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the Panel considers appropriate in light of such
results in order to—
(i) ensure the independence and con-
sumer focus of the Panel;
(ii) ensure the participation of the
Panel as an advisory board throughout im-
plementation of the Department of Defense
pharmacy benefits program; and
(iii) achieve more effective communica-
tion between the Secretary and the Panel.
(d) REPORT.—Not later than nine months after the
date of the enactment of this Act, the Comptroller General
shall submit to the congressional defense committees a re-
port on the study required by subsection (a). The report
shall include such recommendations as the Comptroller
General considers appropriate for legislative or administra-
tive action to improve the Department of Defense pharmacy
benefits program in light of the study.
SEC. 744. COMPTROLLER GENERAL AUDITS OF DEPART-
MENT OF DEFENSE HEALTH CARE COSTS AND
COST-SAVING MEASURES.
(a) GENERAL AUDIT REQUIRED.—
(1) IN GENERAL.—The Comptroller General of
the United States shall conduct an audit of the health
care costs and cost-saving measures of the Department
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of Defense in accordance with this subsection. The
Comptroller General shall conduct the audit in con-
junction with the Department of Defense initiative to
manage future medical benefits available through the
Department known as ‘‘Sustain the Benefit’’.
(2) ELEMENTS.—The audit required by para-
graph (1) shall examine the following:
(A) The basis for the calculation by the De-
partment of Defense of the portion of the costs of
health care benefits provided by the Department
to beneficiaries that were paid by such bene-
ficiaries in each of 1995 and 2005, including—
(i) a comparison of the cost to the De-
partment of providing such benefits in each
of 1995 and 2005;
(ii) the explanation for any increases
in the costs of the Department of providing
such benefits between 1995 and 2005; and
(iii) a comparison of the amounts
paid, by category of beneficiaries, for health
care benefits in 1995 with the amounts
paid, by category of beneficiaries, for such
benefits in 2005.
(B) The calculations and assumptions uti-
lized by the Department in estimating the sav-
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ings anticipated through the implementation of
proposed increases in cost-sharing for health care
benefits beginning in 2007.
(C) The average annual rate of increase,
based on inflation, of medical costs for the De-
partment under the Defense Health Program.
(D) The annual rate of growth in the cost
of the Defense Health Program that is attrib-
utable to inflation in the cost of medical services
over the last five years and how such rate of
growth compares with annual rates of increases
in health care premiums under the Federal Em-
ployee Health Benefit Program and other health
care programs as well as rates of growth of other
health care cost indices over that time.
(E) The assumptions utilized by the De-
partment in estimating savings associated with
adjustments in copayments for pharmaceuticals.
(F) The costs of the administration of the
Defense Health Program and the TRICARE pro-
gram for all categories of beneficiaries.
(c) AUDIT
OF TRICARE RESERVE SELECT PRO-
GRAM.—
(1) IN GENERAL.—In addition to the audit re-
quired by subsection (a), the Comptroller General
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shall conduct an audit of the costs of the Department
of Defense in implementing the TRICARE Reserve
Select Program.
(2) ELEMENTS.—The audit required by para-
graph (1) shall include an examination of the fol-
lowing:
(A) A comparison of the annual premium
amounts established by the Department of De-
fense for the TRICARE Reserve Select Program
with the actual costs of the Department in pro-
viding benefits under that program in fiscal
years 2004 and 2005.
(B) The rate of inflation of health care costs
of the Department during fiscal years 2004 and
2005, and a comparison of that rate of inflation
with the annual increase in premiums under the
TRICARE Reserve Select Program in January
2006.
(C) A comparison of the financial and
health-care utilization assumptions utilized by
the Department in establishing premiums under
the TRICARE Reserve Select Program with ac-
tual experiences under that program in the first
year of the implementation of that program.
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(3) TRICARE RESERVE SELECT PROGRAM DE-
FINED.—In this section, the term ‘‘TRICARE Reserve
Select Program’’ means the program carried out
under section 1074d of title 10, United States Code.
(d) USE
OF
INDEPENDENT
EXPERTS.—Notwith-
standing any other provision of law, in conducting the au-
dits required by this section, the Comptroller General may
engage the services of appropriate independent experts, in-
cluding actuaries.
(e) REPORT.—Not later than April 1, 2007, the Comp-
troller General shall submit to the congressional defense
committees a report on the audits conducted under this sec-
tion. The report shall include—
(1) the findings of the Comptroller General as a
result of the audits; and
(2) such recommendations as the Comptroller
General considers appropriate in light of such find-
ings to ensure maximum efficiency in the administra-
tion of the health care benefits programs of the De-
partment of Defense.
SEC. 745. REVIEW OF DEPARTMENT OF DEFENSE MEDICAL
QUALITY IMPROVEMENT PROGRAM.
(a) REVIEW REQUIRED.—The Secretary of Defense
shall enter into a contract with the Institute of Medicine
of the National Academy of Sciences, or another similarly
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qualified independent academic medical organization, for
the purpose of conducting an independent review of the De-
partment of Defense medical quality improvement program.
(b) ELEMENTS.—The review required pursuant to sub-
section (a) shall include the following:
(1) An assessment of the methods used by the De-
partment of Defense to monitor medical quality in
services provided in military hospitals and clinics
and in services provided in civilian hospitals and
providers under the military health care system.
(2) An assessment of the transparency and pub-
lic reporting mechanisms of the Department on med-
ical quality.
(3) An assessment of how the Department incor-
porates medical quality into performance measures
for military and civilian health care providers within
the military health care system.
(4) An assessment of the patient safety programs
of the Department.
(5) A description of the extent to which the De-
partment seeks to address particular medical errors,
and an assessment of the adequacy of such efforts.
(6) An assessment of accountability within the
military health care system for preventable negative
outcomes involving negligence.
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(7) An assessment of the performance of the
health care safety and quality measures of the De-
partment.
(8) An assessment of the collaboration of the De-
partment with national initiatives to develop evi-
dence-based quality measures and intervention strate-
gies, especially the initiatives of the Agency for
Health Care Research and Quality within the De-
partment of Health and Human Services.
(9) A comparison of the methods, mechanisms,
and programs and activities referred to in para-
graphs (1) through (8) with similar methods, mecha-
nisms, programs, and activities used in other public
and private health care systems and organizations.
(c) REPORT.—
(1) IN GENERAL.—Not later than one year after
the date of the enactment of this Act, the Secretary
shall submit to the congressional defense committees a
report on the review required pursuant to subsection
(a).
(2) ELEMENTS.—The report required by para-
graph (1) shall include the following:
(A) The results of the review required pur-
suant to subsection (a).
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(B) A discussion of recent highlights in the
accomplishments of the Department of Defense
medical quality assurance program.
(C) Such recommendations for legislative or
administrative action as the Secretary considers
appropriate for the improvement of the program.
SEC. 746. STUDY OF HEALTH EFFECTS OF EXPOSURE TO DE-
PLETED URANIUM.
(a) STUDY.—The Secretary of Defense, in consultation
with the Secretary for Veterans Affairs and the Secretary
of Health and Human Services, shall conduct a comprehen-
sive study of the health effects of exposure to depleted ura-
nium munitions on uranium-exposed soldiers and on chil-
dren of uranium-exposed soldiers who were born after the
exposure of the uranium-exposed soldiers to depleted ura-
nium.
(b) URANIUM-EXPOSED SOLDIERS.—In this section,
the term ‘‘uranium-exposed soldiers’’ means a member or
former member of the Armed Forces who handled, came in
contact with, or had the likelihood of contact with depleted
uranium munitions while on active duty, including mem-
bers and former members who—
(1) were exposed to smoke from fires resulting
from the burning of vehicles containing depleted ura-
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nium munitions or fires at depots at which depleted
uranium munitions were stored;
(2) worked within environments containing de-
pleted uranium dust or residues from depleted ura-
nium munitions;
(3) were within a structure or vehicle while it
was struck by a depleted uranium munition;
(4) climbed on or entered equipment or struc-
tures struck by a depleted uranium munition; or
(5) were medical personnel who provided initial
treatment to members of the Armed Forces described
in paragraph (1), (2), (3), or (4).
(c) REPORT.—Not later than 1 year after the date of
enactment of this Act, the Secretary of Defense shall submit
a report to Congress on the results of the study described
in subsection (a).
Subtitle D—Other Matters
SEC. 761. EXTENSION OF LIMITATION ON CONVERSION OF
MILITARY MEDICAL AND DENTAL POSITIONS
TO CIVILIAN MEDICAL AND DENTAL POSI-
TIONS.
Section 744(a)(1) of the National Defense Authoriza-
tion Act for Fiscal Year 2006 (Public Law 109–163; 119
Stat. 3360; 10 U.S.C. 129c note) is amended—
(1) by inserting ‘‘in a fiscal year’’ before ‘‘until’’;
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(2) by inserting ‘‘with respect to that fiscal
year’’ after ‘‘House of Representatives’’; and
(3) by striking the last sentence and inserting
the following new sentences: ‘‘The certification with
respect to fiscal year 2007 may not be submitted be-
fore June 30, 2006. The certification with respect to
any fiscal year after fiscal year 2007 shall be sub-
mitted at the same time the budget of the President
for such fiscal year is submitted to Congress pursuant
to section 1105(a) of title 31, United States Code.’’.
SEC. 762. TRANSFER OF CUSTODY OF THE AIR FORCE
HEALTH STUDY ASSETS TO MEDICAL FOL-
LOW-UP AGENCY.
(a) TRANSFER.—
(1) NOTIFICATION OF PARTICIPANTS.—The Sec-
retary of the Air Force shall notify the participants
of the Air Force Health Study that the study as cur-
rently constituted is ending as of September 30, 2006.
In consultation with the Medical Follow-Up Agency
(in this section referred to as the ‘‘Agency’’) of the In-
stitute of Medicine of the National Academy of
Sciences, the Secretary of the Air Force shall request
the written consent of the participants to transfer
their data and biological specimens to the Agency
during fiscal year 2007 and written consent for the
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Agency to maintain the data and specimens and
make them available for additional studies.
(2) COMPLETION OF TRANSFER.—Custodianship
of the Air Force Health Study shall be completely
transferred to the Agency on or before September 30,
2007. Assets to be transferred shall include electronic
data files and biological specimens of all the study
participants.
(3) COPIES TO ARCHIVES.—The Air Force shall
send paper copies of all study documents to the Na-
tional Archives.
(b) REPORT ON TRANSFER.—
(1) REQUIREMENT.—Not later than 30 days
after completion of the transfer of the assets of the Air
Force Health Study under subsection (a), the Sec-
retary of the Air Force shall submit to the Committee
on Armed Services of the Senate and the Committee
on Armed Services of the House of Representatives a
report on the transfer.
(2) MATTERS COVERED.—At a minimum, the re-
port shall include information on the number of study
participants whose data and biological specimens
were not transferred, the efforts that were taken to
contact such participants, and the reasons why the
transfer of their data and specimens did not occur.
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(c) DISPOSITION OF ASSETS NOT TRANSFERRED.—
The Secretary of the Air Force may not destroy any data
or biological specimens not transferred under subsection (a)
until the expiration of the one-year period following sub-
mission of the report under subsection (b).
(d) FUNDING.—
(1) COSTS OF TRANSFER.—Of the funds avail-
able to the Defense Health Program, the Secretary of
Defense may make available to the Air Force
$850,000 for preparation, transfer of the assets of the
Air Force Health Study and shipment of data and
specimens to the Medical Follow-Up Agency and the
National Archives during fiscal year 2007 from
amounts available from the Department of Defense for
that year. The Secretary of Defense is authorized to
transfer the freezers and other physical assets assigned
to the Air Force Health Study to the Agency without
charge.
(2) COSTS
OF
COLLABORATION.—Of the funds
available to the Defense Health Program, the Sec-
retary of Defense may reimburse the National Acad-
emy of Sciences up to $200,000 for costs of the Med-
ical Follow-Up Agency to collaborate with the Air
Force in the transfer and receipt of the assets of the
Air Force Health Study to the Agency during fiscal
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year 2007 from amounts available from the Depart-
ment of Defense for that year.
SEC. 763. SENSE OF SENATE ON THE TRANSFORMATIONAL
MEDICAL TECHNOLOGY INITIATIVE OF THE
DEPARTMENT OF DEFENSE.
