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OFF-THE-SHELF ITEM SUBCONTRACTS.—Not later than 
180 days after the date of the enactment of this Act, the 
Secretary of Defense shall revise the Department of Defense 
Supplement to the Federal Acquisition Regulation to elimi-
nate all requirements for a prime contractor to include a 
specific contract clause in a subcontract for commercially 
available off-the-shelf items unless the inclusion of such 
clause is required by law or is necessary for the contractor 
to meet the requirements of the prime contract. 
Subtitle F—Industrial Base Matters 
SEC. 861. REVIEW REGARDING APPLICABILITY OF FOREIGN 
OWNERSHIP, CONTROL, OR INFLUENCE RE-
QUIREMENTS OF NATIONAL SECURITY INDUS-
TRIAL PROGRAM TO NATIONAL TECHNOLOGY 
AND INDUSTRIAL BASE COMPANIES. 
(a) REVIEW.—The Secretary of Defense, with the con-
currence of the Secretary of State, shall review whether com-
panies whose ownership or majority control is based in 
countries that are part of the national technology and in-
dustrial base should be exempted from the foreign owner-
ship, control, or influence (FOCI) requirements of the Na-
tional Security Industrial Program. 
(b) AUTHORITY.— 
(1) IN GENERAL.—The Secretary of Defense may 
establish a program to carry out the exemption proc-
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ess described under subsection (a). Under the pro-
gram, the Secretary, with the concurrence of the Sec-
retary of State, shall maintain a list of companies 
owned or controlled by countries that are part of the 
national technology and industrial base that are eligi-
ble for exemption from the requirements described 
under such subsection. 
(2) DETERMINATIONS OF ELIGIBILITY.—The Sec-
retary of Defense, with the concurrence of the Sec-
retary of State, may designate a company under 
paragraph (1) as exempt from the requirements de-
scribed under subsection (a) upon a determination 
that such exemption— 
(A) is beneficial to improving collaboration 
within countries participating in the national 
technology and industrial base; 
(B) is in the United States national secu-
rity interest; and 
(C) will not result in a greater risk of the 
disclosure of classified or sensitive information 
consistent with the National Security Industrial 
Program. 
(3) EXERCISE
OF
AUTHORITY.—The authority 
under paragraph (1) to exempt a listed company 
from the requirements described under subsection (a)
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may be exercised beginning on the date that is the 
later of— 
(A) the date that is 60 days after the Sec-
retary of Defense, in consultation with the Sec-
retary of State, submits to the congressional de-
fense committees a report summarizing the re-
view conducted under such subsection; and 
(B) the date that is 30 days after the Sec-
retary of Defense, in consultation with the Sec-
retary of State, submits to the congressional de-
fense committees a written notification of a de-
termination under paragraph (2) to exempt the 
company from such requirements, including a 
discussion of the issues related to the foreign 
ownership or control of the company that were 
considered as part of the determination. 
(c) NATIONAL TECHNOLOGY AND INDUSTRIAL BASE 
DEFINED.—In this section, the term ‘‘national technology 
and industrial base’’ has the meaning given the term in 
section 2500 of title 10, United States Code. 
SEC. 862. PILOT PROGRAM ON STRENGTHENING MANUFAC-
TURING IN DEFENSE INDUSTRIAL BASE. 
(a) PILOT PROGRAM REQUIRED.—The Secretary of 
Defense shall carry out a pilot program to assess the feasi-
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bility and advisability of increasing the capability of the 
defense industrial base to support— 
(1) production needs to meet military require-
ments; and 
(2) manufacturing and production of emerging 
defense and commercial technologies of military value. 
(b) AUTHORITIES.—The Secretary shall carry out the 
pilot program under the following: 
(1) The Defense Production Act of 1950 (50 
U.S.C. 4501 et seq.). 
(2) Chapters 137 and 139 and sections 2371, 
2371b, and 2373 of title 10, United States Code. 
(3) Such other legal authorities as the Secretary 
considers applicable to carrying out the pilot pro-
gram. 
(c) ACTIVITIES.—Activities under the pilot program 
may include the following: 
(1) Use of contracts, grants, or other transaction 
authorities to support manufacturing and production 
capabilities in small and medium sized manufactur-
ers. 
(2) Purchases of quantities of goods or equipment 
for testing and qualification purposes. 
