291
‘‘(P) Costs incurred by a contractor for incen-
tive payments to employees to encourage enrollment 
in the TRICARE program under chapter 55 of title 
10, United States Code, or any other Government-
sponsored health care program, except that this sub-
paragraph does not apply to such costs incurred by 
a contractor performing a contract to which any of 
the following applies: 
‘‘(i) The Services Contract Act of 1965 (41 
U.S.C. 351 et seq.). 
‘‘(ii) Any other law or labor agreement 
that requires a company to compensate its em-
ployees for health care whether or not the em-
ployee participates in a company health plan.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to contracts entered 
into after the date occurring 180 days after the date of 
the enactment of this Act. 
SEC. 722. REQUIREMENT FOR MILITARY MEDICAL PER-
SONNEL TO BE TRAINED IN PRESERVATION 
OF REMAINS. 
(a) REQUIREMENT.—The Secretary of Defense shall 
develop a program requiring each military department to 
include training in the preservation of remains for health 
care professionals under the department’s jurisdiction.
292
The training shall be provided before a health care profes-
sional is deployed into a theater of operation and periodi-
cally thereafter as determined necessary for refresher 
training. 
(b) MATTERS COVERED BY TRAINING.—The training 
shall include, at a minimum—
(1) best practices and procedures for the pres-
ervation of the remains of a member of the Armed 
Forces after death, taking into account the needs, 
sensitivities, and potential wishes of the family of 
the decedent, including the return of the remains to 
the family in the best possible condition; and 
(2) practical case studies to illustrate the objec-
tives of paragraph (1) and provide a real world per-
spective. 
(c) HEALTH CARE PROFESSIONAL.—In this section, 
the term ‘‘health care professional’’ means a physician, 
dentist, clinical psychologist, nurse, nurse practitioner, or 
physician assistant and any other person providing direct 
patient care as may be designated by the Secretary of De-
fense in regulations.
293
Subtitle D—Pharmacy Benefits 
Program Improvements 
SEC. 731. TRICARE PHARMACY PROGRAM COST-SHARE RE-
QUIREMENTS. 
Paragraph (6) of section 1074g(a) of title 10, United 
States Code, is amended to read as follows: 
‘‘(6)(A) The Secretary, in regulations prescribed 
under subsection (g), may establish cost-sharing require-
ments (which may be established as a percentage or fixed 
dollar amount) under the pharmacy benefits program for 
generic, formulary, and nonformulary agents. 
‘‘(B)(i) With respect to agents available through the 
national mail-order pharmacy program, the Secretary of 
Defense may not establish requirements for cost sharing 
for generic and formulary agents that are in excess of cost 
sharing requirements for generic and formulary agents 
available through facilities of the uniformed services. 
‘‘(ii) With respect to agents available through retail 
pharmacies, the Secretary of Defense may not establish 
cost sharing in excess of—
‘‘(I) $6 for generic agents; 
‘‘(II) $16 for formulary agents; and 
‘‘(III) $22 for nonformulary agents. 
‘‘(iii) The cost sharing requirements of this subpara-
graph shall be in effect during the period beginning 90
294
days after the date of the enactment of the National De-
fense Authorization Act for Fiscal Year 2007 and ending 
on December 31, 2007.’’. 
TITLE VIII—ACQUISITION POL-
ICY, ACQUISITION MANAGE-
MENT, AND RELATED MAT-
TERS
Subtitle A—Provisions Relating to Major Defense Acquisition Programs 
Sec. 801. Requirements Management Certification Training Program. 
Sec. 802. Additional requirements relating to technical data rights. 
Sec. 803. Study and report on revisions to Selected Acquisition Report require-
ments. 
Sec. 804. Quarterly updates on implementation of acquisition reform in the De-
partment of Defense. 
Sec. 805. Establishment of defense challenge process for critical cost growth 
threshold breaches in major defense acquisition programs. 
Sec. 806. Market research required for major defense acquisition programs be-
fore proceeding to Milestone B. 
Subtitle B—Acquisition Policy and Management 
Sec. 811. Applicability of statutory executive compensation cap made prospec-
tive. 
Sec. 812. Prohibition on procurement from beneficiaries of foreign subsidies. 
Sec. 813. Time-certain development for Department of Defense information 
technology business systems. 
Sec. 814. Establishment of Panel on Contracting Integrity. 
Sec. 815. Award and incentive fee contract standards. 
Sec. 816. Oversight and accountability of contractor personnel. 
Subtitle C—Amendments to General Contracting Authorities, Procedures, and 
Limitations 
Sec. 821. Extension of special temporary contract closeout authority. 
Sec. 822. Limitation on contracts for the acquisition of certain services. 
Sec. 823. Use of Federal supply schedules by State and local governments for 
goods and services for recovery from natural disasters, ter-
rorism, or nuclear, biological, chemical, or radiological attack. 
Sec. 824. Waivers to extend task order contracts for advisory and assistance 
services. 
Sec. 825. Enhanced access for small business. 
Sec. 826. Procurement goal for Hispanic-serving institutions. 
Sec. 827. Prohibition on defense contractors requiring licenses or fees for use 
of military likenesses and designations. 
