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serting in lieu thereof ‘‘using the pay and allowances of
the members’’.
(b) CHARGES EXCLUDED.—Paragraph (2) of such
subsection is amended by adding at the end the following
new subparagraph:
‘‘(C) Amounts necessary to recover the costs of
functions designated by the Secretary of Defense as
mission critical, such as ammunition handling safe-
ty, and amounts for ancillary tasks not directly re-
lated to the mission of the function or activity man-
aged through the Fund.’’.
(c) TERMINATION
OF ADVANCE BILLING PRAC-
TICES.—Such subsection is further amended by adding at
the end the following new paragraph:
‘‘(3) After September 30, 1996, functions and activi-
ties managed through the Fund may not use advance bill-
ing in the provision of goods and services to customers.’’.
SEC. 314. ANNUAL PROPOSED BUDGET FOR OPERATION OF
DEFENSE BUSINESS OPERATIONS FUND.
Subsection (h)(2) of section 2216 of title 10, United
States Code, as added by section 311(a), is amended by
adding at the end the following new sentence: ‘‘The pro-
posed budget shall include the amount necessary to cover
the operating losses, if any, of the Fund for the previous
fiscal year.’’.
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SEC. 315. REDUCTION IN REQUESTS FOR TRANSPORTATION
FUNDED THROUGH DEFENSE BUSINESS OP-
ERATIONS FUND.
(a) REDUCTION.—The Secretary of Defense shall di-
rect the heads of Defense-wide activities and the Secretar-
ies of the military departments to reduce requests during
fiscal year 1996 for purchasing transportation from the
transportation accounts of the Defense Business Oper-
ations Fund by $70,000,000 below the level of such re-
quests during fiscal year 1995. The rates charged for
transportation funded through the Defense Business Op-
erations Fund shall be reduced to reflect the effect of the
reduced requests on overhead costs.
(b) REPORT REQUIRED.—Not later than March 1,
1996, the Secretary of Defense shall submit to Congress
a report regarding—
(1) the effect on the Defense transportation or-
ganization of implementing certain consolidation
proposals, such as the elimination of duplication in
the component command structure; and
(2) the extent that transportation overhead, the
cost of which is passed on to customers, can be sig-
nificantly reduced without adversely affecting mobili-
zation requirements.
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Subtitle C—Environmental
Provisions
SEC. 321. CLARIFICATION OF SERVICES AND PROPERTY
THAT MAY BE EXCHANGED TO BENEFIT THE
HISTORICAL COLLECTION OF THE ARMED
FORCES.
Section 2572(b) of title 10, United States Code, is
amended in paragraph (1) by striking out ‘‘not needed by
the armed forces’’ and all that follows through the end
of the paragraph and inserting in lieu thereof the follow-
ing: ‘‘not needed by the armed forces for any of the follow-
ing items or services if they directly benefit the historical
collection of the armed forces:
‘‘(A) Similar items held by any individual, orga-
nization, institution, agency, or nation.
‘‘(B) Conservation supplies, equipment, facili-
ties, or systems.
‘‘(C) Search, salvage, or transportation services.
‘‘(D) Restoration, conservation, or preservation
services.
‘‘(E) Educational programs.’’.
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SEC. 322. ADDITION OF AMOUNTS CREDITABLE TO DE-
FENSE ENVIRONMENTAL RESTORATION AC-
COUNT.
Section 2703(e) of title 10, United States Code is
amended to read as follows:
‘‘(e) AMOUNTS RECOVERED.—The following amounts
shall be credited to the transfer account:
‘‘(1) Amounts recovered under section 107 of
CERCLA for response actions of the Secretary.
‘‘(2) Any other amounts recovered by the Sec-
retary or the Secretary of the military department
concerned from a contractor, insurer, surety, or
other person to reimburse the Department of De-
fense for any expenditure for environmental response
activities.’’.
SEC. 323. REPEAL OF CERTAIN ENVIRONMENTAL EDU-
CATION PROGRAMS.
Sections 1333 and 1334 of the National Defense Au-
thorization Act for Fiscal Year 1994 (Public Law 103–
160; 10 U.S.C. 2701 note) are repealed.
SEC. 324. REPEAL OF LIMITATION ON OBLIGATION OF
AMOUNTS TRANSFERRED FROM ENVIRON-
MENTAL RESTORATION TRANSFER ACCOUNT.
(a) REPEAL OF LIMITATION.—Section 2703 of title
10, United States Code, is further amended—
(1) by striking out subsection (c); and
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(2) by redesignating subsection (d), subsection
(e) (as amended by section 322), and subsection (f)
as subsections (c), (d), and (e), respectively.
(b) EFFECT ON CONTRACTS.—Nothing in the amend-
ment made by subsection (a) shall be considered to negate
or invalidate any legal protection or legal defense available
to the Department of Defense under ‘‘force majeure’’
clauses in environmental restoration contracts or agree-
ments existing on the date of the enactment of this Act.
SEC. 325. ELIMINATION OF AUTHORITY TO TRANSFER
AMOUNTS FOR TOXICOLOGICAL PROFILES.
Section 2704 of title 10, United States Code, is
amended in subsections (c) and (d)(3)—
(1) by striking out ‘‘, such sums from amounts
appropriated to the Department of Defense,’’; and
(2) by striking out ‘‘, including the manner for
transferring funds and personnel and for coordina-
tion of activities under this section’’.
SEC. 326. SENSE OF CONGRESS ON USE OF DEFENSE ENVI-
RONMENTAL RESTORATION ACCOUNT.
It is the sense of Congress that the Secretary of De-
fense should make every effort to limit, by the end of fiscal
year 1997, spending for administration, support, studies,
and investigations associated with the Defense Environ-
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mental Restoration Account to 20 percent of the total
funding for that account.
Subtitle 
D—Civilian 
Employees
and Nonappropriated Fund In-
strumentality Employees
SEC. 331. MANAGEMENT OF DEPARTMENT OF DEFENSE CI-
VILIAN PERSONNEL.