(a) FINDINGS.—The Senate finds the following:
(1) The most recent Quadrennial Defense Review
and other studies have identified the need to develop
broad-spectrum medical countermeasures against the
threat of genetically engineered bioterror agents.
(2) The Transformational Medical Technology
Initiative of the Department of Defense implements
cutting edge transformational medical technologies
and applies them to address the challenges of known,
emerging, and bioengineered threats.
(3) The Transformational Medical Technology
Initiative is designed to provide such technologies in
a much shorter timeframe, and at lower cost, than is
required with traditional approaches.
(b) SENSE OF SENATE.—It is the sense of the Senate
that—
(1) the Transformational Medical Technology
Initiative is an important effort to provide needed ca-
pability within the Department of Defense to field ef-
fective broad-spectrum countermeasures against a sig-
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nificant array of current and future biological
threats; and
(2) 
innovative 
technological 
approaches 
to
achieve broad-spectrum medical countermeasures are
a necessary component of the capacity of the Depart-
ment to provide chemical-biological defense and force
protection capabilities for the Armed Forces.
TITLE VIII—ACQUISITION POL-
ICY, ACQUISITION MANAGE-
MENT, AND RELATED MAT-
TERS
Subtitle A—Acquisition Policy and
Management
SEC. 801. ADDITIONAL CERTIFICATION REQUIREMENTS
FOR MAJOR DEFENSE ACQUISITION PRO-
GRAMS.
(a) ADDITIONAL CERTIFICATION REQUIREMENTS.—
Subsection (a) of section 2366a of title 10, United States
Code, is amended—
(1) in paragraph (6), by striking ‘‘and’’ at the
end;
(2) redesignating paragraph (7) as paragraph
(10); and
(3) by inserting after paragraph (6) the fol-
lowing new paragraphs:
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‘‘(7) the program is needed to meet validated re-
quirements consistent with the national military
strategy;
‘‘(8) reasonable estimates have been developed to
execute the product development and production plan
under the program;
‘‘(9) funding is available to execute the product
development and production plan under the program
consistent with the estimates described in paragraph
(8) for the program; and’’.
(b) WAIVER FOR NATIONAL SECURITY.—Subsection (c)
of such section is amended by striking ‘‘(5), or (6)’’ and
inserting ‘‘(5), (6), (7), (8), or (9)’’.
SEC. 802. EXTENSION AND ENHANCEMENT OF DEFENSE AC-
QUISITION CHALLENGE PROGRAM.
(a) PRIORITY FOR PROPOSALS FROM CERTAIN BUSI-
NESSES.—Paragraph (5) of subsection (b) of section 2359b
of title 10, United States Code, is amended to read as fol-
lows:
‘‘(5) The Under Secretary—
‘‘(A) may establish procedures to ensure that the
Challenge Program does not become an avenue for the
repetitive submission of proposals that have been pre-
viously reviewed and found not to have merit; and
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‘‘(B) may establish procedures to ensure that the
Challenge Program establishes appropriate priorities
for proposals from businesses that are not major con-
tractors with the Department of Defense.’’.
(b) EXTENSION.—Subsection (j) of such section is
amended by striking ‘‘September 30, 2007’’ and inserting
‘‘September 30, 2012’’.
SEC. 803. BASELINE DESCRIPTION AND UNIT COST RE-
PORTS FOR MAJOR DEFENSE ACQUISITION
PROGRAMS.
(a) SPECIFICATION
OF ORIGINAL BASELINE ESTI-
MATE.—Section 2435(d)(1) of title 10, United States Code,
is amended by inserting after ‘‘with respect to the program
under subsection (a)’’ the following: ‘‘in preparation for
entry into system development and demonstration, or at
program initiation, whichever occurs later’’.
(b) REPORTS TO CONGRESS ON CERTAIN COST IN-
CREASES.—Section 2433(e)(1) of such title is amended by
adding at the end the following new subparagraph:
‘‘(C) If the Secretary concerned determines that the
program acquisition unit cost or procurement unit cost of
a major defense acquisition program has increased by a
percentage equal to or greater than the significant cost
growth threshold for the program and a Selected Acquisition
Report has been submitted to Congress under subparagraph
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(A) or (B), each subsequent quarterly or comprehensive an-
nual Selected Acquisition Report shall include the informa-
tion required by subsection (g). No further report on in-
creases in the program acquisition unit cost or procurement
unit cost shall be required under subsection (c) or (d) unless
the program manager has reasonable cause to believe that
the program acquisition unit cost or procurement unit cost
has increased by a percentage equal to or greater than the
critical cost growth threshold.’’.
SEC. 804. MAJOR AUTOMATED INFORMATION SYSTEM PRO-
GRAMS.
(a) REPORTS AND INFORMATION ON PROGRAM COST
AND PERFORMANCE.—
(1) IN GENERAL.—Part IV of subtitle A of title
10, United States Code, is amended by inserting after
chapter 144 the following new chapter:
‘‘CHAPTER 144A—MAJOR AUTOMATED
INFORMATION SYSTEM PROGRAMS
‘‘Sec.
‘‘2445a. Major automated information system program defined.
‘‘2445b. Cost, schedule, and performance information.
‘‘2445c. Reports: quarterly reports; reports on program changes.
‘‘2445d. Construction with other reporting requirements.
‘‘§ 2445a. Major automated information system pro-
gram defined
‘‘(a) IN GENERAL.—In this chapter, the term ‘major
automated information system program’ means a Depart-
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ment of Defense program for the acquisition of an auto-
mated information system (either as a product or a service)
if—
‘‘(1) the program is designated by the Secretary
of Defense, or a designee of the Secretary, as a major
automated information system program; or
‘‘(2) the dollar value of the program is estimated
to exceed—
‘‘(A) $32,000,000 in fiscal year 2000 con-
stant dollars for all program costs in a single fis-
cal year;
‘‘(B) $126,000,000 in fiscal year 2000 con-
stant dollars for all program acquisition costs for
the entire program; or
‘‘(C) $378,000,000 in fiscal year 2000 con-
stant dollars for the total life-cycle costs of the
program (including operation and maintenance
costs).
‘‘(b) ADJUSTMENT.—The Secretary of Defense may ad-
just the amounts (and base fiscal year) set forth in sub-
section (a) on the basis of Department of Defense escalation
rates. An adjustment under this subsection shall be effective
after the Secretary transmits a written notification of the
adjustment to the congressional defense committees.
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‘‘(c) INCREMENTS.—In the event any increment of a
major automated information system program separately
meets the requirements for treatment as a major automated
information system program, the provisions of this chapter
shall apply to such increment as well as to the overall major
automated information system program of which such in-
crement is a part.
‘‘§ 2445b. Cost, schedule, and performance informa-
tion
‘‘(a) SUBMITTAL OF COST, SCHEDULE, AND PERFORM-
ANCE INFORMATION.—The Secretary of Defense shall sub-
mit to Congress each calendar year, not later than 45 days
after the President submits to Congress the budget for a fis-
cal year under section 1105 of title 31, budget justification
documents regarding cost, schedule, and performance for
each major automated information system program for
which funds are requested by the President in the budget.
‘‘(b) ELEMENTS.—The documents submitted under
subsection (a) with respect to a major automated informa-
tion system program shall include detailed and summarized
information with respect to the automated information sys-
tem to be acquired under the program, and shall specifically
include each of the following:
‘‘(1) The development schedule, including major
milestones.
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‘‘(2) The implementation schedule, including es-
timates of milestone dates, initial operational capa-
bility, and full operational capability.
‘‘(3) Estimates of development costs and full life-
cycle costs.
‘‘(4) A summary of key performance parameters.
‘‘(c) BASELINE.—(1) For purposes of this chapter, the
initial submittal to Congress of the documents required by
subsection (a) with respect to a major automated informa-
tion system program shall constitute the original estimate
or information originally submitted on such program for
purposes of the reports and determinations on program
changes in section 2445c of this title.
‘‘(2) An adjustment or revision of the original estimate
or information originally submitted on a program may be
treated as the original estimate or information originally
submitted on the program if the adjustment or revision is
the result of a critical change in the program covered by
section 2445c(d) of this title.
‘‘(3) In the event of an adjustment or revision to the
original estimate or information originally submitted on a
program under paragraph (2), the Secretary of Defense
shall include in the next budget justification documents sub-
mitted under subsection (a) after such adjustment or revi-
sion a notification to the congressional defense committees
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of such adjustment or revision, together with the reasons
for such adjustment or revision.
‘‘§ 2445c. Reports: quarterly reports; reports on pro-
gram changes
‘‘(a) QUARTERLY
REPORTS
BY
PROGRAM
MAN-
AGERS.—The program manager of a major automated in-
formation system program shall, on a quarterly basis, sub-
mit to the senior Department of Defense official responsible
for the program a written report identifying any variance
in the projected development schedule, implementation
schedule, life-cycle costs, or key performance parameters for
the major automated information system to be acquired
under the program from such information as originally
submitted to Congress under section 2445b of this title.
‘‘(b) SENIOR OFFICIALS RESPONSIBLE
FOR PRO-
GRAMS.—For purposes of this section, the senior Depart-
ment of Defense official responsible for a major automated
information system program is—
‘‘(1) in the case of an automated information
system to be acquired for a military department, the
senior acquisition executive for the military depart-
ment; or
‘‘(2) in the case of any other automated informa-
tion system to be acquired for the Department of De-
fense or any component of the Department of Defense,
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the Under Secretary of Defense for Acquisition, Tech-
nology, and Logistics.
‘‘(c) REPORT
ON SIGNIFICANT CHANGES
IN PRO-
GRAM.—
‘‘(1) IN GENERAL.—If, based on a quarterly re-
port submitted by the program manager of a major
automated information system program pursuant to
subsection (a), the senior Department of Defense offi-
cial responsible for the program makes a determina-
tion described in paragraph (2), the official shall, not
later than 45 days after receiving such report, notify
the congressional defense committees in writing of
such determination.
‘‘(2) COVERED DETERMINATION.—A determina-
tion described in this paragraph with respect to a
major automated information system program is a
determination that—
‘‘(A) there has been a schedule change that
will cause a delay of more than six months but
less than a year in any program schedule mile-
stone or significant event from the schedule origi-
nally submitted to Congress under paragraph (1)
or (2) of section 2445b(b) of this title;
‘‘(B) the estimated program development
cost or full life-cycle cost for the program has in-
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creased by at least 15 percent, but less than 25
percent, over the original estimate submitted to
Congress 
under 
paragraph 
(3) 
of 
section
2445b(b) of this title; or
‘‘(C) there has been a significant, adverse
change in the expected performance of the major
automated information system to be acquired
under the program from the parameters origi-
nally submitted to Congress under paragraph (4)
of section 2445b(b) of this title.
‘‘(d) REPORT ON CRITICAL CHANGES IN PROGRAM.—
‘‘(1) IN GENERAL.—If, based on a quarterly re-
port submitted by the program manager of a major
automated information system program pursuant to
subsection (a), the senior Department of Defense offi-
cial responsible for the program makes a determina-
tion described in paragraph (2), the official shall, not
later than 60 days after receiving such report—
‘‘(A) carry out an evaluation of the pro-
gram under subsection (e); and
‘‘(B) submit, through the Secretary of De-
fense, to the congressional defense committees a
report meeting the requirements of subsection (f).
‘‘(2) COVERED DETERMINATION.—A determina-
tion described in this paragraph with respect to a
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major automated information system program is a
determination that—
‘‘(A) there has been a schedule change that
will cause a delay of one year or more in any
program schedule milestone or significant event
from the schedule originally submitted to Con-
gress under paragraph (1) or (2) of section
2445b(b) of this title;
‘‘(B) the estimated program development
cost or full life-cycle cost for the program has in-
creased by 25 percent or more over the original
estimate submitted to Congress under paragraph
(3) of section 2445b(b) of this title; or
‘‘(C) there has been a change in the expected
performance of the major automated information
system to be acquired under the program that
will undermine the ability of the system to per-
form the functions anticipated at the time infor-
mation on the program was originally submitted
to Congress under section 2445b(b) of this title.
‘‘(e) PROGRAM EVALUATION.—The evaluation of a
major automated information system program conducted
under this subsection for purposes of subsection (d)(1)(A)
shall include an assessment of—
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‘‘(1) the projected cost and schedule for com-
pleting the program if current requirements are not
modified;
‘‘(2) the projected cost and schedule for com-
pleting the program based on reasonable modification
of such requirements; and
‘‘(3) the rough order of magnitude of the cost and
schedule for any reasonable alternative system or ca-
pability.
