I
104TH CONGRESS
1ST SESSION
H. R. 1368
To amend title 10, United States Code, to modernize Department of Defense
acquisition procedures, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 30, 1995
Mr. KASICH (for himself, Mr. HOKE, Ms. MOLINARI, and Mr. BASS) intro-
duced the following bill; which was referred to the Committee on National
Security, and in addition to the Committee on Government Reform and
Oversight, for a period to be subsequently determined by the Speaker, in
each case for consideration of such provisions as fall within the jurisdic-
tion of the committee concerned
A BILL
To amend title 10, United States Code, to modernize Depart-
ment of Defense acquisition procedures, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Department of Defense
Acquisition Management Reform Act of 1995’’.
SEC. 2. TABLE OF CONTENTS.
The table of contents for this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
TITLE I—PERFORMANCE BASED ACQUISITION PROCESS
Subtitle A—Performance Goals
Sec. 101. Strengthened reporting requirement.
Sec. 102. Termination of major defense acquisition programs not meeting
goals.
Sec. 103. Enhanced performance incentives for acquisition workforce.
Subtitle B—Results-Oriented Acquisition Process
Sec. 111. Revision of regulations relating to acquisition of major systems and
information technology systems.
Sec. 112. Results oriented acquisition program cycle.
Sec. 113. Operational test and evaluation requirements in relation to low-rate
production.
Sec. 114. Acquisition of information technology.
Subtitle C—Rapid Contracting
Sec. 121. Goal.
Sec. 122. Authority to limit number of offerors.
Sec. 123. Preference for certified contractors.
Sec. 124. Consideration of past performance and eligibility certification.
Sec. 125. Encouragement of multiyear contracting.
Sec. 126. Encouragement of use of leasing authority.
Subtitle D—Performance Based Contract Management
Sec. 131. Unallowable costs.
Sec. 132. Alternatives approaches to contract management.
Sec. 133. Contractor share of gains and losses from cost, schedule, and per-
formance experience.
Subtitle E—Financial Management
Sec. 141. Phase funding of defense acquisition programs.
Sec. 142. Maximized benefit funding.
Sec. 143. Improved Department of Defense contract payment procedures.
Subtitle F—Defense Acquisition Workforce
Sec. 151. Consideration of past performance in assignment to acquisition posi-
tions.
Sec. 152. Termination of defense acquisition schools.
Subtitle G—Revision of Procurement Integrity Requirements
Sec. 161. Amendments to Office of Federal Procurement Policy Act.
Sec. 162. Amendments to title 18, United States Code.
Sec. 163. Repeal of superseded and obsolete laws.
Sec. 164. Implementation.
Subtitle H—Clerical Amendments
Sec. 171. Clerical amendments to title 10.
Sec. 172. Other laws.
TITLE II—REORGANIZATION AND REFORM OF THE
DEFENSE ACQUISITION SYSTEM
Subtitle A—Streamlining and Improvement of Acquisition
Management
Sec. 201. Reorganization of acquisition authority.
Sec. 202. Joint foreign products development.
Subtitle B—Transfer of Functions
Sec. 211. Transfers.
Sec. 212. Savings provisions.
Subtitle C—Conforming Amendments
Sec. 221. Modification of the responsibility of the Under Secretary of Defense
(Comptroller) for defense acquisition budgets.
Sec. 222. The defense acquisition work force.
Sec. 223. Procurement procedures generally.
Sec. 224. Research and development.
Sec. 225. Miscellaneous procurement provisions.
Sec. 226. Major defense acquisition programs.
Sec. 227. Service specific acquisition authority.
Sec. 228. Other laws.
Subtitle D—Effective Date
Sec. 241. Effective date.
TITLE III—DEPOT-LEVEL MAINTENANCE
Sec. 301. Elimination of 60/40 rule for public / private division of depot-level
maintenance workload.
Sec. 302. Preservation of core maintenance and repair capability.
Sec. 303. Performance of depot-level maintenance workload by private sector
whenever possible.
TITLE I—PERFORMANCE BASED
ACQUISITION PROCESS
Subtitle A—Performance Goals
SEC. 101. STRENGTHENED REPORTING REQUIREMENT.
Section 2220(b) of title 10, United States Code, is
amended in the first sentence by striking out ‘‘an assess-
ment of whether major and nonmajor acquisition pro-
grams of the Department of Defense are achieving’’ and
inserting in lieu thereof ‘‘an assessment, for each Depart-
ment of Defense appropriation account, of whether the
major and nonmajor acquisition programs funded from
such account are achieving’’.