Subtitle D—United States Defense Industrial Base Provisions
295
Sec. 831. Protection of strategic materials critical to national security. 
Sec. 832. Strategic Materials Protection Board.
Subtitle A—Provisions Relating to 
Major Defense Acquisition Pro-
grams 
SEC. 801. REQUIREMENTS MANAGEMENT CERTIFICATION 
TRAINING PROGRAM. 
(a) TRAINING PROGRAM.—
(1) REQUIREMENT.—The Under Secretary of 
Defense for Acquisition, Technology, and Logistics, 
in consultation with the Defense Acquisition Univer-
sity, shall develop a training program to certify civil-
ian and military personnel of the Department of De-
fense with responsibility for generating requirements 
for major defense acquisition programs (as defined 
in section 2430 of title 10, United States Code). 
(2) 
COMPETENCY
AND
OTHER
REQUIRE-
MENTS.—The Under Secretary shall establish com-
petency requirements for the personnel undergoing 
the training program. The Under Secretary shall de-
fine the target population for such training program 
by identifying which civilian and military personnel 
should have responsibility for generating require-
ments. The Under Secretary also may establish 
other training programs for personnel not subject to 
chapter 87 of title 10, United States Code, and who
296
contribute significantly to other types of acquisitions 
by the Department of Defense. 
(3) MATTERS COVERED.—At a minimum, the 
training program shall, with respect to a major de-
fense acquisition program—
(A) provide instruction on the inter-
relationship among the requirements generation 
process, the budget process, and the acquisition 
process within the Department of Defense for 
such a program; 
(B) stress the importance of generating re-
quirements for such a program that result in 
joint applications to the maximum extent pos-
sible; 
(C) provide instruction on the effects of in-
troducing new requirements for such a pro-
gram—
(i) both before and after the com-
mencement of system development and 
demonstration; and 
(ii) during initial operational test and 
evaluation; 
(D) ensure that requirements for such a 
program are derived primarily from capability
297
shortfalls in the program identified by a com-
mander of a combatant command; 
(E) ensure that requirements for such a 
program are informed by a sound analysis of al-
ternatives, by realistic technical assessments 
based on technology readiness levels, and by fis-
cal guidance, including consultation with pro-
duction engineers on the cost, schedule and 
technical feasibility of the requirements; 
(F) ensure that, for the introduction of 
any changes to requirements for such a pro-
gram, an engineering feasibility assessment that 
weighs technology readiness, integration, cost, 
and schedule impacts is conducted after Mile-
stone B approval at the latest, and before Mile-
stone B approval to the maximum extent prac-
ticable; 
(G) stress the importance of introducing 
requirements for such a program that are tech-
nologically mature, feasible, and achievable 
without schedule risk; and 
(H) stress the importance of stable re-
quirements for such a program to provide the 
baseline for successful execution of the pro-
gram.
298
(4) AVAILABILITY.—The training program shall 
be made available on the Internet to ensure the 
widest dissemination possible. 
(b) APPLICABILITY.—Effective on and after Sep-
tember 30, 2007, a member of the Armed Forces or an 
employee of the Department of Defense with authority to 
generate requirements for a major defense acquisition pro-
gram may not continue to participate in the requirements 
generation process unless the member or employee suc-
cessfully completes the certification training program de-
veloped under this section. 
SEC. 802. ADDITIONAL REQUIREMENTS RELATING TO 
TECHNICAL DATA RIGHTS. 
(a) ADDITIONAL
REQUIREMENTS
RELATING
TO 
TECHNICAL DATA RIGHTS .—Section 2320 of title 10, 
United States Code, is amended by adding at the end the 
following new subsection: 
‘‘(e) ADDITIONAL REGULATIONS.—(1) Regulations 
prescribed under subsection (a) shall ensure, at a min-
imum, that—
‘‘(A) in the case of a major system that is de-
veloped exclusively with Federal funds, in part with 
Federal funds and in part at private expense, or ex-
clusively at private expense, rights are acquired in 
full by the United States to technical data necessary
299
to support competition for contracts required for 
sustainment of the system; and 
‘‘(B) any contract for a major system includes 
price and delivery options for acquiring, at any point 
during the life cycle of the system, major elements 
of technical data not acquired at the time of initial 
contract award. 
‘‘(2) Regulations prescribed under subsection (a) also 
shall establish a standard for acquiring rights in technical 
data that supports the purchase of data rights appropriate 
to minimize life cycle costs. 
‘‘(3) The Under Secretary of Defense for Acquisition, 
Technology, and Logistics shall ensure that members of 
the acquisition workforce working with any contract in an 
amount greater than $5,000,000 and involving the acqui-
sition of rights in technical data be provided information 
and formal training sufficient to carry out the regulations 
prescribed under subsection (a) to implement this sub-
section.’’. 
(b) REGULATIONS.—Not later than 180 days after 
the date of the enactment of this Act, the Secretary of 
Defense shall revise regulations under section 2320 of title 
10, United States Code, to implement subsection (e) of 
such section (as added by this section).
300
SEC. 803. STUDY AND REPORT ON REVISIONS TO SELECTED 
ACQUISITION REPORT REQUIREMENTS. 