‘‘(f) REPORT ON CRITICAL PROGRAM CHANGES.—A re-
port on a major automated information system program
conducted under this subsection for purposes of subsection
(d)(1)(B) shall include a written certification (with sup-
porting explanation) stating that—
‘‘(1) the automated information system to be ac-
quired under the program is essential to the national
security or to the efficient management of the Depart-
ment of Defense;
‘‘(2) there is no alternative to the system which
will provide equal or greater capability at less cost;
‘‘(3) the new estimates of the costs, schedule, and
performance parameters with respect to the program
and system are reasonable; and
‘‘(4) the management structure for the program
is adequate to manage and control program costs.
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‘‘(g) PROHIBITION ON OBLIGATION OF FUNDS.—(1) If
the determination of a critical change to a program is made
by the senior Department official responsible for the pro-
gram under subsection (d)(2) and a report is not submitted
to Congress within the 60-day period provided by subsection
(d)(1), appropriated funds may not be obligated for any
major contract under the program.
‘‘(2) The prohibition on the obligation of funds for a
program under paragraph (1) shall cease to apply on the
date on which Congress has received a report in compliance
with the requirements of subsection (d)(2).
‘‘§ 2445d. Construction with other reporting require-
ments
‘‘In the case of a major automated information system
program covered by this chapter that is also treatable as
a major defense acquisition program for which reports
would be required under chapter 144 of this title, no reports
on the program are required under such chapter if the re-
quirements of this chapter with respect to the program are
met.’’.
(2) CLERICAL
AMENDMENTS.—The tables of
chapters the beginning of subtitle A of such title, and
of part IV of subtitle A of such title, are each amend-
ed by inserting after the item relating to chapter 144
the following new item:
‘‘144A. Major Automated Information System Programs ....2445a’’.
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(b) REPORT ON REPORTING REQUIREMENTS APPLICA-
BLE TO MAJOR AUTOMATED INFORMATION SYSTEM PRO-
GRAMS.—Not later than 180 days after the date of enact-
ment of this Act, the Secretary of Defense shall submit to
the congressional defense committees a report setting forth
the reporting requirements applicable to major automated
information system programs as of the date of the report,
including a specification of such reporting requirements
considered by the Secretary to be duplicative or redundant.
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
subsection (a) shall take effect on January 1, 2008,
and shall apply with respect to any major automated
information system program for which amounts are
requested in the budget of the President (as submitted
to Congress under section 1105 of title 31, United
States Code) for a fiscal year after fiscal year 2008,
regardless of whether the acquisition of the automated
information system to be acquired under the program
was initiated before, on, or after January 1, 2008.
(2) REPORT
REQUIREMENT.—Subsection (b)
shall take effect on the date of the enactment of this
Act.
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SEC. 805. ADJUSTMENT OF ORIGINAL BASELINE ESTIMATE
FOR MAJOR DEFENSE ACQUISITION PRO-
GRAMS EXPERIENCING COST GROWTH RE-
SULTING FROM DAMAGE CAUSED BY HURRI-
CANES KATRINA, RITA, AND WILMA.
(a) 
ADJUSTMENT
AUTHORIZED.—Notwithstanding
any limitations under section 2435(d) of title 10, United
States Code, the Secretary of Defense may adjust the origi-
nal Baseline Estimate for a major defense acquisition pro-
gram that is carried out primarily in the Hurricane
Katrina disaster area, Hurricane Rita disaster area, or
Hurricane Wilma disaster area for the sole purpose of ad-
dressing cost growth in such program that, as determined
by the Secretary, is directly attributable to damage caused
by Hurricane Katrina, Hurricane Rita, or Hurricane
Wilma.
(b) NOTICE TO CONGRESS.—The Secretary shall iden-
tify any adjustment to the original Baseline Estimate of
a major defense acquisition program under subsection (a),
and provide an explanation of the basis for such adjust-
ment, in the first Selected Acquisition Report that is sub-
mitted under section 2432 of title 10, United States Code,
after such adjustment is made.
(c) SUNSET.—The authority to adjust an original
Baseline Estimate for a major defense acquisition program
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under subsection (a) shall expire on the date that is one
year after the date of the enactment of this Act.
(d) DEFINITIONS.—In this section:
(1) The term ‘‘major defense acquisition pro-
gram’’ has the meaning given that term in section
2430 of title 10, United States Code.
(2) The term ‘‘original Baseline Estimate’’, in
the case of a major defense acquisition program,
means the first baseline description for the program
established under section 2435(a) of title 10, United
States Code.
(3) The terms ‘‘Hurricane Katrina disaster
area’’, ‘‘Hurricane Rita disaster area’’, and ‘‘Hurri-
cane Wilma disaster area’’ have the meaning given
such terms in section 1400M of the Internal Revenue
Code of 1986.
SEC. 806. INTERNAL CONTROLS FOR PROCUREMENTS ON
BEHALF OF THE DEPARTMENT OF DEFENSE
BY CERTAIN NON-DEFENSE AGENCIES.
(a) INSPECTOR GENERAL REVIEWS AND DETERMINA-
TIONS.—
(1) IN GENERAL.—For each covered non-defense
agency, the Inspector General of the Department of
Defense and the Inspector General of such non-defense
agency shall, not later than March 15, 2007, jointly—
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(A) review—
(i) the procurement policies, proce-
dures, and internal controls of such non-de-
fense agency that are applicable to the pro-
curement of property and services on behalf
of the Department by such non-defense
agency; and
(ii) the administration of those poli-
cies, procedures, and internal controls; and
(B) determine in writing whether—
(i) such non-defense agency is compli-
ant with defense procurement requirements;
(ii) such non-defense agency is not
compliant with defense procurement re-
quirements, but has a program or initiative
to significantly improve compliance with
defense procurement requirements;
(iii) neither of the conclusions stated
in clauses (i) and (ii) is correct in the case
of such non-defense agency; or
(iv) such non-defense agency is not
compliant with defense procurement re-
quirements to such an extent that the inter-
ests of the Department of Defense are at risk
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in procurements conducted by such non-de-
fense agency.
(2) ACTIONS FOLLOWING CERTAIN DETERMINA-
TIONS.—If the Inspectors General determine under
paragraph (1) that the conclusion stated in clause
(ii), (iii), or (iv) of subparagraph (B) of that para-
graph is correct in the case of a covered non-defense
agency, such Inspectors General shall, not later than
June 15, 2008, jointly—
(A) conduct a second review, as described in
subparagraph (A) of that paragraph, regarding
such non-defense agency’s procurement of prop-
erty or services on behalf of the Department of
Defense in fiscal year 2007; and
(B) determine in writing whether such non-
defense agency is or is not compliant with de-
fense procurement requirements.
(b) COMPLIANCE WITH DEFENSE PROCUREMENT RE-
QUIREMENTS.—For the purposes of this section, a covered
non-defense agency is compliant with defense procurement
requirements if such non-defense agency’s procurement poli-
cies, procedures, and internal controls applicable to the pro-
curement of products and services on behalf of the Depart-
ment of Defense, and the manner in which they are admin-
istered, are adequate to ensure such non-defense agency’s
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compliance with the requirements of laws and regulations
that apply to procurements of property and services made
directly by the Department of Defense.
(c) MEMORANDA OF UNDERSTANDING BETWEEN IN-
SPECTORS GENERAL.—
(1) IN GENERAL.—Not later than 60 days after
the date of the enactment of this Act, the Inspector
General of the Department of Defense and the Inspec-
tor General of each covered non-defense agency shall
enter into a memorandum of understanding with each
other to carry out the reviews and make the deter-
minations required by this section.
(2) SCOPE OF MEMORANDA.—The Inspector Gen-
eral of the Department of Defense and the Inspector
General of a covered non-defense agency may by mu-
tual agreement conduct separate reviews of the pro-
curement of property and services on behalf of the De-
partment of Defense that are conducted by separate
business units, or under separate governmentwide ac-
quisition contracts, of such non-defense agency. In
any case where such separate reviews are conducted,
the Inspectors General shall make separate determina-
tions under paragraph (1) or (2) of subsection (a), as
applicable, with respect to each such separate review.
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(d) LIMITATIONS ON PROCUREMENTS ON BEHALF OF
DEPARTMENT OF DEFENSE.—
(1) LIMITATION DURING REVIEW PERIOD.—After
March 15, 2007, and before June 16, 2008, no official
of the Department of Defense may, except as provided
in subsection (e) or (f), order, purchase, or otherwise
procure property or services in an amount in excess
of $100,000 through a covered non-defense agency for
which a determination described in clause (iii) or (iv)
of paragraph (1)(B) of subsection (a) has been made
under subsection (a).
(2) LIMITATION AFTER REVIEW PERIOD.—After
June 15, 2008, no official of the Department of De-
fense may, except as provided in subsection (e) or (f),
order, purchase, or otherwise procure property or
services in an amount in excess of $100,000 through
a covered non-defense agency that, having been subject
to review under this section, has not been determined
under this section as being compliant with defense
procurement requirements.
(3) LIMITATION FOLLOWING FAILURE TO REACH
MOU.—Commencing on the date that is 60 days after
the date of the enactment of this Act, if a memo-
randum of understanding between the Inspector Gen-
eral of the Department of Defense and the Inspector
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General of a covered non-defense agency cannot be at-
tained causing the review required by this section to
not be performed, no official of the Department of De-
fense, except as provided in subsection (e) or (f), may
order, purchase or otherwise procure property or serv-
ices in an amount in excess of $100,000 through such
non-defense agency.
(e) EXCEPTION FROM APPLICABILITY
OF LIMITA-
TIONS.—
(1) EXCEPTION.—No limitation applies under
subsection (d) with respect to the procurement of
property and services on behalf of the Department of
Defense by a covered non-defense agency during any
period that there is in effect a determination of the
Under Secretary of Defense for Acquisition, Tech-
nology, and Logistics, made in writing, that it is nec-
essary in the interest of the Department of Defense to
continue to procure property and services through
such non-defense agency.
(2) 
APPLICABILITY
OF
DETERMINATION.—A
written determination with respect to a covered non-
defense agency under paragraph (1) is in effect for the
period, not in excess of one year, that the Under Sec-
retary shall specify in the written determination. The
Under Secretary may extend from time to time, for
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up to one year at a time, the period for which the
written determination remains in effect.
(f) TERMINATION
OF
APPLICABILITY
OF
LIMITA-
TIONS.—Subsection (d) shall cease to apply to a covered
non-defense agency on the date on which the Inspector Gen-
eral of the Department of Defense and the Inspector General
of such non-defense agency jointly—
(1) determine that such non-defense agency is
compliant with defense procurement requirements;
and
(2) notify the Secretary of Defense of that deter-
mination.
(g) IDENTIFICATION OF PROCUREMENTS MADE DUR-
ING A PARTICULAR FISCAL YEAR.—For the purposes of sub-
section (a), a procurement shall be treated as being made
during a particular fiscal year to the extent that funds are
obligated by the Department of Defense for that procure-
ment in that fiscal year.
(h) RESOLUTION OF DISAGREEMENTS.—If the Inspec-
tor General of the Department of Defense and the Inspector
General of a covered non-defense agency are unable to agree
on a joint determination under subsection (a) or subsection
(f), a determination by the Inspector General of the Depart-
ment of Defense under such subsection shall be conclusive
for the purposes of this section.
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(i) DEFINITIONS.—In this section:
(1) The term ‘‘covered non-defense agency’’
means each of the following:
(A) The Department of Veterans Affairs.
(B) The National Institutes of Health.
(2) The term ‘‘governmentwide acquisition con-
tract’’, with respect to a covered non-defense agency,
means a task or delivery order contract that—
(A) is entered into by the non-defense agen-
cy; and
(B) 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.
SEC. 807. REGULATIONS ON USE OF FIXED-PRICE CON-
TRACTS IN DEVELOPMENT PROGRAMS.
(a) IN GENERAL.—Not later than 120 days after the
date of the enactment of this Act, the Secretary of Defense
shall modify the regulations of the Department of Defense
on the use of fixed-price type contracts in development pro-
grams.
(b) ELEMENTS.—As modified under subsection (a), the
regulations described in that subsection shall—
(1) establish a preference for the use of fixed-
price type contracts in development programs to the
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maximum extent practicable in light of the level of
program risk; and
(2) require the use of fixed-price type contracts
in each contract for system development and dem-
onstration, or operational system development, unless
the use of a different contract type is specifically au-
thorized pursuant to subsection (c).
