent, or 

detect and correct (a) impairments of effectiveness or efficiency of operations, (b) misstatements in 

financial or performance information, or (c) noncompliance with provisions of laws, regulations, 

contracts, or grant agreements on a timely basis. A deficiency in design exists when (a) a control 

necessary to meet the control objective is missing or (b) an existing control is not properly designed so 

that even if the control operates as designed, the control objective is not met. A deficiency in operation 

exists when a properly designed control does not operate as designed or when the person performing 

the control does not possess the necessary authority or qualifications to perform the control 

effectively.15 

A misstatement represents information provided to the government that does not comply with contract 

terms and applicable federal regulations, such as the FAR and CAS. A material misstatement could 

reasonably be expected to influence, and may adversely affect, the economic or management decisions 

of information users. A material misstatement will normally result in a material noncompliance 

because all misstatements are due to a noncompliance with contract terms or federal regulations. A 

material noncompliance is defined as: 

A misstatement in the information provided to the Government (e.g. billings, incurred cost submissions, 

pricing proposals, etc.) that will materially influence, and may adversely impact the economic or 

management decisions of the users of the information. 

For a compliance audit designed to test specific system related criteria, a deficiency can occur due to 

either internal control deficiencies or system shortcomings. A shortcoming pertains to a noncompliance 

 

15 Paragraph .07 of AU-C section 265, Communicating Internal Control Related Matters Identified in an Audit (AICPA, Professional 

Standards, AU-C sec. 265). 
DoD Professional Practice Guide January 2019 

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with system criteria, and not necessarily internal controls, although it is unlikely one would exist 

without the other. For accounting systems, internal control deficiencies are categorized by severity as 

material weakness, significant deficiency, and other deficiency. The categorization is irrespective of the 

type of engagement (e.g., attestation, inspection) that is performed to test internal controls or 

compliance with a specific system criterion. The system deficiencies are as follows: 

 Material Weakness: A deficiency, or combination of deficiencies, in internal control over risks 

related to Government contract compliance or other shortcomings in the system, such that there 

is a reasonable possibility that a material noncompliance will not be prevented, or detected and 

corrected, on a timely basis. A reasonable possibility exists when the likelihood of an event 

occurring is either reasonably possible, meaning the chance of the future event occurring is 

more than remote but less than likely, or is probable. 

 Significant Deficiency: A deficiency, or combination of deficiencies, in internal control over 

Government contract compliance or other shortcomings in the system that is less severe than a 

material weakness yet important enough to merit the attention of those charged with 

governance. 

 Other Deficiency: A deficiency, or combination of deficiencies, in internal control over 

Government contract compliance or other shortcomings in the system that have a clearly trivial, 

or inconsequential, effect on the ability of the business system to detect and correct errors on a 

timely basis. 

The other deficiency definition acknowledges the possibility that a system deficiency, or combination of 

systems deficiencies, may have a clearly trivial effect on the quality of information produced by the 

contractor’s business system. Clearly trivial represents the inverse of material whether judged by any 

criteria of size, nature, or circumstances. Other deficiencies will not affect the audit opinion or 

conclusions and will not be included in the audit report. These deficiencies may be communicated to 

contracting officers using email or other communication methods. 

Not all deficiencies rise to the level of a material weakness. Auditors should evaluate the deficiency in 

the context of the overall system, materiality, whether it is systematic or pervasive, and the existence of 

mitigating controls. These factors are described below: 

 Materiality: To be a material weakness, the internal control deficiency can result in a material 

noncompliance which could reasonably be expected to influence, and may adversely impact, 

the economic or management decisions of the users of the information. For example, the auditor 

identifies several internal control deficiencies in the travel cost process. The travel costs are 

immaterial in relation to other costs at the contractor and generally represent a small percentage 

of costs billed or reported. In this instance, the travel costs will never result in a material 

weakness, because it is impossible for an immaterial cost element to have a misstatement that 

rises to the level of a material noncompliance. The internal control deficiencies should be 

evaluated for categorization as a significant deficiency or other deficiency. 

 Systematic and Pervasive: One of the factors in determining whether a system deficiency is 

material depends on whether it is systematic or pervasive. Some internal control deficiencies 
January 2019 DoD Professional Practice Guide 

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have a limited impact to one or only a few cost elements and will not result in a material 

noncompliance. When the control deficiency affects only one type of cost (e.g., labor or material 

cost), the severity is evaluated based on the materiality of that specific cost element. Another 

factor is the frequency of occurrence based on whether the root cause of the deficiency 

represents a unique situation or one that occurs frequently. 

 Mitigating Controls: If the auditor discovers an internal control deficiency, the next step is to 

determine if there are other controls that are designed and in operation to mitigate the risks 

related to the deficient internal control. If this is the case, the severity of the internal control 

deficiency should be evaluated against the existence of other internal controls and may be 

determined as having no impact on the overall system. 

Reporting Requirements for Internal Control Deficiencies 

Contracting officers will use internal controls audit results to determine if the accounting system is 

approved or disapproved. The key factor in this determination is whether the business system is 

acceptable and materially complies with the Accounting System Criteria. An acceptable business 

system is defined as a contractor business system that materially complies with the criteria of the 

applicable business system clauses and does not contain a material weakness that would affect the 

ability of DoD officials to rely on information produced by the system. 

When auditors identify findings, they should plan and perform procedures to develop the criteria, 

condition, cause, and effect of the findings to the extent that these elements are relevant and necessary 

to achieve the audit objectives.16 The report should provide enough information to allow the 

contracting officer to make an informed decision. Stating something is wrong and providing no 

supporting information is not sufficient. Contracting officers need to be informed of the finding, but the 

cause and effect provide the information necessary to determine the next course of action. The effect 

takes into account materiality, whether the finding is systematic or pervasive, and mitigating controls. 

The following provides a summary of the report note elements: 

 Criteria: The Accounting System Criteria (see above) applicable to the overall accounting 

system and significant cost elements. Criteria identify the required or desired state or 

expectation with respect to the program or operation and provide a context for evaluating 

evidence and understanding the findings, conclusions, and recommendations in the report. For 

internal controls, the criteria should be framed in the context of the cost element, business 

process, and accounting system criteria. 

 Condition: The condition is a situation that exists and is discovered during the audit. For a 

system deficiency, the condition is due to either internal controls or other shortcomings in the 

system. For example, the auditor sampled 50 invoices for evidence of an approval control and 

identified 10 out of 50 as lacking approval. 

 Cause: The cause is the factor or factors responsible for the deficiency. For internal controls, the 

cause can be due to the design or operation, and for shortcomings the cause could be due to a 

 

16 GAO, FY 2018 Yellow Book, paragraph 7.19 
DoD Professional Practice Guide January 2019 

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noncompliance with a prescribed contract term or a deviation in the contractors documented 

policy and procedures. The cause is the factor or factors responsible for the difference between 

the condition and the criteria, and may also serve as a basis for recommendations for corrective 

actions. Common factors include poorly designed policies, procedures, or criteria and 

inconsistent, incomplete, or incorrect implementation. 

 Effect or Potential Effect: The effect or potential effect is the outcome or consequence resulting 

from the difference between the condition and the criteria. The severity of the system deficiency 

as a material weakness, significant deficiency, or other deficiency is correlated to the effect or 

potential effect. Effect or potential effect may be used to demonstrate the need for corrective 

action in response to identified problems or relevant risks. 

 
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APPENDIX A: CONSIDERATION OF MATERIALITY AND INDIRECT COSTS 

Indirect costs are allocated to contracts by using indirect cost rates, which represent a pool of indirect 

costs divided by a cost base of a contractor’s direct and/or indirect activities. Indirect costs are, by 

definition, costs that cannot be directly allocated to contracts. A contractor’s final indirect cost rate 

proposal (i.e., incurred cost proposal) contains several schedules that identify these pools and bases. 

Participation Percent: Because indirect costs are not directly charged to contracts, they are allocated 

over a base of costs representing business activities that may include a mix of commercial and 

competitively award fixed price work, as well as flexibly-priced government contracts. Therefore, the 

indirect costs allocated to flexibly priced government contracts may be less than the total amount of the 

respective indirect cost pool(s). The participation percentage for each final indirect cost pool reflects the 

proportion of flexibly-priced government contract activity within the allocation base to the total of all 

activity in the allocation base. For example, if a general and administrative (G&A) cost base is 

$1,000,000 and the cost of activity on flexibly priced government contracts is $100,000 of the base, then 

the participation percent is 10 percent ($100,000/$1,000,000). This affects the audit approach for indirect 

costs because adjusted materiality should take into account the participation percent. 

See the FAR and CAS for additional information on indirect costs and rates. 

The following steps should be followed by an auditor when calculating adjusted materiality for indirect 

costs: 

 The auditor will calculate quantified materiality and determine whether the indirect cost 

elements are significant. 

 From the perspective of quantified materiality, the significance of indirect costs is based on the 

contribution of those costs to the total subject matter. 

 If the specific indirect cost element is immaterial, then the auditor may perform limited 

procedures. 

The example below includes direct and indirect cost elements with a total subject matter amount of 

$8,219,400. The subject matter amount is the summation of all costs direct and indirect. Quantified 

materiality is calculated using the total subject matter and the materiality formula in this chapter, 

which results in a benchmark of $136,490, or 1.66 percent of the subject matter ($136,490/$8,219,400). An 

auditor will compare the quantified materiality to the cost elements and determine whether they are 

significant. Using this approach, the cost elements of direct labor, subcontracts, overhead indirect costs, 

and G&A costs are considered quantitatively material. Note, an auditor may still consider certain 

quantitatively immaterial cost elements to be material based on their professional judgment concerning 

risk and qualitative factors. 
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Figure 5. Example with Indirect Costs 

Incurred Cost Proposal 

> Materiality 

$136,490 

(YES/NO) 

Direct Costs: 

Direct Labor $ 5,000,000 YES 

Direct Materials $ 100,000 NO 

Other Direct Costs $ 80,000 NO 

Subcontracts $ 1,000,000 YES 

Indirect Costs: 

Overhead $ 1,112,400 YES 

General and Administrative $ 927,000 YES 

Total Subject Matter: $ 8,219,400 

Materiality Threshold: $ 136,490 

For the calculation of adjusted materiality, an auditor should revise quantified materiality for the 

indirect costs ‘participation percent’ to identify significant accounts. The table below compares the costs 

allocated to flexibly priced government contracts (i.e., subject matter) to the total costs in the pool, 

which, when divided together, yields the participation percent. 

Table 10. Comparison of Costs Allocated to Flexibly Priced Government Contracts 

Indirect Costs: 

Total 

Subject Matter 

Total Cost 

in Pool 

Participation

Rate 

Overhead $1,112,400 $11,124,000 10% 

General and Administrative $927,000 $11,587,500 8% 

Based on the above calculation the government participation percent for overhead costs is 10 percent 

and G&A costs is 8 percent. An auditor may now revise the quantified materiality for the participation 

percent. This aligns the materiality for the engagement to the total cost in the pools. Because the 

government participates in these pools, 10 percent and 8 percent, respectively, misstatements 

(individually or in the aggregate) in the overhead and G&A pools would have to exceed $1,364,898 and 

$1,706,122, respectively, to yield a $136,490 misstatement on flexibly priced government contracts. 
January 2019 DoD Professional Practice Guide 

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Table 11. Revised Materiality Calculations 

Indirect Costs: 

Participation 

Percent Materiality 

Revised 

Materiality 

Overhead 10% $136,490 $1,364,898 

General and Administrative 8% $136,490 $1,706,122 

The revised materiality amount for the overhead cost is calculated by dividing the quantified 

materiality of $136,490 by 10 percent. The revised materiality amount for general and administrative 

cost is calculated by dividing the quantified materiality of $136,490 by 8 percent. 

 Calculate adjusted materiality using the revised quantified materiality (see above) and in the 

same manner as Step 3 of the Engagement Materiality Framework. The adjusted materiality will 

be used for the identification of significant accounts that comprise the indirect cost rate pool. 

The following example uses a reduction of 20 percent to calculate adjusted materiality. 

Table 12. Materiality Adjusted by 20 Percent 

Indirect Costs: 

Revised 

Materiality Adjustment 

Adjusted 

Materiality 

Overhead $ 1,364,898 20% $ 1,091,918 

General and Administrative $ 1,706,122 20% $ 1,364,898 

 Based on adjusted materiality, determine which accounts are quantitatively material. Evaluate 

the accounts for factors such as risk, qualitative factors, and variability. Determine the nature, 

timing, and extent of testing. 

The following example compares the adjusted materiality amount of $1,091,918 to accounts in the 

overhead cost pool. This illustration lists only three accounts of many. Based on adjusted materiality, 

only the labor account is considered significant. The process for the general and administrative 

accounts is the same as the overhead accounts. 

Table 13. Comparison of Adjusted Materiality to Accounts in Overhead Cost Pool 

Overhead Pool Accounts Amount 

> Adjusted 

Materiality 

(YES/NO) 

6001 Labor $ 3,000,000 YES 

6002 Operating Supplies $ 900,000 NO 

6003 Computer & Data Process Supply $ 100,000 NO 

XXXX .......... .......... .......... 

 $ 11,124,000 
DoD Professional Practice Guide January 2019 

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Auditors are responsible for determining the nature, timing, and extent of audit procedures for the 

labor account. Note, auditors may consider accounts less than adjusted materiality to be significant 

based on their professional judgment of risk and qualitative factors. 
January 2019 DoD Professional Practice Guide 

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APPENDIX B: TOTAL SUBJECT MATTER 

From an audit perspective, the total subject matter is defined as the information on which the auditor 

provides an opinion (i.e., assurance) or conclusion. For incurred cost audits, the subject matter is 

defined as cost claimed on flexibly priced contracts during the year and includes different categories of 

cost such as labor, materials, other direct costs, and indirect costs. For time and material (T&M) 

contracts, the definition of flexibly priced contracts includes the material portion, but it is not 

uncommon to test both materials and labor (e.g., labor categories and labor hours) as part of the 

incurred cost audit due to audit efficiency. 

Section 803 of the FY 2018 NDAA, defines flexibly priced contract the same as the term flexibly-priced 

contracts and subcontracts in FAR Part 30 (Section 30.001 of Title 48, CFR). 

Total subject matter generally includes the following: 

 The direct and indirect cost of flexibly priced prime contracts and subcontracts awarded by 

DoD. 

 The direct and indirect costs of flexibly priced prime contracts and subcontracts awarded by an 

agency other than DoD and the agency has agreed to the audit. 

 The amount billed on prime T&M contracts that are awarded by DoD. 

 The amount billed on prime T&M contracts that are awarded by an agency other than the DoD 

and the agency has agreed to the audit. 

Total subject matter generally excludes the following: 

 The direct and indirect cost of flexibly priced contracts and subcontracts awarded by agencies 

other than DoD that have not agreed to the audit. 

 The amount billed for prime T&M contracts awarded by agencies other than DoD that have not 

agreed to the audit. 

 Amounts for contracts that are not flexibly priced such as firm-fixed-price contracts. 

 Amounts for nongovernment activity such as commercial activities. 
Section 6 

Streamlining and Improving Compliance 

Implementation Details 

Recommendation 62 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. LIMITATION ON REQUIRED FLOW DOWN OF CONTRACT CLAUSES TO 

SUBCONTRACTORS PROVIDING COMMERCIAL PRODUCTS OR 

COMMERCIAL SERVICES.

This provision would amend section 2375 of title 10, United States Code, and section 

1906 of title 41, United States Code, to require the consolidation of Federal Acquisition 

Regulation (FAR) mandatory subcontracting flow-down clauses into a single clause. The 

committee notes that currently the increasingly large number of flow-down clauses often leads 

to confusion for many contractors, especially for small or non-traditional companies.

The provision would also prohibit federal agencies from requiring any other FAR

clauses to be flowed down to commercial subcontracts. The committee notes that the Defense 

Federal Acquisition Regulation Supplement (DFARS) 252.244-7000 does not specifically identify 

the Defense Department’s prime contract clauses required to be flowed down to subcontracts 

for commercial items. The regulation instead relies on prime contractors or higher-tier 

subcontractors to determine flow-down applicability on a clause-by-clause basis. The committee 

further notes the current government contracting environment leads to prime contractors either 

taking a very conservative approach to tailoring flowdowns or not tailoring them at all. These 

approaches may result in improper compliance requirement burdens which impede the 

efficiency of the defense acquisition system, and serve as a barrier to entry for non-traditional 

businesses.
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1 SEC. ___. LIMITATION ON REQUIRED FLOWDOWN OF CONTRACT CLAUSES 

2 TO SUBCONTRACTORS PROVIDING COMMERCIAL PRODUCTS OR 

3 COMMERCIAL SERVICES. 

4 (a) CONTRACT CLAUSES REQUIRED IN THE FEDERAL ACQUISITION REGULATION.―Section 

5 1906(c) of title 41, United States Code, is amended by adding at the end the following new 

6 paragraph: 

7 “(5) LIMITATION ON CLAUSES.— 

8 “(A) An executive agency may not require that a clause be included in a 

9 subcontract for commercial products and services other than a clause required by a 

10 provision of law that is not on the list included in the Federal Acquisition Regulation 

11 under paragraph (2). 

12 “(B) The Federal Acquisition Regulation shall provide for implementation of all 

13 provisions of law applicable to subcontracts for commercial products and services 

14 through— 

15 “(i) a single clause applicable to contracts for commercial products and 

16 services; and 

17 “(ii) a single clause applicable to contracts for noncommercial products 

18 and services.”. 

19 (b) CONTRACT CLAUSES REQUIRED IN THE DEFENSE FEDERAL ACQUISITION REGULATION 

20 SUPPLEMENT.―Section 2375(c) of title 10, United States Code, is amended— 

21 (1) by redesignating paragraph (4) as paragraph (5); and 

22 (2) by inserting after paragraph (3) the following new paragraph (4): 
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1 “(4)(A) The Secretary of Defense may not require that a defense-unique clause be 

2 included in a subcontract for commercial products and services other than a clause required by a 

3 provision of law, or a contract clause requirement, that is not on the list included in the Defense 

4 Federal Acquisition Regulation Supplement under paragraph (2). 

5 “(B) The Defense Federal Acquisition Regulation Supplement shall provide for 

6 implementation of all defense-unique provisions of law and contract clause requirements that are 

7 applicable to subcontracts for commercial products and services through— 

8 “(i) a single clause applicable to contracts for commercial products and services; 

9 and 

10 “(ii) a single clause applicable to contracts for noncommercial products and 

11 services.”. 

12 (c EFFECTIVE DATES.—(1) Paragraph (5)(A) of section 1906(c) of title 41, United States 

13 Code, as added by subsection (a), and paragraph (4)(A) of section 2375(c) of title 10, United 

14 States Code, as added by subsection (b), shall apply with respect to solicitations issued by the 

15 Government after the end of the 120-day period beginning on the date of the enactment of this 

16 Act. 

17 (2) The Federal Acquisition Regulation shall be updated to implement paragraph (5)(B) 

18 of section 1906(c) of title 41, United States Code, as added by subsection (a), and the Defense 

19 Federal Acquisition Regulation Supplement shall be updated to implement paragraph (4)(B) of 

20 section 2375(c) of title 10, United States Code, as added by subsection (b), not later than the end 

21 of the 180-day period beginning on the date of the enactment of this Act. 

————— 

Title 41, United States Code 
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§1906. List of laws inapplicable to procurements of commercial items 

(a) DEFINITION.—In this section, the term "Council" has the meaning given that term 

in section 1301 of this title. 

(b) CONTRACTS.— 

(1) INCLUSION IN FEDERAL ACQUISITION REGULATION.—The Federal Acquisition 

Regulation shall include a list of provisions of law that are inapplicable to contracts for 

the procurement of commercial items. A provision of law properly included on the list 

pursuant to paragraph (2) does not apply to purchases of commercial items by an 

executive agency. This section does not render a provision of law not included on the list 

inapplicable to contracts for the procurement of commercial items. 

(2) LAWS ENACTED AFTER OCTOBER 13, 1994.—A provision of law described in 

subsection (d) that is enacted after October 13, 1994, shall be included on the list of 

inapplicable provisions of law required by paragraph (1) unless the Council makes a 

written determination that it would not be in the best interest of the Federal Government 

to exempt contracts for the procurement of commercial items from the applicability of the 

provision. 

(c) SUBCONTRACTS.— 

(1) Definition.—In this subsection, the term "subcontract" includes a transfer of 

commercial items between divisions, subsidiaries, or affiliates of a contractor or 

subcontractor. The term does not include agreements entered into by a contractor for the 

supply of commodities that are intended for use in the performance of multiple contracts 

with the Federal Government and other parties and are not identifiable to any particular 

contract. 

(2) INCLUSION IN FEDERAL ACQUISITION REGULATION.—The Federal Acquisition 

Regulation shall include a list of provisions of law that are inapplicable to subcontracts 

under a contract or subcontract for the procurement of commercial items. A provision of 

law properly included on the list pursuant to paragraph (3) does not apply to those 

subcontracts. This section does not render a provision of law not included on the list 

inapplicable to subcontracts under a contract for the procurement of commercial items. 

(3) PROVISIONS TO BE EXCLUDED FROM LIST.—A provision of law described in 

subsection (d) shall be included on the list of inapplicable provisions of law required by 

paragraph (2) unless the Council makes a written determination that it would not be in the 

best interest of the Federal Government to exempt subcontracts under a contract for the 

procurement of commercial items from the applicability of the provision. 

(4) WAIVER NOT AUTHORIZED.—This subsection does not authorize the waiver of 

the applicability of any provision of law with respect to any subcontract under a contract 

with a prime contractor reselling or distributing commercial items of another contractor 

without adding value. 

(5) LIMITATION ON CLAUSES.— 

(A) An executive agency may not require that a clause be included in 

a subcontract for commercial products and services other than a clause 

required by a provision of law that is not on the list included in the Federal 

Acquisition Regulation under paragraph (2). 

(B) The Federal Acquisition Regulation shall provide for 

implementation of all provisions of law applicable to subcontracts for 

commercial products and services through— 
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(i) a single clause applicable to contracts for commercial 

products and services; and 

(ii) a single clause applicable to contracts for noncommercial 

products and services. 

(d) COVERED LAW.—A provision of law referred to in subsections (b)(2) and (c) is a 

provision of law that the Council determines sets forth policies, procedures, requirements, or 

restrictions for the procurement of property or services by the Federal Government, except for a 

provision of law that— 

(1) provides for criminal or civil penalties; or 

(2) specifically refers to this section and provides that, notwithstanding this 

section, it shall be applicable to contracts for the procurement of commercial items. 

(e) PETITION.—A person may petition the Administrator to take appropriate action when 

a provision of law described in subsection (d) is not included on the list of inapplicable 

provisions of law as required by subsection (b) or (c) and the Council has not made a written 

determination pursuant to subsection (b)(2) or (c)(3). The Administrator shall revise the Federal 

Acquisition Regulation to include the provision on the list of inapplicable provisions of law 

unless the Council makes a determination pursuant to subsection (b)(2) or (c)(3) within 60 days 

after the petition is received. 

————— 

Title 10, United States Code 

§2375. Relationship of commercial item provisions to other provisions of law 

(a) Applicability of Government-wide Statutes.-(1) No contract for the procurement of a 

commercial item entered into by the head of an agency shall be subject to any law properly listed 

in the Federal Acquisition Regulation pursuant to section 1906(b) of title 41. 

(2) No subcontract under a contract for the procurement of a commercial item entered 

into by the head of an agency shall be subject to any law properly listed in the Federal 

Acquisition Regulation pursuant to section 1906(c) of title 41. 

(3) No contract for the procurement of a commercially available off-the-shelf item 

entered into by the head of an agency shall be subject to any law properly listed in the Federal 

Acquisition Regulation pursuant to section 1907 of title 41. 

(b) Applicability of Defense-unique Statutes to Contracts for Commercial Items.-(1) 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. A provision of law or contract clause 

requirement properly included on the list pursuant to paragraph (2) does not apply to purchases 

of commercial items by the Department of Defense. This section does not render a provision of 

law or contract clause requirement not included on the list inapplicable to contracts for the 

procurement of commercial items. 

(2) A provision of law or contract clause requirement described in subsection (e) that is 

enacted after January 1, 2015, shall be included on the list of inapplicable provisions of law and 

contract clause requirements required by paragraph (1) unless the Under Secretary of Defense for 

Acquisition, Technology, and Logistics makes a written determination that it would not be in the 
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best interest of the Department of Defense to exempt contracts for the procurement of 

commercial items from the applicability of the provision or contract clause requirement. 

(c) Applicability of Defense-unique Statutes to Subcontracts for Commercial Items.-(1) 

The Defense Federal Acquisition Regulation Supplement shall include a list of 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 subcontracts under a 

Department of Defense contract or subcontract for the procurement of commercial items. A 

provision of law or contract clause requirement properly included on the list pursuant to 

paragraph (2) does not apply to those subcontracts. This section does not render a provision of 

law or contract clause requirement not included on the list inapplicable to subcontracts under a 

contract for the procurement of commercial items. 

(2) A provision of law or contract clause requirement described in subsection (e) shall be 

included on the list of inapplicable provisions of law and contract clause requirements required 

by paragraph (1) unless the Under Secretary of Defense for Acquisition, Technology, and 

Logistics makes a written determination that it would not be in the best interest of the 

Department of Defense to exempt subcontracts under a contract for the procurement of 

commercial items from the applicability of the provision or contract clause requirement. 

(3) In this subsection, the term "subcontract" includes a transfer of commercial items 

between divisions, subsidiaries, or affiliates of a contractor or subcontractor. The term does not 

include agreements entered into by a contractor for the supply of commodities that are intended 

for use in the performance of multiple contracts with the Department of Defense and other 

parties and are not identifiable to any particular contract. 

(4)(A) The Secretary of Defense may not require that a defense-unique clause be 

included in a subcontract for commercial products and services other than a clause 

required by a provision of law, or a contract clause requirement, that is not on the list 

included in the Defense Federal Acquisition Regulation Supplement under paragraph (2). 

(B) The Defense Federal Acquisition Regulation Supplement shall provide for 

implementation of all defense-unique provisions of law and contract clause requirements 

that are applicable to subcontracts for commercial products and services through— 

(i) a single clause applicable to contracts for commercial products and 

services; and 

(ii) a single clause applicable to contracts for noncommercial products and 

services. 

 (4) (5) This subsection does not authorize the waiver of the applicability of any provision 

of law or contract clause requirement with respect to any first-tier subcontract under a contract 

with a prime contractor reselling or distributing commercial items of another contractor without 

adding value. 

(d) Applicability of Defense-unique Statutes to Contracts for Commercially Available, 

Off-the-shelf Items.-(1) The Defense Federal Acquisition Regulation Supplement shall include a 

list of 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 commercially available off-the-shelf items. A 

provision of law or contract clause requirement properly included on the list pursuant to 

paragraph (2) does not apply to Department of Defense contracts for the procurement of 

commercially available off-the-shelf items. This section does not render a provision of law or 
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contract clause requirement not included on the list inapplicable to contracts for the procurement 

of commercially available off-the-shelf items. 

(2) A provision of law or contract clause requirement described in subsection (e) shall be 

included on the list of inapplicable provisions of law and contract clause requirements required 

by paragraph (1) unless the Under Secretary of Defense for Acquisition, Technology, and 

Logistics makes a written determination that it would not be in the best interest of the 

Department of Defense to exempt contracts for the procurement of commercially available offthe-shelf items from the applicability of the provision or contract clause requirement. 

(e) Covered Provision of Law or Contract Clause Requirement.-A provision of law or 

contract clause requirement referred to in subsections (b)(2), (c)(2), and (d)(2) is a provision of 

law or contract clause requirement that the Under Secretary of Defense for Acquisition, 

Technology, and Logistics determines sets forth policies, procedures, requirements, or 

restrictions for the procurement of property or services by the Federal Government, except for a 

provision of law or contract clause requirement that- 

(1) provides for criminal or civil penalties; 

(2) 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; or 

(3) specifically refers to this section and provides that, notwithstanding this 

section, it shall be applicable to contracts for the procurement of commercial items. 
Recommendation 63 

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RECOMMENDED REPORT LANGUAGE 

SEC. ___. SUPPLY CHAIN RISK MITIGATION POLICIES TO BE IMPLEMENTED 

THROUGH REQUIREMENTS GENERATION PROCESS. 

This provision would amend section 807 of the National Defense Authorization Act for 

Fiscal Year 2018 (Public Law 115-91; 10 U.S.C. 2302 note). The amendment would require the 

Defense Department to develop tools for supply chain risk mitigation policies through the 

requirements generation process, rather than through the Defense Acquisition Regulation 

(DAR) Council process, as is currently done. 

The committee notes that supply chain risk issues have grown in importance as the 

United States defense acquisition supply base has become increasingly global. The committee 

further recognizes that supply chain risk mitigation is requirements-specific and that recent 

attempts to create supply chain risk mitigation policy through the DAR Council may result in 

policy that is not adequately tailored or tailorable to the requirement. 
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1 SEC. ___. SUPPLY CHAIN RISK MITIGATION POLICIES TO BE IMPLEMENTED 

2 THROUGH REQUIREMENTS GENERATION PROCESS. 

3 (a) PROCESS FOR ENHANCED SUPPLY CHAIN SCRUTINY.—Subsection (b) of section 807 of 

4 the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91; 10 U.S.C. 

5 2302 note) is amended— 

6 (1) by redesignating paragraphs (5) through (9) as paragraphs (6) through (10), 

7 respectively; and 

8 (2) by inserting after paragraph (4) the following new paragraph (5): 

9 “(5) Development of tools for implementing supply chain risk mitigation policies 

10 through the requirements generation process rather than through the Defense Acquisition 

11 Regulation Council process.”. 

12 (b) TECHNICAL AMENDMENT.—Subsection (a) of such section is amended by striking 

13 “Not later than” and all that follows through “the Secretary” and inserting “The Secretary”. 

14 (c) EFFECTIVE DATE.―Not later than the end of the 90-day period beginning on the date 

15 of the enactment of this Act, the Secretary of Defense shall revise the process established under 

16 section 807 of the National Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91; 

17 10 U.S.C. 2302 note) to implement paragraph (5) of subsection (b) of that section, as added by 

18 subsection (a)(2). 

Changes to Existing Law: This proposal would change existing law as follows: 

Section 807 of the National Defense Authorization Act for Fiscal Year 2018 

(Public Law 115-91; 10 U.S.C. 2302 note) 

SEC. 807. PROCESS FOR ENHANCED SUPPLY CHAIN SCRUTINY. 
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(a) PROCESS.—Not later than 90 days after the date of the enactment of this Act, the The 

Secretary of Defense shall establish a process for enhancing scrutiny of acquisition decisions in 

order to improve the integration of supply chain risk management into the overall acquisition 

decision cycle. 

(b) ELEMENTS.—The process under subsection (a) shall include the following elements: 

(1) Designation of a senior official responsible for overseeing the development 

and implementation of the process. 

(2) Development or integration of tools to support commercial due-diligence, 

business intelligence, or otherwise analyze and monitor commercial activity to 

understand business relationships with entities determined to be threats to the United 

States. 

(3) Development of risk profiles of products or services based on commercial 

due-diligence tools and data services. 

(4) Development of education and training curricula for the acquisition workforce 

that supports the process. 

(5) Development of tools for implementing supply chain risk mitigation 

policies through the requirements generation process rather than through the 

Defense Acquisition Regulation Council process. 

(5) (6) Integration, as needed, with intelligence sources to develop threat profiles 

of entities determined to be threats to the United States. 

(6) (7) Periodic review and assessment of software products and services on 

computer networks of the Department of Defense to remove prohibited products or 

services. 

(7) (8) Synchronization of the use of current authorities for making supply chain 

decisions, including section 806 of Public Law 111–383 (10 U.S.C. 2304 note) or 

improved use of suspension and debarment officials. 

(8) (9) Coordination with interagency, industrial, and international partners, as 

appropriate, to share information, develop Government-wide strategies for dealing with 

significant entities determined to be significant threats to the United States, and 

effectively use authorities in other departments and agencies to provide consistent, 

Government-wide approaches to supply chain threats. 

(9) (10) Other matters as the Secretary considers necessary. 

(c) NOTIFICATION.—Not later than 90 days after establishing the process required by 

subsection (a), the Secretary shall provide a written notification to the Committees on Armed 

Services of the Senate and House of Representatives that the process has been established. The 

notification also shall include the following: 

(1) Identification of the official designated under subsection (b)(1). 

(2) Identification of tools and services currently available to the Department of 

Defense under subsection (b)(2). 

(3) Assessment of additional tools and services available under subsection (b)(2) 

that the Department of Defense should evaluate. 

(4) Identification of, or recommendations for, any statutory changes needed to 

improve the effectiveness of the process. 

(5) Projected resource needs for implementing any recommendations made by the 

Secretary. 
Recommendation 64 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. MODIFICATIONS TO DOMESTIC PURCHASING PREFERENCE 

REQUIREMENTS.

This section would amend section 2375 title 10, United States Code, by adding a new 

paragraph to exclude Department of Defense purchases of commercial products from the Buy 

American Act requirements of section 8302, title 41, United States Code. This section would 

further amend title 10, United States Code, by including an exception to the Berry Amendment 

for Defense Department purchases of commercial products at section 2533a. Such section would 

be further amended to include a public interest exception identical to the exception established 

under the Buy American Act in title 41, United States Code, section 8302, and in title 10, United 

States Code, section 2533. 

The committee is aware that domestic purchasing preferences, notably the Buy 

American Act and the Berry Amendment, can undermine the Department of Defense’s ability to 

field the most innovative technologies to the warfighter in a rapid, cost-effective, and efficient 

manner. Granting exceptions to domestic purchasing preferences for commercial goods will 

enable the Department to expand opportunities to obtain new and innovative products from 

commercial and non-traditional suppliers while continuing to protect its defense-unique 

acquisitions. Additionally, the committee notes that allowing the Defense Department to grant 

public interest exceptions to the Berry Amendment will ensure that it can access advanced, 

state-of-the-art technology.

This section would also make an amendment to section 8302(b)(2), title 41, United States 

Code, to codify the commercial information technology (IT) exception.
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1 SEC. ___. MODIFICATIONS TO DOMESTIC PURCHASING PREFERENCE 

2 REQUIREMENTS. 

3 (a) EXCEPTIONS FOR DEPARTMENT OF DEFENSE PURCHASES OF COMMERCIAL ITEMS.— 

4 (1) BUY AMERICAN ACT.—Section 2375(a) of title 10, United States Code, is 

5 amended by adding at the end the following new paragraph: 

6 “(4)(A) No contract for the procurement of a commercial item or (effective January 1, 

7 2020) a commercial product entered into by the Secretary of Defense or the Secretary of a 

8 military department shall be subject to section 8302 of title 41. 

9 “(B) No subcontract under a contract described in subparagraph (A) entered into by the 

10 Secretary of Defense or the Secretary of a military department shall be subject to section 8302 of 

11 title 41.”. 

12 (2) BERRY AMENDMENT.— 

13 (A) EXCEPTION FOR COMMERCIAL ITEMS.—Subsection (i) of section 2533a 

14 of such title is amended to read as follows; 

15 “(i) EXCEPTION FOR COMMERCIAL ITEMS.—Subsection (a) does not apply to contracts and 

16 subcontracts for the procurement of commercial items.”. 

17 (B) CONFORMING AMENDMENT.—Subsection (a) of such section is 

18 amended by striking “Except as provided in subsections (c) through (h),” and 

19 inserting “Except as provided in subsections (c) through (i),”. 

20 (b) PUBLIC INTEREST EXCEPTION TO BERRY AMENDMENT.—Section 2533a of such title, 

21 as amended by subsection (a)(2), is further amended— 

22 (1) by striking “(c) AVAILABILITY EXCEPTION.—” and inserting “(2) 

23 AVAILABILITY EXCEPTION.—”; 
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1 (2) by realigning paragraph (2), as so designated, two ems to the right; and 

2 (3) by inserting immediately before that paragraph the following: 

3 “(c) PUBLIC INTEREST AND AVAILABILITY EXCEPTIONS.— 

4 “(1) PUBLIC INTEREST EXCEPTION.—Subsection (a) does not apply to the 

5 procurement of an item described in subsection (b) to the extent that the Secretary of 

6 Defense or the Secretary of the military department concerned determines that 

7 applicability of subsection (a) to that procurement would be inconsistent with the public 

8 interest.”. 

9 (c) CODIFICATION OF RECURRING APPROPRIATIONS PROVISION.—Section 8302(b)(2) of 

10 title 41, United States Code, is amended— 

11 (1) by striking “and” at the end of subparagraph (B); 

12 (2) by striking the period at the end of subparagraph (C) and inserting “; and”; and 

13 (3) by adding at the end the following new subparagraph: 

14 “(D) to information technology (as defined in section 11101 of title 40) 

15 that is a commercial item (as defined in section 103 of this title) or, effective 

16 January 1, 2020, that is a commercial product or commercial service (as defined 

17 in sections 103 and 103a, respectively, of this title).”. 
Recommendation 65 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. THRESHOLD FOR APPLICABILITY OF CERTAIN SOCIOECONOMIC LAWS 

TO DEPARTMENT OF DEFENSE CONTRACTS.

This section would amend title 10, United States Code, by inserting a new section 2338a 

to establish a “socioeconomic labor threshold” of $2 million. This threshold would apply to the 

Davis-Bacon Act, the Walsh-Healey Public Contracts Act, and the Services Contract Act. 

The committee is concerned that the Davis-Bacon Act, the Walsh-Healey Public 

Contracts Act, and the Service Contract Act may negatively affect Department of Defense 

acquisitions in several ways, including cost inflation and administrative burden. The committee 

notes that the thresholds for these laws have not been increased since their enactment. The 

committee does not recommend repealing these laws or waiving their applications to defense 

contracts. The committee notes that raising the relevant acquisition thresholds to $2 million will 

strike a balance between lessening the burden on contract actions and continuing to uphold the 

intent of these laws for Defense Department contracts. 
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1 SEC. ___. INCREASE IN THRESHOLD FOR APPLICATION OF SOCIOECONOMIC 

2 STATUTES TO THE DEPARTMENT OF DEFENSE. 

3 (a) IN GENERAL.—Chapter 137 of title 10, United States Code, is amended by inserting 

4 after section 2338 the following new section:

5 “§2338a. Threshold for applicability of certain socioeconomic laws to Department of 

6 Defense contracts 

7 “(a) DAVIS-BACON ACT.—For purposes of the application of the Davis-Bacon Act to 

8 contracts entered by the Department of Defense, the amount in effect under section 3142(a) of 

9 title 40 is the Department of Defense socioeconomic threshold. 

10 “(b) WALSH-HEALEY ACT.—For purposes of the application of the Walsh-Healey Act to 

11 contracts entered by the Department of Defense, the amount in effect under section 6502 of title 

12 41 is the Department of Defense socioeconomic threshold. 

13 “(c) SERVICE CONTRACT ACT.—For purposes of the application of the Service Contract 

14 Act to contracts entered by the Department of Defense, the amount in effect under section 

15 6702(a)(2) of title 41 is the Department of Defense socioeconomic threshold. 

16 “(d) DEFINITIONS.—In this section: 

17 “(1) The term ‘Davis-Bacon Act’ means subchapter IV of chapter 31 of title 40. 

18 “(2) The term ‘Walsh-Healey Act’ means chapter 65 of title 41. 

19 “(3) The term “Service Contract Act’ means chapter 67 of title 41. 

20 “(4) The term “Department of Defense socioeconomic threshold’ means 

21 $2,000,000.”. 

22 (b) CLERICAL AMENDMENT.—The table of sections at the beginning of such chapter is 

23 amended by inserting after the item relating to section 2388 the following new item: 

“2338a. Threshold for applicability of certain socioeconomic laws to Department of Defense contracts.”. 
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RECOMMENDED REPORT LANGUAGE

SEC.___. PURPOSE OF PROVIDING FOR REVIEW OF PROCUREMENT ACTIONS OF 

THE DEPARTMENT OF DEFENSE THROUGH THE GENERAL ACCOUNTING 

OFFICE PROCUREMENT PROTEST SYSTEM AND THROUGH CAUSES OF 

ACTION BEFORE THE UNITES STATES COURT OF FEDERAL CLAIMS.

This provision would create a new section 2317 of title 10, United States Code, to 

establish a purpose statement for bid protests filed in response to Department of Defense

procurement actions or proposed procurement actions. This purpose statement would 

recognize the role protests play in the acquisition system and would apply to bid protests filed 

at any of the available forums. The committee recognizes that protest actions present an 

opportunity for the Defense Department to remedy violations of procurement related statutes 

and regulations when identified by interested parties. The committee notes that bid protests 

and bid protest jurisdictions have evolved over time without there being a clear statement of 

purpose to ensure the integrity of the acquisition system. The committee also notes that the bid 

protest process must exhibit certain attributes to be an effective component of the acquisition 

system.
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1 SEC. ___. PURPOSE OF PROVIDING FOR REVIEW OF PROCUREMENT ACTIONS 

2 OF THE DEPARTMENT OF DEFENSE THROUGH THE GENERAL 

3 ACCOUNTING OFFICE PROCUREMENT PROTEST SYSTEM AND 

4 THROUGH CAUSES OF ACTION BEFORE THE UNITES STATES 

5 COURT OF FEDERAL CLAIMS. 

6 (a) PURPOSE OF PROCUREMENT PROTEST SYSTEM AS APPLICABLE TO DEPARTMENT OF 

7 DEFENSE.—Chapter 137 of title 10, United States Code, is amended by inserting after section 

8 2316 the following new section: 

9 “§ 2317. Purpose of procurement protest procedures 

10 “The purpose of Congress in providing for review of procurement actions of the 

11 Department of Defense through the procurement protest system under subchapter V of chapter 

12 35 of title 31 and through causes of action under section 1491(b) of title 28 was to enhance 

13 confidence in the Department of Defense contracting process by providing— 

14 “(1) a means, based on protests or actions filed by interested parties, for 

15 identification of violations of procurement statutes and regulations in a timely, 

16 transparent, and effective manner; and 

17 “(2) a means for timely, transparent, and effective resolution of any such 

18 violation.”. 

19 (b) CLERICAL AMENDMENT.—The table of sections at the beginning of such chapter is 

20 amended by inserting after the item relating to section 2316 the following new item: 

21 “2317. Purpose of procurement protest procedures.”. 
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RECOMMENDED REGULATORY REVISIONS

SUBPART 233.1--PROTESTS 

(Revised November 18, 2013)

233.102 General.

(a) The purpose of the review of procurement actions of the Department of Defense through the 

procurement protest system at the agency and before the Government Accountability office and 

at the Court of Federal Claims is to enhance confidence in the Department of Defense 

contracting process by—

 (1) providing a means, based on protests or actions filed by interested parties, for violations of 

procurement statutes and regulations in a timely, transparent, and effective manner; and;

 (2) a means for timely, transparent, and effective resolution of any such violation.

(b) If the Government exercises the authority provided in 239.7305(d) to limit disclosure of 

information, no action undertaken by the Government under such authority shall be subject to 

review in a bid protest before the Government Accountability Office or in any Federal court (see 

subpart 239.73).
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RECOMMENDED REPORT LANGUAGE

SEC. ___. TIMELINESS RULES FOR FILING AND DECIDING DEPARTMENT OF 

DEFENSE BID PROTEST CAUSES OF ACTION AT THE UNITED STATES COURT 

OF FEDERAL CLAIMS AND LIMITATION TO ACTIONS NOT ALREADY FILED 

WITH THE GENERAL ACCOUNTING OFFICE AS A BID PROTEST.

This section would amend section 1491 of title 28, United States Code, and section 3556 

of title 31, United States Code, to ensure that procurement bid protests, based on substantially 

the same grounds, may be filed at either the Government Accountability Office (GAO) or the 

United States Court of Federal Claims (COFC), but not both. The amendment addresses preaward protests in section 1491(b)(3)(B)(ii) of title 28 and post-award protests in section 

1491(b)(3)(B)(iii) of title 28. The committee notes that the existing bid protest system allows for 

challenges at the level of the procuring agency, the GAO, or the COFC. The committee notes 

that there is currently nothing to prevent a company from protesting an award at the GAO, 

receiving an unfavorable result, and protesting the same award at the COFC with the 

expectation of a different result.

The committee further notes that the long time delays associated with re-litigating the 

same or substantially the same matter can impede the efficiency of the defense acquisition 

system. These time delays were addressed in the final report of the advisory panel established 

under section 809 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 

114-92). This section would also require the COFC to render judgement on Department of 

Defense protest actions within 100 days, whenever the court orders or the parties agree to 

suspend contract award or performance while the protest action is being litigated. The 

committee notes that this time limit for rendering a decision is consistent with time limits for 

GAO and the direction in section 1491(b)(3) of title 28 for the Court to provide expeditious 

resolution of actions related to national defense and national security. 
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1 SEC. ___. TIMELINESS RULES FOR FILING AND DECIDING DEPARTMENT OF 

2 DEFENSE BID PROTEST CAUSES OF ACTION AT THE UNITED 

3 STATES COURT OF FEDERAL CLAIMS AND LIMITATION TO 

4 ACTIONS NOT ALREADY FILED WITH THE COMPTROLLER 

5 GENERAL AS A BID PROTEST. 

6 (a) JURISDICTION.―Section 1491(b) of title 28, United States Code, is amended— 

7 (1) in paragraph (1), by inserting “, subject to paragraph (3)(B)” before the period 

8 at the end; and 

9 (2) in paragraph (3)— 

10 (A) by inserting “(A)” after “(3)”; and 

11 (B) by adding at the end the following new subparagraph: 

12 “(B) In the case of a procurement action of the Department of Defense, the following 

13 limitations apply to actions before the United States Court of Federal Claims: 

14 “(i) The Court does not have jurisdiction over an action objecting to a solicitation 

15 by the Department of Defense for bids or proposals for a proposed contract or to a 

16 proposed award or the award of a contract or any alleged violation of statute or regulation 

17 in connection with a procurement or a proposed procurement by the Department of 

18 Defense if the interested party had previously filed a bid protest with the Comptroller 

19 General based on substantially the same objection to a solicitation, proposed award, or 

20 award of a contract or alleged violation of statute or regulation. 

21 “(ii) The Court does not have jurisdiction over an action objecting to a 

22 Department of Defense solicitation for bids or proposals that is not instituted before bid 

23 opening or the time set by the Department of Defense for receipt of proposals. 
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1 “(iii) The Court does not have jurisdiction over an action objecting to a proposed 

2 award or award of a Department of Defense contract or an alleged violation of statute or 

3 regulation in connection with a procurement or proposed procurement action that is not 

4 instituted within 10 days of the interested party becoming aware, or should have become 

5 aware, of the basis for the action. In a case in which a debriefing is required, an objection 

6 was first submitted to the agency as an agency level protest, or both, the interested party 

7 may file an action at the Court within 10 days of the agency’s action on the protest or 

8 completion of the debriefing, whichever is later. 

9 “(iv) In any action under this subsection with respect to a procurement action of 

10 the Department of Defense, the Court shall render judgement within 100 days of the 

11 Court ordering, or the parties agreeing, that performance of the contract that is the subject 

12 of the action be suspended or that award of the contract that is the subject of the action be 

13 suspended.”. 

14 (b) TECHNICAL CORRECTIONS TO REFLECT PRIOR SUNSET.—Paragraph (1) of such section 

15 is further amended— 

16 (A), by striking “Both the” in the first and second sentences and inserting “The”; 

17 and 

18 (B) by striking “and the district courts of the United States” in the first and second 

19 sentences. 

20 (c) CONFORMING AMENDMENTS.— 

21 (1) IN GENERAL.—Section 3556 of title 31, United States Code, is amended— 
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1 (A) by striking “agency or to file an action in” and inserting “agency. If a 

2 protest is filed under this subchapter with the Comptroller General, an action 

3 based on substantially the same protest grounds may not also be filed at”; and 

4 (B) by striking the last sentence. 

5 (2) SECTION HEADING AMENDMENT.—The heading of such section, and the item 

6 relating to such section in the table of sections at the beginning of chapter 35 of such title, 

7 are amended by striking the semicolon and the last four words. 

8 (f) EFFECTIVE DATE.―The amendments made by this section shall apply to any cause of 

9 action filed 120 days or more after the date of the enactment of this Act. 

Changes to Existing Law: This proposal would amend section 1491(b) of title 28, United 

States Code, and section 3556 of title 31, United States Code, as follows: 

TITLE 28, UNITED STATES CODE 

* * * * * * * 

§ 1491. Claims against United States generally; actions involving Tennessee Valley 

Authority 

(a) *** 

(b)(1) Both the The Unites States Court of Federal Claims and the district courts of the 

United States shall have jurisdiction to render judgment on an action by an interested party 

objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to 

a proposed award or the award of a contract or any alleged violation of statute or regulation in 

connection with a procurement or a proposed procurement. Both the The United States Court of 

Federal Claims and the district courts of the United States shall have jurisdiction to entertain 

such an action without regard to whether suit is instituted before or after the contract is awarded, 

subject to paragraph (3)(B). 

 (2) To afford relief in such an action, the courts may award any relief that the court 

considers proper, including declaratory and injunctive relief except that any monetary relief shall 

be limited to bid preparation and proposal costs. 

(3)(A) In exercising jurisdiction under this subsection, the courts shall give due regard to 

the interests of national defense and national security and the need for expeditious resolution of 

the action. 

(B) In the case of a procurement action of the Department of Defense, the following 

limitations apply to actions before the United States Court of Federal Claims: 
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(i) The Court does not have jurisdiction over an action objecting to a 

solicitation by the Department of Defense for bids or proposals for a proposed 

contract or to a proposed award or the award of a contract or any alleged violation 

of statute or regulation in connection with a procurement or a proposed 

procurement by the Department of Defense if the interested party had previously 

filed a bid protest with the Comptroller General based on substantially the same 

objection to a solicitation, proposed award, or award of a contract or alleged 

violation of a statute or regulation. 

(ii) The Court does not have jurisdiction over an action objecting to a 

Department of Defense solicitation for bids or proposals that is not instituted before 

bid opening or the time set by the Department of Defense for receipt of proposals. 

(iii) The Court does not have jurisdiction over an action objecting to a 

proposed award or award of a Department of Defense contract or an alleged 

violation of statute or regulation in connection with a procurement or proposed 

procurement action that is not instituted within 10 days of the interested party 

becoming aware, or should have become aware, of the basis for the action. In a case 

in which a debriefing is required, an objection was first submitted to the agency as 

an agency level protest, or both, the interested party may file an action at the Court 

within 10 days of the agency’s action on the protest or completion of the debriefing, 

whichever is later. 

(iv) In any action under this subsection with respect to a procurement action 

of the Department of Defense, the Court shall render judgement within 100 days of 

the Court ordering, or the parties agreeing, that performance of the contract that is 

the subject of the action be suspended or that award of the contract that is the 

subject of the action be suspended. 

(4) In any action under this subsection, the courts shall review the agency’s decision 

pursuant to the standards set forth in section 706 of title 5. 

 (5) If an interested party who is a member of the private sector commences an action 

described in paragraph (1) with respect to a public-private competition conducted under Office 

of Management and Budget Circular A–76 regarding the performance of an activity or function 

of a Federal agency, or a decision to convert a function performed by Federal employees to 

private sector performance without a competition under Office of Management and Budget 

Circular A–76, then an interested party described in section 3551(2)(B) of title 31 shall be 

entitled to intervene in that action. 

(6) Jurisdiction over any action described in paragraph (1) arising out of a maritime 

contract, or a solicitation for a proposed maritime contract, shall be governed by this section and 

shall not be subject to the jurisdiction of the district courts of the United States under the Suits in 

Admiralty Act (chapter 309 of title 46) or the Public Vessels Act (chapter 311 of title 46). 

(c) *** 

————— 

TITLE 31, UNITED STATES CODE 

* * * * * * * 
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§3556. Nonexclusivity of remedies; matters included in agency record 

This subchapter does not give the Comptroller General exclusive jurisdiction over protests, 

and nothing contained in this subchapter shall affect the right of any interested party to file a 

protest with the contracting agency. If a protest is filed under this subchapter with the 

Comptroller General, or to file an action based on substantially the same protest grounds 

may not also be filed at in the United States Court of Federal Claims. In any such action based 

on a procurement or proposed procurement with respect to which a protest has been filed under 

this subchapter, the reports required by sections 3553(b)(2) and 3554(e)(1) of this title with 

respect to such procurement or proposed procurement and any decision or recommendation of 

the Comptroller General under this subchapter with respect to such procurement or proposed 

procurement shall be considered to be part of the agency record subject to review. 
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Recommendation 68 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. THRESHOLD FOR REVIEW OF PROCUREMENT ACTIONS OF THE 

DEPARTMENT OF DEFENSE THROUGH THE GENERAL ACCOUNTING OFFICE 

PROCUREMENT PROTEST SYSTEM AND CAUSES OF ACTION BEFORE THE 

UNITED STATES COURT OF FEDERAL CLAIMS.

This section would amend section 1491 of title 28, United States Code, and section 3552 

of title 31, United States Code. These sections, as amended, would allow companies to protest 

only the award of Department of Defense procurements at or above $75,000 in expected value to 

the Government Accountability Office or the United States Court of Federal Claims. Protests of 

procurements below this amount would be addressed solely at the procuring agency level. The 

committee expects these amendments to mitigate the problem identified by a 2018 Department 

of Defense-funded study finding that agencies often spend more taxpayer dollars processing 

and defending a protest than the actual value of the procurement. 
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1 SEC. ___. THRESHOLD FOR REVIEW OF PROCUREMENT ACTIONS OF THE 

2 DEPARTMENT OF DEFENSE THROUGH THE GENERAL 

3 ACCOUNTING OFFICE PROCUREMENT PROTEST SYSTEM AND 

4 CAUSES OF ACTION BEFORE THE UNITES STATES COURT OF 

5 FEDERAL CLAIMS. 

6 (a) GAO BID PROTESTS.—Section 3552(a) of title 31, United States Code, is amended by 

7 adding at the end the following new sentence: “A protest may not be filed under this subchapter 

8 with respect to an action of the Department of Defense unless the value (or anticipated value) of 

9 the contract or proposed contract (or other matter in question) is greater than $75,000.”. 

10 (b) JUDICIAL ACTIONS.―Section 1491(b) of title 28, United States Code, is amended by 

11 adding at the end the following new paragraph: 

12 “(7) There is jurisdiction over an action described in paragraph (1) in the case of a 

13 proposed contract, or a proposed award or the award of a contract, or of a procurement or 

14 proposed procurement of the Department of Defense only if the value (or anticipated value) of 

15 the matter in question is greater than $75,000.”. 

16 (c) EFFECTIVE DATE.―The amendments made by this section shall apply to any protest 

17 or cause of action filed after the end of the 120-day period beginning on the date of the 

18 enactment of this Act. 

Changes to Existing Law: This proposal would amend section 3556 of title 31, United States 

Code, and section 1491(b) of title 28, United States Code, as follows: 

TITLE 31, UNITED STATES CODE 

* * * * * * * 

§3552. Protests by interested parties concerning procurement actions 
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(a) A protest concerning an alleged violation of a procurement statute or regulation shall be 

decided by the Comptroller General if filed in accordance with this subchapter. A protest may 

not be filed under this subchapter with respect to an action of the Department of Defense 

unless the value (or anticipated value) of the contract or proposed contract (or other matter 

in question) is greater than $75,000. 

(b) *** 

******** 

––––––––– 

TITLE 28, UNITED STATES CODE 

* * * * * * * 

§ 1491. Claims against United States generally; actions involving Tennessee Valley 

Authority 

(a) *** 

(b)(1) Both the Unites States Court of Federal Claims and the district courts of the United 

States shall have jurisdiction to render judgment on an action by an interested party objecting to 

a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed 

award or the award of a contract or any alleged violation of statute or regulation in connection 

with a procurement or a proposed procurement. Both the United States Court of Federal Claims 

and the district courts of the United States shall have jurisdiction to entertain such an action 

without regard to whether suit is instituted before or after the contract is awarded

 (2) *** 

* * * * * * * 

 (7) There is jurisdiction over an action described in paragraph (1) in the case of a 

proposed contract, or a proposed award or the award of a contract, or of a procurement or 

proposed procurement of the Department of Defense only if the value (or anticipated value) 

of the matter in question is greater than $75,000. 

——————— 
Recommendation 69 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. REVISION TO INFORMATION THAT DEPARTMENT OF DEFENSE IS 

REQUIRED TO PROVIDE IN POST-AWARD DEBRIEFINGS.

This section would amend section 818 of the National Defense Authorization Act for 

Fiscal Year 2018 (Public Law 115-91; 10 U.S.C. 2305 note) to expand what is required to be 

disclosed by the Department of Defense as part of a mandatory debriefing of offerors and when 

those debriefings are required. The Department would be required to provide the written 

technical evaluation of the offeror requesting a debriefing as part of the debriefing. The 

requirement to provide a debriefing when requested would also be expanded to all awards in 

excess of $10,000,000.

The committee notes that the Federal Acquisition Regulation already requires the 

information contained in the written technical evaluation to be provided to offerors that request 

a debriefing. A 2018 Department of Defense-funded study indicates that, in practice, complete 

information is often not provided to offerors. The committee expects that providing more 

complete information to offerors would lead to improved proposals on future acquisitions and 

reduce protests that often result from a lack of information.
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1 SEC. ___. REVISION TO INFORMATION THAT DEPARTMENT OF DEFENSE IS 

2 REQUIRED TO PROVIDE IN POST-AWARD DEBRIEFINGS. 

3 (a) THRESHOLD FOR DEBRIEFINGS AND REQUIRED DISCLOSURES.—Section 818(a) of the 

4 National Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91; 10 U.S.C. 2305 

5 note) is amended— 

6 (1) in the matter preceding paragraph (1)— 

7 (A) by striking “Not later than” and all that follows through “revise the” 

8 and inserting “The Secretary of Defense shall ensure that”; and 

9 (B) by striking “to require that all required post-award debriefings” sand 

10 inserting “requires than any required post-award debriefing of an offeror”; and 

11 (2) in paragraph (1)— 

12 (A) by striking “in excess of $100,000,000” and inserting “for which a 

13 debriefing is required pursuant to paragraph (2)”; and 

14 (B) by striking “and, in the case of” and all that follows through “such 

15 disclosure” and inserting “and of the written technical evaluation by the agency of 

16 the offeror requesting the debriefing”. 

17 (b) EFFECTIVE DATE.―The Secretary of Defense shall revise the Department of Defense 

18 Supplement to the Federal Acquisition Regulation to implement the amendments made by 

19 subsection (a) not later than the end of the 180-day period beginning on the date of the 

20 enactment of this Act. 

Changes to Existing Law: This proposal would change existing law as follows: 

 National Defense Authorization Act for Fiscal Year 2018 

(Public Law 115-91; 10 U.S.C. 2305 note) 
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SEC. 818. ENHANCED POST-AWARD DEBRIEFINGS. 

(a) Not later than 180 days after the date of the enactment of this Act [Dec. 12, 2017], the 

The Secretary of Defense shall revise ensure that the Department of Defense Supplement to the 

Federal Acquisition Regulation to require requires that all required post-award debriefings any 

required post-award debriefing of an offeror, while protecting the confidential and proprietary 

information of other offerors, include, at a minimum, the following: 

(1) In the case of a contract award in excess of $10,000,000, for which a 

debriefing is required pursuant to paragraph (2), a requirement for disclosure of the 

agency's written source selection award determination, redacted to protect the 

confidential and proprietary information of other offerors for the contract award, and, in 

the case of a contract award in excess of $10,000,000 and not in excess of $100,000,000 

with a small business or nontraditional contractor, an option for the small business or 

nontraditional contractor to request such disclosure and of the written technical 

evaluation by the agency of the offeror requesting the debriefing. 

(2) A requirement for a written or oral debriefing for all contract awards and task 

or delivery orders valued at $10,000,000 or higher. 

(3) Provisions ensuring that both unsuccessful and winning offerors are entitled to 

the disclosure described in paragraph (1) and the debriefing described in paragraph (2). 

(4) Robust procedures, consistent with section 2305(b)(5)(D) of title 10, United 

States Code, and provisions implementing that section in the Federal Acquisition 

Regulation, to protect the confidential and proprietary information of other offerors. 

****** 
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RECOMMENDED REGULATORY REVISIONS

SUBPART 215.5—PREAWARD, AWARD, AND POSTAWARD NOTIFICATIONS, 

PROTESTS, AND MISTAKES

(Added November 18, 2013)

215.503 Notifications to unsuccessful offerors.

If the Government exercises the authority provided in 239.7305(d), the notifications to 

unsuccessful offerors, either preaward or postaward, shall not reveal any information that is 

determined to be withheld from disclosure in accordance with section 806 of the National 

Defense Authorization Act for Fiscal Year 2011, as amended by section 806 of the National 

Defense Authorization Act for Fiscal Year 2013 (see subpart 239.73).

215.506 Postaward debriefing of offerors.

(a) At a minimum, the debriefing information shall include—

 (1) a copy of the source selection document redacted to protect proprietary information of 

offerors other than the offeror being debriefed; and

 (2) a copy of the written technical evaluation of the offeror being debriefed. 

(e) (b) If the Government exercises the authority provided in 239.7305(d), the debriefing shall 

not reveal any information that is determined to be withheld from disclosure in accordance 

with section 806 of the National Defense Authorization Act for Fiscal Year 2011, as amended by 

section 806 of the National Defense Authorization Act for Fiscal Year 2013 (see subpart 239.73).
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Recommendation 70 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. IMPROVED SYSTEM FOR DATA COLLECTION ON SERVICE CONTRACTING 

TO REPLACE CURRENT INVENTORY OF CONTRACTED SERVICES (ICS) 

SYSTEM.

This section would direct the Secretary of Defense to develop a services contracting 

reporting and analysis system as a replacement for the existing inventory of contracted services 

requirements under section 2330a, title 10, United States Code. The Secretary of Defense is 

further directed to propose any necessary statutory changes to implement the new system as 

well as a funding requirements estimate, and policy implementation language for the new 

system. The new system shall be specifically designed to support and integrate with the 

Department of Defense’s total workforce management system and acquisition requirements 

development processes. The new system would be, in part, intended to resolve the problem of 

the current inventory of contracted services having developed into a legal compliance 

requirement rather than a tool for strategic decision-making or transparent oversight.

The committee notes that the current statute requires the collection of several specific 

data elements which may limit the Department of Defense’s flexibility to engage in business 

process reengineering aimed at improving the inventory of contracted services data collection 

process. The committee, therefore, expects that the Department’s proposed statutory language 

would address data collection needs while avoiding inadvertent barriers to technical innovation 

or business process reform.

The committee is aware that there is a need for the Department to collect information on 

contract employees for the purposes of proper oversight and efficient total force management.

However, the committee notes that the large datasets produced under the current inventory of 

contracted services are of relatively little use for oversight or transparency purposes.

The committee recognizes that the current process for collecting inventory of contracted 

services data imposes additional administrative costs on contractors, adds to the Department’s

staff workload, and requires the ongoing maintenance of complicated, customized information 

management systems. The committee expects that, when formulating the new services 

contracting reporting and analysis system, the Department would minimize these 

administrative and maintenance costs to the maximum extent practicable.
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1 SEC. ___. IMPROVED SYSTEM FOR DATA COLLECTION ON SERVICE 

2 CONTRACTING TO REPLACE CURRENT INVENTORY OF 

3 CONTRACTED SERVICES (ICS) SYSTEM. 

4 (a) SENSE OF CONGRESS.—It is the sense of Congress that the current system of the 

5 Department of Defense for data collection relating to contracted services, known as the Inventory 

6 of Contracted Services (ICS), established pursuant to section 2330a of title 10, United States 

7 Code, should be replaced by more effective system of data collection relating to such services in 

8 order to enable senior leaders of the Department— 

9 (1) to better understand workforce composition to allow for more informed 

10 decisions on workforce staffing and funding decisions; 

11 (2) to improve services acquisition strategy; and 

12 (3) to improve oversight of service contracting. 

13 (b) REPLACEMENT DATA COLLECTION AND REPORTING SYSTEM.— 

14 (1) The Secretary of Defense shall develop a Services Contracting Reporting and 

15 Analysis System, consistent with the objectives stated in subsection (a), to be proposed as 

16 a replacement for the Inventory of Contracted Services requirements in effect under 

17 section 2330a of title 10, United States Code. The software and data standards developed 

18 for such system shall apply uniformly across the military departments and Defense 

19 Agencies. 

20 (2) In developing the proposed Services Contracting Reporting and Analysis 

21 System pursuant to paragraph (1), the Secretary shall also develop— 
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1 (A) a draft for any statutory changes the Secretary determines to be 

2 needed in order to replace the Inventory of Contracted Services system with the 

3 proposed system; 

4 (B) an estimate of funding requirements for the proposed system; and 

5 (C) proposed revisions to Department of Defense directives and other 

6 administrative issuances that would be required for implementation of the 

7 proposed system, including any requirements under the proposed system for 

8 reporting by contractors. 

9 (c) IMPLEMENTATION REPORT.— 

10 (1) The Secretary of Defense shall submit to the congressional defense 

11 committees a report on the proposed Services Contracting Reporting and Analysis 

12 System developed pursuant to subsection (b) as a replacement for the Inventory of 

13 Contracted Services requirements in effect under section 2330a of title 10, United States 

14 Code. 

15 (2) The report shall include the following: 

16 (A) A descriptive overview, in nontechnical language, of the proposed 

17 system and the ways in which it differs from the Inventory of Contracted Services 

18 system. 

19 (B) A list of data elements proposed to be made available through the 

20 proposed system. 

21 (C) The matters specified in subsection (b)(2). 
Recommendations 71, 72, and 73 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. CONTRACT AUDIT PRACTICE.

This section would amend Section 893 of the Ike Skelton National Defense Authorization 

Act for Fiscal Year 2011 (Public Law 111-383; 10 U.S.C. 2302 note) by replacing “significant 

deficiency” with the term “material weakness.” The committee notes that the proposed revised 

definition will better align review and approval of contractor business systems with generally 

accepted commercial and government auditing standards.

This section also would mandate the adoption of the Professional Practice Guide 

prepared by acquisition advisory panel, established under section 809 of the National Defense 

Authorization Act for Fiscal Year 2016 (Public Law 114-92). This section would require the 

Department of Defense to phase-in use of such practice guide within six-months after date of 

enactment and that the audit workforce would be properly trained regarding use of the Guide. 

This section would further establish a collaborative working group of subject matter experts, 

within and outside the government, in order to keep the Guide current with evolving audit 

practices.
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1 SEC. __. CONTRACT AUDIT PRACTICE. 

2 (a) REVISION TO STANDARDS FOR CONTRACTOR BUSINESS SYSTEMS.—Section 893 of the 

3 Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (Public Law 111-383; 10 

4 U.S.C. 2302 note) is amended— 

5 (1) by striking “significant deficiency” in subsections (b)(4), (b)(5), and (h)(3) 

6 and inserting “material weakness”; and 

7 (2) by striking paragraph (4) of subsection (h) and inserting the following: 

8 “(4)(A) The term ‘material weakness’ means a deficiency, or combination of 

9 deficiencies, in internal control over risks related to Government contract compliances or 

10 other shortcomings in the system, such that there is a reasonable possibility that a 

11 material noncompliance will not be prevented, or detected and corrected, on a timely 

12 basis. 

13 “(B) For purposes of subparagraph (A), a reasonable possibility of an event shall 

14 be considered to exist when the likelihood of the event occurring is— 

15 “(i) reasonably possible (meaning that the chance of the event occurring is 

16 more than remote but less than likely); or 

17 “(ii) probable.”. 

18 (b) IMPLEMENTATION OF PROFESSIONAL PRACTICE GUIDE PREPARED BY SECTION 809

19 PANEL.— 

20 (1) IN GENERAL.—The Secretary of Defense shall adopt the audit practice guide 

21 described in paragraph (2) for use as guidance in support of the contract audit practice of 

22 the Department of Defense and of the practice of any independent private auditor that the 
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1 Department may use in support of its contract audit needs. The guide is supplemental to, 

2 and does not supersede, regulations and auditing standards applicable to contract audits. 

3 (2) PROFESSIONAL PRACTICE GUIDE.—The guide referred to in paragraph (1) is the 

4 Professional Practice Guide set forth in Attachment [X] of Volume III of the Report of 

5 the Section 809 Panel, dated January 15, 2019. 

6 (3) DEADLINE.—Adoption and phase-in of the Professional Practice Guide in 

7 accordance with paragraph (1) shall be carried out not later than the end of the six-month 

8 period beginning on the date of the enactment of this Act. In adopting the guide, the 

9 Secretary shall ensure that the audit workforce is properly informed and trained as to the 

10 intent and expected use of the guide. 

11 (c) WORKING GROUP FOR FUTURE CHANGES.— 

12 (1) FINDING.—Congress finds that future changes to the Professional Practice 

13 Guide adopted pursuant to subsection (b) should be made through a collaborative process 

14 involving subject matter experts from a variety of relevant backgrounds who have 

15 expertise in the field of auditing, accounting, or both, similar to the process by which the 

16 guide was developed by the Section 809 Panel. 

17 (2) WORKING GROUP.—The Secretary of Defense shall establish a working group 

18 composed of representatives of the Defense Contract Audit Agency and the Defense 

19 Contract Management Agency and representatives of other organizations from within the 

20 Government and outside the Government with expertise in auditing, accounting, or both. 

21 (3) FUNCTION.—The working group shall ensure that the professional practice 

22 guide for contract audit practice adopted pursuant to subsection (a) stays current with 

23 changes in audit practice. The working group may adopt such changes to the guide as the 
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1 working group determines are appropriate for the purpose stated in the preceding 

2 sentence or as otherwise determined appropriate by the working group, and any changes 

3 adopted by the working group shall be made a part of the guide. 

4 (4) ACTIVITIES TO BE COLLABORATIVE.—The activities of the working group shall 

5 be conducted so that proposed changes to the guide are considered collaboratively. As 

6 part of the collaborative process, the working group shall seek information from other 

7 public and private sector stakeholders as needed to facilitate any proposed changes. 

8 (5) PUBLICATION.—Any revision to the guide that is adopted by the working 

9 group and the proceedings of the working group shall be posted on the website of the 

10 Defense Contract Audit Agency. 

11 (6) FEDERAL ADVISORY COMMITTEE ACT EXEMPTION.—The working group shall 

12 be exempt from the Federal Advisory Committee Act. 

13 (d) SECTION 809 PANEL.—In this section, the term “Section 809 Panel” means the panel 

14 established by the Secretary of Defense pursuant to section 809 of the National Defense 

15 Authorization Act for Fiscal Year 2016 (Public Law 114-92), as amended by section 863(d) of 

16 the National Defense Authorization Act for Fiscal Year 2017 (P. L. 114-328) and sections 803(c) 

17 and 883 of the National Defense Authorization Act for Fiscal Year 2018 (P. L. 115-91). 

————— 
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RECOMMENDED REGULATORY REVISIONS 

252.242-7005 Contractor Business Systems.

As prescribed in 242.7001, use the following clause: 

CONTRACTOR BUSINESS SYSTEMS (FEB 2012) 

(a) This clause only applies to covered contracts that are subject to the Cost Accounting 

Standards under 41 U.S.C. chapter 15, as implemented in regulations found at 48 CFR 9903.201-

1 (see the FAR Appendix). 

(b) Definitions. As used in this clause deficiencies may be either of the following— 

Material Weakness: A deficiency, or combination of deficiencies, in internal control over risks 

related to Government contract compliances or other shortcomings in the system, such that 

there is a reasonable possibility that a material noncompliance will not be prevented, or 

detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood of 

an event occurring is either reasonably possible, meaning the chance of the future event 

occurring is more than remote but less than likely, or is probable 

Significant Deficiency: A deficiency, or combination of deficiencies, in internal control over 

Government contract risks or other shortcomings in the system that is less severe than a 

material weakness yet important enough to merit the attention of those charged with 

governance. 

Other Deficiency: A deficiency, or combination of deficiencies, in internal control over 

Government contract risks or other shortcomings in the system that have a clearly trivial, or 

inconsequential, effect on the ability of the business system to detect and correct errors on a 

timely basis. 

Acceptable contractor business system: means contractor business systems that comply with the 

criteria of the applicable business system clauses and does not contain a material weakness that 

would affect the ability of officials of the Department of Defense to rely upon information 

produced by the system that is needed for management purposes. 

 “Contractor business systems” means— 

Accounting system, if this contract includes the clause at 252.242-7006, Accounting System 

Administration; 
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Earned value management system, if this contract includes the clause at 252.234-7002, Earned 

Value Management System; 

Estimating system, if this contract includes the clause at 252.215-7002, Cost Estimating System 

Requirements; 

Material management and accounting system, if this contract includes the clause at 252.242-

7004, Material Management and Accounting System; 

Property management system, if this contract includes the clause at 252.245-7003, Contractor 

Property Management System Administration; and 

Purchasing system, if this contract includes the clause at 252.244-7001, Contractor Purchasing 

System Administration. 

“Significant deficiency,” in the case of a contractor business system, 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. 

(c) General. The Contractor shall establish and maintain acceptable business systems in 

accordance with the terms and conditions of this contract. 

(d) Significant deficiencies Deficiencies. (1) The Contractor shall respond, in writing, within 30 

days to an initial determination that there are one or more deficiencies in one or more of the 

Contractor’s business systems. 

(2) The Contracting Officer will evaluate the Contractor's response and notify the Contractor, in 

writing, of the final determination as to whether the Contractor’s business system contains 

significant deficiencies material weaknesses. If the Contracting Officer determines that the 

Contractor’s business system contains significant deficiencies material weaknesses such that the 

system would be disapproved, the final determination will include a notice to withhold 

payments. 

(e) Withholding payments. (1) If the Contracting Officer issues the final determination with a 

notice to withhold payments for significant deficiencies material weaknesses in a contractor 

business system required under this contract, the Contracting Officer will withhold five percent 

of amounts due from progress payments and performance-based payments, and direct the 

Contractor, in writing, to withhold five percent from its billings on interim cost vouchers on costreimbursement, labor-hour, and time-and-materials contracts until the Contracting Officer has 

determined that the Contractor has corrected all significant deficiencies as directed by the 

Contracting Officer’s final determination. The Contractor shall, within 45 days of receipt of the 

notice, either correct the deficiencies or submit an acceptable corrective action plan showing 

milestones and actions to eliminate the deficiencies. 

(2) If the Contractor submits an acceptable corrective action plan within 45 days of receipt of a 

notice of the Contracting Officer’s intent to withhold payments, and the Contracting Officer, in 
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consultation with the auditor or functional specialist, determines that the Contractor is effectively 

implementing such plan, the Contracting Officer will reduce withholding directly related to the 

significant deficiencies material weaknesses covered under the corrective action plan, to two 

percent from progress payments and performance-based payments, and direct the Contractor, in 

writing, to reduce the percentage withheld on interim cost vouchers to two percent until the 

Contracting Officer determines the Contractor has corrected all significant deficiencies material 

weaknesses as directed by the Contracting Officer’s final determination. However, if at any time, 

the Contracting Officer determines that the Contractor has failed to follow the accepted 

corrective action plan, the Contracting Officer will increase withholding from progress payments 

and performance-based payments, and direct the Contractor, in writing, to increase the 

percentage withheld on interim cost vouchers to the percentage initially withheld, until the 

Contracting Officer determines that the Contractor has corrected all significant deficiencies 

material weaknesses as directed by the Contracting Officer’s final determination. 

(3) Payment withhold percentage limits. 

The total percentage of payments withheld on amounts due under each progress payment, 

performance-based payment, or interim cost voucher, on this contract shall not exceed-- 

Five percent for one or more significant deficiencies material weaknesses in any single contractor 

business system; and 

Ten percent for significant deficiencies material weaknesses in multiple contractor business 

systems. 

If this contract contains pre-existing withholds, and the application of any subsequent payment 

withholds will cause withholding under this clause to exceed the payment withhold percentage 

limits in paragraph (e)(3)(i) of this clause, the Contracting Officer will reduce the payment 

withhold percentage in the final determination to an amount that will not exceed the payment 

withhold percentage limits. 

(4) For the purpose of this clause, payment means any of the following payments authorized 

under this contract: 

Interim payments under— 

Cost-reimbursement contracts; 

Incentive type contracts; 

Time-and-materials contracts; 

Labor-hour contracts. 

Progress payments. 
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Performance-based payments. 

(5) Payment withholding shall not apply to payments on fixed-price line items where 

performance is complete and the items were accepted by the Government. 

The withholding of any amount or subsequent payment to the Contractor shall not be construed 

as a waiver of any rights or remedies the Government has under this contract. 

Notwithstanding the provisions of any clause in this contract providing for interim, partial, or 

other payment withholding on any basis, the Contracting Officer may withhold payment in 

accordance with the provisions of this clause. 

The payment withholding authorized in this clause is not subject to the interest-penalty 

provisions of the Prompt Payment Act. 

(f) Correction of deficiencies. (1) The Contractor shall notify the Contracting Officer, in writing, 

when the Contractor has corrected the business system’s deficiencies. 

(2) Once the Contractor has notified the Contracting Officer that all deficiencies have been 

corrected, the Contracting Officer will take one of the following actions: 

If the Contracting Officer determines that the Contractor has corrected all significant deficiencies 

material weaknesses as directed by the Contracting Officer’s final determination, the 

Contracting Officer will, as appropriate, discontinue the withholding of progress payments and 

performance-based payments, and direct the Contractor, in writing, to discontinue the payment 

withholding from billings on interim cost vouchers under this contract associated with the 

Contracting Officer’s final determination, and authorize the Contractor to bill for any monies 

previously withheld that are not also being withheld due to other significant deficiencies. Any 

payment withholding under this contract due to other significant deficiencies material weaknesses, 

will remain in effect until the Contracting Officer determines that those significant deficiencies 

are corrected. 

If the Contracting Officer determines that the Contractor still has significant deficiencies material 

weaknesses the Contracting Officer will continue the withholding of progress payments and 

performance-based payments, and the Contractor shall continue withholding amounts from its 

billings on interim cost vouchers in accordance with paragraph (e) of this clause, and not bill for 

any monies previously withheld. 

If the Contracting Officer determines, based on the evidence submitted by the Contractor, that 

there is a reasonable expectation that the corrective actions have been implemented and are 

expected to correct the significant deficiencies material weaknesses, the Contracting Officer will 

discontinue withholding payments, and release any payments previously withheld directly 

related to the significant deficiencies material weaknesses identified in the Contractor 

notification, and direct the Contractor, in writing, to discontinue the payment withholding from 

billings on interim cost vouchers associated with the Contracting Officer’s final determination, 

and authorize the Contractor to bill for any monies previously withheld. 
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If, within 90 days of receipt of the Contractor notification that the Contractor has corrected the 

significant deficiencies material weaknesses, the Contracting Officer has not made a 

determination in accordance with paragraphs (f)(2)(i), (ii ), or (iii) of this clause, the Contracting 

Officer will reduce withholding directly related to the significant deficiencies material weaknesses 

identified in the Contractor notification by at least 50 percent of the amount being withheld from 

progress payments and performance-based payments, and direct the Contractor, in writing, to 

reduce the payment withholding from billings on interim cost vouchers directly related to the 

significant deficiencies material weaknesses identified in the Contractor notification by a 

specified percentage that is at least 50 percent, but not authorize the Contractor to bill for any 

monies previously withheld until the Contracting Officer makes a determination in accordance 

with paragraphs (f)(2)(i), (ii), or (iii) of this clause. 