(a) STUDY REQUIREMENT.—The Secretary of De-
fense, acting through the Under Secretary of Defense for 
Acquisition, Technology, and Logistics in coordination 
with the service acquisition executives of each military de-
partment, shall conduct a study on revisions to require-
ments relating to Selected Acquisition Reports, as set 
forth in section 2432 of title 10, United States Code. 
(b) MATTERS COVERED.—The study required under 
subsection (a) shall—
(1) focus on incorporating into the Selected Ac-
quisition Report those elements of program progress 
that the Department of Defense considers most rel-
evant to evaluating the performance and progress of 
major defense acquisition programs, with particular 
reference to the cost estimates and program sched-
ule established when a major defense acquisition 
program receives Milestone B approval; and 
(2) include any recommendations to eliminate 
elements of the Selected Acquisition Report that the 
Department believes are no longer needed (other 
than the elimination of any unit cost information). 
(c) REPORT.—Not later than March 1, 2007, the 
Secretary shall submit to the Committees on Armed Serv-
ices of the Senate and the House of Representatives a re-
301
port on the results of the study, including such rec-
ommendations as the Secretary considers appropriate. 
SEC. 804. QUARTERLY UPDATES ON IMPLEMENTATION OF 
ACQUISITION REFORM IN THE DEPARTMENT 
OF DEFENSE. 
(a) QUARTERLY
UPDATES
REQUIREMENT.—Not 
later than 45 days after the date of the enactment of this 
Act, and on the first day of each calendar quarter there-
after, the Secretary of Defense shall provide an update 
to the Committees on Armed Services of the Senate and 
the House of Representatives on the implementation of 
plans to reform the acquisition system in the Department 
of Defense. 
(b) MATTERS
COVERED.—Each update provided 
under subsection (a) shall cover the implementation of re-
forms of the processes for acquisition, including genera-
tion of requirements, award of contracts, and financial 
management. At a minimum, the updates shall take into 
account the recommendations made by the following: 
(1) The Defense Acquisition Performance As-
sessment Panel. 
(2) The Defense Science Board Summer Study 
on Transformation, issued in February 2006. 
(3) The Beyond Goldwater-Nichols Study of the 
Center for Strategic and International Studies.
302
(4) The Quadrennial Defense Review, issued 
February 6, 2006. 
(5) The Committee Defense Review of the Com-
mittee on Armed Services of the House of Rep-
resentatives (when available). 
(c) RECOMMENDATIONS.—Each report submitted 
under subsection (a) shall include such recommendations 
as the Secretary considers appropriate, and implementa-
tion plans for the recommendations. 
(d) TERMINATION OF REPORT REQUIREMENT.—The 
requirement to submit reports under subsection (a) shall 
terminate on the first day of the calendar quarter fol-
lowing the first calendar quarter in which the Selected Ac-
quisition Report submitted to Congress under section 
2432 of title 10, United States Code, does not indicate 
that there has been an increase by a percentage equal to 
or greater than the significant cost growth threshold or 
the critical cost growth threshold in any major defense ac-
quisition program (as such thresholds are defined in sec-
tion 2433(a) of such title).
303
SEC. 805. ESTABLISHMENT OF DEFENSE CHALLENGE PROC-
ESS FOR CRITICAL COST GROWTH THRESH-
OLD BREACHES IN MAJOR DEFENSE ACQUISI-
TION PROGRAMS. 
(a) PRELIMINARY EVALUATION OF CHALLENGE PRO-
POSALS FOR CRITICAL COST BREACHES.—
(1) SUBMISSION OF CHALLENGE PROPOSALS.—
Section 2359b(c)) of title 10, United States Code, is 
amended—
(A) in paragraph (1), by striking ‘‘Panel,’’ 
and all that follows through the end and insert-
ing the following: ‘‘Panel—
‘‘(A) through the unsolicited proposal process; 
‘‘(B) in response to a broad agency announce-
ment; or 
‘‘(C) in response to a solicitation issued as a re-
sult of a critical cost growth threshold breach (as de-
fined in paragraph (4)).’’; 
(B) by redesignating paragraphs (4), (5), 
and (6) as paragraphs (5), (7), and (8), respec-
tively; 
(C) by inserting after paragraph (3) the 
following new paragraph (4): 
‘‘(4)(A) If the program acquisition unit cost or 
procurement unit cost of a major defense acquisition 
program increases by a percentage equal to or great-
304
er than the critical cost growth threshold for the 
program, as determined by the Secretary concerned 
under section 2433(d) of this title (in this section re-
ferred to as a ‘critical cost growth threshold 
breach’), the Under Secretary shall issue a solicita-
tion for challenge proposals that would result in im-
provements in affordability of the program. The so-
licitation shall specifically identify (i) the cost and 
schedule variances, and (ii) the design, engineering, 
manufacturing, or technology integration issues, con-
tributing to the breach. 
‘‘(B) A solicitation referred to in subparagraph 
(A) shall be made public before the end of the 14-
day period beginning on the day the Selected Acqui-
sition Report containing the information described in 
section 2433(g) of this title is required to be sub-
mitted under section 2432(f) of this title. 