(3) Purchase commitments to create incentives 
for industry to develop manufacturing and produc-
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tion capabilities of interest to national security, in-
cluding cost sharing with funding from nongovern-
mental sources. 
(4) Issuing loans directly to small and medium 
sized enterprises to support manufacturing and pro-
duction capabilities. 
(5) Guaranteeing loans to enable small and me-
dium sized manufacturers to obtain private sector 
loans to support manufacturing and production capa-
bilities in areas of national security interest. 
(6) Giving awards to third party entities to sup-
port investments in small and medium sized manu-
facturers working in areas of national security inter-
est, including activities to support debt and equity 
investments that would benefit missions of the De-
partment of Defense. 
(7) Such other activities as the Secretary deter-
mines necessary. 
(d) TERMINATION.—The pilot program shall terminate 
on the date that is five years after the date of the enactment 
of this Act. 
SEC. 863. SUNSET OF CERTAIN PROVISIONS RELATING TO 
THE INDUSTRIAL BASE. 
(a) MISCELLANEOUS LIMITATIONS ON THE PROCURE-
MENT OF GOODS OTHER THAN UNITED STATES GOODS.—
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Section 2534 of title 10, United States Code, is amended 
by adding at the end the following new subsection: 
‘‘(k) SUNSET ON CERTAIN RESTRICTIONS.—The re-
striction under subsection (a) relative to the procurement 
of the items set forth in paragraphs (1) through (4) of such 
subsection shall terminate on the close of September 30, 
2018.’’. 
(b) PHOTOVOLTAIC DEVICES.—Section 858 of the Carl 
Levin and Howard P. ‘‘Buck’’ McKeon National Defense 
Authorization Act for Fiscal Year 2015 (Public Law 113– 
291; 10 U.S.C. 2534 note) is amended by adding at the 
end the following new subsection: 
‘‘(c) SUNSET.—This section shall terminate on the 
close of September 30, 2018.’’. 
Subtitle G—International 
Contracting Matters 
SEC. 865. PROCUREMENT EXCEPTION RELATING TO AGREE-
MENTS WITH FOREIGN GOVERNMENTS. 
Section 2533a of title 10, United States Code, is 
amended— 
(1) in subsection (a), by striking ‘‘subsections (c) 
through (h)’’ and inserting ‘‘subsections (c) through 
(i)’’; 
(2) by redesignating subsections (i), (j), and (k) 
as subsections (j), (k), and (l), respectively; and
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(3) by inserting after subsection (h) the following 
new subsection: 
‘‘(i) EXCEPTION RELATING TO AGREEMENTS WITH 
FOREIGN GOVERNMENTS.—Subsection (a) does not preclude 
the acquisition of items described in subsection (b) as part 
of a weapon system if the acquisition is necessary in fur-
therance of an agreement with a foreign government in 
which both governments agree to remove barriers to pur-
chases of supplies produced in the other country or services 
performed by sources of the other country.’’. 
SEC. 866. APPLICABILITY OF COST AND PRICING DATA CER-
TIFICATION REQUIREMENTS. 
Section 2306a(b)(1) of title 10, United States Code, is 
amended— 
(1) in subparagraph (C), by striking ‘‘; or’’ and 
inserting a semicolon; 
(2) in subparagraph (D)(ii), by striking the pe-
riod at the end and inserting ‘‘; or’’; and 
(3) by adding at the end the following new sub-
paragraph: 
‘‘(E) for a foreign military sale where there 
is already an existing Government contract— 
‘‘(i) for the same or similar item or 
service; and
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‘‘(ii) for which the Government has 
current cost and pricing data and insights 
into the reasonableness of price.’’. 
SEC. 867. ENHANCING PROGRAM LICENSING. 
(a) IN GENERAL.—Not later than September 30, 2019, 
the Secretary of Defense, with the concurrence of the Sec-
retary of State, shall establish a structure for implementing 
a revised program export licensing framework intended to 
provide comprehensive export licensing authorization to 
support large international cooperative defense programs 
between multiple nations and determine what, if any, regu-
latory authorities require modification. 
(b) SUSTAINMENT.—The licensing framework estab-
lished under subsection (a) shall require a program license 
for the future sustainment of all international cooperative 
defense programs comprised of more than five nations. The 
program license shall be finalized prior to the sustainment 
phase of that program’s acquisition lifecycle. 
