National Defense Authorization Act for Fiscal Year 2024: Key Procurement Provisions — Study Guide

Photo credit

Introduction

Every year, Title VIII of the National Defense Authorization Act (NDAA) serves as an important vehicle for federal procurement reform. The most recent NDAA’s provisions on procurement (in Title VIII and elsewhere in the act) are summarized below.

The House version of the bill was H.R. 2670 (committee summary). The Senate version of the bill was S. 2226 (committee summary). As is discussed below, the conference report reflected a compromise version of the bill, between the two houses of Congress. (See Congressional Research Service summary.) The conference report (H. Rep. 118-301) was approved by the Senate on December 13, 2023, and by the House on December 14, 2023. The legislation was signed by President Biden on December 22, 2023 (signing statement), and it became Public Law No. 118-31, the National Defense Authorization Act for Fiscal Year 2024.

As Melissa Prusock, Moshe Schwartz, Eleanor Ross and Mike Schaengold noted in their pieces on the most recent NDAA, an important difference “between this year’s NDAA compared to the FY 2022 and 2023 NDAAs is the return to a more regular legislative process. For the FY 2022 and 2023 NDAAs, the House passed its version of the NDAA, but the Senate was unable to pass the bill that was reported out favorably by the Senate Armed Services Committee (SASC). As a result, there was no formal conference and the committees held an ‘informal conference'” — a departure from the normal legislative process, used in this cycle, through which the House and Senate versions of a bill are resolved in a conference committee report. See Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Feature Comment: The Significance Of The FY 2024 NDAA To Federal Procurement Law—Part I, 66 Government Contractor ¶ 8 (Jan. 17, 2024); Part II, 66 Government Contractor ¶ 13 (Jan. 24, 2024) (both parts available here)).

A number of other non-profit organizations, firms and authors, cited throughout this piece, have also produced very useful summaries of the NDAA.

Inflation Relief

The NDAA for FY24 includes provisions to afford inflation relief to vendors (see Perkins Coie summary), and addresses economic price adjustments to accommodate changing prices and costs (see FAR 16.203). For a discussion of the causes of the recent inflation, see Ben S. Bernanke & Olivier Blanchard, What caused the U.S. pandemic-era inflation? (Brookings June 2023).

Section 824 of the NDAA, building on special inflation-related relief in the last NDAA, addresses the post-pandemic surge in inflation by extending the relief authority through December 31, 2024. (See Crowell & Moring summary; Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part I, supra.)

Section 826 allows for the use of amounts authorized under the statute to be used to allow contractors economic price adjustments (per FAR Part 16). As Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part I, supra, note, “the [Joint Explanatory Statement accompanying the legislation] states that the Senate amendment to this provision ‘clarif[ies] that [DOD] may seek consideration when considering whether to modify contracts to include an economic price adjustment clause.’ (Emphasis added.) This JES statement is not reflected in the plain language of § 826. The statute is silent on requiring—or not requiring—consideration for modifying the terms of an existing contract (or option) to provide an economic price adjustment.”

Procurement Flexibility: Commercial Products and Services – Innovative Technologies — Other transactions

Continuing with past trends, the NDAA for FY2024 included a number of provisions intended to make it easier for the Defense Department to purchase commercial goods and technology flexibly, with special authorities but also with adequate protections as to price and quality. (See Perkins Coie summary.)

Section 801 would allow vendors to demand a copy of any memorandum summarizing the commerciality determination regarding a product or service, which vendors could use in advocating the commerciality of their goods or services. (See Wiley summary.) See, for example, the detailed Defense Logistics Agency (DLA) procedures governing commerciality memoranda, DLAD 12.102.

Section 802 builds on prior efforts to identify contractors that refuse to provide requested other-than-certified cost and pricing data to confirm that the prices they are offering the government are reasonable. See Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part I, supra (detailed history of efforts, including Defense Department implementation, to pressure contractors to provide requested data). That controversy, as the CRS summary of the NDAA noted, spilled into the media — most importantly, into a very high-profile “60 Minutes” report — on alleged over-pricing issues at the Defense Department, which generated strong congressional (and public) interest on the topic.