Section 129 of title 10, United States Code, is
amended—
(1) in subsection (a)—
(A) by inserting ‘‘(including any limitation
on full-time equivalent positions)’’ before the
period at the end of the second sentence; and
(B) by adding at the end the following new
sentence: ‘‘The Secretary shall not be required
to make a reduction in the number of full-time
equivalent positions in the Department of De-
fense unless such reduction is necessary due to
a reduction in funds available to the Depart-
ment or is required under a law that is enacted
after the date of the enactment of the National
Defense Authorization Act for Fiscal Year 1996
and that refers specifically to this subsection.’’;
and
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(2) by adding at the end the following new sub-
section:
‘‘(d) With respect to each budget activity within an
appropriation for any fiscal year for operations and main-
tenance, the Secretary of Defense shall ensure that there
are employed during that fiscal year employees in the
number, and of the type and with the skill mix, that are
necessary to carry out the functions within that budget
activity for which funds are provided for that fiscal year.’’.
SEC. 332. MANAGEMENT OF DEPOT EMPLOYEES.
(a) DEPOT EMPLOYEES.—Chapter 146 of title 10,
United States Code, is amended by adding at the end the
following new section:
‘‘§ 2472. Management of depot employees
‘‘(a) PROHIBITION
ON
MANAGEMENT
BY
END
STRENGTH.—The civilian employees of the Department of
Defense involved in the depot-level maintenance and repair
of materiel may not be managed on the basis of any end-
strength constraint or limitation on the number of such
employees who may be employed on the last day of a fiscal
year. Such employees shall be managed solely on the basis
of the available workload and the funds made available
for such depot-level maintenance and repair.
‘‘(b) ANNUAL REPORT.—Not later than 60 days after
the beginning of each fiscal year, the Secretary of Defense
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shall submit to the Committee on Armed Services of the
Senate and the Committee on National Security of the
House of Representatives a report on the number of em-
ployees employed and expected to be employed by the De-
partment of Defense during that fiscal year to perform
depot-level maintenance and repair of materiel. The report
shall indicate whether that number is sufficient to perform
the depot-level maintenance and repair functions for which
funds have been appropriated for that fiscal year for per-
formance by Department of Defense employees.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of chapter 146 of such title is amended
by adding at the end the following new item:
‘‘2472. Management of depot employees.’’.
SEC. 333. CONVERSION TO PERFORMANCE BY CIVILIAN EM-
PLOYEES OF ACTIVE-DUTY POSITIONS.
(a) CONVERSION TO CIVILIAN PERFORMANCE.—Dur-
ing fiscal year 1996, the Secretary of Defense shall change
to performance by employees of the Department of De-
fense the performance of not less than 10,000 positions
in the Department of Defense that, as of September 30,
1995, were designated to be performed by members of the
Armed Forces on active duty.
(b) IMPLEMENTATION PLAN.—Not later than March
31, 1996, the Secretary of Defense shall submit to the
Committee on Armed Services of the Senate and the Com-
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mittee on National Security of the House of Representa-
tives a plan for the implementation of subsection (a).
SEC. 334. PERSONNEL ACTIONS INVOLVING EMPLOYEES OF
NONAPPROPRIATED FUND INSTRUMENTAL-
ITIES.
(a) CLARIFICATION
OF DEFINITION
OF NONAP-
PROPRIATED
FUND
INSTRUMENTALITY
EMPLOYEE.—
Subsection (a)(1) of section 1587 of title 10, United
States Code, is amended by adding at the end the follow-
ing new sentence: ‘‘Such term includes a civilian employee
of a support organization within the Department of De-
fense or a military department, such as the Defense Fi-
nance and Accounting Service, who is paid from
nonappropriated funds on account of the nature of the em-
ployee’s duties.’’.
(b) DIRECT
REPORTING
OF
VIOLATIONS.—Sub-
section (e) of such section is amended in the second sen-
tence by inserting before the period the following: ‘‘and
to permit the direct reporting of alleged violations of sub-
section (b) to the Inspector General of the Department
of Defense’’.
(c) TECHNICAL AMENDMENT.—Subsection (a)(1) of
such section is further amended by striking out ‘‘Navy Re-
sale and Services Support Office’’ and inserting in lieu
thereof ‘‘Navy Exchange Service Command’’.
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(d) CLERICAL AMENDMENTS.—(1) The heading of
such section is amended to read as follows:
‘‘§ 1587. Employees of nonappropriated fund instru-
mentalities: personnel actions’’.
(2) The item relating to section 1587 in the table of
sections at the beginning of chapter 81 of such title is
amended to read as follows:
‘‘1587. Employees of nonappropriated fund instrumentalities: personnel ac-
tions.’’.
SEC. 335. LIMITATION ON PROVISION OF OVERSEAS LIVING
QUARTERS 
ALLOWANCES 
FOR
NONAPPROPRIATED FUND INSTRUMENTAL-
ITY EMPLOYEES.
(a) CONFORMING ALLOWANCE TO ALLOWANCES FOR
OTHER CIVILIAN EMPLOYEES.—Subject to subsection (b),
any overseas living quarters allowance paid from
nonappropriated funds and provided to a nonappropriated
fund instrumentality employee after the date of the enact-
ment of this Act may not exceed the amount of a quarters
allowance provided under subchapter III of chapter 59 of
title 5 to a similarly situated civilian employee of the De-
partment of Defense paid from appropriated funds.
(b) APPLICATION TO CERTAIN CURRENT EMPLOY-
EES.—In the case of a nonappropriated fund instrumen-
tality employee who, as of the date of the enactment of
this Act, receives an overseas living quarters allowance
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under any other authority, subsection (a) shall apply to
such employee only after the earlier of—
(1) September 30, 1998; or
(2) the date on which the employee otherwise
ceases to be eligible for such an allowance under
such other authority.
(c) NONAPPROPRIATED FUND INSTRUMENTALITY
EMPLOYEE DEFINED.—For purposes of this section, the
term ‘‘nonappropriated fund instrumentality employee’’
has the meaning given such term in section 1587(a)(1)
of title 10, United States Code.
SEC. 336. OVERTIME EXEMPTION FOR NONAPPROPRIATED
FUND EMPLOYEES.