Subtitle H—Other Transactions 
SEC. 871. OTHER TRANSACTION AUTHORITY. 
(a) 
EXPANDED
AUTHORITY
FOR
PROTOTYPE 
PROJECTS.—Subsection (a) of section 2371b of title 10, 
United States Code, is amended— 
(1) by striking ‘‘(1) Subject’’ and inserting 
‘‘Subject’’; and
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(2) by striking paragraphs (2) and (3). 
(b) MODIFICATION OF COST SHARING REQUIREMENT 
FOR USE
OF OTHER TRANSACTION AUTHORITY.—Sub-
section (d)(1) of such section is amended by striking sub-
paragraph (C) and inserting the following new subpara-
graph: 
‘‘(C) At least one third of the total cost of the 
prototype project is to be paid out of funds provided 
by sources other than the Federal Government.’’. 
(c) USE OF OTHER TRANSACTION AUTHORITY FOR ON-
GOING PROTOTYPE PROJECTS.—Subsection (f)(1) of such 
section is amended by adding at the end the following: ‘‘A 
transaction includes all individual prototype sub-projects 
awarded under the transaction to a consortium of United 
States industry and academic institutions.’’. 
SEC. 872. EDUCATION AND TRAINING FOR TRANSACTIONS 
OTHER THAN CONTRACTS AND GRANTS. 
Section 2371 of title 10, United States Code, is amend-
ed— 
(1) by redesignating subsection (g) as subsection 
(h); and 
(2) by inserting after subsection (f) the following 
new subsection: 
‘‘(g) EDUCATION AND TRAINING.—The Secretary of 
Defense shall ensure that management, technical, and con-
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tracting personnel of the Department involved in the award 
and administration of transactions under this section or 
other innovative forms of contracting are afforded adequate 
education and training.’’. 
SEC. 873. PREFERENCE FOR USE OF OTHER TRANSACTIONS 
AND EXPERIMENTAL AUTHORITY. 
In the execution of science and technology and proto-
typing programs, the Secretary of Defense shall establish 
a preference for using transactions other than contracts, co-
operative agreements, and grants entered into pursuant to 
sections 2371 and 2371b of title 10, United States Code, 
and authority for procurement for experimental purposes 
pursuant to section 2373 of title 10, United States Code. 
SEC. 874. METHODS FOR ENTERING INTO RESEARCH 
AGREEMENTS. 
Section 2358(b) of title 10, United States Code, is 
amended— 
(1) in paragraph (3), by striking ‘‘or’’; 
(2) in paragraph (4), by striking the period at 
the end and inserting a semicolon; and 
(3) by adding at the end the following new para-
graphs: 
‘‘(5) by transactions other than contracts, cooper-
ative agreements, and grants entered into pursuant to 
sections 2371 and 2371b of this title; or
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‘‘(6) by procurement for experimental purposes 
pursuant to section 2373 of this title.’’. 
Subtitle I—Development and Acqui-
sition of Software Intensive and 
Digital Products and Services 
SEC. 881. RIGHTS IN TECHNICAL DATA. 
(a) MODIFICATION
OF DEFINITION
OF TECHNICAL 
DATA.—Paragraph (4) of section 2302 of title 10, United 
States Code, is amended to read as follows: 
‘‘(4) The term ‘technical data’— 
‘‘(A) means recorded information (regard-
less of the form or method of the recording) of a 
scientific or technical nature relating to supplies 
procured by an agency; 
‘‘(B) with respect to software, includes ev-
erything required to reproduce, build/recompile, 
test, and deploy working system binaries on sys-
tem hardware, including all source code, revision 
histories, build scripts, build/compilation/modi-
fication instructions/procedures, documentation, 
test cases, expected test results, compilers, inter-
preters, test harnesses, specialized build and test 
hardware, connectors, cables, and library de-
pendencies; and
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‘‘(C) does not include computer software in-
cidental to contract administration or financial, 
administrative, cost or pricing, or management 
data or other information incidental to contract 
administration.’’. 
(b) RIGHTS IN TECHNICAL DATA.—Section 2320(a)(2) 
of title 10, United States Code, is amended by adding at 
the end the following new subparagraph: 
‘‘(J) The Secretary of Defense shall require the 
following with respect to software delivery: 
‘‘(i) Software shall be delivered in native 
electronic format. 