At any time after the Contracting Officer reduces or discontinues the 

withholding of progress payments and performance-based payments, or directs the 

Contractor to reduce or discontinue the payment withholding from billings on interim cost 

vouchers under this contract, if the Contracting Officer determines that the Contractor has failed 

to correct the significant deficiencies material weaknesses identified in the Contractor's 

notification, the Contracting Officer will reinstate or increase withholding from progress 

payments and performance-based payments, and direct the Contractor, in writing, to reinstate or 

increase the percentage withheld on interim cost vouchers to the percentage initially withheld, 

until the Contracting Officer determines that the Contractor has corrected all significant 

deficiencies material weaknesses as directed by the Contracting Officer’s final determination. 
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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 complies with the system 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. 

criteria of the applicable business system clauses and does not contain a material weakness that 

would affect the ability of officials of the Department of Defense to rely upon information 

produced by the system that is needed for management purposes. 

 (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) “Material Weakness” means a deficiency, or combination of deficiencies, in internal control 

over risks related to Government contract compliances or other shortcomings in the system, 

such that there is a reasonable possibility that a material noncompliance will not be prevented, 

or detected and corrected, on a timely basis. A reasonable possibility exists when the likelihood 

of an event occurring is either reasonably possible, meaning the chance of the future event 

occurring is more than remote but less than likely, or is probable. 

(4) “Significant Deficiency” means a material weakness, or a combination of material weaknesses, 

in internal control over government reporting objectives, such that there is a reasonable possibility 

that a material mischarge will not be prevented or detected on a timely basis. 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 a deficiency, or 

combination of deficiencies, in internal control over Government contract risks or other 
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shortcomings in the system that is less severe than a material weakness yet important enough to 

merit the attention of those charged with governance. 

(5) “Other Deficiency” means a deficiency, or combination of deficiencies, in internal control 

over Government contract risks or other shortcomings in the system that have a clearly trivial, 

or inconsequential, effect on the ability of the business system to detect and correct errors on a 

timely basis. 

(6) “Material Noncompliance” means a misstatement in the information provided to the 

Government (e.g. billings, incurred cost submissions, pricing proposals, etc.) that will materially 

influence, and may adversely impact the economic or management decisions of the users of the 

information. 

(7) “Misstatement” means that contract costs that are billed, proposed, or reported, to the 

United States Government do not comply with contract terms and federal regulations such as 

contract terms, Federal Acquisition Regulations (FAR) and Cost Accounting Standards (CAS). 

(8) Acceptable contractor business system means contractor business systems that comply with 

the criteria of the applicable business system clauses and does not contain a material weakness 

that would affect the ability of officials of the Department of Defense to rely upon information 

produced by the system that is needed for management purposes. 

(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 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—provide 

reasonable assurance that: 

 Direct costs and indirect costs are classified in accordance with contract terms, FAR, CAS 

and other regulations, as applicable. 

 Direct costs are identified and accumulated by contract in accordance with contract terms, 

FAR, CAS and other regulations, as applicable. 

 Methods are established to accumulate and allocate indirect costs to contracts in accordance 

with contract terms, FAR, CAS and other regulations, as applicable. 

 General ledger control accounts accurately reflect all transactions recorded in subsidiary 

ledgers and/or other information systems that either integrate or interface with the general 
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ledger including, but not limited to, timekeeping, labor cost distribution, fixed assets, 

accounts payable, project costs, and inventory. 

 Adjustments to the general ledger, subsidiary ledgers, or other information systems bearing 

upon the determination of contract costs (e.g. adjusting journal entries, reclassification 

journal entries, cost transfers, etc.) are done for reasons that do not violate contract terms, 

FAR, CAS, and other regulations, as applicable. 

 Identification and treatment of unallowable costs are accomplished in accordance with 

contract terms, FAR, CAS and other regulations, as applicable. 

 Billings are prepared in accordance with contract terms, FAR, CAS and other regulations, as 

applicable. 

 

(d) Significant Deficiencies Material Weaknesses. (1) The Contracting Officer will provide an initial 

determination to the Contractor, in writing, of any significant deficiencies material weaknesses. The 

initial determination will describe the deficiency weakness 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 material weaknesses 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 material weaknesses; 

(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 material weaknesses remain. 

(e) If the Contractor receives the Contracting Officer’s final determination of significant deficiencies 

material weaknesses that may result in a system disapproval, the Contractor shall, within 45 days of 

receipt of the final determination, either correct the significant deficiencies material weaknesses or 

submit an acceptable corrective action plan showing milestones and actions to eliminate the 

significant deficiencies material weaknesses . 

(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) 
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SUBPART 242.70-- CONTRACTOR BUSINESS SYSTEMS

(Revised February 24, 2012)

242.7000 Contractor business system deficiencies.

(a) Definitions. As used in this subpart—— 

“Acceptable contractor business systems” and “contractor business systems” are defined in the 

clause at 252.242-7005, Contractor Business Systems. 

“Covered contract” means a contract that is subject to the Cost Accounting Standards under 41 

U.S.C. chapter 15, as implemented in regulations found at 48 CFR 9903.201-1 

(see the FAR Appendix) (10 U.S.C. 2302 note, as amended by section 816 of Public Law 112-

81). 

Significant deficiency is“Deficiencies” are defined in the clause at 252.242-7005, Contractor 

Business Systems. 

(b) Determination to withhold payments. If the contracting officer makes a final determination to 

disapprove a contractor’s business system in accordance with the clause at 252.242-7005, 

Contractor Business Systems, the contracting officer shall— 

(1) In accordance with agency procedures, identify one or more covered contracts containing the 

clause at 252.242-7005, Contractor Business Systems, from which payments will be withheld. 

When identifying the covered contracts from which to withhold payments, the contracting officer 

shall ensure that the total amount of payment withholding under 252.242-7005 does not exceed 

10 percent of progress payments, performance-based payments, and interim payments under 

cost-reimbursement, labor-hour, and time-and-materials contracts billed under each of the 

identified covered contracts. Similarly, the contracting officer shall ensure that the total amount 

of payment withholding under the clause at 252.242-7005, Contractor Business Systems, for 

each business system does not exceed five percent of progress payments, performance-based 

payments, and interim payments under cost-reimbursement, labor-hour, and time-and-materials 

contracts billed under each of the identified covered contracts. The contracting officer has the 

sole discretion to identify the covered contracts from which to withhold payments. 

(2) Promptly notify the contractor, in writing, of the contracting officer’s determination to 

implement payment withholding in accordance with the clause at 252.242-7005, Contractor 

Business Systems. The notice of payment withholding shall be included in the contracting 

officer’s written final determination for the contractor business system and shall inform the 

contractor that— 

(i) Payments shall be withheld from the contract or contracts identified in the written 

determination in accordance with the clause at 252.242-7005, Contractor Business Systems, until 
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the contracting officer determines that there are no remaining significant deficiencies material 

weaknesses; and 

(ii) The contracting officer reserves the right to take other actions within the terms and 

conditions of the contract. 

(3) Provide all contracting officers administering the selected contracts from which payments 

will be withheld, a copy of the determination. The contracting officer shall also provide a copy of 

the determination to the auditor; payment office; affected contracting officers at the buying 

activities; and cognizant contracting officers in contract administration activities. 

(c) Monitoring contractor’s corrective action. The contracting officer, in consultation with the 

auditor or functional specialist, shall monitor the contractor's progress in correcting the 

deficiencies. The contracting officer shall notify the contractor of any decision to decrease or 

increase the amount of payment withholding in accordance with the clause at 252.242-7005, 

Contractor Business Systems. 

(d) Correction of significant deficiencies material weaknessess. (1) If the contractor notifies the 

contracting officer that the contractor has corrected the significant deficiencies material 

weaknessess, the contracting officer shall request the auditor or functional specialist to review 

the correction to verify that the deficiencies have been corrected. If, after receipt of verification, 

the contracting officer determines that the contractor has corrected all significant deficiencies 

material weaknesses as directed by the contracting officer’s final determination, the contracting 

officer shall discontinue the withholding of payments, release any payments previously withheld, 

and approve the system, unless other significant deficiencies material weaknesses remain. 

(2) Prior to the receipt of verification, the contracting officer may discontinue withholding 

payments pending receipt of verification, and release any payments previously withheld, if the 

contractor submits evidence that the significant deficiencies have been corrected, and the 

contracting officer, in consultation with the auditor or functional specialist, determines that there 

is a reasonable expectation that the 

corrective actions have been implemented and are expected to correct the significant deficiencies 

material weaknesses. 

(3) Within 90 days of receipt of the contractor notification that the contractor has corrected the 

significant deficiencies material weaknesses, the contracting officer shall-- 

(i) Make a determination that— 

(A) The contractor has corrected all significant deficiencies material weaknesses as directed by the 

contracting officer’s final determination in accordance with paragraph (d)(1) of this section; 

(B) There is a reasonable expectation that the corrective actions have been implemented in 

accordance with paragraph (d)(2) of this section; or 
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(C) The contractor has not corrected all significant deficiencies material weaknesses as directed by 

the contracting officer’s final determination in accordance with paragraph (d)(1) of this section, 

or there is not a reasonable expectation that the corrective actions have been implemented in 

accordance with paragraph (d)(2) of this section; or 

(ii) Reduce withholding directly related to the significant deficiencies covered under the 

corrective action plan by at least 50 percent of the amount being withheld from progress 

payments and performance-based payments, and direct the contractor, in writing, to reduce the 

percentage withheld on interim cost vouchers by at least 50 percent, until the contracting officer 

makes a determination in accordance with paragraph (d)(3)(i) of this section. 

(4) If, at any time, the contracting officer determines that the contractor has failed to correct the 

significant deficiencies material weaknesses identified in the contractor's notification, the 

contracting officer will continue, reinstate, or increase withholding from progress payments and 

performance-based payments, and direct the contractor, in writing, to continue, reinstate, or 

increase the percentage withheld on interim cost vouchers to the percentage initially withheld, 

until the contracting officer determines that the contractor has corrected all significant deficiencies 

material weaknesses as directed by the contracting officer’s final determination. 

(e) For sample formats for written notifications of contracting officer determinations to initiate 

payment withholding, reduce payment withholding, and discontinue payment withholding in 

accordance with the clause at DFARS 252.242-7005, Contractor Business Systems, see PGI 

242.7000. 

242.7001 Contract clause. 

Use the clause at 252.242-7005, Contractor Business Systems, in solicitations and contracts 

(other than in contracts with educational institutions, Federally Funded Research and 

Development Centers (FFRDCs), or University Associated Research Centers (UARCs) operated 

by educational institutions) when— 

(a) The resulting contract will be a covered contract as defined in 242.7000(a); and 

(b) The solicitation or contract includes any of the following clauses: 

(1) 252.215-7002, Cost Estimating System Requirements. 

(2) 252.234-7002, Earned Value Management System. 

(3) 252.242-7004, Material Management and Accounting System. 

(4) 252.242-7006, Accounting System Administration. 

(5) 252.244-7001, Contractor Purchasing System Administration. 

(6) 252.245-7003, Contractor Property Management System Administration. 
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 Volume 3 | Page 387 

Section 7 

Simplifying Procurement and Contracting 

DoD should continue pre- and postaward procurement process improvement designed 

to encourage agility, value time and improve contracting best practices. 

RECOMMENDATIONS

Rec. 74: Eliminate redundant documentation requirements or superfluous approvals 

when appropriate consideration is given and documented as part of acquisition 

planning. 

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

documentation or approvals. 

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

delivery order competitions. 

Recommendations continued on following page.
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RECOMMENDATIONS

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

clearance and investigation requirements to contracts. 

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

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

businesses. 

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

considering small business set-asides. 

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

production. 

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

of contract appeals through an electronic case management system. 

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

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

$150,000 respectively. 

 
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INTRODUCTION 

The primary duty assigned to the Section 809 Panel by the FY 2016 NDAA was to review defense 

acquisition regulations “with a view toward streamlining and improving the efficiency and 

effectiveness of the defense acquisition process.”1 During the course of this review of regulations, the 

Section 809 Panel was then tasked to make any recommendations to amend or repeal such regulations 

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).2 

The following section addresses these primary duties in a direct and practical way. Although the topics 

of this section vary across the range of defense acquisition practices, they all are aimed at streamlining 

defense acquisition regulations. These recommendations undertake streamlining in one of four ways: 

decluttering excess documentation requirements or procedures; utilizing existing authorities in a more 

efficient way; removing rigidity; or clarifying definitions. These elements of streamlining seek to return 

time and flexibility to the acquisition workforce. Regulatory decluttering is a constant challenge for 

DoD; these recommendations take aim at improving some particularly timely and important 

acquisition issues. 

It is difficult to overstate the effect of implementing the recommendations in this section. While many 

of the recommendations alter a few words or lines in existing regulations, these small changes echo 

across the defense acquisition workforce with wide effects in the field. In this way, the recommendations 

put forth by the Section 809 Panel in this section act as a fulcrum. Small movements beget major relief 

in DoD’s day-to-day activities. 

The remainder of this section is organized as follows. Recommendations 74 and 75 eliminate or revise 

eight duplicative or non-value-added documentation requirements in the package required in the 

execution of a contract. This decluttering will reduce paperwork and execution schedules, allowing 

contracting officers (COs) to focus on analysis over administration. 

 

1

 FY 2016 NDAA, Pub. L. 114-94, Stat. 1356. 

2

 Ibid. 
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Recommendations 76 and 77 differ in subject but encompass the same call to action: use existing 

authorities and processes to greatly reduce burden in the field. Recommendation 76 stresses using the 

allowed and streamlined fair opportunity procedures when competing orders under multiple-award 

indefinite delivery/indefinite quantity (MA IDIQ) contracts, rather than using the lengthier FAR Part 15 

source selection procedures often used. Recommendation 77 requires that existing role-based planning 

be used for service contracts rather than requiring blanket security clearances and investigations. In 

terms of widespread impact, implementing Recommendation 77 would help reduce the security 

clearance investigation backlog of nearly 700,000 and allowing investigations to be conducted for those 

military and contractor employees with a true need for access. 

Recommendations 78, 79, 82, and 83 remove the rigidity of the regulatory system in specific 

circumstances. Allowing for more flexibility in these areas provides relief to both the defense 

acquisition workforce and private sector companies. Recommendation 78 adds the purchasing of basic 

energy to the exemption list for announcing contract awards. This exemption allows energy to be 

purchased more closely to commercial standards, removing some barriers to entry for the energy 

industry and offering DoD price savings. Recommendation 79 allows advance payment on contract 

awards to provide small businesses needed capital, which is an identified challenge for small 

businesses and currently not recognized or encouraged to any significant extent. Recommendations 82 

and 83 modernize the Armed Services Board of Contract Appeals (ASBCA) by allowing it to require 

filing in the board’s electronic case management system (ECMS) and increasing the monetary threshold 

to allow for the use of expedited case resolution procedures. In both cases, implementing these 

recommendations would allow ASBCA to process, hear, and resolve more claims with less 

administrative burden. 

Recommendations 80 and 81 offer clarifications to current regulations that have created confusion and 

misuse in the field. Recommendation 80 clarifies the preference for procuring commercial items when 

considering small business set-asides. Statute and regulations appear to provide contradictory 

guidance in this area; this recommendation provides a clear order of precedence. Recommendation 81 

clarifies and expands the authorities for follow-on production under the Other Transactions Authority 

(OTA) regime. Clear, established authorities for follow-on production provide a valuable, streamlined 

path for moving from prototyping to production for these projects. Again, small regulatory 

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

acquisition workforce. This is perhaps the most important duty of the Section 809 Panel. 
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RECOMMENDATIONS 74 AND 75 SHARE THE COMMON THEME: 

ELIMINATE OR REVISE DOCUMENTATION REQUIREMENTS 

The acquisition workforce (AWF) faces an ever-expanding series of federal regulations, embodied by 

the Federal Acquisition Regulation (FAR). In 1947, its first iteration, the Armed Services Procurement 

Regulation (ASPR), had just 125 pages. When the FAR was published in 1983, the collection of 

regulations had grown to 1,953 pages.3 By January 2018, the FAR had 2,320 pages and the DoD Defense 

Federal Acquisition Regulation Supplement (DFARS) was 1,702 pages.4 

This body of regulations provides guidance to federal contracting officers. In practice, the regulations 

often provoke frustration and confusion for professionals empowered to act as agents of the federal 

government in negotiating and crafting contracts with companies in the commercial marketplace. 

Federal contracting officers spend years in formal training, dedicating a minimum of 791 hours to 

complete 23 courses.5 This training is followed up by an exam testing would-be contracting officers’ 

knowledge of the copious regulations prior to being issued a warrant to sign contracts. When 

contracting officers receive warrants to buy on behalf of the U.S. government, it is an institutional 

acknowledgement that upon warranting, they are highly informed, able to make complex decisions, 

and are knowledgeable about the laws and regulations guiding those decisions. 

In addition to the federal regulations governing the actions of contracting officers, DoD often layers on 

additional requirements for documentation and reviews. These processes are designed to harness the 

collective expertise of DoD’s acquisition professionals and ensure compliance with numerous 

regulatory, statutory, and policy requirements and coordination with DoD’s complex mission. The 

current acquisition process consumes contracting officers’ time with tedious paperwork and processes 

demonstrating compliance with a puzzle of regulations, many of which are outdated and duplicative. 

Consequently, contracting professionals are discouraged from innovating, DoD fails to adopt best 

practices from the commercial marketplace, and AWF members spend years perfecting process skills, 

and preparing and reviewing often duplicative document requirements for each procurement. 

Numerous assessments indicate that acquisitions are taking too long to complete. In April 2018 the 

Defense Pricing/Defense Procurement & Acquisition Policy office (now the Defense Pricing and 

Contracting office) indicated its top priority for FY 2018 was to reduce procurement administrative lead 

time (PALT). PALT is the time to complete a procurement from its first step, often the solicitation but 

sometimes including requirements generation processes, to its last, when the contracted good or 

service is received. Other similar metrics track the procurement from solicitation to award, focusing 

exclusively on internal administrative processes. Consensus within DoD and the broader federal 

 

3

 Allen Friar, Swamped by Regulations: Perils of an Ever-Increasing Burden, Defense Acquisition University, February 2015, 34, accessed 

November 8, 2018, http://www.dtic.mil/dtic/tr/fulltext/u2/a621269.pdf. 

4

 Page count information obtained from product details section of Amazon.com listings: https://www.amazon.com/Federal-AcquisitionRegulation-January-2018/dp/1454895519 and https://www.amazon.com/Department-Defense-Supplement-DFARSJanuary/dp/1454895500. 

5

 Calculated using Continuous Learning Points for required Acquisition and Functional training for Levels I-III certification in Contracting 

with minimal electives, Defense Acquisition University, accessed August 24, 2018, http://icatalog.dau.mil/onlinecatalog/CareerLvl.aspx. 
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acquisition community is that the administrative time to either award the contract or receive the good 

or service is much too long. 

Case Study: 

Documentation Required from Program Manager (PM) and Contracting Officer

One recent procurement for sustainment services for Army Information Technology took 559 days (19 months) to 

prepare documentation and secure approval on a $3.1 billion acquisition strategy at the DoD level. In total 11 documents 

in addition to the acquisition strategy, totaling 383 pages, were required to be jointly produced by the program and 

contracting office (see Figure 7-1). This 559 days is neither the time taken to receive services nor even award a contract 

for services. This time is strictly that which is needed to garner approval of a strategy to acquire services—a strategy 

which needs to then be implemented through the solicitation, award, and performance phases. A recent study 

conducted by GAO found comparable, protracted procurement timelines to award contracts across DoD, including some 

with lengthier schedules. Three of the nine programs analyzed, all which were under $50 million, took more than 2 years 

from the release of the solicitation to award of the contract.6 This time is additive to the 19 months to garner approval of 

an acquisition strategy described earlier, a phase which comes before the solicitation phase. 

Figure 7-1. Acquisition Strategy Schedule – Actual 

Source: U.S. Army PEO EIS/PM AESIP, “Acquisition Strategy Schedule Analysis and Lessons Learned,” Army-produced 

PowerPoint presentation, August 2014. 

In 2017, Acting Secretary of the Army Ryan McCarthy called for reforms to streamline the contracting 

process and reduce procurement timelines. In his words, “Our contracting policies and documents 

must be well-understood, delayered, and the overall process much faster.”7 To illustrate the problem 

 

6

 GAO, DoD Should Develop a Strategy for Assessing Contract Award Time Frames, GAO-18-467, July 2018, accessed 

July 17, 2018, https://www.gao.gov/assets/700/693123.pdf. 

7

 DoD, Army Directive 2017-32 (Acquisition Reform Initiative #6: Streamlining the Contracting Process), November 15, 2017, accessed 

November 8, 2018, https://armypubs.army.mil/epubs/DR_pubs/DR_a/pdf/web/ARN6464_AD2017-32_Web_Final.pdf. 
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and establish an average baseline of current procurement timelines, Army Contracting Command 

analyzed PALT for new starts where the requirements were competed. Table 7-1 provides these 

findings. 

Table 7-1. Army Competitive Procurement Timelines 

Dollar Value Procurement Lead Time 

$1M - $10M 150 

$10M - $50M 190 

$50M - $100M 400 

$100M - $250M 425 

$250M - $1B 575 

>$1B 700 

These timeframes reflect average procurement lead time from January to September 2017. The Army’s 

strategy for reforming this time-consuming process has the following three main goals:8

 Centralize policy under the Deputy Assistant Secretary of the Army (Procurement) to 

standardize contracting policy across the Army and remove unnecessary or outdated policies 

that delay the contracting process. 

 Complete a review of the 350 potential required contract file documents to identify and reduce 

contract documentation requirements and identify streamlining opportunities. The goal is to 

reduce contract file documents by at least 10 percent. 

 Review and standardize peer review policies and procedures to reduce redundant or advisoryonly peer reviews. Incorporate changes into the Army Federal Acquisition Regulation 

Supplement (AFARS) to support efficient execution of reviews and baseline best practices. 

This need to reduce documentation and save time is not unique to the Army. The Defense Acquisition 

University website estimates procurement action lead time for an action $10,000 to $10 million is 

208 days, 58 days longer than the Army’s published time. In December 2017, Under Secretary of 

Defense for Acquisition and Sustainment (USD(A&S)) Ellen Lord devised a plan to reduce PALT by 

50 percent.9 Across the government, all agencies measure PALT and have initiatives to reduce their 

numbers and shorten time to awarding a contract. The Environment Protection Agency, for instance, 

 

8

 Ibid. 

9

 “Here’s how Ellen Lord will reduce acquisition time by 50 percent,” Aaron Mehta, Defense News, December 8, 2017, accessed 

November 8, 2018, https://www.defensenews.com/pentagon/2017/12/08/heres-how-ellen-lord-will-reduce-acquisition-time-by-50-

percent/. 
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reported in 2018 that only 75 percent of its competitive proposals were meeting the agency’s target 

PALT of 210 days.10 

The Navy has recently made strides to reduce its PALT. In 2007, the Navy published an Acquisition Plan 

Guide that was 63 pages long, with Appendix A, a sample acquisition plan illustrating format and 

content, being 38 pages.11 One official who was working with the Navy at that time, indicated it was 

common to see acquisition plans as long as 120 pages.12 In recognition of the burden of increasing 

paperwork and the time it adds to acquisition, the Navy implemented a streamlining initiative in 

November 2016, with the introduction of the streamlined acquisition plan (STRAP).13 STRAP reduced 

the content for Navy acquisition plans to that which is statutorily required plus a few other salient 

acquisition items. STRAP was implemented in the Navy Marine Corps Acquisition Regulation 

Supplement (NMCARS) through four separate annexes for various types of procurements. A separate 

document, called the Management and Oversight Process for the Acquisition of Services, is used for 

service acquisitions less than $50 million. These five separate documents were used to replace one 

acquisition planning document and helped the Navy reduce the contents of the acquisition plan to 

approximately 30 pages.14 Still, one Navy contracting office reported similar procurement timelines for 

FY 2019 to those the Army realized in 2017. Procurements exceeding $50 million were projected to have 

an average lead time between 330–600 days and those between $7 million and $50 million were lower, 

at 280 days.15

Similarly the Air Force has implemented streamlining initiatives and allows for a Streamlined 

Acquisition Strategy Summary (SASS) for acquisitions less than $10 million. SASS requires less 

information, is fewer pages, and is organized as a fillable worksheet. SASS also acts as a combined 

acquisition strategy and acquisition plan. The Air Force uniquely has self-imposed a requirement to 

prepare an acquisition plan for all actions more than $10 million, even those less than $50 million, 

which would not ordinarily be required by regulation.16 This requirement to have an acquisition plan 

does not alleviate acquisition planners from preparing an acquisition strategy for major system 

acquisitions or service contracts. The Air Force also has initiatives to reduce the acquisition timeline 

and has seen an average reduction from 16.1 months to 12 months from FY 2014 to FY 2017 for sole 

source, negotiated acquisitions.17 The Air Force recently started tracking procurement timelines for 

 

10 Environmental Protection Agency, Data Quality Record for Strategic Measures, January 16, 2018, accessed October 19, 2018, 

https://www.epa.gov/sites/production/files/2018-05/documents/dqr-3-5-palt.pdf. 

11 Department of the Navy, Acquisition Plan Guide, March 2007, accessed November 8, 2018, 

http://www.secnav.navy.mil/rda/Policy/Department of the Navy/donapg0227074.doc. 

12 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, October 2018. 

13 “NMCARS, Archives” ASN RDA, accessed October 12, 2018, http://www.secnav.navy.mil/rda/Pages/NMCARS.aspx. 

NMCARS Change 13-11 issued Annex 17 and 18, which were promulgated via Deputy Assistant Secretary of the Navy (Acquisition and 

Procurement) memorandum. NMCARS Change 13-16 issued Annexes 19-21. 

14 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, October 2018. 

15 Ibid. 

16 DFARS 207.103(d)(i) requires Agency Heads to, “Prepare written acquisition plans for (A) Acquisitions for development, as defined in 

FAR 35.001, when the total cost of all contracts for the acquisition program is estimated at $10 million or more; (B) Acquisitions for 

production or services when the total cost of all contracts for the acquisition program is estimated at $50 million or more for all years or 

$25 million or more for any fiscal year; and (C) Any other acquisition considered appropriate by the department or agency.” However, the 

Acquisition Plan approval authorities listed in AFFARS 5307.104-93 indicates an Acquisition Plan is required at $10M. 

17 U.S. Air Force, Contract Award Timelines FY17 Annual Results, PowerPoint presentation, October 2018. 
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competitive acquisitions in FY 2018 and through third quarter averaged 10.9 months from the time of 

solicitation issuance to the time of contract award.18

The DoD acquisition system is encumbered with processes, reviews, and approvals that are redundant, 

non-value-added, inflexible, and/or unduly restrictive. From a contracting officer or PM perspective, 

these restrictive processes limit the authority of contracting officers entrusted to legally and 

contractually bind the government and result in delayed capability to the warfighter. Innovative 

contracting practices are stifled when the most knowledgeable acquisition professionals spend 

substantial time on check-block tasks they know to have limited or no value. As tasks that are driven 

by regulations, they are unavoidable, and they grow exponentially every year. Such limitations prevent 

DoD agility and ultimately undermine one of the foundational standards set forth in the FAR to 

“Satisfy the customer in terms of cost, quality, and timeliness of the delivered product or service.”19

RECOMMENDATIONS 

Recommendation 74: Eliminate redundant documentation requirements or 

superfluous approvals when appropriate consideration is given and documented 

as part of acquisition planning. 

Problem 

Several documents or iterative approvals are required by multiple regulations despite the fact that they 

are already included in the Acquisition Plan. These requirements create unnecessary work for 

contracting officers, PMs, and approving officials, and they add little value to the end product or 

service. 

Subrecommendation 74a: Eliminate duplicative documentation when rationale is approved 

as part of an acquisition strategy or acquisition plan. Delegate authority to approve 

statutory or regulatory determinations documented within the acquisition strategy or 

acquisition plan to the approving authority of the strategy or plan. 

Background 

Acquisition planning is required by statute (10 U.S.C. § 2305 (a)(1)(A)(ii)) and implemented through 

FAR 7.102 and DFARS 207.1 to promote and provide for acquisition of commercial items and full and 

open competition, to the maximum extent practicable, and for the selection of appropriate contract 

types. Acquisition planning should begin as soon as the agency identifies a need and culminate in a 

written acquisition plan designed to make sure the acquisition can meet its objectives.20 The acquisition 

plan is a detailed document with prescribed contents detailed in the FAR, including all the technical, 

business, and management aspects of the acquisition, as well as any other influences. According to the 

Defense Acquisition Guidebook (DAG), 

An Acquisition Plan is prepared by the Contracting Officer and formally documents the specific actions 

necessary to execute the approach delineated in the approved Acquisition Strategy. The Acquisition Plan 

 

18 Data collection interview, conducted by Section 809 Panel Team 6: IT Acquisition, October 2018. 

19 Performance Standards, FAR 1.102-2(a). 

20 General Procedures, FAR 7.104. Contents of Written Acquisition Plans, FAR 7.105. 
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serves as the basis for contractual implementation as referenced in Federal Acquisition Regulation (FAR) 

Subpart 7.1 and Defense Federal Acquisition Regulation Supplement (DFARS) Subpart 207.1.21

Discussion 

PMs and contracting officers create many planning documents twice—once for the acquisition plan and 

once for the contract file—then wait for them to be approved, often through separate review chains. 

This duplication is driven by redundant FAR or DFARS sections. Table 7-2 illustrates this redundancy 

with some examples of planning required for the acquisition plan (as detailed in FAR Part 7) as well as 

in other FAR or DFARS subparts. 

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

Acquisition Planning 

Requirements 

Other FAR-directed and 

Unnecessary Requirements 

Warranty FAR 7.105(b)(14)(ii) DFARS 246.704(2) 

Options FAR 7.105(a)(5) FAR 17.205 

Past Performance Evaluation FAR 7.105(b)(4) FAR 15.304(c)(3)(ii) 

Electronic and Information Technology Accessibility 

Standards FAR 7.103(q) FAR 39.203 

Ozone Depleting Products FAR 7.103(p)(2) FAR 11 and FAR 23.8 

Consolidation FAR 7.105(b)(1)(iv) FAR 7.107-2(b) 

In addition to creating more work for contracting officers and PMs, each of these duplications wastes 

the time of everyone involved in reviewing the various packages. The FAR allows the acquisition plan 

to be approved at one level above the contracting officer, but the military services typically assign this 

responsibility to a higher authority, such as the program executive officer, who oversees the PM, or 

many levels above the contracting officer in the contracting chain. 

If a contracting officer has generated documentation demonstrating planning or compliance required 

by the acquisition plan, it is unnecessary and wasteful to repeat the same process for a different FAR 

subpart. A single document should suffice for the contract file. While not exhaustive, the six sections 

below briefly discuss examples of this duplication identified in Table 7-2. 

Warranty 

Warranties must be justified for both the acquisition plan and agency procedures related to quality 

assurance. A warranty is “a promise or affirmation given by a contractor to the government regarding 

 

21 DAU, Defense Acquisition Guidebook, September 16, 2013, accessed June 25, 2018, 

https://at.dod.mil/sites/default/files/documents/DefenseAcquisitionGuidebook.pdf. 
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the nature, usefulness, or condition of the supplies or performance of services furnished under the 

contract.”22 

FAR 46.702 indicates, 

(a) The principal purposes of a warranty in a Government contract are— 

(1) To delineate the rights and obligations of the contractor and the Government for defective items 

and services; and 

(2) To foster quality performance. 

(b) Generally, a warranty should provide -- 

(1) A contractual right for the correction of defects notwithstanding any other requirement of the 

contract pertaining to acceptance of the supplies or services by the Government; and 

(2) A stated period of time or use, or the occurrence of a specified event, after acceptance by the 

Government to assert a contractual right for the correction of defects. 

(c) The benefits to be derived from a warranty must be commensurate with the cost of the warranty to the 

Government 

This subpart goes on to say that warranties must be approved in accordance with agency procedures; 

however, the requirement for such documentation already exists in the acquisition plan. 23

Options 

Options must be justified for both the acquisition plan and procedures related to special contracting 

methods. FAR 7.105(a)(5) requires the acquisition plan to describe “the basis for establishing delivery 

or performance-period requirements.” Additionally, FAR 7.105(b)(5)(i) requires use of options to be 

discussed as part of acquisition considerations in the acquisition plan. FAR 17.205 requires contracting 

officers to justify in writing the quantities or the term under option, the notification period for 

exercising the option, and any limitation on option price. If included in the acquisition plan under 

FAR 7, the additional contract file documentation required by FAR 17 is unnecessary.

Past Performance Evaluation 

Past performance evaluation is also required for both the acquisition plan and procedures related to 

source selection. FAR 15.304(c)(3)(ii) requires past performance to be considered in negotiated, 

competitive source selections unless the contracting officer documents the reasons it is not an 

appropriate evaluation factor. Because FAR 7.105(b)(4) requires the acquisition plan to “discuss sourceselection procedures for the acquisition, including the timing for submission and evaluation of 

proposals, and the relationship of evaluation factors to the attainment of the acquisition objectives” the 

documentation required in FAR 15 is unnecessarily duplicative. 

 

22 Definitions, FAR 2.101. 

23 DFARS 246.704(2) states, “The chief of the contracting office shall approve the use of a warranty only when the benefits are expected 

to outweigh the cost.” FAR 7.105(b)(14)(ii) states, “The reliability, maintainability, and quality assurance requirements, including any 

planned use of warranties.” 
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Electronic and Information Technology Accessibility Standards 

Agencies acquiring electronic information technology must ensure that federal employees and 

members of the public with disabilities have comparable access and use of information to those 

without disabilities. This requirement is mandated by the Rehabilitation Act of 1973 and the 

Architectural and Transportation Barriers Compliance Board Electronic and Information Technology 

(EIT) Accessibility Standards and implemented by FAR 39.2.24 

Conflicting regulatory guidance on the timing of exceptions to these requirements creates confusion 

and unnecessary work in drafting the acquisition plan. FAR 39.203 requires acquisitions comply with 

accessibility standards at 36 CFR Part 1194 unless a determination of an exception is made prior to 

contract award. FAR 7.103(q) requires agency heads to ensure acquisition planning addresses EIT 

accessibility standards in requirements planning—long before the contract award. If an exception 

applies, it should be addressed during the acquisition planning phase, included as part of the 

acquisition plan, and omitted as a separate, later determination. 

Ozone-Depleting Products 

DoD is prohibited by law from contracting for an ozone-depleting substance unless deemed necessary 

by the senior acquisition official for the procurement.25 The FAR implements this law in several 

sections, including requiring compliance as part of acquisition planning, describing the agency need, 

and again under FAR 23.8, Ozone-Depleting Substances and Greenhouse Gases.26 Including multiple 

references to this requirement throughout the FAR is confusing and an inefficient means to achieve an 

end. When addressed during acquisition planning, the determination should be partof the acquisition 

plan.

Consolidation 

Multiple determinations are required for contract consolidation. Contract consolidation is, 

use of a solicitation to obtain offers for a single contract or a multiple award contract: (A) to satisfy 2 or 

more requirements of the Federal agency for goods or services that have been provided to or performed for 

the Federal agency under 2 or more separate contracts lower in cost than the total cost of the contract for 

which the offers are solicited; or (B) to satisfy requirements of the Federal agency for construction projects 

to be performed at 2 or more discrete sites.27

By statute, contracts may not be consolidated without the senior procurement executive or chief 

acquisition officer for the agency making a determination that consolidation is necessary and justified. 

 

24 Electronic and Information Technology, 29 U.S.C. 794d. Information and Communication Technology Standards and 

Guidelines, 36 CFR part 1194. 

25 Definitions, 10 U.S.C. 2302 note. 

26 FAR 7.103(p) indicates the Head of the Agency is responsible for “ensuring that agency planners...comply with the policy in 11.002(d) 

regarding procurement of...and non-ozone-depleting products, and products and services that minimize or eliminate, when feasible, the 

use, release, or emission of high global warming potential hydrofluorocarbons, such as by using reclaimed instead of virgin hydrofluorocarbons.” FAR 11.002(d), indicates, “When agencies acquire products and services, various statutes and executive orders (identified in 

part 23) require consideration of sustainable acquisition (see subpart 23.1) including...(vi) Non-ozone depleting substances, and products 

and services that minimize or eliminate, when feasible, the use, release, or emission of high global warming potential 

hydrofluorocarbons, such as by using reclaimed instead of virgin hydrofluorocarbons (subpart 23.8).” 

27 Consolidation of Contract Requirements, 15 U.S.C. 657q. 
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There are many reasons why an agency may conclude that consolidation is necessary and justified, 

including cost, improved quality, or shortened acquisition cycle. Rationale for determining whether 

consolidation is necessary and justified is addressed as part of acquisition planning and must be 

documented as part of the written acquisition plan in accordance with FAR 7.105(b)(1)(iv). Once 

documented as part of the written acquisition plan, there is no relief given to the separate 

determination required by FAR 7.107. This additional determination delays acquisitions by requiring 

more preparation and staff time. When consolidation is addressed during acquisition planning, the 

determination should be part of the acquisition plan, and a separate determination should not be 

required. 

Conclusions 

One of the main issues with government acquisition is the copious amount of documentation and 

approvals required. The FAR and other regulations often create duplicative and conflicting 

requirements to demonstrate compliance with a single statutory mandate. This redundancy creates 

unnecessary paperwork and wastes time. Much of this duplication comes from overlap between the 

acquisition strategy and acquisition plan, or between one of these foundational documents and 

additional regulatory procedures. Eliminating duplicative documentation and obsolete requirements 

would reduce this redundancy. Further, when rationale must be documented or approved by a higher 

authority, it should be consolidated into one place with a singular approval authority. The elimination 

of superfluous documentation and time required to garner approval will reduce procurement lead 

time. 

Subrecommendation 74b: Revise statutory and regulatory requirements for contract type 

determination when already approved as part of a written acquisition plan or acquisition 

strategy, and when a written acquisition plan or acquisition strategy is not required, 

streamline contract type determinations to a single approval authority no higher than the 

Chief of the Contracting Office. 

Background 

Selection of contract type can be one of the most important decisions made by the PM and contracting 

officer. Many factors need to be considered when selecting the contract type, including acquisition 

history, complexity and type of the requirement, and period of performance. The contract type signifies 

not only the risk the government is willing to accept but also the certainty of the defined requirement 

and anticipated performance outcomes. In instances when more complex contract types are selected, 

such as incentive fee or award fee, the contract type can act as a tool to motivate the contractor to 

increase speed of delivery, reduce cost, or enhance performance. 

FAR 16 outlines various contract types and the circumstances when each may be deemed appropriate 

given the nature of the acquisition. The major categories of contract types are fixed-price and cost 

reimbursement with variations covering circumstances such as contractor incentives or market 

fluctuation, and, to a lesser degree, time, and material.28 Depending on the type of contract selected, the 

 

28 FAR 16.202-1 describes a firm-fixed-price contract as one that “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. It provides maximum incentive for the contractor to control costs and perform 

effectively and imposes a minimum administrative burden upon the contracting parties.” FAR 16.301-1 describes a cost reimbursement 
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authority to approve certain contract types can be many levels above the contracting officer. This 

requirement for top-level approval can cause delays in early acquisition phases or even act as a 

deterrent to suitable contract type selection. 

Fixed-price contracts are the preferred and most used contract type, whether measured as dollar 

obligations or contract actions. Figure 7-2 illustrates the extent of DoD’s use of these contract types 

during fiscal year 2017.29

Figure 7-2. Comparison of DoD Contract Dollar Obligations and DoD Contract Actions, FY 201730

Despite the preponderance of fixed-price DoD contract actions and obligations, recent law has further 

encouraged this contract type. The FY 2017 NDAA explicitly establishes a preference for fixed-price 

contracts and requires a contracting officer to gain approval from the Service acquisition executive or 

equivalent when entering into cost reimbursement contracts exceeding $50 million, with the threshold 

lowering to $25 million after fiscal year 2019.31

 

contract as one which provides “for payment of allowable incurred costs, to the extent prescribed in the contract. These contracts 

establish an estimate of total cost for the purpose of obligating funds and establishing a ceiling that the contractor may not exceed 

(except at its own risk) without the approval of the contracting officer.” FAR 16.601(b) describes a time and materials contract as one that 

“provides for acquiring supplies or services on the basis of— (1) Direct labor hours at specified fixed hourly rates that include wages, 

overhead, general and administrative expenses, and profit; and (2) Actual cost for materials.” 

29 Fixed-price includes firm-fixed-price as well as variations, including: fixed-price award fee, fixed-price incentive fee, fixed-price level of 

effort, fixed-price redetermination, and fixed-price with economic price adjustment. Cost type includes cost only as well as variations, 

including: cost-plus award fee, cost-plus fixed fee, cost-plus incentive fee, and cost sharing. 

30 Data from FPDS, extracted September 19, 2018. 

31 Section 829 of FY 2017 NDAA, Pub. L. No. 114-328 (2016). 
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Discussion 

Similar to previous examples, multiple instances exist for which the FAR requires duplicative contract 

type determinations beyond the content of the written acquisition plan. FAR 7.105(b)(3) requires the 

acquisition plan to address the following: 

Discuss the rationale for the selection of contract type. For other than firm-fixed-price contracts, see 

16.103(d) for additional documentation guidance. Acquisition personnel shall document the acquisition 

plan with findings that detail the particular facts and circumstances (e.g., complexity of the requirements, 

uncertain duration of the work, contractor’s technical capability and financial responsibility, or adequacy 

of the contractor’s accounting system), and associated reasoning essential to support the contract type 

selection. The Contracting Officer shall ensure that requirements and technical personnel provide the 

necessary documentation to support the contract type selection. 

This requirement is further emphasized with the requirement for the contract file to include rationale 

for the contract type selection in the acquisition plan, when an acquisition plan is required.32 FAR 

16.203-3 requires additional documentation for fixed-price contracts with economic price adjustment, 

which should be supported in the rationale contained in the acquisition plan. FAR 16.401(d) requires 

the head of the contracting activity to sign a determination and finding for incentive and award-fee 

contracts. Justifying their use is in the best interest of the government. Additionally, FAR 16.601(d) 

requires the head of the contracting activity approve a determination and finding for time-and-material 

contracts exceeding 3 years. 

The rationale for contract selection already must be thoroughly documented in the acquisition plan. 

This documentation is a non-value-added, time-consuming processes when duplicated outside the 

acquisition plan. The additional determination and finding requires more time preparing and staffing a 

duplicative document to support a solicitation and contract, when often the secondary approval 

authority would have already reviewed or been in the staffing chain of the acquisition plan. 

Conclusion 

Multiple instances of redundant, time-consuming contract type approvals exist within the FAR, 

e.g., economic price adjustment, time and materials greater than 3 years, and incentive or award fee. 

Further, the FAR identifies the acquisition plan as the appropriate place for documenting the selected 

contract type. Additional documentation and approvals at levels other than the contracting officer 

categorically undermine contracting officers’ authority, knowledge, and experience with the 

acquisition. The redundancies hinder the contracting officer’s ability to exercise business acumen and 

delay the procurement process; therefore, they should be revised. Further, inconsistent approval 

authorities for various contract types, in particular approval authorities many levels above the 

contracting officers or outside contracting officers’ immediate chain of command, cause confusion and 

further delays in the precontract award phase. When an approved acquisition plan is not required, the 

contract type determinations should have a single approval path no higher than the chief of the 

contracting office.

 

32 Negotiating Contract Type, FAR 16.103(d)(1). 
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Subrecommendation 74c: Revise 10 U.S.C. 2304a(d) and 41 U.S.C. 4103(d) to eliminate 

requirement for approval from the head of the agency for single-source task-order or 

delivery-order contracts. 

Background 

Section 843 of the FY 2008 NDAA included, among other requirements, prohibition of awarding singlesource task order or delivery order contracts. This statutory requirement at 10 U.S.C. § 2304a(d) is 

implemented under FAR 16.504(c)(1). A task-order or deliver-order contract is used when the 

government has a specified requirement with an indefinite quantity, within stated limits, of supplies or 

services during a fixed period, also referred to as an indefinite-quantity contract. The government 

subsequently places orders for individual requirements as needed. Quantity limits may be stated as 

number of units or as dollar amounts. The FAR indicates a preference for multiple awards when 

executing an indefinite-quantity contract, meaning contracting officers award to a pool of qualified 

contractors who will receive future orders for specific quantities once the quantity is known.33 This 

practice ensures continuous competition when orders are placed after the initial indefinite-quantity 

contract is awarded. 

Discussion

The contracting officer is responsible for determining the number of awardees as part of acquisition 

planning. Further, “The Contracting Officer must document the decision whether or not to use multiple 

awards in the acquisition plan or contract file.”34 The FAR then contradicts itself by requiring the head 

of the agency to make a written determination that, 

(i) The task or delivery orders expected under the contract are so integrally related that only a single 

source can reasonably perform the work; 

(ii) The contract provides only for firm fixed price (see 16.202) task or delivery orders for— 

(A) Products for which unit prices are established in the contract; or 

(B) Services for which prices are established in the contract for the specific tasks to be performed; 

(iii) Only one source is qualified and capable of performing the work at a reasonable price to the 

Government; or 

(iv) It is necessary in the public interest to award the contract to a single source due to exceptional 

circumstances. 

The FAR contradicts itself by giving the contracting officer authority to make this determination and 

then later takes it away, reserving the determination for a higher authority. This authority requires 

concurrence and eventual approval five levels above the contracting officer. 

Acquisition plan content requirements, outlined at FAR 7.105, address indefinite-quantity contract 

preferences in multiple sections. First, FAR 7.105(b)(2) addresses competition and “how competition 

will be sought, promoted, and sustained throughout the course of the acquisition.” Under FAR 

7.105(b)(3), the acquisition plan must address “the rationale for the selection of contract type.” If an 

indefinite-quantity contract is selected, whether for single- or multiple-award preference, the 

 

33 Indefinite-Quantity Contracts, FAR 16.504(a)&(c). 

34 Indefinite-Quantity Contracts, FAR 16.504(c)(1)(ii)(A)&(C). 
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acquisition plan is required to address the rationale for the selection in conjunction with the acquisition 

risks, industry support, competition maximization objectives, and other concerns. The acquisition plan 

does so more comprehensively than the determination required by FAR 16. The requirement to seek a 

head of the agency determination for single-source task order or delivery order contracts is both 

duplicative and unduly burdensome. 

Conclusion 

FAR 16.504(c)(1) is contradictory, first delegating responsibility for determining the number of 

awardees to the contracting officer, then reserving the determination for a higher authority. 

Additionally, the written acquisition plan already requires the planning team to address the salient 

components of FAR 16. The statutory requirement to obtain head of the agency approval for singlesource task-order or delivery-order contracts exceeding $112 million should be revised and 

FAR 16.504(c)(1) should be repealed. 

Subrecommendation 74d: Direct DoD to justify, consolidate, or eliminate requirements in 

the FAR and DFARS relative to acquisition plans and acquisition strategies. 

Problem 

FAR Part 7 establishes requirements for acquisition planning and contents of an acquisition plan, but 

this regulation has become overly complex and overlaps with other subparts of the FAR and DoD 

Instructions (DoDIs), especially DoDI 5000.02, 5000.74, and 5000.75, relative to acquisition strategies. 

Background 

DoD must report to Congress annually on major defense acquisition programs and does so using data 

collated in program acquisition strategies. According to the DAG, 

The Acquisition Strategy is a top-level description, in sufficient detail to allow senior leadership and the 

Milestone Decision Authority (MDA) to assess whether the strategy makes good business sense, 

effectively implements laws and policies, and reflects management’s priorities. 35

DoD implements acquisition strategy requirements through FAR 34.004 and DoDI 5000.02 for Major 

System Acquisitions and through FAR 37 and DoDI 5000.74 for services contracts. Yet another DoDI, 

5000.75, governs acquisition strategy requirements for defense business systems. The FAR also requires 

the acquisition strategy for major systems be prepared in accordance with Subpart 7.1, the same 

subpart that governs acquisition plans and indicates that the strategy “shall qualify as the acquisition 

plan for the major system acquisition.”36 According to the DAG, “in practice, DoD Components often 

prefer to provide a more general acquisition strategy to the milestone decision authority (MDA) for 

approval and choose to prepare a separate, more detailed [acquisition plan].”37 Further, DoD 

implements acquisition strategy requirements for service contracts through FAR 37 and DoDI 5000.74. 

 

35 DAU, Defense Acquisition Guidebook, September 16, 2013, accessed June 25, 2018, 

https://at.dod.mil/sites/default/files/documents/DefenseAcquisitionGuidebook.pdf. 

36 Acquisition Strategy, FAR 34.004. 

37 DAU, Defense Acquisition Guidebook, September 16, 2013, accessed June 25, 2018, 

https://at.dod.mil/sites/default/files/documents/DefenseAcquisitionGuidebook.pdf. 
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Both the acquisition strategy and the acquisition plan include statutory and regulatory components, 

but their purposes differ. The acquisition strategy is a higher level document that delineates 

programmatic goals for full lifecycle performance. The acquisition plan is more detailed and focuses on 

the business arrangement structured in the contemplated contract. Table 7-3 compares the two 

documents. 

Table 7-3. Summary of Distinctions between the Acquisition Strategy and Acquisition Plan38

Acquisition Strategy Acquisition Plan 

Required by DoDI 5000.02, Enclosure 2, paragraphs 5(c) 

and 6(a) 

FAR 7.1 

Required for All acquisition categories Contracting or procuring for development 

activities when the total cost of all contracts 

for the acquisition program is estimated 

at$10 million or more; procuring products or 

services when the total cost of all contracts 

is estimated at$50 million or more for all 

years or $25 million or more for any one 

fiscal year; and other procurements 

considered appropriate by the agency. 

Approval Authority MDA Component Acquisition Executive or 

designee in accordance with Agency FAR 

supplements. 

Purpose Describes overall strategy for managing the 

acquisition program. The acquisition strategy 

describes the PM’s plan to achieve 

programmatic goals and summarizes the 

program planning and resulting program 

structure. 

Comprehensive plan for implementing the 

contracting strategy. 

Use Required at program initiation. The 

acquisition strategy should be updated for 

all subsequent milestones, at the full-rate 

production decision review, and whenever 

the approved strategy changes. 

Integrates the efforts of all personnel 

responsible for significant aspects of the 

contractual agreement. The purpose is to 

ensure that the government meets its needs 

in the most effective, economical, and timely 

manner. 

Level of Detail Strategy level. Needed by MDA for decisionmaking. Also planning level for some discrete 

information requirements. 

Execution level. Provides the detail 

necessary to execute the approach 

established in the approved acquisition 

strategy and to guide contractual 

implementation and conduct acquisitions. 

Content Prescribed by DoDI 5000.02 ; additional 

guidance in the DAG 

Prescribed by FAR 7.1; DFARS 207 

Individual Responsible 

for Preparing the 

Document 

PM Person designated as responsible. 

 

38 Ibid. 
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Discussion 

Acquisition planning is a multifunctional team effort. The results of planning efforts are detailed in the 

acquisition plan and include “the technical, business, management, and other significant considerations 

that will control the acquisition.”39 The FAR is itself a comprehensive and detailed set of rules in which 

various subparts often create overlapping requirements. Notably, the acquisition strategy and the 

acquisition plan overlap to such an extent that is unclear why all this documentation is necessary, 

especially when it bogs down the acquisition process. 

Statute requires agencies to document aspects of both an acquisition plan and acquisition strategy, but 

there is no prohibition to doing so in one document. In the case of major system acquisitions, the 

acquisition strategy actually qualifies as the acquisition plan.40 Table 7-4 identifies the required content 

of both documents. Some similarities within the documents present clear opportunities for 

streamlining. Duplicative requirements include contract type determination (including a discussion on 

multiyear procurement and business strategies), risk management, market research (including 

available sources), and background and objectives such as cost and procurement history. 

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

Acquisition Plan Contents41 Statutory Requirements for an Acquisition Strategy42

 

 Acquisition background and objectives: 

 Statement of need 

 Applicable conditions 

 Cost 

 Capability or performance 

 Delivery or performance-period requirements 

 Trade-offs 

 Risks 

 Acquisition streamlining 

 Plan of action: 

 Sources 

 Competition 

 Contract type selection 

 Source-selection procedures 

 Acquisition considerations 

 Budgeting and funding 

 Product or service descriptions 

 Priorities, allocations, and allotments 

 Contractor versus government performance 

 Inherently governmental functions 

 Management information requirements 

 Make or buy 

 Test and evaluation 

 Acquisition approach 

 Benefit analysis and determination 

 Business strategy 

 Contracting strategy 

 Contract type determination 

 Termination liability estimate 

 Cooperative opportunities 

 General equipment valuation 

 Industrial base capabilities considerations 

 Intellectual property strategy 

 Market research 

 Modular open systems approach 

 Multiyear procurement 

 Risk management 

 Small Business Innovation Research/Small Business 

Technology Transfer Program technologies 

 

39 Contents of Written Acquisition Plans, FAR 7.105. 

40 Acquisition Strategy, FAR 34.004. 

41 Adapted from FAR 7.105. 

42 Extracted from DoDI 5000.02, Enclosure 1, Table 2 (2017). 
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Acquisition Plan Contents41 Statutory Requirements for an Acquisition Strategy42

 

 Logistics considerations 

 Government-furnished property 

 Government-furnished information 

 Environmental and energy conservation objectives 

 Security considerations 

 Contract administration 

 Other considerations 

 Milestones for the acquisition cycle 

 Identification of participants in acquisition plan 

preparation 

Naval Sea Systems Command published an Acquisition Strategy Guide in April 2010, which calls out a 

single acquisition management plan (SAMP) combining the acquisition plan and acquisition strategy 

requirements into one document.43 According to the guide, “Use of a SAMP is at the PEO’s discretion 

for [Acquisition Category (ACAT)] I and II programs where the [Milestone Decision Authority] is 

Navy, but is highly recommended when there is a common approval authority for both [acquisition 

strategy] and [acquisition plan] such as ACAT III, IV, and [Abbreviated Acquisition Program] 

programs.”44 One former Navy official interviewed indicated that during his time as a procurement 

analyst, out of the more than 100 acquisition plans he reviewed, only one used the SAMP format.45 For 

the Defense Information Systems Agency, the agency acquisition regulation supplement requires use of 

a combined, standard, or streamlined plan; however, as noted earlier, in the DAG, DoD acquisition 

planners often prefer to prepare separate documents.46

Conclusions 

It is best for DoD and the individual Military Services to review the acquisition planning 

documentation requirements and reduce them to basics. DoD should focus documentation 

requirements on those required by statute or truly critical to “satisfying the mission need in the most 

effective, economical, and timely manner.”47 The growing demand for documentation should be 

reduced by eliminating requirements that are obsolete or not value added. DoD should compare these 

requirements with those in DoDI 5000.02, 5000.74, and 5000.75, then revise—and right size—these 

acquisition instructions to eliminate redundancy with FAR requirements or other unnecessary 

requirements. 

 

43 Naval Sea Systems Command, Acquisition Strategy Guide v1.0, April 2010, accessed October 10, 2018, 

http://www.dtic.mil/dtic/tr/fulltext/u2/a550109.pdf. 

44 Ibid, 18. 

45 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, October 2018. 

46 DISA Acquisition Regulation Supplement (DARS), Subpart 7.103 indicates, “A written plan (combined AS/AP, standard, or streamlined) 

shall also be prepared for... (1) Acquisitions with a total value, including options, of $50M and above.” 

47 Acquisition Strategy, FAR 34.004. 
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Implementation 

Legislative Branch 

 Revise Section 829 of the FY 2017 NDAA (Pub. L. No. 114–328; 10 U.S.C. § 2306 note), which 

requires senior acquisition executive approval for cost type contracts. 

 Revise 10 U.S.C. § 2304a(d), which requires head of the agency approval for single source task 

order or delivery order contracts. 

 Revise 41 U.S.C. § 4103(d) which requires head of the agency approval for single source task 

order or delivery order contracts. 

Executive Branch 

 Revise FAR and DFARS to explicitly eliminate separate determinations, when rationale 

documented in an approved acquisition plan or acquisition strategy. Delegate authority to 

approve determinations documented within the acquisition plan or acquisition strategy to the 

plan or strategy approving authority. 

 Revise FAR and DFARS to eliminate contract type determinations when already approved as 

part of a written acquisition plan or acquisition strategy. When a written acquisition plan or 

acquisition strategy is not required, revise FAR and DFARS to delegate contract type 

determinations to a single approval authority no higher than the Chief of the Contracting 

Office. 

 Direct DoD to consolidate or eliminate requirements in the FAR and DFARS relative to 

acquisition plans and Acquisition Strategies. DoD should compare these requirements with 

those in DoDI 5000.02, 5000.74, and 5000.75, then revise—and right size—these acquisition 

instructions to eliminate redundancy with FAR requirements or other unnecessary 

requirements. This study should begin no later than 180 days after passage of the Act, and 

conclude within 1 year. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 7. 

Implications for Other Agencies 

 The recommended changes to the statutes and the FAR would apply to DoD and civilian 

agencies that use the FAR. Both DoD and civilian agencies will benefit from these 

recommendations. 
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Recommendation 75: Revise regulations, instructions, or directives to eliminate 

non-value-added documentation or approvals.

Problem 

Within the DoD acquisition system, solicitation and precontract award processes are cumbersome and 

non-value-added, leading to substantial acquisition delays. 

Subrecommendation 75a: Repeal the requirement at DFARS 215.371-2 to resolicit for an 

additional 30 days when only one offer is received in response to a solicitation. 

Background 

The 1984 Competition in Contracting Act (CICA) was intended to achieve competitive prices by 

increasing competition. The law requires the government to compete acquisitions with few exceptions 

and includes advanced notification timeframes for imminent solicitations as well as minimum response 

times for contractors responding to solicitations. Nevertheless, in the 30 years since CICA enactment, 

there is growing concern that competition processes have not always met the desired goals for effective 

competition. Beginning in 2010, then Under Secretary of Defense for Acquisition, Technology, and 

Logistics (USD[AT&L]) Ashton Carter included promotion of competition in his Better Buying Power 

(BBP) initiatives.48 Among other things, the BBP series of guidance documents issued from 2010 

through 2015 included direction to DoD policy makers to streamline the competition process, but also 

identified that for services, where a single offer was received in response to a solicitation open for less 

than 30 days, the agency was to resolicit for an additional 30 days. 

This direction led to a broader regulatory proposal to limit the ability of contracting officials to avail 

themselves of the standard for competition at FAR 15.403-1(c) to justify a fair and reasonable price that 

prohibits obtaining cost or pricing data where there was an expectation of competition from 2 or more 

offerors. That broader shift in policy did not require an additional 30-day resolicitation period, but in 

June 2012, DoD issued a final rule to the DFARS addressing competitive procedures when only one 

offer is received in response to a solicitation that requires resolicitation and revised requirements as 

needed. That rule was not limited to the acquisition of services. To date, overall increases in effective 

competition, which have ranged from 50 to 60 percent since 2010 and been the historic range for many 

years for DoD competition, have not been documented by DoD since the implementation of that policy, 

nor is data available to support its continuance.49 The BBP memos do identify that more engagement 

with industry and other structural changes to the business relationships between the private sector and 

DoD, such as issuing better demand signals and enhancing knowledge about the value of Intellectual 

Property, are more important than minor process changes that delay the procurement cycle, but have 

negligible effect on the competitive process. 

 

48 OSD Memorandum, Better Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending, 

September 14, 2010, accessed November 7, 2018, 

https://www.acq.osd.mil/fo/docs/USD_ATL_Guidance_Memo_September_14_2010_FINAL.PDF. 

49 “Contract Policy: Competition,” Defense Pricing and Contracting, accessed November 29, 2018, 

https://www.acq.osd.mil/dpap/cpic/cp/competition.html. 
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Discussion 

DFARS 215.371-1 states, “It is DoD policy, if only one offer is received in response to a competitive 

solicitation ... To take the required actions to promote competition.” The contracting officer is required 

to conduct market research and engage in a variety of requirements outreach activities prior to 

developing the strategy and solicitation and is required to identify a list of potential offerors interested 

in the acquisition as well as scan the marketplace for new or unfamiliar sources.50 Contracting officers 

have a good indication long before a solicitation closes, and throughout the presolicitation procurement 

cycles, even before developing the strategy or solicitation, if the acquisition circumstances will promote 

effective competition. This foresight includes knowing whether or not two or more offerors are likely to 

emerge, allowing for strategies to draw new offerors to the federal market, and acknowledging that 

contracting officers are required to solicit potential offerors and anyone else that expresses interest in a 

procurement (such a request itself is an indicator of interest in competition). If contracting officers 

believe competition is unlikely or a modification to the strategy is necessary to promote competition, 

the time to strategize about increased competition is when drafting the strategy, not after offers have 

been received. Thus, all the predicate steps to achieving effective competition are taken from the outset 

of any procurement and are subject to internal and external process outcome reviews by agency 

managers and several oversight organizations to assure that contracting officials have taken steps to 

maximize competition. 

Interested parties also have multiple opportunities prior to the solicitation phase to be notified of the 

government’s requirement and intent to solicit. FAR 5.203 requires a proposed contract action be 

publicized 15 days prior to issuance of the solicitation. DFARS 215.371-2 (a)(2) requires contracting 

officers to “Resolicit, allowing an additional period of at least 30 days for receipt of proposals” in 

instances where solicitations were open for less than 30 days and only one offer was received. 

Resoliciting does not resolve a potentially flawed acquisition strategy that does not fully promote 

competition. Nor does it obviate the need for offerors to monitor acquisitions and respond to 

solicitations in a timely manner. The requirement at DFARS 215.371-2 to resolicit for an additional 

30 days has proven itself unlikely to result in additional interest in an acquisition or increased 

competition and only delays acquisitions. That said, when only one offer is received, the contracting 

officer is required to “consult with the requiring activity as to whether the requirements document 

should be revised in order to promote more competition” and, further, seek post-award feedback from 

potential offerors. This feedback is to be documented and used in future acquisitions to promote 

competition.51 The requirement to adopt lessons learned in any given procurement and to adapt the 

procurement strategy for the future, which force contracting officers and requiring activities to analyze 

their requirements and methods of fulfilling them, are more likely to promote competition than relying 

on resoliciting, which will likely only delay the acquisition. 

Conclusions 

Interested parties have multiple opportunities prior to the solicitation closing to be notified of the 

government’s requirement and intent to solicit, e.g. market research, synopsis and to engage in the 

competitive process. The policy to resolicit adds time to the procurement process, has no direct nexus 

to any documented increase in competition in DoD and does not align with other internal and external 

 

50 Procedures, Guidance and Information, DFARS 210.002. 

51 Source Selection: Promote Competition, DFARS 215.371-2 and DFARS PGI 215.371-2. 
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outreach activities conducted by contracting officials as a predicate to soliciting competitive offerors. 

The requirement at DFARS 215.371-2 for contracting officers to resolicit for an additional 30 days when 

only one offer is received in response to a solicitation should be repealed. 

Subrecommendation 75b: Eliminate the documentation approval process for DoD programs 

to use OMB-designated best-in class contract vehicles for direct acquisitions. 

Background 

OMB designates more than a dozen interagency contracts as best-in-class (BICs). Several of these 

contracts provide DoD and other agencies with access to IT services and solutions. The General 

Services Administration (GSA) publishes a regularly updated list of approved BICs via the agency’s 

Acquisition Gateway web tool.52 When DoD conducts acquisitions using non-DoD BIC contract 

vehicles, there are lengthy documentation approval processes. These approval processes can take 

several months and incentivizes contracting personnel to use or create agency-unique contract vehicles. 

Avoidance of already-established contract vehicles increases the amount of duplicative administrative 

work in DoD contracting offices and potentially decreases the government’s negotiating power.53

Discussion 

Interagency contracting is an important part of DoD’s acquisition system, particularly in IT and other 

areas that may require specialized technical or market knowledge on the part of contracting 

professionals. Interagency contracting can also be important when buying commoditized products. If 

the government, as a whole, purchases large amounts of something, a large, preexisting, nondefense 

contract may provide a faster and higher-quality solution than if contracting officers were to develop 

a brand-new contract. Statutory requirements on interagency contracts exist under 10 U.S.C. § 2304 and 

31 U.S.C. § 1535 (commonly referred to as the Economy Act). The acquisition community implements 

these laws via FAR Part 17 and DFARS Part 217.54

10 U.S.C. § 2304(f) establishes restrictions on making a contract award using “other than competitive 

procedures,” including the streamlined process of using a non-DoD BIC contract vehicle. The section 

creates thresholds above which senior officials must approve a written justification for the acquisition 

in question. For contracts valued at $75 million or more, an agency-level senior procurement executive 

must provide approval.55 DFARS 217.7 expands these requirements, adding special procedures for 

interagency contract acquisitions that exceed the simplified acquisition threshold. The subpart requires 

 

52 Table lists all BICs identified as providing access to IT solutions in GSA Acquisition Gateway, “Best in Class (BIC) Consolidated List,” 

accessed April 30, 2018, https://hallways.cap.gsa.gov/app/#/gateway/best-class-bic/6243/best-in-class-bic-consolidated-list. 

53 In order to use agency-unique solutions, a contracting office must in many cases spend time and resources putting a new contract 

vehicle in place (complete with a competition to establish an indefinite delivery, indefinite quantity vehicle as required under 

FAR Part 15). These same solutions might be obtained by competing a task order on an existing contract vehicle using the more 

streamlined FAR 16.5 procedures. 

54 Agency Agreements, 31 U.S.C. § 1535(a), states, “The head of an agency or major organizational unit within an agency may place an 

order with a major organizational unit within the same agency or another agency for goods or services if (1) amounts are available; 

(2) the head of the ordering agency or unit decides the order is in the best interest of the United States Government; (3) the agency or 

unit to fill the order is able to provide or get by contract the ordered goods or services; and (4) the head of the agency decides ordered 

goods or services cannot be provided by contract as conveniently or cheaply by a commercial enterprise.” 

55 Under Chief Acquisition Officers and Senior Procurement Executives, 41 U.S.C. § 1702(c), senior procurement executive refers to the 

person “responsible for management direction of the procurement system of the executive agency.” 
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DoD components to conduct best-interest evaluations, scope determinations, funding reviews, and 

data collection and reporting.56

DoD interagency procurements are categorized as either direct or assisted. A direct acquisition is one 

for which a requiring agency places an order directly against another agency’s existing contract 

vehicle—essentially placing a simple purchase order. An assisted acquisition is one for which the 

requiring agency sends requirements to the contracting agency, which then engages in acquisition 

processes on behalf of the requiring agency.57

Greater use of interagency OMB-designated BICs in DoD contracting should be encouraged. Using 

BICs may provide several benefits: 

 Allowing for the development of common requirements. 

 Reducing duplicate contracts (freeing up more of the contracting workforce for other priorities). 

 Applying demand management practices; and 

 Improving the government’s negotiating power with vendors.58

Despite the clear benefits to using OMB-designated BICs for contracting, DoD creates mechanisms that 

discourage their use. Through an overabundance of unnecessary approval documents and signatureaccumulation exercises, DoD incentivizes acquisition personnel to create new, duplicative, and overly 

expensive contract vehicles rather than rely on preexisting ones. 

Conclusion 

Statutory requirements on interagency contracts exist under the Economy Act and additional 

documentation required of DoD when using best in class contract vehicles for direct acquisitions 

discourages use of these vehicles. The results are inefficient contracting strategies and loss of volume 

discounts and purchasing power. The documentation approval process for DoD programs to use bestin-class contract vehicles for direct acquisitions should be eliminated. The approval process for assisted 

acquisitions should remain unchanged to ensure greater visibility of offloading and control of contract 

terms and conditions. 

Subrecommendation 75c: Repeal regulatory requirement for preaward Equal Employment 

Opportunity (EEO) clearance, FAR 22.805(a). 

Background 

The 1965 Executive Order (EO) 11246, Equal Employment Opportunity, prohibits the discrimination of 

government or government contractor employees or applicants for employment because of race, color, 

religion, sex, sexual orientation, gender identity, or national origin. Section 211 of the EO indicates,

 

56 Interagency Acquisitions: Acquisitions by Nondefense Agencies on Behalf of the Department of Defense, DFARS 217.7. 

57 See Procedures, FAR 17.502-1(a). Definitions adapted in part from presentation by Steve Sizemore, Interagency Acquisition, GSA 

Federal Acquisition Service, April 25-26, 2017, 3, accessed May 11, 2018, 

https://interact.gsa.gov/sites/default/files/Interagency%20Acquisition_2017_CLP.pdf. 

58 Adapted in part from presentation by Geri Haworth, Best in Class Contracts, GSA Professional Services & Human Capital Symposium, 

June 6-8, 2017, accessed April 23, 2018, https://interact.gsa.gov/sites/default/files/PSHC%20Symp%20-

%20Best%20in%20Class%20Contracts%20Final.pdf. 
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If the Secretary shall so direct, contracting agencies shall not enter into contracts with any bidder or 

prospective contractor unless the bidder or prospective contractor has satisfactorily complied with the 

provisions of this Order or submits a program for compliance acceptable to the Secretary of Labor. 

Although the EO does not describe a lengthy precontract award process to demonstrate compliance, 

the FAR’s implementation of the EO does. 

Discussion 

FAR 22.805(a) requires clearance from the Department of Labor’s (DOL’s) Office of Federal Contract 

Compliance Programs (OFCCP) that contracts and subcontracts over $10 million are compliant with 

one or more of the requirements of EO 11246. This requirement is duplicative with FAR 52.222-26 and 

leads to unnecessary delays. 

This process can take up to 35 consecutive days prior to award of a contract for all contracts and 

subcontract awards over $10 million. Contracting officers are required to submit a preaward clearance 

request 30 days before the proposed award date, once the awardee is known. On submitting the 

request to the OFCCP, contracting officers must wait up to 15 days for a response. The response may 

come in the form of granted clearance for award or a notification of intent to conduct a compliance 

evaluation, which can take an additional 20 days. In FY 2017, according to data retrieved from FPDS, 

there were 3,200 contracts awarded meeting this threshold.59 These 3,200 contracts do not include 

subcontract awards or modifications to contracts that would constitute a contract award, both of which 

may also be subjected to this clearance process. In a worst-case scenario the potential result is a 

cumulative delay, in just one fiscal year, of up to 113,000 days waiting for this clearance, the equivalent 

of more than 300 years.60

Case Study: 

Mission Vulnerability Caused by EEO Pre-Award Clearance 

One contracting officer interviewed described an emergent requirement performed by a nontraditional 

contractor not previously cleared by the OFCCP for EEO compliance. The contracting officer submitted a 

request for preaward clearance to the OFCCP, waited the requisite 15 days and never received a response 

from the office. After considering this tacit approval of the contractor’s compliance with the requirements of 

EO 11246, the contracting officer proceeded with award. The lack of response caused a 15 day vulnerability to 

a critical Army mission. The contracting officer indicated that even in instances of urgency, the regulations do 

not provide enough latitude for timely execution, as claims of urgency require coordination between the head 

of the contracting activity and OFCCP, which is an even more burdensome and lengthier process than 

coordinating with the OFCCP directly and waiting for a response.61

 

59 Based on Section 809 Panel staff analysis of FPDS query results for FY 2017 base and all options value of DoD modification-zero 

contract actions above $10 million. Blanket purchase agreement, blanket order agreement, and indefinite delivery contract actions 

omitted from query. FPDS data extracted July 13, 2018 produced 3,221 results. 

60 Number of days based on calculation of number of contracts (about 3,200) multiplied by 35 days. Number of years based on number of 

days (about 113,000) divided by 365 days per year. 

61 Data collection interviews, conducted by Section 809 Panel Team 6: IT Acquisition, August 2018. 
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With few exceptions, all contracts over $10 million must include FAR clause 52.222-26, Equal 

Opportunity, which requires the contractor to comply with EO 11246 and the rules, regulations, and 

orders of the Secretary of Labor.62 The clause at 52.222-26 is required for use in all solicitations and 

contracts estimated over $10,000 unless it fits one of the aforementioned exceptions for national 

security or under exceptional circumstances. The clause describes the contractual authority of the 

OFCCP to cancel, terminate or suspend the contract after issuance if the contractor is found not to be in 

compliance with the clause or any rule enforced by DOL relative to EO 11246. Among other things, the 

clause has substantive obligations for a contractor not to discriminate for employment purposes on the 

basis of a variety of factors, to take affirmative action to prevent discrimination in employment, to 

publicize and disseminate the remedies and protections for workers for any non-compliance, and to 

allow OFCCP to have access and enforce prescribed remedies for non-compliance. It is also required as 

a clause for use in the simplified acquisitions of commercial items. As such, the clause is one that is 

included in virtually all federal forms used to both solicit offers from industry and to award final 

contracts, and is typically included in the final form contracts in Section I as part of the general 

reference provisions, which then become part of the performance requirements of every contract, 

subject to remedies for breach, False Claims Act liability and specific OFCCP enforcement actions. 

Prior to even being solicited, as a predicate to becoming eligible to receive a federal contract, offerors 

are also required to register their company in the System for Award Management (SAM), incorporated 

by reference in contracts at clause 52.204-7, which encompasses the data base for online representations 

and certifications (formerly ORCA). ORCA contains two related EEO compliance clauses at 52.222-22, 

Previous Contracts and Compliance Reports, and 52.222-25, Affirmative Action Compliance. Both 

clauses require an affirmative representation by any recognized federal contract offeror to their prior 

compliance with the Equal Opportunity clause at 52.222-26 and that they have an Affirmative Action 

program in place whose compliance is monitored by the OFCCP under EO 11246. Insofar as the preaward process includes multiple ongoing representations as to EO compliance prior to receiving a 

solicitation, and any contract awarded contains the operative clause at 52.222-26 that provides for 

various remedies for non-compliance, including breach of contract, it is reasonable to conclude that 

when an offeror to a federal contract self-certifies their agreement to, and previous compliance with, 

the requirements of EO 11246 by signing their proposal/offer to the federal government, the 

government has ample protection from potential contractor noncompliance prior to the time of award. 

Thus, under contract formation principles and law, the contractor has both certified to their previous 

and ongoing compliance with EO 11246 and then promised their future compliance, subject to breach, 

on the specific contract. 

The Pre-award Compliance Review Clearance form required under FAR 22.805 thus duplicates a series 

of electronic and paper oversight mechanisms that are already embedded in the procurement process 

in the FAR solicitation and contract clauses, SAM and ORCA representations and certification already 

and is unnecessary at the award stage to ensure that contractors are in compliance with EO 11246 or 

Equal Opportunity law generally. While we understand that DOL may object to eliminating the preaward compliance clearance form, it is not true that eliminating it will create additional compliance or 

 

62 Exceptions include national security contracts and those explicitly excluded by the Deputy Assistant Secretary for Federal Contract 

Compliance, U.S. Department of Labor. 
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performance risk or that oversight of the EO will be any less strictly construed under contract law 

provided the offeror has completed their mandatory SAM registration and signed their offer, but its 

elimination will allow for greater speed to award and one less duplicative procurement file document.” 

Precedent exists in acquisition regulations for contractors to self-certify compliance in streamlined 

processes that avoid the delay of government validation. EO 13627, Strengthening Protections Against 

Trafficking in Persons in Federal Contracts, for instance, simply requires the contractor to certify, prior 

to award, it has implemented a compliance plan to prevent prohibited activities. The same process 

should apply to EO 11246. Contractor certification prior to award should be sufficient, with ongoing 

compliance checks by OFCCP. Authority to take action against noncompliance would come from the 

EO authority. This reform would greatly reduce the procurement acquisition lead time and allow for 

speedier contract awards. 

Conclusion 

Requirements for preaward EEO clearance are inconsistent with comparable labor laws and EOs, 

which rely on contractor certification and post-award enforcement using the terms of the contract and 

the EO. The preaward clearance process leads to substantial delays in contract awards and should be 

repealed. 

Subrecommendation 75d: Revise FAR 19.815 to allow for tacit release for non-8(a) 

competition by the Small Business Administration (SBA) if concurrence or rejection has not 

been received by the Small Business Administration after 15 working days. 

Background 

In the Small Business Act of July 30, 1953, Congress created the Small Business Administration (SBA), 

for which the function was to “aid, counsel, assist and protect, insofar as is possible, the interests of 

small business concerns.” The charter also stipulated that SBA would ensure small businesses a “fair 

proportion” of government contracts and sales of surplus property.63 Section 8 of the act allows the SBA 

to enter into contract with the government and subsequently “arrange for the performance of such 

procumbent contracts by negotiating or otherwise letting subcontracts to socially and economically 

disadvantaged small business concerns.”64 This program is commonly referred to as the 8(a) program, 

deriving its name from the section of the act itself. The 8(a) program allows or, in some cases, requires 

the limitation of competition for certain contracts to businesses that participate in the 8(a) Business 

Development Program. The program helps the government achieve its socioeconomic goal to award at least 

5 percent of federal contracting dollars to small disadvantaged businesses each year.65

Discussion 

The FAR implements section 8(a) of the Small Business Act in subpart 19.8. The FAR offers detail on the 

process of contracting with SBA, including how to select acquisitions and determine eligibility as a 

 

63 “About the SBA: History,” U.S. Small Business Administration, accessed November 8, 2018, https://www.sba.gov/about-sba/what-wedo/history. 

64 Small Business Act § 8(a)(1)(B). 

65 “8(a) Business Development Program,” U.S. Small Business Administration, accessed November 8, 2018, https://www.sba.gov/federalcontracting/contracting-assistance-programs/8a-business-development-program. 
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small business, the agency offering and SBA acceptance, and contract execution and administration 

processes. Unique to the 8(a) program and its requirements is the presumption of perpetual inclusion. 

The FAR indicates that “once a requirement has been accepted by SBA into the 8(a) program, any 

follow-on requirements shall remain in the 8(a) program unless there is a mandatory source... or SBA 

agrees to release the requirement from the 8(a) program.”66 The FAR briefly describes the process to 

release a procurement from the 8(a) program. Unlike the detailed process for determining whether to 

accept a requirement for the 8(a) program, which allows the SBA 10 working days to accept offers over 

the simplified acquisition threshold and 2 working days for those under the threshold, there is no 

prescribed timeframe when a request is made to release a requirement from the 8(a) program. This 

prevents contracting officers from soliciting performance outside the 8(a) program and causes 

unnecessary delays while waiting for the SBA’s response. One source indicated on several occasions his 

office requested release of a requirement, or portion of a requirement, and waited between 3 and 

90 days while the SBA processed the request for release. He said, “The lack of predictability of the SBA 

in the release process is very detrimental to acquisition planning and our ability to adhere to schedule 

constraints for critical programs within the DoD.”67

Conclusions 

SBA should be allowed 15 working days after receipt of the contracting officer’s written request, 

described at FAR 19.815(b), to respond with a determination whether to release a requirement from the 

8(a) program. If SBA does not provide the requesting contracting officer with a determination within 

that period, release from the 8(a) program should be presumed and the contracting officer should be 

authorized to proceed with award outside the 8(a) program. 

Implementation 

Legislative Branch 

 Revise 10 U.S.C. 2304(f) to clarify and streamline the process of awarding DoD task orders 

under OMB-designated BIC contract vehicles. For assisted acquisitions, the current process may 

remain in place with higher-level approvals needed. For direct acquisitions, DoD contracting 

officers should execute the acquisition without explicit approval. 

