10 USC Subtitle A, PART V, Subpart D: General Contracting Provisions

From Title 10—ARMED FORCESSubtitle A—General Military LawPART V—ACQUISITION

Subpart D—General Contracting Provisions

Editorial Notes

Amendments

2021—Pub. L. 117–81, div. A, title XVII, §1701(h)(1), Dec. 27, 2021, 135 Stat. 2140, amended subpart heading generally. Prior to amendment, heading read as follows: "General Contracting Requirements".

2018—Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1828, added subpart heading.

Statutory Notes and Related Subsidiaries

Pilot Program To Accelerate Contracting and Pricing Processes

Pub. L. 115–232, div. A, title VIII, §890, Aug. 13, 2018, 132 Stat. 1919, as amended by Pub. L. 116–92, div. A, title VIII, §825, Dec. 20, 2019, 133 Stat. 1491; Pub. L. 116–283, div. A, title XVIII, §1831(j)(7), Jan. 1, 2021, 134 Stat. 4217; Pub. L. 117–263, div. A, title VIII, §818, Dec. 23, 2022, 136 Stat. 2708; Pub. L. 118–31, div. A, title VIII, §841, Dec. 22, 2023, 137 Stat. 339, provided that:

"(a) In General.—The Secretary of Defense shall establish a pilot program to reform and accelerate the contracting and pricing processes associated with contracts in excess of $50,000,000 by—

"(1) basing price reasonableness determinations on actual cost and pricing data for purchases of the same or similar products for the Department of Defense; and

"(2) reducing the cost and pricing data to be submitted in accordance with chapter 271 of title 10, United States Code.

"(b) Implementation Guidance.—The Secretary, acting through the Under Secretary of Defense for Acquisition and Sustainment, shall ensure that each senior contracting official (as defined in section 1737 of title 10, United States Code) for a contract described in subsection (a) has the discretion to implement the pilot program under this section efficiently and effectively by ensuring the following:

"(1) That the pilot program does not include any preferences for contract type or specific contract requirements.

"(2) That each Secretary of a military department has minimal reporting requirements to the Under Secretary of Defense for Acquisition and Sustainment with respect to the pilot program.

"(c) Report.—Not later than January 30, 2021, the Secretary of Defense shall submit to the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] a report on the results of the pilot program authorized under subsection (a).

"(d) Sunset.—The authority to carry out the pilot program under this section shall expire on January 2, 2028."

Guidance and Training Related to Evaluating Reasonableness of Price

Pub. L. 112–239, div. A, title VIII, §831, Jan. 2, 2013, 126 Stat. 1842, provided that:

"(a) Guidance.—Not later than 180 days after the date of the enactment of this Act [Jan. 2, 2013], the Under Secretary of Defense for Acquisition, Technology, and Logistics shall issue guidance on the use of the authority provided by sections 2306a(d) [now 10 U.S.C. 3705] and 2379 [now 10 U.S.C. 3455] of title 10, United States Code. The guidance shall—

"(1) include standards for determining whether information on the prices at which the same or similar items have previously been sold is adequate for evaluating the reasonableness of price;

"(2) include standards for determining the extent of uncertified cost information that should be required in cases in which price information is not adequate for evaluating the reasonableness of price;

"(3) ensure that in cases in which such uncertified cost information is required, the information shall be provided in the form in which it is regularly maintained by the offeror in its business operations; and

"(4) provide that no additional cost information may be required by the Department of Defense in any case in which there are sufficient non-Government sales to establish reasonableness of price.

"(b) Training and Expertise.—Not later than 270 days after the date of the enactment of this Act, the Under Secretary of Defense for Acquisition, Technology, and Logistics shall develop and begin implementation of a plan of action to—

"(1) train the acquisition workforce on the use of the authority provided by sections 2306a(d) [now 10 U.S.C. 3705] and 2379 [now 10 U.S.C. 3455] of title 10, United States Code, in evaluating reasonableness of price in procurements of commercial items; and

"(2) develop a cadre of experts within the Department of Defense to provide expert advice to the acquisition workforce in the use of the authority provided by such sections in accordance with the guidance issued pursuant to subsection (a).

"(c) Documentation Requirements.—The Under Secretary of Defense for Acquisition, Technology, and Logistics shall ensure that requests for uncertified cost information for the purposes of evaluating reasonableness of price are sufficiently documented. The Under Secretary shall require that the contract file include, at a minimum, the following:

"(1) A justification of the need for additional cost information.

"(2) A copy of any request from the Department of Defense to a contractor for additional cost information.

"(3) Any response received from the contractor to the request, including any rationale or justification provided by the contractor for a failure to provide the requested information.

"(d) Comptroller General Review and Report.—

"(1) Review requirement.—The Comptroller General of the United States shall conduct a review of data collected pursuant to sections 2306a(d) [now 10 U.S.C. 3705] and 2379 [now 10 U.S.C. 3455] of title 10, United States Code, during the two-year period beginning on the date of the enactment of this Act.

"(2) Report requirement.—Not later than 180 days after the end of the two-year period referred to in paragraph (1), the Comptroller General shall submit to the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] a report on—

"(A) the extent to which the Department of Defense needed access to additional cost information pursuant to sections 2306a(d) [now 10 U.S.C. 3705] and 2379 [now 10 U.S.C. 3455] of title 10, United States Code, during such two-year period in order to determine price reasonableness;

"(B) the extent to which acquisition officials of the Department of Defense complied with the guidance issued pursuant to subsection (a) during such two-year period;

"(C) the extent to which the Department of Defense needed access to additional cost information during such two-year period to determine reasonableness of price, but was not provided such information by the contractor on request; and

"(D) recommendations for improving evaluations of reasonableness of price by Department of Defense acquisition professionals, including recommendations for any amendments to law, regulations, or guidance."

Grants of Exceptions to Cost or Pricing Data Certification Requirements and Waivers of Cost Accounting Standards

Pub. L. 107–314, div. A, title VIII, §817, Dec. 2, 2002, 116 Stat. 2610, as amended by Pub. L. 112–81, div. A, title VIII, §809(a), Dec. 31, 2011, 125 Stat. 1490; Pub. L. 113–291, div. A, title X, §1071(b)(7), Dec. 19, 2014, 128 Stat. 3507; Pub. L. 115–91, div. A, title X, §1051(j), Dec. 12, 2017, 131 Stat. 1563; Pub. L. 115–232, div. A, title VIII, §§825, 836(f)(4), Aug. 13, 2018, 132 Stat. 1856, 1871, provided that:

"(a) Guidance for Exceptions in Exceptional Circumstances.—Not later than 60 days after the date of the enactment of this Act [Dec. 2, 2002], the Secretary of Defense shall issue guidance on the circumstances under which it is appropriate to grant an exceptional case exception or waiver with respect to certified cost and pricing data and cost accounting standards.

