ticipated product improvement under subparagraph (C) of 
that paragraph.’’. 
SEC. 323. AUTHORIZATION OF USE OF WORKING-CAPITAL 
FUNDS FOR ACQUISITION OF CERTAIN ITEMS. 
Section 2208 of title 10, United States Code, as amend-
ed by section 332, is further amended by adding at the end 
the following new subsection: 
‘‘(t) ACQUISITION THRESHOLD FOR WEAPONS SYSTEM 
MODIFICATION, IMPROVEMENT
AND LIFECYCLE EXTEN-
SION.— (1) Any of the following items may be provided 
through working-capital funds, if the item has a unit cost 
of not more than $500,000: 
‘‘(A) An item that is materiel for supplies or 
supply chain management, assemblies, spare or re-
pair parts, modification kits, or any other item of 
equipment to provide maintenance, repair, or over-
haul and rework. 
‘‘(B) An item for continuous technology refresh-
ment to provide newer technologies that improve reli-
ability and maintainability, extend the useful life, en-
hance safety, lower maintenance costs, provide per-
formance enhancement, or expand the performance 
capability of a weapons system platform. 
‘‘(2) With respect to an item described in paragraph 
(1), the Secretary of each military department may increase 
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the acquisition threshold under paragraph (1) to an amount 
that does not exceed $1,000,000, if the Secretary— 
‘‘(A) determines the increase is necessary to 
maintain core logistics capabilities required by sec-
tion 2464 of this title; and 
‘‘(B) not later than 30 days after such an in-
crease, notifies Congress of the increase and the rea-
sons for the increase. 
‘‘(3) An item described in paragraph (1) may be an 
item used for a commercial- or industrial-type function per-
formed at a Center of Industrial and Technical Excellence 
designated under section 2474 of this title.’’. 
SEC. 324. MODIFICATION TO PUBLIC-PRIVATE COMPETI-
TION REQUIREMENTS BEFORE CONVERSION 
TO CONTRACTOR PERFORMANCE. 
(a) COMPARISON OF RETIREMENT SYSTEM COSTS.— 
Section 2461(a)(1) of title 10, United States Code is amend-
ed— 
(1) in subparagraph (F), by striking ‘‘and’’ at 
the end; 
(2) by redesignating subparagraph (G) as sub-
paragraph (H); and 
(3) by inserting after subparagraph (F) the fol-
lowing new subparagraph (G): 
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‘‘(G) requires that the contractor shall not receive 
an advantage for a proposal that would reduce costs 
for the Department of Defense by— 
‘‘(i) not making an employer-sponsored 
health insurance plan (or payment that could be 
used in lieu of such a plan), health savings ac-
count, or medical savings account, available to 
the workers who are to be employed to perform 
the function under the contract; 
‘‘(ii) offering to such workers an employer- 
sponsored health benefits plan that requires the 
employer to contribute less towards the premium 
or subscription share than the amount that is 
paid by the Department of Defense for health 
benefits for civilian employees of the Department 
under chapter 89 of title 5; or 
‘‘(iii) offering to such workers a retirement 
benefit that, in any year, costs less than the an-
nual retirement cost factor applicable to civilian 
employees of the Department of Defense under 
chapter 84 of title 5; and’’. 
(b) CONFORMING AMENDMENTS.—Such title is further 
amended— 
(1) by striking section 2467; and 
(2) in section 2461— 
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(A) by redesignating subsections (b) through 
(d) as subsections (c) through (e); and 
(B) by inserting after subsection (a) the fol-
lowing new subsection (b): 
‘‘(b) REQUIREMENT TO CONSULT DOD EMPLOYEES.— 
(1) Each officer or employee of the Department of Defense 
responsible for determining under Office of Management 
and Budget Circular A-76 whether to convert to contractor 
performance any function of the Department of Defense— 
‘‘(A) shall, at least monthly during the develop-
ment and preparation of the performance work state-
ment and the management efficiency study used in 
making that determination, consult with civilian em-
ployees who will be affected by that determination 
and consider the views of such employees on the devel-
opment and preparation of that statement and that 
study; and 
‘‘(B) may consult with such employees on other 
matters relating to that determination. 