SEC. 102. TERMINATION OF MAJOR DEFENSE ACQUISITION
PROGRAMS NOT MEETING GOALS.
Section 2220 of title 10, United States Code, is amend-
ed by adding at the end the following:
‘‘(d) TERMINATION OF PROGRAMS SIGNIFICANTLY
UNDER GOALS.—The Secretary of Defense shall termi-
nate any major defense acquisition program that—
‘‘(1) is more than 50 percent over the cost goal
established for a phase of the program;
‘‘(2) fails to achieve at least 50 percent of the
performance capability goals established for a phase
of the program; or
‘‘(3) is more than 50 percent behind schedule,
as determined in accordance with the schedule goal
established for a phase of the program.’’.
SEC. 103. ENHANCED PERFORMANCE INCENTIVES FOR AC-
QUISITION WORKFORCE.
(a) CLARIFICATION OF REQUIREMENTS FOR SYSTEM
OF INCENTIVES.—Subsection (b) of section 5001 of the
Federal Acquisition Streamlining Act of 1994 (Public Law
103–355; 108 Stat. 3350; 10 U.S.C. 2220 note) is
amended—
(1) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively;
(2) by designating the second sentence as para-
graph (2); and
(3) by inserting ‘‘(1)’’ after ‘‘(b) ENHANCED
SYSTEM OF PERFORMANCE INCENTIVES.—’’; and
(4) by adding at the end the following:
‘‘(3) The Secretary shall include in the enhanced sys-
tem of incentives the following:
‘‘(A) Pay bands.
‘‘(B) Significant and material pay and pro-
motion incentives to be awarded, and significant and
material unfavorable personnel actions to be im-
posed, under the system exclusively, or primarily, on
the basis of the contributions of personnel to the
performance of the acquisition program in relation
to cost goals, performance goals, and schedule goals.
‘‘(C) Provisions for pay incentives and pro-
motion incentives to be awarded under the system
only if—
‘‘(i) the cost of the acquisition program is
less than 90 percent of the baseline parameter
established for the cost of the program under
section 2435 of title 10, United States Code;
(c) IMPLEMENTATION
OF INCENTIVES SYSTEM.—
Section 5001 of the Federal Acquisition Streamlining Act
of 1994 is further amended by adding at the end the
following:
‘‘(d) IMPLEMENTATION OF INCENTIVES SYSTEM.—
(1) The Secretary shall complete the review required by
subsection (b) and take such actions as are necessary to
provide an enhanced system of incentives in accordance
with such subsection not later than October 1, 1997.
‘‘(2) Not later than October 1, 1996, the Secretary
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 actions taken
to satisfy the requirements of paragraph (1).’’.
Subtitle B—Results-Oriented
Acquisition Process
SEC. 111. REVISION OF REGULATIONS RELATING TO ACQUI-
SITION OF MAJOR SYSTEMS AND INFORMA-
TION TECHNOLOGY SYSTEMS.
Not later than October 1, 1996, the Secretary of De-
fense shall revise the regulations of the Department of De-
fense relating to the acquisition of major systems and of
information technology systems to ensure that, in the ac-
quisition of those systems, program managers focus on
achieving results rather than on preparing and transmit-
ting reports and building consensus among interested
persons.
SEC. 112. RESULTS ORIENTED ACQUISITION PROGRAM
CYCLE.
(a) CYCLE DEFINED.—Chapter 131 of title 10,
United States Code, is amended by adding at the end the
following:
‘‘§ 2221. Results oriented acquisition program cycle
‘‘(a) PROGRAM PHASES.—The Secretary of Defense
shall define in regulations a simplified acquisition program
cycle that is results-oriented and consists of the following
phases:
‘‘(1) The integrated decision team meeting
which—
‘‘(A) may be requested by a potential user
of the system or component to be acquired, the
head of a laboratory, or a program office on
such bases as the emergence of a new military
requirement, cost savings opportunity, or new
technology opportunity;
‘‘(B) shall be conducted by the program
executive officer;
‘‘(C) shall include representatives of com-
manders of unified and specified combatant
commands, all armed forces (other than the
Coast Guard), laboratories, and industry; and
‘‘(D) shall result in the team recommend-
ing to the potential user a range of solutions for
meeting user requirements or for evaluating op-
portunities;
‘‘(E) shall be completed within one to three
months.