"(b) Determination Required for Exceptional Case Exception or Waiver.—The guidance shall, at a minimum, include a limitation that a grant of an exceptional case exception or waiver is appropriate with respect to a contract, subcontract, or (in the case of submission of certified cost and pricing data) modification only upon a determination that—

"(1) the property or services cannot reasonably be obtained under the contract, subcontract, or modification, as the case may be, without the grant of the exception or waiver;

"(2) the price can be determined to be fair and reasonable without the submission of certified cost and pricing data or the application of cost accounting standards, as the case may be; or

"(3) there are demonstrated benefits to granting the exception or waiver.

"(c) Applicability of New Guidance.—The guidance issued under subsection (a) shall apply to each exceptional case exception or waiver that is granted on or after the date on which the guidance is issued.

"(d) Definitions.—In this section:

"(1) The term 'exceptional case exception or waiver' means either of the following:

"(A) An exception pursuant to section 2306a(b)(1)(C) of title 10, United States Code [now 10 U.S.C. 3703(a)(3)], relating to submission of certified cost and pricing data.

"(B) A waiver pursuant to section 1502(b)(3)(B) of title 41, United States Code, relating to the applicability of cost accounting standards to contracts and subcontracts.

"(2) The term 'commercial product-commercial service exception' means an exception pursuant to section 2306a(b)(1)(B) of title 10, United States Code [now 10 U.S.C. 3703(a)(2)], relating to submission of certified cost and pricing data."

[Section 836(f)(4)(A) of Pub. L. 115–232, which directed amendment of section 817(d)(1) of Pub. L. 107–314, set out above, by substituting "commercial product-commercial service exceptions" for "commercial item exceptions", could not be executed because those words did not appear subsequent to amendment by section 1051(j) of Pub. L. 115–91.]

CHAPTER 271—TRUTHFUL COST OR PRICING DATA (TRUTH IN NEGOTIATIONS)

Sec.

3701.

Definitions.

3702.

Required cost or pricing data and certification.

3703.

Exceptions.

3704.

Cost or pricing data on below-threshold contracts.

3705.

Submission of other information.

3706.

Price reductions for defective cost or pricing data.

3707.

Interest and penalties for certain overpayments.

3708.

Right to examine contractor records.

Editorial Notes

Prior Provisions

A prior chapter 271, "TRUTHFUL COST OR PRICING DATA", as added by Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1828, and consisting of reserved section 3701, was repealed by Pub. L. 116–283, div. A, title XVIII, §1831(a), Jan. 1, 2021, 134 Stat. 4208.

§3701. Definitions

In this chapter:

(1) Cost or pricing data.—The term "cost or pricing data" means all facts that, as of the date of agreement on the price of a contract (or the price of a contract modification), or, if applicable consistent with section 3706(a)(2) of this title, another date agreed upon between the parties, a prudent buyer or seller would reasonably expect to affect price negotiations significantly. Such term does not include information that is judgmental, but does include the factual information from which a judgment was derived.

(2) Subcontract.—The term "subcontract" includes a transfer of commercial products or commercial services between divisions, subsidiaries, or affiliates of a contractor or a subcontractor.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1831(a), (b), Jan. 1, 2021, 134 Stat. 4209; Pub. L. 117–81, div. A, title XVII, §1701(b)(10)(A), Dec. 27, 2021, 135 Stat. 2133.)

Editorial Notes

Codification

The text of subsec. (h) of section 2306a of this title, which was transferred to this section and amended by Pub. L. 116–283, §1831(b), was based on Pub. L. 99–500, §101(c) [title X, §952(a)], Oct. 18, 1986, 100 Stat. 1783–82, 1783-166, and Pub. L. 99–591, §101(c) [title X, §952(a)], Oct. 30, 1986, 100 Stat. 3341–82, 3341-166; Pub. L. 99–661, div. A, title IX, formerly title IV, §952(a), Nov. 14, 1986, 100 Stat. 3945, renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273; Pub. L. 100–180, div. A, title VIII, §804(a), Dec. 4, 1987, 101 Stat. 1125; Pub. L. 103–355, title I, §§1204(1), 1208, Oct. 13, 1994, 108 Stat. 3275, 3277; Pub. L. 104–106, div. D, title XLII, §4201(a)(2)(B), Feb. 10, 1996, 110 Stat. 651; Pub. L. 111–350, §5(b)(15), Jan. 4, 2011, 124 Stat. 3843; Pub. L. 115–232, div. A, title VIII, §836(c)(5)(C), Aug. 13, 2018, 132 Stat. 1865. Pub. L. 99–500, Pub. L. 99–591, and Pub. L. 99–661 added identical sections. Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Amendments

2021—Pub. L. 116–283, §1831(b), as amended by Pub. L. 117–81, §1701(b)(10)(A), transferred subsec. (h) of section 2306a of this title to this section, struck out subsec. (h) designation and heading "Definitions" at beginning, and substituted "this chapter" for "this section" in introductory provisions and "section 3706(a)(2) of this title" for "subsection (e)(1)(B)" in par. (1).

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Amendment by Pub. L. 117–81 applicable as if included in the enactment of title XVIII of Pub. L. 116–283 as enacted, see section 1701(a)(2) of Pub. L. 117–81, set out in a note preceding section 3001 of this title and Effective Date note below.

Effective Date

Section and amendment by Pub. L. 116–283 effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as an Effective Date of 2021 Amendment note preceding section 3001 of this title.

§3702. Required cost or pricing data and certification

(a) When Required.—The head of an agency shall require offerors, contractors, and subcontractors to make cost or pricing data available as follows:

(1) Offeror for prime contract.—An offeror for a prime contract under a chapter 137 legacy provision to be entered into using procedures other than sealed-bid procedures that is only expected to receive one bid shall be required to submit cost or pricing data before the award of a contract if—

(A) in the case of a prime contract entered into after June 30, 2018, the price of the contract to the United States is expected to exceed $2,000,000; and

(B) in the case of a prime contract entered into on or before June 30, 2018, the price of the contract to the United States is expected to exceed $750,000.

(2) Contractor.—The contractor for a prime contract under a chapter 137 legacy provision shall be required to submit cost or pricing data before the pricing of a change or modification to the contract if the price adjustment is expected to exceed $2,000,000.

(3) Offeror for subcontract.—An offeror for a subcontract (at any tier) of a contract under this chapter shall be required to submit cost or pricing data before the award of the subcontract if the prime contractor and each higher-tier subcontractor have been required to make available cost or pricing data under this chapter and the price of the subcontract is expected to exceed $2,000,000.

(4) Subcontractor.—The subcontractor for a subcontract covered by paragraph (3) shall be required to submit cost or pricing data before the pricing of a change or modification to the subcontract if the price adjustment is expected to exceed $2,000,000.

(b) Certification.—A person required, as an offeror, contractor, or subcontractor, to submit cost or pricing data under subsection (a) (or required by the head of the agency concerned to submit such data under section 3704 of this title) shall be required to certify that, to the best of the person's knowledge and belief, the cost or pricing data submitted are accurate, complete, and current.