Section 6121(2) of title 5, United States Code, is
amended to read as follows:
‘‘(2) ‘employee’ has the meaning given it by sec-
tion 2105(a) and also includes those paid from
nonappropriated funds of the Army and Air Force
Exchange Service, Navy Ship’s Stores Ashore, Navy
exchanges, Marine Corps exchanges, Coast Guard
exchanges, and other instrumentalities of the United
States under the jurisdiction of the armed forces
conducted for the comfort, pleasure, contentment,
and mental and physical improvement of personnel
of the armed forces;’’.
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SEC. 337. CONTINUED HEALTH INSURANCE COVERAGE.
Section 8905a(d)(4) of title 5, United States Code,
is amended—
(1) in subparagraph (A), by inserting ‘‘, or a
voluntary separation from a surplus position,’’ after
‘‘an involuntary separation from a position’’; and
(2) by adding at the end the following new sub-
paragraph:
‘‘(C) For the purpose of this paragraph, ‘surplus po-
sition’ means a position which is identified in pre-reduc-
tion in force planning as no longer required, and which
is expected to be eliminated under formal reduction-in-
force procedures.’’.
SEC. 338. CREDITABILITY OF CERTAIN NAFI SERVICE
UNDER THE FEDERAL EMPLOYEES’ RETIRE-
MENT SYSTEM.
(a) IN GENERAL.—Subject to subsections (b) and (c),
upon application to the Office of Personnel Management,
any individual who, on the date of making such applica-
tion, is an employee within the Department of Defense or
the legislative branch of the Government shall be allowed
credit under chapter 84 of title 5, United States Code (for
purposes of benefits payable out of the Fund) for any serv-
ice if—
(1) such service was performed by such individ-
ual as an employee of a nonappropriated fund in-
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strumentality of the Department of Defense or the
Coast Guard, described in section 2105(c) of such
title; and
(2) such individual has served continuously,
since moving (after December 31, 1986, and without
a break in service of more than 3 days) from a
nonappropriated fund instrumentality referred to in
paragraph (1), in—
(A) the Department of Defense; or
(B) the legislative branch of the Govern-
ment.
(b) CONDITIONS.—An individual may not be allowed
credit for service under this section unless—
(1) an application is filed before the deadline
under subsection (c);
(2) such individual has been subject to chapter
84 of title 5, United States Code, since moving in
the manner described in subsection (a)(2); and
(3) such individual deposits to the credit of the
Fund an amount equal to 1.3 percent of the basic
pay paid to such individual for such service, with in-
terest (computed in accordance with paragraphs (2)
and (3) of section 8334(e) of title 5, United States
Code).
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(c) DEADLINE.—An application under this section
may not be filed after—
(1) the end of the 6-month period beginning on
the date of the enactment of this Act; or
(2) if earlier, the date on which a written deter-
mination is made by the Office of Personnel Man-
agement that the actuarial present value of all bene-
fits payable as a result of the enactment of this sec-
tion has reached $50,000,000.
(d) REGULATIONS.—The Office of Personnel Man-
agement shall prescribe any regulations necessary to carry
out this section.
(e) DEFINITION.—For purposes of this section, the
term ‘‘Fund’’ means the Civil Service Retirement and Dis-
ability Fund under section 8348 of title 5, United States
Code.
Subtitle 
E—Commissaries 
and
Nonappropriated Fund Instru-
mentalities
SEC. 341. OPERATION OF COMMISSARY STORE SYSTEM.
(a) COOPERATION WITH OTHER ENTITIES.—Section
2482 of title 10, United States Code, is amended—
(1) in the section heading, by striking out
‘‘private’’;
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(2) by inserting ‘‘(a) PRIVATE OPERATION.—’’
before ‘‘Private persons’’; and
(3) by adding at the end the following new sub-
section:
‘‘(b) CONTRACTS WITH OTHER AGENCIES AND IN-
STRUMENTALITIES.—(1) The Defense Commissary Agen-
cy, and other agencies of the Department of Defense that
support the operation of the commissary store system,
may enter into contracts or other agreements with other
appropriated fund or nonappropriated fund instrumental-
ities of the Department of Defense or other departments
or agencies of the United States to facilitate efficiency in
the management and operation of the commissary store
system.
‘‘(2) 
A 
commissary 
store 
operated 
by 
a
nonappropriated fund instrumentality shall be operated in
accordance with section 2484 of this title. Subject to such
section, the Secretary of Defense may authorize a transfer
of goods, supplies, and facilities of, and funds appro-
priated for, the Defense Commissary Agency to a
nonappropriated fund instrumentality operating a com-
missary store.’’.
(b) AUTHORIZATION FOR DISTRIBUTORS TO SERVE
AS VENDOR AGENTS.—Such section is further amended
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by adding after subsection (b), as added by subsection (a),
the following new subsection:
‘‘(c) PAYMENTS TO VENDOR AGENTS.—If a distribu-
tor for a vendor of resale products under contract to the
Defense Commissary Agency is designated as an agent by
and for the vendor, the distributor may invoice the agency
and accept payments from the agency under the vendor’s
contract. A distributor designated as a agent for purposes
of this subsection may request payment for more than one
product of the vendor on the same invoice. All payments
made by the agency to a distributor designated by a ven-
dor as the vendor’s agent shall be considered payments
under the vendor’s contract, and the payments shall fulfill
the payment obligations of the United States in the same
manner as if the payments had been made directly to the
vendor.’’.
(c) CLERICAL AMENDMENT.—The item relating to
such section in the table of sections at the beginning of
chapter 147 of such title is amended to read as follows:
‘‘2482. Commissary stores: operation.’’.
SEC. 342. PRICING POLICIES FOR COMMISSARY STORE
MERCHANDISE.
Section 2486(d)(1) of title 10, United States Code,
is amended—
(1) by striking out ‘‘each item’’ and inserting in
lieu thereof ‘‘items’’; and
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(2) by striking out ‘‘actual product cost of the
item’’ and inserting in lieu thereof ‘‘total average
product cost of merchandise sold’’.