‘‘(ii) Builds must not be dependent upon 
pre-defined build directories. 
‘‘(iii) In the case of licensing restrictions 
that do not allow library dependency inclusion, 
verified accessible repositories and revision his-
tory shall be documented and included. 
‘‘(iv) Commercial Off-The Shelf/Non-Devel-
opment Item (COTS/NDI) shall be delivered on 
original Licensed Media. If firmware is part of 
the delivery, then a Firmware Support Manual 
should be included as an Appendix.’’.
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SEC. 882. DEFENSE INNOVATION BOARD ANALYSIS OF 
SOFTWARE ACQUISITION REGULATIONS. 
(a) STUDY.— 
(1) IN GENERAL.—Not later than 30 days after 
the date of the enactment of this Act, the Secretary of 
Defense shall task the Defense Innovation Board to 
undertake a study on streamlining software develop-
ment and acquisition regulations. 
(2) MEMBER PARTICIPATION.—The Chairman of 
the Defense Innovation Board shall select appropriate 
members from the membership of the Board to par-
ticipate in this study, and may recommend addi-
tional temporary members or contracted support per-
sonnel to the Secretary of Defense for the purposes of 
this study. In considering additional appointments to 
the study, the Secretary of Defense shall ensure that 
members have significant technical, legislative, or reg-
ulatory expertise and reflect diverse experiences in the 
public and private sector. 
(3) SCOPE.—The study conducted pursuant to 
paragraph (1) shall— 
(A) review the acquisition regulations ap-
plicable to the Department of Defense with a 
view toward streamlining and improving the ef-
ficiency and effectiveness of software acquisition
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in order to maintain defense technology advan-
tage; 
(B) produce specific and detailed rec-
ommendations for any legislation, including the 
amendment or repeal of regulations, that the 
members of the Board conducting the study de-
termine necessary to— 
(i) streamline development and pro-
curement of software; 
(ii) adopt best practices from the pri-
vate sector applicable to government use; 
(iii) promote rapid adoption of new 
technology; 
(iv) ensure continuing financial and 
ethical integrity in procurement; and 
(v) protect the best interests of the De-
partment of Defense; and 
(C) produce such additional recommenda-
tions for legislation as such members consider 
appropriate. 
(4) CONSULTATION
ON
MAJOR
PROGRAM
RE-
ALIGNMENT.—The Secretary of Defense shall consult 
with the Defense Innovation Board in conducting ac-
tivities under the major program realignment pilot 
program established pursuant to section 873. The Sec-
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retary shall provide the Board with timely access to 
all information necessary for the Board to provide 
such consultation and report on the major program 
realignment. 
(5) ACCESS TO INFORMATION.—The Secretary of 
Defense shall provide the Defense Innovation Board 
with timely access to appropriate information, data, 
resources, and analysis so that the Board may con-
duct a thorough and independent analysis as required 
under this subsection. 
(b) REPORTS.— 
(1) INTERIM REPORTS.—Not later than 150 days 
after the date of the enactment of this Act, the Sec-
retary of Defense shall submit a report to or brief the 
congressional defense committees on the interim find-
ings of the study conducted pursuant to subsection 
(a). The Defense Innovation Board shall provide reg-
ular updates to the Secretary of Defense and the con-
gressional defense committees for purposes of pro-
viding the interim report. 
(2) FINAL
REPORT.—Not later than one year 
after the Secretary of Defense tasks the Defense Advi-
sory Board to conduct the study, the Board shall 
transmit a final report of the study to the Secretary. 
Not later than 30 days after receiving the final re-
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port, the Secretary of Defense shall transmit the final 
report, together with such comments as the Secretary 
determines appropriate, to the congressional defense 
committees. 
SEC. 883. PILOT TO TAILOR SOFTWARE-INTENSIVE MAJOR 
PROGRAMS TO USE AGILE METHODS. 
(a) IN GENERAL.—Not later than 30 days after the 
date of the enactment of this Act, the Secretary of Defense, 
in consultation with the Secretaries and Chiefs of the mili-
tary services, shall identify one major program per service 
and one defense-wide program for tailoring into smaller in-
crements. The programs shall be selected from among those 
designated as major defense acquisition programs and those 
formerly designated as major automated information sys-
tems (excluding defense business systems). 