Section 808 would launch a pilot program for the use of innovative intellectual property strategies to acquire technical data rights. As Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part I, supra, note, “DOD’s substantial problems with acquiring sufficient technical data necessary for future operation and maintenance, which if not done properly ‘can lead’ and has led ‘to surging [sustainment] costs’ and ‘reduced mission readiness,’ is discussed in [Congressional Research Service], In Focus IF12083 (April 22, 2022), Intellectual Property & Technical Data in DOD Acquisitions, and Government Accountability Office, . . . Defense Acquisitions: DOD Should Take Additional Actions to Improve How It Approaches Intellectual Property (GAO-22-104752), available at www.gao.gov/products/gao-22-104752.”

Section 809 establishes a pilot program to award “anything-as-a-service” contracts (defined by the legislation as “consumption-based solutions to address any defense need . . . that is feasible to provide users on-demand access, quickly add newly released capabilities, and bill based on actual usage at fixed price units”), with metrics that will allow DoD to compare whether this approach is cheaper and faster. As Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part I, supra, point out, contracts and other agreements under this pilot program may be exempt from normal competition and cost data requirements.

Section 811 calls for DoD to develop a streamlined process for contract requirements which includes rapid validation of commercial products and services. (See Crowell & Moring summary.)  The reformed requirements process is to “maximize[] the use of commercial products or commercial services . . . and allow[] for a broader range of new or alternative technological opportunities to be incorporated without the requirement being validated again.” The legislation calls for the Defense Department to “develop a formal career path, training, and structure for requirements managers.”

Section 813 calls upon the DoD to use its authority for “Commercial Solutions Openings” procurement (a special competitive process for buying innovative commercial products and services (see Defense Acquisition University summary)) at least four times every fiscal year.

Section 822 increases flexibility in the Defense Department’s use of other transactions authority (OTA) (see DoD Other Transactions Guide (2023)) for installation or facility prototyping, building on reforms in earlier legislation. See Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part I, supra.

Section 842 gives the Defense Department temporary special “other transaction” authority to establish a prototyping program that would reduce operational risks in a “contested” (conflict zone) logistics environment. The arrangements “can be based on other transaction authorities outlined in 10 USCA: crossservicing agreements (§ 2342), centers of industrial and technical excellence (§ 2474), procedures for urgent acquisition and deployment (§ 3601), research projects—other than contracts and grants (§ 4021), and authority for certain prototype projects (§ 4022).” Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part II, supra.

Section 874 calls for a pilot program to increase progress payments by up to 10% based on performance. (See Crowell & Moring summary.) This comes after the prior NDAA rejected a pilot program in favor of a GAO report (see Inside Defense report; GAO, Defense Contracting: More Insight into Use of Financing Payments Could Benefit DOD in Future Emergencies (Feb. 2022)).

Section 875 calls for DoD to conduct a study on creating a default presumption that acquired goods and services are commercial, and requiring that FAR Part 12’s more flexible procedures be used unless there has been a determination that a product or service is not commercial. (See Crowell & Moring summary.) Per the conference report, the study is to “provide recommendations on ways to improve the acquisition of commercial products and services.”

Environmental Sustainability

Section 318 would impose a one-year bar against the Defense Department requiring that defense contractors disclose greenhouse gas (GHG) inventory or emissions as a condition of receiving a defense contract. The bar would be permanent for “nontraditional” defense contractors. This could in effect stall implementation (at least for the Defense Department) of a pending Biden administration rule (discussed here) which would require contractors to disclose GHG emissions. (Image credit.)

Socioeconomic Requirements

Section 862 would tighten payment protections for subcontractors. (See Steven Koprince analysis; Crowell & Moring summary.)

Section 863 would increase Service-Disabled Veteran Owned Small Businesses‘ (SDVOSBs’) share of federal contracting, from 3% to 5%. (See Congressional Research Service report on SDVOSB program; Crowell & Moring legislative summary.)