Executive Branch 

 Repeal requirement at DFARS 215.371-2 to resolicit for an additional 30 days when only one 

offer was received in response to a solicitation. 

 Eliminate the documentation approval process required at DFARS 217.770 for DoD programs to 

use OMB-designated BIC contract vehicles for direct acquisitions. 

 Repeal requirement for pre-award EEO clearance, FAR 22.805(a). 

 

66 Release for Non-8(a) Procurement, FAR 19.815(a). 

67 Email to Section 809 Panel, September 2018. 
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 Revise FAR 19.815 to allow for tacit release for non-8(a) competition by the SBA if no response 

has been received by the SBA after 15 working days. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 7. 

Implications for Other Agencies 

 The recommended changes to the statutes and the FAR would apply to DoD and civilian 

agencies that use the FAR. Both DoD and civilian agencies will benefit from these 

recommendations. 

RECOMMENDATIONS 76 THROUGH 81 ARE STAND-ALONE RECOMMENDATIONS ABOUT 

VARIOUS TOPICS RELATED TO SIMPLIFYING PROCUREMENT AND CONTRACTING 

Recommendation 76: Revise the fair opportunity procedures and require their 

use in task and delivery order competitions. 

Problem 

When competing orders under MA IDIQ contracts, contracting personnel frequently choose complex 

source selection procedures derived from FAR 15.3 instead of the streamlined fair opportunity 

procedures in FAR 16.505(b) intended for these types of procurements.68 Voluntary use of source 

selection procedures results in additional, unnecessary steps in the solicitation, proposal, and 

evaluation processes that create additional workload for both government and industry. Forgoing the 

opportunity to use the more streamlined fair opportunity procedures also extends the timeline to 

award.69 

Background 

The concept of fair opportunity first appeared in the Federal Acquisition Streamlining Act of 1994 

(FASA). It was considered a necessary and common sense process to accompany the proliferation of 

MA IDIQ contracts. The logic was that contractors that already participated in a full FAR 15.3 

competition to get onto the vehicle should not be subjected to the same process to compete for orders. 

Streamlined ordering procedures would shorten award timeframes, benefitting both government and 

its MA IDIQ contract holders. The Office of Federal Procurement Policy (OFPP) explained in 1997 

“Congress recognized that without streamlined order placement, the quality benefits and cost savings 

made possible by continuous competition might be outweighed by excessive expenditures of time and 

administrative resources.”70

 

68 DoD, Source Selection Procedures: Defense Federal Acquisition Regulation Supplement, Procedures, Guidance and Information, 

Subpart 215.3--Source Selection, March 31, 2016, accessed October 23, 2018, 

https://www.acq.osd.mil/dpap/policy/policyvault/USA004370-14-DPAP.pdf. 

69 ASI Government Advisory, Streamlining Task and Delivery Order Solicitations under MA/IDIQ Contracts, May 2016, accessed 

October 23, 2018, https://interact.gsa.gov/sites/default/files/ASI%20Advisory%20on%20Streamlining%20Final%206.9.2016.pdf. 

70 “Best Practices for Multiple Award Task and Delivery Order Contracting,” Office of Management and Budget, July 1997, Chapter 4—

Ordering Procedures, accessed October 23, 2018, https://www.gsa.gov/cdnstatic/BestPracticesMultipleAward.pdf. 
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As incorporated into the FAR, the language in Subpart 16.505(b)(1)(ii) describes the latitude provided 

to contracting officers: 

The contracting officer may exercise broad discretion in developing appropriate order placement 

procedures. The contracting officer should keep submission requirements to a minimum. Contracting 

officers may use streamlined procedures, including oral presentations. ...The competition requirements in 

Part 6 and the policies in Subpart 15.3 do not apply to the ordering process. 

To assist with adoption of these streamlined procedures, OFPP issued best practices guidance in 1999.71

Specific examples of streamlining available when using FAR 16.5 procedures include the following: 

 No formal source selection plan or evaluation team structure is required. As stated in the FAR, 

“Formal evaluation plans or scoring of quotes or offers are not required.” For orders exceeding 

$5.5 million made on a best value basis, however, contracting officers are required to provide “a 

written statement documenting the basis for award and the relative importance of quality and 

price or cost factors.” 

 The only mandatory evaluation factor is cost/price. There are no required rating tables or 

definitions, which provided the contracting officer with flexibility to use simplified evaluation 

schemes. 

 No requirement exists to establish a competitive range or enter into discussions with all offerors. 

The contracting officer may decide to initiate exchanges (the fair opportunity equivalent of 

discussions) with any number of offerors or with only one. 

 Immediate comparison of proposals is permitted with no need to independently evaluate prior 

to comparative analysis. 

 Use of oral presentations and/or demonstrations is allowed. Also available in FAR 15.3 

procedures, these types of activities can play a prominent role as the main or even sole technical 

evaluation technique in FAR 16.5 competitions. 

 No requirement exists to quantify tradeoffs that lead to the selection decision. However, “The 

contracting officer shall document in the contract file the rationale for placement and price of 

each order, including the basis for award and the rationale for any tradeoffs among cost or price 

and non-cost considerations in making the award decision.” 

Streamlined ordering procedures for Federal Supply Schedules (FSS) are available in FAR 8.405. GSA 

publishes various guidance documents encouraging proper use of these streamlined procedures, 

including one titled Think Simplified (Not FAR Part 15).

72 When DoD competes orders on FSS contracts, 

however, it sometimes uses FAR 15.3 procedures. 

 

71 Ibid. 

72 GSA, Handout F: Think Simplified (Not FAR Part 15), 22, November 12, 2013, accessed October 23, 2018, 

https://interact.gsa.gov/sites/default/files/handouts%20a%20through%20h%2011.29.14.pdf. 
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Despite all the advantages of FAR 16.5 procedures and the substantial number of years they have been 

available, DoD has shown a general reluctance toward their adoption and use. 

Discussion 

The broad discretion afforded to contracting officers in FAR 16.5 goes hand-in-hand with FAR 1.102 

which states “absence of direction should be interpreted as permitting the Team to innovate and use 

sound business judgment,” and yet use of the streamlined procedures described in FAR 16.5 has been 

inconsistent at best, leading many in the acquisition community to comment on the matter. An article 

in the Nash & Cibinic Report titled Simplified Acquisition Procedures: Why Can’t We Keep Them Simple?

states the following:73

One of the most remarkable and disappointing phenomena of Government contracting is the 

unwillingness or inability of many contracting officers to take advantage of the streamlining and laborsaving contract formation procedures that became available during the acquisition reform era of the 

1990’s. COs needlessly resort to Federal Acquisition Regulation Part 15 solicitation, offer, and award 

procedures when making simplified acquisitions, when competing task orders under multiple award 

service contracts, and even when placing orders under General Services Administration schedules. 

Numerous presentations at the National Contract Management Association (NCMA) World Congress 

from 2014 to 2018 expressed a similar sentiment, including one titled Fair Opportunity—Why Are We 

Making This So Hard?74

Some DoD organizations have developed guides to encourage and assist contracting professionals in 

the use of fair opportunity procedures. For example, in August 2017 the Air Force Materiel Command 

published Guiding Principles for Fair Opportunity Selection Under Federal Acquisition Regulation 

(FAR) 16.505(b)(1). The introduction to the guide summarizes the issue as follows: 

Many acquisition teams do not capitalize on the flexibility and potential time savings associated with the 

less formal FAR 16.505 competition strategies because the FAR and its supplements do not contain more 

specific guidance or information on how COs can utilize their “broad discretion.” As a result, the 

advantages available through competing an action under a MAC IDIQ are underutilized as many teams 

spend valuable time, money and resources using formal FAR 15.3 source selection procedures because 

there is so much regulation, training and sample documentation available. Simply put, the current 

acquisition community is extremely conversant with FAR 15.3 source selection procedures, so teams 

revert to using formal FAR 15.3 competition procedures rather than exploring and utilizing the 

streamlining opportunities afforded by FAR 16.505. 

The Coalition for Government Procurement found “it takes a contracting officer 145 days less to place 

an order under an MA IDIQ, than to establish a new contract. That faster ordering time saves the 

 

73 Vernon J. Edwards and Ralph C. Nash, THE FAR: Does It Have Contractual Force And Effect?, 31 Nash & Cibinic Rep. NL ¶ 10, 

February 2017, accessed October 23, 2018, http://www.wifcon.com/analy/thefardoesithave.pdf. 

74 Nick Tsiopanas and Jessica Dobbeleare, Fair Opportunity – Why Are We Making this So Hard?, presentation to the NCMA World 

Congress 2014, July 29, 2014, accessed October 23, 2018, https://www.ncmahq.org/docs/default-source/default-documentlibrary/pdfs/f02---fair-opportunity---why-are-we-making-this-so-hard.pdf?sfvrsn=5932202b_2. 
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government an estimated $37,000 per contracting officer per order. This estimate does not account for 

the savings that result from customers receiving their products and services more quickly.”75 Frequent 

use of full source selection procedures when fair opportunity procedures could—or should—be used, 

raises a number of questions: How much time and money is being wasted in this manner across the 

department on an annual basis? To what degree is the department needlessly delaying capabilities to warfighters 

and other end users, and what are the second-order effects of these inefficiencies? 

An ASI Government advisory from 2016 found the following: 76 

Awarding a new standalone contract took between 405 and 495 hours, while awarding a task order took 

between 119 and 168 hours. A comparison of acquisition strategies revealed that issuing a standalone 

contract versus awarding an order under a GWAC for a transaction exceeding $12.5 million: 

Increased the total amount of work by 121 percent 

Increased the amount of work done by experts from 14 percent to 80 percent 

Reduced the amount of work done by journeymen and entry levels from 86 percent to 20 percent 

Required a GS-14/15 supervisor as expert for approximately .92 staff years versus .07 staff years, or a 

non-supervisory expert for .36 staff years versus .03 staff years. 

The implications of these analyses are clear: Widespread and more consistent use of FAR 16.5 

procedures would benefit DoD by reducing cycle times for task order awards and by freeing senior and 

expert personnel to focus on more strategic and difficult procurements. 

Some have observed the tendency to use FAR 15.3 is due to the workforce’s comfort with rules and 

procedures that are spelled out in detail. By contrast, the FAR does not provide a formal definition of 

what constitutes providing MA IDIQ awardees fair opportunity for order competitions. The flexibility of 

the FAR 16.5 process—viewed by some as a strength—can actually be a weakness because it requires 

the contracting team to develop details. That is, it requires some creativity and possibly innovation as 

opposed to just following predetermined steps. FAR 16.5 specifically tells contracting officers they have 

broad discretion in this process; yet it appears that discretion is unsettling in a culture that values 

compliance and checklists. 

Current DoD source selection procedures state the FAR 15.3 procedures should be considered for use 

on MA IDIQ orders of more than $10 million. In DoD contracting’s compliance oriented culture, the 

word considered is often interpreted as should or even shall. Presumably, the rationale for recommending 

consideration of source selection procedures at $10 million was based on the then-current GAO protest 

threshold. That threshold has since been increased to $25 million, but dollar value alone does not 

 

75 “Multiple Award IDIQ Contracts: Essential Tools in the Acquisition Toolbox,” The Coalition for Government Procurement, 

September 28, 2017, accessed October 23, 2018, http://thecgp.org/multiple-award-idiq-contracts-essential-tools-in-the-acquisitiontoolbox.html. 

76 ASI Government Advisory, Streamlining Task and Delivery Order Solicitations under MA/IDIQ Contracts, May 2016, accessed 

October 23, 2018, https://interact.gsa.gov/sites/default/files/ASI%20Advisory%20on%20Streamlining%20Final%206.9.2016.pdf. 
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accurately indicate risk, and when properly planned and executed, FAR 16.5 procedures do not 

increase risk of protest. 

Contracting officers’ apprehension could stem in part from GAO’s consistently held view that if a 

FAR 16.5 competition uses FAR 15.3 terminology and/or partial procedures, then GAO will apply the 

standards of a FAR 15.3 negotiated procurement to bid protests.77 The same is true for orders against 

FSS. A protest by Finlen Complex, Inc. of an Army award for procurement of meals, lodging, and 

transportation was sustained by GAO because the “agency’s use of a negotiated procurement 

approach, rather than a simple Federal Supply Schedule purchase, triggered [the] requirement to 

provide for a fair and equitable competition.” GAO went on to say “Despite the ‘simplified’ label, this 

procurement is very similar to any other negotiated acquisition conducted under the rules set forth in 

FAR part 15.”78 In this and many similar bid protest cases, GAO has repeatedly invoked the stance that 

it looks to the substance of an agency’s actions, rather than the form.79 Simply stating a solicitation uses 

FAR 16.5 procedures is not sufficient. The entire solicitation and associated process must follow those 

procedures and carefully avoid using FAR 15.3 terminology. Table 7-5 provides a comparison of 

FAR 15.3 and FAR 16.5 terminology. These different lexicons are a critical component to establishing 

which procedures are being used. 

Table 7-5. FAR 15.3 and 16.5 Terminology Comparison 

FAR 15.3 Terms FAR 16.5 Terms 

Offeror Contractor 

Request for Proposals (RFP) Request for Task Order Proposals (RFTOP) 

Fair Opportunity Proposals Request (FOPR) 

Source Selection Task Order Evaluation 

Evaluation and Selection 

Source Selection Plan Proposal Evaluation Plan 

Fair Opportunity Selection Plan 

Source Selection Authority Task Order Determining Official 

Fair Opportunity Decision Authority 

Discussions Interchanges 

Exchanges 

Proposal 

Proposal 

Quote 

Response 

Other nuances can come into play when using FAR 16.5 procedures. One such nuance is whether oral 

presentations constitute discussions. In a bid protest by Sapient Government Services, Inc., the company 

argued that the Department of Homeland Security (DHS) had initiated discussions by conducting a 

dialogue about Sapient’s proposed solution during a task order competition oral presentation. GAO 

 

77 GAO, Decision, Matter of: Abacus Technology Corporation; SMS Data Products Group, Inc., B-413421, October 28, 2016, accessed 

October 23, 2018, https://www.gao.gov/assets/690/680987.pdf. 

78 “Finlen Complex, Inc., B-288280,” GAO, October 10, 2001, accessed October 23, 2018, https://www.gao.gov/products/407353. 

79 GAO, Decision, Matter of: CourtSmart Digital Systems, Inc., B-292995.2, February 13, 2004, accessed October 23, 2018, 

https://www.gao.gov/assets/380/371312.pdf. 
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denied the protest, stating DHS properly followed FAR 16.5 procedures because the exchanges that 

occurred during the oral presentation pertained only to the oral presentation and not to Sapient’s 

earlier submitted written proposal.80 It is understandable how nuances like these could give contracting 

officers pause when deciding which set of procedures to use. With appropriate planning and 

understanding, the streamlined procedures can be used with confidence while saving valuable time in 

the process. The default procedures for MA IDIQ order competitions should be based on the 

streamlining available in FAR 16.5; however, interviews, publications, and conference presentations 

indicate FAR 15.3 procedures are frequently used instead. Many DoD contracting offices do not have 

guidance or procedures for fair opportunity, so their personnel continue to use what they know and 

have been trained on—full FAR 15.3 source selection procedures. 

Conclusions 

When properly designed and followed, FAR 16.5 procedures save time and money for DoD and 

industry partners, as well as get needed capabilities to users faster. These procedures also encourage 

innovation in the contracting process by providing substantial flexibility to contracting officers and 

explicitly authorizing broad discretion in the process. 

DoD must increase use of FAR 16.5 procedures by providing practitioners with policy, guidance, and 

best practices to give them the knowledge, support, and confidence needed to benefit from this 

important acquisition tool. 

Implementation 

Legislative Branch 

 Revise 10 U.S.C. § 2304c(d)(1–5) to more clearly specify what constitutes streamlined ordering 

procedures (e.g., subfactors are not required), and to increase the threshold for use of these 

procedures from $5.5 million to $7 million, consistent with the streamlined procedures for 

acquiring commercial products and services addressed in the Section 809 Panel Volume 2 Report, 

Recommendation 28. 

Executive Branch 

 Revise FAR 16.505(b)(1)(iv) to more clearly specify what constitutes streamlined ordering 

procedures (e.g., subfactors are not required), and to increase the threshold for use of these 

procedures from $5.5 million to $7 million, consistent with the streamlined procedures for 

acquiring commercial products and services addressed in the Section 809 Panel Volume 2 Report, 

Recommendation 28. 

 Revise FAR 16.505(b)(1)(ii) to require contracting officers to use streamlined procedures when 

placing orders under multiple-award contracts. Require contracting officers to obtain approval 

 

80 GAO, Decision, Matter of: Sapient Government Services, Inc., B-412163.2, January 4, 2016, 6-7, accessed October 23, 2018, 

https://www.gao.gov/assets/680/674778.pdf. 
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to use the complex source selection policies and procedures in FAR Part 15.3 when placing 

orders under multiple-award contracts. 

 Remove from FAR 16.505(b)(1)(ii) the statement “Include the procedures in the solicitation and 

the contract.” Different orders under the same contract may benefit from different procedures. 

Establishing a single set of procedures up-front and years before specific order requirements are 

known could conflict with the intent to provide broad discretion in developing fair opportunity 

procedures. 

 Develop a Fair Opportunity desk guide to assist contracting professionals in confidently using 

proven streamlined procedures, and encourage development and use of innovative techniques 

to increase the quality of the evaluation and selection process while further reducing cycle time. 

This desk guide would not be prescriptive and instead would include examples of successful 

procedures, case studies, and best practices. 

 Remove the following statement from the DoD Source Selection Procedures: “Agencies shall 

consider the use of these procedures for orders under multiple award (Fair Opportunity) 

greater than $10 million.”81

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 7. 

Implications for Other Agencies 

 Although there are no explicit cross-agency implications for this recommendation, other 

agencies could benefit from using the fair opportunity procedures developed by DoD. 

Recommendation 77: Require role-based planning to prevent unnecessary 

application of security clearance and investigation requirements to contracts. 

Problem 

DoD sometimes incorrectly applies security clearance and investigation requirements to unclassified 

contracts, reducing the talent pool from which contractor companies can recruit and exacerbating the 

substantial investigation backlog. The National Background Investigations Bureau (NBIB) backlog 

currently exceeds 657,000 personnel investigations and requires on average more than 200 days to 

complete a background investigation.82 In many cases, these contract requirements violate the need-toknow principle that guides the National Industrial Security Program (NISP). In addition to reducing 

the talent pool from which contractor personnel can be recruited, unnecessary clearance requirements 

 

81 DoD, Source Selection Procedures: Defense Federal Acquisition Regulation Supplement, Procedures, Guidance and Information, 

Subpart 215.3--Source Selection, March 31, 2016, accessed October 23, 2018, 

https://www.acq.osd.mil/dpap/policy/policyvault/USA004370-14-DPAP.pdf. 

82 Derek B. Johnson, Security Clearance Backlog Drops 9 Percent, FCW, September 25, 2018, accessed September 27, 2018, 

https://fcw.com/articles/2018/09/25/clearance-backlog-drops.aspx?m=1/. 
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increase the investigation backlog and add administrative burden to both DoD and contractor 

companies. 

Background 

Unnecessary requirements for cleared personnel place a substantial burden on contractor companies 

and disincentivize hiring new, innovative employees. DoD has stated repeatedly its desire to attract 

talent from the commercial marketplace where the vast majority of innovation and technology 

development now takes place. The personnel who work in this marketplace generally do not have 

security clearances and many are not willing to subject themselves to either the inconvenience 

associated with the process or the protracted delay waiting for the results of an investigation and 

adjudication. It stands to reason that an individual with in-demand skills would prefer a more 

streamlined hiring process without such dependencies. 

The NBIB backlog is a governmentwide problem, but 75 percent of government clearances are for DoD 

jobs. In 2005, GAO added the personnel security clearance process to its High Risk List—a list that 

“calls attention to the agencies and program areas that are high risk due to their vulnerabilities to 

fraud, waste, abuse, and mismanagement or are most in need of broad reform.”83 After demonstrating 

progress in 2011, the security clearance process was removed from the list, only to reappear in 2018. 

This recurrence was attributed to large growth in the clearance backlog, a previous security breach of 

the background investigation IT system, lack of a discernable plan to address the backlog, investigator 

capacity, or reform effort delays.84 Although the report listed numerous factors, GAO did not evaluate 

whether DoD’s 3.6 million clearance holders met the need-to-know requirement for having access to 

classified data. Defense Security Service (DSS) personnel estimate as many as 10 to 30 percent of 

contractor secret clearances are unnecessary.85 

The government communicates contract clearance requirements through the DD Form 254, Department 

of Defense Contract Security Classification Specification, “for the protection of information in the 

possession of cleared contractors associated with a classified contract.”86 To access material requiring 

confidential, secret, and top secret clearances, contractors must obtain a Facility Security Clearance 

(FCL) from DSS based on DD Form 254 requirements. The FCL is particularly important when common 

contract language contains requirements such as “[A]ll Contractor personnel performing on this TO 

shall possess or be eligible to obtain a SECRET security clearance” even on an unclassified system.87

Unnecessary security requirements such as these make maintaining an FCL a necessity to compete on 

contracts. DSS conducts annual security reviews of cleared contractors to ensure safeguards are 

employed and National Industrial Security Program Operating Manual procedures are followed. These 

reviews include verifying a valid need to know exists, and DSS can rescind an FCL based on failure to 

demonstrate a need to know, regardless of the contract’s DD Form 254. As a result, unnecessary 

classification leaves contractors vulnerable to termination of its FCL through no fault of their own. 

 

83 GAO, Overview: High Risk List, GAO-17-317, January 2018 edition, accessed October 31, 2018, https://www.gao.gov/highrisk/overview. 

84 GAO, High Risk List, GAO-17-317, January 2018 edition, accessed June 25, 2018, 

https://www.gao.gov/highrisk/govwide_security_clearance_process/why_did_study#t=1

85 Defense Security Service, interview with Section 809 Panel Staff, June 13, 2018. 

86 Defense Security Service, Public Affairs Office, What is a DD Form 254?, DSS Access Magazine, Volume 3, Issue 1, Spring 2014, 10, 

accessed June 20, 2018, http://www.dss.mil/documents/about/DSS_ACCESS_v3i1_Web.pdf. 

87 Excerpt from an Army Performance Work Statement (PWS) Small Business Task Order. 
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According to some at DSS who monitor and process contractor personnel security eligibility and access, 

contractors face “a losing battle in most circumstances...[they] do not want to fight their GCA/COR 

[Government Contracting Agency/Contracting Officer Representative] due to possible backlash.”88 

Once an FCL is approved and a classified contract awarded, the contractor uses the same systems as 

the government to manage cleared personnel. Considering the large clearance backlog and nearly 

9-month average timeline for new investigations, contractors are incentivized to take the path of least 

resistance and settle for individuals with a current clearance, even if they are less qualified. The most 

qualified personnel languish waiting on clearances and ultimately move on to other opportunities. The 

real-world effect of the backlog on the industry talent pool was captured in a Senate intelligence 

hearing in March 2018:89

New careers are put on hold, top talent is lost to nondefense industries, and programs that will provide 

critical warfighter capabilities are delayed. And these impacts come with a real-world price tag, resulting 

in otherwise unnecessary increases in program costs and inefficient use of taxpayer dollars. 

The process levies unnecessary requirements on contractors and makes DoD unattractive to top talent. 

Discussion 

Most government contractors work on unclassified programs and do not require national security 

clearances.90 This workforce consists of support contractors, such as acquisition support or cost analysis 

support, who will never access classified information and only require credentialing and access to an 

unclassified email system. There are already governmentwide and DoD-specific processes in place to 

complete this credentialing, in addition to the security clearance process. The 2008 Homeland Security 

Presidential Directive (HSPD) 12 established minimum standards for issuance of Personal Identity 

Verification (PIV) cards and Title 32 CFR established the IT security clearance standards. A PIV card 

and a Tier 1 investigation, formerly the National Agency Check with Inquiries (NACI), is the minimum 

standard for an individual to access federal facilities and unclassified systems such as DoD email. 

HSPD-12 charged the Office of Personnel Management (OPM) to “ensure the effective, efficient and 

timely completion of investigations and adjudications relating to eligibility for logical and physical 

 

88 Defense Security Service, interview with Section 809 Panel Staff, June 13, 2018. 

89 U.S. Senate Select Committee on Intelligence, Hearing Video, Mar. 7, 2018, accessed June 25, 2018, 

https://www.intelligence.senate.gov/hearings/open-hearing-security-clearance-reform. 

90 According to a 2014 report on security clearance determinations from the Director of National Intelligence, 483,185 contractor 

personnel were eligible for a Confidential or Secret clearance, whereas in 2015 a Volcker Alliance issue paper reported the total number 

of government contractor personnel (“contract employees”) was 3,702,000. Office of the Director of National Intelligence, 2014 Security 

Clearance Determinations Report, 4, accessed October 31, 2018, https://www.dni.gov/files/documents/2015-4-

21%20Annual%20Report%20on%20Security%20Clearance%20Determinations.pdf. Paul C. Light, The True Size of Government, Issue 

Paper, The Volker Alliance, October 5, 2017, accessed October 31, 2018, https://www.volckeralliance.org/publications/true-sizegovernment. 
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access.” The PIV card is the first step to establish eligibility. Some of the criteria needed to grant a PIV 

card to individuals include the following:91

 The individual is not known to be or reasonably suspected of being a terrorist. 

 The employer is able to verify the individual's claimed identity. 

 There is no reasonable basis to believe the individual has submitted fraudulent information 

concerning his or her identity. 

 There is no reasonable basis to believe the individual will attempt to gain unauthorized access 

to classified documents, information protected by the Privacy Act, information that is 

proprietary in nature, or other sensitive or protected information. 

 There is no reasonable basis to believe the individual will use an identity credential outside the 

workplace unlawfully or inappropriately. 

 There is no reasonable basis to believe the individual will use Federally-controlled information 

systems unlawfully, make unauthorized modifications to such systems, corrupt or destroy such 

systems. 

HSPD-12 also standardized the NACI, now known as the Tier 1 investigation, for issuing an identity 

credential. It includes an NAC with “written inquiries to past employers, schools, references, and local 

law enforcement agencies covering the past five years and if applicable, of the appropriate agency for 

any identified arrests.”92 Tier 1 provides confidence an individual will not misuse information or seek 

to gain unauthorized access to classified data. 

In addition to governmentwide credentialing, DoD also requires contractors with a valid need to know 

for accessing defense IT systems be categorized by the positions they fill. A 1978 change to Title 32 CFR 

introduced the three Automated Data Processing (ADP) position categories based on potential threats 

to IT systems. These criteria are used today via the DD Form 2875, System Authorization Access 

Request, for every DoD government employee, contractor, and Military Service member to document 

their level of access in DoD IT systems. They also establish employees’ responsibility and involvement 

in IT systems and the commensurate security clearance needed.93 

 ADP–I positions: Critical-Sensitive Positions requiring a Tier 5 background investigation 

 Those positions in which the incumbent is responsible for the planning, direction, and 

implementation of a computer security program; major responsibility for the direction, 

planning and design of a computer system, including the hardware and software; or, can 

 

91 OPM Memorandum, Final Credentialing Standards for Issuing Personal Identity Verification Cards under HSPD-12, July 31, 2008, 

accessed June 26, 2018, https://www.opm.gov/suitability/suitability-executive-agent/policy/final-credentialing-standards.pdf. 

92 “Security Clearance Investigations Process Updated,” William Henderson, ClearanceJobs, October 9, 2011, accessed July 12, 2018, 

https://news.clearancejobs.com/2011/10/09/security-clearance-investigations-process-updated/. 

93 Defense Industrial Personnel Security Clearance Program, 32 C.F.R. 155. 
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access a system during the operation or maintenance in such a way, and with a relatively 

high risk for causing grave damage, or realize a significant personal gain. 

 ADP–II positions: Noncritical-Sensitive Positions requiring a Tier 3 background investigation 

 Those positions in which the incumbent is responsible for the direction, planning, design, 

operation, or maintenance of a computer system, and whose work is technically reviewed 

by a higher authority of the ADP–I category to insure the integrity of the system. 

 ADP–III positions: Nonsensitive positions requiring a Tier 1 background investigation 

 All other positions involved in computer activities. 

The HSPD-12 requirements for credentialing and the CFR IT ADP criteria ensure personnel are 

adequately screened and given the proper level of access to IT systems. Used in concert, these 

programs allow the government to confidently plan by individual role and limit overclassifying 

contracts. 

Conclusions 

Although NBIB plans a new National Background Investigation System to “address security concerns 

and provide a continuous vetting process to reduce errors and provide efficiencies,” it will not change 

the process or reduce the number of unnecessary clearances.94 For unclassified DoD contracts, the 

apparent fallback position of requiring all cleared personnel is a costly burden to the government and 

the contractor. Doing so incentivizes contractors to provide cleared but less qualified personnel due to 

the large increase in new clearance requests and reinvestigations. DoD loses the opportunity to hire 

quality personnel by settling for an expedient solution, and highly qualified applicants move to 

nondefense opportunities. Section 925 of the FY 2018 NDAA Conference Report states “The 

background investigation process is broken” and the current security clearance process causes a 

“degradation in workforce quality, as high-performing personnel with the best alternatives are unlikely 

to wait for many months to begin work for the U.S. Government.”95 One way to reduce the clearance 

burden on contractors is to scrutinize each clearance/investigation requested based on the role from the 

DD Form 2875. 

There are few clearances required for unclassified systems aside from those needed for elevated 

permissions that could compromise the system. The DD Form 254 should be the authoritative source 

for clearance requirements based on consolidated and detailed information from the OPM Position 

Designation Tool and employee DD Form 2875, which provides the job title, justification, clearance 

held, and ADP level designation for each role in the organization. Section 13 of the DD Form 254, 

Security Guidance, is the ideal consolidation point to communicate every role that requires a security 

clearance or a Tier 3 or Tier 5 investigation. Documents can be attached within Section 13 to clearly 

specify the contract security requirements. If properly planned and aligned with the DD Form 254, this 

 

94 “DISA Modernizing Clearance Process with Continuous Monitoring,” Lauren C. Williams, Defense Systems, June 22, 2018, accessed 

June 25, 2018, https://defensesystems.com/articles/2018/06/22/disa-clearance-nbis-tech.aspx?s=ds_250618,. 

95 FY 2018 NDAA, Conference Report to Accompany H.R. 2810, Report 115-404, November 9, 2017, 905, accessed October 16, 2018, 

https://www.congress.gov/115/crpt/hrpt404/CRPT-115hrpt404.pdf#page=943. 
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role-based requirement could drastically reduce the number of clearance requests thereby providing 

improved access to uncleared talent. 

Implementation 

Legislative Branch 

 There are no statutory changes required for this recommendation. 

Executive Branch 

 Develop policy to ensure clearance requirements in contracts are based only on valid security 

requirements that do not violate the NISP need-to-know principle. 

 Issue guidance requiring role-based planning using the OPM Position Designation Tool to 

inform the DD Form 254, Department of Defense Contract Security Classification Specification. 

 Expand use of the DD Form 254 to include use in unclassified contracts where Tier 3 and Tier 5 

investigations are required based on ADP positions. 

 Require use of DD Form 2875, System Authorization Access Request, to inform the DD Form 

254 of required Tier 3 and Tier 5 investigations where no access to classified exists. 

 Include personnel clearance planning in programs of instruction for DoD acquisition 

professionals and personnel generating contract investigation and clearance requirements. 

Note: Draft regulatory text can be found in the Implementation Details subsection at the end of Section 7. 

Implications for Other Agencies 

 Although there are no explicit cross-agency implications for this recommendation, other 

agencies could benefit from using role-based planning for security clearances. 

Recommendation 78: Include the supply of basic energy as an exemption under 

FAR 5.202. 

Problem 

The price of natural gas and electricity (i.e., basic energy) moves on a spot market, which means the price 

fluctuates so much that it is traded in 1-minute intervals. 96 The majority of basic energy bought in 

government as a commodity is awarded within 3 hours of receiving price proposals, otherwise offerors 

have the right to withdraw their price.97 These practices are customary in the marketplace due to the 

by-the-minute-interval at which basic energy is traded. FAR 5.303 does not offer an exception 

 

96 “What is Price Volatility,” U.S. Energy Information Administration, accessed October 14, 2018, 

https://www.eia.gov/naturalgas/weekly/archivenew_ngwu/2003/10_23/Volatility%2010-22-03.htm. U.S. Energy Information 

Administration cites the term basic energy as a supply of natural gas, electricity, heating oil. 

97 DLA Energy, briefing to Section 809 Panel, October 2018. 
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precluding this fluctuating commodity from announcement of contract awards (also known as public 

announcement), as it does for other commodities with price instability (i.e., FAR 5.202, Exceptions 

Perishable Subsistence Supplies), for which a delay in award is unreasonable. The requirement at 

FAR 5.303, Announcement of Contract Awards, triggers an unnecessary contract award delay from the 

time the government has received offers, to the time it is authorized to notify the potential awardee, 

thus resulting in either: (a) overinflated prices to cover an unnecessary risk factor of price volatility; or 

(b) during exchanges with industry, offerors reported that any delay award notification for basic 

energy is so far out of customary commercial practices, it dissuades the firm from doing business with 

the government. 

Background 

At least 15 government agencies that procure basic energy are affected by the FAR requirement 

according to a Federal Business Opportunities (FBO) search for the purchase of electricity or natural 

gas as a commodity.98 There is a distinct difference in the FAR from buying power (i.e., electricity, 

utilities) as a service, as opposed to a supply or commodity (these two terms are interchangeable). Many 

of the requests for proposal advertised on FBO used the classification code S –Utility and housekeeping 

services, because there is no commodity classification code available for basic energy as a supply.99

A classification disconnect exists between government agencies procuring basic energy as a supply, and 

those procuring power as a service. This distinction becomes important because the FAR provides an 

exception at 5.202 (b)(5) which precludes an agency from the announcement requirements (including 

those required at FAR 5.303) if the proposed contract action is for utility services and only one source is 

available. According to FAR Part 41, Utility Services, “the acquisition of natural or manufactured gas 

when purchased as a commodity does not apply.” Therefore, agencies procuring basic energy as a 

supply are not exempt. 

The term ‘price volatility’ is used to describe price fluctuations of a commodity; it is measured by the dayto-day percentage difference in the price of the commodity. The degree of variation, not the level of prices, 

defines a volatile market. Since price is a function of supply and demand, it follows that volatility is a 

result of the underlying supply and demand characteristics of the market. Therefore, high levels of 

volatility reflect extraordinary characteristics of supply and/or demand. Volatility provides a measure of 

price uncertainty in markets. When volatility rises, firms may delay investment and other decisions or 

increase their risk management activities. The costs associated with such activities tend to increase the 

costs of supplying and consuming gas.100

Basic energy today is a commodity. As a wholesale commodity, this product is bought and sold on the 

New York Mercantile Exchange (NYMEX) where pricing is calculated in 5-minute increments with 

over 400 thousand contracts traded daily. 101 “Currently, electricity products can be traded at more than 

 

98 “Agencies,” FedBizOpps.Gov, Federal Business Opportunities, accessed October 14, 2018. 

https://www.fbo.gov/index?s=agency&mode=list&tab=list. 

99 “Home,” FedBizOpps.Gov, Federal Business Opportunities, accessed October 14, 2018. 

https://www.fbo.gov/index?s=main&mode=list&tab=list. 

100 “What is Price Volatility,” U.S. Energy Information Administration, accessed October 14, 2018, 

https://www.eia.gov/naturalgas/weekly/archivenew_ngwu/2003/10_23/Volatility%2010-22-03.htm. 

101 “New York Mercantile Exchange—NYMEX,” Investopedia, accessed October 14, 2018. 

https://www.investopedia.com/terms/n/nymex.asp. 
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two dozen hubs and delivery points in North America, and natural gas products can be traded at more 

than 120 hubs.”102 Trades occur every minute and prices fluctuate with each trade because powerplants must maintain or change their output to meet demand at least every 5 minutes. 103 This spot 

market operation is indicative of real-time price transactions so as to not have a generation shortfall on 

the overall system.104

Only the requirements at FAR 5.303, Announcement of Contract Awards, are problematic because they 

cause an unnecessary delay in award notification for a commodity with major price fluctuations. The 

requirements in FAR 5.2, Synopsis of Proposed Contract Actions, do not inhibit commercial practices, 

nor do these requirements prevent timely award. Adding an exemption category under FAR 5.202, 

Exceptions, which specifically exempts the agency from the requirements in FAR 5.303 if the 

contracting officer determines the proposed contract action for the supply of basic energy (i.e., natural 

gas, electricity, heating oil, or similar basic energy commodities subject to price volatility) would 

address the problem. 

Discussion 

“Prices of basic energy are generally more volatile than prices of other commodities.”105 When 

purchasing basic energy as commodities, the current contract award announcement process adversely 

affects the government’s ability to engage the dynamic marketplace in a manner consistent with 

commercial practice. The requirement under FAR 5.303, Announcement of Contract Awards, requires 

the contracting officer to make award information available (if more than $4 million) in “sufficient time 

for the agency concerned to announce it by 5 p.m. Washington D.C. time. Agencies shall not release 

information on awards before the public release time of 5 p.m. Washington D.C. time.” There are two 

major problems with the latter FAR requirement regarding the award of basic energy: 

 If the local agency had the capacity to notify the public through its media directorate after 

5 p.m. Eastern time on the day of award, then the award notification for basic energy would still 

disrupt the commercial practices of an instantaneous price evaluation and award notification 

within 3 hours of receiving firm price offers. 

 Agency supplements (e.g., DFARS, AFARS) all require either 2 or 3 business days. For example, 

Army contracting officers must submit the information for contract award no later than noon 

3 business days’ notice prior to the date of proposed award.106 If the Army were to receive final 

price offers for the supply of basic energy on a Thursday at 2 p.m., it could not notify offerors of 

the award until the following Tuesday. This practice is unreasonable in the basic energy market 

 

102 “Wholesale Electricity and Natural Gas Market Data,” U.S. Energy Information Administration, accessed October 14, 2018, 

https://www.eia.gov/electricity/wholesale/. 

103 Ibid. Richard J. Campbell, Electricity Markets – Recent Issues in Market Structure and Energy Trading, R43093, Congressional Research 

Service, 37, accessed October 11, 2018. https://fas.org/sgp/crs/misc/R43093.pdf. 

104 Ibid. 

105 “What is Price Volatility,” U.S. Energy Information Administration, accessed October 14, 2018, 

https://www.eia.gov/naturalgas/weekly/archivenew_ngwu/2003/10_23/Volatility%2010-22-03.htm. 

106 “A quick reference of the AFARS,” Department of the Army, accessed October 14, 2018, http://farsite.hill.af.mil/vmafara.htm. 
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and dissuades vendors from doing business with the government, particularly small 

businesses.107 

The scale at which the government buys basic energy is huge, consistently resulting in awards more 

than $4 million dollars. “The Federal government consumed roughly 57.4 million megawatt-hours of 

electricity to operate all of its U.S. facilities in fiscal year 2007 (the latest information available), making 

it the single largest U.S. electricity consumer.”108 “Electricity prices vary by region across the United 

States based on supply and demand factors which are largely influenced by the cost of fuels 

(i.e., natural gas), power generation technologies and infrastructure, and trends in weather.”109 The 

price of electricity is codependent on the price of natural gas because electricity is most often generated 

using either coal or natural gas.110

If not otherwise mitigated, any award notification delay when purchasing basic energy as a commodity 

exposes the supplier to significant price risk, resulting in higher offered prices to the government. 

Conclusions 

Basic energy in the commercial market place is dependent on the trading practices of the NYMEX, 

where pricing is done on a 1-minute increment basis and contracts are leveraged based on supply-anddemand variations on a 5-minute basis. The immediacy to secure contract pricing is paramount to the 

government receiving the best priced offer. Equally important, the government should closely adhere 

to commercial practices to maintain a healthy pool of vendors willing to do business with the 

government. 

The proposed FAR change to add an exemption under FAR 5.202 excludes the announcement of a 

contract award in accordance with FAR 5.303 for basic energy. This proposed change would mitigate 

price inflation and reinforce commercial business practices. It would allow the government to take full 

advantage of the dynamic marketplace and align with the commercial practice by awarding basic 

energy contracts almost immediately after receipt of a price offer. This exception is anticipated to 

increase the number of participating offerors, enhance competition, and facilitate participation of small 

businesses. 

Implementation 

Legislative Branch 

 There are no statutory changes required for this recommendation. 

 

107 DLA Energy, briefing to Section 809 Panel, October 2018. 

108Anthony Andrews, Federal Agency Authority to Contract for Electric Power and Renewable Energy Supply, R41960, Congressional 

Research Service, accessed October 14, 2018, http://nationalaglawcenter.org/wp-content/uploads/assets/crs/R41960.pdf. 

109 Richard J. Campbell, Electricity Markets – Recent Issues in Market Structure and Energy Trading, R43093, Congressional Research 

Service, 37, accessed October 11, 2018. https://fas.org/sgp/crs/misc/R43093.pdf. 

110 “Wholesale Electricity and Natural Gas Market Data,” U.S. Energy Information Administration, accessed October 14, 2018, 

https://www.eia.gov/electricity/wholesale/. 
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Executive Branch 

 Modify FAR 5.202, Exceptions, to create and insert paragraph (b) and reorder the remaining 

sequential paragraph (c). 

Note: Draft regulatory text 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. 

Recommendation 79: Enable enhanced use of advanced payments, at time of 

contract award, to small businesses. 

Problem 

Small businesses have limited cash flow, and DoD is very slow to pay invoices.111 The costs incurred by 

small companies to borrow money to continue operations can be substantial. Without an initial upfront 

payment on contract awards, small businesses may not bid on government contracts because they 

cannot afford to buy the material, produce the product, and then wait to get paid by the government.112

Additionally, the government pays after the invoice is officially received by the government, whereas 

industry pays at the invoice creation date.113 This delay discourages small businesses from DoD 

contracts, creates a barrier to entry and decreases competition, potentially depriving warfighters of new 

and innovative solutions to their technology and innovation requirements. One solution is advance 

payments as covered in law and regulation under contract financing.114 

Background 

Small businesses are incubators of innovation; they account for an average of 13 more patents per 

employee than large firms. The Small Business Act codifies the government’s interest in obtaining 

innovation and solutions from small businesses. Large-scale DoD policy initiatives like Better Buying 

Power Initiative have made attracting small business entry into DoD contracting a major goal. 

Numerous laws and regulations exist to promote small business participation in government 

contracting: 

 Small Business Act (15 U.S.C. §§ 631-657): Establishes mandatory small business contracting 

goals and small business programs applicable to all Federal agencies, including the DoD. 

 

111 GAO, DOD Payments to Small Businesses: Implementation and Effective Utilization of Electronic Invoicing Could Further Reduce Late 

Payments, GAO-06-358, May 2006, accessed November 5, 2018, https://www.gao.gov/assets/260/250143.pdf. 

112 The Small Business Administration’s size standards for small businesses are based on average annual revenues and number of 

employees. A business must make between or below $750,000 and $35.5 million and have between or below 100 and 1,500 employees 

depending on the industry. 

113 “Collecting from the Federal Government,” The Credit Research Foundation, accessed November 5, 2018, 

https://www.crfonline.org/orc/cro/cro-6.html. 

114 FAR Part 32,001, Definitions: Contract financing payment means an authorized Government disbursement of monies to a contractor 

prior to acceptance of supplies or services by the Government. ... Delivery payments are invoice payments for prompt payment purposes. 
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 DoDI 5134.04 (Director of Small Business Programs): Establishes the Director of SBP as the 

principal advisor to the USD(AT&L) and the Secretary of Defense on small business matters and 

provides small businesses the maximum practicable opportunity for contracts in accordance 

with the Small Business Act. 

 DoDI 4205.01 (DoD Small Business Programs): Establishes DoD small business programs 

under the authority of the Director of SBP. DoD small business programs include small 

business; veteran-owned small business; service-disabled, veteran-owned small business; 

historically underutilized business zone small business; small, disadvantaged business; womenowned small business, DoD Mentor-Protégé Program; Indian Incentive Program; Small 

Business Innovation Research (SBIR); Small Business Technology Transfer; and all other small 

business programs in DoD. 

 The Small Business Innovation Development Act (SBIR) (15 U.S.C. § 638): This section of the 

Small Business Act establishes the SBIR program as well as the rules governing the program. 

 10 U.S.C. § 2307, Contract Financing Section D, Security for Advance Payments: Advance 

payments made under subsection (a) may be made only if the contractor gives adequate 

security and after a determination by the head of the agency that to do so would be in the public 

interest. 

 FAR Part 52.232-40 – Providing Accelerated Payments to Small Business Subcontractors: As 

prescribed in 32.009-2, states that “upon receipt of accelerated payments from the Government, 

the Contractor shall make accelerated payments to its small business subcontractors under this 

contract, to the maximum extent practicable and prior to when such payment is otherwise 

required under the applicable contract or subcontract, after receipt of a proper invoice and all 

other required documentation from the small business subcontractor.” 

 FAR Part 32.402(b): “Advance payments may be provided on any type of contract; however, the 

agency shall authorize advance payments sparingly. Except for the contracts described in 

32.403(a) and (b), advance payment is the least preferred method of contract financing and 

generally they should not be authorized if other types of financing are reasonably available to 

the contractor in adequate amounts.” 

 FAR Part 32.402(c)(1)(iii): The agency head or designee determines, based on written findings, 

that the advance payment— 

(A) Is in the public interest (under 32.401(a) or (b)); or 

(B) Facilitates the national defense (under 32.401(c)). 

 Section 852 of the FY 2019 NDAA: Reinforces acceleration of payments to small business 

subcontractors. 
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Despite these laws, regulations, and policies, studies indicate small business participation in DoD is 

still not as robust as it could be, leaving DoD unable to tap potential innovation and solutions.115 

Discussion 

Small businesses report the time required to receive payments impedes their ability to do business with 

DoD.116 Unlike large companies, small businesses do not have cash flow available at contract execution 

to cover expenses that arise before they can submit their first invoice. Small businesses need incentives 

to risk bidding on DoD contracts that advance contract payments can offer.117 

DoD encounters obstacles when using the existing federal and departmental regulations that allow 

advance payments. Current regulations designate the head of an agency as the decision authority for 

advance payment use. Requiring this level of authority makes it impractical to get necessary approvals. 

Reaching the head of an agency requires, in most cases, eight to 12 independent reviews and approvals 

for a single document. In some cases, more layers of review may be required, depending on the size of 

the contracting activity. Because of the time and manpower required, acquisition personnel rarely 

consider routing a document up the chain of command seeking approval for advanced payments. Most 

of these types of actions involve contracts valued at less than the Simplified Acquisition Threshold 

(SAT) and are often small business set-asides. Many of these types of contract actions occur at the end 

of the fiscal year, which further constrains the amount of time personnel have to obtain this level of 

review and approval. 

Conclusions 

Regardless of company size, emerging technologies and research and development move at a rapid 

pace, often much faster than federal procurement and payment timelines. Emerging small technology 

businesses often require capital in advance of performance to stay in the forefront of technological 

advances and cannot borrow operational capital for months at a time while awaiting contract payments 

from the government without jeopardizing their future viability as a business. A more flexible 

advanced payment policy that authorizes approval at lower levels than the head of the agency will 

encourage greater use of advanced payments to finance small businesses and provide the capital 

needed to develop innovative ideas and solutions. 

The statute allows for advance payments up to the total price of the contract, but currently limits 

advance payments for commercial items to 15 percent of the contract price. Raising the advance 

payment threshold to 20 percent for small businesses offering commercial items in addition to the 

general authority up to 100 percent of the contract price will add even more flexibility in cases where 

innovation is dependent on the modification or integration of commercial products or services into a 

new product. Modifying existing regulations and guidance on advanced payments will also make it 

easier to identify and approve eligible small businesses and create more of a marketplace for small 

businesses to engage in DoD innovation. 

 

115 Ronnie Schilling, Thomas A. Mazzuchi, and Shahram Sarkani, “Survey of Small Business Barriers to Department of Defense Contracts, 

Defense Acquisition Research Journal, Vol. 24, No. 1 (2017): 2-29, http://dx.doi.org/10.22594/dau.16-752.24.01, accessed November 5, 

2018, https://www.dau.mil//library/arj/Lists/PageContent/Attachments/2/ARJ80-Article01_Schilling.pdf. 

116 Ibid. 

117 Information gathered during Section 809 Panel Enablers/Incentives Workshop, March 14, 2018. 
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Implementation 

Legislative Branch 

 Modify 10 U.S.C. § 2307, Contract Financing, to (a) allow advanced payments when a cognizant 

approval authority or its delegate below the head of the agency determines that doing so would 

be in the public interest and to (b) provide an exception for small businesses supplying 

commercial items that would allow them to receive advanced payments of up to 20 percent of 

the contract price. 

Executive Branch 

 Conduct training for relevant personnel on the ability to maximize use of FAR Part 32.403(g). 

Note: Explanatory report language and draft legislative text 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. 

Recommendation 80: Preserve the preference for procuring commercial 

products and services when considering small business set-asides. 

Problem 

When the government’s needs may be met by products or services available in the commercial 

marketplace and contracting officers are considering a small business set-aside, they may face a 

dilemma if the small-business solution does not satisfy the definition of commercial product or commercial 

service. Neither statute nor regulation provides an order of precedence between the statute’s preference 

for acquiring commercial products or services and the requirement to procure certain products or 

services from small businesses. 

Background 

Preference for Commercial Products and Services 

One of the most pivotal parts of FASA was the establishment of a preference for the government to 

procure commercial products and commercial services rather than government-unique products and 

services. This preference is codified in 41 U.S.C. § 3307, Preference for Commercial Items: 

(b) PREFERENCE. — The head of each executive agency shall ensure that, to the maximum extent 

practicable— 

 (1) requirements of the executive agency with respect to a procurement of supplies or services are 

stated in terms of— 

 (A) functions to be performed; 

 (B) performance required; or 
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 (C) essential physical characteristics; 

 (2) those requirements are defined so that commercial items or, to the extent that commercial items 

suitable to meet the executive agency's needs are not available, nondevelopmental items other than 

commercial items may be procured to fulfill those requirements; and 

 (3) offerors of commercial items and nondevelopmental items other than commercial items are 

provided an opportunity to compete in any procurement to fill those requirements. 

The preference is also codified in 10 U.S.C. § 2377, Preference for Acquisition of Commercial Items: 

(a) PREFERENCE .— The head of an agency shall ensure that, to the maximum extent practicable— 

 (1) requirements of the agency with respect to a procurement of supplies or services are stated in 

terms of— 

 (A) functions to be performed; 

 (B) performance required; or 

 (C) essential physical characteristics; 

 (2) such requirements are defined so that commercial items or, to the extent that commercial items 

suitable to meet the agency's needs are not available, nondevelopmental items other than commercial 

items, may be procured to fulfill such requirements; and 

 (3) offerors of commercial items and nondevelopmental items other than commercial items are 

provided an opportunity to compete in any procurement to fill such requirements. 

This preference is implemented in FAR Part 10, Market Research, Subpart 10.002, Procedures and 

Part 12, Acquisition of Commercial Items, Subpart 12.101, Policy: 

(d) (1) If market research establishes that the Government’s need may be met by a type of item or service 

customarily available in the commercial marketplace that would meet the definition of a commercial item 

at Subpart 2.1, the contracting officer shall solicit and award any resultant contract using the policies 

and procedures in Part 12. 

Agencies shall -- 

(a) Conduct market research to determine whether commercial items or nondevelopmental items are 

available that could meet the agency’s requirements; 

(b) Acquire commercial items or nondevelopmental items when they are available to meet the needs of the 

agency; and 

(c) Require prime contractors and subcontractors at all tiers to incorporate, to the maximum extent 

practicable, commercial items or nondevelopmental items as components of items supplied to the agency. 
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Small Business Set-Aside 

The government’s overarching small business policy is contained in 15 U.S.C. § 644(a), Commerce and 

Trade, Awards and Contracts: 

(a) Determination 

To effectuate the purposes of this chapter, small-business concerns within the meaning of this chapter 

shall receive any award or contract or any part thereof, and be awarded any contract for the sale of 

Government property, as to which it is determined by the Administration and the contracting 

procurement or disposal agency (1) to be in the interest of maintaining or mobilizing the Nation's full 

productive capacity, (2) to be in the interest of war or national defense programs, (3) to be in the interest 

of assuring that a fair proportion of the total purchases and contracts for property and services for the 

Government in each industry category are placed with small-business concerns, or (4) to be in the 

interest of assuring that a fair proportion of the total sales of Government property be made to smallbusiness concerns 

In particular, Paragraph (a)(4) is permissive and leaves to the contracting officer’s judgment the extent 

to which small business “shall receive any award or contract...as to which it is determined...(4) to be in 

the interests of assuring that a fair proportion...be made to small business concerns.” 

In 15 U.S.C. § 644 (j), the statute specifically reserves procurements greater than the micro-purchase 

threshold (MPT) (currently $10,000) and less than the SAT (currently $250,000): 

(j) Small business reservation 

(1) Each contract for the purchase of goods and services that has an anticipated value greater than the 

micro-purchase threshold, but not greater than the simplified acquisition threshold shall be reserved 

exclusively for small business concerns unless the contracting officer is unable to obtain offers from two 

or more small business concerns that are competitive with market prices and are competitive with regard 

to the quality and delivery of the goods or services being purchased. 

15 U.S.C. § 644 (j) is implemented in regulation in FAR Part 19, Small Business Programs, 

Subpart 19.502-2, Total Small Business Set-Asides: 

(a) Before setting aside an acquisition under this paragraph, refer to 19.203(b). Each acquisition of 

supplies or services that has an anticipated dollar value exceeding $3,500 ($20,000 for acquisitions as 

described in 13.201(g)(1)), but not over $150,000, ($750,000 for acquisitions described in paragraph 

(1)(i) of the Simplified Acquisition Threshold definition at 2.101), is automatically reserved exclusively 

for small business concerns and shall be set aside for small business unless the contracting officer 

determines there is not a reasonable expectation of obtaining offers from two or more responsible small 

business concerns that are competitive in terms of market prices, quality, and delivery. 
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Setting aside the procurement is subject to there being “two or more responsible small business 

concerns that are competitive in terms of market prices, quality and delivery,”118 typically referred to as 

the Rule of Two. 

For procurements greater that the SAT, the statute is silent, but FAR 19.203 (c) asks contracting officers 

to consider using a small business program for such a procurement: 

(c) Above the simplified acquisition threshold. For acquisitions of supplies or services that have an 

anticipated dollar value exceeding the simplified acquisition threshold definition at 2.101, the contracting 

officer shall first consider an acquisition for the small business socioeconomic contracting programs 

Discussion 

Both statute and regulation establish a preference for acquiring commercial products and commercial 

services, when available, to satisfy the government’s need. This clear preference is strongly supported 

by language at FAR 10.001(a)(3), which states if the government cannot find a commercial product or 

commercial service to meet its need, it must consider modifying commercial products and commercial 

services to meet its need, and if that is not sufficient, consider modifying the government’s requirement 

itself before considering procuring a noncommercial product or service. 

Statute is silent on any conflict between the preference for commercial products and services and small 

business set-asides. The statute does not specifically establish a preference for awards to small business, 

but it establishes the overarching policy of assuring a fair proportion of awards are made to small 

business. For awards between the MPT and the SAT, the statue reserves awards for small business 

subject to satisfying the Rule of Two. For awards greater than the SAT, reserving a procurement is left 

to the judgment of the contracting officer, again subject to the Rule of Two. 

An important consideration is the logical order in which the commercial determination and Rule of 

Two determination take place in the acquisition process. It is logical to conclude that the contracting 

officer, using market research, would first determine what will be procured (including commercial and 

noncommercial) to satisfy the government’s need. Once what is to be procured is established, it is 

logical to then address the question of how (interagency procurement, existing multiple-award contract, 

solicitation) and from whom (competitive, sole source, small business, large business). Although, the 

plain language of the FAR can reasonably be read to require contracting officers to determine if a 

commercial product or service could satisfy the government’s requirements before deciding whether 

the procurement at issue should be set aside for small businesses, nothing in the FAR expressly states 

that commerciality determinations must come before any set-aside determinations. 

When this issue was recently considered in Analytical Graphics, Inc. v. United States, the Court of 

Federal Claims (COFC) found that “there is not a clear order of precedence in the statutes or 

 

118 Total Small Business Set-Asides, FAR 19.502-2(a). 
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implementing regulations for how to approach a procurement which potentially involves both a small 

business set-aside analysis and a commercial availability analysis.”119

At a minimum, the current ambiguity in the law will lead to inconsistencies across agencies, and, 

indeed, between individual contracting officers within agencies in terms of how acquisitions are 

planned. In a worst-case scenario, the Court’s holding in Analytical Graphics, Inc. creates a roadmap 

for agencies to circumvent the statutory preference for commercial products and services. Specifically, 

following Analytical Graphics, Inc., contracting officers have no obligation to determine whether the 

government’s requirements can be satisfied by commercial products or services before deciding 

whether to set-aside the procurement for small businesses. 

Practically speaking, if the government has a requirement that can be satisfied by a commercial product 

or service, and the commercial product or service that could satisfy the government’s requirement is 

only available from large businesses, but two or more small businesses are available that could meet 

the government’s requirement with a noncommercial product or service, then the government would 

be permitted to set-aside the procurement for small businesses and conduct the acquisition on a FAR 

Part 15 basis, thereby purchasing a developmental product when a commercial product or service 

already exists that meets the government’s needs. 

Clearly, this outcome is inconsistent with Congress’s goals in FASA. Equally troubling however, absent 

language clarifying the priority of the commercial products and services preference over the Rule of 

Two, the government could avoid purchasing commercial products and services whenever it wants 

simply by identifying two or more small business offerors that can meet the government’s 

requirements with a developmental solution. 

Because the Rule of Two presupposes agencies have already developed their requirements, and 

because agencies are required by FASA and the FAR to consider the availability of commercial 

products and services at the requirements development stage, it follows that agencies must decide 

whether or not a procurement can be conducted on a FAR Part 12 basis before deciding whether the 

procurement can be set aside for small businesses. Implicit in the language of FAR 19.502-2 is that 

prospective small business offerors will be submitting an offer in response to a defined requirement. 

Without this assumption, the language “offers will be obtained” has no meaning. Agencies should be 

considering the commerciality of their requirement at the outset of the acquisition. Only after such 

requirements are defined can the agency rationally consider a set-aside determination based on 

whether there is a reasonable expectation that “offers will be obtained” from small businesses in 

response to that requirement. 

Conclusions 

Clarification is needed regarding existing law following the COFC’s determination in Analytical 

Graphics, Inc. v. United States that “there is not a clear order of precedence” between the commercial 

item preference and the Rule of Two. The Court highlighted the need for legislators and regulators to 

address this issue, stating, 

 

119 Analytical Graphics, Inc. v. United States, 135 F. Cl. 378, 412 (2017). 
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[g]iven the ambiguity in the two competing statutory goals and absent regulatory guidance regarding the 

choice as to which has precedence, the choice made by agency generally deserves deference ... The court 

should not be the entity to make that choice, and should intervene only when there is an obvious foul. 

Absent compelling statutory or regulatory guidance, which is missing here, the court generally defers to 

the agency’s choice in a procurement in which the market research was carefully conducted. As the 

statutes and regulations do not point to a clear order for an agency to proceed between the small business 

set-aside determination and a commercial availability decision, the court does not read a requirement into 

the statutes and regulations that requires the agency or this court to first examine either.120

Implementation 

Legislative Branch 

 Modify 41 U.S.C. § 3307, Preference for Commercial Products and Services, to establish 

acquisition of commercial products, commercial services, and nondevelopmental items as 

having precedence over small-business set-asides. 

 Modify 10 U.S.C. § 2377, Preference for Acquisition of Commercial Products and Commercial 

Services, to establish acquisition of commercial products, commercial services, and 

nondevelopmental items as having precedence over small-business set-asides.121 

Executive Branch

 Modify FAR 6.203, Set-Asides for Small Business Concerns, to establish acquisition of 

commercial products, commercial services, and nondevelopmental items as having precedence 

over small-business set-asides. 

 Modify FAR 12.102, Applicability, to refer to commercial items as commercial products and 

services and to establish acquisition of commercial products, commercial services, and 

nondevelopmental items as having precedence over small-business set-asides. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 7. 

Implications for Other Agencies 

 The recommended statutory and FAR revisions will benefit all federal agencies subject to the 

FAR by clarifying the precedence for the preference for acquisitions of commercial products and 

services when considering a small business set-aside. 

 

120 Analytical Graphics, Inc. v. United States, 135 F. Cl. 378, 412 (2017). 

121 Note that similar language was proposed in Section 854 of the base version of the Senate FY 2018 NDAA. 
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Recommendation 81: Clarify and expand the authority to use Other Transaction 

agreements for production. 

Problem 

The current statutory authorities do not adequately allow use of Other Transaction agreements (OTs) 

for follow-on production and use of OTs for rapid fielding existing technologies when necessary. 

Background 

Congress has provided DoD with broad authority to use OTs to carry out prototype projects under 

10 U.S.C. § 2371b, but the path to using OTs for follow-on related production is limited to when 

competitive procedures were used, the prototype was successfully completed, and a participant in the 

prototype project is involved in the production OT. Creating additional opportunities to use OTs for 

production will facilitate DoD’s ability to address emergent challenges that senior DoD officials 

determine to have national security implications. 

OTs are widely recognized as important tools to address the current threat environment and allow 

DoD to make purchases in a manner more consistent with private-sector practices. Congress provided 

permanent authority in the FY 2016 NDAA for follow-on production in an effort to accelerate fielding 

technologies that could offset technological advantages of potential adversaries, specifically in directed 

energy, high-speed munitions, autonomous systems, undersea warfare, cyber technology, and 

intelligence data analytics.122 Despite changes in technology development, DoD’s acquisition process 

has not adequately kept pace, as Under Secretary of Defense (Acquisition and Sustainment) Ellen Lord, 

informed Congress: “Inarguably . . . the current pace at which we develop advanced capability is being 

eclipsed by those nations that pose the greatest threat to security, seriously eroding our measure of 

overmatch.”123 

The primary purpose of using OTs is to leverage the flexibility they provide to do the following: 

 Attract innovative ideas and solutions from industry sectors that would not typically participate 

in the traditional invasive, cumbersome, and costly government contracting process. 

 Allow for leveraging private-sector research and development investments that have military 

utility, thereby lowering required DoD investment and reducing development lead time and 

the cost of fielding capabilities. 

 Encourage traditional DoD contractors to invest in and pursue innovation, especially in those 

areas that may have broader application (e.g., commercial market). 

 

122 Section 815 of FY 2016 NDAA, Pub. L. No. 114–92, 129 Stat. 784 (2015). 

123 Ellen Lord, Testimony Statement Before the Committee on Armed Services, United States Senate, First Session, 115th Congress,

December 7, 2017, accessed October 30, 2018https://www.armed-services.senate.gov/imo/media/doc/Lord_12-07-17.pdf. 
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 Allow for highly flexible, creative contract arrangements that more directly capture the best deal

between the parties (e.g., unique funding and financial contribution schemes, intellectual 

property rights, outcome-based performance milestones).124

For a number of years, DoD’s ability to use these agreements was tightly controlled. When DoD was 

first granted authority in 1989, only the Defense Advanced Research Project Agency (DARPA) could 

grant authorization to enter into an OT, for basic, applied, or advanced research projects.125 In 1993, 

DARPA’s authority was expanded to include prototyping under Section 845 of the NDAA, and in 1996, 

the rest of the DoD was authorized to use OT.126 In 2001, Congress amended Section 845 to include a 

provision to allow for limited follow-on production to participants in the original prototype project, 

provided the production did not exceed the specific number of units at specific target prices set in the 

original transaction.127

In 2015, Congress rescinded the temporary prototype authority and codified it under a new section, 

10 U.S.C. § 2371b, Authority of the Department of Defense to Carry Out Certain Prototype Projects. The 

FY 2016 NDAA removed many of restrictions in place for follow-on production, and allowed the 

award for production to be in the form of a contract, pursuant to the FAR, or transaction under its 

Other Transaction authority (OTA).128 Congress intended the new authority to be used to attract “firms 

and organizations that do not usually participate in government contracting due to the typical 

overhead burden and ‘one size fits all’ rules.”129 Expanded use of OTs in DoD, Congress reasoned, was 

to support efforts to access new sources of technical innovation, including Silicon Valley startup 

companies and small commercial firms.130

Congress provided for follow-on production of successful prototype projects in 10 U.S.C. § 2371b(f).131

Subsection (f) provides for the award of a follow-on production contract or transaction, pursuant to the 

following: 

 (f) Follow-on Production Contracts or Transactions. 

 (1) A transaction entered into under this section for a prototype project may provide for the 

award of a follow-on production contract or transaction to the participants in the transaction. 

A transaction includes all individual prototype subprojects awarded under the transaction to a 

consortium of United States industry and academic institutions. 

 (2) A follow-on production contract or transaction provided for in a transaction under 

paragraph (1) may be awarded to the participants in the transaction without the use of 

competitive procedures, notwithstanding the requirements of section 2304 of this title, if— 

 

124 Gary Kyle, email to the Section 809 Panel, September 20, 2018. 

125 Section 251 of FY 1990-1991 NDAA, Pub. L. No. 101-189, 103 Stat. 1403 (1989). Research Projects: Transaction Other Than Contracts 

and Grants, 10 U.S.C. § 2371. 

126 Section 845 of FY 1994 NDAA, Pub. L. No. 103-160 (1993). Section 804 of FY 1997 NDAA, Pub. L. No. 104-201, 110 Stat. 2605 (1996). 

127 Section 822 of FY 2002 NDAA, Pub. L. No. 107–107, 115 Stat 1182 (2001). 

128 Section 815 of FY 2016 NDAA, Pub. L. No. 114–92, 129 Stat. 893 (2015). 

129 FY 2016 NDAA, Senate Rep. No 1356, Pub. L. No. 114-92, at 700, May 2015. 

130 Ibid. 

131 Ibid. 
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 (A) competitive procedures were used for the selection of parties for participation in the 

transaction; and 

 (B) the participants in the transaction successfully completed the prototype project provided 

for in the transaction. 

 (3) Contracts and transactions entered into pursuant to this subsection may be awarded using 

the authority in subsection (a), under the authority of chapter 137 of this title, or under such 

procedures, terms, and conditions as the Secretary of Defense may establish by regulation.132

Within the context of Subsection (f), Congress clarified competitive procedures refers to a competition for 

award of an OT to a consortium or to a competition for a particular project, known as a standalone 

OT.133 A consortium is an association of two or more individuals, companies, organizations, 

governments, or combination of the above designed to facilitate mutually beneficial collaborative 

research and development activities among the government, industry, and/or academia, resulting in an 

agreement for consortium members to build a prototype that demonstrates solutions to problems. 

A consortium generally reflects a unique sector of industry, such as cyber, robotic systems, or vertical 

lift. Congress explicitly addressed its intent to maximize use of follow-on production contracts and 

transactions entered into pursuant to this section to promote access to the participants’ products, as 

appropriate, by any organization within DoD.134 

Additionally, Section 806 of the FY 2017 NDAA, codified in 10 U.S.C. § 2447d, Mechanisms to Speed 

Deployment of Successful Weapon System Component or Technology Prototypes for Major Weapons 

Systems, provides the following authority: 

 (a) Selection of Prototype Project for Production and Rapid Fielding.-A weapon system component or 

technology prototype project may be selected by the service acquisition executive of the military 

department concerned for a follow-on production contract or other transaction without the use of 

competitive procedures, notwithstanding the requirements of section 2304 of this title, if- 

 (1) the follow-on production project addresses a high priority warfighter need or reduces the costs 

of a weapon system; 

 (2) competitive procedures were used for the selection of parties for participation in the original 

prototype project; 

 (3) the participants in the original prototype project successfully completed the requirements of 

the project; and 

 (4) a prototype of the system to be procured was demonstrated in a relevant environment. 

Further increasing DoD’s ability to rapidly field successful prototype projects, this provision authorizes 

use of OTs for follow-on production under circumstances similar to those in 10 U.S.C. § 2371b(f) but 

 

132 Ibid. FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

133 FY 2018 NDAA, Report 115-125 to accompany S. 1519, Subtitle H—Other Transactions, Other Transaction Authority, 191, accessed 

November 2, 2018, https://www.congress.gov/115/crpt/srpt125/CRPT-115srpt125.pdf. 

134 Ibid. 
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without requiring the follow-on contract or agreement to be with a participant in the prototype project. 

This section lays out funding and flexible acquisition approaches for DoD to “experiment with, 

prototype, and rapidly deploy” only “weapon system components and other technologies.”135 DoD has 

yet to issue implementing guidance, but if it is determined that weapon system modifies both components 

and other technologies, the application of § 2447b could be rather limited. 

Discussion 

OTs can help overcome barriers to commercial participation in the government market. Stripped of 

most of the government procurement regulatory and legal idiosyncrasies, OTs allow the government to 

conduct business with industry on more familiar terms and fosters nontraditional contractors’ 

willingness to provide innovative solutions. The Senate Armed Services Committee instructed 

agreements officers to use any acquisition tool available, including modification to the original 

consortium-based or individual prototype project award, a separate OT, or a FAR acquisition 

instrument to maximize DoD’s ability to move from successful prototype to production.136 By using 

broader follow-on production authority, DoD can achieve a “swifter, seamless transition of cuttingedge technologies to the warfighter throughout the acquisition process.”137

 

To address rapidly emerging threats, Congress provided DoD authority to pursue rapid prototyping 

and rapid fielding for efforts intended to be completed within 2 to 5 years, as opposed to the typical 10 

to 14 year timeline for major systems.138 Using OTs is not explicitly authorized by this middle tier 

acquisition authority. Although an OT could be used for rapid prototyping and follow-on production, 

an OT would not be authorized for rapid fielding of existing technology. The rapid fielding authority 

does not help DoD overcome the barriers to accessing nontraditional sources in the same way that OTs 

do. Delivering capability and lethality at the speed of relevance, at least from certain nontraditional 

sources, may require expanded OT authority.

Although there is a trend of increased OT use, recent events have demonstrated that DoD has yet to 

resolve all the challenges associated with moving quickly from prototype to production. In one 

example, the Defense Innovation Unit, with contracting support from the Army, issued the largest 

follow-on production award to date in February 2018, to REAN Cloud.139 The follow-on production 

award under 10 U.S.C. § 2371b(f) was for cloud migration services, and while the prototype award was 

originally valued at a total of $2,426,799, the follow-on production OT had a not-to-exceed value of 

$950,000,000.140 Oracle protested on numerous grounds to GAO, despite having not competed for the 

original prototype OT.141 In the first-ever follow-on production award protest, GAO found that Oracle 

was an interested party due to the difference between the solicitation and work contemplated in the 

follow-on award. GAO sustained the protest because the agency failed to include the option for a 

 

135 FY 2017 NDAA, Conference Report 114-840 to Accompany S. 2943, November 30, 2016, accessed November 2, 2018, 

https://www.congress.gov/114/crpt/hrpt840/CRPT-114hrpt840.pdf. 

136 FY 2018 NDAA, Report 115-125 to accompany S. 1519, Subtitle H—Other Transactions, Other Transaction Authority, 191, accessed 

November 2, 2018, https://www.congress.gov/115/crpt/srpt125/CRPT-115srpt125.pdf. 

137 Ibid. 

138 Section 804 of FY 2016, Pub. L. No. 114–92, 129 Stat. 882 (2015). 

139 GAO, Decision: Matter of Oracle America, Inc., B-416061, May 31, 2018, accessed November 2, 2018, 

https://www.gao.gov/assets/700/692327.pdf. 

140 Ibid. 

141 Ibid. 
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follow-on production award in the original prototype OT and because the entire prototype project 

provided for in the prototype OTA had not been completed prior to award of the follow-on production 

OT.142

In the FY 2019 NDAA, Congress addressed one aspect of the Oracle protest by detailing when a 

prototype project reaches successful completion.

143 Section 211 provides an update to 10 U.S.C. § 2371b(f), 

giving the Secretary of Defense the ability to determine that an individual prototype or subproject as 

part of a consortium is successfully completed by the participants. Use of a follow-on production OT is 

still not available in situations for which the prototype OT does not include the option of a follow-on 

production OT. Additional scenarios for which a production OT may be necessary but would not be 

authorized under § 2371b(f) are depicted in Figure 7-3. 

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

The decision in Oracle highlights two limitations on use of production OTs to get capabilities developed 

or prototyped by technology firms and start-ups into production under § 2371b. In the Oracle case, 

GAO made several findings that will shape the conversation within DoD on follow-on production OTs 

for the foreseeable future. 

GAO’s findings are the result of a strict interpretation of the statutory language in § 2371b(f), at least as 

it relates to Subsection (f) requiring that the prototype OT affirmatively reserve the option of the 

follow-on production contract or transaction to use the noncompetitive follow-on production 

authority.144 The statutory language states that “a prototype project may provide for the award of a 

follow-on production contract or transaction.”145 This narrow interpretation can leave existing OTs 

without the option of a follow-on production transaction, even if, as in the REAN Cloud case, the 

 

142 Ibid. 

143 Section 211 of FY 2019 NDAA, Pub. L. No. 115–232 (2018). 

144 GAO, Decision: Matter of Oracle America, Inc., B-416061, May 31, 2018, accessed November 2, 2018, 

https://www.gao.gov/assets/700/692327.pdf. 

145 Authority of the Department of Defense to Carry Out Certain Prototype Projects, 10 U.S.C. § 2371b(f)(1). 
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publication and solicitation of the prototype OT provided notice of the potential for sole-source followon production award to the awardee of the prototype OT.146

 

Including the follow-on production option in the prototype OT does not ensure notice to potential 

awardees, as its inclusion is only required in the actual agreement and not the solicitation. Thus, this 

interpretation has the effect of ensuring strict compliance for compliance’s sake with a statute that 

Congress has repeatedly pleaded with DoD to interpret broadly and use liberally. It provides no 

additional transparency to potential competitors, which Subsection (f) appears most concerned about 

as it permits award of the follow-on production contract or transaction without additional competition 

provided competitive procedures were used to select participants to the original transaction.147 It is a 

box-check procedure with no underlying purpose other than the statute, arguably, says to include it in 

the prototype OT. This or similar language is not included in the § 2447d prototype and production 

OTA. Removing this language from § 2371(f) would harmonize the two production OTAs. 

The requirement for participants to successfully complete the prototype project is a more straight 

forward analysis, though it illuminates a limitation with the statute. It is unclear what successfully 

completed means; accordingly, GAO made the determination for the agency, finding that work on the 

prototype project, including all modifications made under the OT, must be completed according to the 

specifications in the OT.148 Using the plain meaning of successfully completed yielded a result that 

Congress likely did not intend when it gave the follow-on production authority to DoD—that GAO, 

not the requiring activity, would be the ultimate arbiter of what constitutes a successfully completed 

prototype. 

In this case, REAN Cloud completed all work required under the original prototype OT; however, it 

had not completed additional work required by a later modification at the time the agency signed the 

determination and findings approving the production OT award.149 Again, this decision supports the 

idea of strict compliance of a statute intended to be interpreted broadly. It also incentivizes agencies to 

modify transaction agreements prior to awarding a follow-on transaction to remove requirements that 

are incomplete or identify new subprojects to move forward with production. In the absence of CICA 

applicability, such modification cannot be challenged. This approach could fuel the argument that the 

regulatory free space that OTs operate in lacks transparency and fairness. If the original prototype 

project or subproject is not completed but a different result that DoD needs to rapidly field is produced, 

the current authority would preclude the use of a follow-on noncompetitive production OT. 

Outside of limitations highlighted by the Oracle protest, there are other limitations to follow-on 

production authority. Follow-on awards through either contract or production OT can be made 

without competition if the requirements under § 2371b(f) or § 2447d(a) are met. These requirements are 

not entirely consistent and there is no explicit authority for awarding a production OT through 

competitive procedures. Another limitation that exists in § 2371b(f) but does not exist in § 2447d(a) is 

 

146 GAO, Decision: Matter of Oracle America, Inc., B-416061, May 31, 2018, accessed November 2, 2018, 

https://www.gao.gov/assets/700/692327.pdf. 

147 Authority of the Department of Defense to Carry Out Certain Prototype Projects, 10 U.S.C. § 2371b(f)((2)(A). 

148 GAO, Decision: Matter of Oracle America, Inc., B-416061, May 31, 2018, 18-19, accessed November 2, 2018, 

https://www.gao.gov/assets/700/692327.pdf. 

149 Ibid, 18. 
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that the follow-on production contract or transaction may only be awarded to the participants of the 

original prototype OT.150 This limitation could force agreements officers to initiate a traditional 

procurement, including a new competition under CICA, if the participants of that project are unwilling 

or unable to develop or scale the prototype in follow-on production. This limitation is also included in 

the flow chart in Figure 7-3. 

Without a path to awarding a follow-on OT in § 2371b(f) to a consortium or contractor that was not a 

participant in the prototype project, except under § 2447d authority, DoD would struggle to field 

technology fast enough to be relevant and timely. OTs are more flexible than other contracting 

methods, but relegating their use to the prototype stage in all but a few projects that meet the other 

statutory requirements and are performed by participants willing and able to carry out production, 

unnecessarily restrains DoD’s ability to efficiently transition from prototype to fielding emerging 

technology. One consortium that is performing on multiple prototype OTs for DoD explained that the 

consortium has no interest in entering into follow-on production OTs. The members want to provide 

prototype solutions and then move on to the next hard problem DoD needs help solving. Under the 

current § 2371b(f) authority, unless one of the consortium members that participated in the prototype 

project was willing to accept a follow-on production OT outside of the consortium umbrella, that 

option would not be available to DoD. 

Authority does not yet exist to use OTs when DoD needs to acquire more mature capabilities from 

nontraditional companies that are unwilling to do business with DoD under a FAR-based contract. 

Professional Services Council Senior Advisor for Research and Defense, Bill Greenwalt, recently argued 

that “OTAs (Other Transactions Authority) are currently the only way to remove the barriers necessary 

to get these non-traditional sources of innovation to do business with the military.”151 If a 

nontraditional source of innovation has already produced a working porotype or production-ready 

solution, rendering a prototype OT unnecessary, the only option available to DoD to rapidly field that 

capability would be a FAR-based production contract. The authority to use a production OT may be 

required for DoD to procure emergent technologies that have already been successfully prototyped at 

private expense or are otherwise ready for production. The effectiveness of the rapid fielding authority 

in § 804(c)(3) of the FY 2016 NDAA will be limited by the inability to use production OTs when a 

prototype is not needed. OTA should not be seen as a convenient means of avoiding the FAR, and their 

use should be limited to exceptional circumstances as determined by the agency’s service acquisition 

executive (SAE). 

In addition to expanding the SAE’s ability to authorize follow-on production OTs, one clarification to 

the statutory language would be prudent. It is unclear whether follow-on production OTs are subject to 

the same participation requirements as prototype OTs are under subsection (d). For prototype projects 

performed exclusively by traditional defense contractors under § 2371b(d)(1)(C), it is unclear whether a 

cost share of at least one-third of the total cost of the follow-on production from nonfederal sources 

would be required. Given the potential scale of production, it is unlikely Congress intended to require 

nonfederal funding of production from traditional defense contractors. The statute should be clarified 

 

150 Authority of the Department of Defense to Carry Out Certain Prototype Projects, 10 U.S.C. § 2371b(f)(1). 

151 “GAO Decision Threatens US Military Dominance; Reject It,” Bill Greenwalt, Breaking Defense, June 27, 2018, accessed October 30, 

2018, https://breakingdefense.com/2018/06/gao-decision-threatens-us-military-dominance-reject-it/. 
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to exempt the participation requirements from follow-on production transactions. These proposed 

prototype authorities are listed in Figure 7-4. 