(c) AUTHORIZATION
OF USE
OF DIFFERENT CON-
TRACT TYPE.—
(1) IN GENERAL.—As modified under subsection
(a), the regulations described in that subsection shall
provide that the Secretary of Defense may authorize
the use of a difference contract type under subsection
(b)(2) with respect to a program upon a written de-
termination by the Secretary that—
(A) the program is so complex and tech-
nically challenging that it would not be prac-
ticable to reduce program risk to a level that
would permit the use of a fixed-price type con-
tract; and
(B) the complexity and technical challenge
of the program is not the result of a failure to
meet the certification requirements established in
section 2366a of title 10, United States Code.
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(2) SUBMITTAL
TO
CONGRESSIONAL
DEFENSE
COMMITTEES.—The regulations shall provide that a
copy of any determination on a program under para-
graph (1), together with an explanation of the basis
for such determination, shall be submitted to the con-
gressional defense committees with the first Selected
Acquisition Report submitted under section 2432 of
title 10, United States Code, after such determination
is made.
(3) DELEGATION OF AUTHORITY.—The regula-
tions shall provide that the authority to make a deter-
mination under paragraph (1) may not be delegated
below the level of the Under Secretary of Defense for
Acquisition, Technology, and Logistics.
(d) REPEAL OF SUPERSEDED REQUIREMENTS.—Sec-
tion 807 of the National Defense Authorization Act for Fis-
cal Year 1989 (10 U.S.C. 2304 note) is repealed.
(e) EFFECTIVE DATE OF REGULATIONS.—
(1) IN GENERAL.—The modified regulations re-
quired under this section shall apply to any contract
entered into after the date that is 120 days after the
date of the enactment of this Act.
(2) SYSTEM DEVELOPMENT AND DEMONSTRATION
OR OPERATIONAL SYSTEM DEVELOPMENT.—The modi-
fication required by subsection (b)(2) in the regula-
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tions shall apply with respect to programs that enter
into system development and demonstration, or oper-
ational system development, after the date that is 120
days after the date of the enactment of this Act.
SEC. 808. AVAILABILITY OF FUNDS FOR PERFORMANCE-
BASED LOGISTICS CONTRACTS FOR WEAPON
SYSTEMS LOGISTICS SUPPORT.
(a) AVAILABILITY OF OPERATION AND MAINTENANCE
FUNDS.—
(1) IN GENERAL.—Amounts available to the De-
partment of Defense for operation and maintenance—
(A) are available for performance-based lo-
gistics contracts for weapon systems; and
(B) subject to paragraph (2), may be used
in accordance with the terms of such contracts to
implement engineering changes that result in a
reduction of the operation and maintenance costs
to the Government of such systems.
(2) LIMITATION.—Funds may not be used for a
performance-based logistics contract to implement en-
gineering changes the total cost of which is expected
to exceed $20,000,000.
(b) NOTICE
TO CONGRESS
ON ENTRY INTO CON-
TRACTS.—
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(1) IN GENERAL.—Not later than 30 days before
entering into a performance-based logistics contract
under this section, the Secretary of a military depart-
ment shall submit to Congress a notice of intent to
enter into such contract.
(2) ELEMENTS.—The notice on a performance-
based logistics contract under paragraph (1) shall in-
clude the following:
(A) A statement that the military depart-
ment concerned—
(i) has performed a business case anal-
ysis for such contract;
(ii) has determined, based on such
analysis, that there is a reasonable expecta-
tion that such contract will result in an
overall reduction of operation and mainte-
nance costs with respect to a weapon sys-
tem; and
(iii) has specific plans in place to—
(I) update such analysis at ap-
propriate decision points when suffi-
cient cost and performance data have
been collected to validate the assump-
tions used in developing such analysis;
and
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(II) periodically review and vali-
date the propriety and integrity of
program performance measures, and
verify the reliability of contractor cost
and performance data, with respect to
such contract.
(B) An estimate of the projected cost and
savings from such contract, together with an ex-
planation of the basis for such estimates.
(c) PERFORMANCE-BASED LOGISTICS CONTRACT DE-
FINED.—In this section, the term ‘‘performance-based logis-
tics contract’’ means a contract for the acquisition of logis-
tics support (whether at the system, subsystem, or major
assembly level) for a weapon system that combines logistics
support in an integrated, affordable, performance package
designed to optimize system readiness and meet perform-
ance goals for the weapon system through long-term support
arrangements with clear lines of authority and responsi-
bility for the provision of such support.
(d) REPORT.—
(1) IN GENERAL.—Not later than March 1, 2012,
the Secretary of Defense shall submit to the congres-
sional defense committees a report on the status of all
performance-bases logistics contracts entered into pur-
suant to this section.
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(2) ELEMENTS.—The report under paragraph
(1) shall include, for each contract covered by such re-
port, a comparison of the projected cost and savings
of such contract (as estimated in the notice to Con-
gress under subsection (b)(2)(B)) with the actual cost
and savings of such contract (as determined in ac-
cordance with the plan for such contract under sub-
section (b)(2)(A)(iii)).
(e) SUNSET.—
(1) IN GENERAL.—The authority to enter con-
tracts under this section shall terminate on September
30, 2012.
(2) EFFECT ON EXISTING CONTRACTS.—The ter-
mination under paragraph (1) of the authority to
enter contracts under this section shall not affect the
use of funds for purposes authorized by subsection (a)
under contracts entered on or before the date specified
in that paragraph.
SEC. 809. QUALITY CONTROL IN PROCUREMENT OF SHIP
CRITICAL SAFETY ITEMS AND RELATED SERV-
ICES.
(a) QUALITY CONTROL POLICY.—The Secretary of De-
fense shall prescribe in regulations a quality control policy
for the procurement of the following:
(1) Ship critical safety items.
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(2) Modifications, repair, and overhaul of ship
critical safety items.
(b) ELEMENTS.—The policy required under subsection
(a) shall include requirements as follows:
(1) That the head of the design control activity
for ship critical safety items establish processes to
identify and manage the procurement, modification,
repair, and overhaul of such items.
(2) That the head of the contracting activity for
a ship critical safety item enter into a contract for
the procurement, modification, repair, or overhaul of
such item only with a source on a qualified manufac-
turers list or a source approved by the design control
activity in accordance with section 2319 of title 10,
United States Code (as amended by subsection (d)).
(3) That the ship critical safety items delivered,
and the services performed with respect to such items,
meet all technical and quality requirements specified
by the design control activity.
(c) DEFINITIONS.—In this section, the terms ‘‘ship
critical safety item’’ and ‘‘design control activity’’ have the
meanings given such terms in subsection (g) of 2319 of title
10, United States Code (as so amended).
(d) CONFORMING AMENDMENTS.—Section 2319 of title
10, United States Code, is amended—
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(1) in subsection (c)(3), by inserting ‘‘or ship
critical safety item’’ after ‘‘aviation critical safety
item’’; and
(2) in subsection (g)—
(A) by redesignating paragraph (2) as
paragraph (3);
(B) by inserting after paragraph (1) the fol-
lowing new paragraph (2):
‘‘(2) The term ‘ship critical safety item’ means
any ship part, assembly, or support equipment con-
taining a characteristic the failure, malfunction, or
absence of which could cause a catastrophic or critical
failure resulting in loss of or serious damage to the
ship or unacceptable risk of personal injury or loss of
life.’’; and
(C) in paragraph (3), as so redesignated—
(i) by inserting ‘‘or ship critical safety
item’’ after ‘‘aviation critical safety item’’;
(ii) by inserting ‘‘, or the seaworthiness
of a ship or ship equipment,’’ after ‘‘equip-
ment’’; and
(iii) by striking ‘‘the item’’ and insert-
ing ‘‘such item’’.
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SEC. 810. THREE-YEAR EXTENSION OF REQUIREMENT FOR
REPORTS ON COMMERCIAL PRICE TREND
ANALYSES OF THE DEPARTMENT OF DE-
FENSE.
Section 803(c)(4) of the Strom Thurmond National
Defense Authorization Act for Fiscal Year 1999 (10 U.S.C.
2306a note) is amended by striking ‘‘2006’’ and inserting
‘‘2009’’.
SEC. 811. PILOT PROGRAM ON TIME-CERTAIN DEVELOP-
MENT IN ACQUISITION OF MAJOR WEAPON
SYSTEMS.
(a) PILOT PROGRAM AUTHORIZED.—The Secretary of
Defense may carry out a pilot program on the use of time-
certain development in the acquisition of major weapon sys-
tems.
(b) PURPOSE OF PILOT PROGRAM.—The purpose of the
pilot program authorized by subsection (a) is to assess the
feasibility and advisability of utilizing time-certain devel-
opment in the acquisition of major weapon systems in order
to deliver new capabilities to the warfighter more rapidly
through disciplined decision-making, emphasis on techno-
logical maturity, and appropriate trade-offs between system
performance and schedule.
(c) INCLUSION OF SYSTEMS IN PILOT PROGRAM.—
(1) IN GENERAL.—The decision whether to in-
clude a major weapon system in the pilot program
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shall be made by the Milestone Decision Authority for
the acquisition program for the system.
(2) CRITERIA.—A major weapon system may be
included in the pilot program only if the Milestone
Decision Authority determines, in consultation with
the service acquisition executive for the military de-
partment carrying out the acquisition program for
the system and one or more combatant commanders
responsible for fielding the system, that—
(A) the certification requirements of section
2366a of title 10, United States Code, have been
met, and no waivers have been granted from
such requirements;
(B) a preliminary design has been com-
pleted after appropriate requirements analysis
using systems engineering, and the system, as so
designed, will meet battlefield needs identified by
the relevant combatant commanders;
(C) all critical technologies needed to meet
system requirements have been demonstrated in
an operational environment;
(D) an independent cost estimate has been
conducted and used as the basis for funding re-
quirements for the acquisition program for the
system;
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(E) the budget of the military department
responsible for carrying out the acquisition pro-
gram for the system provides the funding nec-
essary to execute the product development and
production plan consistent with the requirements
identified pursuant to subparagraph (D);
(F) an appropriately-qualified program
manager has entered into a performance agree-
ment with the Milestone Decision Authority that
establishes expected parameters for the cost,
schedule, and performance of the acquisition pro-
gram for the system, consistent with a business
case for such acquisition program;
(G) the service acquisition executive and the
program manager have agreed that the program
manager will continue in such position until the
delivery of the initial operational capability
under the acquisition program for the system;
(H) the service acquisition executive, the
relevant combatant commanders, and the pro-
gram manager have agreed that no additional
requirements will be added during the develop-
ment phase of the acquisition program for the
system; and
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(I) a planned initial operational capability
will be delivered to the relevant combatant com-
manders no more than 6 years after the date of
the milestone B approval for the system.
(3) TIMING OF DECISION.—The decision whether
to include a major weapon system in the pilot pro-
gram shall be made at the time of milestone approval
for the acquisition program for the system.
(d) LIMITATION ON NUMBER OF SYSTEM IN PILOT
PROGRAM.—The number of major weapon systems included
in the pilot program at any time may not exceed 12 major
weapon systems.
(e) SPECIAL FUNDING AUTHORITY.—
(1) AUTHORITY FOR RESERVE ACCOUNT.—Not-
withstanding any other provision of law, the Sec-
retary of Defense may establish a special reserve ac-
count utilizing funds made available for the major
weapon systems included in the pilot program.
(2) ELEMENTS.—The special reserve account
may include—
(A) funds made available for any major
weapon system included in the pilot program to
cover termination liability;
(B) funds made available for any major
weapon system included in the pilot program for
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award fees that may be earned by contractors;
and
(C) funds appropriated to the special re-
serve account.
(3) AVAILABILITY OF FUNDS.—Funds in the spe-
cial reserve account may be used, in accordance with
guidance issued by the Secretary for purposes of this
section, for the following purposes:
(A) To cover termination liability for any
major weapon system included in the pilot pro-
gram.
(B) To pay award fees that are earned by
any contractor for a major weapon system in-
cluded in the pilot program.
(C) To address unforeseen contingencies that
could prevent a major weapon system included
in the pilot program from meeting critical sched-
ule or performance requirements.
(4) REPORTS ON USE OF FUNDS.—Not later than
30 days after the use of funds in the special reserve
account for the purpose specified in paragraph (3)(C),
the Secretary shall submit to the congressional defense
committees a report on report the use of funds in the
account for such purpose. The report shall set forth
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the purposes for which the funds were used and the
reasons for the use of the funds for such purposes.