(c) To Whom Submitted.—Cost or pricing data required to be submitted under subsection (a) (or under section 3704 of this title), and a certification required to be submitted under subsection (b), shall be submitted—

(1) in the case of a submission by a prime contractor (or an offeror for a prime contract), to the contracting officer for the contract (or to a designated representative of the contracting officer); or

(2) in the case of a submission by a subcontractor (or an offeror for a subcontract), to the prime contractor.

(d) Applicability of Chapter.—Except as provided under section 3703 of this title, this chapter applies to contracts entered into by the head of an agency on behalf of a foreign government.

(e) Subcontracts Not Affected by Waiver.—A waiver of requirements for submission of certified cost or pricing data that is granted under section 3703(a)(3) of this title in the case of a contract or subcontract does not waive the requirement under subsection (a)(3) for submission of cost or pricing data in the case of subcontracts under that contract or subcontract unless the head of the procuring activity granting the waiver determines that the requirement under that subsection should be waived in the case of such subcontracts and justifies in writing the reasons for the determination.

(f) Modifications to Prior Contracts.—Under subsection (a), in connection with a prime contract entered into on or before June 30, 2018, the head of the agency that entered into such contract shall modify the contract as soon as practicable to reflect paragraphs (1) and (2) of such subsection, without requiring consideration.

(g) Adjustment of Amounts.—Effective on October 1 of each year that is divisible by 5, each amount set forth in subsection (a) shall be adjusted in accordance with section 1908 of title 41.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1831(a), (c), Jan. 1, 2021, 134 Stat. 4209; Pub. L. 117–81, div. A, title VIII, §804(b), title XVII, §1701(b)(10)(B)–(G), (c)(3), Dec. 27, 2021, 135 Stat. 1816, 2133, 2134, 2136; Pub. L. 118–31, div. A, title XVIII, §1801(a)(29), Dec. 22, 2023, 137 Stat. 684.)

Editorial Notes

Codification

The text of subsec. (a) of section 2306a of this title, which was transferred to this section and amended by Pub. L. 116–283, §1831(c), was based on Pub. L. 99–500, §101(c) [title X, §952(a)], Oct. 18, 1986, 100 Stat. 1783–82, 1783-166, and Pub. L. 99–591, §101(c) [title X, §952(a)], Oct. 30, 1986, 100 Stat. 3341–82, 3341-166; Pub. L. 99–661, div. A, title IX, formerly title IV, §952(a), Nov. 14, 1986, 100 Stat. 3945, renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273; Pub. L. 100–180, div. A, title VIII, §804(b)(1), Dec. 4, 1987, 101 Stat. 1125; Pub. L. 101–510, div. A, title VIII, §803(a)(1), Nov. 5, 1990, 104 Stat. 1589; Pub. L. 102–25, title VII, §701(b), Apr. 6, 1991, 105 Stat. 113; Pub. L. 102–190, div. A, title VIII, §804(a)–(c)(1), Dec. 5, 1991, 105 Stat. 1415, 1416; Pub. L. 103–355, title I, §§1201, 1202(b), Oct. 13, 1994, 108 Stat. 3273, 3274; Pub. L. 105–85, div. A, title X, §1073(a)(46), Nov. 18, 1997, 111 Stat. 1902; Pub. L. 105–261, div. A, title VIII, §805(a), Oct. 17, 1998, 112 Stat. 2083; Pub. L. 114–328, div. A, title VIII, §822(1), Dec. 23, 2016, 130 Stat. 2276; Pub. L. 115–91, div. A, title VIII, §811(a)(1), Dec. 12, 2017, 131 Stat. 1459; Pub. L. 116–283, div. A, §814(a)(1), Jan. 1, 2021, 134 Stat. 3479; Pub. L. 117–81, div. A, title VIII, §804(a), Dec. 27, 2021, 135 Stat. 1816. Pub. L. 99–500, Pub. L. 99–591, and Pub. L. 99–661 added identical sections. Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Amendments

2023—Subsec. (a)(4). Pub. L. 118–31, §1801(a)(29)(A), substituted "paragraph (3)" for "subparagraph (C)".

Subsec. (f). Pub. L. 118–31, §1801(a)(29)(B), substituted "paragraphs (1) and (2) of such subsection" for "subparagraphs (B) and (C) of such paragraph".

2021—Pub. L. 116–283, §1831(c)(1), (2)(A), transferred subsec. (a) of section 2306a of this title to this section and redesignated pars. (1) to (7) of such former subsec. (a) as subsecs. (a) to (g), respectively.

Subsec. (a). Pub. L. 116–283, §1831(c)(2)(A), (B), (3), as amended by Pub. L. 117–81, §1701(b)(10)(B), after redesignation of section 2306a(a)(1) of this title as subsec. (a) of this section, substituted "When Required" for "Required Cost or Pricing Data and Certification" in heading, redesignated subpars. (A) to (D) as pars. (1) to (4), respectively, and substituted "a prime contract under a chapter 137 legacy provision" for "a prime contract under this chapter" in introductory provisions of pars. (1) and (2).

Subsec. (a)(1). Pub. L. 116–283, §1831(c)(2)(C), inserted heading and redesignated cls. (i) and (ii) as subpars. (A) and (B), respectively.

Subsec. (a)(2). Pub. L. 116–283, §1831(c)(2)(D)(ii)–(v), which directed amendment of par. (2) by redesignating cls. (i) to (iii) as subpars. (A) to (C), respectively, and making further substitutions in text and which could not be executed, was repealed by Pub. L. 117–81, §1701(b)(10)(C)(i).

Pub. L. 116–283, §1831(c)(2)(D), as amended by Pub. L. 117–81, §1701(b)(10)(C)(ii), inserted heading.

Subsec. (a)(3). Pub. L. 117–81, §1701(c)(3)(A), substituted "under this chapter" for "under this section".

Pub. L. 116–283, §1831(c)(2)(E)(ii)–(v), which directed amendment of par. (3) by redesignating cls. (i) to (iii) as subpars. (A) to (C), respectively, and making further substitutions in text and which could not be executed, was repealed by Pub. L. 117–81, §1701(b)(10)(D)(i).

Pub. L. 116–283, §1831(c)(2)(E), as amended by Pub. L. 117–81, §1701(b)(10)(D)(ii), (iii), inserted heading.

Subsec. (a)(4). Pub. L. 116–283, §1831(c)(2)(F)(ii), (iv), (v), which directed amendment of par. (4) by redesignating cls. (i) and (ii) as subpars. (A) and (B), respectively, and making further substitutions in text and which could not be executed, was repealed by Pub. L. 117–81, §1701(b)(10)(E)(i).