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

Conclusions 

Expanding and clarifying follow-on production authorities under § 2371b and better aligning them 

with those available in § 2447d would address the challenges of moving quickly from a prototype to 

production and ensure DoD has access to nontraditional sources of innovation. Agency SAEs should be 

granted authority to approve use of production OTs under each of the circumstances depicted in 

Figure 7-4 above and discussed in this section SAEs should be granted production OTA under 

exceptional circumstances to address a high priority warfighter need that would be at risk for going 

unmet if an OT were not awarded in the following three scenarios: 

 The production OT is being used to rapidly field an existing technology. 

 The prototype project has not been successfully completed. 

 The competitive procedures were not used to award the prototype project 

The authority to determine if a prototype project has been successfully completed should be 

maintained at the lowest possible level within DoD. 

Making these adjustments should provide participants in the prototype project the right of first refusal 

for a follow-on production, as well as allow a different supplier to receive the production OT when the 

participants refuse or do not have the capacity to move into production. The SAE should have 

authority to award follow-on production OTs in situations where the prototype OT does not specify the 

option for follow-on production. In each of these circumstances, the SAE should have the authority to 

enter into an OT structured as determined appropriate for the requirement (whether sole source or 

competitive). To maintain whatever technological edge the U.S. military currently has over its nearpeer competitors and to adapt as rapidly as the nonstate actors that threaten our national security are 
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able to adapt, DoD must have an OTA that provides more opportunity for rapid fielding of innovative 

capabilities. 

Implementation 

Legislative Branch 

 Revise 10 U.S.C. § 2371b to correspond with the clarification and expansion of follow-on 

production transaction authority recommended above. 

Executive Branch 

 Direct the Military Services and Defense Agencies to delegate authority to the lowest practicable 

level to determine a prototype or prototype subproject as part of a consortium is successfully 

completed by the participants under 10 U.S.C. § 2371b(f)(3). 

Note: Explanatory report language and draft legislative text 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. 

RECOMMENDATIONS 81 AND 82 SHARE THE COMMON THEME: 

MODERNIZING THE ARMED SERVICES BOARD OF CONTRACT APPEALS 

Recommendation 82: Provide Armed Services Board of Contract Appeals 

authority to require filing of contract appeals through an electronic case 

management system. 

Problem 

The Armed Services Board of Contract Appeal (ASBCA) would benefit from clarity on authorities 

related to its forthcoming electronic case management system (ECMS) to facilitate implementation of 

that system.

Background 

ASBCA is an independent, quasijudicial DoD agency. ASBCA’s mission is to provide impartial, 

informal, expeditious, and inexpensive resolution of disputes arising out of or related to contracts 

entered into by DoD, including the Military Services, the National Aeronautics and Space 

Administration (NASA), and other departments and agencies as permitted by law. 

ASBCA provides the primary forum to resolve DoD contract disputes between DoD agencies and 

contractors under DoD contracts, which makes it a critical part of the DoD acquisition system. Most 

Board appeals involve monetary claims, but ASBCA also adjudicates contract interpretation claims, 

certain contractor claims regarding performance ratings, and other nonmonetary claims. 
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DoD contractors have a choice to appeal adverse contracting officers’ final decisions either to the 

COFC, within a year, or to ASBCA within 90 days. ASBCA is the forum for the vast majority of DoD 

contract disputes, particularly for small businesses. 

To manage increasing caseloads and facilitate ASBCA operations, ASBCA has been pursuing an ECMS, 

similar to those used by all federal courts, and the vast majority of state courts, to allow electronic filing 

and offer some sort of electronic case management and docketing capabilities. ECMS will facilitate the 

day-to-day operations of the board. ABSCA expects to award a contract for an ECMS sometime before 

the end of 2018, and to have the system online within a year to 18 months of contract award. 

Discussion 

The ASBCA caseload has about doubled from 532 in 2009. In the last 3 fiscal years, the number of cases 

pending has ranged from 1,087 (at the end of FY 2015) to 970 (at the end of FY 2017). Cases before 

ASBCA range in size from small cases of less than $10,000 to appeals of $100 million or more. There are 

nine currently pending cases. At least two cases before ASBCA have exceeded $2 billion. The number 

of cases filed, the dollar amounts at issue, and the relative complexity of the cases have all steadily 

increased over the last decade. 

Document filings at ASBCA include pleadings, motions, briefs, and evidence submitted to the 

presiding judges. All federal, and the vast majority of state, courts currently allow electronic filing and 

offer some sort of electronic case management/docketing capabilities. Board members frequently travel 

to hear cases, requiring ASBCA to ship hundreds of paper documents. The ability to review these files 

electronically, including the use of keyword searches, facilitates the decision-making process. In an 

effort to avoid undue burden on administrative staff, ASBCA would like to ensure mandatory use of 

the new system.

On May 1, 2018, the GAO implemented a mandatory web-based electronic filing and document 

dissemination system for the procurement protest system. The system was required by Congress in 

31 U.S.C. § 355(c), as amended by Section 1501 of the Legislative Branch Appropriations Act, 2014 

(Div. I of Pub. L. No. 113–76). Under this statute, GAO is also allowed to collect filing fees to offset the 

costs of the electronic filing system. ASBCA would welcome similar language from Congress to require 

establishment and operation of a mandatory electronic case management system that includes 

electronic filing and document management, as well as internal case tracking software. Congress 

should also provide ASBCA the discretionary authority to collect fees to offset the costs of operating 

and maintaining the system without obligation to use it, in case collection of these fees becomes feasible 

in the future. 

Because many of the companies doing business with DoD also do business with other agencies of the 

federal government, these authorities should apply to all agency boards as defined by 41 U.S.C. § 7101. 

Conclusions 

Using ECMS will facilitate ASBCA’s day-to-day operations. Revising Title 41 to ensure mandatory 

contractor and contracting officer use of the system—in line with the statutory authority granted to 

GAO when it adopted a similar system—will facilitate adoption of the electronic case management 

system and ease administrative burden. The Defense Acquisition Regulations (DAR) Council should 
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coordinate regulatory implementation at the FAR level. The new processes that will come on line with 

the system will ultimately increase ASBCA productivity. 

Implementation 

Legislative Branch 

 Revise Title 41 to facilitate establishment of a case management system at the Armed Services 

Board of Contract Appeals.

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 7. 

Implications for Other Agencies 

 The recommendation stated here has implications for other federal agency Board of Contract 

Appeals (BCAs); the FAR Council should revise FAR Part 33.2, Disputes and Appeals, to align 

with the recommended statutory revision to authorize the establishment of case management 

systems and corresponding fee structures at the relevant BCAs. 

Recommendation 83: Raise the monetary threshold to provide agency boards of 

contract appeals accelerated, small business, and small claims (expedited) 

procedures to $250,000 and $150,000 respectively. 

Problem 

ASBCA and corresponding agency boards want more cases to use the accelerated and expedited 

procedures to resolve cases more quickly, necessitating a higher threshold for those procedures. 

Background 

ASBCA is an independent, quasijudicial DoD agency. ASBCA’s mission is to provide impartial, 

informal, expeditious, and inexpensive resolution of disputes arising from or related to DoD contracts, 

including the Military Services, Defense Agencies, NASA, and other departments and agencies as 

permitted by law. 

To ensure a timely resolution to small-dollar claim amount contract disputes, ASBCA and the civilian 

agency boards have both expedited and accelerated procedures. These procedures are not limited to 

small businesses. If the appeal claim dollar value is $50,000 or less, the contractor can choose expedited 

procedures to get a decision within 120 days. If the dollar value is $100,000 or less, the contractor can 

choose accelerated procedures for a decision within 180 days. A contractor with a $50,000 claim can 

elect either expedited or accelerated procedures, but a contractor with a claim between $50,001 and 
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$100,000 can only elect accelerated procedures.152 These dollar thresholds were established pursuant to 

the Contract Disputes Act of 1978 (CDA) (41 U.S.C. § 7106). Additionally, the CDA was amended in 

2006 to allow that a small business can elect to use the small claims procedures up to $150,000.153 

The difference in the various timelines originates in shortened discovery periods. Under procedures 

that apply above these thresholds, the parties to the appeal generally dictate the schedule. The decision 

timeline is extended substantially by conducting discovery and deposing witnesses for 12 to 18 months 

and the parties may request extensions to briefing deadlines multiple times.154

Discussion 

CDA provides the Administrator of the OFPP the authority to review and adjust the threshold amounts 

“from time to time,” in accordance with “economic indexes selected by the Administrator.”155 The 

amounts have only been adjusted once during the 40 years since CDA’s inception—in 1994 the dollar 

limit for accelerated appeals was increased from $50,000 to $100,000, and the dollar limit for small 

claims appeals was raised from $10,000 to $50,000. No further adjustments to the maximum amounts 

for applicability have been made since 1994. Adjusted for inflation, the thresholds would be $172,359 

for accelerated procedures, $86,179 for expedited procedures, and $190,611 for use by small 

businesses.156 ASBCA indicated for the 2018 case load only 15 percent of claims are eligible for 

accelerated procedures at $100,000 and 9 percent at the expedited level of $50,000. If the thresholds 

were raised, about 25 percent of cases would be eligible for accelerated procedures at the $250,000 level 

and 19 percent would be eligible for expedited procedures at the $150,000 level.157 Although the 

caseload data would differ for the other agency boards, the thresholds should be the same to maintain 

consistency and avoid confusion. 

It is reasonable to expect that increasing the dollar limits would lead to more contractors (large and 

small) electing these procedures. Because appeals would be decided in a shorter period, the pendency 

rate for appeals at the board would be lowered. ASBCA requested the Section 809 Panel review these 

thresholds, and supports the recommendation of raising these thresholds. Raising these thresholds 

would accommodate achieving fast resolution of as many claims as possible while balancing increased 

administrative demands. 

Conclusions 

Raising the threshold for the expedited and accelerated procedures will allow for additional claims to 

be treated and closed sooner. To simultaneously simplify the thresholds and raise them, small 

businesses should be allowed to select the procedures up to $250,000, and all others be allowed to select 

accelerated procedures at a threshold of $250,000. The expedited procedure threshold should be 

$150,000. These thresholds should be reviewed along with the other acquisition-related thresholds 

every 5 years. 

 

152 ASBCA, email to Section 809 Panel, July 27, 2018. 

153 Agency Board Procedures for Accelerated and Small Claims, 41 U.S.C. § 7106. 

154 ASBCA, email to Section 809 Panel, July 27, 2018. 

155 Agency Board Procedures for Accelerated and Small Claims, 41 U.S.C. § 7106. 

156 Calculated using the Bureau of Labor Statistics, Consumer Price Index, accessed October 26, 2018, https://www.bls.gov/data/. 

157 ASBCA, email to Section 809 Panel, August 8, 2018. 
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Implementation 

Legislative Branch 

 Revise Title 41, Armed Services Board of Contract Appeals, to reflect the new threshold values. 

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 7. 

Implications for Other Agencies 

 Implementing the recommended changes will affect other agencies, because they will be subject 

to claims at the higher threshold level. 
Section 7 

Simplifying Procurement and Contracting 

Implementation Details 

Recommendations 74 and 75 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. ADMINISTRATIVE SIMPLIFICATION. 

This section would revise procurement planning and compliance by making a number 

of repeals and amendments to current law. Specifically, this section would repeal Section 829 of 

the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-328; 10 U.S.C. 2306 

note) to eliminate certain approval requirements for cost-type contracts. This section would also 

repeal Section 2304a(d) of title 10, United States Code and Section 4103(d) of title 41, United 

States Code, to eliminate determinations by the head of the agency before making a single 

source award of a task order or delivery order contract. This section would amend Section 

326(a) of the National Defense Authorization Act for Fiscal Year 1993 (Public Law 102-484; 

10 U.S.C. 2302 note) to repeal the limitation of delegation of authority with respect to contracts 

requiring use of certain ozone-depleting substances. Further, this section would be amended to 

repeal expired reporting requirements. Finally, this section would require the Department of 

Defense to consolidate or eliminate redundant or unnecessary requirements in the Federal 

Acquisition Regulation, its defense supplement, and defense acquisition directives

This committee notes this section is intended to eliminate processes, reviews, and 

approvals that are redundant, non-value-added, or unduly restrictive, which ultimately reduce 

acquisition agility and delay delivery of capability to the warfighter. The committee expects 

these amendments would advance efforts to streamline acquisition procedures, reducing 

procurement lead time and associated costs while maintaining rigor in oversight.
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1 SEC. ___. ADMINISTRATIVE SIMPLIFICATION. 

2 (a) REPEAL OF APPROVAL REQUIREMENT FOR COST-TYPE CONTRACTS ABOVE A CERTAIN 

3 THRESHOLD.— 

4 (1) REPEAL.—Section 829 of the National Defense Authorization Act for Fiscal 

5 Year 2017 (Public Law 114-328; 10 U.S.C. 2306 note) is amended by striking subsection 

6 (b). 

7 (2) TECHNICAL AMENDMENT.—Such section is further amended by striking “(a) 

8 and all that follows through “to establish” and inserting “The Defense Federal 

9 Acquisition Regulation Supplement shall establish”.

10 (b) REPEAL OF REQUIREMENT FOR CERTAIN DETERMINATIONS BY HEAD OF AGENCY 

11 BEFORE MAKING A SINGLE SOURCE AWARD OF A TASK OR DELIVERY ORDER CONTRACT 

12 EXCEEDING $112,000,000.— 

13 (1) DEFENSE CONTRACTS.—Section 2304a(d) of title 10, United States Code, is 

14 amended by striking paragraph (3). 

15 (2) CIVILIAN AGENCY CONTRACTS.—Section 4103(d) of title 41, United States 

16 Code, is amended by striking paragraph (3). 

17 (c) REPEAL OF LIMITATION ON DELEGATION OF CERTAIN AUTHORITY WITH RESPECT TO 

18 CONTRACTS REQUIRING USE OF CERTAIN OZONE-DEPLETING SUBSTANCES.— 

19 (1) LIMITATION ON DELEGATION.—Section 326(a) of the National Defense 

20 Authorization Act for Fiscal Year 1993 (Public Law 102-484; 10 U.S.C. 2302 note) is 

21 amended by striking the second sentence of paragraph (3). 

22 (2) EXPIRED REPORTING REQUIREMENT.—Such section is further amended by 

23 striking paragraphs (4) and (5). 
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1 (d) REDUCTION IN REGULATORY REDUNDANCY, ETC.— 

2 (1) The Secretary of Defense shall revise the DFARS and defense acquisition 

3 directives as necessary— 

4 (A) to eliminate redundancy in those documents with requirements in the 

5 FAR; 

6 (B) to eliminate or reduce, to the extent possible, requirements (including 

7 requirements for documentation) in those documents that are redundant or 

8 unnecessary; 

9 (C) with respect to the Acquisition Plan and Acquisition Strategy for a 

10 program or system, to provide for reduction and elimination of redundant 

11 requirements (including requirements for documentation) and, to the extent 

12 possible, for consolidation of the Plan and Strategy. 

13 (2) DEFINITIONS.— In this section: 

14 (A) DEFENSE ACQUISITION DIRECTIVES.—The term “defense acquisition 

15 directives” means the following: 

16 (i) Department of Defense Instruction 5000.02. 

17 (ii) Department of Defense Instruction 5000.74. 

18 (iii) Department of Defense Instruction 5000.75. 

19 (B) FAR.—The term “FAR” means the Federal Acquisition Regulation. 

20 (C) DFARS.—The term “DFARS” means the defense supplement to the 

21 FAR. 

22 (3) LIMITATION.—Paragraph (1) does not authorize the Secretary of Defense to 

23 eliminate a regulation that implements a requirement imposed by law or Executive order. 
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1 (4) DEADLINE.—The Secretary shall complete the actions required by paragraph 

2 (1) not later than one year after the date of the enactment of this Act. 
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RECOMMENDED REGULATORY REVISIONS 

Recommendation 74a

Revise DFARS by adding proposed language below: 

SUBPART 246.7—WARRANTIES 

246.704 Authority for use of warranties.

(1) Unless included as part of an approved Acquisition Plan or Acquisition 

Strategy the chief of the contracting office must approve use of a warranty, except 

in acquisitions for— 

(i) Commercial items (see FAR 46.709); 

(ii) Technical data, unless the warranty provides for extended liability (see 

246.708); 

(iii) Supplies and services in fixed-price type contracts containing quality 

assurance provisions that reference higher-level contract quality 

requirements (see 246.202-4); or 

(iv) Supplies and services in construction contracts when using the 

warranties that are contained in Federal, military, or construction guide 

specifications. 

(2) The chief of the contracting office shall approve the use of a warranty only 

when the benefits are expected to outweigh the cost. 

Revise FAR by adding proposed language below: 

Subpart 17.2 – Options 

17.205 -- Documentation. 

(a) The contracting officer shall justify in writing the quantities or the term under option, the 

notification period for exercising the option, and any limitation on option price under 17.203(g); 

and shall include the justification document in the contract file unless included as part of an 

approved Acquisition Plan or an Acquisition Strategy. 

Revise FAR by adding proposed language below: 

Subpart 15.3 -- Source Selection 

15.304 -- Evaluation Factors and Significant Subfactors. 

[see DoD deviation below] 

(a) The award decision is based on evaluation factors and significant subfactors that are tailored 

to the acquisition. 
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(b) Evaluation factors and significant subfactors must -- 

(1) Represent the key areas of importance and emphasis to be considered in the source 

selection decision; and 

(2) Support meaningful comparison and discrimination between and among competing 

proposals. 

(c) The evaluation factors and significant subfactors that apply to an acquisition and their relative 

importance are within the broad discretion of agency acquisition officials, subject to the 

following requirements: 

(1) Price or cost to the Government shall be evaluated in every source selection (10 

U.S.C. 2305(a)(3)(A) (ii) and 41 U.S.C. 3306(c)(1)(B)) (also see Part 36 for architectengineer contracts). 

(2) The quality of the product or service shall be addressed in every source selection 

through consideration of one or more non-cost evaluation factors such as past 

performance, compliance with solicitation requirements, technical excellence, 

management capability, personnel qualifications, and prior experience (10 U.S.C. 

2305(a)(3)(A)(i) and 3306(c)(1)(A). 

(3) 

(i) Past performance, except as set forth in paragraph (c)(3)(iii) of this section, 

shall be evaluated in all source selections for negotiated competitive acquisitions 

expected to exceed the simplified acquisition threshold. 

[Deviation per DAR Tracking Number: 2013-O0018, 15.304-(c)(3)(i), Effective until 

incorporated in the FAR or DFARS or otherwise rescinded.]

215.304 Evaluation factors and significant subfactors (DEVIATION). 

(c) 

(3) 

(i) In lieu of the threshold specified at FAR 15.304(c)(3)(i), except as provided at 

FAR 15.304(c )(3)(iii), evaluate past performance in source selections for 

negotiated competitive acquisitions as follows: 

(A) For systems and operations support acquisitions expected to exceed 

$5,000,000; 

(B) For services and information technology acquisitions expected to 

exceed $1,000,000; and 
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(C) For ship repair and overhaul acquisitions expected to exceed 

$500,000. 

(ii) For solicitations that are not set aside for small business concerns, involving 

consolidation or bundling, that offer a significant opportunity for subcontracting, 

the contracting officer shall include a factor to evaluate past performance 

indicating the extent to which the offeror attained applicable goals for small 

business participation under contracts that required subcontracting plans (15 

U.S.C. 637(d)(4)(G)(ii)). 

(iii) Past performance need not be evaluated if the contracting officer documents 

the reason past performance is not an appropriate evaluation factor for the 

acquisition. When documented as part of an approved Acquisition Plan or 

Acquisition Strategy no additional file documentation is required. 

Revise FAR by adding proposed language below: 

Subpart 39.2 – Electronic and Information Technology 

39.203 Applicability. 

(a) Unless an exception at 39.204 applies, acquisitions of EIT supplies and services must meet 

the applicable accessibility standards at 36 CFR part 1194. 

(b) 

(1) Exception determinations are required prior to contract award, except for indefinitequantity contracts (see paragraph (b)(2) of this section). 

(2) Exception determinations are not required prior to award of indefinite-quantity 

contracts, except for requirements that are to be satisfied by initial award. Contracting 

offices that award indefinite-quantity contracts must indicate to requiring and ordering 

activities which supplies and services the contractor indicates as compliant, and show 

where full details of compliance can be found (e.g., vendor's or other exact website 

location). 

(3) Requiring and ordering activities must ensure supplies or services meet the applicable 

accessibility standards at 36 CFR part 1194, unless an exception applies, at the time of 

issuance of task or delivery orders. Accordingly, indefinite-quantity contracts may 

include noncompliant items; however, any task or delivery order issued for noncompliant 

items must meet an applicable exception. 

(c) 
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(1) When acquiring commercial items, an agency must comply with those accessibility 

standards that can be met with supplies or services that are available in the commercial 

marketplace in time to meet the agency's delivery requirements. 

(2) Unless included as part of an Acquisition Plan IAW FAR 7.103(q) or Acquisition 

Strategy , the requiring official must document in writing the nonavailability, including a 

description of market research performed and which standards cannot be met, and 

provide documentation to the contracting officer for inclusion in the contract file. 

39.204 Exceptions. 

The requirements in 39.203 do not apply to EIT that-- 

(a) Is purchased in accordance with Subpart 13.2 (micro-purchases) prior to April 1, 2005. 

However, for micro-purchases, contracting officers and other individuals designated in 

accordance with 1.603-3 are strongly encouraged to comply with the applicable accessibility 

standards to the maximum extent practicable; 

(b) Is for a national security system; 

(c) Is acquired by a contractor incidental to a contract; 

(d) Is located in spaces frequented only by service personnel for maintenance, repair or 

occasional monitoring of equipment; or 

(e) Would impose an undue burden on the agency. 

(1) Basis. In determining whether compliance with all or part of the applicable 

accessibility standards in 36 CFR part 1194 would be an undue burden, an agency must 

consider-- 

(i) The difficulty or expense of compliance; and 

(ii) Agency resources available to its program or component for which the supply 

or service is being acquired. 

(2) Documentation.

(i) Unless included as part of an Acquisition Plan IAW FAR 7.103(q) or 

Acquisition Strategy, the requiring official must document in writing the basis for 

an undue burden decision and provide the documentation to the contracting 

officer for inclusion in the contract file. 

(ii) When acquiring commercial items, an undue burden determination is not 

required to address individual standards that cannot be met with supplies or 

service available in the commercial marketplace in time to meet the agency 
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delivery requirements (see 39.203(c)(2) regarding documentation of 

nonavailability). 

 Revise FAR by adding proposed language below: 

7.107 – Additional Requirements for Acquisitions Involving Consolidation, Bundling, or 

Substantial Bundling. 

7.107-2 -- Consolidation. 

(a) Consolidation may provide substantial benefits to the Government. However, because of the 

potential impact on small business participation, before conducting an acquisition that is a 

consolidation of requirements with an estimated total dollar value exceeding $2 million, the 

senior procurement executive or chief acquisition officer shall make a written determination that 

the consolidation is necessary and justified in accordance with 15 U.S.C. 657q, after ensuring 

that-- 

(1) Market research has been conducted; 

(2) Any alternative contracting approaches that would involve a lesser degree of 

consolidation have been identified; 

(3) The determination is coordinated with the agency's Office of Small Disadvantaged 

Business Utilization or the Office of Small Business Programs; 

(4) Any negative impact by the acquisition strategy on contracting with small business 

concerns has been identified; and 

(5) Steps are taken to include small business concerns in the acquisition strategy. 

(b) The senior procurement executive, or chief acquisition officer, or designee may determine 

that the consolidation is necessary and justified if the benefits of the acquisition would 

substantially exceed the benefits that would be derived from each of the alternative contracting 

approaches identified under paragraph (a)(2) of this subsection, including benefits that are 

quantifiable in dollar amounts as well as any other specifically identified benefits. 

(c) Such benefits may include cost savings or price reduction and, regardless of whether 

quantifiable in dollar amounts-- 

(1) Quality improvements that will save time or improve or enhance performance or 

efficiency; 

(2) Reduction in acquisition cycle times; 

(3) Better terms and conditions; or 
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(4) Any other benefit. 

(d) Benefits. 

(1) Benefits that are quantifiable in dollar amounts are substantial if individually, in 

combination, or in the aggregate the anticipated financial benefits are equivalent to-- 

(i) Ten percent of the estimated contract or order value (including options) if the 

value is $94 million or less; or 

(ii) Five percent of the estimated contract or order value (including options) or 

$9.4 million, whichever is greater, if the value exceeds $94 million. 

(2) Benefits that are not quantifiable in dollar amounts shall be specifically identified and 

otherwise quantified to the extent feasible. 

(3) Reduction of administrative or personnel costs alone is not sufficient justification for 

consolidation unless the cost savings are expected to be at least 10 percent of the 

estimated contract or order value (including options) of the consolidated requirements, as 

determined by the senior procurement executive or chief acquisition officer (15 U.S.C. 

657q(c)(2)(B)). 

(e) 

(1) Notwithstanding paragraphs (a) through (d) of this subsection, the approving authority 

identified in paragraph (e)(2) of this subsection may determine that consolidation is 

necessary and justified when-- 

(i) The expected benefits do not meet the thresholds for a substantial benefit at 

paragraph (d)(1) of this subsection but are critical to the agency's mission success; 

and 

(ii) The procurement strategy provides for maximum practicable participation by 

small business. 

(2) The approving authority is-- 

(i) For the Department of Defense, the senior procurement executive, or 

approving authority for an Acquisition Plan or Acquisition Strategy when 

included within the plan or strategy; or 

(ii) For the civilian agencies, the Deputy Secretary or equivalent, or approving 

authority for an Acquisition Plan or Acquisition Strategy when included within 

the plan or strategy. 
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(f) If a determination is made that consolidation is necessary and justified, the contracting officer 

shall include it in the acquisition strategy documentation and provide it to the Small Business 

Administration (SBA) upon request. 

Recommendation 74b

Revise FAR by adding proposed language below: 

16.203 -- Fixed-Price Contracts with Economic Price Adjustment. 

16.203-3 -- Limitations. 

A fixed-price contract with economic price adjustment shall not be used unless the contracting 

officer determines that it is necessary either to protect the contractor and the Government against 

significant fluctuations in labor or material costs or to provide for contract price adjustment in 

the event of changes in the contractor’s established prices. When included as part of an 

approved Acquisition Plan IAW or Acquisition Strategy, additional file documentation is not 

required. 

Revise FAR by adding and striking proposed language below: 

 Subpart 16.4 -- Incentive Contracts 

16.401 -- General. 

(a) Incentive contracts as described in this subpart are appropriate when a firm-fixed-price 

contract is not appropriate and the required supplies or services can be acquired at lower costs 

and, in certain instances, with improved delivery or technical performance, by relating the 

amount of profit or fee payable under the contract to the contractor’s performance. Incentive 

contracts are designed to obtain specific acquisition objectives by-- 

(1) Establishing reasonable and attainable targets that are clearly communicated to the 

contractor; and 

(2) Including appropriate incentive arrangements designed to -- 

(i) motivate contractor efforts that might not otherwise be emphasized and 

(ii) discourage contractor inefficiency and waste. 

(b) When predetermined, formula-type incentives on technical performance or delivery are 

included, increases in profit or fee are provided only for achievement that surpasses the targets, 

and decreases are provided for to the extent that such targets are not met. The incentive increases 

or decreases are applied to performance targets rather than minimum performance requirements. 

(c) The two basic categories of incentive contracts are fixed-price incentive contracts (see 16.403 

and 16.404) and cost-reimbursement incentive contracts (see 16.405). Since it is usually to the 

Government’s advantage for the contractor to assume substantial cost responsibility and an 

appropriate share of the cost risk, fixed-price incentive contracts are preferred when contract 

costs and performance requirements are reasonably certain. Cost-reimbursement incentive 

contracts are subject to the overall limitations in 16.301 that apply to all cost-reimbursement 

contracts. 
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(d) Unless included as part of an approved Acquisition Plan or Acquisition Strategy , a 

determination and finding, signed by the chief of the contracting office head of the contracting 

activity, shall be completed for all incentive- and award-fee contracts justifying that the use of 

this type of contract is in the best interest of the Government. This determination shall be 

documented in the contract file and, for award-fee contracts, shall address all of the suitability 

items in 16.401(e)(1). 

(e) Award-fee contracts are a type of incentive contract. 

(1) Application. An award-fee contract is suitable for use when-- 

(i) The work to be performed is such that it is neither feasible nor effective to 

devise predetermined objective incentive targets applicable to cost, schedule, and 

technical performance; 

(ii) The likelihood of meeting acquisition objectives will be enhanced by using a 

contract that effectively motivates the contractor toward exceptional performance 

and provides the Government with the flexibility to evaluate both actual 

performance and the conditions under which it was achieved; and 

(iii) Any additional administrative effort and cost required to monitor and 

evaluate performance are justified by the expected benefits as documented by a 

risk and cost benefit analysis to be included in the Determination and Findings or 

Acquisition Plan or Acquisition Strategy referenced in 16.401(e)(5)(iii). 

(2) Award-fee amount. The amount of award fee earned shall be commensurate with the 

contractor's overall cost, schedule, and technical performance as measured against 

contract requirements in accordance with the criteria stated in the award-fee plan. Award 

fee shall not be earned if the contractor's overall cost, schedule, and technical 

performance in the aggregate is below satisfactory. The basis for all award-fee 

determinations shall be documented in the contract file to include, at a minimum, a 

determination that overall cost, schedule and technical performance in the aggregate is or 

is not at a satisfactory level. This determination and the methodology for determining the 

award fee are unilateral decisions made solely at the discretion of the Government. 

(3) Award-fee plan. All contracts providing for award fees shall be supported by an 

award-fee plan that establishes the procedures for evaluating award fee and an AwardFee Board for conducting the award-fee evaluation. Award-fee plans shall-- 

(i) Be approved by the FDO unless otherwise authorized by agency procedures; 

(ii) Identify the award-fee evaluation criteria and how they are linked to 

acquisition objectives which shall be defined in terms of contract cost, schedule, 

and technical performance. Criteria should motivate the contractor to enhance 

performance in the areas rated, but not at the expense of at least minimum 

acceptable performance in all other areas; 

(iii) Describe how the contractor's performance will be measured against the 

award-fee evaluation criteria; 

(iv) Utilize the adjectival rating and associated description as well as the awardfee pool earned percentages shown below in Table 16-1. Contracting officers may 

supplement the adjectival rating description. The method used to determine the 

adjectival rating must be documented in the award-fee plan; 
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Award-Fee 

Adjectival Rating

Award-Fee 

Pool 

Available To 

Be Earned

Description

Excellent 91%--100% Contractor has exceeded almost all of the 

significant award-fee criteria and has met 

overall cost, schedule, and technical 

performance requirements of the contract in 

the aggregate as defined and measured 

against the criteria in the award-fee plan for 

the award-fee evaluation period. 

Very Good 76%--90% Contractor has exceeded many of the 

significant award-fee criteria and has met 

overall cost, schedule, and technical 

performance requirements of the contract in 

the aggregate as defined and measured 

against the criteria in the award-fee plan for 

the award-fee evaluation period. 

Good 51%--75% Contractor has exceeded some of the 

significant award-fee criteria and has met 

overall cost, schedule, and technical 

performance requirements of the contract in 

the aggregate as defined and measured 

against the criteria in the award-fee plan for 

the award-fee evaluation period. 

Satisfactory No Greater 

Than 50%. 

Contractor has met overall cost, schedule, 

and technical performance requirements of 

the contract in the aggregate as defined and 

measured against the criteria in the awardfee plan for the award-fee evaluation 

period. 

Unsatisfactory 0% Contractor has failed to meet overall cost, 

schedule, and technical performance 

requirements of the contract in the 

aggregate as defined and measured against 

the criteria in the award-fee plan for the 

award-fee evaluation period. 

(v) Prohibit earning any award fee when a contractor's overall cost, schedule, and 

technical performance in the aggregate is below satisfactory; 

(vi) Provide for evaluation period(s) to be conducted at stated intervals during the 

contract period of performance so that the contractor will periodically be 

informed of the quality of its performance and the areas in which improvement is 

expected (e.g. six months, nine months, twelve months, or at specific milestones); 

and 
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(vii) Define the total award-fee pool amount and how this amount is allocated 

across each evaluation period. 

(4) Rollover of unearned award fee. The use of rollover of unearned award fee is 

prohibited. 

(5) Limitations. No award-fee contract shall be awarded unless-- 

(i) All of the limitations in 16.301-3, that are applicable to cost-reimbursement 

contracts only, are complied with; 

(ii) An award-fee plan is completed in accordance with the requirements in 

16.401(e)(3); and 

(iii) A determination and finding is completed in accordance with 16.401(d) 

addressing all of the suitability items in 16.401(e)(1), unless included as part of an 

approved Acquisition Plan or Acquisition Strategy . 

Revise DFARS by adding and striking proposed language below: 

PGI 216.4—INCENTIVE CONTRACTS 

PGI 216.401 General.

 (e) Award-fee contracts. 

 

 (i) It is DoD policy to utilize objective criteria, whenever possible, to measure contract 

performance. In cases where an award-fee contract must be used due to lack of objective criteria, the 

contracting officer shall consult with the program manager and the fee determining official when 

developing the award-fee plan. Award-fee criteria shall be linked directly to contract cost, schedule, 

and performance outcomes objectives. 

 

 (ii) Award fees must be tied to identifiable interim outcomes, discrete events or milestones, 

as much as possible. Examples of such interim milestones include timely completion of preliminary 

design review, critical design review, and successful system demonstration. In situations where there 

may be no identifiable milestone for a year or more, consideration should be given to apportioning 

some of the award fee pool for a predetermined interim period of time based on assessing progress 

toward milestones. In any case, award fee provisions must clearly explain how a contractor’s 

performance will be evaluated. 

 

 (iii) FAR 16.401(d) requires a determination and findings (D&F) to be completed, unless 

included in an approved Acquisition Plan or Acquisition Strategy, for all incentive- and award-fee 

contracts, justifying that the use of this type of contract is in the best interest of the Government. The 

D&F for award-fee contracts shall be signed by the chief of the contracting office, unless included in 

an approved Acquisition Plan or Acquisition Strategy. head of the contracting activity or designee no 

lower than one level below the head of the contracting activity. The D&F required by FAR 16.401(d) 

for all other incentive contracts may be signed at one level above the contracting officer. This 

authority may not be further delegated. 

 

 (iv) The head of the contracting activity for each defense agency shall retain the D&F for (a) 

all acquisition category (ACAT) I or II) programs, and (b) all non-ACAT I or II contracts with an 
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estimated value of $50 million or more. The head of the contracting activity shall forward the D&Fs 

for ACAT I programs to Defense Procurement and Acquisition Policy/ Contract Policy and 

International Policy directorate (DPAP/CPIC) within 1 month of the end of the quarter. Copies of 

D&Fs on all contracts shall also be included in the contract file. 

Revise FAR by adding and striking proposed language below: 

Subpart 16.6 -- Time-and-Materials, Labor-Hour, and Letter Contracts 

16.601 -- Time-and-Materials Contracts. 

(a) Definitions for the purposes of Time-and-Materials Contracts. 

“Direct materials” means those materials that enter directly into the end product, or that are used 

or consumed directly in connection with the furnishing of the end product or service. 

“Hourly rate” means the rate(s) prescribed in the contract for payment for labor that meets the 

labor category qualification of a labor category specified in the contract that are— 

(1) Performed by the contractor; 

(2) Performed by the subcontractors; or 

(3) Transferred between divisions, subsidiaries, or affiliates of the contractor under a 

common control. 

“Materials” means— 

(1) Direct materials, including supplies transferred between divisions, subsidiaries, or 

affiliates of the contractor under a common control; 

(2) Subcontracts for supplies and incidental services for which there is not a labor 

category specified in the contract; 

(3) Other direct costs (e.g., incidental services for which there is not a labor category 

specified in the contract, travel, computer usage charges, etc.); and 

(4) Applicable indirect costs. 

(b) Description. A time-and-materials contract provides for acquiring supplies or services on the 

basis of— 

(1) Direct labor hours at specified fixed hourly rates that include wages, overhead, 

general and administrative expenses, and profit; and 

(2) Actual cost for materials (except as provided for in 31.205-26(e) and (f)). 

(c) Application. A time-and-materials contract may be used only when it is not possible at the 

time of placing the contract to estimate accurately the extent or duration of the work or to 

anticipate costs with any reasonable degree of confidence. See 12.207(b) for the use of time-andmaterial contracts for certain commercial services. 

(1) Government surveillance. A time-and-materials contract provides no positive profit 

incentive to the contractor for cost control or labor efficiency. Therefore, appropriate 

Government surveillance of contractor performance is required to give reasonable 

assurance that efficient methods and effective cost controls are being used. 

(2) Fixed hourly rates. 

(i) The contract shall specify separate fixed hourly rates that include wages, 

overhead, general and administrative expenses, and profit for each category of 

labor (see 16.601(f)(1)). 
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(ii) For acquisitions of noncommercial items awarded without adequate price 

competition (see 15.403-1(c)(1)), the contract shall specify separate fixed hourly 

rates that include wages, overhead, general and administrative expenses, and 

profit for each category of labor to be performed by— 

(A) The contractor; 

(B) Each subcontractor; and 

(C) Each division, subsidiary, or affiliate of the contractor under a 

common control. 

(iii) For contract actions that are not awarded using competitive procedures, 

unless exempt under paragraph (c)(2)(iv) of this section, the fixed hourly rates for 

services transferred between divisions, subsidiaries, or affiliates of the contractor 

under a common control— 

(A) Shall not include profit for the transferring organization; but 

(B) May include profit for the prime contractor. 

(iv) For contract actions that are not awarded using competitive procedures, the 

fixed hourly rates for services that meet the definition of commercial item at 

2.101 that are transferred between divisions, subsidiaries, or affiliates of the 

contractor under a common control may be the established catalog or market rate 

when— 

(A) It is the established practice of the transferring organization to price 

interorganizational transfers at other than cost for commercial work of the 

contractor of any division, subsidiary or affiliate of the contractor under a 

common control; and 

(B) The contracting officer has not determined the price to be 

unreasonable. 

(3) Material handling costs. When included as part of material costs, material handling 

costs shall include only costs clearly excluded from the labor-hour rate. Material handling 

costs may include all appropriate indirect costs allocated to direct materials in accordance 

with the contractor’s usual accounting procedures consistent with Part 31. 

(d) Limitations. A time-and-materials contract or order may be used only if— 

(1) The contracting officer prepares a determination and findings that no other contract 

type is suitable, unless the rationale is included in an approved Acquisition Plan or 

Acquisition Strategy. The determination and finding shall be— 

(i) Signed by the contracting officer prior to the execution of the base period or 

any option periods of the contracts; and 

(ii) Approved by the chief of the contracting office head of the contracting 

activity prior to the execution of the contract base period when the base period 

plus any option periods exceeds three years; and 

(2) The contract or order includes a ceiling price that the contractor exceeds at its own 

risk. Also see 12.207(b) for further limitations on use of time-and-materials or labor hour 

contracts for acquisition of commercial items. 
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Revise DFARS by adding and striking proposed language below: 

SUBPART 216.6--TIME-AND-MATERIALS, LABOR-HOUR, AND LETTER 

CONTRACTS

216.601 Time-and-materials contracts. (DEVIATION 2018-O0018)

(d) Limitations. 

(i)(A) Approval of determination and findings for time-and-materials or laborhour contracts.

(1) Base period plus any option periods is three years or less.

(i) For contracts (including indefinite-delivery contracts) 

and orders in which the portion of the requirement 

performed on a time-and-materials or labor-hour basis 

exceeds $1 million, the approval authority for the 

determination and findings shall be the chief of the 

contracting office, unless included in an approved 

Acquisition Plan or Acquisition Strategy. senior contracting 

official within the contracting activity. This authority may 

not be delegated. 

(ii) For contracts (including indefinite-delivery contracts) 

and orders in which the portion of the requirement 

performed on a time-and-materials or labor-hour basis is 

less than or equal to $1 million, the determination and 

findings shall be approved one level above the contracting 

officer, unless included in an approved Acquisition Plan or 

Acquisition Strategy. 

(2) Base period plus any option periods exceeds three years. The 

authority of the head of the contracting activity to approve the 

determination and findings may not be delegated. 

(3) Exception. The approval requirements in paragraphs 

(d)(i)(A)(1) 

and (2) of this section do not apply to contracts that, as determined by the head of the contracting 

activity— 

(i) Support contingency or humanitarian or peacekeeping 

operations; or 

(ii) Facilitate defense against or recovery from 

conventional, cyber, nuclear, biological, chemical or 

radiological attack; 

(iii) Facilitate the provision of international disaster 

assistance; or 

(iv) Support response to an emergency or major disaster. 
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Recommendation 74c

Revise FAR by striking language below: 

Subpart 16.5 -- Indefinite-Delivery Contracts 

16.504 -- Indefinite-Quantity Contracts.

(a) Description. An indefinite-quantity contract provides for an indefinite quantity, within stated 

limits, of supplies or services during a fixed period. The Government places orders for individual 

requirements. Quantity limits may be stated as number of units or as dollar values. 

(1) The contract must require the Government to order and the contractor to furnish at 

least a stated minimum quantity of supplies or services. In addition, if ordered, the 

contractor must furnish any additional quantities, not to exceed the stated maximum. The 

contracting officer should establish a reasonable maximum quantity based on market 

research, trends on recent contracts for similar supplies or services, survey of potential 

users, or any other rational basis. 

(2) To ensure that the contract is binding, the minimum quantity must be more than a 

nominal quantity, but it should not exceed the amount that the Government is fairly 

certain to order. 

(3) The contract may also specify maximum or minimum quantities that the Government 

may order under each task or delivery order and the maximum that it may order during a 

specific period of time. 

(4) A solicitation and contract for an indefinite quantity must— 

(i) Specify the period of the contract, including the number of options and the 

period for which the Government may extend the contract under each option; 

(ii) Specify the total minimum and maximum quantity of supplies or services the 

Government will acquire under the contract; 

(iii) Include a statement of work, specifications, or other description, that 

reasonably describes the general scope, nature, complexity, and purpose of the 

supplies or services the Government will acquire under the contract in a manner 

that will enable a prospective offeror to decide whether to submit an offer; 

(iv) State the procedures that the Government will use in issuing orders, including 

the ordering media, and, if multiple awards may be made, state the procedures and 

selection criteria that the Government will use to provide awardees a fair 

opportunity to be considered for each order (see 16.505(b)(1)); 

(v) Include the name, address, telephone number, facsimile number, and e-mail 

address of the agency task and delivery order ombudsman (see 16.505(b)(8)) if 

multiple awards may be made; 

(vi) Include a description of the activities authorized to issue orders; and 

(vii) Include authorization for placing oral orders, if appropriate, provided that the 

Government has established procedures for obligating funds and that oral orders 

are confirmed in writing. 

(b) Application. Contracting officers may use an indefinite-quantity contract when the 

Government cannot predetermine, above a specified minimum, the precise quantities of supplies 

or services that the Government will require during the contract period, and it is inadvisable for 
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the Government to commit itself for more than a minimum quantity. The contracting officer 

should use an indefinite-quantity contract only when a recurring need is anticipated. 

(c) Multiple award preference— 

(1) Planning the acquisition. 

(i) Except for indefinite-quantity contracts for advisory and assistance services as 

provided in paragraph (c)(2) of this section, the contracting officer must, to the 

maximum extent practicable, give preference to making multiple awards of 

indefinite-quantity contracts under a single solicitation for the same or similar 

supplies or services to two or more sources. 

(ii) 

(A) The contracting officer must determine whether multiple awards are 

appropriate as part of acquisition planning. The contracting officer must 

avoid situations in which awardees specialize exclusively in one or a few 

areas within the statement of work, thus creating the likelihood that orders 

in those areas will be awarded on a sole-source basis; however, each 

awardee need not be capable of performing every requirement as well as 

any other awardee under the contracts. The contracting officer should 

consider the following when determining the number of contracts to be 

awarded: 

(1) The scope and complexity of the contract requirement. 

(2) The expected duration and frequency of task or delivery orders. 

(3) The mix of resources a contractor must have to perform 

expected task or delivery order requirements. 

(4) The ability to maintain competition among the awardees 

throughout the contracts' period of performance. 

(B) The contracting officer must not use the multiple award approach if-- 

(1) Only one contractor is capable of providing performance at the 

level of quality required because the supplies or services are 

unique or highly specialized; 

(2) Based on the contracting officer's knowledge of the market, 

more favorable terms and conditions, including pricing, will be 

provided if a single award is made; 

(3) The expected cost of administration of multiple contracts 

outweighs the expected benefits of making multiple awards; 

(4) The projected orders are so integrally related that only a single 

contractor can reasonably perform the work; 

(5) The total estimated value of the contract is less than the 

simplified acquisition threshold; or 

(6) Multiple awards would not be in the best interests of the 

Government. 

(C) The contracting officer must document the decision whether or not to 

use multiple awards in the acquisition plan or contract file. The 

contracting officer may determine that a class of acquisitions is not 

appropriate for multiple awards (see subpart 1.7). 

(D) 
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(1) No task or delivery order contract in an amount estimated to 

exceed $112 million (including all options) may be awarded to a 

single source unless the head of the agency determines in writing 

that— 

(i) The task or delivery orders expected under the contract 

are so integrally related that only a single source can 

reasonably perform the work; 

(ii) The contract provides only for firm fixed price (see 

16.202) task or delivery orders for— 

(A) Products for which unit prices are established in the 

contract; or 

(B) Services for which prices are established in the contract 

for the specific tasks to be performed; 

(iii) Only one source is qualified and capable of performing 

the work at a reasonable price to the Government; or 

(iv) It is necessary in the public interest to award the 

contract to a single source due to exceptional 

circumstances. 

(2) The head of the agency must notify Congress within 30 days 

after any determination under paragraph (c)(1)(ii)(D)(1)(iv) of this 

section. 

(3) The requirement for a determination for a single-award contract 

greater than $112 million— 

(i) Is in addition to any applicable requirements of Subpart 

6.3; and 

(ii) Is not applicable for architect-engineer services 

awarded pursuant to Subpart 36.6. 

(2) Contracts for advisory and assistance services. 

(i) Except as provided in paragraph (c)(2)(ii) of this section, if an indefinitequantity contract for advisory and assistance services exceeds 3 years and $13.5 

million, including all options, the contracting officer must make multiple awards 

unless-- 

(A) The contracting officer or other official designated by the head of the 

agency determines in writing, as part of acquisition planning, that multiple 

awards are not practicable. The contracting officer or other official must 

determine that only one contractor can reasonably perform the work 

because either the scope of work is unique or highly specialized or the 

tasks so integrally related; 

(B) The contracting officer or other official designated by the head of the 

agency determines in writing, after the evaluation of offers, that only one 

offeror is capable of providing the services required at the level of quality 

required; or 

(C) Only one offer is received. 

(ii) The requirements of paragraph (c)(2)(i) of this section do not apply if the 

contracting officer or other official designated by the head of the agency 
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determines that the advisory and assistance services are incidental and not a 

significant component of the contract. 

Recommendation 75a

Revise DFARS by striking language below: 

SUBPART 215.3--SOURCE SELECTION

215.371 Only one offer.

215.371-1 Policy.

It is DoD policy, if only one offer is received in response to a competitive solicitation— 

(a) To take the required actions to promote competition (see 215.371-2); and 

(b) To ensure that the price is fair and reasonable (see 215.371-3) and to comply with the 

statutory requirement for certified cost or pricing data (see FAR 15.403-4). 

215.371-2 Promote competition.

Except as provided in sections 215.371-4 and 215.371-5— 

(a) If only one offer is received when competitive procedures were used and the 

solicitation allowed fewer than 30 days for receipt of proposals, the contracting officer 

shall— 

(1) Consult with the requiring activity as to whether the requirements document 

should be revised in order to promote more competition (see FAR 6.502(b) and 

11.002); and 

(2) Resolicit, allowing an additional period of at least 30 days for receipt of 

proposals; and 

(b) For competitive solicitations in which more than one potential offeror expressed an 

interest in an acquisition, but only one offer was ultimately received, follow the 

procedures at PGI 215.371-2. 

215.371-3 Fair and reasonable price.

(a) If there was “reasonable expectation... that ...two or more offerors, competing 

independently, would submit priced offers” but only one offer is received, this 

circumstance does not constitute adequate price competition unless an official at a level 

above the contracting officer approves the determination that the price is reasonable (see 

FAR 15.403-1(c)(1)(ii)). 

(b) Except as provided in section 215.371-4(a), if only one offer is received when 

competitive procedures were used and the solicitation allowed at least 30 days for receipt 

of proposals (unless the 30-day requirement is not applicable in accordance with 

215.371-4(a)(3) or has been waived in accordance with section 215.371-5), the 

contracting officer shall— 

(1) Determine through cost or price analysis that the offered price is fair and 

reasonable and that adequate price competition exists (with approval of the 

determination at a level above the contracting officer) or another exception to the 

requirement for certified cost or pricing data applies (see FAR 15.403-1(c) and 

15.403-4). In these circumstances, no further cost or pricing data is required; or 
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(2)(i) Obtain from the offeror cost or pricing data necessary to determine a fair 

and reasonable price and comply with the requirement for certified cost or pricing 

data at FAR 15.403-4. For acquisitions that exceed the cost or pricing data 

threshold, if no exception at FAR 15.403-1(b) applies, the cost or pricing data 

shall be certified; and 

(ii) Enter into negotiations with the offeror as necessary to establish a fair 

and reasonable price. The negotiated price should not exceed the offered 

price. 

215.371-4 Exceptions. (DEVIATION 2018-O0018)

(a) The requirements at sections 215.371-2 do not apply to— 

(1) Acquisitions at or below the simplified acquisition threshold; 

(2) Acquisitions, as determined by the head of the contracting activity, in support 

of contingency or humanitarian or peacekeeping operations; to facilitate defense 

against or recovery from cyber, nuclear, biological, chemical, or radiological 

attack; to facilitate the provision of international disaster assistance; or to support 

response to an emergency or major disaster; 

Class Deviation- 2018-O0018, Micro-Purchase Threshold, Simplified Acquisition Threshold, 

and Special Emergency Procurement Authority. This clause deviation is effective on August 

31, 2018, and remains in effect until incorporated into the FARS or DFARS, or until 

otherwise rescinded.

(a) The requirements at sections 215.371-2 do not apply to— 

(1) Acquisitions at or below the simplified acquisition threshold; 

(2) Acquisitions in support of contingency or humanitarian or peacekeeping 

operations; to facilitate defense against or recovery from cyber, nuclear, 

biological, chemical, or radiological attack; to facilitate the provision of 

international disaster assistance; or to support response to an emergency or 

major disaster; 

(3) Small business set-asides under FAR subpart 19.5, set asides offered and 

accepted into the 8(a) Program under FAR subpart 19.8, or set-asides under the 

HUBZone Program (see FAR 19.1305(c)), the Service-Disabled Veteran-Owned 

Small Business Procurement Program (see FAR 19.1405(c)), or the WomenOwned Small Business Program (see FAR 19.1505(d)); 

(4) Acquisitions of basic or applied research or development, as specified in FAR 

35.016(a), that use a broad agency announcement; or 

(5) Acquisitions of architect-engineer services (see FAR 36.601-2). 

(b) The applicability of an exception in paragraph (a) of this section does not eliminate 

the need for the contracting officer to seek maximum practicable competition and to 

ensure that the price is fair and reasonable. 

215.371-5 Waiver.

(a) The head of the contracting activity is authorized to waive the requirement at 

215.371-2 to resolicit for an additional period of at least 30 days. 

(b) This waiver authority cannot be delegated below one level above the contracting 

officer. 

215.371-6 Solicitation provision.

Use the provision at 252.215-7007, Notice of Intent to Resolicit, in competitive solicitations, 

including solicitations using FAR part 12 procedures for the acquisition of commercial 
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items, that will be solicited for fewer than 30 days, unless an exception at 215.371-4 applies 

or the requirement is waived in accordance with 215.371-5. 

252.215-7007 Notice of Intent to Resolicit.

As prescribed at 215.371-6, use the following provision: 

 

NOTICE OF INTENT TO RESOLICIT (JUN 2012) 

 

This solicitation provides offerors fewer than 30 days to submit proposals. In the event that only one 

offer is received in response to this solicitation, the Contracting Officer may cancel the solicitation and 

resolicit for an additional period of at least 30 days in accordance with 215.371-2. 

Recommendation 75b

Revise FAR by adding proposed language below: 

SUBPART 17.5 -- INTERAGENCY ACQUISITIONS 

17.500 -- Scope of Subpart. 

(a) This subpart prescribes policies and procedures applicable to all interagency acquisitions 

under any authority, except as provided for in paragraph (c) of this section. In addition to 

complying with the interagency acquisition policy and procedures in this subpart, nondefense 

agencies acquiring supplies and services on behalf of the Department of Defense shall also 

comply with the policy and procedures at subpart 17.7. 

(b) This subpart applies to interagency acquisitions, see 2.101 for definition, when— 

(1) An agency needing supplies or services obtains them using another agency’s contract; 

or 

(2) An agency uses another agency to provide acquisition assistance, such as awarding 

and administering a contract, a task order, or delivery order. 

(c) This subpart does not apply to— 

(1) Interagency reimbursable work performed by Federal employees (other than 

acquisition assistance), or interagency activities where contracting is incidental to the 

purpose of the transaction; or 

(2) Orders of $550,000 or less issued against Federal Supply Schedules. 

(3) Direct acquisitions for orders placed under OMB Best In Class (BIC) designated 

contracts. 

Revise DFARS by adding proposed language below: 

SUBPART 217.7-- INTERAGENCY ACQUISITIONS: ACQUISITIONS BY 

NONDEFENSE AGENCIES ON BEHALF OF THE DEPARTMENT OF DEFENSE

(Revised September 21, 2015)

217.700 Scope of subpart.

This subpart— 
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(a) Implements section 854 of the National Defense Authorization Act for Fiscal Year 

2005 (Pub. L. 108-375), section 801 of the National Defense Authorization Act for Fiscal 

Year 2008 (Pub. L. 110-181), and section 806 of the National Defense Authorization Act 

for Fiscal Year 2010 (Pub. L. 111-84); and 

(b) Prescribes policy for the acquisition of supplies and services through the use of 

contracts or orders issued by non-DoD agencies. 

217.701 Definitions.

As used in this subpart— 

“Assisted acquisition” means the type of interagency contracting through which acquisition 

officials of a non-DoD agency award a contract or a task or delivery order for the acquisition of 

supplies or services on behalf of DoD. 

“Direct acquisition” means the type of interagency contracting through which DoD orders a 

supply or service from a Governmentwide acquisition contract maintained by a non-DoD 

agency. 

“Governmentwide acquisition contract” means a task or delivery order contract that– 

(i) Is entered into by a non-defense agency; and 

(ii) May be used as the contract under which property or services are procured for one or 

more other departments or agencies of the Federal Government 

217.702 Exceptions. 

(a) Direct acquisitions for orders placed under OMB Best In Class (BIC) designated contracts are 

not subject to this subpart. 

217.770 Procedures.

Departments and agencies shall establish and maintain procedures for reviewing and approving 

orders placed for supplies and services under non-DoD contracts, whether through direct 

acquisition or assisted acquisition, when the amount of the order exceeds the simplified 

acquisition threshold. These procedures shall include— 

(a) Evaluating whether using a non-DoD contract for the acquisition is in the best interest 

of DoD. Factors to be considered include— 

(1) Satisfying customer requirements; 

(2) Schedule; 

(3) Cost effectiveness (taking into account discounts and fees). In order to ensure 

awareness of the total cost of fees associated with use of a non-DoD contract, 

follow the procedures at PGI 217.770(a)(3); and 

(4) Contract administration (including oversight); 

(b) Determining that the tasks to be accomplished or supplies to be provided are within 

the scope of the contract to be used; 

(c) Reviewing funding to ensure that it is used in accordance with appropriation 

limitations; and 

(d) Collecting and reporting data on the use of assisted acquisition for analysis. Follow 

the reporting requirements in subpart 204.6. 
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Recommendation 75c 

Revise FAR by striking language below: 

Subpart 22.8 -- Equal Employment Opportunity 

22.805 -- Procedures.Reserved. 

(a) Preaward clearances for contracts and subcontracts of $10 million or more (excluding 

construction).

(1) Except as provided in paragraphs (a)(4) and (a)(8) of this section, if the estimated 

amount of the contract, subcontract is $10 million or more, the contracting officer shall 

request clearance from the appropriate OFCCP regional office before -- 

(i) Award of any contract, including any indefinite delivery contract or letter 

contract; or 

(ii) Modification of an existing contract for new effort that would constitute a 

contract award.

(2) Preaward clearance for each proposed contract and for each proposed first-tier 

subcontract of $10 million or more shall be requested by the contracting officer directly 

from the OFCCP regional office(s). Verbal requests shall be confirmed by letter or 

facsimile transmission. 

(3) When the contract work is to be performed outside the United States with employees 

recruited within the United States, the contracting officer shall send the request for a 

preaward clearance to the OFCCP regional office serving the area where the proposed 

contractor’s corporate home or branch office is located in the United States, or the 

corporate location where personnel recruiting is handled, if different from the 

contractor’s corporate home or branch office. If the proposed contractor has no corporate 

office or location within the United States, the preaward clearance request action should 

be based on the location of the recruiting and training agency in the United States. 

(4) The contracting officer does not need to request a preaward clearance if— 

(i) The specific proposed contractor is listed in OFCCP’s National Preaward 

Registry via the Internet at https://ofccp.dol-esa.gov/preaward/pa_reg.html; 

(ii) The projected award date is within 24 months of the proposed contractor’s 

Notice of Compliance completion date in the Registry; and 

(iii) The contracting officer documents the Registry review in the contract file. 

(5) The contracting officer shall include the following information in the preaward 

clearance request: 

(i) Name, address, and telephone number of the prospective contractor and of any 

corporate affiliate at which work is to be performed. 

(ii) Name, address, and telephone number of each proposed first-tier 

subcontractor with a proposed subcontract estimated at $10 million or more. 

(iii) Anticipated date of award. 

(iv) Information as to whether the contractor and first-tier subcontractors have 

previously held any Government contracts or subcontracts. 

(v) Place or places of performance of the prime contract and first-tier subcontracts 

estimated at $10 million or more, if known. 
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(vi) The estimated dollar amount of the contract and each first-tier subcontract, if 

known. 

(6) The contracting officer shall allow as much time as feasible before award for the 

conduct of necessary compliance evaluation by OFCCP. As soon as the apparently 

successful offeror can be determined, the contracting officer shall process a preaward 

clearance request in accordance with agency procedures, assuring, if possible, that the 

preaward clearance request is submitted to the OFCCP regional office at least 30 days 

before the proposed award date. 

(7) Within 15 days of the clearance request, OFCCP will inform the awarding agency of 

its intention to conduct a preaward compliance evaluation. If OFCCP does not inform the 

awarding agency within that period of its intention to conduct a preaward compliance 

evaluation, clearance shall be presumed and the awarding agency is authorized to proceed 

with the award. If OFCCP informs the awarding agency of its intention to conduct a 

preaward compliance evaluation, OFCCP shall be allowed an additional 20 days after the 

date that it so informs the awarding agency to provide its conclusions. If OFCCP does not 

provide the awarding agency with its conclusions within that period, clearance shall be 

presumed and the awarding agency is authorized to proceed with the award. 

(8) If the procedures specified in (a)(6) and (a)(7) of this section would delay award of an 

urgent and critical contract beyond the time necessary to make award or beyond the time 

specified in the offer or extension thereof, the contracting officer shall immediately 

inform the OFCCP regional office of the expiration date of the offer or the required date 

of award and request clearance be provided before that date. If the OFCCP regional 

office advises that a preaward evaluation cannot be completed by the required date, the 

contracting officer shall submit written justification for the award to the head of the 

contracting activity, who, after informing the OFCCP regional office, may then approve 

the award without the preaward clearance. If an award is made under this authority, the 

contracting officer shall immediately request a postaward evaluation from the OFCCP 

regional office. 

(9) If, under the provisions of (a)(8) of this section, a postaward evaluation determines 

the contractor to be in noncompliance with E.O. 11246, the Deputy Assistant Secretary 

may authorize the use of the enforcement procedures at 22.809 against the noncomplying 

contractor. 

(b) Furnishing posters. The contracting officer shall furnish to the contractor appropriate 

quantities of the poster entitled “Equal Employment Opportunity Is The Law.” These shall be 

obtained in accordance with agency procedures. 

Recommendation 75d 

Revise FAR by adding and striking the proposed language below: 

Subpart 19.8 -- Contracting with the Small Business Administration (The 8(a) 

Program) 

19.815 – Release for Non-8(a) Procurement. 
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(a) Once a requirement has been accepted by SBA into the 8(a) program, any follow-on 

requirements shall remain in the 8(a) program unless there is a mandatory source (see 8.002 or 

8.003) or SBA agrees to release the requirement from the 8(a) program in accordance with 13 

CFR 124.504(d). 

(b) To obtain release of a requirement for a non-8(a) procurement (other than a mandatory source 

listed at 8.002 or 8.003), the contracting officer shall make a written request to, and receive 

concurrence from, the SBA Associate Administrator for Business Development. 

(c) 

(1) The written request to the SBA Associate Administrator for Business Development 

shall indicate— 

(i) Whether the agency has achieved its small disadvantaged business goal; 

(ii) Whether the agency has achieved its HUBZone, SDVOSB, WOSB, or small 

business goal(s); and 

(iii) Whether the requirement is critical to the business development of the 8(a) 

contractor that is currently performing the requirement. 

(2) Generally, a requirement that was previously accepted into the 8(a) program will only 

be released for procurements outside the 8(a) program when the contracting activity 

agency agrees to set aside the requirement under the small business, HUBZone, 

SDVOSB, or WOSB programs. 

(3) The requirement that a follow-on procurement must be released from the 8(a) 

program in order for it to be fulfilled outside the 8(a) program does not apply to task or 

delivery orders offered to and accepted into the 8(a) program, where the basic contract 

was not accepted into the 8(a) program. 

(d) Within 15 working days of the request, the SBA will inform the awarding agency contracting 

officer of its decisions to concur or non-concur. If the SBA does not inform the awarding agency 

within that period, release from the 8(a) program shall be presumed and the awarding agency is 

authorized to proceed with soliciting and award outside the 8(a) program. 
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Recommendation 76 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. STREAMLINED ORDERING UNDER TASK AND DELIVERY ORDER 

CONTRACTS.

This section would amend section 2304c, title 10, United States Code, and section 4106, 

title 41, United States Code, to increase the threshold for enhanced competition for task and 

delivery orders from $5,000,000 to $7,000,000 and provide additional flexibility to contracting 

officers conducting these order competitions. This flexibility includes removing the requirement 

for the use of subfactors and the disclosure of the relative importance of evaluation factors. 

The committee notes that too frequently the more cumbersome and prescriptive source 

selection procedures in FAR 15.3 are used in competitions for task and deliver orders, whereas 

the fair opportunity procedures in FAR 16.5 are more appropriate and more efficient. The 

committee expects these amendments would advance efforts to further simplify the fair 

opportunity process and increase its use.
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1 SEC. ___. STREAMLINED ORDERING UNDER TASK AND DELIVERY ORDER 

2 CONTRACTS. 

3 (a) TITLE 10, UNITED STATES CODE.— 

4 (1) FAIR OPPORTUNITY REQUIREMENTS.—Subsection (d) of section 2304c of title 

5 10, United States Code, is amended— 

6 (A) by striking “$5,000,000” in the subsection heading and text and 

7 inserting “$7,000,000”; and 

8 (B) in paragraph (1), by inserting “and a statement that the selection 

9 process will be conducted using fair opportunity procedures” after 

10 “requirements”; 

11 (C) in paragraph (3)— 

12 (i) by striking “and subfactors”; and 

13 (ii) by striking “, and their relative importance”; 

14 (D) in paragraph (4), by striking “and the relative importance of quality 

15 and price or cost factors”; and 

16 (E) in paragraph (5), by inserting “, if requested by a contractor that 

17 submitted a proposal” before the period at the end. 

18 (2) SCOPE OF WORK.—Subsection (c) of such section is amended to read as 

19 follows: 

20 “(c) SCOPE.—A task or delivery order shall specify— 

21 “(1) the property to be delivered under the order; or 

22 “(2) in the case of an order for services, the outcomes sought or the tasks to be 

23 performed (or a combination of outcomes sought and tasks to be performed).”. 
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1 (3) STYLISTIC AMENDMENTS.—Subsection (d) of such section, as amended by 

2 paragraph (1), is further amended— 

3 (A) by striking “is not met unless all such contractors are provided, at a 

4 minimum—” and inserting “includes a requirement that each such contractor be 

5 provided the following:”; 

6 (B) by capitalizing the first letter of the first word of each of paragraphs 

7 (1) through (5); 

8 (C) by striking the semicolon at the end of each of paragraphs (1), (2), and 

9 (3) and inserting a period; and 

10 (D) by striking “; and” at the end of paragraph (4) and inserting a period. 

11 (b) TITLE 41, UNITED STATES CODE.— 

12 (1) FAIR OPPORTUNITY REQUIREMENTS.—Subsection (d) of section 4106 of title 

13 41, United States Code, is amended— 

14 (A) by striking “$5,000,000” in the subsection heading and text and 

15 inserting “$7,000,000”; and 

16 (B) in paragraph (1), by inserting “and a statement that the selection 

17 process will be conducted using fair opportunity procedures” after 

18 “requirements”; 

19 (C) in paragraph (3)— 

20 (i) by striking “and subfactors”; and 

21 (ii) by striking “, and their relative importance”; 

22 (D) in paragraph (4), by striking “documenting—“ and all that follows and 

23 inserting “the basis for the award.”; and 
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1 (E) in paragraph (5), by inserting “, if requested by a contractor that 

2 submitted a proposal” before the period at the end. 

3 (2) SCOPE OF WORK.—Subsection (e) of such section is amended to read as 

4 follows: 

5 “(e) SCOPE.—A task or delivery order shall specify— 

6 “(1) the property to be delivered under the order; or 

7 “(2) in the case of an order for services, the outcomes sought or the tasks to be 

8 performed (or a combination of outcomes sought and tasks to be performed).”. 

9 (3) STYLISTIC AMENDMENTS.—Subsection (d) of such section, as amended by 

10 paragraph (1), is further amended— 

11 (A) by striking “is not met unless all such contractors are provided, at a 

12 minimum—” and inserting “includes a requirement that each such contractor be 

13 provided the following:”; 

14 (B) by capitalizing the first letter of the first word of each of paragraphs 

15 (1) through (5); and 

16 (C) by striking the semicolon at the end of each of paragraphs (1), (2), and 

17 (3) and inserting a period.. 

——————— 

SECTIONS AFFECTED BY THE PROPOSAL 

[The material below shows changes proposed to be made by the legislative text above to the 

text of existing statutes. Matter proposed to be deleted is shown in stricken through text; 

matter proposed to be inserted is shown in bold italic.] 

TITLE 10, UNITED STATES CODE 
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§2304c. Task and delivery order contracts: orders 

(a) ISSUANCE OF ORDERS.—The following actions are not required for issuance of a task 

or delivery order under a task or delivery order contract: 

(1) A separate notice for such order under section 1708 of title 41 or section 8(e) 

of the Small Business Act (15 U.S.C. 637(e)). 

(2) Except as provided in subsection (b), a competition (or a waiver of 

competition approved in accordance with section 2304(f) of this title) that is separate 

from that used for entering into the contract. 

(b) MULTIPLE AWARD CONTRACTS.—When multiple task or delivery order contracts are 

awarded under section 2304a(d)(1)(B) or 2304b(e) of this title, all contractors awarded such 

contracts shall be provided a fair opportunity to be considered, pursuant to procedures set forth in 

the contracts, for each task or delivery order in excess of $2,500 that is to be issued under any of 

the contracts unless— 

(1) the agency's need for the services or property ordered is of such unusual 

urgency that providing such opportunity to all such contractors would result in 

unacceptable delays in fulfilling that need; 

(2) only one such contractor is capable of providing the services or property 

required at the level of quality required because the services or property ordered are 

unique or highly specialized; 

(3) the task or delivery order should be issued on a sole-source basis in the 

interest of economy and efficiency because it is a logical follow-on to a task or delivery 

order already issued on competitive basis; 

(4) it is necessary to place the order with a particular contractor in order to satisfy 

a minimum guarantee; or 

(5) the task or delivery order satisfies one of the exceptions in section 2304(c) of 

this title to the requirement to use competitive procedures. 

(c) STATEMENT OF WORK SCOPE.—A task or delivery order shall include a statement of 

work that clearly specifies all tasks to be performed or property to be delivered under the order 

specify— 

(1) the property to be delivered under the order; or 

(2) in the case of an order for services, the outcomes sought or the tasks to be 

performed (or a combination of outcomes sought and tasks to be performed). 

(d) ENHANCED COMPETITION FOR ORDERS IN EXCESS OF $5,000,000 $7,000,000.—In the 

case of a task or delivery order in excess of $5,000,000 $7,000,000, the requirement to provide 

all contractors a fair opportunity to be considered under subsection (b) is not met unless all such 

contractors are provided, at a minimum— includes a requirement that each such contractor be 

provided the following: 

(1) a A notice of the task or delivery order that includes a clear statement of the 

agency's requirements; and a statement that the selection process will be conducted 

using fair opportunity procedures. 

(2) a A reasonable period of time to provide a proposal in response to the notice; . 
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(3) disclosure Disclosure of the significant factors and subfactors, including cost 

or price, that the agency expects to consider in evaluating such proposals, and their 

relative importance;. 

(4) in In the case of an award that is to be made on a best value basis, a written 

statement documenting the basis for the award and the relative importance of quality and 

price or cost factors; and. 

(5) an An opportunity for a post-award debriefing, if requested by a contractor 

that submitted a proposal. 

(e) PROTESTS.—*** 

(f) TASK AND DELIVERY ORDER OMBUDSMAN.—*** 

(g) APPLICABILITY.—This section applies to task and delivery order contracts entered into 

under sections 2304a and 2304b of this title. 

————— 

TITLE 41, UNITED STATES CODE

§4106. Orders 

(a) APPLICATION.—This section applies to task and delivery order contracts entered into 

under sections 4103 and 4105 of this title. 

(b) ACTIONS NOT REQUIRED FOR ISSUANCE OF ORDERS.—The following actions are not 

required for issuance of a task or delivery order under a task or delivery order contract: 

(1) A separate notice for such order under section 1708 of this title or section 8(e) 

of the Small Business Act (15 U.S.C. 637(e)). 

(2) Except as provided in subsection (c), a competition (or a waiver of 

competition approved in accordance with section 3304(e) of this title) that is separate 

from that used for entering into the contract. 

(c) MULTIPLE AWARD CONTRACTS.—When multiple contracts are awarded under section 

4103a(d)(1)(B) or 4105(f) of this title, all contractors awarded the contracts shall be provided a 

fair opportunity to be considered, pursuant to procedures set forth in the contracts, for each task 

or delivery order in excess of $2,500 that is to be issued under any of the contracts, unless— 

(1) the executive agency's need for the services or property ordered is of such 

unusual urgency that providing such opportunity to all those contractors would result in 

unacceptable delays in fulfilling that need; 

(2) only one of those contractor is capable of providing the services or property 

required at the level of quality required because the services or property ordered are 

unique or highly specialized; 

(3) the task or delivery order should be issued on a sole-source basis in the 

interest of economy and efficiency because it is a logical follow-on to a task or delivery 

order already issued on competitive basis; or 
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(4) it is necessary to place the order with a particular contractor in order to satisfy 

a minimum guarantee. 

(d) ENHANCED COMPETITION FOR ORDERS IN EXCESS OF $5,000,000 $7,000,000.—In the 

case of a task or delivery order in excess of $5,000,000 $7,000,000, the requirement to provide 

all contractors a fair opportunity to be considered under subsection (c) is not met unless all such 

contractors are provided, at a minimum— includes a requirement that each such contractor be 

provided the following: 

(1) a A notice of the task or delivery order that includes a clear statement of the 

executive agency's requirements; and a statement that the selection process will be 

conducted using fair opportunity procedures. 

(2) a A reasonable period of time to provide a proposal in response to the notice; . 

(3) disclosure Disclosure of the significant factors and subfactors, including cost 

or price, that the executive agency expects to consider in evaluating such proposals, and 

their relative importance;. 

(4) in In the case of an award that is to be made on a best value basis, a written 

statement documenting— 

(A) the basis for the award; and 

(B) the relative importance of quality and price or cost factors; and. 

(5) an An opportunity for a post-award debriefing, if requested by a contractor 

that submitted a proposal. 

(e) STATEMENT OF WORK SCOPE.—A task or delivery order shall include a statement of 

work that clearly specifies all tasks to be performed or property to be delivered under the order 

specify— 

(1) the property to be delivered under the order; or 

(2) in the case of an order for services, the outcomes sought or the tasks to be 

performed (or a combination of outcomes sought and tasks to be performed). 

(f) PROTESTS.—*** 

(g) TASK AND DELIVERY ORDER OMBUDSMAN.—*** 
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RECOMMENDED REGULATORY REVISIONS

FEDERAL ACQUISITION REGULATION

16.505 -- Ordering

(a) General

...

(b) Orders under multiple-award contracts--

(1) Fair opportunity. 

(i) The contracting officer must provide each awardee a fair opportunity to be 

considered for each order exceeding $3,500 issued under multiple delivery-order 

contracts or multiple task-order contracts, except as provided for in paragraph 

(b)(2) of this section.

(ii) The contracting officer shall use streamlined fair opportunity procedures. 

Justification for use of other than streamlined fair opportunity procedures, 

such as those in Subpart 15.3, shall be approved by a level above the 

contracting officer. The contracting officer may exercise broad discretion in 

developing appropriate streamlined fair opportunity order placement procedures. 

The contracting officer should keep submission requirements to a minimum. 

Contracting officers may use streamlined procedures, including oral presentations. 

If the order does not exceed the simplified acquisition threshold, the contracting 

officer need not contact each of the multiple awardees under the contract before 

selecting an order awardee if the contracting officer has information available to 

ensure that each awardee is provided a fair opportunity to be considered for each 

order. The competition requirements in Part 6 and the policies in Subpart 15.3 do 

not apply to the ordering process. However, the contracting officer must--

(A) Develop placement procedures that will provide each awardee a fair 

opportunity to be considered for each order and that reflect the 

requirement and other aspects of the contracting environment;

(B) Not use any method (such as allocation or designation of any preferred 

awardee) that would not result in fair consideration being given to all 

awardees prior to placing each order;

(C) Tailor the procedures to each acquisition; and

(D) Include the procedures in the solicitation and the contract; and
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(E)(D) Consider price or cost under each order as one of the factors in the 

selection decision.

(iii) Orders exceeding the simplified acquisition threshold.

(A) Each order exceeding the simplified acquisition threshold shall be 

placed on a competitive basis in accordance with paragraph (b)(1)(iii)(B) 

of this section, unless supported by a written determination that one of the 

circumstances described at 16.505(b)(2)(i) applies to the order and the 

requirement is waived on the basis of a justification that is prepared in 

accordance with 16.505(b)(2)(ii)(B);

(B) The contracting officer shall—

(1) Provide a fair notice of the intent to make a purchase, including 

a clear description of the supplies to be delivered or the services to 

be performed and the basis upon which the selection will be made 

to all contractors offering the required supplies or services under 

the multiple-award contract; and

(2) Afford all contractors responding to the notice a fair 

opportunity to submit an offer and have that offer fairly 

considered.

(iv) Orders exceeding $5.5$7 million. For task or delivery orders in excess of 

$5.5$7 million, the requirement to provide all awardees a fair opportunity to be 

considered for each order shall include, at a minimum—

(A) A notice of the task or delivery order that includes a clear statement of 

the agency’s requirements; and a statement that the selection process will 

be conducted using streamlined fair opportunity procedures;

(B) A reasonable response period;

(C) Disclosure of the significant factors and subfactors, including cost or 

price, that the agency expects to consider in evaluating proposals, and 

their relative importance;

(D) Where award is made on a best value basis, a written statement 

documenting the basis for the award and the relative importance of quality 

and price or cost factors; and

(E) An opportunity for a postaward debriefing in accordance with 

paragraph (b)(6) of this section, if requested by a contractor that 

submitted a proposal.
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(v) The contracting officer should consider the following when developing the 

procedures:

(A)

(1) Past performance on earlier orders under the contract, including 

quality, timeliness and cost control.

(2) Potential impact on other orders placed with the contractor.

(3) Minimum order requirements.

(4) The amount of time contractors need to make informed 

business decisions on whether to respond to potential orders.

(5) Whether contractors could be encouraged to respond to 

potential orders by outreach efforts to promote exchanges of 

information, such as—

(i) Seeking comments from two or more contractors on 

draft statements of work;

(ii) Using a multiphased approach when effort required to 

respond to a potential order may be resource intensive (e.g., 

requirements are complex or need continued development), 

where all contractors are initially considered on price 

considerations (e.g., rough estimates), and other 

considerations as appropriate (e.g., proposed conceptual 

approach, past performance). The contractors most likely to 

submit the highest value solutions are then selected for oneon-one sessions with the Government to increase their 

understanding of the requirements, provide suggestions for 

refining requirements, and discuss risk reduction measures.

(B) Formal evaluation plans or scoring of quotes or offers are not required.

(B) Basis of award: The contracting officer has broad discretion in 

fashioning suitable evaluation procedures under this subpart.

(1) The solicitation should make it clear that the selection process 

is being conducted under this subpart and not Subpart 15.3. 

Conduct of the selection process must be consistent with that 

statement.

(2) Use of best value tradeoff is encouraged.
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(3) Submission of detailed technical and management plans, the 

use of formal evaluation plans, use of a competitive range, 

conducting discussions or exchanges to make an offer 

acceptable, scoring quotations and offers, and final price 

revisions are not required and are generally discouraged as 

inconsistent with the objective of simplification under the 

subpart. (see 41 USC §4106 and 10 U.S.C. §2304c)

(4) Contracting officers shall state the evaluation factor(s) to be 

used as the basis for award. Use of subfactors is not required. 

Solicitations under this subpart are not required to establish the 

relative importance of each evaluation factor or subfactor 

(thereby making them of equal importance).

(5) When evaluating past performance, use of a formal database 

is not required. The evaluation may be based on the contracting 

officer’s knowledge and prior experience with the awardee on the 

multiple-award contract, customer surveys, PPIRS, or any

reasonable basis. There is no obligation to discuss adverse past 

performance.
Recommendation 78 

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RECOMMENDED REGULATORY REVISIONS 

Federal Acquisition Regulation 5.202 

Volume 3 

FAR Subpart 5.202-- Exceptions. 