(f) ADMINISTRATION OF PILOT PROGRAM.—The Sec-
retary of Defense shall prescribe policies and procedures on
the administration of the pilot program. Such policies and
procedures shall—
(1) provide for the use of program status reports
based on earned value data to track progress on a
major weapon system under the pilot program
against baseline estimates applicable to such system
at each systems engineering technical review point;
and
(2) grant authority to the program manager for
the acquisition program for a major weapon system
to make key program decisions and trade-offs, subject
to management reviews only if cost or schedule devi-
ations exceed 10 percent baselines for such acquisition
program.
(g) EXPIRATION OF AUTHORITY TO INCLUDE ADDI-
TIONAL SYSTEMS IN PILOT PROGRAM.—
(1) EXPIRATION.—A major weapon system may
not be included in the pilot program after September
30, 2012.
(2) RETENTION OF SYSTEMS.—A major weapon
system included in the pilot program before the date
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specified in paragraph (1) in accordance with the re-
quirements of this section may remain in the pilot
program after that date.
(h) ANNUAL REPORT.—
(1) IN GENERAL.—Not later than one year after
including the first major weapon system in the pilot
program, and annually thereafter, the Secretary shall
submit to the congressional defense committees a re-
port on the pilot program, and the major weapon sys-
tems included in the pilot program, during the one-
year period ending on the date of such report.
(2) ELEMENTS.—Each report under this sub-
section shall include—
(A) a description of progress under the pilot
program, and on each major weapon system in-
cluded in the pilot program, during the period
covered by such report; and
(B) such other matters as the Secretary con-
siders appropriate.
(i) MAJOR WEAPON SYSTEM DEFINED.—In this sec-
tion, the term ‘‘major weapon system’’ means a weapon sys-
tem that is treatable as a major system under section
2302(5) of title 10, United States Code.
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SEC. 812. GOVERNMENT PERFORMANCE OF CRITICAL AC-
QUISITION FUNCTIONS.
(a) GOVERNMENT PERFORMANCE OF FUNCTIONS.—
(1) IN
GENERAL.—Section 2383 of title 10,
United States Code is amended—
(A) by redesignating subsection (b) as sub-
section (c); and
(B) by inserting after subsection (a) the fol-
lowing new subsection (b):
‘‘(b) GOVERNMENT PERFORMANCE OF CRITICAL AC-
QUISITION FUNCTIONS.—The head of an agency shall ensure
that, at a minimum, for each major defense acquisition pro-
gram and each major automated information system pro-
gram, each of the following positions is performed by a
properly qualified full-time Federal military or civilian
employee:
‘‘(1) Program manager.
‘‘(2) Deputy program manager.
‘‘(3) Chief engineer.
‘‘(4) Systems engineer.
‘‘(5) Cost estimator.’’.
(2) DEFINITIONAL MATTERS.—Subsection (c) of
such section, as redesignated by paragraph (1)(A) of
this subsection, is further amended by adding at the
end the following new paragraphs:
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‘‘(5) The term ‘major defense acquisition pro-
gram’ has the meaning given such term in section
2430(a) of this title.
‘‘(6) The term ‘major automated information
system program’ has the meaning given such term in
section 2445a(a) of this title.’’.
(b) EFFECTIVE DATE AND PHASE-IN.—
(1) EFFECTIVE DATE.—The amendments made
by subsection (a) shall take effect on the date that is
one year after the date of enactment of this Act.
(2) TEMPORARY WAVER.—During the two-year
period beginning on the effective date specified in
paragraph (1), the head of an agency may waive the
requirement in subsection (b) of section 2383 of title
10, United States Code, as amended by subsection (a)
of this section, with regard to a specific function on
a particular program upon a written determination
by the head of the agency that a properly qualified
full-time Federal military or civilian employee can-
not reasonably be made available to perform such
function.
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Subtitle B—Defense Industrial Base
Matters
SEC. 821. REMOVAL OF HAND AND MEASURING TOOLS
FROM CERTAIN REQUIREMENTS.
(a) IN GENERAL.—Subsection (b) of section 2533a of
title 10, United States Code, is amended by striking para-
graph (3).
(b) CONFORMING AMENDMENT.—Subsection (d) of
such section is amended by striking ‘‘(b)(1)(A), (b)(2), or
(b)(3)’’ each place it appears and inserting ‘‘(b)(1)(A) or
(b)(2)’’.
SEC. 822. APPLICABILITY OF CERTAIN REQUIREMENTS RE-
GARDING SPECIALTY METALS.
(a) EXEMPTION FOR CERTAIN COMMERCIAL ITEMS.—
Subsection (i) of section 2533a of title 10, United States
Code, is amended—
(1) by inserting ‘‘, DUAL-USE ITEMS, AND ELEC-
TRONIC COMPONENTS’’ after ‘‘COMMERCIAL ITEMS’’;
(2) by inserting ‘‘(1)’’ before ‘‘this section’’;
(3) in paragraph (1), as so designated, by insert-
ing ‘‘described in subsection (b)(1)’’ after ‘‘commercial
items’’; and
(4) by adding at the end the following new para-
graphs:
‘‘(2) This section is not applicable to—
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‘‘(A) a contract or subcontract for the procure-
ment of a commercial item containing specialty met-
als described in subsections (b)(2) and (b)(3); or
‘‘(B) specialty metals that are incorporated into
an electronic component, where the value of the spe-
cialty metal used in the component is de minimis in
relation to the value of the electronic component.
‘‘(3) For purposes of paragraph (2)(A), a commercial
item does not include—
‘‘(A) any item that contains noncommercial
modifications that cost or are expected to cost, in the
aggregate, more than 5 percent of the total price of
such item;
‘‘(B) any item that would not be considered to
be a commercial item, but for sales to government en-
tities or inclusion in items that are sold to govern-
ment entities;
‘‘(C) forgings or castings for military unique end
items;
‘‘(D) fasteners other than commercial off-the-shelf
items (as defined in section 35(c) of the Office of Fed-
eral Procurement Policy Act (41 U.S.C. 431(c)); or
‘‘(E) specialty metals.’’.
(b) EXCEPTION FOR CERTAIN DUAL-USE ITEMS TO
FACILITATE CIVIL-MILITARY INTEGRATION.—Such section
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is further amended by adding at the end the following new
subsection:
‘‘(k) EXCEPTION FOR CERTAIN DUAL-USE ITEMS TO
FACILITATE
CIVIL-MILITARY
INTEGRATION.—Subsection
(a) does not apply to the procurement of an item from a
contractor or a first-tier subcontractor if the Secretary of
Defense or the Secretary of a military department deter-
mines that—
‘‘(1) the item is or will be produced using the
same production facilities, a common supply chain,
and the same or similar production processes that are
used for the production of similar items delivered to
non-defense customers; and
‘‘(2) the contractor or subcontractor has made a
contractual commitment to purchase a quality, grade,
and amount of domestically-melted specialty metals
for use by the purchaser during the period of contract
performance in the production of the item and other
similar items delivered to non-defense customers that
is not less that the greater of—
‘‘(A) the amount of specialty metals that is
purchased by the contractor for use in the item
delivered to the Department of Defense; or
‘‘(B) 40 percent of the amount of specialty
metals purchased by the contractor or subcon-
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tractor for use during such period in the produc-
tion of the item and similar items delivered to
non-defense contractors.’’.
(c) DE MINIMIS STANDARD
FOR SPECIALTY MET-
ALS.—Such section is further amended by adding at the
end the following new subsection:
‘‘(l) MINIMUM THRESHOLD
FOR SPECIALTY MET-
ALS.—Notwithstanding the requirements of subsection (a),
the Secretary of Defense or the Secretary of a military de-
partment may accept delivery of an item containing spe-
cialty metals that were not grown, reprocessed, reused, or
produced in the United States if the total amount of non-
compliant specialty metals in the item does not exceed 2
percent of the total amount of specialty metals in the item.’’.
(d) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
subsections (a) and (c) shall take effect on the date of
the enactment of this Act, and shall apply with re-
spect to items accepted for delivery on or after that
date.
(2) CIVIL-MILITARY INTEGRATION.—The amend-
ment made by subsection (b) shall take effect on the
date of the enactment of this Act, and shall apply to
contracts entered into on or after that date.
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SEC. 823. WAIVER AUTHORITY FOR DOMESTIC SOURCE OR
CONTENT REQUIREMENTS.
(a) AUTHORITY.—Subchapter V of chapter 148 of title
10, United States Code, is amended by adding at the end
the following new section:
‘‘§ 2539c. Waiver of domestic source or content re-
quirements
‘‘(a) AUTHORITY.—Except as provided in subsection
(f), the Secretary of Defense may waive the application of
any domestic source requirement or domestic content re-
quirement referred to in subsection (b) and thereby author-
ize the procurement of items that are grown, reprocessed,
reused, produced, or manufactured—
‘‘(1) in a foreign country that has a Declaration
of Principles with the United States;
‘‘(2) in a foreign country that has a Declaration
of Principles with the United States substantially
from components and materials grown, reprocessed,
reused, produced, or manufactured in the United
States or any foreign country that has a Declaration
of Principles with the United States; or
‘‘(3) in the United States substantially from
components and materials grown, reprocessed, reused,
produced, or manufactured in the United States or
any foreign country that has a Declaration of Prin-
ciples with the United States.
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‘‘(b) COVERED REQUIREMENTS.—For purposes of this
section:
‘‘(1) A domestic source requirement is any re-
quirement under law that the Department of Defense
satisfy its requirements for an item by procuring an
item that is grown, reprocessed, reused, produced, or
manufactured in the United States or by a manufac-
turer that is a part of the national technology and in-
dustrial base (as defined in section 2500(1) of this
title).
‘‘(2) A domestic content requirement is any re-
quirement under law that the Department of Defense
satisfy its requirements for an item by procuring an
item produced or manufactured partly or wholly from
components and materials grown, reprocessed, reused,
produced, or manufactured in the United States.
‘‘(c) APPLICABILITY.—The authority of the Secretary
to waive the application of a domestic source or content
requirements under subsection (a) applies to the procure-
ment of items for which the Secretary of Defense determines
that—
‘‘(1) application of the requirement would im-
pede the reciprocal procurement of defense items
under a Declaration of Principles with the United
States; and
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‘‘(2) such country does not discriminate against
defense items produced in the United States to a
greater degree than the United States discriminates
against defense items produced in that country.
‘‘(d) LIMITATION ON DELEGATION.—The authority of
the Secretary to waive the application of domestic source
or content requirements under subsection (a) may not be
delegated to any officer or employee other than the Under
Secretary of Defense for Acquisition, Technology, and Lo-
gistics.
‘‘(e) CONSULTATIONS.—The Secretary may grant a
waiver of the application of a domestic source or content
requirement under subsection (a) only after consultation
with the United States Trade Representative, the Secretary
of Commerce, and the Secretary of State.
‘‘(f) LAWS NOT WAIVABLE.—The Secretary of Defense
may not exercise the authority under subsection (a) to
waive any domestic source or content requirement con-
tained in any of the following laws:
‘‘(1) The Small Business Act (15 U.S.C. 631 et
seq.).
‘‘(2) The Javits-Wagner-O’Day Act (41 U.S.C.
46 et seq.).
‘‘(3) Sections 7309 and 7310 of this title.
‘‘(4) Section 2533a of this title.
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‘‘(g) RELATIONSHIP
TO OTHER WAIVER AUTHOR-
ITY.—The authority under subsection (a) to waive a domes-
tic source requirement or domestic content requirement is
in addition to any other authority to waive such require-
ment.
‘‘(h) CLARIFICATION
OF RELATIONSHIP WITH BUY
AMERICAN ACT.—Nothing in this section shall be construed
to alter in any way the applicability of the Buy American
Act (41 U.S.C. 10a), or the authority of the Secretary of
Defense to waive the requirements of such Act, with respect
to the procurement of any item to which such Act would
apply without regard to this section.
‘‘(i) CONSTRUCTION WITH RESPECT TO LATER EN-
ACTED LAWS.—This section may not be construed as being
inapplicable to a domestic source requirement or domestic
content requirement that is set forth in a law enacted after
the enactment of this section solely on the basis of the later
enactment.