Pub. L. 116–283, §1831(c)(2)(F)(iii), which directed substitution of "paragraph (3)" for "subparagraph (C)" in introductory provisions of par. (4) and which could not be executed as directed but could be executed in text of par. (4), was repealed by Pub. L. 117–81, §1701(b)(10)(E)(i).

Pub. L. 116–283, §1831(c)(2)(F), as amended by Pub. L. 117–81, §1701(b)(10)(E)(ii), (iii), inserted heading.

Subsec. (b). Pub. L. 116–283, §1831(c)(4), as amended by Pub. L. 117–81, §1701(b)(10)(F), after redesignation of section 2306a(a)(2) of this title as subsec. (b) of this section, inserted heading and substituted "subsection (a)" for "paragraph (1)" and "section 3704 of this title" for "subsection (c)".

Subsec. (c). Pub. L. 116–283, §1831(c)(5), after redesignation of section 2306a(a)(3) of this title as subsec. (c) of this section, inserted heading, redesignated subpars. (A) and (B) as pars. (1) and (2), respectively, and, in introductory provisions, substituted "subsection (a) (or under section 3704 of this title)" for "paragraph (1) (or under subsection (c))" and "subsection (b)" for "paragraph (2)".

Subsec. (d). Pub. L. 117–81, §1701(c)(3)(B), substituted "this chapter" for "this section".

Pub. L. 116–283, §1831(c)(6), after redesignation of section 2306a(a)(4) of this title as subsec. (d) of this section, inserted heading and substituted "section 3703 of this title" for "subsection (b)".

Subsec. (e). Pub. L. 116–283, §1831(c)(7), after redesignation of section 2306a(a)(5) of this title as subsec. (e) of this section, inserted heading and substituted "section 3703(a)(3) of this title" for "subsection (b)(1)(C)", "subsection (a)(3)" for "paragraph (1)(C)", and "that subsection" for "that paragraph".

Subsec. (f). Pub. L. 116–283, §1831(c)(8)(D), which directed substitution of "paragraphs (2)(B) and (3)(B) of subsection (a)" for "subparagraphs (B)(ii) and (C)(ii) of paragraph (1)", could not be executed because the phrase "subparagraphs (B)(ii) and (C)(ii) of paragraph (1)" did not appear after the intervening amendment made by Pub. L. 117–81, §804(a), to subsec. (a)(6) of section 2306a of this title prior to its transfer to subsec. (f) of this section.

Pub. L. 116–283, §1831(c)(8)(C), which directed substitution of "that subsection" for "that paragraph" and could not be executed, was repealed by Pub. L. 117–81, §1701(b)(10)(G).

Pub. L. 116–283, §1831(c)(8)(B), substituted "subsection (a)" for "paragraph (1)".

Pub. L. 116–283, §1831(c)(8)(A), as amended by Pub. L. 117–81, §804(b), inserted heading.

Subsec. (g). Pub. L. 116–283, §1831(c)(9), after redesignation of section 2306a(a)(7) of this title as subsec. (g) of this section, inserted heading and substituted "subsection (a)" for "paragraph (1)".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Amendment by section 1701(b)(10)(B)–(G) of Pub. L. 117–81 applicable as if included in the enactment of title XVIII of Pub. L. 116–283 as enacted, see section 1701(a)(2) of Pub. L. 117–81, set out in a note preceding section 3001 of this title and Effective Date note below.

Amendment by section 1701(c)(3) of Pub. L. 117–81 to take effect immediately after the amendments made by title XVIII of Pub. L. 116–283 have taken effect, see section 1701(a)(3) of Pub. L. 117–81, set out in a note preceding section 3001 of this title and Effective Date note below.

Effective Date

Data Collection

Pub. L. 117–81, div. A, title VIII, §862(b), Dec. 27, 2021, 135 Stat. 1852, provided that: "The Secretary of Defense shall develop and implement a plan to collect and analyze data on the use of authority under such section 873 [of Pub. L. 114–92, set out below] for the purposes of—

"(1) developing and sharing best practices; and

"(2) providing information to the Secretary of Defense and Congress on the use of authority under such section 873 and related policy issues."

Pilot Program for Streamlining Awards for Innovative Technology Projects

Pub. L. 114–92, div. A, title VIII, §873(a)–(g), Nov. 25, 2015, 129 Stat. 939, 940, as amended by Pub. L. 114–328, div. A, title VIII, §896, Dec. 23, 2016, 130 Stat. 2326; Pub. L. 116–283, div. A, title VIII, §832, Jan. 1, 2021, 134 Stat. 3753; Pub. L. 117–81, div. A, title VIII, §862(a), Dec. 27, 2021, 135 Stat. 1852, provided that:

"(a) Exception From Certified Cost and Pricing Data Requirements.—The requirements under section 2306a(a) of title 10, United States Code [now 10 U.S.C. 3702], shall not apply to a contract, subcontract, or modification of a contract or subcontract valued at less than $7,500,000 awarded to a small business or nontraditional defense contractor pursuant to—

"(1) a technical, merit-based selection procedure, such as a broad agency announcement, or

"(2) the Small Business Innovation Research Program or Small Business Technology Transfer Program,

unless the head of the agency determines that submission of cost and pricing data should be required based on past performance of the specific small business or nontraditional defense contractor, or based on analysis of other information specific to the award.

"(b) Exception From Records Examination Requirement.—The requirements under subparagraphs (A), (B), and (C) of section 2313(a)(2) of title 10, United States Code [now 10 U.S.C. 3841(b)(2)(A)–(C)], and subsection (b) of section 2313 of title 10, United States Code [now 10 U.S.C. 3841(c)], shall not apply to a contract valued at less than $7,500,000 awarded to a small business or nontraditional defense contractor pursuant to—

"(1) a technical, merit-based selection procedure, such as a broad agency announcement, or

"(2) the Small Business Innovation Research Program,

unless the head of the agency determines that auditing of records should be required based on past performance of the specific small business or nontraditional defense contractor, or based on analysis of other information specific to the award, and if such performance audit is initiated within 18 months of the contract completion.

"(c) Treatment as Competitive Procedures.—Use of a technical, merit-based selection procedure or the Small Business Innovation Research Program or Small Business Technology Transfer Program for the pilot program under this section shall be considered to be use of competitive procedures for purposes of [former] chapter 137 of title 10, United States Code.

"(d) Discretion To Use Non-certified Accounting Systems.—In executing programs under this pilot program, the Secretary of Defense shall establish procedures under which a small business or nontraditional contractor may engage an independent certified public accountant for the review and certification of its accounting system for the purposes of any audits required by regulation, unless the head of the agency determines that this is not appropriate based on past performance of the specific small business or nontraditional defense contractor, or based on analysis of other information specific to the award.

"(e) Guidance and Training.—The Secretary of Defense shall ensure that acquisition and auditing officials are provided guidance and training on the flexible use and tailoring of authorities under the pilot program to maximize efficiency and effectiveness.