5.202 -- Exceptions 

“(b) The contracting officer need not submit the notice required by 5.303 when – 

(1) The proposed contract action is made for the supply of basic energy (i.e., natural gas, electricity, 

heating oil, or similar basic energy commodities subject to price volatility).” 

(c) (b) The head of the agency determines in writing, after consultation with the Administrator 

for Federal Procurement Policy and the Administrator of the Small Business Administration, 

that advance notice is not appropriate or reasonable. 
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Recommendation 79 

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RECOMMENDED REPORT LANGUAGE 

SEC. ___. ADVANCE PAYMENTS. 

This section would amend section 2307, title 10, United States Code, 10 U.S.C. 2307, 

Contract Financing, to allow for lower levels of approval for security requirements below the 

head of the agency for the use of advance payments and raise the advance payment rate to 20% 

for small businesses supplying commercial items. The committee is aware of the financial 

challenges faced by small businesses developing emerging technology to support the 

Department of Defense (DoD) and the lack of contract financing may be a barrier to entry to the 

defense market that current accelerated payment processes do not address. This section would 

provide flexibility for contracting officials to authorize advance payments to small businesses at 

lower organizational levels and also, by raising the advance payment level to 20%, incentivize 

more market participation by small businesses, especially in cases where emerging technology 

is dependent on the modification or integration of commercial products or services into a new 

innovative product. The committee notes this section would make it easier to approve small 

business financing and create a more open and competitive marketplace for small businesses to 

engage in DoD innovation. 
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1 SEC. ___. ADVANCE PAYMENTS. 

2 (a) PUBLIC INTEREST DETERMINATION AS A CONDITION FOR ADVANCE PAYMENTS.—

3 Subsection (d) of section 2307 of title 10, United States Code, is amended by striking “by the 

4 head of the agency” and inserting “by a cognizant authority or delegate below the head of the 

5 agency”. 

6 (b) ADVANCE PAYMENTS TO SMALL BUSINESSES SUPPLYING COMMERCIAL ITEMS.—

7 Subsection (f)(2) of such section is amended by inserting before the period at the end the 

8 following: “, except that a small business supplying commercial items may receive advance 

9 payments of not more than 20 percent of the contract price”. 

————— 

§2307. Contract financing 

(a) PAYMENT AUTHORITY.—(1) The head of any agency may*** 

*** 

(d) SECURITY FOR ADVANCE PAYMENTS.— Advance payments made under subsection (a) 

may be made only if the contractor gives adequate security and after a determination by the head 

of the agency by a cognizant authority or delegate below the head of the agency that to do so 

would be in the public interest. Such security may be in the form of a lien in favor of the United 

States on the property contracted for, on the balance in an account in which such payments are 

deposited, and on such of the property acquired for performance of the contract as the parties 

may agree. This lien is paramount to any other liens and is effective immediately upon the first 

advancement of funds without filing, notice, or any other action by the United States. 

(e) *** 

(f) CONDITIONS FOR PAYMENTS FOR COMMERCIAL ITEMS.—(1) Payments under 

subsection (a) for commercial items may be made under such terms and conditions as the 

head of the agency determines are appropriate or customary in the commercial marketplace and 

are in the best interests of the United States. The head of the agency shall obtain adequate 

security for such payments. If the security is in the form of a lien in favor of the United States, 

such lien is paramount to all other liens and is effective immediately upon the first payment, 

without filing, notice, or other action by the United States. 
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(2) Advance payments made under subsection (a) for commercial items may include 

payments, in a total amount of not more than 15 percent of the contract price, in advance of any 

performance of work under the contract, except that a small business supplying commercial 

items may receive advance payments of not more than 20 percent of the contract price. 

(3) The conditions of subsections (d) and (e) need not be applied if they would be 

inconsistent, as determined by the head of the agency, with commercial terms and conditions 

pursuant to paragraphs (1) and (2). 

(g) *** 

———— 
Recommendation 80 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. PREFERENCE FOR COMMERCIAL PRODUCTS AND SERVICES RELATIVE TO 

SMALL BUSINESS SET-ASIDES.

This section would amend section 3307, title 41, United States Code, and section 2377, 

title 10, United States Code, to make clear the preference for acquiring commercial products, 

commercial services, and non-developmental items takes priority over any small business setaside program. In instances, where the government determines its need can be met by a 

commercial product, commercial service, or non-developmental item, and two or more small 

businesses offer a commercial product, commercial services or non-developmental item, a setaside may still be used.

Both statute and regulation establish a preference for acquiring commercial products 

and commercial services when available to satisfy the government’s need. The statutes do not 

specifically establish a preference for awards to small business but establishes the overarching 

policy of assuring a fair proportion of awards are made to small business. The Court of Federal 

Claims noted in Analytical Graphics, Inc. v. United States (135 Fed Cl. 378,412 (2017)) that the 

statutes are silent on any conflict between the preference for commercial products or 

commercial services and small business set-asides. The committee is concerned that without 

articulating a priority, contracting officers have no obligation to determine whether the 

government’s requirements can be satisfied by commercial products or services before deciding 

whether to set-aside the procurement for small businesses, potentially leading to the 

unnecessary use of set-asides to procure noncommercial products and services when 

commercial products and services are available in the market. 
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1 SEC. ___. PREFERENCE FOR COMMERCIAL PRODUCTS AND SERVICES 

2 RELATIVE TO SMALL BUSINESS SET-ASIDES. 

3 (a) TITLE 41.—Section 3307(a) of title 41, United States Code, is amended by adding at 

4 the end the following new paragraph: 

5 “(3) SMALL BUSINESS ACT.—In conducting a procurement of supplies or services, 

6 the head of an executive agency shall apply the requirements of this section in preference 

7 to applying section 15(j) of the Small Business Act (15 U.S.C. 644(j)).”. 

8 (b) TITLE 10.—Section 2377 of title 10, United States Code, is amended by adding at the 

9 end following new subsection: 

10 “(f) SMALL BUSINESS ACT.—In conducting a procurement of supplies or services, the 

11 head of an agency shall apply the requirements of this section in preference to applying section 

12 15(j) of the Small Business Act (15 U.S.C. 644(j)).”. 

13 (c) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to 

14 contracts entered into under solicitations issued after the end of the 180-day period beginning on 

15 the date of the enactment of this Act. 
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RECOMMENDED REGULATORY REVISIONS

FAR 6.203, Set -asides for small business concerns

(a) To fulfill the statutory requirements relating to small business concerns, contracting officers 

may set aside solicitations to allow only such business concerns to compete. This includes 

contract actions conducted under the Small Business Innovation Research Program established 

under Pub. L. 97-219.

(b) No separate justification or determination and findings is required under this part to set aside 

a contract action for small business concerns.

(c) Subpart 19.5 prescribes policies and procedures that shall be followed with respect to setasides.

(d) The acquisition of commercial products and commercial services shall apply in preference to 

any small business set-aside program.

FAR 12.102, Applicability

(a) This part shall be used for the acquisition of supplies or services that meet the definition of 

commercial items products and commercial services at 2.101.

(b) Contracting officers shall use the policies in this part in conjunction with the policies and 

procedures for solicitation, evaluation and award prescribed in Part 13, Simplified Acquisition 

Procedures; Part 14, Sealed Bidding; or Part 15, Contracting by Negotiation, as appropriate for 

the particular acquisition.

(c) Contracts for the acquisition of commercial items products and commercial services are 

subject to the policies in other parts of the FAR. When a policy in another part of the FAR is 

inconsistent with a policy in this part, this part 12 shall take precedence for the acquisition of 

commercial items. 

(d) The acquisition of commercial products and commercial services shall apply in preference to 

any small business set-aside program.
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Recommendation 81 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. PRODUCTION CONTRACTS AND PRODUCTION TRANSACTION 

AUTHORITY AS FOLLOW-ON TO CERTAIN PROTOTYPE PROJECTS.

This section would amend 10 U.S.C. § 2371b to conform this other transaction authority 

with the recently enacted authority found in 10 U.S.C. § 2447d which does not require the 

follow-on production contract or transaction be provided for in the original prototype 

transaction. The committee notes that having greater consistency in what is required to be 

provided for in a prototype transaction will be beneficial to those negotiating and entering into 

these transactions among the Department of Defense and industry.

This section, as amended, would allow a follow-on production contract or transaction be 

awarded, with or without using competitive procedures, to the participants in a prototype 

project or to a party other than the participants in the prototype project. The committee 

recognizes that there may be situations where contractors or consortium involved in a 

prototype project are not willing or able to enter into a follow-on production contract or 

transaction yet the Department of Defense may still need access to certain non-traditional 

sources of supply that a production other transaction affords. The committee notes that limiting 

the Department of Defense to production through a procurement contract, if none of the 

prototype participants are willing or able to enter into production, could inhibit rapid fielding 

of successfully prototyped solutions to warfighter needs. 

This section further would authorize the component or service acquisition executives to 

enter into a production contract or transaction, under exceptional circumstances, without using 

competitive procedures when a critical warfighter need is at stake. Those situations could be

where the prototype transaction was awarded without using competitive procedures, and 

where the participants in the prototype project have not completed the prototype project or

subproject. The committee recognizes that the Department of Defense may have a critical 

warfighter need that some aspect of the prototype development could address which would 

require moving into production before the intended prototype is complete. The committee also 

notes that in the commercial technology marketplace there may be patented technologies that 

require a non-competitive prototype transaction and non-competitive follow-on production 

transaction.

This section also would authorize the component or service acquisition executives, 

under exceptional circumstances to meet a critical warfighter need, to award a production 

transaction for a solution that has been prototyped and demonstrated at private expense, where 

the Department of Defense cannot acquire the solution through a standard procurement 

contract. The committee recognizes that advanced technologies such as artificial intelligence are 

rapidly being developed and prototyped at private expense by small non-traditional companies 
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that are not equipped, or have no desire, to enter into a standard Department of Defense 

procurement contract. The committee notes that where small non-traditional companies refuse 

to enter into, or do not have the complex business systems necessary for entering into a 

Department of Defense procurement contract, the Department of Defense may be precluded 

from accessing the innovative products those companies offer without this expanded 

transaction authority.
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1 SEC. ___. PRODUCTION CONTRACTS AND PRODUCTION TRANSACTION 

2 AUTHORITY AS FOLLOW-ON TO CERTAIN PROTOTYPE 

3 PROJECTS. 

4 (a) AUTHORITY.—Subsection (a)(1) of section 2371b of title 10, United States Code, is 

5 amended by inserting “, and may carry out production contracts or transactions entered into 

6 pursuant to subsection (f) or (g),” after “prototype projects”. 

7 (b) FOLLOW-ON PRODUCTION CONTRACTS OR TRANSACTIONS .—Subsection (f) of such 

8 section is amended— 

9 (1) in paragraph (1), by striking the first sentence and inserting the following: “A 

10 prototype project under this section may be selected for a follow-on production contract 

11 or transaction to be awarded to one or more of the participants in the transaction or, if 

12 none of the participants in the transaction are willing or able to enter into such a contract 

13 or transaction, to any other party using competitive procedures.”; 

14 (2) in paragraph (2), by striking “to the participants in the transaction” and 

15 inserting “to one or more of the participants in the transaction or, if none of the 

16 participants in the transaction are willing or able to enter into such a contract or 

17 transaction, to any other party,”; 

18 (3) in paragraph (5), by inserting “and subsection (g) after “this subsection”; and 

19 (4) by adding at the end the following new paragraph: 

20 “(6) A production contract or transaction may be awarded pursuant to this subsection 

21 without regard to subparagraphs (A) and (B) of paragraph (2) if the appropriate component

22 executive determines in writing that exceptional circumstances justify the use of such a contract 

23 or transaction to address a high priority warfighter need.”.
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1 (c) AUTHORITY TO AWARD A PRODUCTION TRANSACTION TO RAPIDLY FIELD AN 

2 EXISTING CAPABILITY.—Such section is further amended— 

3 (1) by redesignating subsections (g) and (h) as subsections (h) and (i), 

4 respectively; and 

5 (2) by inserting after subsection (f) the following new subsection (g): 

6 “(g) AUTHORITY TO AWARD A PRODUCTION TRANSACTION TO RAPIDLY FIELD AN 

7 EXISTING CAPABILITY.—A production transaction may be awarded without the use of 

8 competitive procedures, to acquire emergent and proven technologies and field production 

9 quantities of new or upgraded systems that do not require additional development and have been 

10 demonstrated in a relevant environment when the appropriate component acquisition executive 

11 determines in writing that exceptional circumstances justify the use of such a transaction to 

12 address a high priority warfighter need.”. 

13 (e) DEFINITION.—Subsection (e) of such section is amended by adding at the end the 

14 following new paragraph: 

15 “(3) The term ‘component acquisition executive’ means— 

16 “(A) in the case of a military department, the service acquisition executive 

17 for that military department; and 

18 “(B) in the case of a component of the Department of Defense other than a 

19 military department, the authority performing for that component the functions 

20 that a service acquisition executive performs for a military department.”. 

21 (f) CONFORMING AMENDMENTS.—Such section is further amended— 

22 (1) in subsection (a)(2)— 

23 (A) by striking “follow-on” in subparagraph (A); and 
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1 (B) by inserting “or (g)” after “subsection (f)” in subparagraphs (A) and 

2 (B); 

3 (2) in subsection (h), as redesignated by subsection (c)(1)— 

4 (A) by striking “FOLLOW-ON” in the subsection heading; 

5 (B) by striking “follow-on contract” and inserting “production contract”; 

6 (C) by inserting “or (g)” after “subsection (f)”; and 

7 (D) striking “follow-on” after “prototypes or”. 

8 (g) SECTION HEADING.— 

9 (1) The heading of such section is amended to read as follows: 

10 “§ 2371b. Authority of the Department of Defense to carry out certain prototype projects 

11 and follow-on production transactions”. 

12 (2) The item relating to such section in the table of sections at the beginning of 

13 chapter 139 of such title is amended to read as follows: 

“2371b. Authority of the Department of Defense to carry out certain prototype projects and follow-on 

production transactions.”.

—————— 

SECTIONS OF CURRENT LAW AFFECTED BY THE PROPOSAL 

[The material below shows changes proposed to be made by the legislative text above to the text of 

existing statutes. Matter proposed to be deleted is shown in stricken through text; matter proposed 

to be inserted is shown in bold italic.] 

TITLE 10, UNITED STATES CODE 

§ 2371b. Authority of the Department of Defense to carry out certain prototype projects

and follow-on production transactions 

(a) AUTHORITY.—(1) Subject to paragraph (2), the Director of the Defense Advanced 

Research Projects Agency, the Secretary of a military department, or any other official 

designated by the Secretary of Defense may, under the authority of section 2371 of this title, 
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carry out prototype projects, and may carry out production contracts or transactions entered 

into pursuant to subsection (f) or (g), that are directly relevant to enhancing the mission 

effectiveness of military personnel and the supporting platforms, systems, components, or 

materials proposed to be acquired or developed by the Department of Defense, or to 

improvement of platforms, systems, components, or materials in use by the armed forces. 

(2) The authority of this section— 

(A) may be exercised for a transaction for a prototype project, and any follow-on

production contract or transaction that is awarded pursuant to subsection (f) or (g), that is 

expected to cost the Department of Defense in excess of $100,000,000 but not in excess 

of $500,000,000 (including all options) only upon a written determination by the senior 

procurement executive for the agency as designated for the purpose of section 1702(c) of 

title 41, or, for the Defense Advanced Research Projects Agency or the Missile Defense 

Agency, the director of the agency that— 

(i) the requirements of subsection (d) will be met; and 

(ii) the use of the authority of this section is essential to promoting the 

success of the prototype project; and 

(B) may be exercised for a transaction for a prototype project, and any production 

contract or transaction that is awarded pursuant to subsection (f) or (g), that is expected to 

cost the Department of Defense in excess of $500,000,000 (including all options) only 

if— 

(i) the Under Secretary of Defense for Research and Engineering or the 

Under Secretary of Defense for Acquisition and Sustainment determines in 

writing that— 

(I) the requirements of subsection (d) will be met; and 

(II) the use of the authority of this section is essential to meet 

critical national security objectives; and 

(ii) the congressional defense committees are notified in writing at least 30 

days before such authority is exercised. 

(3) The authority of a senior procurement executive or director of the Defense Advanced 

Research Projects Agency or Missile Defense Agency under paragraph (2)(A), and the authority 

of the Under Secretaries of Defense under paragraph (2)(B), may not be delegated. 

(b) EXERCISE OF AUTHORITY.— 

(1) Subsections (e)(1)(B) and (e)(2) of such section 2371 shall not apply to 

projects carried out under subsection (a). 

(2) To the maximum extent practicable, competitive procedures shall be used 

when entering into agreements to carry out the prototype projects under subsection (a). 

(c) COMPTROLLER GENERAL ACCESS TO INFORMATION.— *** 

(d) APPROPRIATE USE OF AUTHORITY.— *** 

(e) DEFINITIONS.—In this section: 

(1) The term "nontraditional defense contractor" has the meaning given the term 

under section 2302(9) of this title. 
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(2) The term "small business" means a small business concern as defined under 

section 3 of the Small Business Act (15 U.S.C. 632). 

(3) The term “component acquisition executive” means— 

(A) in the case of a military department, the service acquisition executive 

for that military department; and 

(B) in the case of a component of the Department of Defense other than 

a military department, the authority performing for that component the 

functions that a service acquisition executive performs for a military 

department. 

(f) FOLLOW-ON PRODUCTION CONTRACTS OR TRANSACTIONS.—(1) A transaction 

entered into under this section for a prototype project under this section may be selected may 

provide for the award of for a follow-on production contract or transaction to be awarded to 

one or more of the participants in the transaction or, if none of the participants in the 

transaction are willing or able to enter into such a contract or transaction, to any other party 

using competitive procedures. A transaction includes all individual prototype subprojects 

awarded under the transaction to a consortium of United States industry and academic 

institutions. 

(2) A follow-on production contract or transaction provided for in a transaction under 

paragraph (1) may be awarded to the participants in the transaction to one or more of the 

participants in the transaction or, if none of the participants in the transaction are willing or 

able to enter into such a contract or transaction, to any other party, without the use of 

competitive procedures, notwithstanding the requirements of section 2304 of this title, if— 

(A) competitive procedures were used for the selection of parties for participation 

in the transaction; and 

(B) the participants in the transaction successfully completed the prototype project 

provided for in the transaction. 

(3) A follow-on production contract or transaction may be awarded, pursuant to this 

subsection, when the Department determines that an individual prototype or prototype subproject 

as part of a consortium is successfully completed by the participants. 

(4) Award of a follow-on production contract or transaction pursuant to the terms under 

this subsection is not contingent upon the successful completion of all activities within a 

consortium as a condition for an award for follow-on production of a successfully completed 

prototype or prototype subproject within that consortium. 

(5) Contracts and transactions entered into pursuant to this subsection and subsection (g)

may be awarded using the authority in subsection (a), under the authority of chapter 137 of this 

title, or under such procedures, terms, and conditions as the Secretary of Defense may establish 

by regulation. 

(6) A production contract or transaction may be awarded pursuant to this subsection 

without regard to subparagraphs (A) and (B) of paragraph (2) if the appropriate component 

acquisition executive determines in writing that exceptional circumstances justify the use of 

such a contract or transaction to address a high priority warfighter need. 

(g) AUTHORITY TO AWARD A PRODUCTION TRANSACTION TO RAPIDLY 

FIELD AN EXISTING CAPABILITY—A production transaction may be awarded, with or 
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without the use of competitive procedures, to acquire emergent and proven technologies and 

field production quantities of new or upgraded systems that do not require additional 

development and have been demonstrated in a relevant environment when the appropriate 

component acquisition executive determines in writing that exceptional circumstances justify 

the use of such a transaction to address a high priority warfighter need. 

(g) (h) AUTHORITY TO PROVIDE PROTOTYPES AND FOLLOW-ON PRODUCTION ITEMS AS 

GOVERNMENT-FURNISHED EQUIPMENT.—An agreement entered into pursuant to the authority of 

subsection (a) or a follow-on production contract or transaction entered into pursuant to the 

authority of subsection (f) or (g) may provide for prototypes or follow-on production items to be 

provided to another contractor as Government-furnished equipment. 

(h) (i) APPLICABILITY OF PROCUREMENT ETHICS REQUIREMENTS.—An agreement entered 

into under the authority of this section shall be treated as a Federal agency procurement for the 

purposes of chapter 21 of title 41. 

—————— 
Recommendation 82 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. ELECTRONIC CASE MANAGEMENT SYSTEMS FOR BOARDS OF CONTRACT 

APPEALS. 

This section would amend section 7105, title 41, United States Code, to facilitate 

establishment of an electronic case management system at agency Boards of Contract Appeals.

The committee is aware that the Government Accountability Office (GAO) recently 

implemented a mandatory web-based electronic filing and document dissemination system for 

the procurement protest system, as required by Section 1501 of the Legislative Branch 

Appropriations Act, 2014 (Public Law 113–76). Under this statute, GAO is allowed to collect 

filing fees to offset the costs of the electronic filing system. The committee notes that providing 

similar authority to the Boards, including authority to collect fees to offset the costs of operating 

and maintaining the system, would facilitate establishment of electronic case management 

systems, ease administrative burdens, and improve the Boards’ productivity. 
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1 SEC. ___. ELECTRONIC CASE MANAGEMENT SYSTEMS FOR BOARDS OF 

2 CONTRACT APPEALS. 

3 Section 7105 of title 41, United States Code, is amended by adding at the end the 

4 following new subsection: 

5 “(h) ELECTRONIC CASE MANAGEMENT SYSTEM.— 

6 “(1) IN GENERAL.—An agency board may establish and operate an electronic case 

7 management system for submission, document dissemination, and processing of appeals 

8 under subsection (e)(1) under which, in accordance with the procedures prescribed by the 

9 agency board— 

10 “(A) a contractor submitting an appeal to the agency board may be 

11 required to submit the appeal through the electronic case management system; 

12 and 

13 “(B) all documents and information required with respect to an appeal 

14 may be disseminated and made available to the contractor and the contracting 

15 officer through the electronic case management system. 

16 “(2) WAIVERS.—The chairman of an agency board may waive a requirement 

17 under subparagraph (A) or (B) of paragraph (1) when compliance with such requirement 

18 is determined to place an undue burden on the contractor, the Federal Government, or the 

19 agency board. 

20 “(3) IMPOSITION OF FEES.—An agency board may require any contractor who 

21 submits an appeal to the board to pay a fee to support the establishment and operation of 

22 the electronic system of the board under this subsection, without regard to whether or not 
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1 the contractor uses the system with respect to the appeal. The amount of the fee shall be 

2 established in the rules of the agency board. 

3 “(4) TREATMENT OF AMOUNTS COLLECTED.— 

4 “(A) If the Armed Services Board exercises the authority under paragraph 

5 (3) to impose a fee on contractors submitting appeals to it, the Secretary of 

6 Defense shall establish a separate account among the accounts of the Department 

7 of Defense for the electronic system of the Armed Services Board under this 

8 subsection, and all amounts received by the Armed Services Board as fees under 

9 paragraph (3) shall be deposited into the account and shall be available as 

10 provided in subparagraph (E). 

11 “(B) If the Civilian Board exercises the authority under paragraph (3) to 

12 impose a fee on contractors submitting appeals to it, the Administrator of General 

13 Services shall establish a separate account among the accounts of the General 

14 Services Administration for the electronic system of the Civilian Board under this 

15 subsection, and all amounts received by the Civilian Board as fees under 

16 paragraph (3) shall be deposited into the account and shall be available as 

17 provided in subparagraph (E). 

18 “(C) If the board of contract appeals of the Tennessee Valley Authority 

19 exercises the authority under paragraph (3) to impose a fee on contractors 

20 submitting appeals to it, the Board of Directors of the Tennessee Valley Authority 

21 shall establish a separate account among the accounts of the Tennessee Valley 

22 Authority for the electronic system of the board of contract appeals of the 

23 Tennessee Valley Authority under this subsection, and all amounts received by 
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1 that board as fees under paragraph (3) shall be deposited into the account and 

2 shall be available as provided in subparagraph (E). 

3 “(D) If the Postal Service Board of Contract Appeals exercises the 

4 authority under paragraph (3) to impose a fee on contractors submitting appeals to 

5 it, the Postmaster General shall establish a separate account among the accounts 

6 of the Postal Service for the electronic system of the Postal Service Board of 

7 Contract Appeals under this subsection, and all amounts received by the that 

8 board as fees under paragraph (3) shall be deposited into the account and shall be 

9 available as provided in subparagraph (E). 

10 “(E) Amounts in the accounts established under this paragraph shall be 

11 available to the respective agency boards, without fiscal year limitation, solely to 

12 establish and operate their respective electronic systems under this subsection.”. 

—————— 
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RECOMMENDED REPORT LANGUAGE

SEC. ___. INCREASE IN THRESHOLDS FOR USE OF ACCELERATED PROCEDURES 

AND SMALL CLAIM PROCEDURES BY BOARDS OF CONTRACT 

APPEALS. 

This section would amend section 7106, title 41, United States Code, to increase the 

thresholds for use of expedited case resolution procedures by Department of Defense and 

agency Boards of Contract Appeals. This section would further amend such section to require 

periodic adjustments every five years to the thresholds. The committee notes that raising these 

thresholds would accommodate achieving fast resolution of as many claims as possible while 

balancing increased administrative demands.
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1 SEC. ___. INCREASE IN THRESHOLDS FOR USE OF ACCELERATED 

2 PROCEDURES AND SMALL CLAIM PROCEDURES BY BOARDS OF 

3 CONTRACT APPEALS. 

4 (a) INCREASED THRESHOLDS.— 

5 (1) ACCELERATED PROCEDURE.—Subsection (a) of section 7106 of title 41, United 

6 States Code, is amended by striking “$100,000” in the subsection heading and text and 

7 inserting “$250,000”. 

8 (2) SMALL CLAIMS PROCEDURE.—Subsection (b) of such section is amended— 

9 (A) by striking “$50,000” and inserting “$150,000”; and 

10 (B) by striking “$150,000” and inserting “$250,000”. 

11 (b) PERIODIC ADJUSTMENT OF THRESHOLDS.—Such section is further amended— 

12 (1) in subsection (b), by striking paragraph (6); and 

13 (2) by adding at the end the following new subsection: 

14 “(c) PERIODIC ADJUSTMENT OF THRESHOLD AMOUNTS.—Effective on October 1 of each 

15 year that is divisible by 5, each amount set forth in subsection (a) or (b) shall be adjusted in 

16 accordance with section 1908 of this title.”. 

17 (c) TECHNICAL AMENDMENTS FOR INTERNAL CONSISTENCY.—Subsection (a) of such 

18 section, as amended by subsection (a)(1), is further amended— 

19 (1) by designating the first and second sentences as paragraph (1) and inserting 

20 “IN GENERAL.—” before “The rules of”; and 

21 (2) by designating the third sentence as paragraph (2) and inserting “TIME OF 

22 DECISION.—” before “An appeal”. 

23 (d) SECTION HEADING.— 
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1 (1) IN GENERAL.—The heading of such section is amended to read as follows: 

2 “§7106. Agency board procedures: thresholds for use of accelerated procedure and small 

3 claims procedure”. 

4 (2) CLERICAL AMENDMENT.—The item relating to such section in the table of 

5 sections at the beginning of chapter 71 of such title is amended to read as follows: 

“7106. Agency board procedures: thresholds for use of accelerated procedure and small claims procedure.”. 

6 (e) EFFECTIVE DATE.—The amendments made by subsection (a) shall apply with respect 

7 to appeals from decisions of contracting officers that are filed with a board of contract appeals 

8 after the date of the enactment of this Act. 

————— 

SECTIONS AFFECTED BY THE PROPOSAL 

[The material below shows changes proposed to be made by the legislative text above to the text of 

existing statutes. Matter proposed to be deleted is shown in stricken through text; matter proposed 

to be inserted is shown in bold italic.] 

TITLE 41, UNITED STATES CODE 

§7106. Agency board procedures for accelerated and small claims: thresholds for use of accelerated 

procedures and small claims procedures 

(a) ACCELERATED PROCEDURE WHERE $100,000 $250,000 OR LESS IN DISPUTE.— 

(1) IN GENERAL.—The rules of each agency board shall include a procedure for the 

accelerated disposition of any appeal from a decision of a contracting officer where the amount in 

dispute is $100,000 $250,000 or less. The accelerated procedure is applicable at the sole election 

of the contractor. 

(2) TIME OF DECISION.—An appeal under the accelerated procedure shall be resolved, 

whenever possible, within 180 days from the date the contractor elects to use the procedure. 

(b) SMALL CLAIMS PROCEDURE.— 

(1) IN GENERAL.—The rules of each agency board shall include a procedure for the 

expedited disposition of any appeal from a decision of a contracting officer where the amount in 

dispute is $50,000 $150,000 or less, or in the case of a small business concern (as defined in the 

Small Business Act (15 U.S.C. 631 et seq.) and regulations under that Act), $150,000 $250,000 

or less. The small claims procedure is applicable at the sole election of the contractor. 

(2) SIMPLIFIED RULES OF PROCEDURE.—The small claims procedure shall provide for 

simplified rules of procedure to facilitate the decision of any appeal. An appeal under the small 
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claims procedure may be decided by a single member of the agency board with such 

concurrences as may be provided by rule or regulation. 

(3) TIME OF DECISION.—An appeal under the small claims procedure shall be resolved, 

whenever possible, within 120 days from the date the contractor elects to use the procedure. 

(4) FINALITY OF DECISION.—A decision against the Federal Government or against the 

contractor reached under the small claims procedure is final and conclusive and may not be set 

aside except in cases of fraud. 

(5) NO PRECEDENT.—Administrative determinations and final decisions under this 

subsection have no value as precedent for future cases under this chapter. 

(6) REVIEW OF REQUISITE AMOUNTS IN CONTROVERSY.—The Administrator, from time 

to time, may review the dollar amounts specified in paragraph (1) and adjust the amounts in 

accordance with economic indexes selected by the Administrator. 

(c) PERIODIC ADJUSTMENT OF THRESHOLD AMOUNTS.—Effective on October 1 of each year 

that is divisible by 5, each amount set forth in subsection (a) or (b) shall be adjusted in accordance with 

section 1908 of this title.

————— 
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Section 8 

Government–Industry Interactions 

The consequences of failing to understand the elements of commercial market 

economics impede DoD’s ability to meet its warfighting mission. Broad and open 

communications with all market stakeholders are indispensable to provide 

warfighters the means to maintain an overwhelming technical advantage. 

RECOMMENDATIONS

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

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

disposal. 

Rec. 85: Establish a Market Liaison at each acquisition activity to facilitate 

communication with industry.

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

Recommendations continued on following page.
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RECOMMENDATIONS

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

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

two-way communication.
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Government–Industry Interactions Volume 3 | Page 455 

INTRODUCTION 

New commercial technology will change society and, ultimately, the character of war. Maintaining the 

Department’s technological advantage will require changes to industry culture, investment sources, and 

protection across the National Security Innovation Base.1

Cultivating a competitive mindset requires that we optimize our relationships with industry to drive 

higher performance while always remaining within the letter and spirit of ethics and procurement 

regulations.2

Communication is key to harnessing commercial technology in a complex regulatory environment. The 

2018 National Defense Strategy (NDS) includes commercial technology in its description of the modern 

security landscape. The rapid pace of technological change and the proliferation of commercial 

technologies combine to erode some of the U.S. military’s strategic advantage. To regain strategic 

overmatch, the NDS and other high-level DoD documents mandate that the defense acquisition 

workforce and the industrial base improve how they exchange information and communicate needs. In 

a March 2018 memo, then-Deputy Defense Secretary Patrick Shanahan emphasizes that 

communications with industry are both necessary and already permitted. The memo states, “Industry 

is often the best source of information concerning market conditions and technological capabilities.”3

The consequences of failing to understand commercial markets are direct and meaningful. Without 

appropriate communications with industry, warfighters are likely to receive more costly, less advanced 

equipment later than desired. 

Compounding the challenge of resetting how DoD and industry communicate is an ever-expanding 

series of federal regulations, most notably the FAR. As an example, the Armed Services Procurement 

Regulation of 1947 had 125 pages. When the FAR was codified in April 1984, it was 1,953 pages. By 

July 2014, the FAR had 2,193 pages and the DFARS was 1,554 pages.4 When Jacques Gansler testified in 

2015, the full Code of Federal Regulations (CFR) was estimated to be 180,000 pages and growing by 

2,000 pages every year.5 The regulatory burden on the acquisition workforce has grown so acute in 

recent years that the Defense Business Board’s primary recommendation in its FY 2012 report, Linking 

and Streamlining the Defense Requirements, Acquisition, and Budget Processes, was to “zero-base the entire 

system, including all directives and regulations.”6

 

1

 DoD, 2018 National Defense Strategy, 3, accessed November 20, 2018, https://dod.defense.gov/Portals/1/Documents/pubs/2018-

National-Defense-Strategy-Summary.pdf. 

2

 Deputy Defense Secretary Patrick Shanahan, Memorandum, Engaging with Industry, March 2, 2018, accessed November 20, 2018, 

http://ogc.osd.mil/defense_ethics/resource_library/engaging_with_industry_policy.pdf. 

3

 Ibid. 

4

 Allen Friar, “Swamped by Regulations: Perils of an Ever-Increasing Burden,” Defense AT&L Magazine, January-February 2015, 34, 

accessed November 20, 2018, https://apps.dtic.mil/dtic/tr/fulltext/u2/a621269.pdf. 

5

 Scott Chandler, “Rethinking Defense Acquisition: Zero-Base the Regulations,” War on the Rocks, January 6, 2017, accessed 

November 20, 2018, https://warontherocks.com/2017/01/rethinking-defense-acquisition-zero-base-the-regulations/. Jacques S. Gansler, 

PhD, Testimony to the United States Senate Committee on Armed Services, December 1, 2015, accessed November 20, 2018, 

https://www.armed-services.senate.gov/imo/media/doc/Gansler_12-01-15.pdf. 

6

 Defense Business Board, Report to the Secretary of Defense: Linking and Streamlining the Defense Requirements, Acquisition, and 

Budget Processes, Report FY 12-02, accessed November 20, 2018, https://dbb.defense.gov/Portals/35/Documents/Reports/2012/FY12-

2_Linking_And_Streamlining_The_Defense_Requirements_Acquisition_Budget_Processes_2012-4.pdf. 
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Short of starting from scratch, DoD can do much to improve its acquisition processes and its ability to 

procure goods and services in support of the NDS. At the heart of these efforts is communication. 

A culture of open communication allows the acquisition workforce to share best practices, learn from 

mistakes, and align missions among stakeholders. A culture of open communication also allows the 

federal government and its contractors to better understand each other’s needs, constraints, and areas 

for confluence. The Section 809 Panel recommends building a more open and flexible acquisition 

culture. 

Communication within the acquisition workforce is key to truly optimizing the FAR and other 

acquisition regulations. Developing expertise in working with only a few FAR Parts often takes a 

decade. Acquisition teams must work together to leverage expertise and to train new members of the 

workforce.7 Leadership at all levels must facilitate this team culture and encourage new approaches to 

working within the system. Support for experimenting and learning comes from a leadership culture 

that allows for and accounts for mistakes. Providing top cover to acquisition teams is an important 

element of leadership. Leaders must inculcate a passion for lessons learned. For example, acquisition 

teams should communicate their lessons learned in group settings. Through this emphasis on 

supportive leadership and communication, the workforce can offset the complexity of the regulatory 

system to illuminate and operate within the full breadth of the FAR. 

This section focuses on DoD’s communication with contractors and potential contractors. In many 

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

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

industry. Recommendation 84 emphasizes that communications with industry are authorized and 

encouraged. It also recommends that DoD submit annual reports on its plans to improve its 

communications with industry and its successes therein. Recommendation 85 establishes and enables a 

market liaison position to simplify the way in which industry communicates with DoD. A single, 

named point of contact could advocate on behalf of industry within the acquisition community and 

could work to resolve issues between the two. This program would increase clarity and communication 

in a regulatory system demanding more of both. Recommendation 86 emphasizes market research for 

commercial goods and services. In this area, DoD can improve it understanding of the commercial 

marketplace in terms of price and availability through existing rules and procedures. Recommendation 

87 establishes a market intelligence capability. 

RECOMMENDATIONS 

Recommendation 84: Direct DoD to communicate with the marketplace 

concerning acquisition from development of the need/requirement through 

contract closeout, final payment, and disposal. 

Problem 

Despite attempts by governmentwide and DoD acquisition leaders since Congress passed the Federal 

Acquisition Streamlining Act of 1994 (FASA), DoD acquisition personnel and individuals in the 

 

7

 Statement of Guiding Principles for the Federal Acquisition System, FAR 1.102(c) and (d). 
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marketplace have expressed concern about communicating with each other openly and frequently 

throughout the acquisition process, for fear of legal violations.8 They report fear of being challenged by 

both oversight functions in government and through the protest processes, yet this fear is rooted in 

lore, rather than law. There are very few restrictions that apply to communication with the 

marketplace. 

Background 

Congress has not explicitly directed the acquisition team to communicate with the marketplace but has 

encouraged and permitted communication with industry. 9 The difference between directing and 

encouraging and permitting is key in terms of DoD culture and behavior regarding communication with 

industry. Over time, the perceived risks that members of the acquisition team have attached to 

communication between government and the marketplace have created a perception that such 

communication is risky and may even be prohibited. 

The Office of Federal Procurement Policy (OFPP), the FAR Council, the office of the Secretary of 

Defense, and the DAR Council have issued numerous policy documents directing and encouraging 

communications with the marketplace.10 In a March 2018 policy memorandum to secretaries of the 

Military Services, then-Deputy Secretary of Defense Patrick Shanahan encouraged communication with 

the marketplace. Shanahan noted although operating within required ethical guidelines is essential, 

doing so must not preclude frequent communication with industry at all points in the acquisition 

process. He emphasized, “Conducting effective, responsible, and efficient procurement of supplies and 

services while properly managing the resultant contracts requires Department personnel to engage in 

early, frequent, and clear communications with suppliers.”11 Even this clear direction from DoD 

leadership has not been sufficient to address the acquisition workforce’s reticence to communicate with 

 

8

 Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103–355 (1994). There are very few restrictions that apply to communications 

with the marketplace. This recommendation is needed to affirmatively debunk the “lore.” 

9

 FAR 1.102(c) states, “The Acquisition Team consists of all participants in Government acquisition including not only representatives of 

the technical, supply, and procurement communities but also the customers they serve, and the contractors who provide the products 

and services.” 

10 OMB Memorandum, “Myth-Busting”: Addressing Misconceptions to Improve Communication with Industry during the Acquisition 

Process, February 2, 2011, accessed November 7, 2018, 

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/procurement/memo/Myth-Busting.pdf. OMB Memorandum, “MythBusting 2”: Addressing Misconceptions and Further Improving Communication During the Acquisition Process, May 7, 2012, accessed 

November 7, 2018, https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/procurement/memo/myth-busting-2-addressingmisconceptions-and-further-improving-communication-during-the-acquisition-process.pdf. OMB Memorandum, “Myth-busting 3”: 

Further Improving Industry Communication with Effective Debriefings, January 5, 2017, accessed November 7, 2018, 

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/procurement/memo/mythbusting_3_further_improving_industry_communications_with_effectiv....pdf. Market Research, FAR Part 10. OSD Memorandum, Better 

Buying Power: Guidance for Obtaining Greater Efficiency and Productivity in Defense Spending, September 14, 2010, accessed 

November 7, 2018, https://www.acq.osd.mil/fo/docs/USD_ATL_Guidance_Memo_September_14_2010_FINAL.PDF. OSD Memorandum, 

Better Buying Power 2.0: Continuing the Pursuit for Greater Efficiency and Productivity in Defense Spending, November 13, 2012, accessed 

November 7, 2018, 

https://www.acq.osd.mil/fo/docs/USD(ATL)%20Signed%20Memo%20to%20Workforce%20BBP%202%200%20(13%20Nov%2012)%20wit

h%20attachments.pdf. OSD Memorandum, Implementation Directive for Better Buying Power 3.0 – Achieving Dominant Capabilities 

through Technical Excellence and Innovation, April 9, 2015, accessed November 7, 2018, 

https://www.acq.osd.mil/fo/docs/betterBuyingPower3.0(9Apr15).pdf. Market Research, DFARS Part 210. 

11 DoD Memorandum, Engaging with Industry, March 2, 2018, accessed October 23, 2108, http://www.ndia.org/-/media/sites/pressreleases/documents/dsd_letter_engaging_with_industry.ashx?la=en. 
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industry, which leaves congressional direction as the only remaining avenue for promulgating this 

essential behavioral and cultural change. 

Discussion 

Every aspect of the acquisition process is adversely affected by acquisition team members’ 

apprehensiveness when communicating with the marketplace. This apprehension is reinforced by legal 

advice provided by the various offices of general counsel, staff judge advocate’s offices, and fear of 

protests. It discourages communication between government and the private sector even when the 

related fear is unfounded. The potential costs of failing to communicate adequately with the private 

sector include added time to already inherently lengthy acquisitions processes and lost opportunities to 

access the innovative solutions accessible to nonstate actors and the nation’s near-peer competitors. 

The acquisition team is defined in FAR Part 1 as “all participants in Government acquisition including 

not only representatives of the technical, supply, and procurement communities but also the customers 

they serve, and the contractors who provide the products and services.” The perceived limitations on 

communication hinder team members’ ability to work together to identify and deliver capability to 

warfighters. 

This fear of communicating with the marketplace extends to the formulation of policy applicable to the 

acquisition system, despite permissive language in the Office of Federal Procurement Policy Act, the 

Administrative Procedures Act, and policy statements by every administration for at least the last 20 

years. The myriad rules that govern doing business with DoD present a great enough challenge. The 

fact that those rules often do not mirror how the private sector buys and sells further complicates the 

acquisition process. To foster successful procurement in the marketplace DoD must communicate with 

the private sector in the form of policy formulation and market research. 

Market research should not be limited to contracting officers. It should include communication among 

acquisition team members as they discern what products or services are available. It should also 

include communication with industry such as identifying potential suppliers’ respective capabilities, 

considering the possible applications marketplace solutions might offer, and even exploring the 

disposal side of acquisition. Applications of a solution may evolve over time, necessitating continued 

communication throughout the acquisition process. 

In 1994, Congress enacted FASA, which included landmark language in Title VIII regarding acquisition 

of commercial products and services, placing even greater emphasis on the need for and proper 

conduct of market research.12 Section 8104, Preference for Acquisition of Commercial Items, included a 

section on market research that was codified at 41 U.S.C. § 3307 and 10 U.S.C. § 2377 which state, in 

part, the following: 13

 

12 Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103-355, 108 Stat. 3390 (1994). 

13 The Panel believes that this applies equally to its proposal on readily available and readily available with customization. See 

Recommendation 35 in Section 1 of this Volume 3 Report. 
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 (d) MARKET RESEARCH. — 

 (1) WHEN TO BE USED. —The head of an executive agency shall conduct market research 

appropriate to the circumstances— 

 (A) before developing new specifications for a procurement by that executive agency; and 

 (B) before soliciting bids or proposals for a contract in excess of the simplified acquisition 

threshold. 

 (2) USE OF RESULTS. —The head of an executive agency shall use the results of market 

research to determine whether commercial items or, to the extent that commercial items suitable 

to meet the executive agency's needs are not available, non-developmental items other than 

commercial items are available that— 

 (A) meet the executive agency's requirements; 

 (B) could be modified to meet the executive agency's requirements; or 

 (C) could meet the executive agency's requirements if those requirements were modified to a 

reasonable extent. 

10 U.S.C. § 2377 includes a broad additional requirement for DoD personnel to receive training in 

conducting market research: 

 (e) MARKET RESEARCH TRAINING REQUIRED. —The Secretary of Defense shall provide 

mandatory training for members of the armed forces and employees of the Department of Defense 

responsible for the conduct of market research required under subsections (c) and (d). Such 

mandatory training shall, at a minimum— 

 (1) provide comprehensive information on the subject of market research and the function of 

market research in the acquisition of commercial items; 

 (2) teach best practices for conducting and documenting market research; and 

 (3) provide methodologies for establishing standard processes and reports for collecting and 

sharing market research across the Department. 

Market research serves as the foundation for learning about many important procuring-activity 

decisions such as availability of commercial products or services to meet agency needs, as well as 

nondevelopmental products or services, the appropriate procurement method, the likelihood of 

competition, appropriate terms and conditions, pricing, and more. 

Congress has continued to focus on market research though additional requirements in NDAAs. For 

example, the FY 2008 NDAA required DoD to develop market research training focused primarily on 

contracting officers and prime contractors.14 Section 855 of the FY 2016 NDAA addressed market 

 

14 FY 2008 NDAA, Pub. L. No. 110-181, div A, title VIII, § 826(b) (2008). 
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research in a much more inclusive manner.15 It makes clear the importance Congress places on the 

proper conduct of market research: 

 (a) GUIDANCE REQUIRED. —Not later than 90 days after the date of the enactment of this Act, 

the Under Secretary of Defense for Acquisition, Technology, and Logistics shall issue guidance to 

ensure that acquisition officials of the Department of Defense fully comply with the requirements of 

section 2377 of title 10, United States Code, regarding market research and commercial items. The 

guidance issued pursuant to this subsection shall, at a minimum— 

 (1) provide that the head of an agency may not enter into a contract in excess of the simplified 

acquisition threshold for information technology products or services that are not commercial 

items unless the head of the agency determines in writing that no commercial items are suitable 

to meet the agency’s needs as provided in subsection (c)(2) of such section; and 

 (2) ensure that market research conducted in accordance with subsection (c) of such section is 

used, where appropriate, to inform price reasonableness determinations. 

Section 855 included language that demonstrates Congress’s intent that market research be conducted 

across the acquisition community and not solely by contracting officers: 

 (b) REVIEW REQUIRED.—Not later than 180 days after the date of the enactment of this Act, the 

Chairman and the Vice Chairman of the Joint Chiefs of Staff, in consultation with the Under 

Secretary of Defense for Acquisition, Technology, and Logistics, shall review Chairman of the Joint 

Chiefs of Staff Instruction 3170.01, the Manual for the Operation of the Joint Capabilities Integration 

and Development System, and other documents governing the requirements development process and 

revise these documents as necessary to ensure that the Department of Defense fully complies with the 

requirement in section 2377(c) of title 10, United States Code, and section 10.001 of the Federal 

Acquisition Regulation for Federal agencies to conduct appropriate market research before developing 

new requirements. 

Congress defined the term market research for purposes of Section 855 to include the exchange of 

information between “knowledgeable individuals in Government and industry.” Section 855 states the 

following: 

 (c) MARKET RESEARCH DEFINED. —For the purposes of this section, the term ‘‘market 

research’’ means a review of existing systems, subsystems, capabilities, and technologies that are 

available or could be made available to meet the needs of the Department of Defense in whole or in 

part. The review may include any of the techniques for conducting market research provided in 

section 10.002(b)(2) of the Federal Acquisition Regulation and shall include, at a minimum, 

contacting knowledgeable individuals in Government and industry regarding existing market 

capabilities. 

 

15 FY 2015 NDAA, Pub. L. No. 114-92, div. A, title VIII, § 855 (2015). 
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This definition of market research in Section 855 is more detailed than the very generic definition 

currently found in FAR 2.101, Definitions: 

“Market research” means collecting and analyzing information about capabilities within the market to 

satisfy agency needs. 

The 2016 NDAA was even more specific on this question of the exchanges between government and 

industry personnel as part of market research. Section 887 encourages “responsible and constructive 

exchanges with industry.” 

Not later than 180 days after the date of the enactment of this Act, the Federal Acquisition Regulatory 

Council shall prescribe a regulation making clear that agency acquisition personnel are permitted and 

encouraged to engage in responsible and constructive exchanges with industry, so long as those 

exchanges are consistent with existing law and regulation and do not promote an unfair competitive 

advantage to particular firms. 

The new definition and the congressional direction have not yet been adopted in the FAR or DFARS. 

The difficulty with this language is that it is permissive and not directive in nature. To change the 

current culture of apprehension and fear the language must be directive. In the absence of clear 

direction, there will always be advice to the effect, “you may communicate with the marketplace, 

but...” The but, though not prohibitive, clearly creates a risk to be avoided. 

Communication between members of the acquisition team and industry is essential so that DoD 

customers who determine the requirements, program managers, contracting officers, contract 

managers, and sustainers can ensure warfighters benefit from the most innovative solutions available. 

It is apparent that a congressional mandate is the only condition that will convince government 

acquisition team members that they really are empowered to search the marketplace, ask questions 

about the products or services they believe meet their needs, negotiate for the purchase of that product 

or service, and continue a dialogue with the seller as they put the product in service or the seller 

performs the service. 

There will be those who criticize the potential for corruption created by a direction to communicate 

with the marketplace without a caveat about various forms of prohibited activity from lack of 

competition to criminal conduct. Such critics should note the host of specific rules that already exist 

governing behavior set out in detail in the federal standards of conduct at 5 CFR 2635.101. Those 

standards provide that federal government employees must abide by a series of independent duties 

that make up the basic tenets of public service, including the duties of providing an honest effort in 

performing their functions and a duty to act impartially in dealing with nongovernmental entities. 

Federal agencies place additional obligations for fairness and honesty in supplemental agency ethics 

guidance. 

Although there have been some isolated standards of conduct breaches, they are rare. Considering the 

huge number of interactions between federal employees and the public every year, the standards have 

proven to be an effective method of ensuring that fraud, waste, and abuse of the public trust rarely 

occur. Just in case those standards are not inherently enough to control bad behavior, Congress has 
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enacted protections for whistleblowers embedded throughout the standards, such that if a breach occurs, 

institutional incentives support identifying and sanctioning those behaviors 

Fundamentally, the cultural fear of ethics breaches, illegal, or bad behavior that has taken hold in 

agencies for the past 20 years has led to generalized fear of open communication. This fear is an 

irrational response to a disproportionately small number of standards breaches or abuses of the duty of 

fair dealings. It should not be a reason to limit communications related to acquisition on either 

procedural or substantive reasons. 

In Recommendations 59-61, the Section 809 Panel addresses both the training and education members 

of the acquisition team require before they are authorized to act on behalf of warfighters and taxpayers. 

Private-sector firms also train their acquisition team members on the various requirements for doing 

business with the government. The vast majority have their own codes of conduct and educate their 

employees on the consequences of violating those codes. 

Current law does not specifically clarify that communications with the marketplace are not only 

permitted, but most importantly, directed throughout the acquisition process. The current statutory 

construct does not make it clear that when there is a question about whether there should be a 

communication with the marketplace, members of the acquisition team should err in favor of that 

communication. 

Conclusions 

To overcome the current cultural fear within DoD’s acquisition team of communicating with the 

marketplace, Congress must direct that communications with the marketplace, at all stages of the 

procurement process, including policy making, sustainment, and disposal, are required. 

Providing acquisition team members appropriate training and education before authorizing them to act 

on behalf of warfighters and taxpayers is key to supporting ethical behavior. It is important that 

Congress not caveat its direction to communicate with the marketplace with warnings about various 

forms of prohibited activity. This sort of qualified mandate will obscure the clear-cut break with 

current practice that is recommendation is intended to create. 

Congress should express the sense that communications with the marketplace are not only authorized 

but encouraged throughout the acquisition process, to include policy development, facilitating an 

approach of when in doubt, authorize communication. Congress should also direct DoD, by statute, to 

communicate with the marketplace concerning acquisition from development of the need/requirement 

through contract closeout, final payment and disposal and submit an annual report for the 5 years 

following enactment of this statute articulating DoD’s plans for communicating with industry and its 

accomplishments in implementing the direction to communicate with industry. Nothing in these 

recommendations eliminates the requirements governing ethical behavior by the acquisition team. 
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Implementation 

Legislative Branch 

 Express the sense of Congress that communications with the marketplace are not only 

authorized but encouraged during every step of the process from development of the 

requirement through disposal. This communication specifically includes policy development 

and makes clear that when in doubt, DoD should authorize communication. 

 Direct DoD, by statute, to communicate with the marketplace concerning acquisition from 

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

 Direct DoD to submit an action plan to the congressional defense committees within 30 days of 

enactment that identifies barriers and restrictions and steps to remove them. Require DoD to 

submit annual updates. 

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 8. 

Implications for Other Agencies 

 These recommendations will affect all contracting agencies within the government if adopted as 

governmentwide policy. The FAR, as well as agency supplements, will require changes. 

Recommendation 85: Establish a Market Liaison at each acquisition activity to 

facilitate communication with industry. 

Problem 

DoD continually seeks new suppliers to refresh its supplier base and is especially interested in 

attracting potential new suppliers that offer innovative, state-of-the art technologies and software. 

A free flow of communication between government and a variety of potential suppliers is essential to 

ensure DoD obtains the best products available. This flow of information must be with potential 

suppliers unfamiliar with government bureaucracy, as well as current suppliers. 

Generally, DoD’s large and complex buying activities reside on DoD facilities that include a mix of 

operational units, tenant organizations, and confusing organizational acronyms and symbols. Websites 

for these operations can be out of date or so information-heavy that locating needed help is difficult. 

Organization charts, especially with phone numbers, are frequently unavailable. 

To facilitate effective dialogue with industry that fosters competition, quickly addresses supplier 

issues, and attracts new suppliers, DoD needs to establish clear points of entry to make it more 

accessible to the marketplace and facilitate simple, predictable communications between its acquisition 

establishment and the marketplace. 
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Background 

DoD has taken a number of steps to address the kinds of communication gaps typical of a large 

bureaucracy. In the acquisition arena, DoD established specialized responsibilities focused on specific 

acquisition-related matters or communities such as the following:

 Small Business Ombudsman for Defense Audit Agencies (10 U.S.C. § 204)

In general, these ombudsmen “serve as the defense audit agency’s [DCAA and DCMA] primary 

point of contact and source of information for small business concerns.” The Defense Contract 

Audit Agency (DCAA) and Defense Contract Management Agency (DCMA) small business 

ombudsmen are identified through links on their respective home pages. DCAA’s website 

identifies the ombudsman as a “small business focal point,” DCMA website identifies the 

ombudsman as the “DCMA Connect Point for Industry/Contractor Concerns.” 

 Memorandum of Agreement: DoD Ombudsman for Foreign Signatories (10 U.S.C. § 2350h)

This ombudsman “shall assist officials of those foreign governments in understanding and 

complying with procedures and requirements of the Department of Defense (and, as 

appropriate, other departments and agencies of the United States) insofar as they relate to any 

such memorandum of agreement.” This ombudsman’s responsibility resides in DoD with the 

Defense Pricing and Contracting (DPC) office and can be found on the DPC website under 

“International Contracting.” 

 Task and Delivery Order Ombudsman (10 U.S.C. § 2304c(f) and 41 U.S.C. § 4106(g)

This ombudsman is “responsible for reviewing complaints from the contactors on such [task 

and delivery order] contracts and ensuring that all the contractors are afforded a fair 

opportunity to be considered for task or delivery orders.” Each agency that awards task or 

delivery order contracts must appoint such an ombudsman. To date, it appears few agencies 

have publicized the availability of this specialized ombudsman. FAR case 2017–020 is in process 

to develop a standard clause for use in task and delivery order contracts with contact 

information for these ombudsmen.16 

The Army Materiel Command (AMC) established a much broader acquisition-focused ombudsman at 

the headquarters and several subordinate commands. 17 The AMC ombudsmen serve as a point of entry 

for business inquiries, concerns, and complaints, and supports other AMC activities in industry 

outreach. The Defense Logistics Agency (DLA) established an industry ombudsman primarily focused 

exclusively on external outreach and engagement.18 DLA Procurement Technical Assistance Centers 

also assist industry in engaging with the DoD acquisition establishment, but they are not well suited to 

answer questions about particular procuring activities or determining the most appropriate contacts for 

industry at procuring activities they do not work with often.

 

16 Federal Acquisition Regulation: Ombudsman for Indefinite Delivery Contracts, Fed. Reg. Vol. 83, No. 212 (Nov. 1, 2018). 

17 “AMC Business Connections: Ombudsman,” Army Materiel Command, accessed November 30, 2018, 

https://www.amc.army.mil/Connect/Business-Connections. 

18 “DLA Strategic Plan 2018–2026, Industry Engagement Plan,” Defense Logistics Agency, accessed November 30, 2018, 

http://www.dla.mil/Info/strategicplan/IndustryEngagementPlan/. 
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Discussion 

Although there are examples of several different approaches DoD has taken to improve two-way 

communication with industry, no standard manner exists for industry to approach an unfamiliar DoD 

acquisition organization or pose a question or suggestion outside the confines of an acquisition. It is 

ironic that DoD has an ombudsman specifically designated to “assist officials of those foreign 

governments in understanding and complying with procedures and requirements of the Department of 

Defense,” but no parallel office exists for U.S. companies unfamiliar with the procedures and 

requirements. 

Businesses have indicated that when they considered offering their commercial products or services to 

DoD for the first time they found identifying the proper channel for communications with government 

procuring activities very difficult. Such businesses may have little understanding of the DoD 

acquisition establishment, how to communicate with the establishment, and no idea where to find 

information on these topics. This observation is discussed in more detail in the Section 809 Panel’s 

Volume 1 Report, Recommendation 21, Refocus DoD’s small business policies and programs to prioritize 

mission and advance warfighter capabilities and capacities. The report included the following 

observations: 

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. 

Anecdotal evidence gathered by the Section 809 Panel indicates that the example above is not a unique 

experience; companies with new technologies unknown to DoD cannot easily introduce their products 

and services into the defense market, to the detriment of warfighters.19 

Companies considering doing business with DoD for the first time, may question who in the 

acquisition establishment might be interested in a particular technology, how to find out what 

acquisitions are being considered in the future, or how to get cleared to come onto the facility. 

Companies that become frustrated with the pursuit of the proper DoD contact may feel pressure to hire 

a consultant simply to help untangle the bureaucracy or may decide not pursue business with DoD. 

Incumbent contractors generally understand how their customers are organized and with whom they 

can communicate when they have questions or concerns. Often, these companies have former DoD 

personnel on staff who can guide the business through the bureaucracy. Even though communication 

with their customer may be smooth, familiarity with one DoD procuring activity does not necessarily 

translate to ease of communication with an unfamiliar acquisition activity. 

Often, suppliers have a question or concern about an activity’s procurement processes or have a 

concern with a particular individual or organization’s handling of a situation. The contracting officer 

clearly serves as the point of contact for communication with potential suppliers/offerors during the 

formal solicitation (FAR 15.2) and source selection phases (FAR 15.3). There needs to be a clear channel 

 

19 Section 809 Panel, Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 1 of 3, 21, 178–179 (2018). 
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to a disinterested party at the senior level of the procuring activity, however, to provide an outlet for 

those concerns and questions outside the boundaries of the formal solicitation, proposal, and source 

selection process. Addressing questions early will foster competition and may avoid more complex 

issues later in a particular procurement. 

Recommendation 87 of this report recommends programs and portfolios establish a market intelligence 

capability. The market intelligence capability would be an important element of an activity’s market 

research responsibilities and would proactively engage in two-way communications to labs, 

universities, and companies large and small (both existing suppliers and prospective new suppliers) to 

explain the government’s needs and to search for new and innovative technologies, software, or 

processes for use in a particular program or portfolio of programs. This proactive external search for 

focused market intelligence is distinct from the more general need for the government to be open and 

easily accessible to industry in a predictable way, and to be available to assist industry in piercing the 

often imposing DoD acquisition bureaucracy. 

Conclusions 

Regardless of size, new potential suppliers, with new technologies, services, or ideas of potential 

interest to DoD must be able to quickly identify and communicate with the appropriate DoD 

acquisition contact. Even companies currently doing business with DoD may have questions about 

doing business with a particular organization. The bureaucracy is complex and often difficult to 

penetrate. To be open and welcoming to industry, DoD must create a culture in which communication 

is simple and predictable. 

To address this shortcoming, each DoD acquisition activity should establish a market liaison capability. 

This procuring activity-focused market liaison would serve as the activity’s point of entry for new or 

existing suppliers with new ideas, products, or services, as well as those with questions or concerns 

about the activity’s acquisition processes. The individuals assigned this responsibility should have 

sufficient experience, knowledge, and insight into the operation of the procuring activity to 

meaningfully assist those businesses making an inquiry. The market liaison capability would be widely 

publicized, standard across all DoD procuring activities, and readily accessible on activity web sites so 

potential suppliers know there is one easy-to-locate point of entry for anyone seeking information at a 

particular procuring activity. 

Implementation 

Legislative Branch 

 Revise Title 10 at 10 U.S.C. § XXX to establish the requirement for and responsibilities of the 

procuring activity Market Liaison. 

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 8. 
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Implications for Other Agencies 

 These recommendations will affect all contracting agencies within the government if adopted as 

governmentwide policy. The FAR, as well as agency supplements, will require changes. 

Recommendation 86: Encourage greater interaction with industry during 

market research. 

Problem 

Market research is the foundation of any successful procurement of products and services, especially 

commercially available products and services. Numerous statutes and regulations prescribe elements 

of market research, but thorough market research is often hampered by concerns about the extent to 

which buying activities can engage in exchanges with industry.

Background 

Market research is an important component of any successful procurement in the commercial or 

defense marketplace. In 1994, Congress enacted FASA20 which included landmark language in 

Title VIII regarding acquisition of commercial products and services, placing even greater emphasis on 

the need for and proper conduct of market research. Section 8104, Preference for Acquisition of 

Commercial Items, included a section on market research that was codified at 41 U.S.C. § 3307 and 

10 U.S.C. § 2377. 

Market research serves as the foundation for many important procuring activity decisions, such as the 

availability of commercial products or services to meet an agency’s need, the appropriate procurement 

method, the likelihood of competition, appropriate terms and conditions, pricing, and more. 

Section 887 of the FY 2016 NDAA has specific language on exchanges between government and 

industry personnel as part of market research. FAR case 2016-005, implementing Section 887, is 

currently in the proposed rule stage and proposes to amend the existing language at FAR 1.102-2 

Performance Standards.21 FAR 1-102-2(a)(4) currently reads as follows: 

 (4) The Government must not hesitate to communicate with the commercial sector as early as possible 

in the acquisition cycle to help the Government determine the capabilities available in the commercial 

marketplace. The Government will maximize its use of commercial products and services in meeting 

Government requirements. 

The proposed rule would simply add a sentence to address the requirement of Section 887: 

 (4) The Government must not hesitate to communicate with the commercial sector as early as possible 

in the acquisition cycle to help the Government determine the capabilities available in the commercial 

marketplace. The Government will maximize its use of commercial products and services in meeting 

 

20 Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103-355, 108 Stat. 3243 (1994). 

21 FAR: Effective Communication Between Government and Industry, FAR Case 2016-005, Fed. Reg. Volume 81, Issue 229 (Nov. 29, 2016). 
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Government requirements. Government acquisition personnel are permitted and encouraged to 

engage in responsible and constructive exchanges with industry as part of market research 

(see 10.002), so long as those exchanges are consistent with existing laws, regulations, and 

promote a fair competitive environment.

There are several issues with this proposed rule. The proposed new sentence appears in FAR Part 1, 

Federal Acquisition Regulations System. It would be unlikely for contracting officers to refer to Part 1 for 

guidance on how to conduct exchanges with industry. It would be particularly unlikely for other 

members of the acquisition team other than contracting officers to even be aware of this guidance in 

Part 1. This approach satisfies only the letter, but not the spirit, of Section 887 by literally repeating the 

language of Section 887, with no emphasis on the desirability and appropriateness of conducting such 

exchanges. The added language in the law expends almost as many words warning the acquisition 

team about the dangers of conducting exchanges with industry (“so long as those exchanges are 

consistent with existing laws, regulations, and promote a fair competitive environment”) as it does 

declaring that it is permitted and encouraged. Finally, having warned the acquisition team about the 

dangers of exchanges, it provides no guidance on their proper conduct. 

Exchanges between government and industry are essential to creating knowledgeable buyers and 

establishing well-founded requirements. Much more than the proposed one sentence warning is in 

order. 

Exchanges can occur under four circumstances. The proper distinction among these circumstances is 

critically important because conducting exchanges is different in each circumstance with the latter two 

being carefully controlled by the contracting officer. 

 On-going exchanges with industry that occur as part of government acquisition teams’ 

responsibility to remain attuned to the current capabilities and future trends in their assigned 

area of responsibility for the procurement of products or services. Government acquisition 

teams, requirements teams, or even end users may conduct this type of market research for 

broadly defined categories of products or services, or for specific inquiries focused on the ability 

of the current marketplace to satisfy particular needs. They may conduct this kind of research 

by engaging in industry days, participating in industry technical and professional association 

forums, reviewing professional literature, attending product demonstrations, or holding oneon-one meetings for the general purpose of becoming more knowledgeable buyers (see 

FAR 10.001). These types of exchanges may, but are not required to, involve contracting officers 

(although in the Section 809 Panel’s vision of the dynamic marketplace, contracting officers 

should be highly encouraged, if not required, to become more knowledgeable of the products, 

services and markets that are available to satisfy customers’ needs). 

 Exchanges with industry conducted during the market research phase of a particular

procurement prior to issuance of a solicitation for a product or service. For these exchanges, the 

government has a specific need identified and is further refining its understanding of market 

place capabilities to satisfy that need through one-on-one exchanges with potential offerors or 

those interested in subcontract opportunities (see FAR 10.001). There is no requirement to 

regulate such industry exchanges through contracting or legal staffs; however, the best 
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outcomes are achieved when the entire acquisition team is involved in open, flexible dialog with 

industry. It is not necessary to have the same communication with each potential offeror to have 

fair communication. The type of questions and answers will vary from offeror to offeror, as each 

firm tries to capitalize on its innovations and unique strengths. The government does not have 

to disclose the content of exchanges with one firm to all interested firms to maintain 

transparency. It is likely that truly innovative approaches will involve proprietary information 

that offerors would want protected, and the government may give assurances it will be. Only if 

an exchange in this phase results in the government changing its requirement does the agency 

have to provide the reason for such a change to all potential offerors. 

 Exchanges with industry subsequent to the issuance of a government solicitation and prior to 

the government’s receipt of proposals or quotations are tightly regulated. (See FAR 15.201.) 

 Exchanges with industry subsequent to the receipt of proposals and prior to the subsequent 

contract award are also tightly regulated. (See FAR 15.306.) 

Discussion 

The importance of market research to DoD is clear. Exchanges between government and industry are 

an essential component of market research. The government cannot shut itself off from these necessary 

exchanges by policy, fear, or lack of training, and then expect to emerge as knowledgeable buyers when a 

specific requirement is identified. This assertion is particularly true in the market for commercial 

products and services. Market research is a continuous and engaged activity common and essential to 

any entity’s procurement of products or services.

Comparisons are frequently made between government procurement and commercial industry 

procurement. In industry, buyers tend to be more specialized than their government counterparts. 

Frequently, buyers in commercial businesses focus on a particular industry, commodity, product, or 

service and conduct continuous market research to ensure they are best positioned to meet their 

business’s needs in that specialized area. This continuous research is key to becoming a knowledgeable

buyer and necessarily includes exchanges with others in that specialized market. 

Government acquisition personnel are hesitant to engage in the kind of one-on-one exchanges common 

in the commercial marketplace and encouraged by Congress. The reason for this reluctance is unclear, 

but anecdotal evidence points to concerns that such exchanges are either inappropriate or will 

eventually lead to a protest. 

The effect of this reluctance to engage in market research is apparent in a recent Government 

Accountability Office (GAO) report that focused on the steps DoD is taking to better engage with 

companies that do not typically do business with DoD.22 GAO identified six challenges that deter these 

companies from selling their products and services to DoD, one of which was the “inexperienced DoD 

contracting workforce.” General inexperience, coupled with inexperience with the details of a 

particular product or service and how it is typically procured in the marketplace can lead to a variety of 

 

22 GAO, DoD is Taking Steps to Address Challenges Faced by Certain Companies, GAO-17-644, accessed October 25, 2018, 

https://www.gao.gov/assets/690/686012.pdf. 
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issues later in the process. Market research is key to overcoming this experience in a given marketplace 

for products or services. 

Conclusions 

Policy guidance is helpful, but not widely used. OFPP took an important step in addressing these 

questions though a series of myth-busting memoranda.23 These memoranda, though widely applauded 

by both government and industry, appear to have received little attention beyond the Washington, 

D.C. area and higher headquarter staffs.24 The proposed rule implementing the direction in Section 887 

of the FY 2016 NDAA is also useful, but it is unlikely to draw much attention in a little-read section of 

FAR Part 1. Despite this laudable guidance, contracting officers remain reluctant to talk to industry as 

part of market research, especially in one-on-one meetings. Important elements of the myth-buster

memorandum related to market research should be incorporated into a new FAR Subpart 10.1, 

Exchanges With Industry During Market Research. 25 

Market research is not well defined for the broad purpose of conducting acquisition. Market research is 

defined in Section 855 of the FY 2016 NDAA, for purposes of that section only. Market research is also 

defined in 10 U.S.C. 2410n, applicable only to that section on products of federal prison industries. 

FAR Part 2, Definitions, defines market research for the FAR, but does so very narrowly and in a 

manner that suggests market research can be conducted as a solicitation-specific activity without 

exchanges or interaction with knowledgeable experts in the government and industry. A more inclusive 

definition of market research is needed at 41 U.S.C. § 117, 10 U.S.C. § 2302, and FAR 2.101. 

The current FAR guidance does not adequately make distinctions in industry exchanges.26 FAR Part 10, 

Market Research, lays out the responsibilities and steps to be taken in conducting market research. It 

does not distinguish market research and related exchanges with industry from exchanges conducted 

after issuance of solicitations and receipt of proposals. This important distinction is not well described 

in the FAR. The FAR also does not adequately address the concerns contracting officers frequently 

express with regard to the timing and appropriateness of one-on-one exchanges with industry. 

FAR 15.201, Exchanges with Industry Before Receipt of Proposals, confuses the important distinction 

between exchanges before and after the issuance of the formal solicitation. Further confusing the 

matter, much of 15.201 duplicates the list of “techniques to promote early exchanges of information 

with industry” already found in FAR 10.001 and 10.002 and related to exchanges conducted before 

release of a solicitation. FAR 15.201(f) compounds the confusion by beginning with a sentence about 

 

23 OFPP Memorandum, “Myth-Busting: Addressing Misconceptions to Improve Communication with Industry During the Acquisition 

Process,” February 2, 2011, accessed October 25, 2018, https://interact.gsa.gov/document/%E2%80%9Cmyth-busting%E2%80%9Daddressing-misconceptions-improve-communication-industry-during-acquisition-. Two subsequent memoranda dated May 7, 2012, and 

January 5, 2017, addressed related policy. 

24 Nash & Cibinic Report, “Enhancing Communications During the Acquisition Process: Proposing the Wrong Fix,” 31 No. 1 (2015). 

25 The recommended language in FAR Subpart 10.1 draws heavily on OFPP Memorandum, “Myth-Busting: Addressing Misconceptions to 

Improve Communication with Industry During the Acquisition Process,” February 2, 2011, accessed October 25, 2018, 

https://interact.gsa.gov/document/%E2%80%9Cmyth-busting%E2%80%9D-addressing-misconceptions-improve-communicationindustry-during-acquisition-. 

26 Nash & Cibinic Report, “Enhancing Communications During the Acquisition Process: Proposing the Wrong Fix,” 31 No. 1 (2015). 
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the release of general information, followed by a sentence focused on control of exchanges after release 

of the solicitation, and a subsequent sentence pertaining to general release of information to the public. 

Clear distinctions are needed among exchanges conducted prior to release of a solicitation 

(FAR Part 10), exchanges after issuance of a solicitation (FAR 15.201), and exchanges after receipt of 

proposals (FAR 15.306). 

Market research information in Part 15 is misplaced. Market research applies to all types of 

procurement methods, including commercial products and services (Part 12), micro-purchases and 

simplified acquisitions (Part 13), sealed bidding (Part 14), and contracting by negotiation (Part 15). 

Including policies on market research in Part 15, speaks too narrowly to the importance of market 

research to all these methods. 

FAR 15.201 should be focused on exchanges after issuance of a solicitation and all market research 

information should be placed in FAR Part 10. 

Implementation 

Legislative Branch 

 Revise Title 41 at 41 U.S.C. § 117, to define market research to include exchanges among 

knowledgeable government and industry personnel. 

 Revise Title 10 to reference the definition of market research at 41 U.S.C. § 117. 

Executive Branch 

 Revise FAR Part 2.101, Definitions, to incorporate the statutory definition of market research. 

 Revise FAR Part 10, to add Subpart 10.1, Exchanges with Industry During Market Research. 

 Revise FAR Part 15.2 and 15.201 to eliminate duplication with FAR 10.001 and to clarify the 

distinction between exchanges with industry during market research, after issuance of a 

solicitation, and after receipt of proposals. 

Note: Explanatory report language and draft legislative and regulatory text can be found in the 

Implementation Details subsection at the end of Section 8. 

Implications for Other Agencies 

 These recommended changes to the U.S. Code and FAR will affect all government agencies that 

use the FAR. This widespread applicability is necessary, appropriate, and aligns with the 

existing governmentwide application of the OFPP policies referenced in this recommendation. 
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Recommendation 87: Establish a market intelligence capability throughout DoD 

to facilitate communication that enhances the government’s industry 

knowledge through open, two-way communication. 

Problem 

DoD needs greater and more consistent knowledge and insight regarding emerging technologies and 

capabilities in industry that could be leveraged to address current and future needs. Articulated in 

Recommendations 84–86 above, government officials are reluctant to, or believe they are prohibited 

from, engaging with industry due to the nature of procurement competitions, source selections, and the 

possibility of disclosing sensitive information. These misperceptions create an information barrier 

between government and industry that reduces the government’s ability to foresee technology 

opportunities and expand industry participation and limits innovative and timely resolutions by 

industry. 

Background 

The relationship between acquisition officials and industry has been unnecessarily constrained. The 

government is typically risk adverse and restricts communications rather than pursuing dynamic 

partnership with industry. Industry perceives the government as unable or unwilling to foster ongoing 

relationships beyond specific programs or capabilities. Although industry is eager to share with the 

government, programs are reluctant to engage with industry because officials misunderstand the 

distinction between ongoing, open, and interactive market research and the more constrained 

solicitation and source selection phases at which communications restrictions exist. Market research 

should be an ongoing process focused broadly on capabilities research and evolving technologies and 

focused narrowly in support of researching requirements for a particular program. 

Market research is typically accomplished through limited and controlled engagements with industry 

or Internet searches. This approach leads to missed opportunities for DoD to gain insight into 

technology advancements and to proactively use knowledge to inform development of future 

requirements and strategic plans. Meanwhile, industry is missing the opportunity to gain insight into 

DoD’s future needs. 

Industry is looking to do the following: 

 Share innovative new technologies and their development and/or trajectories with the 

government. 

 Gain insight into the government’s future needs and acquisitions strategies. 

 Seek ways to respond better to RFPs/RFQs. 

 Help the programs solve current and future needs and requirements. 

DoD officials are constrained as follows 

 Concerned about sharing too much information that could jeopardize acquisition strategies, 

source selections or result in future protests. 
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Government–Industry Interactions Volume 3 | Page 473 

 Unwilling to meet with industry one-on-one during market research, believing it may give the 

appearance of favoritism. 

 Focused on execution of current programs and not resourced to gather broader market 

intelligence for current and future applications. 

Discussion 

Government officials say they fear engaging in open and transparent dialogues with industry could 

lead to future protests.27 U.S. agencies, which once owned “technology superiority and fielded cuttingedge technologies now find that off-the-shelf solutions may be more advanced than the solutions they 

are working on.”28 Open communication and information sharing would reduce industry’s investment 

in non-value-added development activities, enabling companies to offer better solutions more 

efficiently. Enhanced communication and information sharing would improve DoD’s ability to identify 

opportunities, particularly in emerging technologies and small businesses, which could decrease 

acquisition lead time needed to deliver innovative solutions to warfighters. 

OFPP addressed this issue in 2011 when it published the first of three myth busting memos focused on 

improved communications with industry. Of note, the memo substantiates that “early, frequent, and 

constructive engagement with industry is especially important for complex, high-risk procurements.”29

The value of such interactions is not limited to one specific category of procurement but rather to the 

entire defense enterprise. The need exists for skilled, knowledgeable executives in the structures 

developed under the portfolio management concepts proposed in Section 2, for Military Service cohorts 

to gather market intelligence about technologies and capabilities in support of inventory managers and 

institutional buyers throughout DoD. This market intelligence capability would result in a continual 

assessment of market research and technology trajectories, and identify potential implications for 

applying this intelligence real-time to the program, PEO (PAE), military service leadership, and other 

DoD acquisition executives. Senior leaders would use this market intelligence regarding the path of 

technology and state of the market to inform and shape program strategies. 

To maximize market intelligence capability, cohorts of experienced, knowledgeable acquisition 

professionals would need to understand the short- and long-term mission, technical requirements, and 

acquisition outlook. Market intelligence cohorts could reach out to industry seeking knowledge of 

existing products, technology, and project trajectories, and their potential future use or application 

throughout the entire acquisition lifecycle from requirements definition through sustainment. 

Conclusions 

DoD needs to establish an enduring market intelligence capability to facilitate continual two-way 

communications with industry about the factors impacting the marketplace, including developing 

 

27 Various government officials, interviews/data-gathering meetings with Section 809 Panel, February–March 2018. 

28 “The Red Queen Problem – Innovation in the DoD and Intelligence Community,” Steve Blank, October 17, 2017, accessed October 30, 

2018, https://steveblank.com/2017/10/17/the-red-queen-problem-innovation-in-the-dod-and-intelligence-community. 

29 OMB Memorandum, “Myth-Busting”: Addressing Misconceptions to Improve Communication with Industry During the Acquisition 

Process, February 2, 2011, accessed October 30, 2018, https://www.whitehouse.gov/omb/management/office-federal-procurementpolicy. 
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institutional knowledge on business cycles and the influence of factors such as geography and scarcity 

on economic fluctuations. Market intelligence responsibilities would include the following: 

 Conduct market and technology research and conduct site visits. 

 Represent the program/PEO (PAE)/Military Services/and other acquisition executives to 

industry. 

 Identify and participate in relevant conferences, tradeshows, and other technology exchange 

venues to collect, establish, and maintain awareness of emerging technologies. 

 Gain understanding and knowledge of technology, research, and development, and use it to 

decrease acquisition cycles, increase capabilities, and provide optimal solutions to warfighters. 

 Provide market intelligence assessments and recommendations to the program/PEO 

(PAE)/Military Services/and other acquisition executives to inform and support requirements 

development and strategic planning. 

Implementation 

Legislative Branch 

 There are no statutory changes required for this recommendation. 

Executive Branch 

 Establish market intelligence capability for programs, PEOs (PAEs), and Military Services. 

Individuals fulfilling the market intelligence role should, 

 Maintain in-depth knowledge of the technology, mission, and strategic needs of program, 

PEO, Military Service, or Defense Agency to effectively communicate current and future 

needs. 

 Gather intelligence on current and emerging technologies across key industries relative to 

the primary mission space and operational requirements of the program(s) and identify 

potential application of technologies. 

 Support the program, PEO (PAE), Military Service, and Defense Agency capability and 

technology roadmaps to inform and advise the future requirements writers of technology 

developments, maturity, and potential innovative applications of technology. 

Note: Draft regulatory text 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. 
Section 8 

Government-Industry Interactions 

Implementation Details 

Recommendation 84 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. COMMUNICATION WITH THE MARKETPLACE.