‘‘(j) DECLARATION OF PRINCIPLES.—(1) In this sec-
tion, the term ‘Declaration of Principles’ means a written
understanding (including any Statement of Principles) be-
tween the Department of Defense and its counterpart in a
foreign country signifying a cooperative relationship be-
tween the Department and its counterpart to standardize
or make interoperable defense equipment used by the armed
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forces and the armed forces of the foreign country across
a broad spectrum of defense activities, including—
‘‘(A) harmonization of military requirements
and acquisition processes;
‘‘(B) security of supply;
‘‘(C) export procedures;
‘‘(D) security of information;
‘‘(E) ownership and corporate governance;
‘‘(F) research and development;
‘‘(G) flow of technical information; and
‘‘(H) defense trade.
‘‘(2) A Declaration of Principles is underpinned by a
memorandum of understanding or other agreement pro-
viding for the reciprocal procurement of defense items be-
tween the United States and the foreign country concerned
without unfair discrimination in accordance with section
2531 of this title.’’.
(b) CLERICAL AMENDMENT.—The table of sections at
the beginning of such subchapter is amended by inserting
after the item relating to section 2539b the following new
item:
‘‘2539c. Waiver of domestic source or content requirements.’’.
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SEC. 824. REPEAL OF REQUIREMENT FOR IDENTIFICATION
OF ESSENTIAL MILITARY ITEMS AND MILI-
TARY SYSTEM ESSENTIAL ITEM BREAKOUT
LIST.
Section 813 of the National Defense Authorization Act
for Fiscal Year 2004 (Public Law 108–136; 117 Stat. 1543)
is repealed.
SEC. 825. CONSISTENCY WITH UNITED STATES OBLIGA-
TIONS UNDER TRADE AGREEMENTS.
No provision of this Act or any amendment made by
this Act shall apply to a procurement by or for the Depart-
ment of Defense to the extent that the Secretary of Defense,
in consultation with the Secretary of Commerce, the United
States Trade Representative, and the Secretary of State, de-
termines that it is inconsistent with United States obliga-
tions under a trade agreement.
Subtitle C—Defense Contractor
Matters
SEC. 841. REQUIREMENTS FOR DEFENSE CONTRACTORS RE-
LATING TO CERTAIN FORMER DEPARTMENT
OF DEFENSE OFFICIALS.
(a) REQUIREMENTS.—
(1) IN
GENERAL.—Chapter 141 of title 10,
United States Code, is amended by adding at the end
the following new section:
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‘‘§ 2410p. 
Defense 
contractors: 
requirements 
con-
cerning former Department of Defense of-
ficials
‘‘(a) IN GENERAL.—Each contract for the procurement
of goods or services in excess of $10,000,000, other than a
contract for the procurement of commercial items, that is
entered into by the Department of Defense shall include a
provision under which the contractor agrees to submit to
the Secretary of Defense, not later than April 1 of each year
such contract is in effect, a written report setting forth the
information required by subsection (b).
‘‘(b) REPORT INFORMATION.—Except as provided in
subsection (c), a report by a contractor under subsection
(a) shall—
‘‘(1) list the name of each person who—
‘‘(A) is a former officer or employee of the
Department of Defense or a former or retired
member of the armed forces who served—
‘‘(i) in an Executive Schedule position
under subchapter II of chapter 53 of title 5;
‘‘(ii) in a position in the Senior Exec-
utive Service under subchapter VIII of
chapter 53 of title 5;
‘‘(iii) in a general or flag officer posi-
tion compensated at a rate of pay for grade
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0–7 or above under section 201 of title 37;
or
‘‘(iv) as a program manager, deputy
program manager, procuring contracting
officer, administrative contracting officer,
source selection authority, member of the
source selection evaluation board, or chief of
a financial or technical evaluation team for
a contract with a value in excess of
$10,000,000; and
‘‘(B) during the preceding calendar year
was provided compensation by the contractor, if
such compensation was first provided by the con-
tractor not more than two years after such offi-
cer, employee, or member left service in the De-
partment of Defense; and
‘‘(2) in the case of each person listed under para-
graph (1)—
‘‘(A) identify the agency in which such per-
son was employed or served on active duty dur-
ing the last two years of such person’s service
with the Department of Defense;
‘‘(B) state such person’s job title and iden-
tify each major defense system, if any, on which
such person performed any work with the De-
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partment of Defense during the last two years of
such person’s service with the Department; and
‘‘(C) state such person’s current job title
with the contractor and identify each major de-
fense system on which such person has performed
any work on behalf of the contractor.
‘‘(c) DUPLICATE INFORMATION NOT REQUIRED.—An
annual report submitted by a contractor pursuant to sub-
section (b) need not provide information with respect to any
former officer or employee of the Department of Defense or
former or retired member of the armed forces if such infor-
mation has already been provided in a previous annual re-
port filed by such contractor under this section.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions at the beginning of chapter 141 of such title is
amended by adding at the end the following new item:
‘‘2410p. Defense contractors: requirements concerning former Department of De-
fense officials.’’.
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall take effect on the date of the enactment
of this Act, and shall apply with respect to contracts entered
into on or after that date.
SEC. 842. LEAD SYSTEMS INTEGRATORS.
(a) LIMITATIONS ON CONTRACTORS ACTING AS LEAD
SYSTEMS INTEGRATORS.—
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(1) IN
GENERAL.—Chapter 141 of title 10,
United States Code, as amended by section 841(a)(1)
of this Act, is further amended by adding at the end
the following new section:
‘‘§ 2410q. Contracts: limitations on lead systems inte-
grators
‘‘(a) IN GENERAL.—Except as provided in subsection
(b), no contractor performing any inherently governmental
functions, or functions closely associated with inherently
governmental functions, relating to the acquisition, engi-
neering, structuring, planning, integration, management,
or control of a system of systems, regardless of whether or
not such contractor is expressly designated as a so-called
‘lead systems integrator’, may have any financial interest
in the development or construction of any individual system
or element of such system of systems.
‘‘(b) EXCEPTION.—A contractor described in sub-
section (a) may have a financial interest in the development
or construction of an individual system or element of a sys-
tem of systems if the Secretary of Defense certifies to the
congressional defense committees that—
‘‘(1) the contractor is the preferred best of indus-
try supplier of the system or element concerned; and
‘‘(2) the contractor was selected to develop or
construct the system or element concerned only after
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a formal competition for such system or element con-
ducted by the Department of Defense in which the
contractor participated only as a respondent to the
request for proposal (RFP) under the competition.
‘‘(c) CONSTRUCTION.—Nothing in this section shall be
construed to preclude a contractor described in subsection
(a) from performing work necessary to integrate two or
more individual systems or elements of a system of systems
with each other.
‘‘(d) DEFINITIONS.—In this section:
‘‘(1) The term ‘best of industry’, with respect to
the development or construction of a system or ele-
ment by a contractor, means that the contractor pro-
vides the Government any of the following in the de-
velopment or construction of the system or element for
the Government:
‘‘(A) Best overall value.
‘‘(B) Best technology.
‘‘(C) Best capability.
‘‘(D) Best availability.
‘‘(2) The term ‘functions closely associated with
inherently governmental functions’ has the meaning
given such term in section 2383(b)(3) of this title.
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‘‘(3) The term ‘inherently governmental func-
tions’ has the meaning given such term in section
2383(b)(2) of this title.
‘‘(4) The term ‘system of systems’ means a set of
interdependent systems, including one or more major
weapon systems, that are related to provide a given
capability and in which the loss of any one would
significantly degrade the performance or capabilities
of the set of systems as a whole.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions at the beginning of chapter 141 of such title, as
amended by section 841(a)(2) of this Act, is further
amended by adding at the end the following new item:
‘‘2410q. Contracts: limitations on lead systems integrators.’’.
(3) EFFECTIVE DATE.—The amendments made
by subsection (a) shall take effect on the date of the
enactment of this Act, and shall apply with respect to
contracts entered into on or after that date.
(b) UPDATE OF REGULATIONS ON LEAD SYSTEMS IN-
TEGRATORS.—Not later than December 31, 2006, the Sec-
retary of Defense shall update the acquisition regulations
of the Department of Defense in order to specify fully in
such regulations the matters with respect to lead systems
integrators set forth in section 805(b) of the National De-
fense Authorization for Fiscal Year 2006 (Public Law 109–
163; 119 Stat. 3372).
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(c) DEFINITION OF LEAD SYSTEMS INTEGRATOR.—
(1) DEFINITION
REQUIRED.—The Secretary of
Defense shall include in the report required by section
805 of the National Defense Authorization for Fiscal
Year 2006 a precise and comprehensive definition of
the term ‘‘lead systems integrator’’, as that term is
utilized in such section.
(2) MATTERS TO BE ADDRESSED.—In defining
the term ‘‘lead systems integrator’’ under paragraph
(1), the Secretary shall take into account the fol-
lowing:
(A) The importance of lead systems integra-
tors in the production, fielding, and sustainment
of complex systems, including their role in ad-
dressing increases in cost, the evolution of inter-
operability requirements, and the maintenance
and sustainment of critical capabilities.
(B) The unique engineering and integration
skills of lead systems integrators.
(C) The management and organizational
skills and capabilities of lead systems integra-
tors, including the capacity of lead systems inte-
grators to facilitate the participation of small
and disadvantaged businesses in the production,
fielding, and sustainment of complex systems.
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(d) CONTRACT TYPES AND FEE STRUCTURES.—The
Secretary of Defense shall include in the report required by
section 805 of the National Defense Authorization for Fiscal
Year 2006 a specification of various types of contracts and
fee structures, including award and incentive fees, that are
appropriate for use by lead systems integrators in the pro-
duction, fielding, and sustainment of complex systems.
SEC. 843. LINKING OF AWARD AND INCENTIVE FEES TO AC-
QUISITION OUTCOMES.
(a) GUIDANCE ON LINKING OF AWARD AND INCENTIVE
FEES TO ACQUISITION OUTCOMES.—Not later than 180
days after the date of the enactment of this Act, the Sec-
retary of Defense shall issue guidance, with detailed imple-
mentation instructions (including definitions), for the De-
partment of Defense on the appropriate use of award and
incentive fees in Department of Defense acquisition pro-
grams.
(b) ELEMENTS.—The guidance under subsection (a)
shall—
(1) ensure that all new contracts using award
fees link such fees to acquisition outcomes (which shall
be defined in terms of program cost, schedule, and
performance);
(2) provide guidance on the circumstances in
which contractor performance may be judged to be
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‘‘excellent’’ or ‘‘superior’’ and the percentage of the
available award fee which contractors should be paid
for such performance;
(3) establish standards for determining the per-
centage of the available award fee, if any, which con-
tractors should be paid for performance that is judged
to be ‘‘acceptable’’, ‘‘average’’, ‘‘expected’’, ‘‘good’’, or
‘‘satisfactory’’;
(4) ensure that no award fee may be paid for
contractor performance that is judged to be below-sat-
isfactory performance or performance that does not
meet the basic requirements of the contract;
(5) provide specific direction on the cir-
cumstances, if any, in which it may be appropriate
to roll over award fees that are not earned in one
award fee period to a subsequent award fee period or
periods;
(6) ensure that the Department of Defense—
(A) collects relevant data on award and in-
centive fees paid to contractors; and
(B) has mechanisms in place to evaluate
such data on a regular basis;
(7) include performance measures to evaluate the
effectiveness of award and incentive fees as a tool for
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improving contractor performance and achieving de-
sired program outcomes; and
(8) provide mechanisms for sharing proven in-
centive strategies for the acquisition of different types
of products and services among contracting and pro-
gram management officials.
(c) ASSESSMENT
OF
INDEPENDENT
EVALUATION
MECHANISMS.—
(1) IN GENERAL.—The Secretary of Defense shall
select a federally-funded research and development
center to assess various mechanisms that could be
used to ensure an independent evaluation of con-
tractor performance for the purpose of making deter-
minations applicable to the judging and payment of
award fees.
(2) 
CONSIDERATIONS.—The 
assessment 
con-
ducted pursuant to paragraph (1) shall include con-
sideration of the advantages and disadvantages of a
system in which award fees are—
(A) held in a separate fund or funds of the
Department of Defense; and
(B) allocated to a specific program only
upon a determination by an independent board,
charged with comparing contractor performance
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across programs, that such fees have been earned
by the contractor for such program.
(3) REPORT.—The Secretary shall submit to the
congressional defense committees a report on the as-
sessment conducted pursuant to paragraph (1) not
later than one year after the date of the enactment of
this Act.