SEC. 343. LIMITED RELEASE OF COMMISSARY STORES
SALES INFORMATION TO MANUFACTURERS,
DISTRIBUTORS, AND OTHER VENDORS DOING
BUSINESS 
WITH 
DEFENSE 
COMMISSARY
AGENCY.
Section 2487(b) of title 10, United States Code, is
amended in the second sentence by inserting before the
period the following: ‘‘unless the agreement is between the
Defense Commissary Agency and a manufacturer, dis-
tributor, or other vendor doing business with the Agency
and is restricted to information directly related to mer-
chandise provided by that manufacturer, distributor, or
vendor’’.
SEC. 344. ECONOMICAL DISTRIBUTION OF DISTILLED SPIR-
ITS BY NONAPPROPRIATED FUND INSTRU-
MENTALITIES.
(a) ECONOMICAL DISTRIBUTION.—Subsection (a)(1)
of section 2488 of title 10, United States Code, is amend-
ed by inserting after ‘‘most competitive source’’ the follow-
ing: ‘‘and distributed in the most economical manner’’.
(b) DETERMINATION OF MOST ECONOMICAL DIS-
TRIBUTION METHOD.—Such section is further amended—
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(1) by redesignating subsection (c) as sub-
section (d); and
(2) by inserting after subsection (b) the follow-
ing new subsection:
‘‘(c)(1) In the case of covered alcoholic beverage pur-
chases of distilled spirits, to determine whether a
nonappropriated fund instrumentality of the Department
of Defense represents the most economical method of dis-
tribution to package stores, the Secretary of Defense shall
consider all components of the distribution costs incurred
by the nonappropriated fund instrumentality, such as
overhead costs (including management, logistics, adminis-
tration, depreciation, and utilities), the costs of carrying
inventory, and handling and distribution costs.
‘‘(2) If the use of a private distributor would subject
covered alcoholic beverage purchases of distilled spirits to
direct or indirect State taxation, a nonappropriated fund
instrumentality shall be considered to be the most eco-
nomical method of distribution regardless the results of
the determination under paragraph (1).
‘‘(3) The Secretary shall use the agencies performing
audit functions on behalf of the armed forces and the In-
spector General of the Department of Defense to make
determinations under this subsection.’’.
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SEC. 345. TRANSPORTATION BY COMMISSARIES AND EX-
CHANGES TO OVERSEAS LOCATIONS.
(a) IN GENERAL.—Chapter 157 of title 10, United
States Code, is amended by adding at the end the follow-
ing new section:
‘‘§ 2643. Commissary and exchange services: trans-
portation overseas
‘‘The Secretary of Defense shall give the officials re-
sponsible for operation of commissaries and military ex-
changes the authority to negotiate directly with private
carriers for the most cost-effective transportation of com-
missary and exchange supplies by sea without relying on
the Military Sealift Command or the Military Traffic Man-
agement Command. Section 2631 of this title, regarding
the preference for vessels of the United States or belong-
ing to the United States in the transportation of supplies
by sea, shall apply to the negotiation of transportation
contracts under the authority of this section.’’.
(b) CLERICAL AMENDMENT.—The table of sections
at the beginning of such chapter is amended by adding
at the end the following new item:
‘‘2643. Commissary and exchange services: transportation overseas.’’.
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SEC. 
346. 
DEMONSTRATION 
PROGRAM 
FOR 
UNIFORM
FUNDING 
OF 
MORALE, 
WELFARE, 
AND
RECREATION ACTIVITIES AT CERTAIN MILI-
TARY INSTALLATIONS.
(a) DEMONSTRATION PROGRAM REQUIRED.—The
Secretary of Defense shall conduct a demonstration pro-
gram at six military installations, under which funds ap-
propriated for the support of morale, welfare, and recre-
ation programs at the installations are combined with
nonappropriated funds available for such programs and
treated as nonappropriated funds. Under this demonstra-
tion program, the combined appropriated funds shall be
expended pursuant to the laws and regulations that apply
to nonappropriated funds.
(b) COVERED MILITARY INSTALLATIONS.—The Sec-
retary of Defense shall select two military installations
from each military department to participate in the dem-
onstration program.
(c) EFFECT ON CIVILIAN EMPLOYEES.—Civilian em-
ployees of the Department of Defense who are normally
paid using the appropriated funds that are combined
under subsection (a) shall be considered to be
nonappropriated fund instrumentality employees unless
they continue to be paid using other appropriated funds.
Any converted employee shall automatically revert to the
employee’s former status at the end of the program or
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upon any action by management to terminate the em-
ployee, whichever occurs first. Any converted employee
shall retain retirement and medical benefits under the em-
ployee’s former status.
(d) PERIOD OF DEMONSTRATION PROGRAM.—The
demonstration program shall terminate at the end of the
first full fiscal year beginning on or after the date of the
enactment of this Act.
(e) REPORT.—Not later than 90 days after the end
of the demonstration program, the Secretary of Defense
shall submit to Congress a report describing the results
of the demonstration program.
SEC. 347. CONTINUED OPERATION OF BASE EXCHANGE
MART AT FORT WORTH NAVAL AIR STATION
AND 
AUTHORITY 
TO 
EXPAND 
BASE 
EX-
CHANGE MART PROGRAM.
(a) CONTINUED OPERATION OF BASE EXCHANGE
MART.—Section 375 of the National Defense Authoriza-
tion Act for Fiscal Year 1995 (Public Law 103–337; 108
Stat. 2736) is amended by striking out ‘‘, until December
31, 1995,’’.
(b) EXPANSION OF BASE EXCHANGE MART PRO-
GRAM.—(1) Subject to paragraph (2), the Secretary of
Defense 
may 
provide 
for 
the 
operation 
by 
a
nonappropriated fund instrumentality of not more than
100
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ten combined exchange and commissary stores, in which
groceries are sold at five percent above cost and other
items are sold at the typical military exchange markup.
(2) The Secretary may select a military installation
as the location for a combined exchange and commissary
store only if—
(A) the installation has been or is selected for
closure or realignment; or
(B) the continued operation of a separate mili-
tary exchange and commissary store at the installa-
tion is not economically feasible.