Section 864 would bar SDVOSBs from self-certifying; the Small Business Administration will have to certify eligible SDVOSBs. This tightens an SBA rule which required certification with the agency. (See Stephanie Hagan/Winvale analysis.)

Section 865 calls for DoD contracting officers to consider the past performance of small businesses’ affiliates as well in proposal evaluation. (See Steven Koprince analysis; Morrison & Foerster summary.)

Restrictions on Dealing with Entities with Ties to China or Russia

The NDAA for FY2024 includes a number of provisions that restrict dealings with entities with ties to China or Russia. (See Arnold & Porter summary; Perkins Coie summary.)

Section 154 will impose new constraints on Defense Department purchases of batteries from certain Chinese companies.

Section 804 generally bars contracting with persons that have fossil fuel operations with Russia or its energy sector, though waivers and exceptions are available.

Section 805 prohibits contracting with companies with ties to the Chinese military. As detailed by Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part I, supra, the provision exempts many types of technologies and systems. This may be because of the difficulties experienced in implementing the blanket ban on Huawei (and related) products, per an earlier NDAA (see Congressional Research Service report).

Section 812 requires certification that DoD contractors do not hold consulting agreements with covered entities, including the Chinese and Russian governments. Vendors providing covered consulting services to the Defense Department must maintain conflict-of-interest mitigation plans (analogous to the organizational conflict of interest plans contemplated by FAR Subpart 9.5) to mitigate risks posed by their work with foreign firms and governments. (See Crowell & Moring summary.) The conference report noted that both the House and Senate versions of the bill included bans on consulting contracts “with firms that have in the last 5 years provided consulting services to the Chinese Government, the  Chinese Communist Party, the People’s Liberation Army, or other covered entities.” The final bill, per the conference report, included a clarifying amendment with “updated elements for the Conflict of Interest Mitigation Plan.” Under the legislation, a mitigation plan must address (1) risk identification, (2) a “written analysis, including a course of action for avoiding, neutralizing, or mitigating the actual or potential conflict of interest of such a covered contract with the Department of Defense”; (3) a description of “the procedures adopted by an entity to ensure that individuals who will be performing a covered contract will not . . . also provide any consulting services to any covered foreign entity”; and, (4) a description of the procedures under which the vendor will notify Defense Department overseers of an “unmitigated conflict of interest.” The new law comes against the backdrop of 2022 legislation (the Preventing Organizational Conflicts of Interest in Federal Acquisition Act, S. 3905) which called for an overhaul of the OCI rules (see Edward Arnold/Seyfarth Shaw analysis); implementing regulations for that OCI reform legislation are in process (FAR Case 2023-006 (status)), and a Notice of Proposed Rulemaking is expected in March 2024 (OMB/OIRA notice).

Section 825 bars DoD from contracting with entities that provide data to the Chinese national transportation public information platform LOGINK. A Voice of America (VOA) report quoted Michael Wessel, an expert in the field, who (like others) says “an alternative to LOGINK needs to be developed” because of the access to logistics information that LOGINK gives the Chinese government. But Gabe Collins, a fellow at Rice University’s Baker Institute for Public Policy and a former Department of Defense analyst, told VOA he “has not seen an alternative to LOGLINK ‘that can operate at that scale.'” The VOA report said that Collins “estimates that LOGINK collects data on as much as half of all global shipping capacity,” but that the NDAA ban “sends a ‘demand signal’ telling the marketplace it must invent an alternative to LOGINK, though [Collins] said it could take as long as five years to develop one.” As the VOA report noted, the NDAA provision “also requires the secretary of state to begin negotiations with allies and partners to remove LOGINK from their ports.” In his signing statement, President Biden said that this provision may conflict with the Executive branch’s authority to conduct foreign relations. (Photo credit.)

Section 1312 calls for the Defense Department to assess whether biotechnology firms should be identified as having ties to the Chinese military.