‘‘(C) A solicitation referred to in subparagraph 
(A) shall require any challenge proposals responding 
to the solicitation to be submitted within 30 days 
after the date of issuance of the solicitation.’’; 
(D) in paragraph (5) (as so redesignated) 
in the matter preceding subparagraph (A)—
(i) by striking ‘‘or submitted’’ and in-
serting ‘‘submitted’’; and
305
(ii) by inserting after ‘‘paragraph 
(2),’’ the following: ‘‘or submitted in re-
sponse to a solicitation issued as a result 
of a critical cost growth threshold breach’’; 
and 
(E) by inserting after paragraph (5) (as so 
redesignated) the following new paragraph (6): 
‘‘(6) A panel shall complete a preliminary eval-
uation of challenge proposals submitted in response 
to a solicitation issued as a result of a critical cost 
growth threshold breach before the end of the 60-
day period beginning on the day the Selected Acqui-
sition Report referred to in paragraph (4)(B) is sub-
mitted to Congress and shall inform the Secretary of 
Defense of the results of the evaluation to aid in the 
completion of the Secretary’s certification under sec-
tion 2433(e)(2)(B) of this title.’’. 
(b) ACTION UPON FAVORABLE FULL REVIEW AND 
EVALUATION OF CHALLENGE PROPOSALS FOR CRITICAL 
COST BREACHES.—Section 2359b(e) of such title is 
amended by adding at the end the following new para-
graph: 
‘‘(3) In the case of a challenge proposal re-
ferred to in paragraph (1) that was submitted in re-
sponse to a solicitation issued as a result of a critical
306
cost growth threshold breach, the costs of the pro-
posal shall be borne by the major defense acquisition 
program with respect to which the breach oc-
curred.’’. 
(c) ACTION UPON UNFAVORABLE FULL REVIEW AND 
EVALUATION OF CHALLENGE PROPOSALS FOR CRITICAL 
COST BREACHES.—Section 2359b of such title, as amend-
ed by section 213, is further amended—
(1) by redesignating subsections (f), (g), (h), 
and (i) as subsections (g), (h), (i), and (j), respec-
tively; and 
(2) by inserting after subsection (e) the fol-
lowing new subsection (f): 
‘‘(f) ACTION UPON UNFAVORABLE FULL REVIEW 
AND EVALUATION OF CRITICAL COST BREACH SOLICITA-
TIONS.—In the case of a challenge proposal that was sub-
mitted in response to a solicitation issued as a result of 
a critical cost growth threshold breach and that is not de-
termined under a full review and evaluation to satisfy each 
of the criteria specified in subsection (c)(5), the following 
provisions apply: 
‘‘(1) The office carrying out the full review and 
evaluation shall provide to the Panel that conducted 
the preliminary evaluation a statement containing a
307
summary of the rationale for the unfavorable evalua-
tion. 
‘‘(2) If the Panel disagrees with the rationale 
provided under paragraph (1), the Panel may return 
the challenge proposal to the office for further con-
sideration. 
‘‘(3) The full review and evaluation, including a 
further consideration of the review and evaluation 
under paragraph (2), shall be completed not later 
than the expiration of the 60-day period beginning 
on the date of completion of the preliminary evalua-
tion of the proposal by a Panel under subsection (c). 
‘‘(4) After a full review and evaluation of all 
such challenge proposals submitted for such review 
and evaluation are completed, including further con-
sideration under paragraph (2), the Under Secretary 
shall submit to the congressional defense committees 
a report containing a list of each challenge proposal 
with an unfavorable evaluation, including an identi-
fication of each such challenge proposal returned to 
an office for further consideration, and a detailed ra-
tionale for the unfavorable evaluations upon both 
initial and further consideration (if any). Such re-
port shall be submitted not later than the expiration 
of the 60-day period beginning on the date of com-
308
pletion of the last preliminary evaluation of the pro-
posals by a Panel under subsection (c).’’. 
(d) AMENDMENTS TO UNIT COST REPORTS PROVI-
SIONS.—
(1) ADDITIONAL ASSESSMENT REQUIRED UPON 
BREACH OF CRITICAL COST GROWTH THRESHOLD.—
Section 2433(e)(2)(A) of title 10, United States 
Code, is amended—
(A) by striking ‘‘and’’ at the end of clause 
(ii); 
(B) by inserting ‘‘and’’ at the end of clause 
(iii); and 
(C) by adding at the end the following new 
clause: 
‘‘(iv) the availability of components, sub-
systems, or systems that may result in near-
term improvements in affordability of the pro-
gram, as identified under the Defense Acquisi-
tion Challenge Program through a solicitation 
issued pursuant to section 2359b(c)(1)(C) of 
this title;’’. 
(2) ADDITIONAL
CERTIFICATION
REQUIRED 
UPON BREACH OF CRITICAL COST GROWTH THRESH-
OLD.—Section 2433(e)(2)(B) of such title is amend-
ed—
309
(A) by redesignating clauses (iii) and (iv) 
as clauses (iv) and (v), respectively; and 
(B) by inserting after clause (ii) the fol-
lowing new clause (iii): 
‘‘(iii) the Panel conducting preliminary 
evaluation of challenge proposals submitted in 
response to the solicitation issued under the De-
fense Acquisition Challenge Program pursuant 
to section 2359b(c)(1)(C) of this title has iden-
tified no promising proposals meriting full re-
view and evaluation;’’. 