"(f) Sunset.—The exceptions under subsections (a) and (b) shall terminate on October 1, 2024.

"(g) Definitions.—In this section [enacting this note and amending section 638 of Title 15, Commerce and Trade]:

"(1) Small business.—The term 'small business' has the meaning given the term 'small business concern' under section 3 of the Small Business Act (15 U.S.C. 632).

"(2) Nontraditional defense contractor.—The term 'nontraditional defense contractor' has the meaning given that term in section 2302(9) of title 10, United States Code [now 10 U.S.C. 3014]."

[Section 896(2)(B) of Pub. L. 114–328, which directed amendment of par. (2) of subsec. (b) of section 873 of Pub. L. 114–92, set out above, by inserting ", and if such performance audit is initiated within 18 months of the contract completion" before the period at the end, was executed by making the insertion before the period at the end of the concluding provisions of subsec. (b), to reflect the probable intent of Congress.]

§3703. Exceptions

(a) In general.—Submission of certified cost or pricing data shall not be required under section 3702 of this title in the case of a contract, a subcontract, or modification of a contract or subcontract—

(1) for which the price agreed upon is based on—

(A) adequate competition that results in at least two or more responsive and viable competing bids; or

(B) prices set by law or regulation;

(2) for the acquisition of a commercial product or a commercial service;

(3) in an exceptional case when the head of the procuring activity, without delegation, determines that the requirements of this chapter may be waived and justifies in writing the reasons for such determination; or

(4) to the extent such data—

(A) relates to an offset agreement in connection with a contract for the sale of a weapon system or defense-related item to a foreign country or foreign firm; and

(B) does not relate to a contract or subcontract under the offset agreement for work performed in such foreign country or by such foreign firm that is directly related to the weapon system or defense-related item being purchased under the contract.

(b) Modifications of contracts and subcontracts for commercial products or commercial services.—In the case of a modification of a contract or subcontract for a commercial product or commercial services that is not covered by the exception to the submission of certified cost or pricing data in paragraph (1) or (2) of subsection (a), submission of certified cost or pricing data shall not be required under section 3702 of this title if—

(1) the contract or subcontract being modified is a contract or subcontract for which submission of certified cost or pricing data may not be required by reason of paragraph (1) or (2) of subsection (a); and

(2) the modification would not change the contract or subcontract, as the case may be, from a contract or subcontract for the acquisition of a commercial product or commercial services to a contract or subcontract for the acquisition of an item other than a commercial product or commercial services.

(c) Noncommercial modifications of commercial products.—(1) The exception in subsection (a)(2) does not apply to cost or pricing data on noncommercial modifications of a commercial product that are expected to cost, in the aggregate, more than the amount specified in section 3702(a)(1)(A) of this title, as adjusted from time to time under section 3702(g) of this title, or 5 percent of the total price of the contract (at the time of contract award), whichever is greater.

(2) In this subsection, the term "noncommercial modification", with respect to a commercial product, means a modification of such product that is not a modification described in section 103(3)(A) of title 41.

(3) Nothing in paragraph (1) shall be construed—

(A) to limit the applicability of the exception in paragraph (1) or (3) of subsection (a) to cost or pricing data on a noncommercial modification of a commercial product; or

(B) to require the submission of cost or pricing data on any aspect of an acquisition of a commercial product other than the cost and pricing of noncommercial modifications of such product.

(d) Commercial product or commercial service determination.—(1) For purposes of applying the exception under subsection (a)(2) to the required submission of certified cost or pricing data, the contracting officer may presume that a prior commercial product or commercial service determination made by a military department, a Defense Agency, or another component of the Department of Defense shall serve as a determination for subsequent procurements of such product or service.

(2) If the contracting officer does not make the presumption described in paragraph (1) and instead chooses to proceed with a procurement of a product or service previously determined to be a commercial product or a commercial service using procedures other than the procedures authorized for the procurement of a commercial product or a commercial service, as the case may be, the contracting officer shall request a review of the commercial product or commercial service determination by the head of the contracting activity.

(3) Not later than 30 days after receiving a request for review of a determination under paragraph (2), the head of a contracting activity shall—

(A) confirm that the prior determination was appropriate and still applicable; or

(B) issue a revised determination with a written explanation of the basis for the revision.

(e) A contracting officer shall consider evidence provided by an offeror of recent purchase prices paid by the Government for the same or similar commercial products or commercial services in establishing price reasonableness on a subsequent purchase if the contracting officer is satisfied that the prices previously paid remain a valid reference for comparison after considering the totality of other relevant factors such as the time elapsed since the prior purchase and any differences in the quantities purchased or applicable terms and conditions.

(f) Determination by prime contractor.—A prime contractor required to submit certified cost or pricing data under section 3702 of this title with respect to a prime contract shall be responsible for determining whether a subcontract under such contract qualifies for an exception under subsection (a)(1) from such requirement.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1831(a), (d), Jan. 1, 2021, 134 Stat. 4209, 4211.)

Editorial Notes

Codification

The text of subsec. (b) of section 2306a of this title, which was transferred to this section and amended by Pub. L. 116–283, §1831(d), was based on Pub. L. 99–500, §101(c) [title X, §952(a)], Oct. 18, 1986, 100 Stat. 1783–82, 1783-166, and Pub. L. 99–591, §101(c) [title X, §952(a)], Oct. 30, 1986, 100 Stat. 3341–82, 3341-166; Pub. L. 99–661, div. A, title IX, formerly title IV, §952(a), Nov. 14, 1986, 100 Stat. 3945, renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273; Pub. L. 103–355, title I, §1202(a), Oct. 13, 1994, 108 Stat. 3274, as amended by Pub. L. 104–106, div. D, title XLIII, §4321(a)(2), Feb. 10, 1996, 110 Stat. 671; Pub. L. 104–106, div. D, title XLII, §4201(a)(1), Feb. 10, 1996, 110 Stat. 649; Pub. L. 108–375, div. A, title VIII, §818(a), Oct. 28, 2004, 118 Stat. 2015; Pub. L. 110–181, div. A, title VIII, §814, Jan. 28, 2008, 122 Stat. 222; Pub. L. 113–291, div. A, title X, §1071(a)(3), Dec. 19, 2014, 128 Stat. 3504; Pub. L. 114–92, div. A, title VIII, §§812, 851(b), 853, Nov. 25, 2015, 129 Stat. 891, 916, 919; Pub. L. 114–328, div. A, title VIII, §822(2), Dec. 23, 2016, 130 Stat. 2276; Pub. L. 115–232, div. A, title VIII, §836(c)(5)(A), Aug. 13, 2018, 132 Stat. 1865. Pub. L. 99–500, Pub. L. 99–591, and Pub. L. 99–661 added identical sections. Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Amendments

2021—Pub. L. 116–283, §1831(d)(1), transferred subsec. (b) of section 2306a of this title to this section, struck out subsec. (b) designation and heading "Exceptions" at beginning, and redesignated pars. (1) to (6) as subsecs. (a) to (f), respectively, and realigned margins.