(3) If a nonappropriated fund instrumentality incurs
a loss in operating a commissary store as a result of the
pricing requirements specified in paragraph (1), the Sec-
retary may authorize a transfer of funds appropriated for
the Defense Commissary Agency to the nonappropriated
fund instrumentality to offset the loss. However, the total
amount of appropriated funds transferred during a fiscal
year to support the operation of a commissary store may
not exceed an amount equal to 25 percent of the appro-
priated funds provided during the last full year of oper-
ation of the commissary store by the Defense Commissary
Agency.
(4) The combined military exchange and commissary
stores authorized under this subsection shall include the
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combined military exchange and commissary store oper-
ated at the Naval Air Station Fort Worth, Joint Reserve
Center, Carswell Field, Texas.
(5) For purposes of this section, the term
‘‘nonappropriated fund instrumentality’’ means the Army
and Air Force Exchange Service, Navy Exchange Service
Command, Marine Corps exchanges, or any other instru-
mentality of the United States under the jurisdiction of
the Armed Forces which is conducted for the comfort,
pleasure, contentment, or physical or mental improvement
of members of the Armed Forces.
SEC. 348. UNIFORM DEFERRED PAYMENTS PROGRAM FOR
MILITARY EXCHANGES.
(a) USE OF COMMERCIAL BANKING INSTITUTIONS.—
As soon as possible after the date of the enactment of this
Act, the Secretary of Defense shall endeavor to enter into
an agreement with a commercial banking institution under
which the commercial banking institution will fund and
operate the deferred payment programs of the Army and
Air Force Exchange Service and Navy Exchange Service
Command. To ease the transition to commercial operation,
the Secretary may initially limit the agreement to one of
the two military exchange services.
(b) UNIFORM EXCHANGE CREDIT PROGRAM.—Not
later than January 1, 1997, the Secretary shall establish
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a uniform deferred payment program for use in all mili-
tary exchanges to replace the separate deferred payment
programs currently operated by the Army and Air Force
Exchange Service and Navy Exchange Service Command.
(c) REPORT.—Not later than December 31, 1995, the
Secretary of Defense shall submit to Congress a report
describing the implementation of this section.
SEC. 349. AVAILABILITY OF FUNDS TO OFFSET EXPENSES
INCURRED BY ARMY AND AIR FORCE EX-
CHANGE SERVICE ON ACCOUNT OF TROOP
REDUCTIONS IN EUROPE.
Of funds authorized to be appropriated under section
301(5), not more than $70,000,000 shall be available to
the Secretary of Defense for transfer to the Army and Air
Force Exchange Service to offset expenses incurred by the
Army and Air Force Exchange Service on account of re-
ductions in the number of members of the United States
Armed Forces assigned to permanent duty ashore in Eu-
rope.
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SEC. 350. STUDY REGARDING IMPROVING EFFICIENCIES IN
OPERATION OF MILITARY EXCHANGES AND
OTHER 
MORALE, 
WELFARE, 
AND 
RECRE-
ATION 
ACTIVITIES 
AND 
COMMISSARY
STORES.
(a) STUDY REQUIRED.—The Secretary of Defense
shall conduct a study regarding the manner in which
greater efficiencies can be achieved in the operation of—
(1) military exchanges;
(2) other instrumentalities of the United States
under the jurisdiction of the Armed Forces which
are conducted for the comfort, pleasure, content-
ment, or physical or mental improvement of mem-
bers of the Armed Forces; and
(3) commissary stores.
(b) REPORT OF STUDY.—Not later than March 1,
1996, the Secretary of Defense shall submit to Congress
a report describing the results of the study and containing
such recommendations as the Secretary considers appro-
priate to implement efficiency-building options identified
in the study.
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SEC. 351. EXTENSION OF DEADLINE FOR CONVERSION OF
NAVY SHIPS’ STORES TO OPERATION AS
NONAPPROPRIATED FUND INSTRUMENTAL-
ITIES.
(a) EXTENSION.—Section 371(a) of the National De-
fense Authorization Act for Fiscal Year 1994 (Public Law
103–160; 10 U.S.C. 7604 note) is amended by striking
out ‘‘December 31, 1995’’ and inserting in lieu thereof
‘‘December 31, 1996’’.
(b) INSPECTOR GENERAL REVIEW.—Not later than
April 1, 1996, the Inspector General of the Department
of Defense shall submit to Congress a report—
(1) evaluating the costs and benefits of convert-
ing the operation of all Navy ships’ stores to oper-
ation by the Navy Exchange Service Command, as
required by section 371(a) of the National Defense
Authorization Act for Fiscal Year 1994 (Public Law
103–160; 10 U.S.C. 7604 note); and
(2) reviewing the Navy Audit Agency report re-
garding such conversion prepared pursuant to sec-
tion 374 of the National Defense Authorization Act
for Fiscal Year 1995 (Public Law 103–337; 108
Stat. 2736).
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Subtitle F—Contracting Out
SEC. 357. PROCUREMENT OF ELECTRICITY FROM MOST EC-
ONOMICAL SOURCE.
(a) PROCUREMENT OF ELECTRICITY.—(1) Chapter
147 of title 10, United States Code, is amended by insert-
ing after section 2483 the following new section:
‘‘§ 2483a. Procurement of electricity from most eco-
nomical source
‘‘The Secretary of Defense shall procure electricity
for use on military installations and by other activities and
functions of the Department of Defense from the most ec-
onomical source, as determined by the Secretary. The Sec-
retary shall make the determination required by this sec-
tion in the manner provided in section 2462 of this title.’’.
(2) The table of sections at the beginning of such
chapter is amended by inserting after the item relating
to section 2483 the following new item:
‘‘2483a. Procurement of electricity from most economical source.’’.
(b) EFFECTIVE DATE; RULE OF CONSTRUCTION.—
The amendment made by subsection (a) shall take effect
on March 1, 1996, except that the amendment shall not
be construed to require the termination of any contract
for the purchase of electricity for the Department of De-
fense entered into before that date.