(3) ADDITIONAL INFORMATION IN CERTAIN RE-
PORT REQUIRED.—Section 2433(g)(1)(P)(vi) of such 
title is amended by inserting after ‘‘of the program’’ 
the following: ‘‘and design, engineering, manufac-
turing, or technology integration issues’’. 
(e) ADDITIONAL CONFORMING AMENDMENTS.—Sec-
tion 2359b of such title is further amended—
(1) in subsection (c)(8), as redesignated by sub-
section (a), by striking ‘‘paragraph (4)’’ and insert-
ing ‘‘paragraph (5)’’; 
(2) in subsection (d)(1), by striking ‘‘subsection 
(c)(6)’’ and inserting ‘‘subsection (c)(8)’’; 
(3) in subsection (d)(2), by striking ‘‘subsection 
(c)(4)’’ and inserting ‘‘subsection (c)(5)’’; and
310
(4) in subsection (e)(1), by striking ‘‘subsection 
(c)(4)’’ and inserting ‘‘subsection (c)(5)’’. 
SEC. 806. MARKET RESEARCH REQUIRED FOR MAJOR DE-
FENSE 
ACQUISITION 
PROGRAMS 
BEFORE 
PROCEEDING TO MILESTONE B. 
Section 2366a(a) of title 10, United States Code, is 
amended—
(1) by redesignating paragraphs (1) through 
(7) as paragraphs (2) through (8), respectively; and 
(2) by inserting before paragraph (2) (as so re-
designated) the following new paragraph (1): 
‘‘(1) market research has been conducted prior 
to technology development to reduce duplication of 
existing technology and products;’’. 
Subtitle B—Acquisition Policy and 
Management 
SEC. 811. APPLICABILITY OF STATUTORY EXECUTIVE COM-
PENSATION CAP MADE PROSPECTIVE. 
(a) PROSPECTIVE APPLICABILITY
OF EXECUTIVE 
COMPENSATION CAP.—Section 808(e)(2) of Public Law 
105–85 (41 U.S.C. 435 note; 111 Stat. 1838) is amended 
by striking ‘‘before, on,’’ and inserting ‘‘on’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply as if included in Public Law 
105–85 as enacted.
311
SEC. 812. PROHIBITION ON PROCUREMENT FROM BENE-
FICIARIES OF FOREIGN SUBSIDIES. 
(a) PROHIBITION.—The Secretary of Defense may 
not enter into a contract for the procurement of goods 
or services from any foreign person to which the govern-
ment of a foreign country that is a member of the World 
Trade Organization has provided a subsidy if—
(1) the United States has requested consulta-
tions with that foreign country under the Agreement 
on Subsidies and Countervailing Measures on the 
basis that the subsidy is a prohibited subsidy under 
that Agreement; and 
(2) either—
(A) the issue before the World Trade Or-
ganization has not been resolved; or 
(B) the World Trade Organization has 
ruled that the subsidy provided by the foreign 
country is a prohibited subsidy under the 
Agreement on Subsidies and Countervailing 
Measures. 
(b) JOINT VENTURES.—The prohibition under sub-
section (a) with respect to a foreign person also applies 
to any joint venture, cooperative organization, partner-
ship, or contracting team of which that foreign person is 
a member.
312
(c) SUBCONTRACTS AND TASK ORDERS.—The prohi-
bition under subsection (a) with respect to a contract also 
applies to any subcontracts at any tier entered into under 
the contract and any task orders at any tier issued under 
the contract. 
(d) DEFINITIONS.—In this section: 
(1) The term ‘‘Agreement on Subsidies and 
Countervailing Measures’’ means the agreement de-
scribed in section 101(d)(12) of the Uruguay Round 
Agreements Act (19 U.S.C. 3501(d)(12)). 
(2) The term ‘‘foreign person’’ means—
(A) an individual who is not a United 
States person or an alien lawfully admitted for 
permanent residence into the United States; or 
(B) a corporation, partnership, or other 
nongovernmental entity which is not a United 
States person. 
(3) The term ‘‘United States person’’ means—
(A) a natural person who is a citizen of the 
United States or who owes permanent alle-
giance to the United States; and 
(B) a corporation or other legal entity 
which is organized under the laws of the United 
States, any State or territory thereof, or the 
District of Columbia, if natural persons de-
313
scribed in subparagraph (A) own, directly or in-
directly, more than 50 percent of the out-
standing capital stock or other beneficial inter-
est in such legal entity. 
(e) APPLICABILITY.—
(1) PROGRAMS WITH MILESTONE B APPROVAL 
NOT
COVERED.—The prohibition under subsection 
(a) shall not apply to any contract under a major 
defense acquisition program that has received Mile-
stone B approval as of the date of the enactment of 
this Act. 
(2) DEFINITIONS.—In this subsection: 
(A) The term ‘‘major defense acquisition 
program’’ means a Department of Defense ac-
quisition program that is a major defense ac-
quisition program for purposes of section 2430 
of title 10, United States Code. 