‘‘(2) The prototype development and testing
phase which—
‘‘(A) shall include operational tests and
concerns relating to manufacturing operations
and life cycle support;
‘‘(B) shall be completed within 6 to 36
months; and
‘‘(C) shall produce sufficient numbers of
prototypes to assess operational utility.
‘‘(3) Product integration, development, and
testing which—
‘‘(A) shall include full-scale development,
operational testing, and integration of compo-
nents; and
‘‘(B) shall be completed within one to five
years.
‘‘(4) Production, integration into existing sys-
tems, or production and integration into existing
systems.
‘‘(b) RELATIONSHIP BETWEEN EXTENT OF TECH-
NICAL RISK AND COMPLETION OF PHASES.—(1) The time
constraints set forth in subsections (a)(1)(E), (a)(2)(B),
and (a)(3)(B) establish maximum limits for completion of
the acquisition program cycle and for each phase of the
program cycle. The regulations prescribed for the acquisi-
tion program cycle shall provide for reducing the maxi-
mum time limits for an acquisition program in relation
to the degree of the technical difficulty that is involved
in the execution of the various recommendations developed
for the program in the integrated decision team phase
under subsection (a)(1)(D).
‘‘(2) The regulations shall provide three alternatives
for maximum time limits that are to apply to completion
of the acquisition program cycle for a program and for
each phase of the program cycle, as follows:
‘‘(A) In the case of an acquisition that involves
complex technical risks and integration issues, com-
pletion within the maximum time limits set forth in
subsection (a).
‘‘(B) In the case of an acquisition of a compo-
nent primarily using existing technology or of a
modification of a component or system primarily
using existing technology, accelerated completion.
‘‘(C) In the case of an acquisition of a commer-
cial item or a nondevelopmental item, relatively
rapid completion.
‘‘(c) SINGLE MAJOR DECISION POINT.—(1) The ac-
quisition program approval process within the Department
of Defense shall have one major decision point which shall
occur for an acquisition program before that program pro-
ceeds into product integration, development, and testing.
‘‘(2) At the major decision point for an acquisition
program, the Under Secretary of Defense for Acquisition,
in consultation with the Vice Chairman of the Joint Chiefs
of Staff, shall—
‘‘(A) review the program;
‘‘(B) determine whether the program should
continue to be carried out beyond product integra-
tion and development; and
‘‘(C) decide whether—
‘‘(i) to direct the program manager to re-
quest an integrated decision team meeting;
‘‘(ii) to proceed into product integration or
development; or
‘‘(iii) to terminate the program.
‘‘(3) In the review of an acquisition program, the
Under Secretary shall consider the potential benefits,
independent cost estimates, affordability, needs, and risks
of the program.
‘‘(d) USER INVOLVEMENT
IN INTEGRATION MAT-
TERS.—The regulations under subsection (a) shall ensure
that the potential users (within the military departments)
of an item being acquired under the program cycle set
forth in subsection (a) are afforded an opportunity to par-
ticipate meaningfully in the acquisition decisions concern-
ing such item during the phases described in paragraphs
(3) and (4) of that subsection.’’.
(b) CONFORMING AMENDMENTS.—
(1) COORDINATION
AND
COMMUNICATION
OF
DEFENSE RESEARCH ACTIVITIES.—Section 2364 of
title 10, United States Code, is amended—
(A) in subsection (b)(5), by striking out
‘‘making milestone 0, milestone I, and mile-
stone II decision’’ and inserting in lieu thereof
‘‘the integrated decision team meeting, the
making of the decision at the single major deci-
sion point under subsection (c) of section 2221
of this title, and, as appropriate, the making of
other acquisition program decisions during the
acquisition program cycle described in section
2221 of this title’’; and
(B) by striking out subsection (c).
(2) SURVIVABILITY
AND
LETHALITY
TEST-
ING.—Section 2366(c) of such title is amended by
striking out ‘‘engineering and manufacturing devel-
opment’’ in paragraph (1) and in the second sen-
tence of paragraph (2) and inserting in lieu thereof
‘‘product integration, development, and testing’’.
(3) LOW-RATE INITIAL PRODUCTION OF NEW
SYSTEMS.—Section 2400(a)(2) of such title is
amended by striking out ‘‘engineering and manufac-
turing development’’ and inserting in lieu thereof
‘‘product integration, development, and testing’’.