Subsec. (a). Pub. L. 116–283, §1831(d)(2)(A), (B), (C), (E), after redesignation of section 2306a(b)(1) of this title as subsec. (a) of this section, substituted "under section 3702 of this title" for "under subsection (a)" in introductory provisions, redesignated subpar. (A) and its cls. (i) and (ii) as par. (1) and subpars. (A) and (B), respectively, redesignated subpars. (B) and (C) as pars. (2) and (3), respectively, and redesignated subpar. (D) and its cls. (i) and (ii) as par. (4) and subpars. (A) and (B), respectively.

Subsec. (a)(3). Pub. L. 116–283, §1831(d)(2)(D), substituted "this chapter" for "this section".

Subsec. (b). Pub. L. 116–283, §1831(d)(3)(A), (B), after redesignation of section 2306a(b)(2) of this title as subsec. (b) of this section, in introductory provisions, substituted "paragraph (1) or (2) of subsection (a)" for "paragraph (1)(A) or (1)(B)" and "under section 3702 of this title" for "under subsection (a)" and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively.

Subsec. (b)(1). Pub. L. 116–283, §1831(d)(3)(C), substituted "paragraph (1) or (2) of subsection (a)" for "paragraph (1)(A) or (1)(B)".

Subsec. (c). Pub. L. 116–283, §1831(d)(4)(A), (D)(i), after redesignation of section 2306a(b)(3) of this title as subsec. (c) of this section, redesignated subpars. (A), (B), and (C) and its cls. (i) and (ii) as pars. (1), (2), and (3) and subpars. (A) and (B), respectively.

Subsec. (c)(1). Pub. L. 116–283, §1831(d)(4)(B), substituted "subsection (a)(2)" for "paragraph (1)(B)", "section 3702(a)(1)(A) of this title" for "subsection (a)(1)(A)(i)", and "section 3702(g) of this title" for "subsection (a)(7)".

Subsec. (c)(2). Pub. L. 116–283, §1831(d)(4)(C), substituted "this subsection" for "this paragraph".

Subsec. (c)(3). Pub. L. 116–283, §1831(d)(4)(D)(ii), (ii) [(iii)], substituted "paragraph (1)" for "subparagraph (A)" in introductory provisions and "paragraph (1) or (3) of subsection (a)" for "subparagraph (A) or (C) of paragraph (1)" in subpar. (A).

Subsec. (d). Pub. L. 116–283, §1831(d)(5)(A), (D)(i), after redesignation of section 2306a(b)(4) of this title as subsec. (d) of this section, redesignated subpars. (A), (B), and (C) and its cls. (i) and (ii) as pars. (1), (2), and (3) and subpars. (A) and (B), respectively.

Subsec. (d)(1). Pub. L. 116–283, §1831(d)(5)(B), substituted "subsection (a)(2)" for "paragraph (1)(B)".

Subsec. (d)(2). Pub. L. 116–283, §1831(d)(5)(C), substituted "paragraph (1)" for "subparagraph (A)".

Subsec. (d)(3). Pub. L. 116–283, §1831(d)(5)(D)(ii), substituted "paragraph (2)" for "subparagraph (B)" in introductory provisions.

Subsec. (f). Pub. L. 116–283, §1831(d)(6), after redesignation of section 2306a(b)(6) of this title as subsec. (f) of this section, substituted "section 3702 of this title" for "subsection (a)" and "subsection (a)(1)" for "paragraph (1)(A)".

Statutory Notes and Related Subsidiaries

Effective Date

§3704. Cost or pricing data on below-threshold contracts

(a) Authority to require submission.—Subject to subsection (b), when certified cost or pricing data are not required to be submitted by section 3702 of this title for a contract, subcontract, or modification of a contract or subcontract, such data may nevertheless be required to be submitted by the head of the procuring activity, but only if the head of the procuring activity determines that such data are necessary for the evaluation by the agency of the reasonableness of the price of the contract, subcontract, or modification of a contract or subcontract. In any case in which the head of the procuring activity requires such data to be submitted under this section, the head of the procuring activity shall justify in writing the reason for such requirement.

(b) Exception.—The head of the procuring activity may not require certified cost or pricing data to be submitted under this subsection for any contract or subcontract, or modification of a contract or subcontract, covered by the exceptions in paragraph (1) or (2) of section 3703(a) of this title.

(c) Delegation of authority prohibited.—The head of a procuring activity may not delegate functions under this subsection.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1831(a), (e), Jan. 1, 2021, 134 Stat. 4209, 4213.)

Editorial Notes

Codification

The text of subsec. (c) of section 2306a of this title, which was transferred to this section and amended by Pub. L. 116–283, §1831(e), was based on Pub. L. 99–500, §101(c) [title X, §952(a)], Oct. 18, 1986, 100 Stat. 1783–82, 1783-166, and Pub. L. 99–591, §101(c) [title X, §952(a)], Oct. 30, 1986, 100 Stat. 3341–82, 3341-166; Pub. L. 99–661, div. A, title IX, formerly title IV, §952(a), Nov. 14, 1986, 100 Stat. 3945, renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273; Pub. L. 101–510, div. A, title VIII, §803(d), Nov. 5, 1990, 104 Stat. 1590; Pub. L. 103–355, title I, §1203, Oct. 13, 1994, 108 Stat. 3274; Pub. L. 104–106, div. D, title XLII, §4201(a)(1), Feb. 10, 1996, 110 Stat. 650. Pub. L. 99–500, Pub. L. 99–591, and Pub. L. 99–661 added identical sections. Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Amendments

2021—Pub. L. 116–283, §1831(e)(1)(A), transferred subsec. (c) of section 2306a of this title to this section and struck out subsec. (c) designation and heading "Cost or Pricing Data on Below-Threshold Contracts" at beginning.

Subsec. (a). Pub. L. 116–283, §1831(e)(1)(B), (2), redesignated par. (1) of section 2306a(c) of this title as subsec. (a) of this section, realigned margin, and substituted "subsection (b)" for "paragraph (2)", "section 3702 of this title" for "subsection (a)", and "under this section" for "under this subsection".

Subsec. (b). Pub. L. 116–283, §1831(e)(1)(B), (3), redesignated par. (2) of section 2306a(c) of this title as subsec. (b) of this section, realigned margin, and substituted "under this subsection" for "under this paragraph" and "paragraph (1) or (2) of section 3703(a) of this title" for "subparagraph (A) or (B) of subsection (b)(1)".

Subsec. (c). Pub. L. 116–283, §1831(e)(1)(B), (4), redesignated par. (3) of section 2306a(c) of this title as subsec. (c) of this section, realigned margin, and substituted "under this subsection" for "under this paragraph".