Sections 1821 to 1833, the “American Security Drone Act of 2023,” originally introduced as S.473, would impose new constraints on federal agencies’ purchase or use of drones from covered foreign entities, including certain Chinese firms. The legislation also calls for studies and policies on agencies’ procurement and use of unmanned aircraft systems (UAS). The committee report which accompanied the original legislation (S. Rep. 118-87) noted that while federal agencies “use UAS for tasks like land-use research, data collection, search and rescue operations, and monitoring the border,” reliance on UAS “complicates the ability of the federal government to protect the security of this [its], in part because, as of March 2020, more than 70% of UAS in the globally were manufactured and assembled by foreign- owned entities with affiliations that have divergent interests than the United States.”

Domestic Preferences – Security of Supply – International Trade

The NDAA for FY2024 includes a number of provisions calling for domestic preferences, including U.S.-only sources. (See Arnold & Porter summary.) At the same time, the legislation includes provisions to boost U.S. arms exports abroad, to ensure adequate arms stockpiles are available for U.S. allies, and to address other issues in foreign trade.

Section 810 calls for the Defense Department to “ensure that the program guidance for major defense acquisition programs . . . and for acquisition programs and projects” using rapid prototyping are revised to integrate exportability features – how to export the technology at issue. As the Defense Department explains, “DoD’s Defense Exportability Features (DEF) initiatives, which include the AT&L DEF Pilot Program and its associated DEF focus area under the Controlling Cost section in Better Buying Power (BBP) 2.0, encourage DoD program management to design and develop technology protection features in systems early in their acquisition life cycle to facilitate earlier foreign sales.”

Section 831 creates emergency acquisition authority to replenish U.S. stockpiles per urgent acquisition procedures when needed because defense articles have been provided to an ally in response to an attack by certain countries, such as Russia. (See Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part I, supra.)

Section 832 requires that U.S. flags used by the Defense Department be produced fully in the United States.

Section 833 addresses the sourcing of specialty metals, and would recognize an exception for specialty metals incorporated into a component (not an end item) in a country with a trade agreement with the United States. This is the latest in longstanding policy discussion over specialty metals, which are critical to arms manufacture; the debate has centered on preserving the U.S. domestic specialty metals industry and ensuring security of supply in times of conflict. See Valerie Grasso, Congressional Research Service, The Specialty Metals Clause: Oversight Issues and Options for Congress (2014); Congressional Research Service, Defense Primer: U.S. Defense Industrial Base (Apr. 2023). The new NDAA provision in effect tightens the existing rule under which “DOD uses the foundry location where the final melting or similar production of a specialty metal takes place to determine its origin. For example, titanium sponge—unwrought titanium that has not been melted—that has been manufactured in Kazakhstan, shipped to the United States, and melted into ingots at a foundry in Ohio would be considered compliant with the specialty metals domestic sourcing mandate.” Congressional Research Service, Defense Primer: Acquiring Specialty Metals and Sensitive Materials (Mar. 2023). The provision also calls for the Defense Department to submit an annual report indicating how much specialty metal from China, Iran, North Korea and Russia has been acquired and placed into DoD systems. See See Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part II, supra.

Section 835 raises the U.S.-content requirements on major defense acquisition programs, up to 60% and then to 75% in 2029. (As the conference report notes, purchases from nations with reciprocal defense procurement agreements with the U.S. Defense Department are exempt from these price preferences.) Congress has also called for a Defense Department report assessing the domestic source content of procurements for major defense programs. See Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part II, supra; see also Congressional Research Service, Domestic Content Restrictions: The Buy American Act and Complementary Provisions of Federal Law (2016) (comprehensive review of domestic content legislation); Christopher Yukins & Allen Green, International Trade Agreements and U.S. Procurement Law, in The Contractor’s Guide to International Procurement (American Bar Association 2018, Erin Loraine Felix & Marques Peterson, eds.).

Section 851 calls for the Defense Department to enhance its strategy for the National Technology and Industrial Base, to ensure “reliable sources of services, supplies, and materials that are critical to national security” should include “reducing reliance on potential adversaries for such services, supplies, and materials to the maximum extent practicable.” See Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part II, supra.