(4) SELECTED ACQUISITION REPORTS.—Section
2432 of such title is amended—
(A) in subsection (b)(3)(A)(i), by striking
out ‘‘engineering and manufacturing develop-
ment’’ and inserting in lieu thereof ‘‘product in-
tegration, development, and testing’’;
(B) in subsection (c)(3)(A), by striking out
‘‘engineering and manufacturing development
phase or has completed that stage’’ and insert-
ing in lieu thereof ‘‘product integration, devel-
opment, and testing phase or has completed
that phase’’;
(C) in subsection (h)(1)—
(i) in the first sentence, by striking
out ‘‘engineering and manufacturing devel-
opment’’ and inserting in lieu thereof ‘‘pro-
totype development and testing’’; and
(ii) in the second sentence, by striking
out ‘‘engineering and manufacturing devel-
opment’’ and inserting in lieu thereof
‘‘product integration, development, and
testing’’.
(5) 
MAJOR
DEFENSE
ACQUISITION
PRO-
GRAMS.—
(A) INDEPENDENT
COST
ESTIMATES.—
Section 2434(a) of such title is amended by
striking out ‘‘engineering and manufacturing
development, or the production and deploy-
ment,’’ and inserting in lieu thereof ‘‘product
integration, development, and testing’’.
(B) 
BASELINE
DESCRIPTION.—Section
2435 of such title is amended—
(i) in subsection (b), by striking out
‘‘engineering and manufacturing develop-
ment’’ and inserting in lieu thereof ‘‘proto-
type development and testing’’; and
(ii) by striking out subsection (c) and
inserting in lieu thereof the following:
‘‘(c) SCHEDULE.—A baseline description for a major
defense acquisition program shall be prepared under this
section—
‘‘(1) before the program enters prototype devel-
opment and testing;
‘‘(2) before the program enters product integra-
tion and development; and
‘‘(3) before the program enters production, in-
tegration into existing systems, or production and
integration into existing systems.’’.
SEC. 113. OPERATIONAL TEST AND EVALUATION REQUIRE-
MENTS IN RELATION TO LOW-RATE PRODUC-
TION.
(a) REQUIREMENTS.—Section 2399 of title 10,
United States Code, is amended to read as follows:
‘‘§ 2399. Operational test and evaluation of major sys-
tems
‘‘(a) CONDITION FOR PROCEEDING INTO LOW-RATE
INITIAL PRODUCTION.—(1) The Secretary of Defense
may not issue a notice to proceed with production of a
major system until—
‘‘(A) at least one phase of initial operational
test and evaluation has been completed, during the
prototype development and testing phase and again
during the product integration, development, and
testing phase, in order to demonstrate that the sys-
tem—
‘‘(i) meets the minimum performance re-
quirements established for the system;
‘‘(ii) is suitable for the purposes for which
the system is to be acquired; and
‘‘(iii) does not require significant design
changes or other significant modifications in
order to demonstrate required operational capa-
bilities; and
‘‘(B) the Director of Operational Test and
Evaluation has certified to the Secretary and to the
congressional defense committees that—
‘‘(i) the test and evaluation performed on
the system were adequate; and
‘‘(ii) the conditions set forth in clauses (i),
(ii), and (iii) of subparagraph (A) were satis-
fied.
‘‘(2) The Secretary may waive the requirements of
paragraph (1)(B) in the case of a major system if the
Secretary—
‘‘(A) determines and certifies to the congres-
sional defense committees that the waiver is vital to
national security interests; or
‘‘(B) certifies to the congressional defense com-
mittees that the Secretary has information that
demonstrates that the conditions set forth in clauses
(i), (ii), and (iii) of paragraph (1)(A) can be satis-
fied without increasing—
‘‘(i) the production unit cost of the system
by more than 10 percent over the production
unit cost estimated at the time of the waiver;
and
‘‘(ii) the production period for the system
by more than 10 percent over the production
period estimated at the time of the waiver.
‘‘(3) Paragraph (1) does not apply to acquisition of
a naval vessel or a satellite.
‘‘(b) CONDITION FOR PROCEEDING BEYOND LOW-
RATE INITIAL PRODUCTION.—The Secretary of Defense
shall provide that a program for the acquisition of a major
system may not proceed beyond low-rate initial production
until initial operational test and evaluation of the program
is completed.
‘‘(c) OPERATIONAL TEST
AND EVALUATION.—(1)
Operational testing of a major system may not be con-