Statutory Notes and Related Subsidiaries

Effective Date

§3705. Submission of other information

(a) Authority to require submission.—When certified cost or pricing data are not required to be submitted under this chapter for a contract, subcontract, or modification of a contract or subcontract, the offeror shall be required to submit to the contracting officer data other than certified cost or pricing data (if requested by the contracting officer), to the extent necessary to determine the reasonableness of the price of the contract, subcontract, or modification of the contract or subcontract. Except in the case of a contract or subcontract covered by the exceptions in section 3703(a)(1) of this title, the contracting officer shall require that the data submitted include, at a minimum, appropriate information on the prices at which the same item or similar items have previously been sold that is adequate for evaluating the reasonableness of the price for the procurement. If the contracting officer determines that the offeror does not have access to and cannot provide sufficient information on prices for the same or similar items to determine the reasonableness of price, the contracting officer shall require the submission of information on prices for similar levels of work or effort on related products or services, prices for alternative solutions or approaches, and other information that is relevant to the determination of a fair and reasonable price. Contracting officers shall not determine the price of a contract or subcontract to be fair and reasonable based solely on historical prices paid by the Government.

(b) Ineligibility for award.—(1) In the event the contracting officer is unable to determine proposed prices are fair and reasonable by any other means, an offeror who fails to make a good faith effort to comply with a reasonable request to submit data in accordance with subsection (a) is ineligible for award unless the head of the contracting activity, or the designee of the head of contracting activity, determines that it is in the best interest of the Government to make the award to that offeror, based on consideration of pertinent factors, including the following:

(A) The effort to obtain the data.

(B) Availability of other sources of supply of the item or service.

(D) Reasonableness of the price of the contract, subcontract, or modification of the contract or subcontract based on information available to the contracting officer.

(E) Rationale or justification made by the offeror for not providing the requested data.

(F) Risk to the Government if award is not made.

(2)(A) Any new determination made by the head of the contracting activity under paragraph (1) shall be reported to the Principal Director, Defense Pricing and Contracting on a quarterly basis.

(B) The Under Secretary of Defense for Acquisition and Sustainment, or a designee, shall produce an annual report identifying offerors that have denied multiple requests for submission of uncertified cost or pricing data over the preceding three-year period, but nevertheless received an award. The report shall identify products or services offered by such offerors that should undergo should-cost analysis. The Secretary of Defense may include a notation on such offerors in the system used by the Federal Government to monitor or record contractor past performance. The Under Secretary shall assess the extent to which these offerors are sole source providers within the defense industrial base and shall develop strategies to incentivize new entrants into the industrial base to increase the availability of other sources of supply for the product or service. The Under Secretary shall make appropriate portions of the report available to the leadership of the offerors named in such report.

(C) The Under Secretary of Defense for Acquisition and Sustainment shall develop a framework for revising what constitutes a denial of uncertified cost or pricing data, including—

(i) identifying situations under which such denials occur to exclude situations outside the control of the offeror or Federal Government;

(ii) identifying whether such denial is from the prime contractor or subcontractor; and

(iii) developing an appropriate timeframe for requiring submission of uncertified cost or pricing data before a request for such data is considered a denial, including a standardized determination of a starting point and conclusion for such requests.

(c) Limitations on authority.—The Federal Acquisition Regulation shall include the following provisions regarding the types of information that contracting officers may require under subsection (a):

(1) Reasonable limitations on requests for sales data relating to commercial products or commercial services.

(2) A requirement that a contracting officer limit, to the maximum extent practicable, the scope of any request for information relating to commercial products or commercial services from an offeror to only that information that is in the form regularly maintained by the offeror in commercial operations.

(3) A statement that any information received relating to commercial products or commercial services that is exempt from disclosure under section 552(b) of title 5 shall not be disclosed by the Federal Government.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1831(a), (f), Jan. 1, 2021, 134 Stat. 4209, 4213; Pub. L. 118–31, div. A, title VIII, §802, Dec. 22, 2023, 137 Stat. 312.)

Editorial Notes

Codification

The text of subsec. (d) of section 2306a of this title, which was transferred to this section and amended by Pub. L. 116–283, §1831(f), was based on Pub. L. 103–355, title I, §1204, Oct. 13, 1994, 108 Stat. 3275; Pub. L. 104–106, div. D, title XLII, §4201(a)(1) ,Feb. 10, 1996, 110 Stat. 650; Pub. L. 105–261, div. A, title VIII, §808(a), Oct. 17, 1998, 112 Stat. 2085; Pub. L. 114–92, div. A, title VIII, §852(e), 853, Nov. 25, 2015, 129 Stat. 918; Pub. L. 115–91, div. A, title VIII, §811(b), Dec. 12, 2017, 131 Stat. 1459; Pub. L. 115–232, div. A, title VIII, §836(c)(5)(B), Aug. 13, 2018, 132 Stat. 1865, as amended by Pub. L. 116–283, div. A, title X, §1081(d)(4)(B)(i), Jan. 1, 2021, 134 Stat. 3874; Pub. L. 116–92, div. A, title VIII, §803, Dec. 20, 2019, 133 Stat. 1483.

Amendments

2023—Subsec. (b)(2)(B). Pub. L. 118–31, §802(1), inserted at end "The Under Secretary shall make appropriate portions of the report available to the leadership of the offerors named in such report."

Subsec. (b)(2)(C). Pub. L. 118–31, §802(2), added subpar. (C).

2021—Pub. L. 116–283, §1831(f)(1), transferred subsec. (d) of section 2306a of this title to this section, struck out subsec. (d) designation and heading "Submission of Other Information" at beginning, and redesignated pars. (1) to (3) as subsecs. (a) to (c), respectively, and realigned margins.

Subsec. (a). Pub. L. 116–283, §1831(f)(2), after redesignation of section 2306a(d)(1) of this title as subsec. (a) of this section, substituted "under this chapter" for "under this section" and "section 3703(a)(1) of this title" for "subsection (b)(1)(A)".

Subsec. (b). Pub. L. 116–283, §1831(f)(3)(A), (B)(i), (C)(i), after redesignation of section 2306a(d)(2) of this title as subsec. (b) of this section, redesignated subpar. (A) and its cls. (i) to (vi) as par. (1) and subpars. (A) to (F), respectively, and redesignated subpar. (B) and its cls. (i) and (ii) as par. (2) and subpars. (A) and (B), respectively.

Subsec. (b)(1). Pub. L. 116–283, §1831(f)(3)(B)(ii), substituted "subsection (a)" for "paragraph (1)" in introductory provisions.

Subsec. (b)(2)(A). Pub. L. 116–283, §1831(f)(3)(C)(ii), substituted "paragraph (1)" for "subparagraph (A)".

Subsec. (c). Pub. L. 116–283, §1831(f)(4), after redesignation of section 2306a(d)(3) of this title as subsec. (c) of this section, redesignated subpars. (A) to (C) as pars. (1) to (3), respectively, and substituted "under subsection (a)" for "under paragraph (1)" in introductory provisions.