This section would amend Chapter 137, title 10, United States Code, to insert a new 

section 2301 that would express the Sense of Congress that communications with the 

marketplace are not only authorized but must occur during every step of the process from 

development of the requirement through disposal. This section also would direct the 

Department of Defense (DoD) to submit annual updates for the first five years after date of 

enactment to the congressional defense committees regarding implementation of this section. 

The committee notes, that despite attempts by government-wide and DoD acquisition 

leaders since Congress enacted the Federal Acquisition Streamlining Act of 1994 (Public 

Law 103-355), DoD acquisition personnel and individuals in the marketplace have expressed 

concern about communicating with each other openly and frequently, believing it is either 

prohibited or fraught with risk, fearing possible legal violations or being challenged by 

oversight functions in government and through the protest processes. The committee further 

notes, however, that this fear is rooted in lore, rather than law; there are very few restrictions 

that apply to communications with the marketplace.

The committee recognizes that communications with the marketplace on an ongoing 

basis are essential to acquiring intelligence in terms of what the marketplace has to offer and 

acquiring and maintaining technological superiority that might be employed by DoD to counter 

threats. More importantly, such communications would allow DoD to get inside the turn of our 

near peer competitors and non-state actors in terms of delivering lethality to our warfighter in a 

timely and cost-efficient manner. This section would finally make it clear that, with very limited 

exceptions, communications is not only encouraged and authorized, they are essential and 

required. This section would reinforce the direction that whenever DoD personnel engaged in 

an acquisition function are in doubt about whether to communicate with elements of the 

marketplace, they should err in favor of communication.
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1 SEC. ___. COMMUNICATION WITH THE MARKETPLACE. 

2 (a) IN GENERAL.—Chapter 137 of title 10, United States Code, is amended by inserting 

3 before section 2302 the following new section : 

4 “§2301. Communication with the marketplace 

5 “(a) SENSE OF CONGRESS.—It is the sense of Congress that— 

6 “(1) the Department of Defense must communicate with the marketplace when 

7 acquiring goods and services; 

8 “(2) communication between the Department of Defense and the marketplace 

9 must occur at every step of the acquisition process, from the identification of a need or 

10 requirement through disposal of an item after being taken out of service; 

11 “(3) such communication must include communication with respect to the 

12 development of policy from formulation of the concept to the issuance of the final policy; 

13 and 

14 “(4) whenever Department of Defense personnel engaged in an acquisition 

15 function are in doubt about whether to communicate with elements of the marketplace, 

16 they should err in favor of communication. 

17 “(b) REQUIREMENT FOR COMMUNICATION THROUGHOUT ACQUISITION PROCESS.— 

18 “(1)The Secretary of Defense shall issue such regulations and directives as 

19 necessary to require the acquisition workforce, when conducting an acquisition of goods 

20 or services for the Department of Defense, to engage in responsible and constructive 

21 communication with industry at each stage of the acquisition process, from the 

22 identification of a need or requirement through disposal of an item after being taken out 

23 of service, including during policy development. 
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1 “(2) As part of those regulations and directives, the Secretary shall require that 

2 such communication be consistent with law and regulation. 

3 “(3) As part of those regulations and directives and as the Secretary otherwise 

4 determines to be necessary, the Secretary shall take steps to inculcate within the 

5 acquisition workforce an environment conducive to communication with the marketplace 

6 as required under those regulations and directives. 

7 “(c) ANNUAL REPORT.—Not later than February 1 of each year for the first five years 

8 after this section is enacted, the Secretary of Defense shall submit to the congressional defense 

9 committees a report on the actions taken by the Secretary to implement this section and the 

10 accomplishments of the Department in communicating with the marketplace.”. 

11 (b) CLERICAL AMENDMENT.—The table of sections at the beginning of such chapter is 

12 amended by inserted before the item relating to section 2302 the following new item: 

“2301. Communication with the marketplace.”. 
Recommendation 85 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. MARKET LIAISON REQUIRED AT EACH DEPARTMENT OF DEFENSE 

PROCURING ACTIVITY.

This section would amend Chapter 141, title 10, United States Code, by inserting a new 

section 2387 to establish the requirement for, and responsibilities of, a procuring activity market 

liaison. This market liaison would serve primarily as the point of entry for companies seeking to 

do business with the Department of Defense (DoD), particularly companies unfamiliar with the 

DoD procurement process. The market liaison would also serve to assist industry with inquiries 

or concerns regarding the activities’ acquisition processes.

The committee has long been concerned with the perceived difficulty the Department

has in attracting new, innovative businesses to its supplier base, and in particular, companies in 

the commercial marketplace with state-of-the-art products. DoD procuring activities are often 

located in large, secured facilities not easily accessible to companies unfamiliar with the 

acquisition organization and its often-bureaucratic processes. The committee has learned from 

many companies about their difficulty deciphering the acquisition bureaucracy to find the right 

office to discuss how they might offer their products and services to satisfy the Department’s 

requirements. The market liaison would serve as a common approach across DoD acquisition 

activities that industry may go to as a first point of entry or to obtain answers to questions or 

concerns of a general nature. The committee expects this responsibility to be executed in a 

manner that makes DoD acquisition more accessible and communications between the DoD 

activity and marketplace simple and predictable.
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1 SEC. ___. MARKET LIAISON REQUIRED AT EACH DEPARTMENT OF DEFENSE 

2 PROCURING ACTIVITY. 

3 (a) REQUIREMENT.— 

4 (1) IN GENERAL.—Chapter 141 of title 10, United States Code, is amended by 

5 inserting after section 2386 the following new section: 

6 “§ 2387. Market liaison required at each procuring activity 

7 “(a) REQUIREMENT.—The Secretary of Defense shall require that each procuring activity 

8 of the Department of Defense assign an individual within that procuring activity to be the market 

9 liaison for that activity. 

10 “(b) FUNCTION.—The market liaison for a procuring activity shall serve as the activity’s 

11 point of entry for new or existing suppliers with new ideas, products, or services, as well as those 

12 with questions or concerns about the activity’s acquisition processes. 

13 “(c) QUALIFICATIONS.—An individual assigned as the market liaison for a procuring 

14 activity should have sufficient experience, knowledge, and insight into the operation of the 

15 procuring activity to meaningfully assist those businesses making an inquiry. 

16 “(d) ACCESSIBILITY.—The Secretary of Defense shall ensure that— 

17 “(1) the market liaison responsibility is widely publicized; 

18 “(2) the market liaison function is standard across all procuring activities; and 

19 “(3) the market liaison for a particular procuring activity is readily accessible 

20 through the public web sites of that activity 

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 2386 the following new 

23 item: 

“2387. Market liaison required at each procuring activity.”. 
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1 (b) IMPLEMENTATION DEADLINE.—The Secretary of Defense shall implement section 

2 2387 of title 10, United States Code, as added by subsection (a), not later than 180 days after the 

3 date of the enactment of this Act. 
Recommendation 86 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. DEFINITION OF MARKET RESEARCH FOR PURPOSES OF FEDERAL 

ACQUISITION STATUTES.

This section would amend Chapter I, title 41, United States Code, by inserting a new 

section 117 to establish a definition for market research, and make conforming amendments to 

related sections in Title 10, United States Code. This definition would clearly include exchanges

with knowledgeable individuals in both government and industry as being within the scope of 

market research.

The committee notes that Congress has, on several occasions, emphasized the 

importance of market research to the success of procurements. Most recently, section 855 of the 

National Defense Authorization Act for Fiscal Year 2016 (Public Law 114-92) addressed market 

research and encompassed, for purposes of section 855, a definition of market research that 

includes government contact with knowledgeable individuals in government and industry 

regarding market capabilities. The committee is aware that acquisition personnel often have 

been hesitant to engage in exchanges with industry as part of market research because of lack of 

training or concerns about the proper extent to which such exchanges may occur at the buying 

activities, as well as fear of a protest. The market research definition would make it clear that it 

is both appropriate and necessary for the government to engage with industry to meet the 

needs of the Department of Defense. The committee notes that such emphasis on market 

research is appropriate as it serves as the foundation for many important procuring activity 

decisions such as the availability of commercial products or services to meet the agency’s need; 

the appropriate procurement method; the likelihood of competition; and appropriate terms and 

conditions, and pricing. 
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1 SEC. ___. DEFINITION OF MARKET RESEARCH FOR PURPOSES OF FEDERAL 

2 ACQUISITION STATUTES. 

3 (a) TITLE 41.— 

4 (1) IN GENERAL.—Chapter 1 of title 41, United States Code, is amended by 

5 inserting after section 116 the following new section: 

6 “§ 117. Market research 

7 “In this subtitle, the term ‘market research’ means obtaining information about 

8 capabilities, products, and services available in the private sector through a variety of means, 

9 which may include— 

10 “(1) contacting knowledgeable individuals in government and industry; 

11 “(2) interactive communication among industry, acquisition personnel, and 

12 customers; and 

13 “(3) interchange meetings or pre-solicitation conferences with potential offerors.”. 

14 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of such 

15 chapter is amended by inserting after the item relating to section 116 the following new 

16 item: 

“117. Market research.”. 

17 (b) TITLE 10.—Title 10, United States Code, is amended as follows: 

18 (1) CHAPTER 137.—Section 2302(3) is amended by adding at the end following 

19 new subparagraph: 

20 “(M) The term ‘market research’.”. 

21 (2) SECTION 2222.—Section 2222(i) is amended by adding at the end following 

22 new paragraph: 
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1 “(12) MARKET RESEARCH.—The term ‘market research’ has the meaning given 

2 that term in section 117 of title 41.”. 

3 (3) SECTION 2366a.—Section 2366a(d) is amended by adding at the end following 

4 new paragraph: 

5 “(11) MARKET RESEARCH.—The term ‘market research’ has the meaning given 

6 that term in section 117 of title 41.”. 

7 (4) SECTION 2366b.—Section 2366b(g) is amended by adding at the end following new 

8 paragraph: 

9 “(9) MARKET RESEARCH.—The term ‘market research’ has the meaning given that 

10 term in section 117 of title 41.”. 

11 (5) CHAPTER 140.—Section 2376 is amended by adding at the end following new 

12 paragraph: 

13 “(4) The term ‘market research’ has the meaning given that term in section 117 of 

14 title 41.”. 

15 (6) SECTION 2431a.—Section 2431a(c)(2)(E)(iii) is amended by inserting “(as 

16 defined in section 117 of title 41)” after “market research”. 

17 (7) SECTION 2548.—Section 2548(b)(2)(A)(iii) is amended by inserting “(as 

18 defined in section 117 of title 41)” after “market research”. 
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RECOMMENDED REGULATORY REVISIONS

FAR Subpart 2.101, Definition

“Market research” means collecting and analyzing information about capabilities within the 

market to satisfy agency needs obtaining information about capabilities, products and services 

available in the private sector through a variety of means, which may include contacting 

knowledgeable individuals in government and industry; interactive communication among 

industry, acquisition personnel, and customers; and interchange meetings or pre-solicitation 

conferences with potential offerors.

FAR – Part 10 Market Research

Subpart 10.1 – Exchanges with Industry During Market Research

(a) The purpose of exchanging information is to improve the understanding of Government 

requirements and industry capabilities, thereby allowing potential offerors to judge whether or 

how they can satisfy the Government’s requirements and enhancing the Government’s ability to 

obtain quality supplies and services, including construction, at reasonable prices, and increase 

efficiency in proposal preparation, proposal evaluation, negotiation, and contract award.

(b) As part of the continuous process of market research, agencies are encouraged to promote 

early exchanges of information about general government needs and future acquisitions. Such 

exchanges are particularly useful for understanding the commercial market place for a given 

product, service or technology. Government acquisition teams, requirements teams, or even end 

users may conduct this type of market research for broadly defined categories of products or 

services, or for specific inquiries focused on the ability of the current marketplace to satisfy 

particular needs. They may conduct this kind of research by engaging in industry days, 

participating in industry technical, and professional association forums, reviewing professional 

literature, attending product demonstrations, or holding one-on-one meetings for the general 

purpose of becoming a more knowledgeable buyer (See FAR 10.001). These types of exchanges 

may, but aren’t required to, involve contracting officers.

(c) For specific acquisitions, an early exchange of information among industry and the program 

manager, contracting officer, and other participants can identify and resolve concerns regarding 

matters such as the feasibility of the requirement, the acquisition strategy, proposed contract 

type; key terms and conditions; acquisition planning schedules;, including performance 

requirements, statements of work; the suitability of the proposal instructions and evaluation 

criteria, including the approach for assessing past performance information; the availability of 

reference documents; and any other industry concerns or questions. 
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(d) Government officials – including the program manager, subject matter technical experts, 

users, and/or contracting officer – may meet with potential offerors to exchange general 

information and conduct market research related to an acquisition. Exchanges of information 

are encouraged with interested parties during the pre-solicitation process, ending with issuance 

of the solicitation. To make it clear that one-on-one communication is available to all potential 

offerors, the contracting officer should consider publicizing the Government’s interest in 

meeting with potential offerors on a one-on-one basis as part of the agency’s market research.

(e) There is no requirement that the meetings include all possible offerors, nor is there a 

prohibition on one-on-one meetings. Government ethics rules and Competition in Contracting 

Act, (10 U.S.C. § 2304), prohibit preferential treatment of one vendor over another. Any 

information that is shared in a meeting that could directly affect proposal preparation must be 

shared in a timely manner with all potential offerors to avoid providing any offeror with an 

unfair advantage. Where vendor interaction is expected to include contract terms and 

conditions, any one-on-one meetings should include, or at a minimum be coordinated with, the 

contracting officer.

(f) Industry involvement in pre-solicitation discussions should not lead to exclusion resulting 

from organizational conflict of interest (OCI) concerns. While a vendor who, as part of contract 

performance, drafts the specification for a future procurement will almost certainly be barred by 

OCI rules from competing for that future procurement, pre-solicitation communications are 

generally less structured, less binding, and much less problematic. In the presolicitation context, 

the government is not looking for impartial advice from one source but is instead looking for a 

variety of options from a variety of sources, each one understandably, and reasonably, 

attempting to demonstrate the value of its own approach. These marketing efforts, in 

themselves, do not raise OCI concerns. 

(g) Agency personnel have a responsibility to protect any information that is received in 

confidence from a potential offeror. While the protections of the Procurement Integrity Act do 

not apply prior to source selection, other protections remain. In many cases, the Trade Secrets 

Act (18 U.S.C.§1905) will prohibit Federal employees from divulging protected information, 

including confidential commercial or financial data, trade secrets, operations, processes, or style 

of work. Also, the Freedom of Information Act (FOIA) allows agencies to protect commercial or 

financial information that is privileged or confidential. In cases where a vendor is concerned 

that existing protections are insufficient and engaging in pre-solicitation communication will be 

beneficial, agencies should consider the use of appropriate non-disclosure agreements (NDAs) 

to ensure that proprietary information will be kept from potential competitors. 

(h) Disclosure is an important tool that ensures public trust in our contracting process, but it 

should not be an impediment to meeting with contractors and is not required in every 

circumstance. In the case of meetings where registered lobbyists are employed, contractors are 

required to track the costs and activities of their lobbying activities, as required by FAR Part 31, 

but that obligation places the disclosure burden on the contractor and does not require the 
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government to take any steps. Where registered lobbyists are not involved, additional 

communication with contractors will not involve an additional disclosure burden, though 

conduct of all communications should be consistent with the principles of fairness and 

accountability. 

(i) After issuance of the solicitation, the contracting officer shall be the focal point for exchanges 

with offerors or potential offerors. See FAR 15.201

(j) After receipt of proposals, the contracting officer shall be the focal point for exchanges with 

offerors. See FAR 15.306

FAR Part 15 – Contracting by Negotiation

Subpart 15.2 – Solicitation and Receipt of Proposals and Information

15.200 – Scope of Subpart

This subpart prescribes policies and procedures for –

(a) Exchanging information with industry prior to receipt of proposals after issuance of a 

solicitation;

(b) Preparing and issuing requests for proposals (RFPs) and requests for information (RFI); 

and 

(c) Receiving proposals and information.

15.201 -- Exchanges with Industry before receipt of proposals after Issuance of the 

Solicitation

(a) Exchanges of information among all interested parties, from the earliest identification of a 

requirement through issuance of the solicitation receipt of proposals, are encouraged. Any 

exchange of information must be consistent with procurement integrity requirements 

(see 3.104). Interested parties include potential offerors, end users, Government acquisition and 

supporting personnel, and others involved in the conduct or outcome of the acquisition.

(b) The purpose of exchanging information is to improve the understanding of Government 

requirements and industry capabilities, thereby allowing potential offerors to judge whether or 

how they can satisfy the Government’s requirements, and enhancing the Government’s ability 

to obtain quality supplies and services, including construction, at reasonable prices, and 

increase efficiency in proposal preparation, proposal evaluation, negotiation, and contract 

award.
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(c) Agencies are encouraged to promote early exchanges of information about future 

acquisitions. An early exchange of information among industry and the program manager, 

contracting officer, and other participants in the acquisition process can identify and resolve 

concerns regarding the acquisition strategy, including proposed contract type, terms and 

conditions, and acquisition planning schedules; the feasibility of the requirement, including 

performance requirements, statements of work, and data requirements; the suitability of the 

proposal instructions and evaluation criteria, including the approach for assessing past 

performance information; the availability of reference documents; and any other industry 

concerns or questions. Some techniques to promote early exchanges of information are --

(1) Industry or small business conferences;

(2) Public hearings;

(3) Market research, as described in Part 10;

(4) One-on-one meetings with potential offerors (any that are substantially involved 

with potential contract terms and conditions should include the contracting officer; also 

see paragraph (f) of this section regarding restrictions on disclosure of information);

(5) Presolicitation notices;

(6) Draft RFPs;

(7) RFIs;

(8) Presolicitation or preproposal conferences; and

(9) Site visits.

(d) The special notices of procurement matters at 5.205(c), or electronic notices, may be used to 

publicize the Government’s requirement or solicit information from industry.

(e) RFIs may be used when the Government does not presently intend to award a contract, but 

wants to obtain price, delivery, other market information, or capabilities for planning purposes. 

Responses to these notices are not offers and cannot be accepted by the Government to form a 

binding contract. There is no required format for RFIs.

(f) General information about agency mission needs and future requirements may be disclosed 

at any time. (a) After release of the solicitation, the contracting officer must be the focal point of 

any exchange with potential offerors. When specific information about a proposed acquisition 

that would be necessary for the preparation of proposals is disclosed to one or more potential 

offerors, that information must be made available to the public as soon as practicable, but no 

later than the next general release of information, in order to avoid creating an unfair 
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Government–Industry Interactions Rec. 86 | Page 9

competitive advantage. Information provided to a potential offeror in response to its request 

must not be disclosed to others if doing so would reveal the potential offeror’s confidential 

business strategy, and is protected under 3.104 or Subpart 24.2. When conducting a 

presolicitation or preproposal conference, material distributed at the conference should be made 

available to all potential offerors, upon request.

(b) See FAR 10.1 regarding exchanges with industry during market research. See FAR 15.306 

regarding exchanges with offerors after receipt of proposals.
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Volume 3 | Page 475 

Section 9 

Acquisition Data 

Acquisition and financial data transparency can improve efficiency and bring about 

better governance, but the right solution to effective tradeoffs will be a matter for 

Congress, DoD, and the rest of the executive branch to address at senior levels. 

RECOMMENDATIONS

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

strategic decision making on acquisition and workforce issues.

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

defense acquisition and financial system. 
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INTRODUCTION 

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

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

improvements to accompany any IT upgrades. 

Lacking data is not the main problem with DoD’s data ecosystem. DoD spends billions of dollars 

collecting and reporting a broad array of data on its own business operations. Rather, two major 

problems undermine the utility of DoD’s already-existing acquisition and financial management data: 

 DoD personnel in many cases lack the ability to use information systems to access data. The 

problem can be corrected via a mix of improved access, more widely disseminated knowledge, 

and greater expertise. 

 A lack of standardized data architectures requires the inclusion of various data translation 

mechanisms throughout DoD’s business environment. These translators can take the form of 

people—specialists who understand two different data systems enough to interpret data 

between them. Translators can also take the form of machines—software to interpret data 

between two different systems. Human translators are generally highly-paid and few in 

number. Machine translators generally consist of expensive custom-built computer code, which 

must be maintained and may lock DoD into paying unknown costs for years to come. 

To address the problem of insufficient ability to use data, the DoD Chief Management Officer (CMO) 

should encourage use of existing defense business system open-data requirements to improve strategic 

decision making. This should include the following: 

 Compliance with open-data mandates in recent legislation. 

 Provision of a single-window interface through which acquisition and finance professionals 

may access each other’s data. 

 Improving the level of familiarity with key datasets among senior decision makers. 

 Using existing hiring and scholarship authorities to bolster the data analytics workforce. 

To address the problem of nonstandardized data architectures, the DoD CMO should expand efforts to 

identify conflicting or redundant data architectures within the defense acquisition and financial system, 

merging or eliminating them when possible. 

These recommendations do not directly address the tradeoffs between data transparency and data 

security, which will be an important part of the policy debate in coming decades. If DoD were to 

restrict acquisition and financial data to classified networks, for example, it could inhibit organizational 

efficiency. Too little transparency could also undermine the quality of congressional and public 

oversight. If DoD were to place on the public Internet a detailed, real-time accounting of contracts and 

financial transactions, it could pose unacceptable operational security risks. Acquisition and financial 

data transparency can improve efficiency and bring about better governance, but competing security 
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Acquisition Data Volume 3 | Page 477 

objectives exist. The right solution to these difficult tradeoffs will be a matter for Congress, DoD, and 

the rest of the executive branch to address at senior levels. 

RECOMMENDATIONS 

Recommendation 88: Use existing defense business system open-data 

requirements to improve strategic decision making on acquisition and 

workforce issues. 

Problem 

In recent decades, DoD and the rest of the U.S. government have spent tens of billions of dollars on 

software development, data architectures, and business processes to enable collection of vast amounts 

of acquisition and financial data. There has not been a similarly scoped effort to build up DoD’s data 

analytics capabilities or use those capabilities for strategic decision making. DoD currently has access to 

a vast amount of acquisition and financial data, but in too many cases lacks the ability to do anything 

useful with the data. 

Background 

The U.S. government manages many systems for collecting and reporting information related to 

defense acquisition. Defense business systems contain enterprise data on regulations and laws, 

acquisition requirements, budgeting and appropriations, program management, contract solicitations, 

contract awards, contract vendors, and other parts of the broader acquisition process.1

When these datasets are viewed at an aggregate level, analysts can perceive patterns and policy makers 

can form conclusions that might not be possible by looking at individual data points at the working 

level. Many stakeholders, however, have noted that DoD has limited abilities to engage in this type of 

aggregate information analysis. Inadequate data science training and recruitment is part of the reason 

for this problem.2 Information siloes and the resulting unavailability of data across DoD are also key 

factors.3

This data silo phenomenon can lead to situations in which one office collects data that is highly 

applicable to the work of another office but unavailable to them. In some cases, the problem is that key 

personnel lack access to the data in question. In other cases, the problem is simply that personnel are 

unaware the data exist. 

 

1 Defense business systems (DBSs) are defined in statute under 10 U.S.C. § 2222 and in DoD policy under DoDI 5000.75. For detailed 

recommendations on process improvements to DBS acquisition, see Section 809 Panel, Report of the Advisory Panel on Streamlining and 

Codifying Acquisition Regulations: Volume 1 of 3, 103-148 (2018). 

2

 See, for example, the 2018 National Defense Strategy, which states that DoD will “emphasize new skills and complement our current 

workforce with information experts [and] data scientists” who are able “to use information, not simply manage it.” From Department of 

Defense, Summary of the 2018 National Defense Strategy, 8, accessed May 21, 2018, 

https://www.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf. 

3

 See, for example, a statement from the DoD CIO in 2017: “The current approach of unique systems with stove-piped data sources is a 

high risk, high cost approach. It ensures long developmental lead times and fragile solutions that cannot be transferred to other 

operations.” “DoD’s Mission Partner Environment – Information System (MPE-IS),” DoD Chief Information Officer, accessed May 21, 

2018, http://dodcio.defense.gov/In-the-News/MPE. 
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What is Data Analytics? 

Terms such as data science, data analysis, and data analytics are frequently used interchangeably in 

informal conversation. For the purposes of this paper, data science is considered a more narrowly 

defined and rigorous field, which combines formal methods from academic disciplines such as 

statistics, computer science, and mathematics. 

Data analysis and data analytics are used interchangeably here to describe a broader skill set that does 

not necessarily involve formal academic methods. Data analysts may work in an academic setting, but 

in DoD they are more likely to work in a policy setting, providing information as needed to support 

decision makers. 

Data architecture is another term frequently used to refer to the way information is organized. The first 

section of this paper focuses on the role of data analytics in DoD’s strategic decision making, and does 

not address the issue of data architecture. 

Open Data Requirement Within DoD 

Both DoD leadership and Congress have in recent years encouraged DoD to improve its ability to 

analyze and use its own acquisition data.4 In Section 911 of the FY 2018 NDAA, Congress mandated an 

open data policy within DoD, requiring that “except as otherwise provided by law or regulation,” DoD 

business enterprise data “shall be made readily available” to military departments, combatant 

commands, and “all other offices, agencies, activities, and commands of the Department of Defense.”5

Section 912 of the FY 2018 NDAA codified the requirements for departmentwide transparency in 

enterprise-level datasets.6 The section also specified the DoD CMO as the owner of “primary decisionmaking authority with respect to the development of common enterprise data.”7

 The section required 

the CMO to set up “a data analytics capability” in support of “enhanced oversight and management” 

and launch pilot programs “to develop data integration strategies... to address high-priority 

management challenges.”8

As of mid-2018, the DoD CMO’s office had begun work to implement the FY 2018 provisions, 

establishing information sharing systems such as the CMO Connect Portal website. The site is intended 

as a “resource and collaboration tool for DoD service members, civilian employees and contractors.”9

 

4

 The Joint Staff, for example, publishes a guide to best practices on knowledge and information management, which advocates for “flat, 

transparent networks to share and retain information” instead of an “exclusive, stove-piped approach to information sharing and 

decision-making.” See J7 Deputy Director for Joint Training, Insights and Best Practices Focus Paper on Knowledge and Information 

Management, May 2018, 13, accessed May 21, 2018, 

http://www.jcs.mil/Portals/36/Documents/Doctrine/fp/knowledge_and_info_fp.pdf. 

5

 Section 911 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

6

 Section 911 of FY 2018 NDAA, Pub. L. No. 115-91 codified the transparency requirements under 10 U.S.C. § 2222 (with conforming 

amendments to other sections of U.S. Code under Title 10). 

7

 Section 911 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

8

 Ibid. 

9

 “Chief Management Officer,” DoD, accessed July 27, 2018, https://cmo.defense.gov. As of July 2018, little departmentwide acquisition 

data had been made accessible via the site. 
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Data as a Tool for Strategic Decision Making 

Stakeholders within Congress and DoD have long pushed for greater use of existing data in strategic 

decision making. The Congressional Research Service has noted that DoD agencies “lag behind the 

private sector in effectively incorporating data analyses into decisionmaking.”10 The Government 

Accountability Office (GAO) has reported that in some cases, despite being required by statute, DoD 

management data analysis “did not assess the reliability of the data used, define key terms, clearly state 

criteria used for analysis, or make recommendations.”11 The GAO also publishes a best practices guide 

to support improved data-driven decision making in federal agencies.12

Section 913 of the FY 2018 NDAA mandated that DoD “establish a set of activities that use data 

analysis, measurement, and other evaluation-related methods to improve the acquisition outcomes.”13

Congress gave DoD broad discretion over what exactly these activities should entail. 

The DoD Chief Information Officer (CIO) serves as a key maintainer of the IT systems in which much 

of DoD’s business data are housed. Once such systems have been built, it is critical to have an entity 

dedicated to maintenance, cybersecurity, and related software issues. The CIO serves in this role, and 

can also provide expertise on development of needed application program interfaces to provide 

departmentwide access to DoD management data. 

Hiring and Financial Assistance Authorities 

The difficulty of recruiting and training qualified talent is a key impediment to improving data 

analytics in DoD. The CMO’s 2018 report on DoD business operations specifically cited the need for 

“the skills and knowledge to analyze results and suggest improvements as needed” as a key focus area 

for using data to drive decisions.14

To enable DoD to bring in skilled technical ability, Congress has enacted many special hiring 

authorities targeting personnel with skills in science, engineering, management, and related disciplines. 

Many of these authorities are pilot programs; others are permanent.15 Several of the authorities may be 

applicable to recruitment and training of data science professionals. 

 

10 Moshe Schwartz, Using Data to Improve Defense Acquisitions: Background, Analysis, and Questions for Congress, Congressional 

Research Service, January 5, 2016, accessed November 7, 2018, https://fas.org/sgp/crs/natsec/R44329.pdf. 

11 GAO, Defense Management: DOD Needs to Address Inefficiencies and Implement Reform across Its Defense Agencies and DOD Field 

Activities, GAO-18-592, September 2018,10, accessed September 13, 2018, https://www.gao.gov/assets/700/694333.pdf. 

12 “Data-Driven Decision Making,” GAO, accessed July 27, 2018, https://www.gao.gov/key_issues/data-driven_decision_making. 

13 Section 913 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

14 DoD Chief Management Officer, FY 2018 – FY 2022 National Defense Business Operations Plan, 36, accessed November 7, 2018, 

https://cmo.defense.gov/Portals/47/Documents/Publications/NBDOP/TAB%20B%20FY18-22%20NDBOP%20Appendices.pdf?ver=2018-

05-25-131454-683. 

15 See Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, 61-100 

(2018) for analysis and lists of special hiring authorities available to DoD. Also see Appendix C of this Volume 3 Report for hiring and 

financial assistance authorities that may apply to data scientists. 
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Automation and Artificial Intelligence 

Business process automation can greatly reduce the time and labor required to conduct data analysis. 

Increasing use of automated analytical tools, sometimes referred to under the umbrella label of artificial 

intelligence (AI), promises to increase the efficiency of DoD’s business data analysis in coming years. 

Discussion

DoD has spent tens of billions of dollars in recent decades building up its data collection capabilities in 

the form of IT infrastructure, custom-built software, and policy documents to establish business 

processes. Thanks to massive investment of time and money, DoD now has access to a wealth of 

acquisition and financial data. Some policy and decision-making offices, however, lack the ability to 

properly use the data that DoD collects. 

In the FY 2018 NDAA, Congress instructed DoD to embrace an open-data philosophy, providing 

defense business system data to analysts throughout the organization. This effort is a positive first step 

toward building a more effective data analytics culture within DoD. It will fall to the CMO and related 

offices to ensure open availability of data across DoD, and it will fall to individual offices to fully use 

those datasets in their day-to-day decision making. 

In addition to congressional and DoD efforts to improve data analytics, the Office of Management and 

Budget (OMB) and related executive agencies promote a Federal Data Strategy.16 The strategy is 

intended to provide a broad, long-term framework for improving agencies’ data stewardship and 

leveraging data to create value. A late-2018 draft of the strategy includes 47 goals (practices), many of 

which overlap with the goals of data management provisions in the FY 2018 NDAA. 

Table 9-1. Selected Federal Data Strategy Draft Practices17

Draft Practice OMB Description 

2: Inventory Data Assets Maintain an inventory of data assets with sufficient completeness, quality, and 

metadata to facilitate planning, discovery, access, and use.

3: Identify High-Value and 

Authoritative Data Assets 

Assign value and cost to data assets based on usefulness, applicable law, regulation, 

policy, and operational guidance to appropriately prioritize and document 

stewardship and resource decisions. 

4: Align Resources to Value and 

Authority 

Periodically review alignment of resources to the value and authority of datasets to 

promote consistency and fairness. 

5: Manage High-Value and 

Authoritative Data Assets 

Periodically review high-value and authoritative data assets to identify and document 

opportunities to improve data management systems and procedures and ensure 

quality and integrity. 

 

16 The Office of Management and Budget, Office of Science and Technology Policy, Department of Commerce, Small Business 

Administration, and General Services Administration were all involved in the development of the Federal Data Strategy as of late 2018. 

See Federal Data Strategy introduction at: https://strategy.data.gov. 

17 From Office of Management and Budget, “Federal Data Strategy: The Draft Practices,” https://strategy.data.gov/practices. 
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Draft Practice OMB Description 

13: Diversify Data Access 

Methods 

Invest in the creation and usability of multiple tiers of access to federal data by 

committing federal resources to making data as open and accessible as possible while 

protecting confidentiality. 

14: Innovate to Enable Safe Use Explore and periodically review methods and technologies that enable tiered access 

to safeguard data and promote accessibility to relevant stakeholders. 

19: Prepare to Share Provide encouragement and incentives for agencies to develop a culture in which 

they are predisposed to share data within and across federal agencies, as well as with 

external partners, with proper protections and where relevant and appropriate. 

20: Share Data Across Agencies Facilitate data sharing across federal agencies to efficiently generate more 

comprehensive data for improved decision making. 

34: Promote a Culture that 

Values Data as an Asset 

Conduct routine assessments of current organizational practices to identify 

opportunities to improve the agency's ability to acquire, use, and disseminate data 

for program, statistical, and mission-support purposes to improve data use and value. 

36: Incorporate Data into 

Decision-Making 

As part of budget, operational, policy, and management processes, identify 

opportunities to effectively and routinely use data for decision making and to create a 

bridge between evaluation, performance, and other activities within agencies. 

37: Communicate Insights from 

Data 

Adopt a range of innovative communication tools and techniques to effectively 

transmit insights from data to a broad set of consumers, both internal and external to 

the agency. 

38: Connect Federal Spending to 

Outcomes 

Analyze spending data to align resources with strategic priorities and desired 

outcomes to enable the public to understand the results of federal investments and 

to support informed decision making regarding future investments. 

39: Focus on End Uses of Data Design new data collections with the end uses in mind to ensure that the data 

collected will be of appropriately high quality and meet internal and external 

stakeholder expectations and needs. 

40: Assess the Needs of 

Stakeholders 

Routinely engage both internal and external stakeholders throughout the data 

lifecycle to assess the needs of data consumers. 

Conclusions 

One of the impediments to DoD data analysis is the fact that many information systems are siloed off 

from senior decision makers. Even within DoD acquisition and financial circles, many of these systems 

are not widely understood and lack enough proficient users to provide useful analysis at the policy 

level. Congress has helped to correct this problem by enacting the open data requirements of the 

FY 2018 NDAA, but implementing it will likely be a long and technically challenging process. 

The CMO should take the lead in this effort, in part by reminding DoD of the requirement and 

providing portals through which personnel can access defense business data collected by entities 

elsewhere in DoD. 
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The CMO should also take steps to ensure that Defense Agency leaders and data analysts are aware of 

what data exist outside of their offices. Senior leaders and analysts should be encouraged to think 

creatively about the ways they might use data from outside their areas of functional expertise. 

The CMO should also encourage Defense Agencies to recruit more data science professionals and train 

current personnel in data analytics. Existing special hiring and education financial assistance 

authorities may, in some cases, be used for these purposes. 

An Executive-Legislative Grand Bargain? 

If DoD offices fully opened up their business system data to scrutiny by the rest of DoD and Congress, 

it could allow for side benefits in the form of a grand bargain on acquisition and financial data as used 

by the oversight community. Open access to data systems would provide much deeper insight into 

individual transactions. With such insight, congressional committees might show greater confidence 

that effective oversight could be conducted reactively rather than proactively, on a case-by-case basis. 

With that confidence, Congress might show a greater willingness to substantially reduce the degree of 

prescriptivism in acquisition law. This shift would allow Executive Branch personnel greater leeway to 

make decisions based on what makes sense at the moment, rather than basing decisions on 

preestablished policies written without transaction-specific context. 

To promote confidence among congressional stakeholders, DoD would also need to empower workinglevel people, trust them to do good work, and provide for real consequences if they failed to do good 

work. Improved data analytics capabilities, in both DoD and Congress, would be a necessary but 

insufficient condition for this type of a grand bargain to be realized. 

If DoD intends to improve its data analytics capabilities, it should (a) comply with congressional opendata requirements, (b) ensure defense agencies are aware of the data that is available, and (c) improve 

the quality of its data analytics workforce. The CMO is the logical entity to direct these changes, but 

ultimately, they will have to be carried out at the lower levels. 

Implementation 

Legislative Branch 

 There are no statutory changes required for this recommendation. 

Executive Branch 

 Issue a memorandum implementing Sections 911–913 of the FY 2018 NDAA open-data 

mandate. 

 Use existing hiring and scholarship authorities to bolster DoD agencies’ data analytics 

workforce (see Appendix C). 

Note: A draft memorandum can be found in the Implementation Details subsection at the end of Section 9. 
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Implications for Other Agencies 

 If DoD’s efforts to improve strategic data analytics are successful, they may serve as a template 

for similar future efforts by other agencies. 

Recommendation 89: Direct DoD to consolidate or eliminate competing data 

architectures within the defense acquisition and financial system. 

Problem 

The proliferation of different data architectures throughout the acquisition and financial system leads 

to countless marginal inefficiencies in DoD and the rest of government. Collectively, these inefficiencies 

lead to poor interoffice communication, entrenchment of institutional siloes, lower adaptability of 

labor, and damaged workforce morale. One senior acquisition leader characterized the large number of 

data architectures as a Tower of Babel preventing communication across the organization.18

Virtually all stakeholders in the defense acquisition system—requirements developers, program 

managers, congressional committees, contracting personnel, financial managers—use different 

financial data architectures, many of which are incompatible with one another. Data architecture 

proliferation is an extremely challenging problem, with both technological and political aspects. Too 

many preexisting stakeholders are wedded to their own ways of doing business and unwilling to 

change their approaches to accommodate other stakeholders. 

Background 

Recent decades have seen a proliferation of data systems in federal acquisition. These data systems 

contain information on requirements development, appropriations requests, budget allocations, 

program management, contracting, contract audits, disbursement of funds, and many other functional 

areas that are core parts of the acquisition process. With the proliferation of data systems, a 

proliferation of data architectures has also occurred.19 Even within individual organizational 

jurisdictions or functional communities, multiple data architectures cause confusion in many cases. 

These different architectures effectively constitute different languages, inhibiting both comparative 

data analysis and data tracking from one transaction to another. Because of these different languages, 

useful data analysis requires a large number of human and machine translators throughout the process. 

Many of the machine translators are aging systems to which few people pay attention until they break 

or produce obvious errors. Such errors lead to unnecessary dysfunction, added maintenance costs, and 

small data errors that can persist for years unnoticed by analysts. Many of the human translators serve 

as the sole providers of niche expertise in their workplaces. This situation leads to inefficiency in the 

form of work backlogs, long wait times, and potential labor market distortions. 

 

18 Retired Air Force general officer, discussions with Section 809 Panel, July 2018. 

19 A 2017 study of 21 acquisition and financial data systems found that one of the overarching problems was inconsistency of technical 

terminology and data formats across systems: “The same term can have different meanings in different acquisition systems, which makes 

analyses across systems particularly challenging.” See Megan McKernan et al., Issues with Access to Acquisition Data and Information in 

the Department of Defense: Doing Data Right in Weapon System Acquisition, RAND Corporation, 2017, 41, accessed July 21, 2018, 

https://www.rand.org/pubs/research_reports/RR1534.html. 
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Misallocation of Skilled Labor 

Each year, DoD employees and support contractors spend an enormous amount of time performing the 

work required to interpret nonstandardized data across different functional communities. It is 

impossible to calculate an exact number of annual labor hours associated with this type of work, but it 

is likely in the millions. 

Many of these people are among the most highly-skilled data science professionals working for DoD. 

If acquisition and financial activities were to adopt more uniform data architectures, it would free up 

a large volume of skilled labor for more substantive tasks, such as data analysis and strategic planning. 

Data Analytics Versus Data Architecture 

In recent years, many proposals in the Legislative and Executive Branches have focused on improving 

the quality of data analytics in DoD.20 These are commendable initiatives, as the quality of 

governmentwide financial data analytics clearly needs improvement.21

Improving the quality of data analytics in DoD is mostly about personnel, not policy. Academic studies 

and senior-level meetings will not build these capabilities. The most important part of improving DoD 

data analytics is ensuring that creative and competent data science professionals choose to work for the 

organization. Policy changes may be able to affect workforce recruitment and retention somewhat, but 

workforce quality will improve substantially in the long run only if capable people are given the 

leeway to innovate and are committed to DoD’s mission. Poor data analysis is a personnel issue; there 

are no miracle cures for such problems. 

What is Data Architecture? 

In its broadest sense, the term data architecture refers to the way information is organized. The term 

data architecture often refers to the organization of formally structured relational databases with data 

elements that are standardized throughout the database. A defense acquisition example would be the 

contract-writing systems run by the Military Services, which track and report data on contract and 

related actions using standardized formats. 

The term data architecture could also be used to refer to unstructured datasets such as large 

repositories of documents written in free-form prose. A defense acquisition example would be the 

Acquisition Information Repository (AIR), a web-based system allowing access to a large number of 

program management documents.22

 

20 As examples, see Section 913 in the FY 2018 defense authorization, “Establishment of set of activities that use data analysis, 

measurement, and other evaluation-related methods to improve acquisition program outcomes.” FY 2018 NDAA, Pub. L. No. 115-91 

(2017). Also see U.S. Department of the Army, Enterprise Data Analytics Strategy for Army Business 2018-2022, accessed July 10, 2018, 

https://www.army.mil/e2/downloads/rv7/professional/enterprise_analytics_strategy.pdf. 

21 GAO, Contracting Data Analysis: Assessment of Government-wide Trends, GAO-17-244SP, March 2017, accessed July 10, 2018, 

https://www.gao.gov/assets/690/683273.pdf. 

22 AIR provides access to program management documents such as Acquisition Strategies, Test and Evaluation Master Plans, and Analyses 

of Alternatives. It is designed in part to help program managers write required acquisition documents by using documents from other 

successful programs as templates. 
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In the context of this recommendation, data architecture refers to the structure of information that DoD 

and other stakeholders use to categorize different parts of the acquisition system. These parts include, 

but are not limited to, the following. 

 The requirements development community categorizes capabilities based on the needs of 

current and future missions. 

 The programming community compiles lists of programs that are needed to meet required 

capabilities.23

 The budgeting community compiles lists of line items that will require congressional 

appropriations to fund required programs. 

 Congress enacts appropriations bills into law using a much more aggregated version of the 

budgeting community’s data architecture. It also publishes clarifying reports using the same 

data architecture as the budgeting community. 

 The financial management community releases funds to the program management community, 

using additional data architectures meant to translate between appropriations accounts and the 

program-level perspective. 

 The program management community uses a variety of data architectures to manage funds 

based on appropriation availability. 

 The contracting community uses several different data architectures to manage contract 

solicitations and awards. Organizations such as the General Services Administration (GSA) and 

Small Business Administration use their own data architectures for tracking certain aspects of 

DoD contracting. 

 The accounting and contract close-out communities use their own data architectures to track 

contract finances. The Department of the Treasury is also involved in final disbursement of 

funds and has data architectures to track that process. 

Each of these broadly defined data architectures contains a variety of data elements. For example, the 

top-level data architecture used for public reporting of contract awards has roughly 200 data elements 

in 14 subcategories. These elements include unique transaction identification numbers, dates of 

contract signing, dollar obligations, agencies, legislative mandates, and many other data elements.24

To some extent, mismatches between different architectures may be inevitable. When translating 

mission requirements into programs, for example, changing technologies and external dynamics may 

require that individual program subcategories be reorganized; however, minimizing the frequency and 

 

23 The term programming community in this context refers to the resource managers and other personnel who specialize in translating 

technical warfighting requirements into specific acquisition programs. 

24 “FPDS-NG Data Dictionary” (Federal Procurement Data System—Next Generation documentation), GSA, accessed July 18, 2018, 

https://fpds.gov/wiki/index.php/V1.5_FPDS-NG_Data_Dictionary. 
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scope of these reorganizations is important to ensure that communication across different functional 

communities does not require an excessive amount of translator middlemen. 

History 

The data architectures of the modern acquisition system date back at least to the mid-1900s. In many 

cases they evolved in iterative, organic ways that make it difficult to pin their development to specific 

years. 

Much of the modern budgeting data architecture can be traced to the National Security Act of 1947 and 

subsequent amendments. It empowered the Secretary of Defense to, 

Supervise and coordinate the preparation of the budget estimates of the departments and agencies 

comprising the National Military Establishment; formulate and determine the budget estimates for 

submittal to the Bureau of the Budget; and supervise the budget programs of such departments and 

agencies under the applicable appropriation Act.25

An amending law in 1949 established the office of the DoD Comptroller and directed the individual 

holding this position to “establish uniform terminologies, classifications, and procedures” in matters 

related to “budgetary and fiscal functions as may be required to carry out the powers conferred upon 

the Secretary of Defense.”26

The data architecture that underpins the defense budget was highly unstructured for most of 

U.S. history. In appropriations laws from the early 1900s, congressional appropriations were enacted at 

regular intervals throughout the year as needed. Funding categories were nonstandardized and ad hoc, 

introduced based largely on congressional interest.27 In many cases, individual laws were enacted to 

provide funding for specific projects, pensions, or people.28

After the 1949 legislation, however, budget estimates began to adopt a format roughly identical to that 

used today. The FY 1953 defense appropriations act laid out a now-familiar data architecture for 

appropriations accounts. To use the Army accounts as an example, accounts included 

 Military Personnel, Army; 

 Maintenance and Operations, Army; 

 

25 Section 202(a)(4) of the National Security Act of 1947, Pub. L. No. 80-253 (1947). The Bureau of the Budget was the predecessor to the 

modern-day Office of Management and Budget. 

26 Section 11 of the National Security Act Amendments of 1949, Pub. L. No. 81-216 (1949). 

27 For example, see An Act Making appropriations to supply urgent deficiencies in appropriations for the fiscal year nineteen hundred and 

ten, and for other purposes, Pub. L. No. 61-62 (1910). The law included three Navy appropriations: $300,000 for dredging an entrance 

channel at Pearl Harbor, HI; $48,136.46 for repair of the Mare Island, CA, shipwright’s shop; and $10,000 for heating and lighting the 

men’s band quarters at the U.S. Naval Academy. 

28 Virtually all legislation enacted today takes the form of public law, but Congress used to enact dozens or even hundreds of private laws 

per year. These frequently took the form of “An Act For the relief of” or “An Act Granting a pension to” individuals. As an example, a 

U.S. government mail carrier allegedly stole $208.44 out of a letter intended for Mr. Jacob Pickens of Neosho, Missouri. Congress enacted 

a law in 1906 reimbursing Mr. Pickens via funding from the Treasury. See Private Law 59-1526 (Chap. 1628, “An Act For the relief of Jacob 

Pickens”), enacted April 14, 1906. 
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 Procurement and Production, Army; and 

 Research and Development, Army.29

Within each of these accounts are more detailed budget line items that lay out in detail the intended 

expenditures for each account. 

The data architecture behind contract awards dates back at least to the mid-1970s, when the Federal 

Procurement Data System Committee laid out a standardized set of data elements applicable to DoD 

and major civilian agencies.30 The data architecture the committee built was used as the basis for the 

Federal Procurement Data System (FPDS), evolved over the course of subsequent decades, and 

continues to be used and modified in FPDS’s successor IT system as of 2018. 

The modern data architecture behind DoD’s contract accounting systems can be traced back at least as 

far as the 1950s, when the Mechanization of Contract Administration Services system was developed. 

The system was still in use as of 2018, supporting the business processes for about $1.6 trillion in 

contract obligations and entitlements.31 These are some of the most prominent and well-known data 

architectures that form the backbone of acquisition and financial data collection for executive agencies. 

Many other data architectures have gradually developed in response to various organizational needs.32

These data architectures largely evolved organically over time, independent of one another. They have 

been modified over the course of multiple generations by executive agency officials, business process 

managers, and IT system developers. Laws and regulations are sometimes written with a policy 

objective in mind but without substantial consideration for the reorganization of data architectures 

required for implementation. Private-sector companies rarely build commercial off-the-shelf enterprise 

resource planning software to comply with U.S. executive agency rules, meaning that customized 

systems must frequently be built to convert commercial data architectures into federal governmentcompliant architectures. The end result is a system in which relatively few data architectures are 

purpose-built to be compatible with each other. 

Below are several examples of specific data architectures that are used in the DoD acquisition system, 

as well as examples of incompatibilities. 

Requirements 

Joint Capability Areas (JCAs) are one of the predominant data architectures used by the requirements 

community in DoD. JCAs are laid out in the Joint Capabilities Integration and Development System 

 

29 From Department of Defense Appropriations Act, 1953, Pub. L. No. 82-488 (1952). For comparison with earlier appropriations law data 

architecture, see Fourth Supplemental Appropriation Act, 1951, Pub. L. No. 81-43 (1951). 

30 GAO, The Federal Procurement Data System—Making It Work Better, April 18, 1980, accessed July 16, 2018, 

https://www.gao.gov/assets/130/129310.pdf. Also see Section 6(d)(5) of the Office of Federal Procurement Policy Act, Pub. L. No. 93-400 

(1974). 

31 Discussion between Chairman Jason Chaffetz and DoD CIO Terry Halvorsen during testimony before House Committee on Oversight 

and Government Reform, Federal Agencies’ Reliance on Outdated and Unsupported Information Technology: A Ticking Time Bomb,

May 25, 2016, 83, accessed July 16, 2018, https://www.gpo.gov/fdsys/pkg/CHRG-114hhrg23644/pdf/CHRG-114hhrg23644.pdf. 

32 See, for instance, the Product and Service Code (PSC) system, which is used for policy purposes to determine whether an acquisition is 

a product or service. The PSC data architecture is jointly built by DoD, GSA, and the NSF. Also see the North American Industry 

Classification System (NAICS) codes and SBA Small Business Size Standards, which are used to determine whether a potential vendor is or 

is not a small business. NAICS codes are built by NAFTA member country agencies. 
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manual, which provides examples of each category.33 They are described as collections of attributes and 

include categories such as force support attributes, battlespace awareness attributes, and force 

application attributes.34 These categories of attributes do not match the data architectures used among 

the offices that develop budget requests to send to Congress. Indeed, the attributes used by the 

requirements development community do not match any data architectures used by any community 

for the vast majority of the acquisition process. Arguably, the only matching data architectures are 

those used to categorize solutions available to warfighters when carrying out missions. 

Budget Requests 

When DoD and other agencies submit budgets to Congress each year, they must convert the data 

architecture of requirements into the data architecture of the President’s Budget Request (PBR). The 

PBR’s data architecture is largely mapped to the architectures of congressional regular appropriations 

bills.35 PBR documents for DoD contain a top-level data architecture with individual line items 

representing appropriations accounts. Within these accounts are data elements called budget activities. 

Within the budget activity data elements are further subelements called budget subactivities, with 

additional layers of lower-level data elements.36 These data layers largely map to those presented in 

defense authorization bills and regular appropriations bill conference report joint explanatory 

statements. They do not directly map to most of the data architecture used by the requirements 

community to define what the military needs to accomplish its missions. 

Appropriations 

Appropriations data architecture consists of several accounts that appear in roughly the same format 

for each annual bill. These accounts contain dollar amounts that agencies are to spend, as well as 

constraints on how they are to spend them. The amounts defined in appropriations accounts legally 

bind agencies to spend the amounts indicated, with some exceptions for flexibility.37 Within each of the 

top-level appropriations accounts are lower-level data elements that appear in appropriations bill 

conference report joint explanatory statements. These lower-level data elements describe how much 

agencies are expected to spend on each line item indicated. They are not legally binding to the same 

degree as appropriations accounts. 

 

33 DoD, Manual for the Operation of the Joint Capabilities Integration and Development System (JCIDS), Appendix A: JCA Specific 

Examples, modified December 18, 2015, accessed November 8, 2018, http://www.acqnotes.com/wp-content/uploads/2014/09/Manualfor-the-Operationsof-the-Joint-Capabilities-Integration-and-Development-System-JCIDS-18-Dec-2015.pdf. 

34 “Joint Capability Area (JCA),” Defense Acquisition Glossary, accessed January 29, 2018, https://www.dau.mil/glossary/pages/2104.aspx. 

35 Regular appropriation is a term of art in fiscal law, referring to 12 specific bills per year that overlap with appropriations subcommittee 

jurisdiction. The defense appropriations bill is one of these 12. Regular appropriations bills are distinct from other types of congressional 

appropriations laws, such as continuing resolutions and supplemental appropriations. Unlike regular appropriations bills, these bills do 

not always have a uniform, standardized, recurring data architecture. 

36 For example, see FY 2019 DoD budget request for the Procurement appropriations accounts. Within the Aircraft Procurement, Army 

appropriations account are the budget activities Aircraft, Modification of Aircraft, Support Equipment and Facilities, and Undistributed. 

Within the Aircraft budget activity are budget subactivities Rotary and Fixed Wing. Within the Rotary budget subactivity are additional 

data element layers indicating type of aircraft and funding approach. 

37 For example, DoD reprogramming under the general transfer authority and DoD 7000.14-R Financial Management Regulation, 

Volume 3, Chapter 6. 
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Budget Allocations and Allotments 

Once Congress approves funding, the data architectures used by agency comptrollers closely resemble 

those used by the budget request and appropriations communities. Distribution of funding throughout 

DoD is based on appropriations accounts at the congressional level, apportionment at the OMB level, 

allocation at the DoD Comptroller level, suballocation at the Military Service comptroller level, 

allotment at the major commands level, and suballotment at the program management level.38 These 

data architectures do not precisely map to those used by congressional appropriators. Data elements 

within a Military Service’s budget structure originate in accounts from multiple regular appropriations 

bills.39

Program Management 

The data structure of acquisition program management does not conform to those of budgeting and 

appropriations. A program manager reports to a program executive officer, who ultimately reports to a 

service acquisition executive and the Office of the Secretary of Defense. Virtually all of these tiers of 

command must commit funds from multiple appropriations accounts to do their job. There is 

substantial data architecture misalignment between the budgeting community and the program 

management community. 

Contract Awards 

Several unstructured data architectures are used to describe various phases of the contracting process 

prior to award. For example, the contract solicitations posted to Federal Business Opportunities (FBO) 

generally consist of a few standardized data elements and several text documents or spreadsheets 

describing solicitation requirements. The financial data architecture of government contracts is largely 

based on contract line-item numbers (CLINs). CLINs describe what is being purchased as well as the 

appropriations identity and fiscal year.40 It is common for individual contracts to use CLINs from 

multiple appropriations accounts to meet multiple technical requirements. There is data architecture 

misalignment between the contracting and requirements communities, as well as between the 

contracting and budgeting communities. 

When a contract award is made, there is a standardized data architecture in place for reporting the 

award. Agencies collect data related to the award, and some 200 of these standardized data elements 

are in most cases reported publicly.41 This standardized data structure is largely built based on legal 

and regulatory requirements, and bears little resemblance to data architectures used by the 

requirements community, budgeting and appropriations community, or program management chains 

of command. 

 

38 As they apply to defense acquisition, these processes are laid out in DoD 7000.14-R Financial Management Regulation, Volume 14, 

Chapter 1. For a simplified overview of these processes, see William Fast, “Budget Execution 101,” presentation at Defense Acquisition 

University, June 3, 2010. 

39 Congress enacts about 12 regular appropriations bills each year. The majority of military department budgets come from the 

Department of Defense appropriations bill. Some also comes from the Military Construction, Veterans Affairs, and Related Agencies bill. 

40 See FAR Subpart 4.10 for detailed CLIN requirements. 

41 Contract award data publicly available via Federal Procurement Data System or USA Spending. 
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Data Architecture Mismatch Effects 

When data architectures are not aligned across functional communities, those functional communities 

find it much more difficult to communicate with one another. This situation is partly because of the 

lack of a shared lexicon. It is also partly because more complicated data architectures necessitate 

involving more stakeholders in decision making. This leads to deep inefficiencies in the acquisition 

process. As an example, a military department might determine that instead of a hardware IT solution, 

a mission would be more effectively accomplished via a services contract solution accompanied by 

changes to internal business processes. If the hardware solution is already a program of record in the 

budget, this transition process will take years. The Military Service would have to reorganize its budget 

request, wait for Congress to appropriate funding, reorganize or close down the program office, and 

get the contracting community to obligate the funding on a new contract. If data architectures 

throughout the acquisition system were uniformly aligned to missions, the department would simply 

be able to reallocate the already-appropriated funding from the hardware solution to a service and 

business process solution. It would eliminate the need for much of the waiting that occurs throughout 

this process. 

Mismatched data architectures also impede oversight by limiting transparency. When different 

communities speak different data languages, it can be difficult for even a willing executive agency to 

provide understandable information to an inspector general, auditor, or congressional committee. For 

example, data on contract transactions is collected and reported in a way that is out of sync with both 

the needs being met and the budgeting process. Determining the appropriations account that funded a 

given transaction is challenging at best. 

It can also be extremely difficult, using standardized contract transaction data, to determine what 

problem a contract was intended to solve. This situation is largely because the data architecture of 

product, service, or industry codes does not provide meaningful detail.42 This situation also limits 

agencies’ ability to engage in strategic acquisition planning. 

In addition to misalignment across functional communities, data architecture misalignment across 

jurisdictions can reduce efficiency. GAO noted in 2018 that “DFAS, DLA, and WHS differ in how they 

measure and report their performance data, which results in inconsistent information and limits 

customers’ ability to make informed choices about selecting a human resources service provider to 

meet their needs.”43 These and many other architectural issues prevent oversight officials and strategic 

planners from understanding of the inner workings of acquisition and financial data. 

Problems with Data System Consolidation 

Consolidating different data systems may be part of a solution, because it can force people to adopt 

uniform data architectures across different datasets. In too many cases, however, data system 

consolidation appears to simply take the form of new, more aesthetically pleasing interfaces between 

 

42 The data architecture used for identifying contract product and service categories is the Product and Service Code (PSC) system. For 

some areas PSCs can be fairly detailed, such as PSC Q501, “medical services – anesthesiology.” For other PSCs, the lack of detail makes 

them effectively meaningless for understanding why something is being purchased. For example, PSC 7030, “information technology – 

software,” can encompass anything from logistics to human resources to health care. 

43 GAO, Defense Management: DOD Needs to Address Inefficiencies and Implement Reform across Its Defense Agencies and DOD Field 

Activities, GAO-18-592, September 2018, 19, accessed September 13, 2018, https://www.gao.gov/assets/700/694333.pdf. 
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existing systems. This approach generally leads to a more uniform top-level data architecture. The 

original data architectures, however, continue to exist and require maintenance and updates. 

Maintaining these architectures is made more difficult because the popularity of top-level architecture 

means there are fewer people who understand the underlying architectures well enough to manage the 

software systems in which the architectures live. In a best-case scenario, this situation may lock DoD 

into paying economic rents to system integrators for decades to come. In a worst-case scenario, it may 

increase cybersecurity risks due to the limited number of in-house personnel who are knowledgeable 

enough to address problems as they arise. 

Other Issues: Data Architecture Ownership 

Ownership is an important issue in acquisition and financial data management. In the past, robust 

debates have centered around whether data architectures should be government-owned or privatelyowned. Common complaints about government-owned architectures involve costs associated with 

maintenance and documentation, as well as the need to keep systems updated to reflect the real world 

they are meant to represent. 

Adopting privately owned data architectures and incorporating them into government systems may in 

some cases provide better-quality processes in the short term. This approach, however, can effectively 

lock the government into an arrangement under which it must pay in perpetuity for continued access 

to a monopoly translator service between two data systems. When sufficiently integrated into 

government processes, such a translation service can be difficult to replace with a governmentcontrolled alternative. 

Case Study: 

Government Ownership of Company Identifier Data Architecture

Around 1960, DoD began using a data architecture called the H4/H8 system for tracking the corporate identities of 

contractors in North Atlantic Treaty Organization countries.44 Essentially, the system allowed people to connect the data 

on a contract with data indicating a company’s identity and ownership. 

In 1975, a congressionally established committee identified several problems with the H4/H8 system. Among them was 

the need for the government to publish data manuals and maintain up-to-date records of corporate name changes, 

mergers, and acquisitions.45

The committee noted that a private company might be better able to provide high-quality, up-to-date information on 

these changes to corporate identity. It expressed concerns about “whether it is appropriate to have a sole source 

contract” and “what happens if the contractor goes out of business.”46 The committee and DoD stakeholders at the time 

also noted higher costs associated with a private sector solution. GAO analysts assessed that potential improvements to 

analytical capabilities did not justify transferring from a government-controlled to a privately-owned data architecture 

for tracking corporate identifiers.47

 

44 Based on GAO statement that in 1975, DoD “had been using its own system for 16 years.” GAO, The Federal Procurement Data 

System—Making It Work Better, April 18, 1980, 17, accessed November 8, 2018, https://www.gao.gov/assets/130/129310.pdf. 

45 GAO, The Federal Procurement Data System—Making It Work Better, April 18, 1980, 16, accessed November 8, 2018, 

https://www.gao.gov/assets/130/129310.pdf. 

46 Ibid. 

47 Ibid, iii. 
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Case Study: 

Government Ownership of Company Identifier Data Architecture

Despite these concerns, the committee recommended in 1975 that the government adopt the proprietary data 

architecture.48 In the late 1990s, the proprietary system was formally incorporated into the Federal Acquisition 

Regulation. 

In 2012, GAO published another report on the issue of corporate identifier data architecture. The report noted that in the 

span of a decade, contract costs had increased roughly 1,800 percent.49 GAO attributed this increase in part to an 

“effective monopoly” that “contributed to higher costs.”50 Switching to a government-owned system would resolve this 

issue, but for technical reasons, this was not an option in the near term. By the time of GAO’s report, the privatelyowned data architecture had “become an integral component in how government data systems operate.”51

Other Issues: Black Box Data Elements 

In recent years, a cottage industry has arisen wherein analytics companies sell their analyses of 

government data to the government. There is nothing inherently wrong with this model. In many 

cases, analytics firms may provide insights, recommendations, or dashboard visualizations that add 

value to government operations. 

In at least some cases, however, these companies’ products essentially constitute new data architectures 

in their own right. Several firms perform automated analyses of existing data elements in federal 

contract award and related data. Through proprietary computer code—an opaque black box—these 

companies create new, proprietary data elements. 

These new data elements may, in some cases, serve as highly accurate and helpful tools to guide senior 

leaders’ decision making. In other cases, they may be inaccurate and highly misleading. Despite being 

built from constituent government data, there is rarely any transparent mechanism to determine which 

is the case. To provide such a mechanism would be to illustrate to the government how the data 

elements are built, eliminating the need to keep paying the contractor. 

These proprietary data elements may ingrain themselves into an office’s processes to the extent that the 

office becomes dependent on the contractor. In these cases, a de facto monopoly arrangement can arise 

because the contractor is the only company with access to the computer code used to make new data 

elements out of the government data. 

 

48 Ibid, 16. 

49 GAO, Government Is Analyzing Alternatives for Contractor Identification Numbers, June 12, 2012, accessed July 16, 2018, 

https://www.gao.gov/assets/600/591551.pdf. The GAO reported that contract costs increased from $1 million per year in 2002 to $19 

million per year in 2012. 

50 Ibid, 4. 

51 Ibid. 
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Case Study:

Black-Box Data Elements 

In recent years, AI has become a prominent buzzword in Washington, DC, policy circles, leading to increased interest in 

DoD expenditures on AI-related services and solutions. There is no AI description in the product, service, or industry 

coding systems used by the government for tracking contract award data. Some policymakers have expressed a desire in 

recent years for data on government procurement spending that might be considered AI-related. 

At least one company provides an answer to this question. The company runs automated analysis on data from FPDS and 

other sources to determine whether individual transactions are likely to be AI-related or not. This analysis produces 

aggregate numbers for the whole U.S. government, which are displayed in a dashboard interface that can be filtered and 

customized by the user.52

The resulting data may or may not accurately convey whether a transaction is AI-related, but one problem is that there is 

no way to know for sure. The data are essentially generated via guesswork. The guesswork is performed via computer 

code written by well informed people, but it is guesswork nonetheless. 

Possible inaccuracy is only one problem involved in this process. The other is that due to the lack of methodological 

transparency, DoD has no way to generate the new data elements on its own. If senior leaders begin to expect the 

regular reporting of those data elements, DoD will be dependent on a monopoly vendor to provide it. 

There is a way to address both the accuracy problem and the monopoly problem: Have people at the working-level 

collect and report the desired data elements. It would cost additional time and money, and in some cases, it may require 

involving non-DoD stakeholders—for instance, GSA agreeing to add new functions to existing IT systems. Some data 

collection efforts would likely be cost-prohibitive. For this reason, policymakers would need to be willing to engage in 

honest, good-faith discussions about which types of data collection fail to produce a sufficiently high return on 

investment.

None of these issues suggest that data analytics firms do not add value to DoD acquisition efficiency 

and oversight. There is an enormous difference, however, between analyzing data and maintaining key 

parts of a system’s data architecture. A firm that adds value by analyzing data can presumably be 

replaced with another, more competitive vendor. A firm that owns the sole means of creating certain 

data elements is effectively a monopoly. 

Discussion

The ecosystem of federal acquisition data is enormous, but it suffers from an endemic lack of 

standardization. This situation leads to inefficient government operations, poor communication, and 

less effective acquisition systems. There are two ways to address this problem—one easier and shorterterm, the other more difficult but ultimately better in the long run. Recognizing that the best solution 

may be too expensive and would take too long at this time, a middle approach to improve the sharing 

of data would offer near-term benefits. 

The easy solution is to add translators as needed to convert the data architecture from one IT system 

into the architecture of another IT system. This approach is currently embraced by DoD and the rest of 

the federal government. A prominent example is USA Spending, a Treasury-run website that converts 

several nonstandardized data architectures into a common architecture. 

 

52 Data analytics firm, presentation to Section 809 Panel, mid-2018. 
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The upside of this approach is that problems can be addressed on an ad hoc basis, and problem-solvers 

can build solutions without first obtaining buy-in from senior decision-makers and data system 

owners. The downside is that it essentially involves plastering additional interfaces on top of legacy 

systems. This approach adds a new layer of data, but does not actually streamline the underlying 

architectures of data collection systems. For this reason, it retains the added costs and inefficiencies 

associated with having too many translators involved in the process. 

The more difficult solution would involve consolidating existing data architectures into a single 

common architecture and getting all stakeholders to agree to its adoption. There would be substantial 

technical, bureaucratic, and political challenges. 

 Technical difficulties: No single person knows enough about the governmentwide acquisition 

and financial data to singlehandedly redesign the entire architecture. A high-quality 

architectural redesign would have to involve working-level people with data science expertise 

in requirements, budget planning, appropriations, resource management, contracting, and other 

fields. To maximize interoperability across functional communities, it would be preferable to 

adopt existing commercial standards to the maximum extent practicable. 

 Bureaucratic difficulties: Involving so many stakeholders would create a danger of stagnant 

committee decision making, universal veto authority, and scope creep. There might also be a 

danger of not invented here syndrome impeding adoption of already-existing data 

architectures—for instance, those borrowed from National Institute of Standards and 

Technology, industry organizations, multilateral institutions, and the open-source developer 

and data science community. 

 Political difficulties: In many organizations that would be affected by a redesign of defense 

acquisition data architecture—for instance, congressional committees, OMB, GSA, and private 

companies—no one reports to the Secretary of Defense. For this reason, it would be critical to 

obtain advance buy-in from these stakeholders if modifying data architectures with 

jurisdictional overlap. 

Costs and Benefits 

Reorganizing portions of DoD’s acquisition data architecture would cost substantial time, effort, and 

money. There are also substantial costs associated with the status quo. A notional breakdown of the 

major costs associated with the status quo approach would include the following: 

 Continued inefficiencies in DoD operations at the working level. 

 Poor communication across functional communities due to widespread misunderstandings of 

the way other offices do business. 

 Labor immobility leading to both inflated salaries and a frequent lack of the right type of highly 

specialized data science expertise. 

 Continued investment in software maintenance to ensure continued accuracy of data 

translation. 
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Maintenance of legacy IT systems would be one of the most expensive costs associated with 

maintaining the status quo. Software systems used in acquisition and finance frequently must 

communicate with one or many other software systems. If the data structure used in one system is 

modified, other systems must be modified to accommodate the change. Changing one piece of software 

or business process can in some cases require dozens of changes to other systems—building new 

translators to allow for intersystem communication. This can generate enormous costs. 

It is not possible to calculate with certainty the percentage of IT upgrades dedicated to building new 

data translation functions into existing systems. GAO analyses suggest the total amount invested 

annually in IT modernization is close to $75 billion.53 If only one-tenth of this money went toward 

building data translation features, costs would stretch into the tens of billions of dollars over just a few 

years. 

Major costs associated with the reorganization of data architectures would include the following: 

 The direct dollar costs of staffing and researching the modifications to be made. 

 Efficiency and implementation costs of business process reengineering. 

 Costs associated with redesigning existing IT systems to be compliant with new standards. 

Ideally, uniform data architectures would use existing commercial standards. They would be designed 

in such a way that preexisting, customized, business software could be replaced with simple software 

based largely on code in the public domain. If a data standardization effort were to abide by these 

principles, the costs of such an effort could in many cases be much lower than the costs of maintaining 

the status quo. 

Short-Term Solutions Using Proprietary Interfaces 

Many companies now offer services wherein they download bulk federal government data, add 

customized data elements to it, and sell visualizations using those data elements back to the 

government. This practice may be an acceptable short-term approach in some cases. If policymakers 

come to rely on visualization tools that simply collect from preexisting systems, there is a danger that it 

will gradually degrade the political incentives to reform the underlying data architecture. Without this 

kind of reform, functional communities will continue to lack architectural alignment and institutional 

inefficiencies will keep increasing. 

Conclusions 

If acquisition financial data architecture were to be comprehensively reformed, senior U.S. government 

leaders would need to collectively commit to standardizing and consolidating existing architectures. 

The data architectures used by the many functional communities would need to be aligned to 

portfolios of mission capabilities. 

 

53 Based on GAO’s FY 2018 governmentwide IT spending estimate of $96 billion and analysis that the federal government spends “more 

than 75 percent” of IT investment on operation and maintenance. GAO, Information Technology: Federal Agencies Need to Address Aging 

Legacy Systems, GAO-16-696T, May 25, 2016, accessed August 17, 2018, https://www.gao.gov/assets/680/677454.pdf. GAO, Information 

Technology: Further Implementation of Recommendations Is Needed to Better Manage Acquisitions and Operations, GAO-18-460T,

March 14, 2018, accessed August 17, 2018, https://www.gao.gov/assets/700/690655.pdf. 
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This process would be technically challenging and politically contentious. It would affect the way 

business is done in congressional committees, OMB, GSA, and other organizations where no one 

reports to the Secretary of Defense. 

Regardless of the challenges, such a reform would have to occur eventually to allow for meaningful 

comparison of acquisition and financial data analysis across functional communities. Without common 

architectures, a data analyst from the contracting community will not be able to reliably trace a 

program back to the budgeting data from which it was funded, let alone the requirements data from 

which the program originated. 

One option is to continue spending billions of dollars building interfaces to translate between IT 

systems, or providing additional education and training to data analysts. Continuing to speak several 

different data languages across communities, however, will mean data analysis continues to be 

untrustworthy and inefficient because of the need to include various human and machine translators in 

the process. Many of the machine translators are obscure IT systems to which virtually no one pays 

attention until they break or produce obvious errors. This approach leads to unnecessary delay, 

dysfunction, and maintenance costs. Many of the human translators are the only individuals in their 

workplaces with certain skill sets, meaning inefficiency in the form of backlogs, wait times, and 

potential labor market distortions. 

A long-term way to address these problems would be for senior-level stakeholders to appoint experts; 

assign these experts to build a uniform, top-level data architecture; and commit in advance to 

implementing that new architecture throughout the government’s acquisition and financial system, 

which would likely take decades. 

Case Study: 

Trade Data Standardization54

In the mid-1800s, governments used a patchwork of different categorization systems to apply tariffs and collect statistics 

on goods being traded internationally. A trader importing American wheat into France, for instance, might have his 

product defined and assessed using a completely different framework from that applied to the same wheat being 

imported into Spain. This lack of standardization across jurisdictions led to confusion, excess complexity, and higher 

transaction costs in the international trade community. 

These problems were acute enough that beginning in 1853, a global community of statisticians and economists began to 

meet regularly to develop a uniform tariff data architecture. Despite holding congresses on the matter every few years, it 

took decades before participants made even small headway on real-world implementation. Early efforts to create a 

standardized tariff data architecture included the Austria–Hungary Tariff of 1882 and the 33-country Brussels 

Nomenclature of 1913. 

 

54 Historical details on 1882 Austria-Hungary tariff, 1913 Brussels Nomenclature, and 1931 League of Nations tariff data architecture from 

Howard L. Friedenberg, The Development of a Uniform International Tariff Nomenclature, published by U.S. International Trade 

Commission (then U.S. Tariff Commission), April 1968, accessed September 7, 2018, 

https://www.usitc.gov/publications/tariff_affairs/pub237.pdf. Other historical information from World Customs Organization, The 

Harmonized System: A Universal Language for International Trade, 2018, accessed September 7, 2018, http://www.wcoomd.org/-

/media/wco/public/global/pdf/topics/nomenclature/activities-and-programmes/30-years-hs/hs-compendium-2018_v4_june-2018.pdf. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Acquisition Data Volume 3 | Page 497 

Case Study: 

Trade Data Standardization54

In 1931, under the League of Nations, the first widely-accepted tariff data architecture was published. The vast majority 

of countries today, including the United States, continue to apply tariffs and negotiate trade agreements using a data 

architecture largely based on that of 1931. Between initial conceptual development and initial implementation, it took 

nearly a century for the reformed data architecture to come into effect. 

The chief lesson of this historical case study is that data architecture standardization can take a very long time. In the 

case of tariff data, it took decades to reach agreement across jurisdictional communities. 

A uniform acquisition financial data architecture would not only stretch across jurisdictional communities; it would also 

stretch across functional communities—requirements, budgeting, program management, contracting, and others. Both 

these factors—jurisdiction and functional area—would increase the total time, complexity, and political capital that 

would be necessary for such an effort to be successful.

In the short term, a more feasible alternative to comprehensively redesigning data architectures would 

be to iteratively improve DoD data management by improving business processes and eliminating 

IT interfaces. The CMO would be the obvious authority to lead such an effort. Implementation of DoD 

data management practices would be largely a technical endeavor, not a policy one. The CMO should 

be tasked with identifying redundant business processes, process nodes, and IT systems for 

elimination. 

Implementation 

Legislative Branch 

 Direct DoD to identify and consolidate or eliminate competing data architectures within the 

defense acquisition and financial systems. 

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 9. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

 
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Section 9 

Acquisition Data 

Implementation Details 

Recommendation 88 

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RECOMMENDED REGULATORY REVISIONS

FY 2018 NDAA CMO Implementation Memorandum

The following draft memorandum serves as a suggested template for implementing Section 809 

Panel Volume 3, Recommendation 88 on using existing defense business system open-data 

requirements to improve strategic decision making on acquisition and workforce issues.

This draft document may be out of date by the time DoD begins the process of official 

memorandum issuance, and working level personnel may determine that some details are not 

practicable. For these reasons, the DoD CMO or other issuing authority is encouraged to modify 

the text as needed.
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[DATE]

MEMORANDUM FOR SECRETARIES OF THE MILITARY DEPARTMENTS

CHAIRMAN OF THE JOINT CHIEFS OF STAFF

UNDER SECRETARIES OF DEFENSE

CHIEFS OF THE MILITARY SERVICES

GENERAL COUNSEL OF THE DEPARTMENT OF DEFENSE

DIRECTOR OF COST ASSESSMENT AND PROGRAM 

EVALUATION

INSPECTOR GENERAL OF THE DEPARTMENT OF DEFENSE

DIRECTOR OF OPERATIONAL TEST AND EVALUATION

CHIEF INFORMATION OFFICER OF THE DEPARTMENT OF 

DEFENSE

ASSISTANT SECRETARIES OF DEFENSE

DIRECTOR OF NET ASSESSMENT

DIRECTORS OF DEFENSE AGENCIES

DIRECTORS OF DOD FIELD ACTIVITIES

SUBJECT: Guidance on Defense Management Data Transparency Provisions under Public Law 

115-91, National Defense Authorization Act for Fiscal Year 2018

REFERENCES: See Enclosure 1 (Key Sources of Defense Management Data)

Section 911, Section 912, and Section 913 of Public Law (P.L.) 115-91, the National 

Defense Authorization Act (NDAA) for Fiscal Year 2018, were enacted into law December 12, 

2017. These NDAA sections require the establishment of data policy on defense business 

systems; require increased transparency of defense management data; and require the 

establishment of additional data analysis activities in support of improved acquisition program 

outcomes.

Defense management data greatly enhances our ability to efficiently allocate resources 

and plan appropriately for future challenges. Too often, however, management data is 

stovepiped within specific organizations and systems, unavailable to the Department of 

Defense workforce more broadly.

Organizations that collect large amounts of management data are expected, to the 

maximum extent practicable, to

(1) Make data available, by default, via application program interfaces (APIs) which 

may be accessed by personnel throughout the rest of the Department of Defense and 

the military departments;

(2) Make data available in formats that conform to departmentwide standards; and

(3) Familiarize themselves with the major sources of defense management data, 

including those data sources that fall outside of their area of functional specialization 
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(for example, see ENCLOSURE 1 for a list of key defense acquisition and financial 

management data sources).

These data sources should be used for strategic decision-making, including in the areas 

of both acquisition and workforce management. For the purpose of improving strategic data 

analytics capabilities, agencies are encouraged to make use of congressionally approved 

statutory authorities that allow for more streamlined hiring of data science professionals. These 

authorities may include those under 10 U.S.C. §1599h, 10 U.S.C. §1701 (see notes), and 10 U.S.C. 

Chapter 81 (see front matter).

In implementing this open-data requirement, individual organizations that manage IT 

systems are responsible for building standardized APIs through which outside organizations 

may access their data. In consultation with the CIO and CMO, organizations are also 

responsible for ensuring that data formats meet common standards defined at the OSD level.

This guidance is effective immediately. Further guidance may be issued as necessary. 