‘‘(2)(A) In the case of employees represented by a labor 
organization accorded exclusive recognition under section 
7111 of title 5, consultation with representatives of that 
labor organization shall satisfy the consultation require-
ment in paragraph (1). 
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‘‘(B) In the case of employees other than employees re-
ferred to in subparagraph (A), consultation with appro-
priate representatives of those employees shall satisfy the 
consultation requirement in paragraph (1). 
‘‘(C) The Secretary of Defense shall prescribe regula-
tions to carry out this subsection. The regulations shall in-
clude provisions for the selection or designation of appro-
priate representatives of employees referred to in paragraph 
(2)(B) for purposes of consultation required by paragraph 
(1)’’. 
(c) TECHNICAL AMENDMENTS.—Section 2461 of such 
title, as amended by subsection (a) is further amended— 
(1) in subsection (a)(1)— 
(A) in subparagraph (B), by inserting after 
‘‘2003’’ the following: ‘‘, or any successor cir-
cular’’; and 
(B) in subparagraph (D), by striking ‘‘and 
reliability’’ and inserting ‘‘, reliability, and 
timeliness’’; and 
(2) in subsection (c)(2), as redesignated under 
subsection (b)(2), by inserting ‘‘of’’ after ‘‘examina-
tion’’. 
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SEC. 325. PUBLIC-PRIVATE COMPETITION AT END OF PE-
RIOD SPECIFIED IN PERFORMANCE AGREE-
MENT NOT REQUIRED. 
Section 2461(a) of title 10, United States Code, is 
amended by adding at the end the following new paragraph: 
‘‘(4) A public-private competition may not be re-
quired under Office of Management and Budget Cir-
cular A-76 or any other provision of law at the end 
of the period specified in the performance agreement 
for any function of the Department of Defense per-
formed by Department of Defense civilian employ-
ees.’’. 
SEC. 326. GUIDELINES ON INSOURCING NEW AND CON-
TRACTED OUT FUNCTIONS. 
(a) CODIFICATION AND REVISION OF REQUIREMENT 
FOR GUIDELINES.— 
(1) IN
GENERAL.—Chapter 146 of title 10, 
United States Code, is amended by inserting after sec-
tion 2462 the following new section: 
‘‘§ 2463. Guidelines for use of civilian employees to 
perform Department of Defense functions 
‘‘(a) GUIDELINES REQUIRED.—The Under Secretary 
of Defense for Personnel and Readiness shall devise and im-
plement guidelines to ensure that consideration is given to 
using, on a regular basis, civilian employees of the Depart-
ment of Defense to perform new functions and functions 
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that are performed by contractors and could be performed 
by such civilian employees. The Secretary of a military de-
partment may prescribe regulations, if the Secretary deter-
mines such regulations are necessary for implementing such 
guidelines within that military department. 
‘‘(b) SPECIAL CONSIDERATION FOR CERTAIN FUNC-
TIONS.—The guidelines implemented under subsection (a) 
shall provide for special consideration to be given to using 
civilian employees of the Department of Defense to perform 
any function that— 
‘‘(1) was performed by a civilian employee of the De-
partment of Defense at any time on or after October 1, 
1980; 
‘‘(2) is associated with the performance of an inher-
ently governmental function (as that term is defined in sec-
tion 5 of the Federal Activities Inventory Reform Act of 
1998 (31 U.S.C. 501 note)); 
‘‘(3) has been performed by a contractor pursuant to 
a contract awarded on a non-competitive basis; or 
‘‘(4) has been performed poorly by a contractor because 
of excessive costs or inferior quality, as determined by a 
contracting officer. 