Section 856 launches a pilot program to assess supply chains in the Indo-Pacific theater. The Defense Department (per the conference report) is to “use a combination of government and commercial tools to analyze the supply chains of up to five key munitions identified as part of the Pacific Deterrence Initiative.”

Section 873 calls for improvements at the Defense Department to boost Foreign Military Sales. (See Crowell & Moring summary.) The conference report explained that the legislation (per the original Senate bill) is looking to “improve the process of foreign acquisition of U.S. defense articles through: (1) A pilot program for combatant commands to hire acquisition specialists as advisors; (2) A foreign acquisition industry day; (3) A Department of Defense (DOD) senior-level industry advisory group; (4) Establishment of DOD points of contact for Foreign Military Sales; and (5) Establishment of combatant command needs for exportability.”

Section 1414 calls for critical minerals “independence” by 2035; as a first step, the Defense Department is to submit a strategy to develop DoD supply chains that are not dependent on critical minerals from covered countries, including China, Iran, North Korea and Russia.

Section 3523 calls for the Department of Transportation to launch a study to evaluate how foreign state-owned enterprises’ interests in marine terminals at the largest U.S. ports may affect U.S. economic and national security.

Section 7405 calls for the Director of National Intelligence to assess the national security threat posed by cranes from identified firms and countries, including certain firms from China.

Defense Industrial Base

Section 857 would require concurrent notice to the Defense Department if a proposed merger or acquisition requires DoD review and the transaction must be noticed to the Justice Department or the Federal Trade Commission under the Clayton Act. (See Crowell & Moring summary; Arnold & Porter summary.) As Melissa Prusock, Moshe Schwartz, Eleanor Ross & Mike Schaengold, Part II, supra, noted, GAO “has recently identified various deficiencies in DOD’s review of proposed mergers or acquisitions impacting the U.S. defense industrial base. See Defense Industrial Base: DOD Needs Better Insight into Risks from Mergers and Acquisitions (GAO-24-106129), www.gao.gov/assets/d24106129.pdf. For example, the report concluded that ‘DOD’s insight into defense M&A is limited. [The very small DOD M&A office plus other DOD stakeholders] assessed an average of 40 M&A per year in fiscal years 2018 through 2022, which represents a small portion [about 10 percent] of defense M&A.’ DOD ‘focuses its resources on assessing high-dollar-value M&A for competition risks in support of antitrust reviews.'”

Artificial Intelligence

The NDAA includes a large number of provisions regarding artificial intelligence. (See Perkins Coie summary; Crowell & Moring summary.)

Section 1521 lends broad new authorities to the DoD’s Chief Digital and Artificial Intelligence Office (CDAO) to oversee issues of artificial intelligence in the Department.

Section 1523 gives the CDAO responsibility over the “digital infrastructure and procurement vehicles necessary” to manage data assets and analytics.

Section 1543 calls for a prize competition for contractors to develop technology that detects and highlights the use of generative AI. The use of prize competitions to spur innovation is not unique to Section 1543; Section 1525 of the act, for example, calls for a prize competition to support business systems modernization at the DoD. As the Congressional Research Service noted in a 2020 report, prize competitions “are a tool for incentivizing the achievement of scientific and technological innovation by offering monetary and nonmonetary benefits (e.g., recognition) to competition participants. Prize competitions have a long history of use in both the public and private sectors, but have gained popularity in recent years. Experts view federal prize competitions as an alternative policy instrument for spurring innovation, not a substitute for more traditional methods of federal support for research and innovation such as competitive research grants and procurement contracts. . . . Despite an increase in the use of federal prize competitions, there is limited information on their effectiveness and impact in spurring innovation and providing other potential benefits to the federal government.” Marcy Gallo, Federal Prize Competitions, CRS Report R45271 (2020).

Section 1544 calls for DoD to establish strategies for AI. For a view on the UK’s emerging policies for purchasing AI, see Sanchez-Graells, Albert, Responsibly Buying Artificial Intelligence: A ‘Regulatory Hallucination’ (November 24, 2023), Current Legal Problems 2023-24.