(B) The term ‘‘Milestone B approval’’ has 
the meaning provided that term in section 
2366(e)(7) of such title. 
SEC. 813. TIME-CERTAIN DEVELOPMENT FOR DEPARTMENT 
OF DEFENSE INFORMATION TECHNOLOGY 
BUSINESS SYSTEMS. 
(a) MILESTONE A LIMITATION.—The Department of 
Defense executive or entity that is the milestone decision
314
authority for an information system described in sub-
section (c) may not provide Milestone A approval for the 
system unless, as part of the decision process for such ap-
proval, that authority determines that the system will 
achieve initial operational capability within five years of 
such approval. 
(b) INITIAL
OPERATIONAL
CAPABILITY
LIMITA-
TION.—Funds appropriated or otherwise available to the 
Department of Defense may not be obligated or expended 
for an information system described in subsection (c) if 
the system, having received Milestone A approval, has not 
achieved initial operational capability within five years of 
the date of such approval. 
(c) COVERED SYSTEMS.—An information system de-
scribed in this subsection is any Department of Defense 
information technology business system that is not a na-
tional security system, as defined in 3542(b)(2) of title 
44, United States Code. 
(d) APPLICABILITY TO EXISTING PROGRAMS.—
(1) WAIVER
AUTHORITY
FOR
EXISTING
PRO-
GRAMS
IN
DEVELOPMENT.—The Secretary of De-
fense may waive the applicability of subsection (b) in 
the case of a program described in subsection (c) 
that as of the date of the enactment of this Act has
315
received Milestone A approval but has not as of such 
date achieved initial operational capability. 
(2) INAPPLICABILITY TO PROGRAMS THROUGH 
DEVELOPMENT.—This section does not apply to an 
information system that achieved initial operational 
capability before the date of the enactment of this 
Act. 
(e) DEFINITIONS.—In this section: 
(1) MILESTONE
DECISION
AUTHORITY.—The 
term ‘‘milestone decision authority’’ has the meaning 
given that term in Department of Defense Instruc-
tion 5000.2, dated May 12, 2003. 
(2) MILESTONE A.—The term ‘‘Milestone A’’ 
has the meaning given that term in Department of 
Defense Instruction 5000.2, dated May 12, 2003. 
SEC. 814. ESTABLISHMENT OF PANEL ON CONTRACTING IN-
TEGRITY. 
(a) ESTABLISHMENT.—
(1) IN
GENERAL.—The Secretary of Defense 
shall establish a panel to be known as the ‘‘Panel on 
Contracting Integrity’’. 
(2) COMPOSITION.—The panel shall be com-
posed of the following: 
(A) The Deputy Secretary of Defense, who 
shall be the chairman of the panel.
316
(B) The service acquisition executive of 
each military department. 
(C) The Inspector General of the Depart-
ment of Defense. 
(D) The Director of the Defense Logistics 
Agency. 
(E) The Director of the Defense Contract 
Management Agency. 
(F) The Director of the Defense Contract 
Audit Agency. 
(G) Such other members as determined ap-
propriate by the Secretary of Defense. 
(b) DUTIES.—In addition to other matters assigned 
to it by the Secretary of Defense, the panel shall—
(1) conduct reviews of progress made by the 
Department of Defense to eliminate areas of vulner-
ability of the defense contracting system that allow 
fraud, waste, and abuse to occur; 
(2) review the report by the Comptroller Gen-
eral required by section 841 of the National Defense 
Authorization Act for Fiscal Year 2006 (Public Law 
109–163; 119 Stat. 3389), relating to areas of vul-
nerability of Department of Defense contracts to 
fraud, waste, and abuse; and
317
(3) recommend changes in law, regulations, and 
policy that it determines necessary to eliminate such 
areas of vulnerability. 
(c) MEETINGS.—The panel shall meet as determined 
necessary by the Secretary of Defense but not less often 
than once every six months. 
(d) REPORT.—
(1) REQUIREMENT.—The panel shall prepare 
and submit to the congressional defense committees 
an annual report on its activities. The report shall 
contain a summary of its findings and recommenda-
tions for the year covered by the report. 
(2) FIRST REPORT.—The first report under this 
subsection shall be submitted not later than 180 
days after the date of the enactment of this Act and 
shall contain an examination of the current struc-
ture in the Department of Defense for personnel ac-
countability relating to the contracting system and 
recommendations for any changes needed to the sys-
tem of administrative safeguards and disciplinary 
actions to ensure accountability at the appropriate 
level for any violations of appropriate standards of 
behavior in contracting.
318
SEC. 815. AWARD AND INCENTIVE FEE CONTRACT STAND-
ARDS. 
(a) REQUIREMENT TO DEVELOP AND ISSUE STAND-
ARDS.—Not later than 90 days after the date of the enact-
ment of this Act, the Secretary of Defense shall develop 
and issue—
(1) standards that link award and incentive fees 
to desired program outcomes, such as meeting cost, 
schedule, and capability goals; 
(2) standards that identify the appropriate ap-
proving official level involved in awarding new con-
tracts utilizing award and incentive fees; 
(3) guidance on when the use of rollover is ap-
propriate in terms of new contracts utilizing award 
and incentive fees; 
(4) performance measures to evaluate the effec-
tiveness of award and incentive fees as a tool for im-
proving contractor performance and achieving de-
sired program outcomes; and 
(5) guidance for the development of a mecha-
nism to capture award and incentive fee data and to 
share proven award and incentive fee strategies with 
appropriate contracting and program officials at the 
Department of Defense. 