SEC. 844. PROHIBITION ON EXCESSIVE PASS-THROUGH
CHARGES.
(a) REGULATIONS REQUIRED.—Not later than 120
days after the date of the enactment of this Act, the Sec-
retary of Defense shall prescribe regulations prohibiting ex-
cessive pass-through charges on contracts or subcontracts (or
task or delivery orders) that are entered into for or on behalf
of the Department of Defense that are in excess of the sim-
plified acquisition threshold, as specified in section 4(11)
of the Office of Federal Procurement Policy Act (41 U.S.C.
403(11)).
(b) SCOPE OF REGULATIONS.—The regulations pre-
scribed under this section shall not apply to any firm, fixed-
price contract or subcontract (or task or delivery order) that
is—
(1) awarded on the basis of adequate price com-
petition; or
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(2) for the acquisition of a commercial item, as
defined in section 4(12) of the Office of Federal Pro-
curement Policy Act (41 U.S.C. 403(12)).
(c) DEFINITIONS.—In this section:
(1) The term ‘‘excessive pass-through charge’’
means a charge by a covered contractor or subcon-
tractor for overhead or profit on work performed by
a covered lower-tier contractor (other than charges for
the direct costs of managing lower-tier contracts and
overhead and profit based on such direct costs).
(2) The term ‘‘covered contractor’’ means the fol-
lowing:
(A) A contractor that assigns work account-
ing for more than 90 percent of the cost of con-
tract performance (not including overhead or
profit) to subcontractors.
(B) In the case of a contract providing for
the development or production of more than one
weapon system, a contractor that assigns work
accounting for more than 90 percent of the cost
of contract performance (not including overhead
or profit) for any particular weapon system
under such contract to subcontractors.
(3) The term ‘‘covered lower-tier contractor’’
means the following:
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(A) With respect to a covered contractor de-
scribed by paragraph (2)(A) in a contract, any
lower-tier subcontractor under such contract.
(B) With respect to a covered contractor de-
scribed by paragraph (2)(B) in a contract, any
lower-tier subcontractor on a weapon system
under such contract for which such covered con-
tractor has assigned work accounting for more
than 90 percent of the cost of contract perform-
ance (not including overhead or profit).
(d) EFFECTIVE DATE.—The regulations prescribed
under this section shall apply to contracts awarded for or
on behalf of the Department of Defense on or after the date
that is 120 days after the date of the enactment of this Act.
SEC. 845. REPORT ON DEPARTMENT OF DEFENSE CON-
TRACTING 
WITH 
CONTRACTORS 
OR 
SUB-
CONTRACTORS 
EMPLOYING 
MEMBERS 
OF
THE SELECTIVE RESERVE.
(a) STUDY REQUIRED.—The Secretary of Defense shall
conduct a study on contracting with the Department of De-
fense by actual and potential contractors and subcontrac-
tors of the Department who employ members of the Selected
Reserve of the reserve components of the Armed Forces.
(b) ELEMENTS.—The study required by subsection (a)
shall address the following:
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(1) The extent to which actual and potential con-
tractors and subcontractors of the Department, in-
cluding small businesses, employ members of the Se-
lective Reserve.
(2) The extent to which actual and potential con-
tractors and subcontractors of the Department have
been or are likely to be disadvantaged in the perform-
ance of contracts with the Department, or in competi-
tion for new contracts with the Department, when
employees who are such members are mobilized as
part of a United States military operation overseas.
(3) Any actions that, in the view of the Sec-
retary, should be taken to address any such disadvan-
tage, including—
(A) the extension of additional time for the
performance of contracts to contractors and sub-
contractors of Department who employ members
of the Selected Reserve who are mobilized as part
of a United States military operation overseas;
and
(B) the provision of assistance in forming
contracting relationships with other entities to
ameliorate the temporary loss of qualified per-
sonnel.
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(c) REPORT.—Not later than one year after the date
of the enactment of this Act, the Secretary shall submit to
Congress a report on the study required by this section. The
report shall set forth the findings and recommendations of
the Secretary as a result of the study.
(d) REPEAL OF SUPERSEDED AUTHORITY.—Section
819 of the National Defense Authorization Act for Fiscal
Year 2006 (Public Law 109–163; 119 Stat. 3385; 10 U.S.C.
2305 note) is repealed.
Subtitle D—Program Manager
Matters
SEC. 861. PROGRAM MANAGER EMPOWERMENT AND AC-
COUNTABILITY.
(a) STRATEGY.—The Secretary of Defense shall develop
a comprehensive strategy for enhancing the role of Depart-
ment of Defense program managers in developing and car-
rying out defense acquisition programs.
(b) MATTERS TO BE ADDRESSED.—The strategy re-
quired by this section shall address, at a minimum—
(1) enhanced training and educational opportu-
nities for program managers;
(2) increased emphasis on the mentoring of cur-
rent and future program managers by experienced
senior executives and program managers within the
Department;
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(3) improved career paths and career opportuni-
ties for program managers;
(4) additional incentives for the recruitment and
retention of highly qualified individuals to serve as
program managers;
(5) improved resources and support (including
systems engineering expertise, cost estimating exper-
tise, and software development expertise) for program
managers;
(6) improved means of collecting and dissemi-
nating best practices and lessons learned to enhance
program management across the Department;
(7) common templates and tools to support im-
proved data gathering and analysis for program
management and oversight purposes;
(8) increased accountability of program man-
agers for the results of defense acquisition programs;
and
(9) 
enhanced 
monetary 
and 
nonmonetary
awards for successful accomplishment of program ob-
jectives by program managers.
(c) REPORT.—Not later than 180 days after the date
of the enactment of this Act, the Secretary shall submit to
the congressional defense committees a report on the strat-
egy developed pursuant to this section.
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SEC. 862. TENURE AND ACCOUNTABILITY OF PROGRAM
MANAGERS FOR PROGRAM DEVELOPMENT
PERIODS.
(a) REVISED GUIDANCE REQUIRED.—Not later than
180 days after the date of the enactment of this Act, the
Secretary of Defense shall revise Department of Defense
guidance for defense acquisition programs to address the
tenure and accountability of program managers for the pro-
gram development period of defense acquisition programs.
(b) PROGRAM DEVELOPMENT PERIOD.—For the pur-
pose of this section, the term ‘‘program development period’’
refers to the period before a decision on Milestone B ap-
proval (or Key Decision Point B approval in the case of
a space program).
(c) RESPONSIBILITIES.—The revised guidance re-
quired by subsection (a) shall provide that the program
manager for the program development period of a defense
acquisition program is responsible for—
(1) bringing to maturity the technologies and
manufacturing processes that will be needed to carry
out such program;
(2) ensuring continuing focus during program
development on meeting stated mission requirements
and other requirements of the Department of Defense;
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(3) making trade-offs between program cost,
schedule and performance for the life-cycle of such
program;
(4) developing a business case for such program;
and
(5) ensuring that appropriate information is
available to the milestone decision authority to make
a decision on Milestone B approval (or Key Decision
Point B approval in the case of a space program), in-
cluding information necessary to make the certifi-
cation required by section 2366a of title 10, United
States Code.
(d) QUALIFICATIONS, RESOURCES, AND TENURE.—
The Secretary shall ensure that each program manager for
the program development period of a defense acquisition
program—
(1) has the appropriate management, engineer-
ing, technical, and financial expertise needed to meet
the responsibilities assigned pursuant to subsection
(c);
(2) is provided the resources and support (in-
cluding systems engineering expertise, cost estimating
expertise, and software development expertise) needed
to meet such responsibilities; and
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(3) is assigned to the program manager position
for such program until such time as such program is
ready for a decision on Milestone B approval (or Key
Decision Point B approval in the case of a space pro-
gram).
SEC. 863. TENURE AND ACCOUNTABILITY OF PROGRAM
MANAGERS FOR PROGRAM EXECUTION PERI-
ODS.
(a) REVISED GUIDANCE REQUIRED.—Not later than
180 days after the date of the enactment of this Act, the
Secretary of Defense shall revise Department of Defense
guidance for defense acquisition programs to address the
tenure and accountability of program managers for the pro-
gram execution period of defense acquisition programs.
(b) PROGRAM EXECUTION PERIOD.—For the purpose
of this section, the term ‘‘program execution period’’ refers
to the period after Milestone B approval (or Key Decision
Point B approval in the case of a space program).
(c) RESPONSIBILITIES.—The revised guidance re-
quired by subsection (a) shall—
(1) require the program manager for the pro-
gram execution period of a defense acquisition pro-
gram to enter into a performance agreement with the
milestone decision authority for such program within
six months of assignment, that—
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(A) establishes expected parameters for the
cost, schedule, and performance of such program
consistent with the business case for such pro-
gram;
(B) provides the commitment of the mile-
stone decision authority to provide the level
funding and resources required to meet such pa-
rameters; and
(C) provides the assurance of the program
manager that such parameters are achievable
and that such program manager will be account-
able for meeting such parameters; and
(2) provide the program manager with the au-
thority to—
(A) veto the addition of new program re-
quirements that would be inconsistent with the
parameters established in the performance agree-
ment entered pursuant to paragraph (1);
(B) make trade-offs between cost, schedule
and performance, provided that such trade-offs
are consistent with the parameters established in
the performance agreement entered pursuant to
paragraph (1);
(C) redirect funding within such program,
to the extent necessary to achieve the parameters
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established in the performance agreement entered
pursuant to paragraph (1);
(D) develop such interim goals and mile-
stones as may be required to achieve the param-
eters established in the performance agreement
entered pursuant to paragraph (1); and
(E) use program funds to recruit and hire
such technical experts as may be required to
carry out such program, if necessary expertise is
not otherwise provided by the Department of De-
fense.
(d) QUALIFICATIONS, RESOURCES, AND TENURE.—
The Secretary shall ensure that each program manager for
the program execution period of a defense acquisition
program—
(1) has the appropriate management, engineer-
ing, technical, and financial expertise needed to meet
the responsibilities assigned pursuant to subsection
(c);
(2) is provided the resources and support (in-
cluding systems engineering expertise, cost estimating
expertise, and software development expertise) needed
to meet such responsibilities; and
(3) is assigned to the program manager position
for such program at the time of Milestone B approval
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(or Key Decision Point B approval in the case of a
space program) and continues in such position until
the delivery of the first production units of such pro-
gram.
(e) LIMITED WAIVER AUTHORITY.—The Secretary
may waive the requirement in subsection (d)(3) that a pro-
gram manager for the program execution period of a defense
acquisition program serve in that position until the deliv-
ery of the first production units of such program upon sub-
mitting to the congressional defense committees a written
determination that—
(1) such program is so complex, and the delivery
of the first production units will take so long, that it
would not be feasible for a single individual to serve
as program manager for the entire period covered by
such subsection; and
(2) the complexity of such program, and length
of time that will be required to deliver the first pro-
duction units, are not the result of a failure to meet
the certification requirements established in section
2366a of title 10, United States Code.
SEC. 864. DEPARTMENT OF DEFENSE PLAN FOR CONTIN-
GENCY PROGRAM MANAGEMENT.
(a) REQUIREMENT.—Not later than one year after the
date of the enactment of this Act, the Secretary of Defense
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shall develop a plan for the Department of Defense for con-
tingency program management during combat operations
and post-conflict operations.
(b) MATTERS TO BE COVERED.—The plan of the De-
partment of Defense for contingency program management
required by subsection (a) shall, at a minimum, provide
for—
(1) the designation of a senior executive service
official on the Joint Staff with the responsibility for
administering the plan;
(2) the assignment of a senior commissioned offi-
cer of the Armed Forces with appropriate program
management experience and qualifications to act as
head of contingency program management during
combat operations, post-conflict operations, and con-
tingency operations, who shall report directly to the
commander of the combatant command in whose area
of responsibility the operations occur;
(3) a preplanned organizational structure for
contingency program management that is designed to
ensure that the Department is prepared to conduct
contingency program management during combat op-
erations and post-conflict operations, including ad-
vance planning for—
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(A) unified, agile program management
processes and procedures for an interagency and
coalition environment;
(B) standardized joint contract mechanisms
with clearly defined metrics;
(C) continuity of program and project man-
agement;
(D) identification of a deployable cadre of
experts, trained in processes required under
paragraph (4);
(E) required information technology re-
sources and reliable, interoperable connections
and communications; and
(F) coordination of program management
operations with the activities of commanders in
the field;
(4) a requirement for the development of a train-
ing program for contingency program management,
including—
(A) comprehension of program management
that focuses on cost, scope, schedule, success
metrices, project oversight, and resource bal-
ancing;
(B) contracting options and rules;
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(C) procedures for the Department on fund-
ing, accountability and component and partner
responsibilities; and
(D) effective communications and rules for
coordination with commanders in the field; and
(5) a requirement for identification of hiring
and appointment authorities for rapid deployment of
personnel under this section to ensure the availability
of key personnel for sufficient lengths of time to pro-
vide for continuing of program and project manage-
ment.