(b) PROGRAM SELECTION CRITERIA.—In identifying 
candidate programs, the Secretary shall prioritize pro-
grams that— 
(1) are software intensive; 
(2) have identified software development as a 
risk; 
(3) have experienced cost growth and schedule 
delay; and 
(4) did not deliver any operational capability 
within the prior calendar year.
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(c) REALIGNMENT PLAN.—The Secretary of Defense 
shall finalize a realignment plan within 60 days of pro-
grams being identified under subsection (a) that provides 
for the realigned program increments having a cost below 
the cost threshold for designation as a major acquisition. 
(d) REALIGNMENT EXECUTION.—Each realigned pro-
gram increment shall— 
(1) be designed to deliver a meaningfully useful 
capability within the first 180 days following realign-
ment; 
(2) be designed to deliver subsequent meaning-
fully useful capabilities on timeframes of less than 
180 days; 
(3) incorporate cross-functional teams focused on 
software production that prioritize user needs and 
control of total cost of ownership; 
(4) be staffed with highly qualified technically 
trained staff and personnel with management and 
business process expertise in leadership positions to 
support requirements modification, acquisition strat-
egy, and program decisionmaking; 
(5) ensure that realigned acquisition strategies 
are broad enough to allow offerors to propose a serv-
ice, system, modified business practice, configuration 
of personnel, or combination thereof as a solution;
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(6) include periodic engagement with the user 
community, as well as representation by the user 
community in program management and software 
production activity; 
(7) ensure realigned acquisition strategies favor 
outcomes-based requirements definition and capa-
bility as a service, including the establishment of tech-
nical evaluation criteria as outcomes to be used to 
drive service-level agreements with vendors; and 
(8) consider options for termination of the rela-
tionship with any vendor unable or unwilling to offer 
terms that meet the requirements of this section. 
(e) CONSULTATION.—In conducting the program selec-
tion and tailoring under this section, the Secretary shall— 
(1) use the tools, resources, and expertise of dig-
ital and innovation organizations resident in the De-
partment, such as the Defense Innovation Board, the 
Defense Innovation Unit Experimental, the Defense 
Science Board, the Defense Digital Services, federally 
funded research and development centers, research 
laboratories, and other technical, management, and 
acquisition experts; 
(2) use the digital development and acquisition 
expertise of the General Services Administration’s 
Technology Transition Service, Office of 18F; and
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(3) leverage the science, technology, and innova-
tion activities established pursuant to section 217 of 
the National Defense Authorization Act for Fiscal 
Year 2016 (Public Law 114–92; 10 U.S.C. 2445a 
note). 
(f) AGILE ACQUISITION DEFINED.—In this section, the 
term ‘‘agile acquisition’’— 
(1) means acquisition pursuant to a methodology 
for delivering multiple, rapid, incremental capabili-
ties to the user for operational use, evaluation, and 
feedback; and 
(2) involves— 
(A) the incremental development and field-
ing of capabilities, commonly called ‘‘spirals’’, 
‘‘spins’’, or ‘‘sprints’’, which can be measured in 
a few weeks or months; and 
(B) continuous participation and collabora-
tion by users, testers, and requirements authori-
ties. 
SEC. 884. REVIEW AND REALIGNMENT OF DEFENSE BUSI-
NESS SYSTEMS TO EMPHASIZE AGILE METH-
ODS. 
(a) IN GENERAL.—Not later than 30 days after the 
date of the enactment of this Act, the Secretary of Defense, 
in consultation with the Chief Information Officers and
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Chief Management Officers of the military services, shall 
conduct a comprehensive assessment of investments in de-
fense business systems and prioritize no fewer than four and 
up to eight such systems for realignment and restructuring 
into smaller increments and the incorporation of agile ac-
quisition methods. 
(b) PROGRAM ASSESSMENT ELEMENTS.—The assess-
ment under subsection (a) shall include the following: 
(1) A comparison of investments in business sys-
tems across the Department of Defense within each 
business system portfolio category, such as personnel 
and pay systems, accounting and financial systems, 
and contracting and procurement systems. 
(2) Identification of opportunities to rationalize 
requirements across investments within a business 
system portfolio. 