(b) DEFINITION.—In this section, the term ‘‘rollover’’ 
means the process of moving unearned available award
319
and incentive fees from one evaluation period to a subse-
quent evaluation period, thereby providing the contractor 
with an additional opportunity to earn that previously un-
earned award or incentive fee. 
(c) REPORT.—Not later than one year after the date 
of the enactment of this Act, the Secretary of Defense 
shall submit to Congress a report on the status and effec-
tiveness of developing the standards required under sub-
section (a) for award and incentive fee contracts. 
(d) SENSE OF CONGRESS.—It is the sense of Con-
gress that award and incentive fees should be used to mo-
tivate excellent contractor performance and that such fees 
should not be awarded for below-satisfactory performance. 
SEC. 816. OVERSIGHT AND ACCOUNTABILITY OF CON-
TRACTOR PERSONNEL. 
(a) REPORT
AND REQUIREMENTS RELATING
TO 
CONTRACTS TO BE PERFORMED IN IRAQ AND AFGHANI-
STAN.—
(1) INSPECTOR GENERAL REPORT.—Not later 
than March 1, 2007, the Inspector General of the 
Department of Defense shall submit to Congress a 
report on overcharges discovered by the Inspector 
General under contracts entered into by the Depart-
ment for work to be performed in Iraq and Afghani-
stan.
320
(2) ASSIGNMENT OF SUFFICIENT CONTRACTING 
OFFICERS.—The Under Secretary of Defense for Ac-
quisition, Logistics, and Technology shall ensure 
that sufficient contracting officers are assigned to 
oversee and monitor contracts entered into by the 
Department of Defense for work to be performed in 
Iraq and Afghanistan. 
(b) REQUIREMENTS RELATING TO EMPLOYEES OF 
DEFENSE
CONTRACTORS
OPERATING
OUTSIDE
THE 
UNITED STATES.—
(1) BACKGROUND CHECKS.—The Secretary of 
Defense shall implement a policy for conducting 
comprehensive background checks on foreign nation-
als hired by contractors (and subcontractors at any 
tier) of the Department of Defense operating outside 
the United States. The type of background check in-
cluded in such policy shall be suitable for employ-
ment screening and shall, at a minimum, include a 
determination of whether the potential employee is 
on a terrorist watch list or has a criminal record. 
The policy shall provide for completing such back-
ground checks as quickly as possible. 
(2) PROHIBITION ON HIRING CERTAIN EMPLOY-
EES.—A contractor (or subcontractor at any tier) of
321
the Department of Defense operating outside the 
United States may not hire any person—
(A) who has been convicted of a violent fel-
ony; or 
(B) who is determined by the Secretary of 
Defense to have committed acts inconsistent 
with the policy of the Department of Defense 
on human rights. 
(c) REPORT AND APPLICABILITY OF DEFENSE IN-
STRUCTION RELATING TO CONTRACTOR PERSONNEL AU-
THORIZED TO ACCOMPANY THE ARMED FORCES.—
(1) REPORT ON IMPLEMENTATION OF INSTRUC-
TION.—The Secretary of Defense shall submit to 
Congress a report on the Department of Defense in-
struction described in paragraph (3). The report 
shall include information on the status of the imple-
mentation of the instruction, how the instruction is 
being enforced, and the effectiveness of the instruc-
tion. 
(2) REQUIREMENT TO APPLY TO CONTRACTS.—
The Department of Defense instruction described in 
paragraph (3) shall apply to—
(A) contracts entered into by the Depart-
ment of Defense after the date of the enact-
ment of this Act;
322
(B) task orders issued after the date of the 
enactment of this Act under contracts in exist-
ence on the date of enactment of this Act; and 
(C) contracts in existence on the date of 
the enactment of this Act with respect to which 
an option to extend the contract is exercised 
after such date. 
(3) INSTRUCTION DESCRIBED.—The instruction 
referred to in this subsection is Department of De-
fense Instruction Number 3020.14, titled ‘‘Con-
tractor Personnel Authorized to Accompany the 
United States Armed Forces’’. 
Subtitle C—Amendments to Gen-
eral 
Contracting 
Authorities, 
Procedures, and Limitations 
SEC. 821. EXTENSION OF SPECIAL TEMPORARY CONTRACT 
CLOSEOUT AUTHORITY. 
Section 804 of the National Defense Authorization 
Act for Fiscal Year 2004 (Public Law 108–136; 117 Stat. 
1541) is amended in subsection (d) by striking ‘‘Sep-
tember 30, 2006’’ and inserting ‘‘September 30, 2007’’.
323
SEC. 822. LIMITATION ON CONTRACTS FOR THE ACQUISI-
TION OF CERTAIN SERVICES. 