(c) UTILIZATION IN PLAN FOR INTERAGENCY PROCE-
DURES FOR STABILIZATION AND RECONSTRUCTION OPER-
ATIONS.—To the extent practicable, the elements of the plan
of the Department of Defense for contingency program man-
agement required by subsection (a) shall be taken into ac-
count in the development of the plan for the establishment
of interagency operating procedures for stabilization and
reconstruction operations required by section 1222.
SEC. 865. COMPTROLLER GENERAL REPORT.
Not later than February 1, 2007, the Comptroller Gen-
eral of the United States shall submit to the congressional
defense committees a report on the actions taken by the Sec-
retary of Defense to comply with the requirements of this
subtitle. The report shall include a description of such ac-
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tions and an assessment by the Comptroller General of the
effectiveness of such actions in meeting such requirements.
Subtitle E—Other Matters
SEC. 871. CLARIFICATION OF AUTHORITY TO CARRY OUT
CERTAIN PROTOTYPE PROJECTS.
Section 845(a) of the National Defense Authorization
Act for Fiscal Year 1994 (10 U.S.C. 2371 note) is
amended—
(1) in paragraph (2)(A), by inserting ‘‘or, for a
defense agency, the director of the defense agency’’
after ‘‘(41 U.S.C. 414(c))’’; and
(2) in paragraph (3), by inserting ‘‘or director
of a defense agency’’ after ‘‘executive’’.
SEC. 872. ONE-YEAR EXTENSION OF SPECIAL TEMPORARY
CONTRACT CLOSEOUT AUTHORITY.
Section 804(d) of the National Defense Authorization
Act for Fiscal Year 2004 (Public Law 108–136; 117 Stat.
1542) is amended by striking ‘‘September 30, 2006’’ and
inserting ‘‘September 30, 2007’’.
SEC. 873. ONE-YEAR EXTENSION OF INAPPLICABILITY OF
CERTAIN LAWS TO CONTRACTING WITH EM-
PLOYERS OF PERSONS WITH DISABILITIES.
Subsections (a)(2)(A) and (b)(2)(A) of the Ronald W.
Reagan National Defense Authorization Act for Fiscal Year
2005 (Public Law 108–375; 118 Stat. 2021), as amended
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by section 848(a) of the National Defense Authorization Act
for Fiscal Year 2006 (Public Law 109–163; 119 Stat.
3395), are each further amended by striking ‘‘2006’’ and
inserting ‘‘2007’’.
SEC. 874. PILOT PROGRAM ON EXPANDED USE OF MENTOR-
PROTEGE AUTHORITY.
(a) PILOT PROGRAM AUTHORIZED.—The Secretary of
Defense may carry out a pilot program to assess the feasi-
bility and advisability of treating small business concerns
described in subsection (b) as disadvantaged small business
concerns under the Mentor-Protege Program under section
831 of the National Defense Authorization Act for Fiscal
Year 1991 (10 U.S.C. 2302 note).
(b) COVERED
SMALL
BUSINESS
CONCERNS.—The
small business concerns described in this subsection are
small business concerns that—
(1) are participants in the Small Business Inno-
vative Research Program of the Department of De-
fense established pursuant to section 9 of the Small
Business Act (15 U.S.C. 638); and
(2) as determined by the Secretary, are devel-
oping technologies that will assist in detecting or de-
feating Improvised Explosive Devices (IEDs) or other
critical force protection measures.
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(c) TREATMENT AS DISADVANTAGED SMALL BUSINESS
CONCERNS.—
(1) IN GENERAL.—For purposes of the pilot pro-
gram, the Secretary may treat a small business con-
cern described in subsection (b) as a disadvantaged
small business concern under the Mentor-Protege Pro-
gram.
(2) MENTOR-PROTEGE AGREEMENT.—Any eligi-
ble business concerned approved for participation in
the Mentor-Protege Program as a mentor firm may
enter into a mentor-protege agreement and provide
assistance described in section 831 of the National
Defense Authorization Act for Fiscal Year 1991 with
respect to a small business concern treated under
paragraph (1) as a disadvantaged small business con-
cern under the Mentor-Protege Program.
(d) FUNDING.—
(1) IN GENERAL.—Notwithstanding the limita-
tion in section 9(f)(2) of the Small Business Act (15
U.S.C. 638(f)(2)), funds for any reimbursement pro-
vided to a mentor firm under section 831(g) of the
National Defense Authorization Act for Fiscal Year
1991 with respect to a small business concern de-
scribed in subsection (b) under the pilot program
shall be derived from funds available for the Small
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Business Innovative Research Program of the Depart-
ment of Defense.
(2) LIMITATION.—The amount available under
paragraph (1) for reimbursement described in that
paragraph may not exceed the amount equal to one
percent of the funds available for the Small Business
Innovative Research Program.
(e) SUNSET.—
(1) AGREEMENTS.—No mentor-protege agree-
ment may be entered into under the pilot program
after September 30, 2010.
(2) OTHER MATTERS.—No reimbursement may
be paid, and no credit toward the attainment of a
subcontracting goal may be granted, under the pilot
program after September 30, 2013.
(f) REPORT.—Not later than March 1, 2009, the Sec-
retary shall submit to the appropriate committees of Con-
gress a report on the pilot program. The report shall—
(1) describe the extent to which mentor-protege
agreements have been entered under the pilot pro-
gram; and
(2) describe and assess the technological benefits
arising under such agreements.
(g) DEFINITIONS.—In this section:
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(1) The term ‘‘appropriate committees of Con-
gress’’ means—
(A) the Committees on Armed Services, Ap-
propriations, and Small Business and Entrepre-
neurship of the Senate; and
(B) the Committees on Armed Services and
Appropriations of the House of Representatives.
(2) The term ‘‘small business concern’’ has the
meaning given that term in section 831(m)(1) of the
National Defense Authorization Act for Fiscal Year
1991.
TITLE IX—DEPARTMENT OF DE-
FENSE 
ORGANIZATION 
AND
MANAGEMENT
Subtitle A—Duties and Functions of
Department of Defense Officers
and Organizations
SEC. 901. UNITED STATES MILITARY CANCER INSTITUTE.
(a) ESTABLISHMENT.—Chapter 104 of title 10, United
States Code, is amended by adding at the end the following
new section:
‘‘§ 2117. United States Military Cancer Institute
‘‘(a) ESTABLISHMENT.—The Secretary of Defense shall
establish in the University the United States Military Can-
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cer Institute. The Institute shall be established pursuant to
regulations prescribed by the Secretary.
‘‘(b) PURPOSES.—The purposes of the Institute are as
follows:
‘‘(1) To establish and maintain a clearinghouse
of data on the incidence and prevalence of cancer
among members and former members of the armed
forces.
‘‘(2) To conduct research that contributes to the
detection or treatment of cancer among the members
and former members of the armed forces.
‘‘(c) HEAD OF INSTITUTE.—The Director of the United
States Military Cancer Institute is the head of the Institute.
The Director shall report to the President of the University
regarding matters relating to the Institute.
‘‘(d) ELEMENTS.—(1) The Institute is composed of
clinical and basic scientists in the Department of Defense
who have an expertise in research, patient care, and edu-
cation relating to oncology and who meet applicable criteria
for affiliation with the Institute.
‘‘(2) The components of the Institute include military
treatment and research facilities that meet applicable cri-
teria and are designated as affiliates of the Institute.
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‘‘(e) RESEARCH.—(1) The Director of the United
States Military Cancer Institute shall carry out research
studies on the following:
‘‘(A) The epidemiological features of cancer, in-
cluding assessments of the carcinogenic effect of ge-
netic and environmental factors, and of disparities in
health, inherent or common among populations of
various ethnic origins within the members of the
armed forces.
‘‘(B) The prevention and early detection of can-
cer among members and former members of the armed
forces.
‘‘(C) Basic, translational, and clinical investiga-
tion matters relating to the matters described in sub-
paragraphs (A) and (B).
‘‘(2) The research studies under paragraph (1) shall
include complementary research on oncologic nursing.
‘‘(f) COLLABORATIVE RESEARCH.—The Director of the
United States Military Cancer Institute shall carry out the
research studies under subsection (e) in collaboration with
other cancer research organizations and entities selected by
the Institute for purposes of the research studies.
‘‘(g) ANNUAL REPORT.—(1) Not later than November
1 each year, the Director of the United States Military Can-
cer Institute shall submit to the President of the University
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a report on the current status of the research studies being
carried out by the Institute under subsection (e).
‘‘(2) Not later than 60 days after receiving a report
under paragraph (1), the President of the University shall
transmit such report to the Secretary of Defense and to Con-
gress.’’.
(b) CLERICAL AMENDMENT.—The table of sections at
the beginning of chapter 104 of such title is amended by
adding at the end the following new item:
‘‘2117. United States Military Cancer Institute.’’.
SEC. 902. SENIOR ACQUISITION EXECUTIVE FOR SPECIAL
OPERATIONS WITHIN STAFF OF THE ASSIST-
ANT SECRETARY OF DEFENSE FOR SPECIAL
OPERATIONS AND LOW INTENSITY CONFLICT.
(a) INCLUSION WITHIN STAFF.—The staff of the As-
sistant Secretary of Defense for Special Operations and
Low Intensity Conflict under section 138(b)(4) of title 10,
United States Code, shall include a senior acquisition exec-
utive for special operations.
(b) DUTIES.—The senior acquisition executive within
the staff of the Assistant Secretary of Defense for Special
Operations and Low Intensity Conflict under subsection (a)
shall conduct policy and management oversight of the ac-
quisition activities of the Special Operations Command
under section 167 of title 10, United States Code, and shall
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have such other duties as the Assistant Secretary shall des-
ignate.
SEC. 903. UNITED STATES MARINE BAND AND UNITED
STATES MARINE DRUM AND BUGLE CORPS.
(a) IN GENERAL.—Section 6222 of title 10, United
States Code, is amended to read as follows:
‘‘§ 6222. United States Marine Band; United States
Marine Drum and Bugle Corps: composi-
tion; appointment and promotion of mem-
bers
‘‘(a) UNITED STATES MARINE BAND.—The band of the
Marine Corps shall be composed of one director, two assist-
ant directors, and other personnel in such numbers and
grades as the Secretary of the Navy determines to be nec-
essary.
‘‘(b) UNITED STATES MARINE DRUM
AND BUGLE
CORPS.—The drum and bugle corps of the Marine Corps
shall be composed of one commanding officer and other per-
sonnel in such numbers and grades as the Secretary of the
Navy determines to be necessary.
‘‘(c) APPOINTMENT AND PROMOTION.—(1) The Sec-
retary of the Navy shall prescribe regulations for the ap-
pointment and promotion of members of the Marine Band
and members of the Marine Drum and Bugle Corps.
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‘‘(2) The President may from time to time appoint
members of the Marine Band and members of the Marine
Drum and Bugle Corps to grades not above the grade of
captain. The authority of the President to make appoint-
ments under this paragraph may be delegated only to the
Secretary of Defense.
‘‘(3) The President, by and with the advice and consent
of the Senate, may from time to time appoint any member
of the Marine Band or of the Marine Drum and Bugle
Corps to a grade above the grade of captain.
‘‘(d) RETIREMENT.—Unless otherwise entitled to high-
er retired grade and retired pay, a member of the Marine
Band or Marine Drum and Bugle Corps who holds, or has
held, an appointment under this section is entitled, when
retired, to be retired in, and with retired pay based on,
the highest grade held under this section in which the Sec-
retary of the Navy determines that such member served sat-
isfactorily.
‘‘(e) REVOCATION OF APPOINTMENT.—The Secretary of
the Navy may revoke any appointment of a member of the
Marine Band or Marine Drum and Bugle Corps. When a
member’s appointment to a commissioned grade terminates
under this subsection, such member is entitled, at the option
of such member—
‘‘(1) to be discharged from the Marine Corps; or