The point of contact (POC) for the Chief Management Officer is [CONTACT PERSON] at 

[CONTACT PHONE NUMBER].
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ENCLOSURE 1—Key Sources of Defense Acquisition Management Data

[DATE OF LAST UPDATE]

Data Source Availability Link Broad Data Description

Federal Business 

Opportunities (FBO)

Public https://www.fbo.gov Largely unstructured data on contract 

solicitations

Federal Procurement Data 

System—Next Generation 

(FPDS-NG)

Public https://www.fpds.gov Contract award data available by 

individual contract action

Defense Acquisition 

Management Information 

Retrieval (DAMIR)

Restricted https://ebiz.acq.osd.mil/damir Acquisition program baselines, selected 

acquisition reports for major acquisition 

programs

Acquisition Information 

Repository (AIR)

Restricted https://www.dodtechipedia.mil/

AIR

Final approved acquisition documents 

in a centralized searchable repository

System for Award 

Management (SAM)

Public http://sam.gov Data on companies that are registered 

to do business with the federal 

government

USA Spending Public https://www.usaspending.gov Data aggregation and visualization tool 

with governmentwide (including DoD) 

budget and contract award data

Federal Funding 

Accountability and 

Transparency Act (FFATA) 

Subaward Reporting System 

(FSRS)

Public https://www.fsrs.gov Contractor spending with 

subcontractors

Electronic Subcontracting 

Reporting System (eSRS)

Public https://www.esrs.gov Contractor subcontracting dollar

allocations

OUSD(C) Budget Materials Public https://comptroller.defense.gov/

Budget-Materials

Appropriated funding data by budget 

line item/program element

OUSD(C) Budget Execution Public https://comptroller.defense.gov/

Budget-Execution

Data on approved reprogramming 

actions, including DD 1416 belowthreshold reprogramming actions and 

related topics

Cost Assessment Data 

Enterprise (CADE)

Restricted http://cade.osd.mil Acquisition program cost data

Procurement Business 

Intelligence Service (PBIS)

Restricted https://reportsosd.altess.army.mil/analyticsAcquisition data warehouse with 

dashboard functions
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Earned Value Management 

Central Repository (EVMCR)

Restricted http://cade.osd.mil/tools/evmtoolsPARCA acquisition data on earned 

value management and related topics

Knowledge 

Management/Decision 

Support System (KM/DS) 

Restricted JCS data on acquisition program

requirements, capabilities, and related 

topics

Unified Research and 

Engineering Database 

(URED)

Restricted Data on R&D efforts

Defense Automated Cost 

Information Management 

System (DACIMS)

Restricted https://www.cape.osd.mil Acquisition program cost and schedule 

data

(DRDW) Restricted https://www.cape.osd.mil Future Years Defense Program (FYDP) 

and Program Objective Memoranda 

(POM) data

(MOCAS) Restricted DFAS and DCMA data on contract 

funding and related topics

(DDRS) Restricted DFAS financial and accounting data

[LIST ADDITIONAL KEY 

DATA SOURCES AS 

NEEDED]
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Recommendation 89 

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RECOMMENDED REPORT LANGUAGE

SEC.___. IMPLEMENTATION OF RECOMMENDATIONS OF THE SECTION 809 PANEL 

RELATING TO DATA ARCHITECTURE CONSOLIDATION.

This section would require the implementation of the data architecture consolidation 

recommendations provided by the advisory panel established under section 809 of the National 

Defense Authorization Act for Fiscal Year 2016 (Public Law 114-92). Under this section, the 

Department of Defense Chief Management Officer and other key stakeholders would be 

directed to consolidate or eliminate the following: (A) information technology systems that 

serve primarily to convert data from one format into another; (B) offices that serve primarily to 

move information from one office to a different office; and (C) personnel functions that 

primarily involve converting information from one format to another or moving it from one 

location to another.

The committee recognizes that the Department may in some cases need to incorporate 

mutually incompatible data architectures into one another. In these cases, the committee expects 

that the data architectures that predominate would be those that are already most widely-used 

in commercial industry, unless a compelling reason exists for using non-commercial standards.

The committee notes that the primary purpose of this section is intended to limit the 

proliferation of different data architectures throughout the Department’s financial and 

acquisition systems. The committee is aware that these different data architectures have led to a 

number of inefficiencies in Department of Defense business operations. The committee notes 

that, collectively, these inefficiencies contribute to poor inter-office communication, 

entrenchment of institutional siloes, lower adaptability of labor, and damaged workforce 

morale.
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This paper’s recommendations relating to data architecture will be important to improving the 

defense acquisition process, and they should therefore be implemented as a matter of law. An 

implementation requirement with the force of law will be important for driving the timely 

implementation of these recommendations within the Department of Defense. 

Attempting to write into statute the precise recommendations would entail a level of technical 

detail not typically seen in statute. This would carry the attendant risk of both inadvertent error 

and of inflexibility in addressing unforeseen future issues. 

In section 868 of the John S. McCain National Defense Authorization Act for Fiscal Year 2019 

(Public Law 115-232), Congress required the Secretary of Defense to implement the 

recommendations of the final report of the Defense Science Board task force on the design and 

acquisition of software for defense systems. This is an appropriate model for Congress to use in 

directing implementation of data architecture recommendations as well. Draft legislative 

language is provided accordingly. 

——— 

(Based on Section 868 of the FY2019 NDAA, 

P. L. 115-232, enacted Aug 13, 2018) 

1 SEC. __. IMPLEMENTATION OF RECOMMENDATIONS OF THE SECTION 809 

2 PANEL RELATING TO DATA ARCHITECTURE CONSOLIDATION. 

3 (a) IMPLEMENTATION REQUIRED.— 

4 (1) IN GENERAL.—The Secretary of Defense shall, except as provided in 

5 subsection (b), implement the data architecture consolidation recommendation made as 

6 part of the report of the Section 809 Panel described in paragraph (2). This 

7 implementation process shall be undertaken with the intent of consolidating or 

8 eliminating— 

9 (A) information technology systems that serve primarily to convert data 

10 from one format into another; 

11 (B) offices that serve primarily to move information from one office to a 

12 different office; and 
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1 (C) personnel functions that primarily involve converting information 

2 from one format to another or moving it from one location to another. 

3 (2) COVERED RECOMMENDATIONS.—The recommendation referred to in 

4 paragraph (1) is the recommendation designated as Recommendation No. 89 in Volume 3 

5 of the Report of the Section 809 Panel, dated January 15, 2019. 

6 (b) EXCEPTIONS.— 

7 (1) NONIMPLEMENTATION.—With respect to individual systems, offices, or 

8 personnel functions, the Secretary may opt not to implement the recommendation 

9 specified in subsection (a) if the Secretary submits to the congressional defense 

10 committees a report— 

11 (A) identifying the systems, offices, or personnel functions for which the 

12 Secretary has opted not to implement the recommendation; and 

13 (B) providing the reasons for the decision not to implement the 

14 recommendation. 

15 (c) IMPLEMENTATION PLANS.—Not later than two years after the date of the enactment of 

16 this Act, the Secretary shall submit to the congressional defense committees a report providing— 

17 (1) a summary of systems, offices, or personnel functions for which the 

18 recommendation has been implemented; and 

19 (2) a schedule, with specific planned months and years, for future implementation 

20 of the recommendation in additional systems, offices, or personnel functions. 

21 (d) SECTION 809 PANEL.—In this section, the term “Section 809 Panel” means the panel 

22 established by the Secretary of Defense pursuant to section 809 of the National Defense 

23 Authorization Act for Fiscal Year 2016 (Public Law 114-92), as amended by section 863(d) of 
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1 the National Defense Authorization Act for Fiscal Year 2017 (P. L. 114-328) and sections 803(c) 

2 and 883 of the National Defense Authorization Act for Fiscal Year 2018 (P. L. 115-91). 

————— 
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 Volume 3 | Page 499 

Section 10 

Title 10 Reorganization 

The tools that support the defense acquisition system need to be simple and 

effective, not burdensome and confusing. Reorganizing Title 10 would help 

restore agility and simplicity to defense acquisition. 

RECOMMENDATION

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

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

acquisition part of Title 10. 

 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Recommendation 90: Reorganize Title 10 of the U.S. Code to place all of the 

acquisition provisions in a single part, and update and move acquisition-related 

note sections into the reorganized acquisition part of Title 10. 

Problem 

Congress, in establishing the Section 809 Panel, directed it to “make any recommendations for the 

amendment or repeal of such regulations that the panel considers necessary” to streamline defense 

acquisition.As the panel began its research, it became apparent that restricting its purview to defense 

acquisition regulations was too narrow. Regulatory implementation is often directed by statutes. 

Amending, or in some cases repealing, certain defense acquisition statutes is necessary to effectively 

streamline defense acquisition and provide greater transparency in its processes. Congress 

acknowledged this situation in subsequent amendments to the Section 809 Panel mandate. 

Defense acquisition statutes are codified in Title 10 of the U.S. Code; however, over the years, those 

statutes have become increasingly disorganized, making it difficult for even the most experienced user 

to sort through the Code. Acquisition reform has become a perennially popular legislative effort, with 

Congress enacting no less than 265 acquisition-related provisions in the past three NDAAs. Few people 

know how to sort through the cluttered Code to find those legislative provisions that often end up as 

notes within the Code. 

The acquisition-related statutes that apply to the rest of the federal government were recently 

organized and codified in Title 41. No similar effort has been made with regard to Title 10, where the 

organization of the acquisition-related statutes has become problematic. The work of the Section 809 

Panel provides an opportunity to bring those defense acquisition statutes into a cohesive organized 

structure for the long-term benefit of the acquisition community and those companies doing business 

with DoD or are seeking to enter the DoD marketplace. 

Background 

When Title 10 was codified in 1956, the drafters did not anticipate where the growth would take place. 

Part IV of Subtitle A, Service, Supply, and Procurement, houses most of the acquisition statutes – the 

house is now full and in disarray. As the Packard Commission noted in 1986: 

... the legal regime for defense acquisition is today impossibly cumbersome. . . .At operating levels within 

DOD, it is now virtually impossible to assimilate new legislative or regulatory refinements promptly or 

effectively. For these reasons we recommend that Congress work with the Administration to recodify 

Federal laws governing procurement into a single consistent and greatly simplified procurement statute.1

The Section 800 Panel (established pursuant to the National Defense Authorization Act for Fiscal Year 

1991, Pub. L. 101-510) made a similar finding and recommendation in its January 1993 report to 

Congress, Streamlining Defense Acquisition Laws. Nothing has changed since those findings and 

recommendations were made. Lasting positive effects of ongoing reform efforts, like those the Section 

 

1

 A Quest for Excellence: Final Report by the President’s Commission on Defense Management 55 (June 1986) 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Title 10 Reorganization Volume 3 | Page 501 

809 Panel is recommending throughout its reports, will be limited without a coherent, organized, and 

transparent structure in which to integrate the resultant legislative changes. 

Discussion 

Not since the passage of the Armed Services Procurement Act of 1947 have all the provisions governing 

DoD acquisition been contained within an organized, logical structure. Over the last 60 years, Congress 

overloaded Part IV of Subtitle A, adding section after section to the Code. Furthermore, Congress has 

added myriad note sections as it enacted long-term or permanent provisions without amending the 

Code. A note is a provision of law from the annual defense authorization acts or other statutes, which 

for different reasons are not set forth in the Code as numbered sections. Instead, the editors of the 

U.S. Code set out the note following a Code section. 

The number of note sections has ballooned over time as Congress authorized short-term pilot programs 

and reporting requirements that all needed homes somewhere within the Code. Some more permanent 

provisions of law—enacted through the annual defense authorization acts—have also been buried as 

note sections under existing sections of the law. 

A miniscule number of specialized attorneys and policy makers inside and outside of DoD understand 

what these notes mean and where they are located. Few attorneys even recognize that the notes are 

indeed law, just like the section of the Code to which they are appended. 

In its Volume 2 Report, the Section 809 Panel proposed a rational, statutory structure to replace the 

confusion and clutter resulting from the Code’s buried note sections and rambling organization. It also 

recommended repeal of approximately 100 note sections that were either obsolete or expired, as well as 

three Title 10 provisions. The John S. McCain National Defense Authorization Act for Fiscal Year 2019 

(Pub. L. No. 115–232) adopted a large portion of those repeal recommendations. More significantly, the 

McCain NDAA recognized the panel’s reorganization effort, by creating a new Part V within Subtitle 

A, General Military Matters. To provide room for additional provisions in the new Part V, elements of 

the Code immediately following the current Part IV will be renumbered. 

Redesignation is necessary because there is no more room in Subtitle A, evidenced by the proliferation 

of note sections and the invention of a baroque numbering system (e.g., 2366a, 2371b, 2374a, and even 

2410s). As discussed in Volume 2 of the panel’s report, note sections that should remain on the books 

will be codified as new Title 10 sections under a logical and intuitive revised chapter structure. The 

redesignation will provide additional room for Congress to reorganize or consolidate statutes related to 

other topics of general military application. 

The task of restructuring these statutes requires a substantial effort. Though the intent of this project is 

not to make any substantive changes to the legislative language, it will include breaking up some long 

sections of the Code into more manageable sections and making technical updates. Another feature of 

the restructuring is to work toward a final product that, where practicable, will restore much of the 

parallelism with Title 41, the acquisition statutes applicable to nondefense agencies that existed before 

Title 41 was codified. 

The Section 809 Panel began the restructuring task, and drafted a number of proposed chapters for 

inclusion in the newly created Part V in Subtitle A of Title 10. These proposed chapters are being 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Page 502 | Volume 3 Title 10 Reorganization 

transmitted periodically to the Senate and House Armed Services Committees as well as to DoD. 

A table of the completed draft chapters (as of December 31, 2018) is included in in the Implementation 

Details for this section. This table identifies the new proposed section number as well as the original 

section number for each Title 10 section, and for the note sections, the Title 10 section under which the 

note originally was located (as well as the public law number). This table is intended to facilitate 

tracking of the defense acquisition provisions across the old and the new structures. Once the entire 

project is completed, via enactment in a single or multiple NDAAs, Congress should publish a 

comprehensive table that identifies the original section numbers and corresponding new section 

numbers in the new Part V of Title 10. A similar table was published following the reorganization and 

codification of Title 41 statutes. 

In the future, companies that already do business with other federal agencies will encounter a more 

readable statutory framework when they seek to do business with DoD. More importantly, greater 

transparency into the laws that govern transacting business with DoD may reduce a barrier into the 

defense market for innovative small businesses and nontraditional companies. 

The mission of the acquisition system is complex, and the stakes are high. DoD must be able to deliver 

lethality to the warfighter inside the turn of our near peer competitors and nonstate actors. Too often, 

the practice of defense acquisition and federal procurement is perceived as more complex than its 

mission, obscured by onerous requirements and shrouded in secrecy. The current lack of organization 

and structure in the laws governing acquisition seems to confirm this perception. 

Conclusions 

The tools that support the defense acquisition system need to be simple and effective, not burdensome 

and confusing. Reorganizing Title 10 would help restore agility and simplicity to defense acquisition. 

Simplifying the governing body of law is key to creating a system that is more transparent and 

accessible—and thus better able to meet DoD’s mission. 

Implementation 

Legislative Branch 

 Reorganize all acquisition provisions into a new Part V at the end of Subtitle A of Title 10, 

U.S. Code. 

 Update and move acquisition related note sections into the new acquisition structure within 

Part V of Title 10, U.S. Code. 

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: A table of completed draft chapters identifying the old versus new location of each defense 

acquisition section (and notes) within the new Part V of Title 10, U.S. Code can be found in the 

Implementation Details subsection at the end of Section 10. 
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Title 10 Reorganization Volume 3 | Page 503 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

 
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Section 10 

Title 10 Reorganization 

Implementation Details 

Recommendation 90 

Proposed Chapters for New Part V of Subtitle A of Title 10, United States Code, 

that have been submitted as of December 31, 2018 

 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

201 Definitions Pending

203 General Matters Pending

205 Defense Acquisition System Pending

207 Budgeting & Approps Matters Pending

209 Operational Contract Support Chapter submitted on 

12/10/2018

Sub I

Joint policies on requirements definition, 

contingency pgm mgt, & contingency 

contracting

137 2333

3151 Joint policies required 137 2333(a)

3152 Joint policy for requirements definition 137 2333(b)

3153 Joint policy for contingency program management 137 2333(c)

3154 Joint policy for contingency contracting 137 2333(d)

3155

Training of military personnel outside acquisition 

workforce 137

2333(e)(1),(

2)

3156 Mission readiness exercises 137 2333(e)(3)

PART V—ACQUISITION

SUBPART A—GENERAL [FAR Subch A]

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 1 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

21

22

23

24

25

26

27

28

29

30

31

3233

34

35

36

37

3157 Definitions 137 2333(f)

Sub II Other Provisions Relating to Operational 

Contract Support

3171 Competition and Review of Contracts For Property 

or Services in Support of a Contingency Operation 137 2302 note FY12 NDAA Pub. L. 112–81, §844(a), (b)

3172

Responsibility Within Department of Defense for 

Operational Contract Support 137 2302 note

FY13 NDAA Pub. L. 112–239, 

§843

221 Planning and Solicitation Generally Pending

223 Planning and Solicitation Relating to 

Particular Items or Services Pending

241 Awarding of Contracts Pending

243 Specific Types of Contracts Pending

245 Task and Delivery Order Contracts 

(Multiple Award Contracts)

Chapter submitted on 

11/07/2018

See 

Ch41

3401 Task & delivery order contracts: definitions 137 2304d 4101

SUBPART B—ACQUISITION PLANNING 

SUBPART C—CONTRACTING METHODS AND CONTRACT TYPES 

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 2 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

38

39

40

41

42

43

44

45

46

47

48

49

50

3402 Authorities or responsibilities not affected 137 2304a note 4102

3403 Task & delivery order contracts: general authority 137 2304a 4103

3404 Guidance on use of task and delivery order 

contracts

new 4104

3405 Task order contracts: advisory and assistance 

services

137 2304b 4105

3406 Task & delivery order contracts: orders 137 2304c 4106

247 Acquisition of Commercial Items Products 

and Commercial Services

249 Multiyear Contracts Chapter submitted on 

12/10/2018

Sub I Multiyear contracts for acquisition of property 137 3903

3501

Multiyear contracts for acquisition of property: 

authority; definitions 137

2306b(a), 

(k)

10 USC 2306b divided into 

11 sections

3502

Multiyear contracts for acquisition of property: 

regulations 137 2306b(b)

3503

Multiyear contracts for acquisition of property: 

contract cancellation or terminationy 137

2306b(c), 

(f), (g)

3504

Multiyear contracts for acquisition of property: 

participation by subcontractors, vendors, and 

suppliers

137 2306b(d)

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 3 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

51

52

53

54

55

56

57

58

59

60

61

62

3505

Multiyear contracts for acquisition of property: 

protection of existing authority 137 2306b(e)

3506

Department of Defense contracts: acquisition of 

weapon systems

137 2306b(h)

3507

Department of Defense contracts: defense 

acquisitions specifically authorized by law 137 2306b(i)

3508

Department of Defense contracts: notice to 

congressional committees before taking certain 

actions

137

2306b(l)(1) 

(6),& (8)

3509

Department of Defense contracts: multiyear 

contracts with value in excess of $500,000,000 137

2306b(l)(3) 

(4), (5), (8) 

& (9) 

3510

Department of Defense contracts: additional 

matters with respect to multiyear defense 

contracts

137

2306b(j), 

(l)(2), (7) & 

(8)

3511 Increased funding and reprogramming requests 137 2306b(m)

Sub II Multiyear contracts for acquisition of services 137 3903

3531 Multiyear contracts for acquisition of services: 

authority; definitions 137 2306c(a), (b), (f), (h)

10 USC 2306c divided into 5 

sections

3532 Multiyear contracts for acquisition of services: 

applicable principles 137 2306c(c)

3533 Multiyear contracts for acquisition of services: 

contract cancellation or termination 137 2306c(e), (d)(4), (5)

3534

Multiyear contracts for acquisition of services: 

contracts with value above $500,000,000 to be 

specifically authorized by law

137 2306c(d)(2)

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 4 of 23
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That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

63

64

65

66

67

68

69

70

71

72

73

74

75

76

3535

Multiyear contracts for acquisition of services: 

notice to congressional committees before taking 

certain actions

137 2306c(d)(1) 

& (3)

Sub III Other Authorities Relating to Multiyear 

Contracts 137

3551

Multiyear procurement authority: purchase of 

dinitrogen tetroxide, hydrazine, and hydrazinerelated products141 2410o

3552

Multiple Program Multiyear Contract 

Demonstration Program 137 2306b note

FY17 NDAA, P.L. 114-328, sec 

853, Dec 23, 2016, Dec. 23, 

2016

[none] Multiyear contracts: purchase of electricity from 

renewable energy sources 141 2410q

Transfer from ch. 141 to 

subch II of ch. 173 as new 

2922i

[none] Pilot program for longer term multiyear service 

contracts

137 2306c note

FY18 NDAA, Pub. L. 115-91, 

§854, Dec. 12, 2017

Will not be codified -- will 

remain as a note.

[none] Multiyear procurement contracts 137 2306b note

FY98 DOD APPROP Pub. L. 

105–56, §8008, and following 

FYs. 

Will not be codified -- will 

remain as a note.

251 Simplified and Streamlined Acquisition 

Procedures Pending

253 Emergency and Rapid Acquisition Pending

255 Contracting With or Through Other 

Agencies 

Chapter submitted on 

12/13/2018

3651 Defense Procurements Made Through Contracts 

Of Other Agencies 137 2304 note FY05 NDAA Pub. L. 108–375, §854

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 5 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

77

78

79

80

81

82

83

84

85

86

87

88

89

90

91

3652

Treatment of Interagency And State And Local 

Purchases When DoD Acts as Contract 

Intermediary for GSA

148 2500 note FY16 NDAA Pub. L. 114–92, 

§897, Nov. 25, 2015

3653 Procurement Of Alternative Fueled And Hybrid 

Light Duty Trucks 137 2302 note FY02 NDAA Pub. L. 107–107, §318, Dec. 28, 2001

3654

Authority to Procure Services From Government 

Publishing Office 8 195 note

FY98 NDAA, P.L. 105-85, 

§387(c), Nov. 18, 1997

271 Truthful Cost or Pricing Data Chapter submitted on 

11/07/2018

Sub I Truthful Cost or Pricing Data (Truth in 

Negotiations) From 2306a See Ch35

3701 Definitions 137 2306a(h) 3501

3702 Required cost or pricing data; certification 137 2306a(a) 3502

3703 Exceptions 137 2306a(b) 3503

3703(d)(

4)

(b) Definition of Commercial Item

(c) Regulations 

(d) Rule of Construction

137 2306a note FY16 NDAA P.L. 114-92, 

§851(c)-(e), Nov 25, 2015

3704 Cost or pricing data on below-threshold contracts 137 2306a(c) 3504

3705 Submission of other information 137 2306a(d) 3505

3706 Price reductions for defective cost or pricing data 137 2306a(e) 3506

3707 Interest and penalties for certain overpayments 137 2306a(f) 3507

SUBPART D—GENERAL CONTRACTING REQUIREMENTS 

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 6 of 23
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That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

92

93

94

95

96

97

98

99

100

101

102

103

104

105

106

3708 Right to examine contractor records 137 2306a(g) 3508

Sub II Other Provisions Relating to Cost or Pricing 

Data

3721

Guidance And Training Related To Evaluating 

Reasonableness of Price 137 2306a note

FY13 NDAA Pub. L. 112–239, 

§831, Jan. 2, 2013

3722

Grants Of Exceptions To Cost Or Pricing Data 

Certification Requirements And Waivers Of Cost 

Accounting Standards

137 2306a note

FY03 NDAA Pub. L. 107–314, 

§817, Dec. 2, 2002

3723 Pilot Program for Streamlining Awards For 

Innovative Technology Projects 137 2306a note FY16 NDAA Pub. L. 114–92, §873(a)–(d), Nov. 25, 2015 

3724

Pilot Program Regarding Risk-Based Contracting 

for Smaller Contract Actions Under the Truth in 

Negotiations Act

137 2306a note

FY16 NDAA Pub. L. 114–92, 

§899 

273 Allowable Costs Chapter submitted on 

12/10/2018

Sub I General 2324 divided into 10 

secs

 Ch43

3741 Definitions 137 2324(l) 4301

3742 Adjustment of threshold amount of covered 

contract

137

2324(l)(1)(B

)

4302

3743 Effect of submission of unallowable costs 137 2324(a)-(d) 4303

3744 Specific costs not allowable 137 2324(e) 4304

3745 Required regulations 137 2324(f) 4305

3746 Applicability of regulations to subcontractors 137 2324(g) 4306

3747 Contractor certification 137 2324(h) 4307

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 7 of 23
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That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

3748

Penalties for submission of cost known to be 

unallowable 137 2324(i) 4308

3749 Burden of proof on contractor 137 2324(j) 4309

3750 Proceeding costs not allowable 137 2324(k) 4310

Sub II Other Allowable Cost Provisions

3761 Restructuring costs 137 2325

3762 Independent research and development costs 139 2372

3763 Bid and proposal costs 139 2372a

3764 Excessive pass-through charges 137 2324 note

FY07 NDAA Pub. L. 109–364, 

§852(b), Oct. 17, 2006 4710

3765 Reimbursement of indirect costs of institutions of 

higher education under DoD contracts 137 2324 note FY94 NDAA Pub. L. 103–160, §841, Nov. 30, 1993 4708

275 Proprietary Contractor Data and Rights in 

Technical Data 

Chapter submitted on 

11/07/2018

Sub I Rights in Technical Data From 10 USC 2320 2302

3771 Rights in technical data 137 2320(a) 2302(a)-

(d)

3772 Provisions required in contracts 137 2320(b), (c) 2302(e)

3773

Domestic business concerns: programs for 

replenishment or spare parts 137 2320(d)

3774(a) 

(b), (d)

Major weapons systems and subsystems: longterm technical data needs 137 2320(e), (f)

3774(c) Guidance Relating to Rights in Technical Data 137 2320 note FY11 NDAA, P.L. 111–383, 

§824(a), Jan. 17, 2011

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 8 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

123

124

125

126

127

128

129

130

131

132

133

134

135

136

3775 Definitions 137 2320(g), (h)

Sub II Validation Of Propriety Data Restrictions From 10 USC 2321 4703

3781

Technical data: contractor justification for 

restrictions; review 137 2321(a)-(c) 4703(a)

3782

Technical data: challenges to contractor 

restrictions 137 2321(d) 4703(b)

3783 Time for contractors to submit justifications 137 2321(e) 4703(c), 

(d)

3784

Technical data under contracts for commercial 

items: presumption of development exclusively at 

private expense

137 2321(f)

3785

Technical data: decision by contracting officer; 

claims 137 2321(g),(h) 4703(e), (f)

3786(a)(

1), (b), 

(c)

Technical data: final disposition of challenge 137 2321(i) 4703(g)

3786(a)(

2),(3) Implementation thru DFARS; Applicability 137 2321 note FY19 NDAA, Pub. L. 115-232, §866(b),(c), Aug. 13, 2018

3787 Use or release restriction: definition 137 2321(j)

Sub III Other Provisions Relating To Proprietary 

Contractor Data & Tech Data Rights 

3791

Management of intellectual property matters 

within the Department of Defense 137 2322(a)

3792 Technical Data Rights: Non-FAR Agreements 137 2320 note FY09 NDAA Pub. L. 110–417, 

§822, Oct. 14, 2008

3793 Technical data rights: noncommercial software 137 2321 note FY19 NDAA, Pub. L. 115-232, 

§866(d), Aug. 13, 2018

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 9 of 23
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That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

137

138

139

140

141

142

143

144

145

146

147

148

149

150

151

3794 Copyrights, patents, designs, etc.; acquisition 141 2386

3795 Release of technical data under Freedom of 

Information Act: recovery of costs 137 2328

277 Contract Financing Chapter submitted on 

10/29/2018

See 

Ch45

3800 Definitions

3801 Authority of agency 137 2307(a) 4501

3802 Payment 137 2307(b), (c) 4502

3803 Security for advance payments 137 2307(d) 4503

3804 Conditions for progress payments 137 2307(e) 4504

3805 Payments for commercial items 137 2307(f) 4505

3806 Action in case of fraud 137 2307(i) 4506

3807 Vesting of title in the United States 137 2307(h) none

[-] Certain Navy contracts 137 2307(g) 2307(g) to go to subtitle C, 

Navy

none

279 Contractor Audits and Accounting Chapter submitted on 

10/29/2018

3841 Examination of facilities and records of contractor 137 2313 3905, 

4706

3842 Performance of incurred cost audits 137 2313b

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 10 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

152

153

154

155

156

157

158

159

160

161

162

163

164

3843 Contractor internal audit reports: Dept of Defense 

access to, use of, & safeguards & protections for 137 2313 note FY13 NDAA Pub. L. 112–239, §832, Jan. 2, 2013

3844 Contractor business systems 137 2302 note FY11 NDAA Pub. L. 111–383, 

§893(a)-(g)

3845

Contractor inventory accounting systems: 

standards 141 2410b

3846

Defense Contract Audit Agency: legal resources 

and expertise 137 2302 note

FY11 NDAA Pub. L. 111–383, 

§893(h)

3847 Defense Contract Audit Agency: annual report 137 2313a

3848

Defense audit agencies: Small Business 

Ombudsmen 8 204

3849 Defense Cost Accounting Standards Board 7 190 1501, 

1502

281 Claims and Disputes Chapter submitted on 

12/10/2018

3861

Research and development contracts: 

indemnification provisions 139 2354

3862 Requests for equitable adjustment or other relief: 

certification 141 2410

3863 Retention of amounts collected from contractor 

during the pendency of contract dispute 141 2410m

3864

Bid protests denied by Government Accountability 

Office: pilot program for requiring contractor 

reimbursement of Department of Defense for 

costs incurred

137 2304 note FY18 NDAA, Pub. L. 115-91, 

§827, Dec. 12, 2017

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 11 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

165

166

167

168

169

170

171

172

173

174

175

176

177

178

179

180

283 Foreign Acquisitions Chapter submitted on 

12/13/2018

Sub I General

3881 Contracts: consideration of national security 

objectives 137 2327

3882 Products and services produced in Africa in 

support of certain activities 137 2302 note FY17 NDAA Pub. L. 114–328, §899A(a)–(e)

3883

Procurements from Communist Chinese military 

companies: prohibition 137 2302 note

FY06 NDAA Pub. L. 109–163, 

§1211, Jan. 6, 2006

3884

Reliance on China and Russia for space-based 

weather data: prohibition 137

before 2381 

note

FY16 NDAA Pub. L. 114–92, 

§1614, Nov. 25, 2015

Sub II Prohibition on Contracting with the Enemy From secs. 841-843 of 

P.L. 113-291

3891 Prohibition on providing funds to the enemy 137 2302 note

FY15 NDAA Pub. L. 113–291, 

§841; amended by FY19 

NDAA, sec 872

3892 Additional access to records 137 2302 note FY15 NDAA Pub. L. 113–291, 

§842

3893 Definitions 137 2302 note FY15 NDAA Pub. L. 113–291, 

§843

285 Defense Small Business Programs Pending

287 Socioeconomic Programs Pending

SUBPART E— RESEARCH AND ENGINEERING

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 12 of 23
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That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

181

182

183

184

185

186

187

188

189

190

191

192

193

301 Research & Engineering Generally Chapter submitted on 

12/21/2018

4001 Research and development projects 139 2358

4002 Research projects: transactions other than 

contracts and grants 139 2371 1904

4003

Authority of the Department of Defense to carry 

out certain prototype projects 139 2371b

4004 Procurement for experimental purposes 139 2373

4005 Preference for use of other transactions and 

experimental authority 139 2371 note FY18 NDAA, Pub. L. 115-91, §867, Dec. 12, 2017

4006

Data, policy, and reporting on the use of other 

transactions 139 2371 note

FY19 NDAA, Pub. L. 115-232, 

§873, Aug 13, 2018

4007

Science & technology pgms to be conducted so as 

to foster the transition of science & technology to 

higher levels of [RDT&E]

139 2359

4008

Merit-based award of grants for research and 

development 139 2374 3105

4009 Technology Protection Features Activities 139 2357

4010

Inclusion of Women and Minorities in Clinical 

Research Projects 139 2358 note

FY94 NDAA Pub. L. 103–160, 

§252, Nov. 30, 1993

4011

Program for Research, Development, and 

Deployment of Advanced Ground Vehicles, 

Ground Vehicle Systems, and Components

139 2358 note FY11 NDAA Pub. L. 111–383, 

§214, Jan. 7, 2011, 

4012 Human factors modeling and simulation activities 139 2358 note FY19 NDAA, Pub. L. 115-232, 

§227, Aug 13, 2018

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 13 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

194

195

196

197

198

199

200

201

202

203

204

205

4013 Defense quantum information science and 

technology research and development program 139 2358 note FY19 NDAA, Pub. L. 115-232, §234, Aug 13, 2018

4014

Coordination and communication of defense 

research activities and technology domain 

awareness

139 2364(a)

4015

Award of grants and contracts to colleges and 

universities: requirement of competition 139 2361

4016 University Research Initiative Support Program 139 2358 note FY94 NDAA Pub. L. 103–160, 

§802, Nov. 30, 1993

4017 Defense Established Program to Stimulate 

Competitive Research [DEPSCoR] 139 2358 note FY95 NDAA Pub. L. 103–337, §257, Oct. 5, 1994

4018

Mechanisms for expedited access to technical 

talent and expertise at academic institutions to 

support Department of Defense missions

139 2358 note FY18 NDAA P.L. 115–91, §217, 

Dec. 13 2017

4019

Initiative to support protection of national security 

academic researchers from undue influence and 

other security threats

139 2358 note FY19 NDAA, Pub. L. 115-232, 

§1286, Aug 13, 2018

[-] Advanced Rotorcraft Flight Research And 

Development 139 2358 note FY12 NDAA Pub. L. 112–81, §222, Dec. 31, 2011

Army-specific discretionay 

pgm 

Will be codified in subtitle 

B as new 7545 [4545].

303 Innovation Chapter submitted on 

12/21/2018

4061 Defense Research and Development Rapid 

Innovation Program

139 2359a

4062 Defense Acquisition Challenge Program 139 2359b

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 14 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

206

207

208

209

210

211

212

213

214

215

216

217

4063

Support for national security innovation and 

entrepreneurial education 139 2359 note

FY18 NDAA, Pub. L. 115-91, 

§225, Dec. 12, 2017

4064 Prizes for advanced technology achievements 139 2374a

4065 Program to Increase Business Innovation in 

Defense Acquisition Programs 137 2302 note FY00 NDAA Pub. L. 106–65, §812(a)–(c), (e), Oct. 5, 1999 

4066

Pilot program on enhanced interaction between 

DARPA and the Service Academies 139 2358 note

FY17 NDAA Pub. L. 114–328, 

§236

4067 Regional Advanced Technology Clusters 139 2358 note FY13 NDAA Pub. L. 112–239, 

§252, Jan. 2, 2013

4068 Global Research Watch Program 139 2365

4069 Hypersonics development 139 2358 note

FY07 NDAA, P.L. 109–364, 

§218, Oct. 17, 2006

4070 Science & technology investment strategy to 

defeat or counter improvised explosive devices 139 2358 note FY09 NDAA Pub. L. 110–417, §1504

4071

Collaborative Program for Research And 

Development Of Vacuum Electronics Technologies 139 2358 note

FY05 NDAA Pub. L. 108–375, 

§212, Oct. 28, 2004

4072

 Department of Defense Program to Expand HighSpeed High-Bandwidth Capabilities for NetworkCentric Operations

139 2358 note

FY04 NDAA Pub. L. 108–136, 

§234, Nov. 24, 2003

4073

Research and Development Of Defense Biomedical 

Countermeasures 139 2358 note

1. FY04 NDAA Pub. L. 108– 

136, §1601, Nov. 24, 2003; 

2. FY02 NDAA Pub. L. 107– 

107, §1044(a), Dec. 28, 2001

4074 Vehicle Fuel Cell Program 139 2358 note FY03 NDAA Pub. L. 107–314, 

§245, Dec. 2, 2002

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 15 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

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2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

218

219

220

221

222

223

224

225

226

227

228

229

230

4075

Defense Nanotechnology Research and 

Development Program 139 2358 note

FY03 NDAA Pub. L. 107–314, 

§246, Dec. 2, 2002

4076 Innovators information repository 139 2364 note

FY19 NDAA Pub. L. 115–232, 

§220, Aug. 13, 2018

4077 Joint artificial intelligence research, development, 

and transition activities 139 2358 note FY19 NDAA Pub. L. 115–232, §238, Aug. 13, 2018

4078 National security innovation activities 139 2358 note FY19 NDAA Pub. L. 115–232, 

§230, Aug. 13, 2018

305 DoD Laboratories Chapter submitted on 

12/21/2018

Sub

ch I General Matters

4101 Laboratory Quality Enhancement Program 139 2358 note FY17 NDAA Pub. L. 114–328, 

§211, Dec. 23, 2016

4102 Defense Laboratory Modernization Pilot Program 139 2358 note FY16 NDAA Pub. L. 114–92, 

§2803

4103

Mechanisms to provide funds for defense 

laboratories for research and development of 

technologies for military missions

139 2363

4104 Collaboration between defense laboratories, 

industry, and academia; open campus program 139 2364 note FY19 NDAA Pub. L. 115–232, §222, Aug 13, 2018

Sub

ch II Personnel-Related Matters

4111

Authorities for certain positions at science and 

technology reinvention laboratories 139 2358a

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 16 of 23
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2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

231

232

233

234

235

236

237

238

239

240

4112

Pilot Program on Enhanced Pay Authority For 

Certain Research and Technology Positions in the 

Science And Technology Reinvention Laboratories 

of the Department of Defense

139 2358 note FY17 NDAA Pub. L. 114–328, 

§1124

4113

Pilot Program on Dynamic Shaping of the 

Workforce To Improve the Technical Skills and 

Expertise at Certain Department Of Defense 

Laboratories

139 2358 note FY16 NDAA Pub. L. 114–92, 

§1109

4114

Pilot Program on Assignment to DARPA of Private 

Sector Personnel With Critical Research And 

Development Expertise

139 2358 note

FY15 NDAA Pub. L. 113–291, 

§232, Dec. 19, 2014

4115

Defense Laboratories Personnel Demonstration 

Projects

139 2358 note

FY10 NDAA Pub. L. 111–84, 

§1105, Oct. 28, 2009; 

FY08 NDAA Pub. L. 110–181, 

§1107, Jan. 28, 2008; 

FY95 NDAA Pub. L. 103–337, 

§342(b)

4116 Research and development laboratories: contracts 

for services of university students 139 2360

307 Research & Development Centers and 

Facilities

Chapter submitted on 

12/21/2018

4141

Contracts: acquisition, construction, or furnishing 

of test facilities and equipment 139 2353

4142

Coordination and communication of defense 

research activities and technology domain 

awareness.

139 2364(b)

4143

Cooperative research and development 

agreements under Stevenson-Wydler Technology 

Innovation Act of 1980

139 2371a

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 17 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

241

242

243

244

245

246

247

248

249

250

251

252

253

4144

Use of test and evaluation installations by 

commercial entities 159 2681

4145

Cooperative agreements for reciprocal use of test 

facilities: foreign countries and international 

organizations

138 2350l

4146 Centers for Science, Technology, and Engineering 

Partnership. 139 2368

4147

Use of federally funded research and development 

centers

139 2367

4148 Coordination of High-Temperature 

Superconductivity Research and Development 139 2364 note FY88 NDAA Pub. L. 100–180, §218(b)(2), Dec. 4, 1987

4149

Pilot Program on Disclosure of Certain Sensitive 

Information to Federally Funded Research and 

Development Centers

139 2367 note

FY17 NDAA Pub. L. 114–328, 

§235, Dec. 23, 2016

4150

Pilot Program for the Enhancement of the 

Research, Development, Test, & Evaluation 

Centers of DoD

139 2358 note FY17 NDAA Pub. L. 114–328, 

§233

309 Test and Evaluation Chapter submitted on 

12/21/2018

4171

Operational test and evaluation of defense 

acquisition programs

141 2399

4172

Major systems and munitions programs: 

survivability testing and lethality testing required 

before full-scale production

139 2366

4173 DoD Test Resource Management Center 8 196

4174

Additional test and evaluation duties of military 

department secretaries and defense agency heads 141 2399 note

FY18 NDAA, Pub. L. 115-91, 

§839(a), Dec. 12, 2017

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 18 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

254

255

256

257

258

259

260

261

262

263

264

265

266

267

268

4175

Requirements for collection of cost data on test 

and evaluation 141 2399 note FY18 NDAA, Pub. L. 115-91, §839(b), Dec. 12, 2017

4176

Access by developmental and operational testing 

activities to data regarding modeling and 

simulation activity

4 139 note FY19 NDAA, P.L. 115-232, 

§887(b), Aug 13, 2018

321 Weapon Systems Development & Related 

Matters

144B Pending

323 Major Defense Acquisition Programs Pending

325 Other Matters Relating to Major Systems Pending

341 Contracting for Perf of Civ Commercial or 

Industrial Type Functions

146 Removed from 

reorganization project 

and to be left as is in 

Part IV

343 Acquisition of Services Pending

SUBPART G—OTHER CATEGORIES OF CONTRACTING 

SUBPART F—MAJOR DEFENSE ACQUISITION PROGRAMS AND 

MAJOR SYSTEMS

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 19 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

269

270

271

272

273

274

275

276

277

278

279

280

281

345 Acquisition of Information Technology Chapter submitted on 

12/13/2018

4571

Information technology acquisition: planning and 

oversight processes 131 2223a

4572 Guidance on Acquisition of Business Systems 131 2223a note FY16 NDAA, Pub. L. 114–92, 

§883(e)

4573 Guidance on use of anti-competitive specifications 

in information technology acquisitions 137 2305 note FY17 NDAA Pub. L. 114–328, §888(b), Dec 23, 2016

4574

Designation of MilDep Entity Responsible for Acq 

of Critical Cyber Capabilities 131 2223a note FY16 NDAA, Pub. L. 114–92, §1645(a)

4575

Supervision of the Acquisition of Cloud Computing 

Capabilities 131 2223a note FY14 NDAA, P.L. 113-66, §938, Dec 26, 2013

4576

Requirement for consideration of certain matters 

during acquisition of noncommercial computer 

software

137 2322a

4577 Improvement of software acquisition processes 137 2302 note FY03 NDAA Pub. L. 107–314, 

§804

4578 Open source software: pilot program 131 2223 note

FY18 NDAA, Pub. L. 115-91, 

§875, Dec. 12, 2017

4579 Data servers and centers 131 2223a note

FY12 NDAA, P.L. 112-81, 

§2867, Dec 31, 2011

4580

Clearinghouse for Rapid Identification & 

Dissemination of Commercial Info Technologies 137 2223a note

FY08 NDAA, P.L. 110-181, 

§881, Jan 28, 2008

4581 Demonstration & pilot projects on cybersecurity 137 2223a note FY11 NDAA, P.L. 111-383, 

§215, Jan 7, 2011

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 20 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

282

283

284

285

286

287

288

289

290

291

292

293

294

361 Contract Administration Chapter submitted on 

12/13/2018

4601 Electronic submission and processing of claims for 

contract payments

131 2227

4602 Contracted property and services: prompt 

payment of vouchers 131 2226

4603

Payment protections for subcontractors and 

suppliers 137 2302 note

FY92 NDAA Pub. L. 102–190, 

§806(a), (b) & (g), Dec. 5, 1991

4604 Advance notification of contract performance 

outside the United States 141 2410g

4605

Consideration of Potential Program Cost Increases 

and Schedule Delays Resulting from Oversight of 

Defense Acquisition Programs

137 2302 note

FY16 NDAA, P.L. 114–92, §881, 

Nov 25, 2015

4606(a),

(b)

Linking of Award and Incentive Fees to Acquisition 

Outcomes

137 2302 note FY07 NDAA P. L. 109–364, 

§814, Oct. 17, 2006 4711

4606(c) Linking of Award and Incentive Fees to Acquisition 

Outcomes

137 2302 note

FY09 DoD APPROP P. L. 

110–329, div. C, §8105, Sept 

30, 2008

4607

Authority for Secretary of Defense to reduce or 

deny award fees to companies found to jeopardize 

health or safety of Government personnel

137 2302 note FY10 NDAA P. L. 111–84, §823

4608 Contract closeout authority 137 2302 note

FY17 NDAA Pub. L. 114–328, 

§836, Dec. 23, 2016

4609 Motor Carrier Fuel Surcharges 137 2302 note FY09 NDAA Pub. L. 110–417, 

§884, Oct. 14, 2008

SUBPART G—CONTRACT MANAGEMENT 

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 21 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

295

296

297

298

299

300

301

302

303

304

305

306

363 Prohibitions and Penalties Chapter submitted on 

10/29/2018

4651

Expenditure of appropriations: limitation with 

respect to impermissible contractor gratuities; 

remedies of the United States against the 

contractor

131 2207

4652

Prohibition on use of funds for documenting 

economic or employment impact of certain 

acquisition programs

134 2249

4653 Prohibition on use of funds to relieve economic 

dislocations. 141 2392

4654

Prohibition on use of funds for contracts with 

persons convicted of unlawful manufacture or sale 

of Congressional Medal of Honor

134 2241 note FY99 APPROP ACT, Pub. L. 

105–262, §8118, Oct. 17, 1998

4655 Prohibition on doing business with certain offerors 

or contractors.

141 2393

4656

Prohibition on persons convicted of defensecontract related felonies and related criminal 

penalty on defense contractors

141 2408

4657

Debarment of persons convicted of fraudulent use 

of "Made in America" labels 141 2410f

4658 Prohibition on contracting with entities that 

comply with the secondary Arab boycott of Israel 141 2410i 

4659 Prohibition on collection of political information. 137 2335

4660 Prohibition of contractors limiting subcontractor 

sales directly to the United States 141 2402 4704

365 Contractor Workforce Chapter submitted on 

12/10/2018

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 22 of 23
 Proposed Chapters for New Part V of Subtitle A of title 10, United States Code

That Have Been Submitted as of December 31, 2018

2

A B C D E F G H

New 

Ch #

New 

Sec # Title

Old 

Ch #

Old 

Sec #

Citation for T10

 "Note" Sections 1 Notes & Comments

T41

Sec # 2

307

308

309

310

311

312

313

314

315

316

317

318

319

320

321

4701

Contractor employees: protection from reprisal for 

disclosure of certain information 141 2409

4705, 

4712

4701(d)(

2)

Information for DoD Contractor Employees On 

Their Whistleblower Rights 141 2409 note

FY09 NDAA Pub. L. 110–417, 

§842, Oct. 14, 2008

4701(h) Construction [of section and amdts as not 

providing right to disclose classified info] 137 2324 note

FY13 NDAA Pub. L. 112–239, 

§827(h), Jan. 2, 2013 4712(h)

4702

Displaced contractor employees: assistance to 

obtain certification and employment as teachers 

or employment as teachers' aides

141 2410j

4703

Defense contractors: listing of suitable 

employment openings with local employment 

service office

141 2410k

4704 Employment of State Residents In States Having 

Unemployment Rate In Excess Of National Average 137 2304 note FY07 DoD APPROP Act, Pub. L. 109–289, §8048 

367 Other Administrative and Misc. Provisions Pending

381 Defense Industrial Base Generally 148 Pending

383 Loan Guarantee Programs Pending

385 Procurement Tech Assistance Coop 

Ageement Program

142

Pending

SUBPART H—DEFENSE INDUSTRIAL BASE

 1 Where the old section # is a "note" section, Column F provides the citation to the statute shown as a note.

2

 Column H indicates where there is a corresponding provision in title 41, U.S.C., Public Contracts.

Dec 31, 2018

Page 23 of 23
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 Volume 3 | Page 505 

Section 11 

FAR Reference Document 

An electronic FAR and DFARS with hyperlinked references that establish the basis for 

regulatory language and requirements will support efforts to enhance the knowledge and 

capability of the acquisition workforce, establish appropriate buyer and seller 

relationships, and improve functioning of the acquisition system. 

RECOMMENDATION

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

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

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

Federal Register Notices. 

 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page 506 | Volume 3 FAR Reference Document 

Recommendation 91: Require the Administrator of General Services and the 

Secretary of Defense to maintain the FAR and DFARS respectively, as electronic 

documents with references to the related statutes, Executive Orders, 

regulations, and policies, and with hyperlinks to Federal Register Notices. 

Problem 

The FAR, codified at Title 48 Code of Federal Regulations, provides the primary regulatory framework 

by which the federal government contracts for supplies and services and implements statutes, 

Executive Orders (EOs), regulations, policies, and Federal Register Notices (FRNs), established by 

organizations across the Federal government. DoD supplements the FAR as needed to accommodate 

DoD-specific statutes, policies, EOs, and FRNs in the DFARS. The FAR system, and consequently the 

FAR and DFARS documents, are necessarily complex because of the depth, breadth and intricacy of the 

acquisition policies and statues implemented and the guidance needed to accommodate the diverse 

agencies and missions across federal government. 

This complexity renders the FAR and DFARS challenging to navigate and understand by many of the 

government and industry personnel who are part of the acquisition team described in Section 1.102 of 

the FAR and are responsible for the requirements and acquisition processes that facilitate getting 

supplies and services to warfighters and support other federal missions. This situation has led to 

criticism by both public- and private-sector leaders and stakeholders that the structure and content of 

the FAR and DFARS impede both government and industry acquisition personnel and organizations 

from adequately understanding the complexity of acquisition and transactional processes. These 

commenters also contend that the inability to effectively navigate and understand the regulations 

prevents acquisition personnel from leveraging the flexibilities, methods, and authorities available to 

increase the speed of the acquisition process and encourage innovation, competition, and investment 

by the private sector. 

Background 

One of the two enumerated duties of the Section 809 Panel established in Section 809 of the FY 2016 

NDAA was to 

“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.” 

Each of the Section 809 Panel report volumes contains recommended changes to statutory and 

regulatory language in the FAR and DFARS. These recommended changes, as required by the FY 2016 

NDAA, are based on thorough research and analyses of applicable existing FAR and DFARS language 

and related statutory requirements and language. 

As part of its review of acquisition regulations, the Section 809 Panel developed a FAR and DFARS 

reference document that provides data on changes to the FAR and DFARS that have been implemented 

since the FAR was initially published as an FRN on September 19, 1983. This research approach 

resulted in a document with comments to each FAR and DFARS part and subpart that trace back to 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

FAR Reference Document Volume 3 | Page 507 

and provide information on the FRNs that specify the changes made to the FAR and DFARS since 

September 1983. 

As stated in FAR 1.102 (d), “The role of each member of the Acquisition Team is to exercise personal 

initiative and sound business judgment in providing the best value product or service to meet the 

customer’s needs.” FAR 1.102 (c) states, “The Acquisition Team consists of all participants in 

government acquisition including not only representatives of the technical, supply, and procurement 

communities but also the customers they serve, and the contractors who provide the products and 

services.” Members of the acquisition team need to understand the regulatory requirements stipulated 

in the FAR and DFARS, which requires more than simply reading the FAR and DFARS. It also requires 

knowledge of the history and requirements of the statutes, policies, EOs, and FRNs that form the basis 

of FAR and DFARS regulatory requirements. 

In their current forms, the FAR and DFARS do not provide substantial detail on most FAR and DFARS 

requirements. This shortcoming contributes to challenges experienced by the acquisition workforce in 

navigating and understanding the FAR and DFARS. The research and reference document developed 

by the Section 809 Panel provides detailed reference information that makes it possible for someone—a 

contracting specialist or contracts administrator in government or industry, a policy analyst in 

government or industry, a new member of the acquisition workforce, or a student at the Defense 

Acquisition University—to quickly identify where regulatory and statutory changes have been made 

since 1983. With the comments in this reference document as a base source, users of the document can 

then access from the Internet copies of the FRNs that contain details on the origin of statutory or policy 

changes, the proposed and final rule language, and the public comments. 

Discussion 

The reference document produced by the Section 809 Panel will help government and industry 

acquisition team members better understand the FAR and DFARS, including the origins and basis for 

language and requirements, resulting in a better informed acquisition workforce. Having a more 

knowledgeable workforce will facilitate better communications between government and industry with 

fewer misunderstandings of FAR and DFARS requirements. In turn, both parties will be more likely to 

understand and appreciate each other’s concerns and incentives, which could result in more productive 

fact finding and negotiations, a faster contracting process, and reduced acquisition lead time. In 

addition to providing a tool that will contribute to a more knowledgeable workforce, this FAR/DFARS 

reference document can serve as a training resource for classroom, on-the-job, job-specific, and just-intime training. It could also help demystify the FAR rulemaking process. 

Both government and industry are striving to recruit and retain well educated, qualified, and 

motivated acquisition personnel. Incoming members of the acquisition workforce are likely familiar 

and comfortable with using Internet-based research and reference tools. They expect to have tools that 

provide quick access to information. Providing relevant and readily available tools that will contribute 

to their learning, professional development, and work performance can and should be resourced and 

leveraged to expeditiously increase their knowledge, maintain their interest, and successfully motivate 

their performance. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page 508 | Volume 3 FAR Reference Document 

The current FAR and DFARS maintained by the FAR and DARS staffs do not include versions that 

provide information on the FRN origins of the FAR and DFARS language like the research document 

developed by the Section 809 Panel. Establishing and maintaining a FAR and a DFARS that provide 

references to the statutes, EOs, regulations, and policies, and hyperlinks to FRNs should be planned 

for, programed, and funded by the Secretary of Defense and the Administrator of General Services. 

The hyperlinked capability noted in this recommendation is based on current technology. It is possible 

that future technology could provide other, better means of accomplishing the intent of this 

recommendation. The Administrator of General Services and the Secretary of Defense should employ 

whatever technology best accomplishes the goal of providing the FAR and DFARS as described above. 

Conclusions 

The complexity of the FAR system has resulted in FAR and DFARS documents that are challenging to 

navigate and understand for most government and industry acquisition team members involved in the 

requirements and acquisition processes. This situation has led to criticism by senior government and 

industry leaders that the system and the regulations themselves are impeding innovation and timely 

acquisition of critical supplies and services. This frustration has also led to increased use of other 

contractual arrangements that are not governed by the FAR and DFARS. 

As part of the statutory requirement to review acquisition regulations applicable to DoD, the Section 

809 Panel developed a research and reference document that provides information about the sources 

and basis for FAR and DFARS content since the FAR’s issuance in 1983. This tool provides summary 

information on the FRNs that contain the background and rationale for FAR and DFARS content. This 

tool can be used by both government and industry acquisition workforce members to improve 

knowledge of the FAR/DFARS and consequently functioning of the acquisition system. 

The Administrator of General Services should plan for and resource development and implementation 

of a FAR that includes references to the statutes, EOs, regulations, and policies, and hyperlinks to FRNs 

that establish the basis for the regulatory language and requirements included in the FAR. The 

Secretary of Defense should plan for and resource development and implementation of a DFARS that 

includes references to the statutes, EOs, regulations, and policies, and hyperlinks to FRNs that establish 

the basis for the regulatory language and requirements included in the DFARS. Deployment of such 

capabilities will support efforts to enhance the knowledge and capability of the acquisition workforce, 

establish appropriate buyer and seller relationships, and improve functioning of the acquisition system. 

Implementation 

Legislative Branch 

 Require the Secretary of Defense to post and make available to the public the reference 

document for the FAR and DFARS compiled by the Section 809 Panel. 

 Require the Secretary to develop and maintain a DFARS that includes references to the statutes, 

EOs, regulations, and policies, and hyperlinks to FRNs that establish the basis for the regulatory 

language and requirements included in the DFARS. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

FAR Reference Document Volume 3 | Page 509 

 Require the Administrator of General Services to develop and maintain a FAR, in a form 

consistent with the DFARS developed and employed by DoD, which includes references to the 

statutes, EOs, regulations, and policies, and hyperlinks to FRNs that establish the basis for the 

regulatory language and requirements included in the FAR. 

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 11. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page 510 | Volume 3 FAR Reference Document 

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Section 11 

FAR Reference Document 

Implementation Details 

Recommendation 91 

Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 3 of 3 | January 2019

Volume 3: Section 11 Implementation Details

FAR Reference Document Rec. 91 | Page 1

RECOMMENDED REPORT LANGUAGE

SEC._____. ENHANCEMENT OF CONTENT FUNCTIONALITY OF THE FAR AND THE 

DFARS.

This section would require the Secretary of Defense and the Administrator of General 

Services to maintain the Defense Federal Acquisition Regulations (DFARS) and the Federal 

Acquisition Regulations (FAR) and respectively, as electronic documents with references to the 

statutes, Executive Orders, regulations, and policies and with internet accessible links to Federal 

Register Notices. 

The committee is aware that the FAR and DFARS currently do not contain references 

and internet accessible links to the relevant underlying documents that form the basis of the 

FAR and DFARS. The committee notes that this lack of basic information has led to criticism by 

the acquisition community in both Government and industry that the FAR and DFARS 

structure and content impedes an adequate understanding of the complexity of the acquisition 

processes. This often hinders acquisition personnel from leveraging the flexibilities, methods,

and authorities available to increase the speed of the acquisition process and encourage 

innovation, competition and investment by the private sector. 

This section would create a tool to be used by the government and industry acquisition 

workforce to enhance their knowledge of the FAR and DFARS. It is intended to further improve 

the functioning of the federal acquisition system. 

This section also would require that the reference document compiled by the acquisition 

advisory panel, established under section 809 of the National Defense Authorization Act for 

Fiscal Year 2016 (Public Law 114-92), be made available through a publicly accessible website of 

the Department of Defense. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations

Volume 3 of 3 | January 2019

Implementation Details Volume 3: Section 11

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Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Volume 3: Section 11 Implementation Details 

FAR Reference Document Rec. 91 | Page 3 

1 SEC. ___. ENHANCEMENT OF CONTENT FUNCTIONALITY OF THE FEDERAL 

2 ACQUISITION REGULATION AND THE DEFENSE FEDERAL 

3 ACQUISITION REGULATION SUPPLEMENT. 

4 (a) POSTING OF 809 PANEL FAR/DFARS REFERENCE DOCUMENT ON DOD WEBSITE.— 

5 (1) POSTING ON PUBLIC WEBSITE.—The Secretary of Defense shall make available 

6 to the public, through a website of the Department of Defense that is accessible to the 

7 public, the research and reference document compiled by the Section 809 Panel that is 

8 described in paragraph (2). 

9 (2) DOCUMENT.—The research and reference document referred to in paragraph 

10 (1) is the reference document compiled by the Section 809 Panel that provides 

11 information on changes to the Federal Acquisition Regulation (in this section referred to 

12 as the “FAR”) and the Defense Federal Acquisition Regulation Supplement (in this 

13 section referred to as the “DFARS”) that have been implemented since the FAR was 

14 issued in 1983. 

15 (3) 809 PANEL.—In this section, the term “Section 809 Panel” means the panel 

16 established by the Secretary of Defense pursuant to section 809 of the National Defense 

17 Authorization Act for Fiscal Year 2016 (Public Law 114-92), as amended by section 

18 863(d) of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-

19 328) and sections 803(c) and 883 of the National Defense Authorization Act for Fiscal 

20 Year 2018 (Public Law 115-91). 

21 (b) MAINTENANCE OF DFARS BY DEPARTMENT OF DEFENSE WITH REFERENCES TO 

22 SOURCE DOCUMENTS.— 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Implementation Details Volume 3: Section 11 

Page 4 | Rec. 91 FAR Reference Document 

1 (1) IN GENERAL.—Chapter 141 of title 10, United States Code, is amended by 

2 inserting after section 2381 the following new section: 

3 “§ 2382. Defense Federal Acquisition Regulation Supplement: maintenance with references 

4 to source documents and references with internet links to Federal Register notices 

5 “(a) IN GENERAL.—The Secretary of Defense shall maintain the Defense Federal 

6 Acquisition Regulation Supplement (in this section referred to as the ‘DFARS’ ) in a form that 

7 includes references to the statutes, executive orders, regulations, and policies, and references 

8 with internet accessible links to the Federal Register notices, that establish the basis for the 

9 regulatory language and requirements included in the DFARS. 

10 “(b) PUBLIC AVAILABILITY.—The Secretary of Defense shall make available to the 

11 public, through a website of the Department of Defense that is accessible to the public, the 

12 DFARS as maintained pursuant to subsection (a). 

13 “(c) TIMEFRAME FOR DEVELOPMENT.—The Secretary of Defense shall fully implement 

14 subsection (a) not later than the end of the 2-year period beginning on the date of the enactment 

15 of this section.”. 

16 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of such 

17 chapter is amended by inserting after the item relating to section 2381 the following new 

18 item: 

“2382. Defense Federal Acquisition Regulation Supplement: maintenance with references to source 

documents and references with internet links to Federal Register notices.”. 

19 (c) MAINTENANCE OF FAR BY GSA WITH REFERENCES TO SOURCE DOCUMENTS.—

20 Section 1303 of title 41, United States Code, is amended by adding at the end the following new 

21 subsection: 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Volume 3: Section 11 Implementation Details 

FAR Reference Document Rec. 91 | Page 5 

1 “(e) FEDERAL ACQUISITION REGULATION WITH REFERENCES TO SOURCE DOCUMENTS AND 

2 REFERENCES WITH INTERNET LINKS TO FEDERAL REGISTER NOTICES.— 

3 “(1) IN GENERAL.—The Administrator of General Services shall maintain the 

4 Federal Acquisition Regulation in a form that includes references to the statutes, 

5 executive orders, regulations, and policies, and references with internet accessible links to 

6 the Federal Register notices, that establish the basis for the regulatory language and 

7 requirements included in the Federal Acquisition Regulation. 

8 “(2) CONSISTENCY WITH DEFENSE FEDERAL ACQUISITION REGULATION 

9 SUPPLEMENT.—The Administrator shall maintain the Federal Acquisition Regulation as 

10 required by paragraph (1) in a form that is consistent with the Defense Federal 

11 Acquisition Regulation Supplement as maintained by the Secretary of Defense under 

12 section 2382 of title 10. 

13 “(3) PUBLIC AVAILABILITY.—The Administrator shall make available to the 

14 public, through a website of the General Services Administration that is accessible to the 

15 public, the Federal Acquisition Regulation as maintained pursuant to paragraph (1). 

16 “(4) TIMEFRAME FOR DEVELOPMENT.—The Administrator shall fully implement 

17 paragraph (1) not later than the end of the 2-year period beginning on the date of the 

18 enactment of this subsection.”. 

—————— 

The section of title 41, United States Code, amended by subsection (c) above is below. 

Note subsection (d) in particular:

Title 41, United States Code 

§1303. Functions and authority 

(a) FUNCTIONS.— 

(1) ISSUE AND MAINTAIN FEDERAL ACQUISITION REGULATION.—Subject to sections 

1121, 1122(a) to (c)(1), 1125, 1126, 1130, 1131, and 2305 of this title, the Administrator 
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of General Services, the Secretary of Defense, and the Administrator of National 

Aeronautics and Space, pursuant to their respective authorities under division C of this 

subtitle, chapters 4 and 137 of title 10, and the National Aeronautics and Space Act of 

1958 (42 U.S.C. 2451 et seq.),1 shall jointly issue and maintain in accordance with 

subsection (d) a single Government-wide procurement regulation, to be known as the 

Federal Acquisition Regulation. 

(2) LIMITATION ON OTHER REGULATIONS.—Other regulations relating to 

procurement issued by an executive agency shall be limited to— 

(A) regulations essential to implement Government-wide policies and 

procedures within the agency; and 

(B) additional policies and procedures required to satisfy the specific and 

unique needs of the agency. 

(3) ENSURE CONSISTENT REGULATIONS.—The Administrator, in consultation with 

the Council, shall ensure that procurement regulations prescribed by executive agencies 

are consistent with the Federal Acquisition Regulation and in accordance with the 

policies prescribed pursuant to section 1121(b) of this title. 

(4) REQUEST TO REVIEW REGULATION.— 

(A) BASIS FOR REQUEST.—Under procedures the Administrator 

establishes, a person may request the Administrator to review a regulation relating 

to procurement on the basis that the regulation is inconsistent with the Federal 

Acquisition Regulation. 

(B) PERIOD OF REVIEW.—Unless the request is frivolous or does not, on 

its face, state a valid basis for the review, the Administrator shall complete the 

review not later than 60 days after receiving the request. The time for completion 

of the review may be extended if the Administrator determines that an additional 

period of review is required. The Administrator shall advise the requester of the 

reasons for the extension and the date by which the review will be completed. 

(5) WHEN REGULATION IS INCONSISTENT OR NEEDS TO BE IMPROVED.—If the 

Administrator determines that a regulation relating to procurement is inconsistent with 

the Federal Acquisition Regulation or that the regulation otherwise should be revised to 

remove an inconsistency with the policies prescribed under section 1121(b) of this title, 

the Administrator shall rescind or deny the promulgation of the regulation or take other 

action authorized under sections 1121, 1122(a) to (c)(1), 1125, 1126, 1130, 1131, and 

2305 of this title as may be necessary to remove the inconsistency. If the Administrator 

determines that the regulation, although not inconsistent with the Federal Acquisition 

Regulation or those policies, should be revised to improve compliance with the 

Regulation or policies, the Administrator shall take action authorized under sections 

1121, 1122(a) to (c)(1), 1125, 1126, 1130, 1131, and 2305 as may be necessary and 

appropriate. 

(6) DECISIONS TO BE IN WRITING AND PUBLICLY AVAILABLE.—The decisions of the 

Administrator shall be in writing and made publicly available. 

(b) ADDITIONAL RESPONSIBILITIES OF MEMBERSHIP.— 

(1) IN GENERAL.—Subject to the authority, direction, and control of the head of 

the agency concerned, each official who represents an agency on the Council pursuant to 

section 1302(b) of this title shall— 
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(A) approve or disapprove all regulations relating to procurement that are 

proposed for public comment, prescribed in final form, or otherwise made 

effective by that agency before the regulation may be prescribed in final form, or 

otherwise made effective, except that the official may grant an interim approval, 

without review, for not more than 60 days for a procurement regulation in urgent 

and compelling circumstances; 

(B) carry out the responsibilities of that agency set forth in chapter 35 of 

title 44 for each information collection request that relates to procurement rules or 

regulations; and 

(C) eliminate or reduce— 

(i) any redundant or unnecessary levels of review and approval in 

the procurement system of that agency; and 

(ii) redundant or unnecessary procurement regulations which are 

unique to that agency. 

(2) LIMITATION ON DELEGATION.—The authority to review and approve or 

disapprove regulations under paragraph (1)(A) may not be delegated to an individual 

outside the office of the official who represents the agency on the Council pursuant to 

section 1302(b) of this title. 

(c) GOVERNING POLICIES.—All actions of the Council and of members of the Council 

shall be in accordance with and furtherance of the policies prescribed under section 1121(b) of 

this title. 

(d) GENERAL AUTHORITY WITH RESPECT TO FEDERAL ACQUISITION REGULATION.—

Subject to section 1121(d) of this title, the Council shall manage, coordinate, control, and 

monitor the maintenance of, issuance of, and changes in, the Federal Acquisition Regulation. 

—————— 
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Volume 3 | Page 511 

Section 12 

Minimize Flowdown of Government-Unique 

Terms in Commercial Buying 

Congress has expressed frustration with the proliferation of contract clauses 

applicable to the procurement of commercial products and services and 

should act aggressively to minimize the number of government-unique 

statutes applicable to commercial buying. 

RECOMMENDATION

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

implementing the Section 809 Panel’s Recommendation 2. 

 
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Recommendation 92: Minimize the flowdown of government-unique 

terms in commercial buying by implementing the Section 809 Panel’s 

Recommendation 2. 

Problem 

In its meetings with companies of various sizes over the past 2 years, and in particular commercial 

companies doing or considering doing business with DoD, the Section 809 Panel heard about the 

numerous barriers they experience when trying to enter the defense marketplace. A consistent theme in 

discussions with these stakeholders is the extensive number of terms and conditions unique to 

government business. Companies fear what they see as the hidden compliance traps in these terms and 

the administrative and overhead cost of establishing and maintaining compliance mechanisms that are 

not readily measurable. This barrier is not new: It was an important reason for the commercial buying 

reforms enacted in the Federal Acquisition Streamlining Act (FASA) of 1994. 

In its Volume 1, Recommendation 2, Minimize government-unique terms applicable to commercial 

buying, the Section 809 Panel applauded Congress for establishing in FASA a unique statutory 

mechanism in 41 U.S.C. § 1906 for limiting the government-unique clauses applicable to commercial 

buying, but pointed out an important weakness in the mechanism that prevents it from fully achieving 

its intended goal. The panel made a bold recommendation to fix the weakness and truly minimize the 

government-unique terms applicable to commercial buying at the prime and subcontract tiers. Recent 

Congressional action has caused the panel some concern that the importance of adopting this 

recommendation is not fully appreciated. 

Background 

As discussed in Volume 1 in more detail, Congress took comprehensive steps to reduce the governmentunique terms applicable to commercial buying. First, FASA addressed the procurement-related laws 

applicable to commercial buying already in place as of October 1, 1994 by making a number of them 

inapplicable or partially inapplicable to commercial buying. Second, FASA established a unique 

statutory mechanism prescribing that going forward, no new procurement-related statute would be 

applicable to commercial buying unless the statute references 41 U.S.C. § 1906 and specifically states 

that notwithstanding § 1906, the statute would be applicable to commercial buying. This rather strict 

limitation on applying statutes to commercial buying was mitigated somewhat by another provision 

that allowed the Federal Acquisition Regulatory Council (FAR Council) to make a determination that it 

was in the best interests of the government to apply a procurement-related statute to commercial 

buying even though Congress had chosen not to make it applicable. Although not specifically 

applicable to DoD, this same determination process was generally followed by the Defense Acquisition 

Regulations Council (DAR Council) for DoD-unique procurement-related statutes, Executive Orders 

(EOs), and regulations. Section 874 of the FY 2017 National Defense Authorization Act (NDAA) 

formally established a similar mechanism for DoD. 

When FASA was implemented in October 1995, there were a total of 57 Federal Acquisition Regulation 

(FAR) and Defense FAR Supplement (DFARS) clauses based on statutes applicable to commercial 

buying. Today, there are a total of 122 FAR and DFARS clauses based on statute applicable to 

commercial buying, with another 20 based on EOs and 23 based on DoD policy, and the numbers 

continue to grow. Of these 122 clauses, only six are genuinely applicable under the extant statutory 
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Minimize Flowdown of Government-Unique Terms Volume 3 | Page 513 

framework because Congress used the mechanism it established in FASA, citing 41 U.S.C. § 1906, and 

specifically made the underlying statutes applicable to commercial buying. The other 116 clauses are 

applicable because the FAR Council or DAR Council made a determination that it was in the best 

interests of the government to do so, or because no determination was made, but the clause was made 

applicable nonetheless. 

The proliferation of clauses applicable to commercial buying at the prime contract level directly affects 

the flow down of government-unique clauses to subcontractors offering commercial products and 

services. In 1995, there were four clauses that flowed down to subcontractors offering commercial 

products or services; today there are 22. 

On several occasions Congress expressed concern about the rapid growth in the government-unique 

clauses applicable to commercial buying. In an attempt to address the problem, Section 821 of the 

FY 2008 NDAA required the Office of the Secretary of Defense (OSD) to 

develop and implement a plan to minimize the number of government-unique contract clauses used in 

commercial contracts by restricting the clauses to the following: (1) Government-unique clauses 

authorized by law or regulation, and (2) Any additional clauses that are relevant and necessary to a 

specific contract. 

The Section 809 Panel was unable to identify any specific action taken to minimize these clauses as a 

result of Section 821. 

Section 854 of the FY 2016 NDAA did not direct any change in policy, criteria, or process for 

determining which procurement-related statutes should be made applicable to commercial buying but 

did require a report to Congress on defense-unique laws applicable to the procurement of commercial 

and commercially available off-the-shelf items. That report was issued in June 2016. The Section 809 

Panel is not aware of any specific action taken as a result of this report. 

The structure envisioned in FASA to minimize the applicability of government-unique terms and 

conditions to commercial buying is not working as planned. 

Discussion 

Section 849 of the FY 2018 NDAA and Section 839 of the FY 2019 NDAA directed the FAR and DAR 

Councils to reconsider their determinations from the past 23 years that resulted in 122 procurementrelated statutes and 23 regulations not otherwise applicable to commercial buying being made 

applicable. The statutes then require the councils to propose revisions to the FAR and DFARS that 

would provide an exemption from each law for commercial buying unless they determine there is a 

specific reason not to provide the exemption. 

Although these two reviews are well intentioned, they are unlikely to address the problem of having 

122 clauses and 23 regulations currently applicable to commercial buying or to the application of future 

procurement-related statutes to commercial buying. As noted above, this approach was used in 2008 

with little to show for the work. Essentially, the councils have again been tasked to review their own 

work since 1995 that resulted in the applicability of this large number of statutes and regulations. The 

councils have been given no criteria for these reviews but have been given the same authority to make 
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a determination that a statute should apply to commercial buying even though Congress chose not to 

make it applicable. Asking the same entity to conduct a review of the same statutes using the same 

criteria is likely to have the same result. 

Conclusions 

The Section 809 Panel’s Volume 1 Recommendation 2 would leave with Congress the sole authority to 

determine that a procurement-related statute was so important that it should be applied to what would 

otherwise be a commercial transaction between the Federal Government and a commercial supplier. 

The Panel recommended in Volume 1 that Congress rescind the authority granted in FASA for the FAR 

and DAR Councils to make a determination that a procurement-related statute, EO, or regulation 

should apply to commercial buying. 

Congress has on many occasions expressed frustration with the proliferation of contract clauses 

applicable to the procurement of commercial products and services. Consequently, Congress should 

take the lead in minimizing the government-unique statutes applicable to commercial buying. 

Implementation 

Legislative Branch 

 Rescind Section 849 of the FY 2018 NDAA. 

 Rescind Section 839 of the FY 2019 NDAA. 

 Implement Section 809 Panel Volume 1, Recommendation 2, Minimize government-unique terms 

applicable to commercial buying. 

Executive Branch 

 There are no regulatory changes required for this recommendation. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 12. 

Implications for Other Agencies 

 The panel recommends that Congress expand this recommendation to apply to all agencies 

subject to the FAR. 
Section 12 

Minimize Flowdown of Government-Unique 

Terms in Commercial Buying 

Implementation Details 

Recommendation 92 

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Minimize Flowdown of Govt-Unique Terms Rec. 92 | Page 1

RECOMMENDED REPORT LANGUAGE

SEC. ___. REPEAL OF TWO REQUIREMENTS FOR EXECUTIVE BRANCH REVIEW OF 

CERTAIN REGULATIONS RELATING TO COMMERCIAL ITEMS.

This section would rescind section 849 of the National Defense Authorization Act for 

Fiscal Year 2018 (Public Law 115-91) and section 839 of the National Defense Authorization Act 

for Fiscal Year 2019 (Public.Law115-232). These two sections require the Department of Defense 

(DoD) and the Federal Acquisition Regulation (FAR) Council to review their previous 

determinations under sections 1906 and 1907, title 41, United States Code, and section 2375, 

title 10, United States Code, that led to the applicability of 122 procurement-related statutes and 

23 regulations to contracts for commercial products and services. These two NDAA sections 

were the most recent attempts to address the proliferation of government-unique contract 

clauses being made applicable to contracts for commercial products and services.

This section would implement a recommendation of the acquisition advisory panel 

established under section 809 of the National Defense Authorization Act for Fiscal Year 2016 

(Public Law 114-92). The committee notes that the Section 809 panel recommended that

Congress serve as the sole authority for determining the applicability of procurement-related 

statutes to commercial contracts by removing the authority of the FAR Council or DoD to make 

such determinations under sections 1906, 1907, and 2375. This authority originally was given to 

the FAR Council and DoD to provide the flexibility to apply a procurement-related statute to 

contracts for commercial products or services notwithstanding that Congress had chosen not to 

make it applicable to such contracts. The committee recognizes this has resulted in the growth 

in statutes applicable to commercial contracts from 57 in 1995 to 122 today, as well as an 

additional 23 regulations and 20 Executive Orders. The committee concedes that prior attempts 

to have the FAR Council and DoD review their determinations were not successful and 

sections 849 and 839 are very likely to have the same result. The committee concurs with the 

Section 809 Panel that more direct congressional involvement is required if the government’s

contracting with the commercial market place is to become more commercial-like.
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Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Minimize Flow Down of Govt-Unique Terms Rec. 92 | Page 3 

1 SEC. ___. REPEAL OF TWO REQUIREMENTS FOR EXECUTIVE BRANCH 

2 REVIEW OF CERTAIN REGULATIONS RELATING TO 

3 COMMERCIAL ITEMS. 

4 (a) FISCAL YEAR 2018 NDAA.—Section 849 of the National Defense Authorization Act 

5 for Fiscal Year 2018 (Public Law 115-91; 131 Stat. 1487) is repealed. 

6 (b) FISCAL YEAR 2019 NDAA.—Section 839 of the John S. McCain National Defense 

7 Authorization Act for Fiscal Year 2019 (Public Law 115-232; 132 Stat. ----) is repealed. 

————— 

Changes to Existing Law: This proposal would repeal the following two provisions of law. 

Section 849 of the National Defense Authorization Act for Fiscal Year 2018 

(Public Law 115-91) 

SEC. 849. REVIEW OF REGULATIONS ON COMMERCIAL ITEMS. 

(a) REVIEW OF DETERMINATIONS NOT TO EXEMPT DEPARTMENT OF DEFENSE CONTRACTS FOR 

COMMERCIAL ITEMS AND COMMERCIALLY AVAILABLE OFF-THE-SHELF ITEMS FROM CERTAIN LAWS AND 

REGULATIONS.—Not later than one year after the date of the enactment of this Act [Dec. 12, 2017], the Secretary of 

Defense shall— 

(1) review each determination of the Federal Acquisition Regulatory Council pursuant to section 

1906(b)(2), section 1906(c)(3), or section 1907(a)(2) of title 41, United States Code, not to exempt 

contracts and subcontracts described in subsection (a) of section 2375 of title 10, United States Code, from 

laws such contracts and subcontracts would otherwise be exempt from under section 1906(d) of title 41, 

United States Code; and 

(2) propose revisions to the Department of Defense Supplement to the Federal Acquisition 

Regulation to provide an exemption from each law subject to such determination unless the Secretary 

determines there is a specific reason not to provide the exemption. 

(b) REVIEW OF CERTAIN CONTRACT CLAUSE REQUIREMENTS APPLICABLE TO COMMERCIAL ITEM 

CONTRACTS.—Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall— 

(1) review the Department of Defense Supplement to the Federal Acquisition Regulation to assess 

all regulations that require a specific contract clause for a contract using commercial item acquisition 

procedures under part 12 of the Federal Acquisition Regulation, except for regulations required by law or 

Executive order; and 

(2) propose revisions to the Department of Defense Supplement to the Federal Acquisition 

Regulation to eliminate regulations reviewed under paragraph (1) unless the Secretary determines on a 

case-by-case basis that there is a specific reason not to eliminate the regulation. 

(c) ELIMINATION OF CERTAIN CONTRACT CLAUSE REGULATIONS APPLICABLE TO COMMERCIALLY 

AVAILABLE OFF-THE-SHELF ITEM SUBCONTRACTS.—Not later than one year after the date of the enactment of this 

Act, the Secretary of Defense shall— 

(1) review the Department of Defense Supplement to the Federal Acquisition Regulation to assess 

all regulations that require a prime contractor to include a specific contract clause in a subcontract for 

commercially available off-the-shelf items unless the inclusion of such clause is required by law or 

Executive order; and 
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(2) propose revisions to the Department of Defense Supplement to the Federal Acquisition 

Regulation to eliminate regulations reviewed under paragraph (1) unless the Secretary determines on a 

case-by-case basis that there is a specific reason not to eliminate the regulation. 

————— 

Section 839 of the John S. McCain National Defense 

Authorization Act for Fiscal Year 2019 

(Public Law 115-232) 

SEC. 839. REVIEW OF FEDERAL ACQUISITION REGULATIONS ON COMMERCIAL PRODUCTS, 

COMMERCIAL SERVICES, AND COMMERCIALLY AVAILABLE OFF-THE-SHELF 

ITEMS. 