‘‘(c) EXCLUSION OF CERTAIN FUNCTIONS FROM COM-
PETITIONS.—No public-private competition may be re-
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quired under this chapter for any function of the Depart-
ment of Defense that— 
‘‘(1) is associated with the performance of an inher-
ently governmental function; 
‘‘(2) has been performed by a contractor pursuant to 
a contract that was awarded on a noncompetitive basis, in-
cluding a contract awarded without the conduct of a public- 
private competition under this section; or 
‘‘(3) has been performed poorly by a contractor because 
of excessive costs or inferior quality, as determined by a 
contracting officer. 
‘‘(d) LIMITATION ON COMPETITIONS FOR NEW AND EX-
PANDED FUNCTIONS.—(1) A public-private competition 
may not be conducted under this section for any Depart-
ment of Defense function before— 
‘‘(A) the commencement of the performance by 
civilian employees of the Department of Defense of a 
new Department of Defense function; 
‘‘(B) the commencement of the performance by 
civilian employees of the Department of Defense of 
any Department of Defense function pursuant to the 
guidelines implemented under subsection (a); 
‘‘(C) the expansion of the scope of any Depart-
ment of Defense function performed by civilian em-
ployees of the Department of Defense. 
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‘‘(2) The Secretary may use the flexible hiring author-
ity available to the Secretary under the National Security 
Personnel System, as established pursuant to section 9902 
of title 5 to facilitate the performance by civilian employees 
of the Department of Defense of functions described in sub-
section (b).’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions at the beginning of such chapter is amended by 
inserting after the item relating to section 2462 the 
following new item: 
‘‘2463. Guidelines for use of civilian employees to perform Department of Defense 
functions.’’. 
(3) DEADLINE FOR ISSUANCE OF GUIDELINES.— 
(A) DEADLINE.—The Secretary of Defense 
shall implement the guidelines required under 
section 2463 of title 10, United States Code, as 
added by paragraph (1), by not later than 60 
days after the date of the enactment of this Act. 
(B) MORATORIUM ON COMPETITIONS UNTIL 
GUIDELINES ARE IMPLEMENTED.—No study or 
competition may be begun or announced pursu-
ant to section 2461 of title 10, United States 
Code, or otherwise pursuant to Office of Manage-
ment and Budget Circular A-76 relating to the 
possible conversion to performance by a con-
tractor of any Department of Defense function 
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until the guidelines required under section 2463 
of such title, as added by paragraph (1) are im-
plemented. 
(b) ESTABLISHMENT OF INVENTORY OF WORK PER-
FORMED
BY CONTRACTORS.—Section 115a of title 10, 
United States Code is amended— 
(1) in subsection (a)— 
(A) by striking ‘‘and’’ at the end of para-
graph (1); 
(B) by striking the period at the end of 
paragraph (2) and inserting ‘‘; and’’; 
(C) by adding at the end the following new 
paragraph: 
‘‘(3) the estimated manpower requirements of 
each component of the Department of Defense pro-
jected to be met by contractor performance of Depart-
ment of Defense functions and the estimated funding 
requirements associated with such contractor perform-
ance for the next fiscal year.’’. 
(2) by adding at the end the following new sub-
section: 
‘‘(i) In each report, the Secretary shall include for each 
military department, combatant command, and major de-
fense organization, a separate report describing contractor 
performance of Department of Defense functions during the 
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preceding fiscal year. Chapter 35 of title 44 shall not apply 
to such report. In each such report, the Secretary shall— 
‘‘(1) specify the number of work-year equivalents 
performed by contractors in performing functions for 
each Department; 
‘‘(2) identify the contracting organization, the 
component of the Department of Defense admin-
istering the contract, and the organization whose re-
quirements are being met through the contractor per-
formance of the function, with an explanation in the 
event these organizational elements are distinct. 
‘‘(3) identify each organization specified under 
paragraph (2) at the unit level of detail, as main-
tained in the Department’s manpower documentation 
systems; 
‘‘(4) identify the funding source for the contract 
under which the function is performed by appropria-
tion and operating agency, and the associated fund-
ing levels obligated and disbursed for the reported 
work-year equivalents; 
‘‘(5) identify the functions and missions per-
formed by the contractor; 
‘‘(6) specify whether the contract for the function 
was entered into pursuant to a public-private com-
petition; and 
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