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SEC. 358. PROCUREMENT OF CERTAIN COMMODITIES
FROM MOST ECONOMICAL SOURCE.
(a) PROCUREMENT OF SUPPLIES.—In the case of
supplies for the Department of Defense procured through
the General Services Administration as of the date of the
enactment of this Act, the Secretary of Defense shall pro-
cure such supplies from another source if the Secretary
determines that the source can provide the supplies at a
lower cost. The Secretary shall make the determinations
required by this section in the manner provided in section
2462 of title 10, United States Code.
(b) EFFECTIVE DATE; RULE OF CONSTRUCTION.—
The amendment made by subsection (a) shall take effect
on March 1, 1996, except that the amendment shall not
be construed to require the termination of any contract
between the Secretary of Defense and the General Services
Administration entered into before that date.
SEC. 359. COMMERCIAL PROCUREMENT OF PRINTING AND
DUPLICATION SERVICES.
Consistent with the requirements of title 44, United
States Code, during fiscal year 1996, the Defense Printing
Service shall competitively procure a minimum of 70 per-
cent of its printing and duplication services.
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SEC. 360. DIRECT DELIVERY OF ASSORTED CONSUMABLE
INVENTORY ITEMS OF DEPARTMENT OF DE-
FENSE.
To reduce the expense and necessity of maintaining
extensive warehouses for consumable inventory items of
the Department of Defense, the Secretary of Defense shall
arrange for direct vendor delivery of food, clothing, medi-
cal and pharmaceutical supplies, automotive, electrical,
fuel, and construction supplies, and other consumable in-
ventory items for military installations throughout the
United States. The Secretary shall complete implementa-
tion of this direct vendor delivery system not later than
September 30, 1996.
SEC. 361. PRIVATE OPERATION OF FUNCTIONS OF DE-
FENSE 
REUTILIZATION 
AND 
MARKETING
SERVICE.
(a) SOLICITATION
OF PROPOSALS.—(1) Not later
than March 15, 1996, the Secretary of Defense shall so-
licit for the selected performance by commercial entities
of those functions of the Defense Reutilization and Mar-
keting Service, a unit of the Defense Logistics Agency,
for which the Secretary determines that privatization
would result in cost savings for the United States and the
generation of additional revenues for the United States.
(b) REPORT ON RETENTION OF FUNCTIONS.—Not
later than January 15, 1996, the Secretary shall submit
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a report to the Congress describing those functions of the
Defense Reutilization and Marketing Service that the Sec-
retary believes should be currently retained for exclusive
performance by civilian employees of the Department of
Defense or military personnel and the reasons why such
functions should be so retained.
SEC. 362. PRIVATE OPERATION OF PAYROLL FUNCTIONS
OF DEPARTMENT OF DEFENSE FOR PAYMENT
OF CIVILIAN EMPLOYEES.
(a) PLAN ON CONTRACTING OUT.—Not later than
March 1, 1996, the Secretary of Defense shall submit to
Congress a plan regarding private operation of payroll
functions for civilian employees of the Department of De-
fense.
(b) IMPLEMENTATION.—Not later than October 1,
1996, the Secretary shall implement the plan developed
under subsection (a).
SEC. 
363. 
DEMONSTRATION 
PROGRAM 
TO 
IDENTIFY
UNDERDEDUCTIONS 
AND 
OVERPAYMENTS
MADE TO VENDORS.
(a) DEMONSTRATION PROGRAM REQUIRED.—The
Secretary of Defense shall conduct a demonstration pro-
gram at the Defense Personnel Support Center, Philadel-
phia, Pennsylvania, to evaluate the feasibility of using pri-
vate contractors to audit accounting and procurement
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records of the Department of Defense to identify moneys
due the United States because of underdeductions and
overpayments made to vendors. Pursuant to an agreement
between the Secretary and one or more private contractors
selected by the Secretary, the contractors shall perform
an audit of accounting and procurement records of the De-
partment for at least fiscal years 1993, 1994, and 1995
using commercial sector data processing techniques, which
would compare purchase documents and agreements with
vendor invoices to discover discrepancies in allowances,
pricing, discounts, billback allowances, backhaul allow-
ances, and freight routing instructions. The audit shall
also attempt to identify duplicate payments and unauthor-
ized invoice charges.
(b) BONUS PAYMENT.—From amounts made avail-
able to conduct the demonstration program, the Secretary
may pay the contractors a negotiated amount not to ex-
ceed 25 percent of all amounts recovered as a result of
the audit.
(c) AVAILABILITY OF FUNDS.—From amounts au-
thorized to be appropriated pursuant to section 301(5),
not more than $5,000,000 shall be available to cover the
costs of the demonstration program, including the cost of
any bonus payment under subsection (b).
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SEC. 364. PILOT PROGRAM TO EVALUATE POTENTIAL FOR
PRIVATE OPERATION OF OVERSEAS DEPEND-
ENTS’ SCHOOLS.
(a) PILOT PROGRAM.—The Secretary of Defense may
conduct a pilot program to assess the feasibility of using
private contractors to operate schools of the defense de-
pendents’ education system established under section
1402(a) of the Defense Dependents’ Education Act of
1978 (20 U.S.C. 921(a)).
(b) SELECTION OF SCHOOL FOR PROGRAM.—If the
Secretary of Defense conducts the pilot program, the Sec-
retary shall select one school of the defense dependents’
education system for participation in the program. Under
the pilot program, the Secretary shall provide for the oper-
ation of the school by an appropriate private contractor
for not less than one complete school year.
(c) REPORT.—Not later than 30 days after the end
of the first school year in which the pilot program is con-
ducted, the Secretary of Defense shall submit to Congress
a report on the results of the program. The report shall
include the recommendation of the Secretary with respect
to the extent to which other schools of the defense depend-
ents’ education system should be operated by private con-
tractors.
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SEC. 365. PILOT PROGRAM FOR EVALUATION OF IMPROVED
DEFENSE 
TRAVEL 
PROCESSING 
PROTO-
TYPES.