(a) REVIEW OF DETERMINATIONS NOT TO EXEMPT CONTRACTS FOR COMMERCIAL PRODUCTS,

COMMERCIAL SERVICES, AND COMMERCIALLY AVAILABLE OFF-THE-SHELF ITEMS FROM CERTAIN LAWS AND 

REGULATIONS.—Not later than one year after the date of the enactment of this Act [Aug. 13, 2018], the Federal 

Acquisition Regulatory Council shall— 

(1) review each determination of the Federal Acquisition Regulatory Council pursuant to section 

1906(b)(2), section 1906(c)(3), or section 1907(a)(2) of title 41, United States Code, not to exempt 

contracts or subcontracts from laws which such contracts and subcontracts would otherwise be exempt 

from under section 1906(d) of title 41, United States Code; and 

(2) propose revisions to the Federal Acquisition Regulation to provide an exemption from each 

law subject to such determination unless the Council determines that there is a specific reason not to 

provide the exemptions pursuant to section 1906 of such title or the Administrator for Federal Procurement 

Policy determines there is a specific reason not to provide the exemption pursuant to section 1907 of such 

title. 

(b) REVIEW OF CERTAIN CONTRACT CLAUSE REQUIREMENTS APPLICABLE TO COMMERCIAL PRODUCTS 

AND COMMERCIAL SERVICES CONTRACTS.—Not later than one year after the date of the enactment of this Act, the 

Federal Acquisition Regulatory Council shall— 

(1) review the Federal Acquisition Regulation to assess all regulations that require a specific 

contract clause for a contract using commercial product or commercial services acquisition procedures 

under part 12 of the Federal Acquisition Regulation, except for regulations required by law or Executive 

order; and 

(2) propose revisions to the Federal Acquisition Regulation to eliminate regulations reviewed 

under paragraph (1) unless the Federal Acquisition Regulatory Council determines on a case-by-case basis 

that there is a specific reason not to eliminate the regulation. 

(c) ELIMINATION OF CERTAIN CONTRACT CLAUSE REGULATIONS APPLICABLE TO COMMERCIALLY 

AVAILABLE OFF-THE-SHELF ITEM SUBCONTRACTS.—Not later than one year after the date of the enactment of this 

Act, the Federal Acquisition Regulatory Council shall— 

(1) review the Federal Acquisition Regulation to assess all regulations that require a prime 

contractor to include a specific contract clause in a subcontract for commercially available off-the-shelf 

items unless the inclusion of such clause is required by law or Executive order; and 

(2) propose revisions to the Federal Acquisition Regulation to eliminate regulations reviewed 

under paragraph (1) unless the Federal Acquisition Regulatory Council determines on a case-by-case basis 

that there is a specific reason not to eliminate the regulation. 

(d) REPORT TO CONGRESS.— 

(1) REQUIREMENT.—Not later than one year after the date of the enactment of this Act, the Federal 

Acquisition Regulatory Council shall submit to the committees listed in paragraph (2) a report on the 

results of the reviews under this section. 

(2) COMMITTEES LISTED.—The committees listed in this paragraph are the following: 

(A) The Committee on Armed Services and the Committee on Homeland Security and 

Governmental Affairs of the Senate. 

(B) The Committee on Armed Services and the Committee on Oversight and Government 

Reform of the House of Representatives. 
 Volume 3 | Page 515 

Section 13 

Center for Acquisition Innovation 

To facilitate future efforts to address challenges associated with 

defense acquisition, the Section 809 Panel’s records must be 

maintained and a center for policy research established. 

RECOMMENDATIONS

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

University, Eisenhower School. 

 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Page 516 | Volume 3 Center for Acquisition Innovation 

Recommendation 93: Create a Center for Acquisition Innovation located at the 

National Defense University, Eisenhower School. 

Problem 

The Section 809 Panel will complete its work and cease to exist pursuant to its Congressional 

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

system will continue to exist, as will the need to propose policy alternatives for addressing those 

challenges. To facilitate future efforts to address challenges associated with defense acquisition, the 

Section 809 Panel’s records must be maintained and a center for policy research established. 

Background 

The House Armed Services Committee provided guidance in the report accompanying HR 5155, the 

FY 2019 NDAA, which indicated that the records of the panel should be moved to the Eisenhower 

School (ES) of the National Defense University (NDU) and that DoD should continue to do research 

and make policy proposals to Congress on improving DoD’s acquisition system. Specifically the 

language in the report directs DoD that “research and analysis” shall continue, and the “panel’s records 

shall be maintained by the Eisenhower School at the National Defense University.”1 

Discussion 

Congress’s intent to avoid the need to commission an acquisition reform panel each decade is clear. To 

establish a driving force for continuous improvement within DoD, the function should be situated in an 

educational environment where operational, acquisition, and industry personnel, as well as faculty 

with diverse backgrounds, have sufficient time to research issues, and discuss those issues candidly 

and without attribution. This academic approach should be conducted with a view to proposing peer 

reviewed solutions for consideration by both the Secretary of Defense and Congress for potential 

action. 

The following elements are important to accomplishing Congress’s intent: 

 Act as an academic entity, specializing in strategic acquisition initiatives and innovative 

processes pursuant to the duties outlined in Table 13-1, Duties of the Panel and Future Center.

 Report on and analyze advanced acquisition strategies to continually refine operational support 

in DoD. 

 Prioritize continuous improvement by promoting high standards and sound judgement in the 

proposal of acquisition policy alternatives, with a specific focus on streamlining acquisition 

statutes, regulations, policies, and procedures. 

The Section 809 Panel discussed alternative strategies to accomplish the congressional intent with both 

NDU and Defense Acquisition University (DAU), the two DoD facilities potentially capable of fulfilling 

such a mission. After deliberation, the panel determined that Congress should establish an 

academically independent center designated as The Center for Acquisition Innovation (CAI) within the 

 

1

 House Report 115-676, Report of the Committee on Armed Services to Accompany H.R. 5515 of the 115th Congress, May 15, 2018, 145. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Center for Acquisition Innovation Volume 3 | Page 517 

NDU ES facility to meet the acquisition policy innovation mission articulated in this section. The 

ES students and faculty are in a unique position, colocated in DoD’s only joint professional military 

education (JPME) phase II senior-level college with a concentrated curriculum for senior acquisition 

professionals. The ES “prepares military officers and civilians for senior leadership and staff positions 

throughout the acquisition community.”2 Additionally, the existing curriculum at ES could be 

leveraged to provide an opportunity for its students and faculty to participate in the center’s mission, 

and subsequent annual deliverable. 

A distinctive complement exists between the mission of the ES and the statutory charter of the 

Section 809 Panel as it is today (see Table 13-1). “The panel is charged with making recommendations 

that will shape DoD’s acquisition system into one that is bold, simple, and effective.”3 The ES mission 

has a similar future oriented vision, where it integrates academic research and forward-thinking 

deliverables to meet 21st century demands with a continued practice in commercial sector partnership. 

Under the guidance of the Chairman, Joint Chiefs of Staff (CJCS), the Eisenhower School Commandant 

and faculty prepare senior military officers, government civilians, and selected representatives from the 

private sector and international officers for the national security challenges of the 21st century. The goal 

is to leverage technological advances, integrate new strategic and operational concepts, identify and adapt 

to evolving global developments, and channel the vitality and innovation of the Services, the interagency, 

and allies to achieve a more seamless, coherent effect when confronting new national security challenges 

and the battlefields of the future.4

Table 13-1 elucidates Section 809 Panel duties established in the pertinent NDAAs, as well as additional 

duties that the panel recommends CAI assume: 

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

Origin of Duties Duties 

Section 809, FY 2016 NDAA (Pub. L. No. 114-92), 

as amended by section 863(d) of FY 2017 NDAA 

(Pub. L. No. 114-328) and sections 803(c) and 883 

of FY 2018 NDAA (Pub. L. No. 115-91) 

Review the acquisition regulations applicable to the DoD with an 

objective to streamline and improve efficiency and effectiveness of 

the defense acquisition process and maintain a defense technology 

advantage. 

Section 809, FY 2016 NDAA (Pub. L. No. 114-92), 

as amended by section 863(d) of FY 2017 NDAA 

(Pub. L. No. 114-328) and sections 803(c) and 883 

of FY 2018 NDAA (Pub. L. No. 115-91) 

Make any recommendations for the amendment or repeal of such 

regulations that the center considers necessary, as a result of such 

review, to— 

1) establish and administer appropriate buyer seller relationships in 

the procurement system improve the functioning of the 

acquisition system; 

2) ensure the continuing financial and ethical integrity of defense 

procurement programs; 

 

2

 “The Eisenhower School for National Security and Resource Strategy,” National Defense University, accessed November 14, 2018, 

https://es.ndu.edu/Programs/Senior-Acquisition/. 

3

 “About Us,” Section 809 Panel, accessed November 14, 2018, https://section809panel.org/about/. 

4

 “About The Eisenhower School for National Security and Resource Strategy,” National Defense University, accessed November 14, 2018, 

https://es.ndu.edu/About/Mission/. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Page 518 | Volume 3 Center for Acquisition Innovation 

Origin of Duties Duties 

3) protect the best interests of the Department of Defense; 

4) improve the efficiency of the contract auditing process, including 

through the development of risk-based materiality standards; 

and 

5) eliminate any regulations that are unnecessary. 

Report of the Committee on Armed Services, 

House of Representatives for FY19, in House 

Report 5515 

DoD’s acquisition reform efforts will not cease upon the termination 

of the Advisory Panel on Streamlining and Codifying Acquisition 

Regulations. 

Report of the Committee on Armed Services, 

House of Representatives for FY19, in House 

Report 5515

DoD’s implementation of recent legislative reforms as well as the 

Advisory Panel’s recommendations on regulations will require 

continued research and analysis. 

Report of the Committee on Armed Services, 

House of Representatives for FY19, in House 

Report 5515 

Upon termination of the Advisory Panel, the Advisory Panel’s records 

shall be maintained by the Eisenhower School at the National 

Defense University by no later than August 1, 2019. 

Section 809 Panel, Volume 3, Section 13 

Recommendation 93 

Produce an annual report, in July, using similar methodologies of the 

current panel’s Volume 3 (i.e., substantiated research and analysis, 

conclusion, legislative and executive branch recommendations where 

appropriate, and specific implementation language for statutory 

changes) delivered to the Secretary of Defense, House Armed 

Services Committee (HASC), and Senate Armed Service Committee 

(SASC). 

Section 809 Panel, Volume 3, Section 13 

Recommendation 93 

Act as an academic entity, specializing in strategic acquisition 

initiatives and innovative processes. 

Section 809 Panel, Volume 3, Section 13 

Recommendation 93 

Use CAI resources to review and track implementation of past 

recommendations issued under Section 809 and future Center policy 

alternatives. 

Considerations for Successful Implementation 

Impartiality and Funding 

It is imperative that CAI be academically independent, while having the ability to leverage the 

acquisition faculty and students at the ES and also at DAU. To ensure such independence, annual 

policy alternatives delivered by CAI should not be subject to any DoD review or approval before 

submission to the Secretary of Defense and the HASC and the SASC. Additionally, each fiscal year 

Congress should authorize and appropriate at least $1.5 million, adjusted annually for inflation, 

specifically for standing up and then operating CAI. CAI should be exempt from any constraints on 

full-time equivalents (FTEs) for the ES, subject to annual Congressional authorization and 

appropriation funding limits. 

Strategic Partnerships 

It is important for the acquisition cadre to have strategic sponsors throughout DoD, specifically with 

the Under Secretary of Defense (USD) Acquisition and Sustainment, and USD Research and 
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Center for Acquisition Innovation Volume 3 | Page 519 

Engineering. Strategic sponsors are also needed to include the congressional defense committees; DAU; 

Director, Acquisition Career Manager offices; the Acquisition Functional Communities; service 

acquisition executives; component acquisition executives; USD(Comptroller); Joint Chiefs of Staff; and 

industry. The strategic sponsors should nominate topics for research and analysis and provide access 

and guidance to develop policy alternatives that support CAI’s mission. 

There is an obvious connection to the existing ES curriculum’s research and analysis capabilities and 

requirements that should be leveraged to promote faculty and student participation. In particular, the 

students in the Senior Acquisition Course are encouraged to conduct research on CAI-sponsored topics 

as part of their academic requirements. 

CAI should collaborate with sponsors to develop policy alternatives for the annual deliverable to solve 

current DoD problems and continuously improve statutes, regulations, policies, and procedures. CAI 

should seek stakeholder engagement (e.g., industry, Military Services, Defense Agencies,) in order to 

nominate and review the scope of policy alternatives and the implementation of such solutions 

provided. Partnerships should be sought to leverage rotational assignments for senior acquisition 

leaders to participate in CAI’s annual deliverable. 

Messaging and outreach, such as those established during the Section 809 Panels commission 

(e.g., podcasts, speaking engagements, open public sessions, a website, newsletters) should be used to 

establish continued engagement and feedback with stakeholders. CAI also provides an opportunity to 

further increase the existing collaboration between the ES and DAU. 

Implementation Review 

CAI would have a unique opportunity to leverage the 300-plus students and faculty at ES, and the 

acquisition community, to track the adoption of the Section 809 Panel recommendations and CAI 

future policy alternatives. This process would ideally mirror the congressional legislative process, and 

allow for adjudication of real-time challenges each recommendation or policy alternative faced when 

submitted to Congress. This recommendation will allow timely public reaction to pressing acquisition 

issues that cannot be duplicated in a simulated exercise historically delivered in the ES curriculum. 

Using the resources allocated to CAI, a CAI chair would partner with the ES to accomplish this 

validation task annually. The volume of recommendations and policy alternatives to track would be 

managed by the Chair, taking into consideration how to best use the ES students and faculty. 

Incentives 

CAI would be required to develop incentives to encourage faculty, students, industry partners, and 

DoD employees outside of NDU to participate in, or collaborate with CAI, in all its efforts to produce 

the most qualified constituents to analyze, shape, and develop necessary and enduring changes to the 

acquisition system. This collaboration would not be limited to NDU’s preexisting relationships with 

DoD and commercial publications that feature academic articles. The ES should offer the participants 

the opportunity to directly engage with DoD senior officials and Congressional staff to develop and 

implement their proposed policy alternatives. Additionally, the panel recommends CAI use 

commercial incentives such as cash awards, time off awards, and public recognition, to promote 

participation with the center for purposes of its annual deliverable. 
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Records Archiving at the National Defense University Library 

The panel’s records are entirely digital, maintained on a public website, but the infrastructure and 

nomenclature may be inconsistent with current information technology standards or other public 

records requirements. The inconsistencies require resolution as the panel transitions its records 

management to NDU. The panel’s records include the current website, which may either be supported 

by or transitioned to NDU. NDU needs to determine the scope of this effort and support it out of the 

annual appropriation for CAI. It is critical the future records owner protect the confidentiality of the 

digital records for the panel’s interviews, as stakeholders agreed to the interviews with an expectation 

of nonattribution. The four existing panel reports (Interim, Volume 1, Volume 2, and Volume 3) would 

need to be housed on a public website (i.e., not in the .edu domain). 

Conclusions 

The functions expressed by the House of Representatives in a report accompanying the FY 2019 NDAA 

(i.e., “continued acquisition research and records maintenance”) are best accomplished by creating a 

new center at NDU for acquisition innovation. CAI’s mission would provide an opportunity for 

student and faculty research to propose policy alternatives to the Secretary of Defense and Congress 

annually on important issues to continuously improve the defense acquisition system. 

Implementation 

Legislative Branch 

 Establish in the FY 2020 NDAA the Center for Acquisition for Innovation to be located at the 

National Defense University, Eisenhower School. 

 Leverage the Eisenhower School’s student body and faculty where practicable. 

 Authorize and appropriate yearly funds sufficient to operate the center in an amount not 

less than $1.5 million adjusted annually for inflation. 

 Include the following among the CAI duties: 

o Operate as an academic entity specializing in acquisition research. 

o Produce an annual report in July that contains, at a minimum: (a) substantiated research 

and analysis, (b) a conclusion summarizing the research, (c) legislative and executive 

branch policy alternatives as appropriate, and (d) specific implementation language for 

statutory changes delivered to the Secretary of Defense, HASC, and SASC. 

o Track implementation of recommendations issued by the Section 809 Panel and policy 

alternatives proposed in the future CAI’s work. 

o Review the acquisition statutes and regulations applicable to DoD with the objectives of 

streamlining and improving efficiency and effectiveness of the defense acquisition 

process and maintaining a defense technology advantage. 
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Center for Acquisition Innovation Volume 3 | Page 521 

o Prioritize research and analysis with the objective of amending or repealing such 

statutes or regulations that the center considers necessary to fulfill its mission. 

 Require the ES at NDU to maintain the Section 809 Panel’s records and reports at the time of the 

panel’s termination. 

Executive Branch 

 Identify and assign CAI sponsors to support the mission in statute. 

Note: Explanatory report language and draft legislative text can be found in the Implementation Details 

subsection at the end of Section 13. 

Implications for Other Agencies 

 There are no cross-agency implications for this recommendation. 

 
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Section 13 

Center for Acquisition Innovation 

Implementation Details 

Recommendation 93 

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RECOMMENDED REPORT LANGUAGE

SEC. ___. ESTABLISHMENT OF CENTER FOR ACQUISITION INNOVATION AT THE

EISENHOWER SCHOOL OF THE NATIONAL DEFENSE UNIVERSITY.

This section would amend chapter 108, title 10, United States Code, by inserting a new 

section 2165 that establishes a Center for Acquisition Innovation at the National Defense 

University, Dwight D. Eisenhower School for National Security and Resource Strategy, 

Washington D.C., to continue the research and analysis of defense acquisition statutes, 

regulations, and policies. 

In the committee’s report accompanying H.R. 5155, the National Defense Authorization 

Act for Fiscal Year 2019, the committee provided guidance to the effect that the records of the 

acquisition advisory panel, established under section 809 of the National Defense Authorization 

Act for Fiscal Year 2016 (Public Law 114-92), should be moved to the Eisenhower School of the 

National Defense University, which would continue to do research and make recommendations 

to the Congress on improving the Department of Defense’s (DoD) acquisition system. The intent 

of the Center for Acquisition Innovation would be to eliminate the need for commissioning 

future acquisition reform advisory panels, such as the Section 809 panel and the previous 

Section 800 panel (established pursuant to the National Defense Authorization Act for Fiscal 

Year 1991, Public Law 101-510). 

The committee notes that the new section 2165 would require the Center to annually 

propose innovative policy alternatives directly to Congress to address acquisition challenges in 

order to deliver capabilities to the warfighter inside the turn of our near peer competitors and 

non-state actors. The committee expects the Center to work with stakeholders within and 

outside the Department in developing its proposals. In addition, to ensure adequate staffing, 

this section would exempt the Center from the full time equivalent levels applicable to the 

Eisenhower School.

In addition, this section would provide for the transfer to and maintenance of the 

records of the Section 809 Panel at the Eisenhower School. Working papers, records of 

interview, and any other draft work products generated for any purpose by the Section 809 

Panel during its research are covered by the deliberative process privilege exemption under 

paragraph (5) of section 552(b) of title 5, United States Code, and shall be available solely for 

academic research, subject to the academic freedom and non-attribution policies of the National 

Defense University.
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1 SEC. ___. ESTABLISHMENT OF CENTER FOR ACQUISITION INNOVATION AT 

2 THE EISENHOWER SCHOOL OF THE NATIONAL DEFENSE 

3 UNIVERSITY. 

4 (a) ESTABLISHMENT OF CENTER.— 

5 (1) IN GENERAL.—Chapter 108 of title 10, United States Code, is amended by 

6 inserting after section 2165 the following new section: 

7 “§ 2166. National Defense University: Center for Acquisition Innovation 

8 “(a) ESTABLISHMENT.—There is in the Dwight D. Eisenhower School for National 

9 Security and Resource Strategy of the National Defense University a Center for Acquisition 

10 Innovation. The Center shall operate as an academic entity within the Eisenhower School 

11 specializing in innovation relating to the defense acquisition system. 

12 “(b) DIRECTOR.—The Director of the Center shall be an individual who is a distinguished 

13 scholar of proven academic, management, and leadership credentials with a superior record of 

14 achievement and publication relating to the defense acquisition system. 

15 "(c) MISSION.—(1) The mission of the Center is to provide to policymakers in the 

16 Department of Defense, Congress, and throughout the Government, academic analyses and 

17 policy alternatives for innovation in the defense acquisition system. The Center shall accomplish 

18 that mission by a variety of means intended to widely disseminate the research findings of the 

19 Center. 

20 “(2) In carrying out the mission under paragraph (1), the Center shall, on an ongoing 

21 basis, review the statutes and regulations applicable to the defense acquisition system. The 

22 objective of such review is to provide policy alternatives for streamlining and improving the 
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1 efficiency and effectiveness of the defense acquisition process in order to ensure a defense 

2 technology advantage for the United States over potential adversaries. 

3 “(d) IMPLEMENTATION REVIEW OF SECTION 809 PANEL RECOMMENDATIONS AND CENTER 

4 POLICY ALTERNATIVES.—(1) The Center shall, on an ongoing basis, review implementation of 

5 the recommendations of the Section 809 Panel and policy alternatives provided by the Center. As 

6 part of such review, the Center shall— 

7 “(A) for recommendations or policy alternatives for the enactment of legislation, 

8 identify whether (or to what extent) the recommendations or policy alternatives have 

9 been adopted by being enacted into law by Congress; 

10 “(B) for recommendations or policy alternatives for the issuance of regulations, 

11 identify whether (or to what extent) the recommendations or policy alternatives have 

12 been adopted through issuance of new agency or Government-wide regulations; and 

13 “(C) for recommendations or policy alternatives for revisions to policies and 

14 procedures in the executive branch, identify whether (or to what extent) the 

15 recommendations or policy alternatives have been adopted through issuance of an 

16 appropriate implementing directive or other form of guidance. 

17 “(2) In this subsection, the term “Section 809 Panel” means the panel established by the 

18 Secretary of Defense pursuant to section 809 of the National Defense Authorization Act for 

19 Fiscal Year 2016 (Public Law 114-92), as amended by section 863(d) of the National Defense 

20 Authorization Act for Fiscal Year 2017 (Public Law 114-328) and sections 803(c) and 883 of the 

21 National Defense Authorization Act for Fiscal Year 2018 (Public Law 115-91). 
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1 “(d) FUNDING AND STAFFING.—(1) There shall be available for the Center for any fiscal 

2 years not less than the amount of $1,500,000 (in fiscal year 2019 constant dollars), in addition to 

3 any other amount available for that fiscal year for the National Defense University. 

4 “(2) Personnel of the Center shall not be counted for purposes of any limitation on the 

5 number of full-time equivalent employees applicable to the Dwight D. Eisenhower School for 

6 National Security and Resource Strategy. 

7 “(f) ANNUAL REPORT.—(1) Not later than July 31 each year, the Center shall submit to 

8 the Secretary of Defense and the Committees on Armed Services of the Senate and House of 

9 Representatives concurrently a report describing the activities of the Center during the previous 

10 year and providing the findings, analysis, and policy alternatives of the Center relating to the 

11 defense acquisition system. 

12 “(2) Each such report shall be submitted in accordance with paragraph (1) without further 

13 review within the executive branch. 

14 “(3) Each report under paragraph (1) shall include the following: 

15 “(A) Results of academic research and analysis. 

16 “(B) Results of the implementation reviews conducted pursuant to 

17 subsection (d). 

18 “(C) Policy alternatives for such legislative and executive branch action as 

19 the Center considers warranted. 

20 “(D) Specific implementation language for any statutory changes 

21 recommended. 

22 “(g) DEFINITION.—In this section, the term ‘defense acquisition system’ has the meaning 

23 given that term in section 2545(2) of this title.”. 
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1 (2) CLERICAL AMENDMENT.—The table of sections at the beginning of such 

2 chapter is amended by inserting after the item relating to section 2165 the following new 

3 item: 

“2166. National Defense University: Center for Acquisition Innovation.”. 

4 (b) STARTUP OF CENTER.—The Secretary of Defense shall establish the Center for 

5 Acquisition Innovation under section 2166 of title 10, United States Code, as added by 

6 subsection (a), not later than March 1, 2020. The first Director of the Center shall be appointed 

7 not later than June 1, 2020, and the Center should be fully operational not later than June 1, 

8 2021. 

9 (c) IMPLEMENTATION REPORT.—(1) Not later than January 1, 2021, the President of the 

10 National Defense University shall submit to the Secretary of Defense a report setting forth the 

11 President's organizational plan for the Center for Acquisition Innovation, the proposed budget for 

12 the Center, and the timetable for initial and full operations of the Center. The President of the 

13 National Defense University shall prepare the report in consultation with the Director of the 

14 Center and the Director of the Dwight D. Eisenhower School for National Security and Resource 

15 Strategy of the University. 

16 (2) The Secretary of Defense shall transmit the report under paragraph (1), together with 

17 whatever comments the Secretary considers appropriate, to the Committee on Armed Services of 

18 the Senate and the Committee on Armed Services of the House of Representatives not later than 

19 February 1, 2021. 

20 (d) RECORDS OF THE SECTION 809 PANEL.— 

21 (1) TRANSFER AND MAINTENANCE OF RECORDS.—Following termination of the 

22 Section 809 Panel, the records of the panel shall be transferred to, and shall be 

23 maintained by, the Dwight D. Eisenhower School for National Security and Resource 
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Center for Acquisition Innovation Rec. 93 | Page 7 

1 Strategy of the National Defense University. Such transfer shall be accomplished not 

2 later than August 1, 2019. 

3 (2) STATUS OF RECORDS.—Working papers, records of interview, and any other 

4 draft work products generated for any purpose by the Section 809 Panel during its 

5 research are covered by the deliberative process privilege exemption under paragraph (5) 

6 of section 552(b) of title 5, United States Code, and shall be available solely for academic 

7 research, subject to academic freedom and non-attribution policies of the National 

8 Defense University. 

9 (3) DEFINITION.— In this section, the term “Section 809 Panel” means the panel 

10 established by the Secretary of Defense pursuant to section 809 of the National Defense 

11 Authorization Act for Fiscal Year 2016 (Public Law 114-92), as amended by section 

12 863(d) of the National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-

13 328) and sections 803(c) and 883 of the National Defense Authorization Act for Fiscal 

14 Year 2018 (Public Law 115-91). 

————— 

For reference, the text of the definition referred to in subsection (f) of the draft is as 

follows: 

10 U.S.C. 2545(2): 

(2) The term "defense acquisition system" means the workforce engaged in 

carrying out the acquisition of property and services for the Department of Defense; the 

management structure responsible for directing and overseeing the acquisition of property 

and services for the Department of Defense; and the statutory, regulatory, and policy 

framework that guides the acquisition of property and services for the Department of 

Defense. 
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Conclusion 

From the moment the first commissioners took their oath of office in August 2016 and commenced 

work, the Section 809 Panel has operated with an understanding that DoD’s priority is defending the 

nation, and the DoD acquisition system’s mission is to deliver lethality to warfighters by providing 

innovative products and services that allow warfighters to obtain and maintain technological 

superiority over near-peer competitors and nonstate actors. This third and last volume of the Final 

Report brings to a close the panel’s efforts to formulate recommendations to improve DoD’s acquisition 

system to achieve that mission. 

The Section 809 Panel’s enacting legislation required the panel to examine acquisition regulations (and 

consequently the statutes that serve as the basis of those regulations) leading to recommendations to 

amend or repeal such regulations 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...(A) through (E).”1 Collectively, 

recommendations contained in Volume 3, along with those in the panel’s Interim, Volume 1, and Volume 2

reports, address all of these mandates set forth by Congress. 

 

1

 FY 2016 NDAA, Pub. L. 114-94, Stat. 1356. 
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Page 524 | Volume 3 Conclusion 

It is important to note that in its research the Section 809 Panel also examined acquisition systems in 

various countries in the global marketplace. The panel shared its ideas for the recommendations in 

Volume 3, and in its previous work, with procurement professionals in other countries and reviewed 

their comments in finalizing the reports. Feedback the panel received was in some cases key to 

understanding barriers to entry for innovative products and services and helped the panel shape 

recommendations that are consistent with international agreements that shape policy within the DoD 

acquisition system. Time prevented the panel from providing discussion and comparison of other 

countries’ acquisition systems. Future acquisition reform work should aim to develop better 

understanding of the acquisition systems in the global marketplace, particularly in regard to U.S. allies 

and near-peer competitors. 

Volume 3 provides the final set of recommendations; however, the Section 809 Panel’s work is far from 

complete. As the recommendation phase of the panel’s work waned, work on an additional publication 

began. This bonus volume, slated for publication by February 15, 2019, will contextualize the entire 

span of the panel’s four reports; provide a complete list of all 98 recommendations (and associated 

subrecommendations), each coupled with a brief summary of the write-up from the respective volume 

in which it appeared; and suggest some starting points for future acquisition reform efforts. The 

Section 809 Panel recommends Congress allow DoD to begin its final review after receiving this final 

volume. 

Publication of Volume 3 marks the end of the panel’s focus on researching and making 

recommendations and a shift to assisting Congress and the Secretary of Defense in implementing the 

panel’s recommendations. To date, the panel’s recommendations have formed the basis for provisions 

in the FY 2018 and FY 2019 NDAAs. Since the FY 2019 NDAA cycle, the panel has issued 68 additional 

recommendations via Volume 2 and Volume 3, many of which require statutory solutions to implement 

the suggested changes. Although the Section 809 Panel has prioritized partnering with Congress, DoD, 

and industry throughout its tenure, commissioners will be redoubling these efforts in the coming 

months through meetings and hearings with the House and Senate defense committees, as well as 

continued discussion with DoD leadership, appearances at industry association events, authoring trade 

publication articles, and appearing at media opportunities. 

If the nation’s warfighters are to maintain their technological superiority over near-peer competitors 

and nonstate actors, the end of the panel’s work on July 15, 2019 must not mark the end of acquisition 

reform efforts. Congress and DoD must be convinced of the need to adopt a war footing sense of 

urgency in the acquisition of the capabilities that warfighters require to maintain and sustain 

technological superiority. Access to innovative solutions in the marketplace must be immediate. There 

is a need for speed coupled with adherence to the principles of competition, integrity, and transparency 

in the process as applied to marketplace practices of the 21st century. In Volume 3, the panel makes 

recommendations to change how DoD views competition and transparency. The view is focused on 

maintaining the integrity of the DoD acquisition system, while also removing barriers to entry to 

nontraditional sellers and providing more competition and transparency than provided under the 

current system. It will be incumbent on Congress and DoD to implement the panel’s recommendations 

and to build on them to create an environment of continuous improvement. 
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List of Section 809 Panel Recommendations Volume 3 | Page 525/526 

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. 

DFARS Case 2018-D005 finalized 5/4/2018

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. 

Statutory change only; operational upon enactment. 

IR-3 Eliminate the requirement for contractors to use recycled paper. 10 Recommendation for executive branch action and not addressed 

in the FY NDAAs. 

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 NDAAs. 

IR-5 Eliminate the requirement to accept and dispense dollar coins at government business operations. 22 Enacted as Sec. 885. 

FAR Case 2018-009 in process. 

VOLUME 1 – JANUARY 2018 

# Recommendations Page Status 

1 Revise definitions related to commercial buying to simplify their application and eliminate inconsistency. 18 FY 2019 NDAA Section 836; DFARS Case 2018-D066 and 

FAR Case 2018-018 in process. 

2 Minimize government-unique terms applicable to commercial buying. 32 FY 2019 NDAA Section 837, 839; DFARS Case 2018-D066 and 

FAR Cases 2018-019 and 2018-013 in process. 

3 Align and clarify FAR commercial termination language. 44 Implementation status still in flux. 

4 Revise DFARS sections related to rights in technical data policy for commercial products. 46 Implementation status still in flux. 

5 Align DCAA’s mission statement to focus on its primary customer, the contracting officer. 64 Implementation status still in flux. 

6 Revise the elements of DCAA’s annual report to Congress to incorporate multiple key metrics. 67 Implementation status still in flux. 

7 Provide flexibility to contracting officers and auditors to use audit and advisory services when appropriate. 70 Implementation status still in flux. 

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 Implementation status still in flux. 

7b Define the term audit. 72 Implementation status still in flux. 

7c DCAA should use the full range of audit and nonaudit services available. 72 Implementation status still in flux. 

7d Direct a review of the roles of DCAA and DCMA to ensure appropriate alignment and eliminate redundancies. 74 FY 2019 Section 925; Report by March 2020 to Defense 

Committees. 

8 Establish statutory time limits for defense oversight activities. 76 Implementation status still in flux. . 

9 Permit DCAA to use IPAs to manage resources to meet time limits. 80 Implementation status still in flux. 

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 Implementation status still in flux. 

See also Recommendations 72 and 73. 

11 Develop a Professional Practice Guide for DoD’s oversight of contractor costs and business systems. 87 Implementation status still in flux. 

See also Recommendations 71 and 73. 

12 Require DCAA to obtain peer review from a qualified external organization. 91 Implementation status still in flux. 

13 Increase coverage of the effectiveness of contractor internal control audits by leveraging IPAs. 93 Implementation status still in flux. 
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List of Section 809 Panel Recommendations Volume 3 | Page 527/528 

# Recommendations Page Status 

14 Incentivize contractor compliance and manage risk efficiently through robust risk assessment. 95 Implementation status still in flux. 

See also Recommendations 62 and 63. 

15 Clarify and streamline the definition of and requirements for an adequate incurred cost proposal to refocus the purpose of DoD’s oversight. 100 Implementation status still in flux. 

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 Implementation status still in flux. 

17 Eliminate separate requirement for annual IRB certification of DBS investments. 130 Implementation status still in flux. 

18 Fund DBSs in a way that allows for commonly accepted software development approaches. 137 Implementation status still in flux. 

19 Eliminate the Earned Value Management mandate for software programs using Agile methods. 151 Implementation status still in flux. 

20 Clarify the definitions of personal and nonpersonal services and incorporate in the DFARS a description of supervisory responsibilities for service contracts. 159 FY 2019 NDAA Section 820; report in 6 months to defense 

committees by SECDEF. 

21 Refocus DoD's small business policies and programs to prioritize mission and advance warfighting capabilities and capacities. 169 FY 2019 NDAA Section 851; DoD SB Strategy due in February 

2019. The OSD Small Business office has been tentatively slated 

for absorption under the office of Manufacturing and Industrial 

Policy. 

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 FY 2019 NDAA Section 858, 859; statutory change operational 

upon enactment; DLA briefing required within 6 months to 

Defense committees. 

21b Build on the successes of the SBIR/STTR and RIF programs. 193 Implementation status still in flux. 

21c Enable innovation in the acquisition system and among industry partners. 194 Implementation status still in flux. 

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 FY 2019 NDAA Section 811; amendment or repeal of sections of 

law authorizing various offices – see sub-recommendations 

below. Requires DoD plan 30 days prior to reorganizing to 

account for the repeals. 

22a Repeal the statutory requirement for Department of Defense Test Resource Management Center, 10 U.S.C. § 196. 199 Implementation outcome status undetermined as of publication. 

22b Repeal the statutory requirement for Office of Corrosion Policy and Oversight, 10 U.S.C. § 2228. 200 Addressed in Sec. 811 of FY 2019 NDAA. 

22c Repeal the statutory requirement for Director for Performance Assessment and Root Cause Analysis (PARCA), 10 U.S.C. § 2438. 201 Addressed in Sec. 811 of FY 2019 NDAA. 

22d Repeal the statutory requirement for Office of Technology Transition, 10 U.S.C. § 2515. 203 Addressed in Sec. 811 of FY 2019 NDAA. 

22e Repeal the statutory requirement for Office for Foreign Defense Critical Technology Monitoring and Assessment, 10 U.S.C. § 2517. 204 Addressed in Sec. 811 of FY 2019 NDAA. 

22f Repeal the statutory requirement at 10 U.S.C. § 204 for a Small Business Ombudsman within each defense audit agency. 206 Addressed in Sec. 811 of FY 2019 NDAA. 

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 Partially addressed in Sec. 811 of FY 2019 NDAA. 

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 Implementation status still in flux. 

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 Addressed in Sec. 811 of FY 2019 NDAA. 

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 Addressed in Sec. 811 of FY 2019 NDAA. 

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 Addressed in Sec. 811 of FY 2019 NDAA. 

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 Addressed in Sec. 811 of FY 2019 NDAA. 

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 Addressed in Sec. 811 of FY 2019 NDAA. 

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 Implementation status still in flux. 

23 Establish a permanent, automatic 5-year sunset provision for DoD congressional reporting requirements. 227 Version included in Sec. 1048 of FY 2019 Senate NDAA. 

24 Repeal, preserve, or maintain various DoD congressional reporting requirements. 229 FY 2019 NDAA Section 813 – see sub-recommendations below; 

no corresponding regulatory case needed. 

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 Implementation status still in flux. 

24b Repeal the statutory requirement for the Ballistic Missile Defense Programs annual budget justification reports, 10 U.S.C. § 223a(a). 235 Implementation status still in flux. 

24c Repeal the statutory requirement for the Programs for Combating Terrorism: Annual budget overview report, 10 U.S.C. § 229. 237 Addressed in Sec. 1049 (a)(1)(A) in FY 2019 Senate NDAA. 

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 Addressed in Sec. 1049 (a)(2)(B) in FY 2019 Senate NDAA. 

24e Repeal the statutory requirement for the Cyber Mission Forces annual budget overview report, 10 U.S.C. § 238(a). 240 Implementation status still in flux. 
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# Recommendations Page Status 

24f Repeal the statutory requirement for the Corrosion Control and Prevention annual budget and policy report, 10 U.S.C. § 2228(e). 241 Implementation status still in flux. 

24g Repeal the statutory requirement for the Major Satellite Acquisition Programs annual integration report, 10 U.S.C. § 2275. 243 Addressed in Sec. 813 (a)(3) in FY19 House NDAA 

24h Repeal the statutory requirement for the Commercial Space Activities annual Cooperation with DoD report, 10 U.S.C. § 2276(e). 244 Addressed in Sec. 813 (a)(4) in FY19 House NDAA and Sec. 1049 

(3) in FY19 Senate NDAA 

24i Repeal the statutory requirement for the Depot-Level Maintenance overview report, 10 U.S.C. § 2466(d). 246 Implementation status still in flux. 

24j Repeal the statutory requirement for the Covered Naval Vessels Repair Work in Foreign Shipyards annual report, 10 U.S.C. § 7310(c). 247 Addressed in Sec. 1049 (a)(4) in FY19 Senate NDAA 

24k Repeal the statutory requirement for the Reserve Component Equipment annual procurement report, 10 U.S.C. § 10543(a). 249 Addressed in Sec. 813 (a)(5)(A) in FY19 House NDAA 

24l Repeal the statutory requirement for the Reserve Components annual procurement threshold report, 10 U.S.C. § 10543(c). 250 Addressed in Sec. 813 (a)(5)(A) in FY19 House NDAA 

24m Repeal the statutory requirement for the Missile Defense Agency annual overview report, FY 2002 NDAA, 232(h)(3). 252 Implementation status still in flux. 

24n Repeal the statutory requirement for the Ford-Class Aircraft Carrier annual cost estimate report, FY 2007 NDAA, 122(d)(1). 253 Addressed in Sec. 813 (b) of FY19 House NDAA 

24o Repeal the statutory requirement for the Carriage by Vessel annual Repair Work in Foreign Shipyards report, FY 2007 NDAA, 1017(e). 254 Addressed in Sec. 1049 (b) of FY19 Senate NDAA 

24p Repeal the statutory requirement for the Bandwidth Capacity annual overview report, FY 2009 NDAA, 1047(d)(2). 255 Addressed in Sec. 1049 (d) of FY19 Senate NDAA 

24q Repeal the statutory requirement for the Afghanistan Infrastructure Fund annual overview report, FY 2011 NDAA, 1217(i). 257 Addressed in Sec. 1049 (e) of FY19 Senate NDAA 

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 Addressed in Sec. 813 (g)(2)(A) in FY19 House NDAA 

24s Repeal the statutory requirement for the Ticonderoga-Class Cruisers and Dock Landing Ships annual modernization report, FY 2015 NDAA, 1026(d). 260 Addressed in Sec. 813 (h) in FY19 House NDAA and Sec. 1049 (f) 

in FY19 Senate NDAA 

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 Implementation status still in flux. 

24u Preserve the statutory requirement for the Director of Operational Test and Evaluation annual overview report, 10 U.S.C. § 139(h). 264 Implementation status still in flux. 

24v Preserve the statutory requirement for Naval Vessel Construction annual strategic plan report, 10 U.S.C. § 231. 265 Addressed in Sec. 1021 in FY 2019 House NDAA 

24w Preserve the statutory requirement for the Director of Operational Test and Evaluation annual program report, 10 U.S.C. § 2399(g). 267 Not addressed in FY 2019 NDAA. 

24x Terminate in 2021 the statutory requirement for the Ballistic Missile Defense Programs annual acquisition baselines report, 10 U.S.C. § 225(c). 268 Not addressed in FY 2019 NDAA. 

24y Terminate in 2021 the statutory requirement for Depot-Level Maintenance biennial capability requirements report, 10 U.S.C. § 2464(d). 269 Not addressed in FY 2019 NDAA. 

24z Terminate in 2021 the statutory requirement for the National Technology and Industrial Base annual policy overview report, 10 U.S.C. § 2504. 271 Not addressed in FY 2019 NDAA. 

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 Not addressed in FY 2019 NDAA. 

24ab Terminate in 2021 the statutory requirement for the Research and Development in Defense Laboratories annual funding report, FY 2009 NDAA, 219(c). 274 Not addressed in FY 2019 NDAA. 

VOLUME 2 – JUNE 2018 

# Recommendations Page Status 

25 Streamline and adapt hiring authorities to support the acquisition workforce. 64 Implementation status in flux. 

26 Convert the Civilian Acquisition Workforce Personnel Demonstration Project (AcqDemo) from an indefinite demonstration project to a permanent personnel system. 78 Implementation status in flux. 

27 Improve resourcing, allocation, and management of the Defense Acquisition Workforce Development Fund (DAWDF). 87 Implementation status in flux. 

28 Simplify the selection of sources for commercial products and services. 102 Implementation status in flux. 

29 Revise 41 U.S.C. §§ 1501-1506 to designate the Cost Accounting Standards Board as an independent federal organization within the executive branch. 114 Implementation status in flux. 

30 Reshape CAS program requirements to function better in a changed acquisition environment. 122 Implementation status in flux. 

31 Eliminate the statutory and regulatory distinction between personal services contracts (PSC) and nonpersonal services (NPS) contracts. 148 Implementation status in flux. 

32 Exempt DoD from paying the Federal Retail Excise Tax. 162 Implementation status in flux. 

33 Update the Assignment of Claims processes under FAR Part 32.805. 168 Implementation status in flux. 

34 Repeal certain Title 10 sections and note sections, create a new Part V under Subtitle A of Title 10, and redesignate sections in Subtitles B–D to make room for Part V to support a more logical 

organization and greater ease of use. 

172 FY 2019 NDAA 801, 806,807, 808, 809 set forth the “china 

cabinet” structures; Section 812; DFARS Case 2018-D059. 
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VOLUME 3 – JANUARY 2019 

# Recommendations Page 

35 Replace commercial buying and existing simplified acquisition thresholds with readily available and readily available with customization for DoD. 17 

36 Transition from a program-centric execution model to a portfolio execution model. 53 

37 Implement a defensewide capability portfolio framework that provides an enterprise view of existing and planned capability, to ensure delivery of integrated and innovative solutions to meet 

strategic objectives. 

64 

38 Implement best practices for portfolio management. 76 

39 Leverage a portfolio structure for requirements. 87 

40 Professionalize the requirements management workforce. 98 

41 Establish a sustainment program baseline, implement key enablers of sustainment, elevate sustainment to equal standing with development and procurement, and improve the defense 

materiel enterprise focus on weapon system readiness. 

102 

42 Reduce budgetary uncertainty, increase funding flexibility, and enhance the ability to effectively execute sustainment plans and address emergent sustainment requirements. 121 

43 Revise acquisition regulations to enable more flexible and effective procurement of consumption-based solutions. 136 

44 Exempt DoD from Clinger–Cohen Act Provisions in Title 40. 149 

45 Create a pilot program for contracting directly with information technology consultants through an online talent marketplace. 162 

46 Empower the acquisition community by delegating below threshold reprogramming decision authority to portfolio acquisition executives. 177 

47 Restore reprogramming dollar thresholds to match their previous levels relative to inflation and the DoD budget. 186 

48 Increase to 50 percent the lesser of 20 percent restriction that creates artificially low reprogramming thresholds for smaller programs. 192 

49 Provide increased flexibility to the time periods within which contract obligations are permitted to occur. 195 

50 Enact regular appropriations bills on time. 230 

51 Mitigate the negative effect of continuing resolutions by allowing congressional regular appropriations to remain available for a standardized duration from date of enactment. 232 

52 Permit the initiation of all new starts, provided Congress has appropriated sufficient funding. 236 

53 Permit the initiation of all production rate increases, provided Congress has appropriated sufficient funding. 239 

54 Permit the initiation of multiyear procurements under a CR. 241 

55 Raise the Prompt Payment Act threshold. 242 

56 Use authority in Section 1077 of the FY 2018 NDAA to establish a revolving fund for information technology modernization projects and explore the feasibility of using revolving funds for other 

money-saving investments. 

250 

57 Modify fiscal law to extend the duration of when funds cancel from 5 years to 8 years in expired status to align program acquisitions with funding periods and prevent putting current funds at 

risk and to support meeting appropriation intent. 

256 

58 Address the issue of over-age contracts through (a) establishing an end-to-end, integrated, streamlined process, (b) codifying DCMA’s Quick Close Out class deviation in the DFARS, and 

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

263 

59 Revise the Defense Acquisition Workforce Improvement Act to focus more on building professional qualifications. 273 

60 Implement acquisition career paths that are integrated with an institutionalized competency model tailored to mission needs. 285 

61 Create a comprehensive public–private exchange program for DoD’s acquisition workforce. 305 

62 Update the FAR and DFARS to reduce burdens on DoD’s commercial supply chain to decrease cost, prevent delays, remove barriers, and encourage innovation available to the Military Services. 324 

63 Create a policy of mitigating supply chain and performance risk through requirements documents. 326 

64 Update socioeconomic laws to encourage purchasing from nontraditional suppliers by (a) adopting exceptions for DoD to domestic purchasing preference requirements for commercial 

products, and (b) adopting a public interest exception and procedures for the Berry Amendment identical to the ones that exist for the Buy American Act. 

330 

65 Increase the acquisition thresholds of the Davis–Bacon Act, the Walsh–Healey Public Contracts Act, and the Services Contract Act to $2 million. 334 

66 Establish a purpose statement for bid protests in the procurement system to help guide adjudicative bodies in resolving protests consistent with said purpose and establish a standard by which 

the effectiveness of protests may be measured. 

341 

67 Reduce potential bid protest processing time by eliminating the opportunity to file a protest with the COFC after filing at the GAO and require the COFC to issue a decision within 100 days of 

ordering a procurement be delayed. 

345 

68 Limit the jurisdiction of GAO and COFC to only those protests of procurements with a value that exceeds, or are expected to exceed, $75,000. 355 

69 Provide as part of a debriefing, in all procurements where a debriefing is required, a redacted source selection decision document and the technical evaluation of the vendor receiving the 

debriefing. 

358 
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# Recommendations Page 

70 Authorize DoD to develop a replacement approach to the inventory of contracted services requirement under 10 U.S.C. § 2330a. 360 

71 Adopt a professional practice guide to support the contract audit practice of DoD and the independent public accountants DoD may use to meet its contract audit needs, and direct DoD to 

establish a working group to maintain and update the guide. 

375 

72 Replace 18 system criteria from DFARS 252.242-7006, Accounting System Administration, with an internal control audit to assess the adequacy of contractors’ accounting systems based on 

seven system criteria. 

379 

73 Revise the definition of system deficiencies to more closely align with generally accepted auditing standards. 381 

74 Eliminate redundant documentation requirements or superfluous approvals when appropriate consideration is given and documented as part of acquisition planning. 395 

75 Revise regulations, instructions, or directives to eliminate non-value-added documentation or approvals. 408 

76 Revise the fair opportunity procedures and require their use in task and delivery order competitions. 416 

77 Require role-based planning to prevent unnecessary application of security clearance and investigation requirements to contracts. 422 

78 Include the supply of basic energy as an exemption under FAR 5.202. 427 

79 Enable enhanced use of advanced payments, at time of contract award, to small businesses. 431 

80 Preserve the preference for procuring commercial products and services when considering small business set-asides. 434 

81 Clarify and expand the authority to use Other Transaction agreements for production. 440 

82 Provide Armed Services Board of Contract Appeals authority to require filing of contract appeals through an electronic case management system. 448 

83 Raise the monetary threshold to provide agency boards of contract appeals accelerated, small business, and small claims (expedited) procedures to $250,000 and $150,000 respectively. 450 

84 Direct DoD to communicate with the marketplace concerning acquisition from development of the need/requirement through contract closeout, final payment, and disposal. 456 

85 Establish a Market Liaison at each acquisition activity to facilitate communications with industry. 463 

86 Encourage greater interaction with industry during market research. 467 

87 Establish a market intelligence capability throughout DoD to facilitate communication that enhances the government’s industry knowledge through open, two-way communication. 472 

88 Use existing defense business system open-data requirements to improve strategic decision making on acquisition and workforce issues. 477 

89 Direct DoD to consolidate or eliminate competing data architectures within the defense acquisition and financial system. 483 

90 Reorganize Title 10 of the U.S. Code to place all of the acquisition provisions in a single part, and update and move acquisition-related note sections into the reorganized acquisition part of 

Title 10. 

500 

91 Require the Administrator of General Services and the Secretary of Defense to maintain the FAR and DFARS respectively, as electronic documents with references to the related statutes, 

Executive Orders, regulations, and policies, and with hyperlinks to Federal Register Notices. 

506 

92 Minimize the flowdown of government-unique terms in commercial buying by implementing the Section 809 Panel’s Recommendation 2. 512 

93 Create a Center for Acquisition Innovation located at the National Defense University, Eisenhower School. 516 

 Volume 3 | Page A-1 

Appendices 

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

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

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

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

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

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

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

Appendix G – Acronym List .................................................................................. A-29 

 
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Appendices Volume 3 | 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: STATUTORY, REGULATORY, AND POLICY INFORMATION 

CONCERNING THE CLINGER-COHEN ACT 

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

DoDI 5000.74 

DoDI 5000.02 and DoDI 5000.74 

language 

CCA P.L. 104-106 language CCA U.S. Code language 

“Make a determination that the 

acquisition supports core, priority 

functions of the DoD” 

Unclear 

CCA text contains no instances of the 

words “core” or “priority” 

Exact checklist language does not 

appear anywhere in U.S. Code 

“Establish outcome-based performance 

measures linked to strategic goals” 

Sec. 5123 

“Performance and results-based 

management... where comparable 

processes and organizations in the 

public or private sectors exist, 

quantitatively benchmark agency 

process performance against such 

processes in terms of cost, speed, 

productivity, and quality of outputs 

and outcomes” 

40 U.S.C. 11313 

“Performance and results-based 

management... where comparable 

processes and organizations in the 

public or private sectors exist, 

quantitatively benchmark agency 

process performance against 

those processes in terms of cost, 

speed, productivity, and quality of 

outputs and outcomes” 

“Redesign the processes that the system 

supports to reduce costs, improve 

effectiveness and maximize the use of 

commercial off-the-shelf technology” 

Sec. 5113(b)(2)(C) 

“revise the executive agency’s missionrelated processes and administrative 

processes, as appropriate, before 

making significant investments in 

information technology” 

40 U.S.C. 11303 

“revise the executive agency's 

mission-related processes and 

administrative processes, as 

appropriate, before making 

significant investments in 

information technology” 

“Determine that no private sector or 

government source can better support 

the function” 

Sec. 5113(b)(2)(B) 

“determine, before making an 

investment in a new information 

system—(i) whether the function to be 

supported by the system should be 

performed by the private sector” 

40 U.S.C. 11303 

“determine, before making an 

investment in a new information 

system-(i) whether the function to 

be supported by the system 

should be performed by the 

private sector” 
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DoDI 5000.02 and DoDI 5000.74 

language 

CCA P.L. 104-106 language CCA U.S. Code language 

“Conduct an analysis of alternatives” Sec. 5312(c)(9)(A) 

“Identification of the most qualified 

source, and ranking of alternative 

sources, primarily on the basis of the 

oral proposals, presentations, and 

discussions, and written proposals” 

40 U.S.C. 11312 

“specific quantitative and 

qualitative criteria for comparing 

and prioritizing alternative 

information systems investment 

projects” 

10 U.S.C. 2366a 

 “an analysis of alternatives has 

been performed consistent with 

study guidance developed by the 

Director of Cost Assessment and 

Program Evaluation” 

“Conduct an economic analysis that 

includes a calculation of the return on 

investment; or for non-AIS programs, 

conduct a life-cycle cost estimate” 

Sec. 5122(b)(3) 

“criteria related to the quantitatively 

expressed projected net, risk-adjusted 

return on investment” 

40 U.S.C. 11312 

“criteria related to the 

quantitatively expressed projected 

net, risk-adjusted return on 

investment” 

“Develop clearly established measures 

and accountability for program progress” 

Sec. 5113(b)(5)(A) 

“The Director [of OMB] may take any 

authorized action that the Director 

considers appropriate, including an 

action involving the budgetary process 

or appropriations management 

process, to enforce accountability” 

40 U.S.C. 11303 

“The Director [of OMB] may take 

any action that the Director 

considers appropriate, including 

an action involving the budgetary 

process or appropriations 

management process, to enforce 

accountability” 

“Ensure that the acquisition is consistent 

with the DoD Information Enterprise 

policies and architecture, to include 

relevant standards” 

Sec. 5125(b)(2) 

“Chief Information Officer of an 

executive agency shall be responsible 

for... developing, maintaining, and 

facilitating the implementation of a 

sound and integrated information 

technology architecture” 

40 U.S.C. 11315 

“Chief Information Officer of an 

executive agency is responsible 

for... developing, maintaining, and 

facilitating the implementation of 

a sound, secure, and integrated 

information technology 

architecture” 
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DoDI 5000.02 and DoDI 5000.74 

language 

CCA P.L. 104-106 language CCA U.S. Code language 

“Ensure that the program has a 

Cybersecurity Strategy that is consistent 

with DoD policies, standards and 

architectures, to include relevant 

standards” 

No mention of cybersecurity in original 

CCA text, but Section 932 of FY 2011 

NDAA (P.L. 111-383) included language 

requiring a DoD “strategy for assuring 

the security of software and softwarebased applications” 

10 U.S.C. 2224 note (“Strategy on 

Computer Software Assurance”) 

“The Secretary of Defense shall 

develop and implement, by not 

later than October 1, 2011, a 

strategy for assuring the security 

of software and software-based 

applications for all covered 

systems” 

“Ensure, to the maximum extent 

practicable, (1) modular contracting has 

been used, and (2) the program is being 

implemented in phased, successive 

increments, each of which meets part of 

the mission need and delivers 

measurable benefit, independent of 

future increment” 

Sec. 5202 

“To the maximum extent practicable, 

use modular contracting for an 

acquisition of a major system of 

information technology” 

Sec. 5201 

“acquisition of information technology 

is a simplified, clear, and 

understandable process that 

specifically addresses... incremental 

acquisitions” 

41 U.S.C. 2308 

“To the maximum extent 

practicable... use modular 

contracting for an acquisition of a 

major system of information 

technology” 

40 U.S.C. 11703 

“acquisition of information 

technology is a simplified, clear, 

and understandable process that 

specifically addresses... 

incremental acquisitions” 

“Register Mission-Critical and MissionEssential systems with the DoD CIO” 

Implemented as the DoD Information 

Technology Portfolio Repository (DITPR) 

Sec. 5112(c) 

“Director shall develop, as part of the 

budget process, a process for 

analyzing, tracking, and evaluating the 

risks and results of all major capital 

investments made by an executive 

agency for information systems” 

40 U.S.C. 11302 

“Director shall develop a process 

for analyzing, tracking, and 

evaluating the risks, including 

information security risks, and 

results of all major capital 

investments made by an executive 

agency for information systems” 
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Table B-2. Redundancies with CCA in IT Acquisition1

CCA requirement Redundant with... Rationale for rescinding 

Make a determination that the 

acquisition supports core, priority 

functions of the DoD. 

DODD 7045.14 PPBE 

DoDD 5000.01, DoDI 5000.02, DoDI 

5000.74, DoDI 5000.75 

JCIDS 

Problem Statement 

PPBE is the annual resource allocation 

process that prioritizes resources in 

support of DoD core mission. All 

acquisition guidance requires identifying 

prioritized business capabilities. 

Establish outcome-based 

performance measures linked to 

strategic goals. 

10 U.S.C. 2222 

DODD 7045.14 PPBE 

DoDD 5000.01, DoDI 5000.02, DoDI 

5000.74, DoDI 5000.75 

DBS Investment Management 

Guidance (DBS IMG) 

Contract requirements 

Performance-based Statements of 

Work 

Outcome-based performance measures 

and linkage to strategic goals are 

implemented in the capital planning 

processes outlined in PPBE, DBS IMG, 

and all acquisition guidance. 

Redesign the processes that the 

system supports to reduce costs, 

improve effectiveness and maximize 

the use of commercial off-the-shelf 

technology. 

10 U.S.C. 2222 (a), (d), (g) 

FY2017 NDAA 

DODD 7045.14 PPBE 

DoDI 5000.75 

FAR Part 12, Acquisition of 

Commercial Items 

FAR Part 7, Acquisition Plans 

Many laws, regulations, and guidance 

explicitly require BPR and maximizing the 

use of commercial solutions. The FY2017 

NDAA gives CMO responsibility for BPR. 

 

1

 Specific requirements associated with CCA are laid out in Enclosure 1, Table 10 of DoD Instruction 5000.02 (page 76), 

http://www.esd.whs.mil/Portals/54/Documents/DD/issuances/dodi/500002_dodi_2015.pdf, accessed June 15, 2018. 
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Appendices Volume 3 | Page A-9 

CCA requirement Redundant with... Rationale for rescinding 

Determine that no private sector or 

government source can better 

support the function. 

Federal Acquisition Regulation 

(FAR) Part 34, Major System 

Acquisition 

FAR Part 7, Acquisition Plans 

DoDI 5000.02, 5000.74, 5000.75 

Service-specific FAR supplements 

Development of the acquisition strategy, 

supported by market research, identifies 

potential sources and defines the 

approach to select the most appropriate 

source. 

Conduct an analysis of alternatives. Weapon Systems Acquisition 

Reform Act of 2009 (WSARA) 

JCIDS 

DoDI 5000.75 

DoDI 5000.02 

DoDD 7045.14 PPBE 

DoDI 5000.73 Cost Analysis Guide 

and Procedures 

AoA is part of the solution approach 

required in DoDI 5000.02 and 5000.75. 

PPBE requires programs to develop 

systematic analysis of mission and 

objectives, as well as alternative methods 

of accomplishing them. 

Conduct an economic analysis that 

includes a calculation of the return 

on investment; or for non-AIS 

programs, conduct a life-cycle cost 

estimate. 

DODD 7045.14 PPBE 

DoDI 5000.75 

DBS Investment Management 

Guidance 

DoDI 7041.03, Economic Analysis 

for Decision-Making 

Many guidance documents require 

calculation of return on investment. 

Develop clearly established 

measures and accountability for 

program progress. 

10 U.S.C. 2223a 

DoDI 5000.02 (knowledge points, 

system engineering plan) 

DoDI 5000.75 

JCIDS Key Performance Parameters 

and Key System Attributes 

10 U.S.C. 2223a requires metrics that can 

be implemented and monitored on a 

real-time basis. Per the DoDI 5000.02 

and 5000.75, the MDA is responsible for 

this oversight and uses the acquisition 

program baseline (APB) as the tool to 

measure cost, performance, and 

schedule. 
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Volume 3 of 3 | January 2019 

Page A-10 | Volume 3 Appendices 

CCA requirement Redundant with... Rationale for rescinding 

Ensure that the acquisition is 

consistent with the DoD Information 

Enterprise policies and architecture, 

to include relevant standards. 

10 U.S.C. 2222 (b)(2), (e) 

10 U.S.C. 142 

DoDD 5144.02 

DoD Architecture Framework 

10 U.S.C. 2222 requires DBSs to be 

integrated into a comprehensive 

business enterprise architecture. 

10 U.S.C. 142 and DODD 5144.02 require 

the DoD CIO to oversee DoD IT 

architecture and prescribe network, 

cybersecurity, and other standards. 

Ensure that the program has a 

Cybersecurity Strategy that is 

consistent with DoD policies, 

standards and architectures, to 

include relevant standards. 

DoDD 7045.14 PPBE 

DoDD 5144.02 

DoDI 5000.75 

DoDI 8500.01 

FISMA 

DODD 5144.02 requires the DOD CIO to 

oversee DoD IT architecture and 

prescribe network, cybersecurity, and 

other standards. 

FISMA requires DOD adhere to NIST 

standards. 

Ensure, to the maximum extent 

practicable, (1) modular contracting 

has been used, and (2) the program 

is being implemented in phased, 

successive increments, each of 

which meets part of the mission 

need and delivers measurable 

benefit, independent of future 

increment. 

10 U.S.C. 2223a 

DoDI 5000.02, DoDI 5000.75 

FITARA 

OMB Circular A-11, Exhibit 300b 

FAR Part 39 

Per DoD’s implementation plan for 

FITARA, the requirement for incremental 

development is met by DoDD 5000.01, 

DoDI 5000.02, and 10 U.S.C. 2223a. 

FY 2018 NDAA includes pilot for agile and 

iterative development that can be 

expanded to all IT. 

Register Mission-Critical and 

Mission-Essential systems with the 

DoD CIO. 

10 U.S.C. 2223 

10 U.S.C. 2223a 

44 U.S.C 3505 (c) 

DoDD 5144.02 

FISMA reviews information in 

DITPR, uses this information for 

reports to OMB and Secretary of 

Defense. 

Multiple laws and directives require DOD 

CIO to maintain inventory of DOD 

mission-critical and mission-essential 

information systems. 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Appendices Volume 3 | Page A-11 

APPENDIX C: HIRING AND EDUCATIONAL FINANCIAL ASSISTANCE AUTHORITIES 

Several special hiring authorities permit DoD to hire and educate qualified experts in science and 

technology fields. Depending on the situation, these authorities may be appropriate for recruitment 

and training of data science and data analytics professionals. The Section 809 Panel’s Volume 2 Report

included a chapter outlining these authorities and recommending that Congress streamline and 

consolidate them.2

Hiring authorities that apply explicitly to data analytics include 10 U.S.C. Chapter 81 front matter, 

Direct Hire Authority for the Department of Defense for Personnel To Assist in Business 

Transformation and Management Innovation. This pilot program allows term-appointed hiring of 

individuals with expertise in “management and organizational change, data analytics, or business 

process design.” The provision expires in 2021.3

The following are hiring authorities related to science, technology, business, and other fields related: 

 10 U.S.C. § 1599h, which permits DoD to make appointments of “eminent experts in science or 

engineering.”4

 10 U.S.C. § 2358a, which allows for direct appointment of qualified “scientific, technical, 

engineering, and mathematics positions, including technicians” in science and technology 

reinvention laboratories.5

 10 U.S.C. § 1701 note, Pilot Program on Direct Hire Authority for Veteran Technical Experts Into 

the Defense Acquisition Workforce, pilot veteran hiring program for “scientific, technical, 

engineering, and mathematics positions, including technicians” in defense acquisition, expiring 

in 2020.6

 10 U.S.C. § 1701 note, Direct Hire Authority for Technical Experts Into the Defense Acquisition 

Workforce, pilot hiring program for “scientific and engineering positions within the defense 

acquisition workforce,” expiring in 2020.7

 10 U.S.C. Chapter 81 front matter, Pilot Program on Enhanced Personnel Management System 

for Cybersecurity and Legal Professionals in the Department of Defense, pilot program for 

hiring cybersecurity and legal professionals, expiring in 2029.8

 10 U.S.C. Chapter 81 front matter, Temporary Direct Hire Authority for Domestic Defense 

Industrial Base Facilities, the Major Range and Test Facilities Base, and the Office of the Director 

of Operational Test and Evaluation, pilot program allowing for appointment of “qualified 

candidates possessing an advanced degree to scientific and engineering positions,” expiring in 

2021.9

 

2

 See Section 809 Panel, Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations: Volume 2 of 3, 61-100 

(2018). 

3

 Section 1101 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

4

 Section 1121 of FY 2017 NDAA, Pub. L. No. 114-328 (2016). 

5

 Ibid. 

6

 Section 1112 of Pub. L. No. 114-92, FY 2016 NDAA (2015). 

7

 Ibid, Section 1113. 

8

 Section 1110 of FY 2018 NDAA, Pub. L. No. 115-91 (2017). 

9

 Section 1121 of FY 2017 NDAA, Pub. L. No. 114-328 (2016). 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Page A-12 | Volume 3 Appendices 

 10 U.S.C. Chapter 81 front matter, Direct Hire Authority for Financial Management Experts in 

the Department of Defense Workforce, pilot program for hiring those with expertise in financial 

management, accounting, auditing, actuarial analysis, cost estimating, operational research, and 

business and business administration, expiring in 2022.10

 10 U.S.C. Chapter 81 front matter Direct Hire Authority for the Department of Defense for PostSecondary Students and Recent Graduates (pilot program for hiring “qualified recent 

graduates” for “professional and administrative occupations,” expiring in 2021.11

Several legal provisions also allow for educational financial assistance in fields related to science and 

engineering. These include: 

 10 U.S.C. § 2192a, which authorizes Science, Mathematics, and Research for Transformation 

(SMART) scholarships and fellowships for development of “science, mathematics, engineering, 

and technology skills,” conditional on DoD or defense-related employment.12

 10 U.S.C. § 2200a, which authorizes financial assistance for individuals pursuing degrees in 

cyber disciplines and, upon completion of their degree programs, directly appoint those 

individuals to positions within DoD.13

 

10 Ibid. 

11 Ibid. 

12 Section 1104 of FY 2006 NDAA, Pub. L. No. 109-163 (2006). 

13 Section 922 of FY 2001 NDAA, Pub. L. No. 106-398, Appendix (2000). 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

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Appendices Volume 3 | Page A-13 

APPENDIX D: 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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Page A-14 | Volume 3 Appendices 

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 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Appendices Volume 3 | Page A-15 

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 

February 20-21, 2018 

Deliberations for Volume 2 Report  Internal Volume 2 Report Discussion and Voting

Threats Update  The Honorable Robert Work, former Deputy Secretary of 

Defense 

Workforce RSACI  David Miskimens, Professor of Program Management 

Mission Assurance, Defense Acquisition University 

March 20-21, 2018 

Deliberations for Volume 2 Report  Internal Volume 2 Report Discussion and Voting

Lessons from Army Modernization Command 

Stand-Up 

 LTG Edward Cardon, Director, Office of Business 

Transformation 

April 17-18, 2018 

Deliberations for Volume 2 Report  Internal Volume 2 Report Discussion and Voting

May 22-23, 2018 

Deliberations for Volume 2 Report  Internal Volume 2 Report Discussion and Voting

Thoughts on DoD Acquisition  David Berteau, former Assistant Secretary of Defense for 

Logistics and Materiel Readiness 

June 19-20, 2018 

Deliberations for Volume 2 Report  Internal Volume 2 Report Discussion and Voting

Deliberations for Volume 3 Report  Internal Volume 3 Report Discussion

July 17-18, 2018 

Deliberations for Volume 3 Report  Internal Volume 3 Report Discussion
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Volume 3 of 3 | January 2019 

Page A-16 | Volume 3 Appendices 

August 14-15, 2018 

Deliberations for Volume 3 Report  Internal Volume 3 Report Discussion

September 10-11, 2018 

Deliberations for Volume 3 Report  Internal Volume 3 Report Discussion

October 16-17, 2018 

Deliberations for Volume 3 Report  Internal Volume 3 Report Discussion

November 13-14, 2018 

Deliberations for Volume 3 Report  Internal Volume 3 Report Discussion

December 11-12, 2018 

Deliberations for Volume 3 Report  Internal Volume 3 Report Discussion
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Appendices Volume 3 | Page A-17 

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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Page A-18 | Volume 3 Appendices 

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 
Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 

Volume 3 of 3 | January 2019 

Appendices Volume 3 | Page A-19 

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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Volume 3 of 3 | January 2019 

Page A-20 | Volume 3 Appendices 

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 
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Appendices Volume 3 | Page A-21 

 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 O'Donnell, 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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Page A-22 | Volume 3 Appendices 

 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 UrbanaChampaign; 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 3 of 3 | January 2019 

Appendices Volume 3 | Page A-23 

APPENDIX E: 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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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 3 of 3 | January 2019

Appendices Volume 3 | Page A-27

APPENDIX G: PANEL MEMBERS AND PROFESSIONAL STAFF

Commissioners

Mr. David A. Drabkin

Chair

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

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

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

BG Michael D. Hoskin The Honorable William A. LaPlante

Maj Gen Kenneth D. Merchant, USAF (Ret.) Mr. David P. Metzger

Dr. Terry L. Raney Maj Gen Darryl A. Scott, USAF (Ret.)

LTG N. Ross Thompson III, USA (Ret.) Mr. Laurence M. Trowel

Mr. Charlie E Williams, Jr.

Former Commissioners

Ms. Claire M. Grady Mr. Harry P. Hallock The Honorable Deidre A. Lee

Major Contributors to This Report

Mr. Terry Albertson Mr. Brent Calhoun Mr. Patrick Fitzgerald

Mr. John Hindman Mr. Roger Holbrook Maj Gen Cameron G. Holt

Mr. Pete Modigliani Ms. Barbara Michael Ms. Linda Neilson 

Mr. Bill Romenius Mr. Louis Rosen Mr. Jim Thomas 

Mr. Steve Trautwein Mr. Richard J. Wall

The Section 809 Panel also recognizes the contributions of the Lockheed Martin Corporation, 

The MITRE Corporation, and personnel from various DoD organizations. 
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Professional Staff 

Christopher P. Veith, Esq

Executive Director 

Lawrence A. Asch 

Professional Staff Member 

Patricia Bourbeau 

Professional Staff Member 

Andrew Caron 

Intern 

Katie A. Cook 

Professional Staff Member 

Robert W. Cover, II 

Legislative Counsel 

COL Harry R. Culclasure, USA 

Professional Staff Member 

Jessica Dobbeleare 

Professional Staff Member 

Herb L. Fenster 

Outside Counsel 

Karen S. Fischetti 

Professional Staff Member 

Darnelle Fisher 

Professional Staff Member 

Paula B. Frankel 

Professional Staff Member 

Shirley J. Franko 

Professional Staff Member 

Darren S. Harvey 

Professional Staff Member 

George C. Hill 

Professional Staff Member 

E. Sanderson Hoe 

Outside Counsel 

Dina T. Thompson, CPCM 

Professional Staff Member 

Michelle VJ Johnson, PhD 

Professional Staff Member 

Lt Col Sam C. Kidd, USAF 

General Counsel 

Wendy J. LaRue, PhD 

Director of Communications 

Thomas Lovely 

Intern 

Shayne L. Martin 

Director of External Affairs 

Jennifer E. McKinney 

Professional Staff Member 

James McMahon 

Intern 

Gabriel M. Nelson 

Professional Staff Member 

Elizabeth B. Oakes, PhD 

Professional Staff Member 

Melissa Roth 

Professional Staff Member 

Joshua T. Schneider 

Professional Staff Member 

Jennifer M. Taylor 

Professional Staff Member 

Nicolas Tsiopanas 

Professional Staff Member 
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Former Professional Staff 

Hanieh Ala CAPT John Bailey, USN Marvin T. Baugh, Col, USAF (ret) 

Intern Professional Staff Member Chief of Staff

Sharon D. Bickford Madeline Buczkowski Jack Chutchian 

Professional Staff Member Intern Intern 

Patricia Donahoe John Haskell, PhD MG Theodore C. Harrison, USA (ret.) 

Intern Director of Research Professional Staff Member 

Alison M. Hawks, PhD Jeremy H. Hayes Ahmed Ismael 

Director of Research Professional Staff Member Intern 

LTC Thomas D. Kelley, USA Jarrett M. Lane CDR Michele LaPorte, USN 

Professional Staff Member Chief of Staff Professional Staff Member 

Michael E. Lebrun Caitlin J. Letle Michael D. Madsen, Col, USAF (ret) 

Professional Staff Member Professional Staff Member Executive Director 

Michael McLendon Martha L. Milan Hannah H. Oh 

Professional Staff Member Professional Staff Member Professional Staff Member 

Lauren Peel, Esq D. Ryan Polk Lucas C. Radice 

Professional Staff Member Professional Staff Member Intern 

Melissa D. Rider Moshe Schwartz Jeanette M. Snyder 

Professional Staff Member Executive Director Professional Staff Member 

Jennifer R. Sullivan Eric A. Valle 

Professional Staff Member Professional Staff Member 
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Appendices Volume 3 | Page A-29 

APPENDIX G: ACRONYM LIST 

Acronym/Term Definition 

AFICA Air Force Installation Contracting Agency 

AIR Acquisition Information Repository 

ALD Acquisition Leader Development 

AMC U.S. Army Materiel Command 

APL Approved Products List 

AQS Acquisition Qualification Standard 

ASBCA Armed Services Board of Contract Appeals 

ASPR Armed Services Procurement Regulation 

AWF Acquisition Workforce 

AWQI Acquisition Workforce Qualification Initiative 

AWS Amazon Web Services 

BAA Buy American Act 

BPA Blanket Purchase Agreement 

BPR Business Process Reengineering 

C2S Commercial Cloud Services 

CAE Component Acquisition Executive 

CAI Center for Acquisition Innovation 

CAP Critical Acquisition Position 

CAS Cost Accounting Standards 

CASTLE Cloud Adoption Survival Tips, Lessons, and Experiences 

CCA Clinger–Cohen Act 

CCE Common Computing Environment 

CCoE Cloud Center of Excellence 

CD Compact Disk 

CDO Chief Data Officer 

CFR Code of Federal Regulations 

CICA Contracting in Competition Act 

CIO Chief Information Officer 

CISO Chief Information Security Officer 

CJCS Chairman, Joint Chiefs of Staff 

CLIN Contract Line-Item Numbers 

CLP Continuous Learning Point 

CMO Chief Management Officer 

CNAS Center for New American Studies 

CO Contracting Officer 
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Acronym/Term Definition 

CoE Center of Excellence 

COTS Commercially Available Off-the-Shelf 

CPA Certified Public Accountant 

CSO Commercial Solutions Opening 

CSP Cloud Service Providers 

DAC Defense Acquisition Corps 

DACM Director, Acquisition Career Manager 

DAU Defense Acquisition University 

DAR Council Defense Acquisition Regulations Council 

DAWDF Defense Acquisition Workforce Development Fund 

DAWIA Defense Acquisition Workforce Improvement Act 

DBS Defense Business System 

DCAA Defense Contract Audit Agency 

DCMA Defense Contract Management Agency 

DHA Defense Health Agency 

DISA Defense Information Systems Agency 

DITAP Digital IT Acquisition Program 

DITPR DoD Information Technology Portfolio Repository 

DLA Defense Logistics Agency 

DoD IG DoD Inspector General 

DoDD DoD Directive 

DoDI DoD Instruction 

DODIN Department of Defense Information Network 

ECMS Electronic Case Management System 

ES Eisenhower School (at National Defense University) 

ESPC Energy Savings Performance Contract 

EWI Education with Industry 

FACA Federal Advisory Committee Act 

FAC-C-DS Federal Acquisition Certification in Contracting Core-Plus Specialization in Digital 

Services 

FAR Council Federal Acquisitions Regulatory Council 

FASA Federal Acquisition Streamlining Act 

FBO Federal Business Opportunities 

FCA Joint Capability Area 

FedRAMP Federal Risk and Authorization Management Program 

FFP Firm–Fixed–Price 
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Acronym/Term Definition 

FISMA Federal Information Security Management Act 

FITARA Federal Information Technology Acquisition Reform Act 

FLSA Fair Labor Standards Act 

FM Financial Management 

FPDS Federal Procurement Data System 

FPDS-NG Federal Procurement Data System-Next Generation 

FRN Federal Register Notice 

FSM Functional Services Manager 

FTE Full-Time Equivalent 

GAO Government Accountability Office 

GovFlex Government Freelance Exchange 

GPA Agreement on Government Procurement (World Trade Organization) 

GPC Government Purchase Card 

GS General Service 

GSA General Services Administration 

HASC House Armed Services Committee 

HCI Human Capital Initiatives (Office) 

IC Intelligence Community 

ICD Initial Capabilities Document 

IDIQ Indefinite-Delivery/Indefinite-Quantity 

IDP Individual Development Plan 

IoT Internet of Things 

IP Intellectual Property 

IT Information Technology 

ITEP Information Technology Exchange Program 

ITMRA Information Technology Management Reform Act 

JEDI Joint Enterprise Defense Infrastructure 

JPME Joint Professional Military Education 

LLCOE Leadership Learning Center of Excellence 

MA IDIQ Multiple-Award Indefinite Delivery/Indefinite Quantity 

MDA Milestone Decision Authority 

MDAP Major Defense Acquisition Program 

MGT Modernizing Government Technology 

MTA Middle Tier Acquisition 

NACI National Agency Check with Inquiries 

NDS National Defense Strategy 
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Acronym/Term Definition 

NDU National Defense University 

NMCARS Navy Marine Corps Acquisition Regulation Supplement 

NSS National Security System 

OCI Organizational Conflict-of-Interest 

ODCs Other Direct Costs 

OEM Original Equipment Manufacturer 

OFPP Office of Federal Procurement Policy 

OMB Office of Management and Budget 

OPM Office of Personnel Management 

OSHA Occupational Safety and Health Act 

OT Other Transactions (agreement) 

OTA Other Transaction Authority 

OUSD Office of the Under Secretary of Defense 

PAE Portfolio Acquisition Executive 

PALT Procurement Administrative Lead Time 

PCI Personal Conflict-of-Interest 

PEO Program Executive Officer 

PM Program Manager 

PMA President’s Management Agenda 

PPEP Public–Private Exchange Program 

PSC Product Service Code 

QASP Quality Assurance Surveillance Plan 

RAP Readily Available Procedure 

RCO Rapid Capabilities Office 

RFP Request for Proposal 

RFQ Request for Quote 

SaaS Software as a Service 

SAE Service Acquisition Executive 

SAE Senior Acquisition Executive 

SAF Security Assessment Framework 

SAM System for Award Management 

SAP Special Access Program 

SAPs Simplified Acquisition Procedures 

SASC Senate Armed Services Committee 

SBA Small Business Administration 

SECDEF Secretary of Defense 
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Acronym/Term Definition 

SES Senior Executive Service 

SETA Systems Engineering and Technical Assistance 

SF Standard Form 

SME Subject Matter Expert 

SOO Statement of Objectives 

SRG Security Requirements Guide 

SSDD Source Selection Decision Document 

STRAP Streamlined Acquisition Plan 

TDY Temporary Duty 

U.S.C. United States Code 

USD Under Secretary of Defense 

USD(A&S) Under Secretary of Defense (Acquisition and Sustainment) 

USD(AT&L) Under Secretary of Defense for Acquisition, Technology and Logistics 

USD(R&E) Under Secretary of Defense (Research and Engineering) 

USDA U.S. Department of Agriculture 

WCF Working Capital Funds 

XaaS Everything as a Service 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
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