Section 6303 calls for the State Department to establish a new Chief Artificial Intelligence Officer.

Anti-Corruption

The NDAA for FY2024 included two major provisions to address corruption: the Foreign Extortion Prevention Act (FEPA) (to criminally prosecute foreign officials who solicit bribes) (Section 5101) and the “Combating Global Corruption Act” (Sections 5401-5406).

Foreign Extortion Prevention Act (FEPA)

Section 5101 extends the domestic U.S. anti-bribery statute (18 U.S.C. 201) to a wide array of foreign officials, to bar them from eliciting or receiving bribes. (See Ropes & Gray summary.) The bill (like many other similar pieces of legislation) was introduced as a standalone bill and then incorporated into the (almost certain to pass) NDAA. The core purpose of the new law is to fill a gap left by the Foreign Corrupt Practices Act — to protect U.S. citizens and companies working abroad from foreign officials’ demands for bribes (known as “demand-side” bribery). (See Transparency International Factsheet (July 2023); Skadden Arps summary.) The law was supported by a broad array of civil society and business groups. (See Transparency International press release (Dec. 2023). Some specifics of FEPA:

• Under FEPA, the covered foreign officials include (A) any employee of a foreign government, (ii) any senior foreign political official (per 31 CFR 1010.605 this includes senior officials of a major foreign political parties, senior executives of government-owned enterprises (and their family members and close associates); (B) employees of public international organizations; (C) anyone acting in official capacity for an agency or public international organization. (See Hogan Lovells summary.) For a discussion of difficulties in deciding which foreign officials to prosecute, see the 2019 analysis by Anton Moiseienko on the FCPA Blog.)
• Covered foreign officials could be criminally prosecuted by the United States if they corruptly demanded anything of value in return for (A) being influenced in a foreign act, (B) being induced to do (or not to do) any act in violation of their official duties, and (C) conferring any improper advantage, in connection with obtaining or retaining business.
• Like the Foreign Corrupt Practices Act (which prohibits giving bribes to foreign officials), the new law would apply extraterritorially as well.

Combating Global Corruption Act

Sections 5401-5406 of the 2024 NDAA constitute the “Combating Global Corruption Act.” These were included in the NDAA with strong support from the Senate Foreign Relations Committee. Some key elements of the Combating Global Corruption Act:

• Section 5402 defines “corrupt actors” under the Act to include any foreign persons or entities responsible for, or complicit in, acts of corruption, or any company in which a corrupt person or entity has a “significant stake.” “Corruption” is defined in the classic sense to mean the “unlawful exercise of entrusted public power for private gain, including by bribery, nepotism, fraud or embezzlement.” “Significant corruption” – a recurring focus of the Act — includes “corruption at a high level of government” which illegitimately distorts major decision-making or “other fundamental functions of governance,” or which involves “economically or socially large-scale government activities.”
• Section 5403 calls for the State Department to publish an annual public list of foreign countries “where the government is sustaining or making good progress on anti-corruption efforts” per the Act’s minimum standards (see Section 5404, below). The State Department is also to provide Congress with a classified list of foreign countries where the governments are not making progress against corruption, with a report on near- and long-term strategies for the United States.
• Section 5404 sets standards for foreign governments’ efforts against corruption. To meet those minimum standards, a foreign government must: pass laws and establish practices and policies that prohibit corruption; enforce those laws; punish corruption; and, make “serious and sustained” efforts to address corruption, including through prevention. In practice, this means criminalizing corruption – investigating and jailing corrupt officials, including those stationed abroad. Governments are to take steps against corruption, including protective measures, and to allow civil society to join in the fight against corruption. There must be an independent and effective judiciary, and the government must cooperate in international anti-corruption efforts. The rights of victims and whistleblowers must be recognized and protected, and the proceeds of corruption must be returned. Anti-money laundering (AML) measures (including those related to due diligence and beneficial ownership transparency) must be taken, and the government must not facilitate corruption abroad through, for example, state-directed investment. These measures will be assessed against international agreements, such as the United Nations Convention Against Corruption (which most nations have joined).
• Section 5405 calls for the State Department to submit a report on those that do not meet minimum standards for anti-corruption, or are engaged in corruption relating to the Nord Stream 2 pipeline, with a view to possible sanctions under the Global Magnitsky Human Rights Accountability Act.
• Section 5406 requires the State Department to designate an anti-corruption point of contact at U.S. diplomatic posts around the world. These officials will be responsible for promoting anti-corruption and good governance efforts in foreign countries.