(a) PILOT PROGRAM REQUIRED; LOCATION.—(1)
The Secretary of Defense, acting through the Under Sec-
retary of Defense (Comptroller), shall conduct a pilot pro-
gram regarding two prototype tests of commercial travel
applications to determine the best approach for the De-
partment of Defense Travel System.
(2) The Secretary shall conduct the pilot program at
six military installations containing approximately equal
numbers of members of the Armed Forces. Two installa-
tions shall be selected from each military department.
(b) DESCRIPTION OF PROTOTYPE TESTS.—The two
respective tests shall be as follows:
(1) In this test, three installations (one for each
military department), with the Department of De-
fense acting as its own integrator, will implement
the travel processes proposed by the task force on
travel management chartered by the Secretary of
Defense in July 1994, and will offer specific busi-
ness opportunities in the services areas currently uti-
lized, namely reservations and credit card tech-
nologies.
(2) In this test, three installations (one for each
military department), will contract out their entire
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travel process, reserving only essential elements,
such as travel authorization, for performance by em-
ployees of the Department of Defense. Particular at-
tention will be focused on the ability of the vendor
to integrate all processes into a responsive, reason-
ably priced, uniform travel system.
(c) CONDUCT OF TESTS.—The two prototype tests
shall be conducted as follows:
(1) Each test must accommodate the guidelines
for travel management issued by the Under Sec-
retary of Defense (Comptroller).
(2) The tests must take no more than 60 days
to set up and be operational for one year.
(d) EVALUATION CRITERIA.—The Secretary of De-
fense shall establish evaluation criteria that include, at a
minimum—
(1) aligning travel policy and cost estimates
with mission at the point of reservation;
(2) using fully integrated solutions envisioned
by the Department of Defense travel reengineering
report of January 1995;
(3) matching credit card data and reservation
data with cost estimate data;
(4) matching data with a trip pro forma plan
to eliminate the need for further approvals; and
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(5) a responsive and flexible management infor-
mation system for managers at all levels to monitor
travel expenses throughout the year, budget accu-
rately for any future year, and assess cost and value
relationship regarding temporary duty travel for
each mission.
(e) PLAN
FOR PROGRAM.—Before conducting the
pilot program, the Secretary of Defense shall develop a
plan for the program that addresses the following:
(1) The purposes of the prototype test, includ-
ing the objective of reducing the total costs of man-
aging travel by at least one-half.
(2) The methodology, duration, and anticipated
costs, including an arrangement whereby the con-
tractor would receive its agreed upon contract pay-
ment plus an additional negotiated amount not to
exceed 50 percent of the dollar savings achieved in
excess of the objective specified in paragraph (1).
(3) A specific citation to any provision or law,
rule, or regulation that, if not waived, would prohibit
the conduct of the program or any part of the pro-
gram.
(4) The evaluation mechanism required by sub-
section (d).
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(5) A provision for implementing the most suc-
cessful prototype Department-wide, based upon final
assessment of results.
SEC. 366. PILOT PROGRAM FOR PRIVATE OPERATION OF
CONSOLIDATED INFORMATION TECHNOLOGY
FUNCTIONS OF DEPARTMENT OF DEFENSE.
(a) PILOT PROGRAM REQUIRED.—(1) The Secretary
of Defense shall enter into discussions with private sector
entities for the purpose of issuing a request for proposal
to establish a pilot program to test and evaluate the cost
savings and efficiencies of private operation of all informa-
tion technology services for the Department of Defense
currently being consolidated in Defense MegaCenters. The
negotiations shall be conducted so that the request for pro-
posal may be issued within 60 days after the date of the
enactment of this Act.
(2) The minimum workload to be contracted out in
the pilot program shall be equivalent to the workload of
at least three Defense MegaCenters.
(b) ESTABLISHMENT
AND DURATION.—The Sec-
retary of Defense shall implement private operations
under the pilot program within one year after the date
of the enactment of this Act. The pilot program shall oper-
ate for not more than a three-year period after implemen-
tation.
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(c) GOAL OF PROGRAM.—The goal of the pilot pro-
gram is to receive proposals from private sector entities
that, if implemented, would reduce operating costs to the
Department of Defense for information technology func-
tions by at least 35 percent in comparison to annual oper-
ating cost as of the date of the enactment of this Act.
(d) PLAN OF PROGRAM.—Before conducting the pilot
program, the Secretary of Defense shall develop a plan
for the program that addresses the following:
(1) The purposes of the program.
(2) The methodology, duration, and anticipated
costs of the program, including the cost of an ar-
rangement whereby the private contractor would re-
ceive the agreed upon contract payment plus an ad-
ditional negotiated amount not to exceed 50 percent
of the dollar savings achieved in excess of the goal
specified in subsection (c).
(3) A specific citation to any provisions of law,
rule, or regulation that, if not waived, would prohibit
the conduct of the program or any part of the pro-
gram.
(4) An evaluation mechanism for the program.
(5) A provision for expanding the program to
all information technology functions of the Depart-
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ment of Defense, based upon final assessment of the
results of the program.
(e) SUSPENSION OF FURTHER CONSOLIDATION.—
Until the completion of the pilot program and submission
of the final report required under subsection (f)(2), none
of the funds appropriated to the Department of Defense
for a fiscal year after fiscal year 1995 may be used to
reduce the number of data centers of the Department of
Defense to fewer than the 16 Defense MegaCenters identi-
fied as of the date of the enactment of this Act.
(f) REPORTING REQUIREMENTS.—(1) Not later than
six months after commencing contracting out activities
under the pilot program, the Secretary of Defense shall
submit to Congress an initial assessment report regarding
the implementation of the pilot program.
(2) The Secretary shall submit to Congress a final
assessment report, including a recommendation for ex-
panding the program as appropriate, not later than one
year after commencing contracting out activities under the
pilot program.
SEC. 367. INCREASED RELIANCE ON THE PRIVATE SECTOR.
(a) GENERAL RULE.—The Secretary of Defense shall
endeavor to carry out through an entity in the private sec-
tor any activity to provide a commercial product or service
for the Department of Defense if—
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(1) the product or service can be provided
through a source in the private sector; and
(2) an adequate competitive environment exists
to provide for economical accomplishment of the
function by the private sector.