(a) LIMITATION.—Except as provided in subsection 
(b), the Secretary of Defense may not enter into a contract 
for covered services if the amount of the contract—
(1) exceeds 75 percent of the estimated value of 
any asset required for the provision of services under 
the contract, as of the date on which contract per-
formance begins; or 
(2) exceeds $150,000,000 in payments over the 
life of the contract assuming all options to extend 
the contract are exercised. 
(b) WAIVER.—The Secretary of Defense may waive 
subsection (a) with respect to a contract for covered serv-
ices if the Secretary—
(1) determines that a waiver is necessary for 
national security purposes; and 
(2) provides to the congressional defense com-
mittees an economic analysis as described in sub-
section (c) at least 30 days before the waiver takes 
effect. 
(c) ECONOMIC ANALYSIS.—The economic analysis 
provided under subsection (b) shall include, at a minimum, 
the following: 
(1) A clear explanation of the need for the con-
tract for covered services.
324
(2) An examination of at least two alternatives 
for fulfilling the requirements that the contract is 
meant to fulfill, including the following with respect 
to each alternative: 
(A) A rationale for including the alter-
native. 
(B) A cost estimate of the alternative and 
an analysis of the quality of each cost estimate. 
(C) A discussion of the benefits to be real-
ized from the alternative. 
(D) A best value determination of each al-
ternative and a detailed explanation of the life-
cycle cost calculations used in the determina-
tion. 
(d) COVERED SERVICES.—The limitation in sub-
section (a) applies to any contract for the following types 
of services: 
(1) Operation, maintenance, or support of fa-
cilities or installations, or construction of facilities 
needed for performing the contract. 
(2) Maintenance or modification of aircraft, 
ships, vehicles, or other highly complex military 
equipment, or the provision of aircraft, ships, vehi-
cles, or other highly complex military equipment 
needed for performing the contract.
325
(3) Specialized training necessitating high qual-
ity instructor skills (for example, pilot and air crew 
members; foreign language training). 
(4) Base services (for example, ground mainte-
nance, in-plane refueling; bus transportation; refuse 
collection and disposal). 
SEC. 823. USE OF FEDERAL SUPPLY SCHEDULES BY STATE 
AND LOCAL GOVERNMENTS FOR GOODS AND 
SERVICES FOR RECOVERY FROM NATURAL 
DISASTERS, TERRORISM, OR NUCLEAR, BIO-
LOGICAL, CHEMICAL, OR RADIOLOGICAL AT-
TACK. 
(a) AUTHORITY TO USE SUPPLY SCHEDULES FOR 
CERTAIN GOODS AND SERVICES.—Section 502 of title 40, 
United States Code, is amended by adding at the end the 
following new subsection: 
‘‘(d) USE
OF SUPPLY SCHEDULES
FOR CERTAIN 
GOODS AND SERVICES.—
‘‘(1) IN
GENERAL.—The Administrator may 
provide for the use by State or local governments of 
Federal supply schedules of the General Services Ad-
ministration for goods or services that are to be used 
to facilitate recovery from a major disaster declared 
by the President under the Robert T. Stafford Dis-
aster Relief and Emergency Assistance Act (42
326
U.S.C. 5121 et seq.) or to facilitate recovery from 
terrorism or nuclear, biological, chemical, or radio-
logical attack. 
‘‘(2) 
DETERMINATION
BY
SECRETARY
OF 
HOMELAND SECURITY.—The Secretary of Homeland 
Security shall determine which goods and services 
qualify as goods and services described in paragraph 
(1) before the Administrator provides for the use of 
the Federal supply schedule relating to such goods 
and services. 
‘‘(3) VOLUNTARY USE.—In the case of the use 
by a State or local government of a Federal supply 
schedule pursuant to paragraph (1), participation by 
a firm that sells to the Federal Government through 
the supply schedule shall be voluntary with respect 
to a sale to the State or local government through 
such supply schedule. 
‘‘(4) DEFINITIONS.—The definitions in sub-
section (c)(3) shall apply for purposes of this sub-
section.’’. 
(b) PROCEDURES.—Not later than 30 days after the 
date of the enactment of this Act, the Administrator of 
General Services shall establish procedures to implement 
section 502(d) of title 40, United States Code (as added 
by subsection (a)).
327
SEC. 824. WAIVERS TO EXTEND TASK ORDER CONTRACTS 
FOR ADVISORY AND ASSISTANCE SERVICES. 
(a) DEFENSE CONTRACTS.—Section 2304b(b) of title 
10, United States Code, is amended—
(1) by inserting ‘‘(1)’’ before ‘‘The period’’; 
(2) by inserting before the period the following: 
‘‘or a waiver is issued under paragraph (2)’’; and 
(3) by adding at the end the following new 
paragraph: 
‘‘(2) The head of an agency may issue a waiver 
to extend a task order contract entered into under 
this section for a period not exceeding 10 years, 
through five one-year options, if the head of the 
agency determines in writing—
‘‘(A) that the contract provides engineering 
or technical services of such a unique and sub-
stantial technical nature that award of a new 
contract would be harmful to the continuity of 
the program for which the services are per-
formed; 
‘‘(B) that award of a new contract would 
create a large disruption in services provided to 
the Department of Defense; and 
‘‘(C) the Department of Defense would en-
dure program risk during critical program