Provisions Omitted

Bid Protest Provision Dropped: The House version of the NDAA bill would have imposed a “loser pays” fee-shifting provision on major contractors that lost bid protests at the Government Accountability Office (GAO). (See Wiley summary.) That type of fee-shifting provision was critically assessed in a 2022 report that David Drabkin and Chris Yukins produced for the Defense Department, at Congress’ request. Despite Congress’ decision to reject this “loser-pays” approach — which has been raised and tried before — the NDAA conference report stated: “The conferees note that frivolous protests to Department contracting decisions have the potential to be a burden on the Department, slow acquisition of capabilities, impose additional costs on the taxpayer, and disadvantage small business contractors with less resources to bring or fight protests. While data from the GAO and the RAND Corporation found that bid protests were rare, and that there were no indications of abuse by medium or large contractors, the conferees continue to support efforts to improve the handling of bid protests to ensure they are fair, equitable, and they provide opportunities for recourse for industry and the government. Additionally, the conferees note the impact that bridge contracts may have on incumbent contractors to protest awards with GAO, at the agency level, or with the U.S. Court of Federal Claims (COFC). However, the committee recognizes that a GAO loser pays pilot could encourage losing bidders to pursue protests at the agency and COFC levels, which may result in a more time-intensive and costly protest process, and thus higher costs and delayed timelines for the government.”

Other Transactions Report – GAO Study Required: The conference report noted: “The House bill contained a provision (sec. 833) that would require the Government Accountability Office to report on the Department of Defense’s use of other transaction authority contracts.” Although that requirement was dropped from the final bill, the conference report noted: “The conferees direct the Comptroller General of the United States to submit to the Committees on Armed Services of the Senate and the House of Representatives, not later than February 1, 2025, a report on the use of transactions authorized under sections 4021 and 4022 of title 10, United  States Code, including: (1) The extent to which such transactions are used in accordance with policy and guidance related to the use of such transactions; (2) The total number of transactions for each fiscal year made to nontraditional defense contractors (as defined in section 3014 of title 10, United States Code); and (3) A summary of such transactions to which the Department of Defense is a participant for which performance has not been completed on the date of submission of such report, including– (a) a description of the entity or agency responsible for any consortium; (b) the number of members in each consortium, including the percentage of such members who are nontraditional defense contractors for each such consortium; (c) the total amount awarded under such transactions to each consortium manager for fiscal years 2022 and 2023; (d) the total amount awarded under such transactions to members who are nontraditional defense contractors for each such consortium for fiscal years 2022 and 2023; and (e) a list of contractors who have been awarded more than $20.0 million under such transactions . . . .”

Looking to Upcoming Legislation

Alan Chvotkin (Centre Law) prepared a summary of pending legislation (S. 3626) to expand the use of what are sometimes called “no-price” indefinite-delivery/indefinite-quantity (IDIQs) contracts — catalogue contracts (known internationally as “framework agreements”) which are awarded without prices stipulated at the master contract level; this in turn leaves it to the ultimate customer agency to negotiate prices when orders (or “framework contracts,” as they’re known outside the United States) are awarded against the master agreement. Alan Chvotkin wrote: “There is considerable support in the acquisition community . . . to shift away from hypothetical pricing for IDIQ contracts for the underlying contract to meaningful pricing at the task order level in response to actual statements of work. . . . However, the Senate bill may go too far too fast and lacks any accountability or reasonable constraints on when agencies [may] shift the pricing for these IDIQs or make single-source awards . . . .”