(b) APPLICABILITY.—(1) Subsection (a) shall not be
construed to apply to any commercial product or service
with respect to which the Secretary of Defense determines
that—
(A) production, manufacture, or provision of
that product or service by the Government is nec-
essary for reasons of national security; or
(B) the product or service is so inherently gov-
ernmental in nature that it is in the public interest
to require production or performance, respectively,
by the Department of Defense.
(2) A determination under paragraph (1) shall be
made in accordance with regulations prescribed under sub-
section (c).
(c) REGULATIONS.—The Secretary of Defense shall
prescribe regulations for the purposes of this section. Such
regulations shall be prescribed in consultation with the Di-
rector of the Office of Management and Budget.
(d) REPORT.—(1) The Secretary of Defense shall
identify all activities of the Department of Defense that
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are carried out to provide commercial products or services
for the Department of Defense and that are carried out
by personnel of the Department of Defense (other than
activities specified by the Secretary pursuant to subsection
(b)).
(2) The Secretary shall transmit to Congress, not
later than April 15, 1996, a report on matters relating
to increased use of the private sector for the performance
of commercial functions for the Department of Defense.
The report shall include a list of all activities identified
under paragraph (1) and indicate, for each activity,
whether the Secretary proposes to convert the perform-
ance of such activity to performance by the private sector
and, if not, the reasons why.
(3) The report shall include—
(A) a description of the advantages and dis-
advantages of using contractor personnel, rather
than employees of the Department of Defense, to
perform functions of the Department that are not
essential to the warfighting mission of the Armed
Forces;
(B) specification of all legislative and regulatory
impediments to contracting those functions for pri-
vate performance; and
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(C) the views of the Secretary of Defense on
the desirability of terminating the applicability of
OMB Circular A–76 to the Department of Defense.
(4) The Secretary shall carry out paragraph (1) in
consultation with the Director of the Office of Manage-
ment and Budget and the Comptroller General of the
United States. In carrying out that paragraph, the Sec-
retary shall consult with, and seek the views of, represent-
atives of the private sector, including organizations rep-
resenting small businesses.
SEC. 368. PILOT PROGRAM FOR PRIVATE OPERATION OF
PAYROLL AND ACCOUNTING FUNCTIONS OF
NONAPPROPRIATED FUND INSTRUMENTAL-
ITIES.
(a) PILOT PROGRAM REQUIRED; LOCATION.—(1)
The Secretary of Defense, acting through the Under Sec-
retary of Defense (Comptroller), shall enter into discus-
sions with private sector entities for the purpose of issuing
a request for proposal to establish a pilot program to test
and evaluate the cost savings and efficiencies of private
operation 
of 
accounting 
and 
payroll 
function 
of
nonappropriated fund instrumentalities of the Department
of Defense. The negotiations shall be conducted so that
the request for proposal may be issued within 60 days
after the date of the enactment of this Act.
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(2) The pilot program shall consist of a major De-
partment of Defense Nonappropriated Fund Accounting
and Payroll function.
(b) GOAL OF PROGRAM.—The goal of the pilot pro-
gram is to receive proposals from private sector entities
that, if implemented, would reduce by at least 25 percent
the total costs to the Government for each pay event.
(c) PLAN OF PROGRAM.—Before conducting the pilot
program, the Secretary of Defense shall develop a plan
for the program that addresses the following:
(1) The purposes of the program.
(2) The methodology, duration, and anticipated
costs of the program, including the cost of an ar-
rangement whereby the private contractor would re-
ceive the agreed upon contract payment plus an ad-
ditional negotiated amount not to exceed 50 percent
of the dollar savings achieved in excess of the goal
specified in subsection (b).
(3) A specific citation to any provisions of law,
rule, or regulation that, if not waived, would prohibit
the conduct of the program or any part of the pro-
gram.
(4) An evaluation mechanism for the program.
(5) A provision for expanding the program to
all 
accounting 
and 
payroll 
functions 
of
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nonappropriated fund instrumentalities of the De-
partment of Defense, based upon final assessment of
the results of the program.
Subtitle G—Miscellaneous Reviews,
Studies, and Reports
SEC. 371. QUARTERLY READINESS REPORTS.
(a) IN GENERAL.—(1) Chapter 22 of title 10, United
States Code, is amended by adding at the end the follow-
ing new section:
‘‘§ 452. Quarterly readiness reports
‘‘(a) REQUIREMENT.—Not later than 30 days after
the end of each calendar-year quarter, the Secretary of
Defense shall submit to the Committee on Armed Services
of the Senate and the Committee on National Security of
the House of Representatives a report on military readi-
ness. The report for any quarter shall be based on assess-
ments that are provided during that quarter—
‘‘(1) to any council, committee, or other body of
the Department of Defense (A) that has responsibil-
ity for readiness oversight, and (B) the membership
of which includes at least one civilian officer in the
Office of the Secretary of Defense at the level of As-
sistant Secretary of Defense or higher;
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‘‘(2) by senior civilian and military officers of
the military departments and the commanders of the
unified and specified commands; and
‘‘(3) as part of any regularly established proc-
ess of periodic readiness reviews for the Department
of Defense as a whole.
‘‘(b) MATTERS TO BE INCLUDED.—Each such re-
port—
‘‘(1) shall specifically describe identified readi-
ness problems or deficiencies and planned remedial
actions; and
‘‘(2) shall include the key indicators and other
relevant data related to the identified problem area
or deficiency.
‘‘(c) CLASSIFICATION OF REPORTS.—Reports under
this section shall be submitted in unclassified form and
may, as the Secretary determines necessary, also be sub-
mitted in classified form.’’.
(2) The table of sections at the beginning of such
chapter is amended by adding at the end the following
new item:
‘‘452. Quarterly readiness reports.’’.
(b) EFFECTIVE DATE.—Section 452 of title 10, United
States Code, as added by subsection (a), shall take effect
with the calendar-year quarter during which this Act is
enacted.