(3) Identification of programs within business 
system portfolio categories that are most closely fol-
lowing the best acquisition practices for software in-
tensive systems. 
(c) PROGRAM REALIGNMENT SELECTION CRITERIA.— 
In identifying programs for potential realignment, the Sec-
retary of Defense shall prioritize programs that— 
(1) did not deliver any operational capability 
within the prior calendar year;
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(2) have experienced cost growth and schedule 
delay; and 
(3) have similar user requirements to a better 
performing program within the same business system 
portfolio category. 
(d) REALIGNMENT PLAN.—The Secretary of Defense 
shall finalize a realignment plan within 60 days of pro-
grams being identified under subsection (c). 
(e) REALIGNMENT EXECUTION.—Each realigned pro-
gram increment shall— 
(1) be designed to deliver a meaningfully useful 
capability within the first 180 days following realign-
ment; 
(2) be designed to deliver subsequent meaning-
fully useful capabilities on timeframes of less than 
180 days; 
(3) incorporate cross-functional teams focused on 
software production that prioritize user needs and 
control of total cost of ownership; 
(4) be staffed with highly qualified technically 
trained staff and personnel with management and 
business process expertise in leadership positions to 
support requirements modification, acquisition strat-
egy, and program decision making;
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(5) ensure that realigned acquisition strategies 
are broad enough to allow offerors to propose a serv-
ice, system, modified business practice, configuration 
of personnel, or combination thereof as a solution; 
(6) include periodic engagement with the user 
community as well as representation by the user com-
munity in program management and software pro-
duction activity; 
(7) ensure realigned acquisition strategies favor 
outcomes-based requirements definition and capa-
bility as a service, including the establishment of tech-
nical evaluation criteria as outcomes to be used to 
drive service-level-agreements with vendors; and 
(8) consider options for termination of the rela-
tionship with any vendor unable or unwilling to offer 
terms that meet the requirements of this section. 
(f) CONSULTATION.—In conducting the program selec-
tion and realignments under this section, the Secretary 
shall— 
(1) use the tools, resources, and expertise of dig-
ital and innovation organizations resident in the De-
partment, such as the Defense Innovation Board, the 
Defense Innovation Unit Experimental, the Defense 
Science Board, the Defense Business Board, the De-
fense Digital Services, federally funded research and
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development centers, research laboratories, and other 
technical, management, and acquisition experts; 
(2) use the digital development and acquisition 
expertise of the General Services Administration’s 
Technology Transition Service, Office of 18F; and 
(3) leverage the science, technology, and innova-
tion activities established pursuant to section 217 of 
the National Defense Authorization Act for Fiscal 
Year 2016 (Public Law 114–92; 10 U.S.C. 2445a 
note). 
(g) AGILE ACQUISITION DEFINED.—In this section, the 
term ‘‘agile acquisition’’— 
(1) means acquisition pursuant to a methodology 
for delivering multiple, rapid, incremental capabili-
ties to the user for operational use, evaluation, and 
feedback; and 
(2) involves— 
(A) the incremental development and field-
ing of capabilities, commonly called ‘‘spirals’’, 
‘‘spins’’, or ‘‘sprints’’, which can be measured in 
a few weeks or months; and 
(B) continuous participation and collabora-
tion by users, testers, and requirements authori-
ties.
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SEC. 885. SOFTWARE DEVELOPMENT PILOT USING AGILE 
BEST PRACTICES. 
(a) IN GENERAL.—Not later than 30 days after the 
date of the enactment of this Act, the Secretary of Defense 
shall identify no fewer than four and up to eight software 
development activities within the Department of Defense or 
military departments to be developed using modern agile 
acquisition methods. 
(b) STREAMLINED
PROCESSES.—Software develop-
ment activities identified under subsection (a) shall be de-
veloped without incorporation of the following contract or 
transaction requirements: 
(1) Earned Value Management (EVM) or EVM- 
like reporting. 
(2) Development of Integrated Master Schedule. 
(3) Development of Integrated Master Plan. 
(4) Development of Technical Requirement Docu-
ment. 
(5) Development of Systems Requirement Docu-
ments. 
(6) Use of Information Technology Infrastructure 
Library agreements. 
(7) Use of Software Development Life Cycle 
(methodology). 
(c) ROLES AND RESPONSIBILITIES.—