Statutory Notes and Related Subsidiaries

Effective Date

§3706. Price reductions for defective cost or pricing data

(a) Provision Requiring Adjustment.—

(1) In general.—A prime contract (or change or modification to a prime contract) under which a certificate under section 3702(b) of this title is required shall contain a provision that the price of the contract to the United States, including profit or fee, shall be adjusted to exclude any significant amount by which it may be determined by the head of the agency that such price was increased because the contractor (or any subcontractor required to make available such a certificate) submitted defective cost or pricing data.

(2) What constitutes defective cost or pricing data.—For the purposes of this chapter, defective cost or pricing data are cost or pricing data which, as of the date of agreement on the price of the contract (or another date agreed upon between the parties), were inaccurate, incomplete, or noncurrent. If for purposes of the preceding sentence the parties agree upon a date other than the date of agreement on the price of the contract, the date agreed upon by the parties shall be as close to the date of agreement on the price of the contract as is practicable.

(b) Valid Defense.—In determining for purposes of a contract price adjustment under a contract provision required by subsection (a) whether, and to what extent, a contract price was increased because the contractor (or a subcontractor) submitted defective cost or pricing data, it shall be a defense that the United States did not rely on the defective data submitted by the contractor or subcontractor.

(c) Invalid Defenses.—It is not a defense to an adjustment of the price of a contract under a contract provision required by subsection (a) that—

(1) the price of the contract would not have been modified even if accurate, complete, and current cost or pricing data had been submitted by the contractor or subcontractor because the contractor or subcontractor—

(A) was the sole source of the property or services procured; or

(B) otherwise was in a superior bargaining position with respect to the property or services procured;

(2) the contracting officer should have known that the cost and pricing data in issue were defective even though the contractor or subcontractor took no affirmative action to bring the character of the data to the attention of the contracting officer;

(3) the contract was based on an agreement between the contractor and the United States about the total cost of the contract and there was no agreement about the cost of each item procured under such contract; or

(4) the prime contractor or subcontractor did not submit a certification of cost and pricing data relating to the contract as required under section 3702(b) of this title.

(d) Offsets.—

(1) When allowed.—A contractor shall be allowed to offset an amount against the amount of a contract price adjustment under a contract provision required by subsection (a) if—

(A) the contractor certifies to the contracting officer (or to a designated representative of the contracting officer) that, to the best of the contractor's knowledge and belief, the contractor is entitled to the offset; and

(B) the contractor proves that the cost or pricing data were available before the date of agreement on the price of the contract (or price of the modification) or, if applicable consistent with subsection (a)(2), another date agreed upon between the parties, and that the data were not submitted as specified in section 3702(c) of this title before such date.

(2) A contractor shall not be allowed to offset an amount otherwise authorized to be offset under paragraph (1) if—

(A) the certification under section 3702(b) of this title with respect to the cost or pricing data involved was known to be false when signed; or

(B) the United States proves that, had the cost or pricing data referred to in paragraph (1)(B) been submitted to the United States before the date of agreement on the price of the contract (or price of the modification) or, if applicable consistent with subsection (a)(2), another date agreed upon between the parties, the submission of such cost or pricing data would not have resulted in an increase in that price in the amount to be offset.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1831(a), (g), Jan. 1, 2021, 134 Stat. 4209, 4214.)

Editorial Notes

Codification

The text of subsec. (e) of section 2306a of this title, which was transferred to this section and amended by Pub. L. 116–283, §1831(g), was based on Pub. L. 99–500, §101(c) [title X, §952(a)], Oct. 18, 1986, 100 Stat. 1783–82, 1783-166, and Pub. L. 99–591, §101(c) [title X, §952(a)], Oct. 30, 1986, 100 Stat. 3341–82, 3341-166; Pub. L. 99–661, div. A, title IX, formerly title IV, §952(a), Nov. 14, 1986, 100 Stat. 3945, renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273; Pub. L. 103–355, title I, §1204(1), Oct. 13, 1994, 108 Stat. 3275; Pub. L. 104–106, div. D, title XLIII, §4321(b)(7)(B), Feb. 10, 1996, 110 Stat. 672. Pub. L. 99–500, Pub. L. 99–591, and Pub. L. 99–661 added identical sections. Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Amendments

2021—Pub. L. 116–283, §1831(g)(1), transferred subsec. (e) of section 2306a of this title to this section, struck out subsec. (e) designation and heading "Price Reductions for Defective Cost or Pricing Data" at beginning, and redesignated pars. (1) to (4) as subsecs. (a) to (d), resepectively.

Subsec. (a). Pub. L. 116–283, §1831(g)(2), after redesignation of section 2306a(e)(1) of this title as subsec. (a) of this section, inserted subsec. heading, redesignated subpar. (A) as par. (1), inserted heading, and substituted "section 3702(b) of this title" for "subsection (a)(2)", and redesignated subpar. (B) as par. (2), inserted heading, and substituted "of this chapter" for "of this section".

Subsec. (b). Pub. L. 116–283, §1831(g)(3), after redesignation of section 2306a(e)(2) of this title as subsec. (b) of this section, inserted heading and substituted "subsection (a)" for "paragraph (1)".

Subsec. (c). Pub. L. 116–283, §1831(g)(4)(A)–(D), after redesignation of section 2306a(e)(3) of this title as subsec. (c) of this section, inserted heading, redesignated subpar. (A), and its cls. (i) and (ii), and subpars. (B) to (D) as par. (1), subpars. (A) and (B), and pars. (2) to (4), respectively, and substituted "subsection (a)" for "paragraph (1)" in introductory provisions.

Subsec. (c)(4). Pub. L. 116–283, §1831(g)(4)(E), substituted "section 3702(b) of this title" for "subsection (a)(2)".

Subsec. (d). Pub. L. 116–283, §1831(g)(5)(A)–(C), after redesignation of section 2306a(e)(4) of this title as subsec. (d) of this section, inserted heading, substituted "subsection (a)" for "paragraph (1)" in introductory provisions, and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively.

Subsec. (d)(1). Pub. L. 116–283, §1831(g)(5)(A), (B), (D), inserted heading, substituted "subsection (a)" for "paragraph (1)" in introductory provisions, and redesignated cls. (i) and (ii) of former section 2306a(e)(4)(A) as subpars. (A) and (B), respectively.

Subsec. (d)(1)(B). Pub. L. 116–283, §1831(g)(5)(E), substituted "subsection (a)(2)" for "paragraph (1)(B)" and "section 3702(c) of this title" for "subsection (a)(3)".

Subsec. (d)(2). Pub. L. 116–283, §1831(g)(5)(F)(i), (ii), substituted "paragraph (1)" for "subparagraph (A)" in introductory provisions and redesignated cls. (i) and (ii) of former section 2306a(e)(4)(B) as subpars. (A) and (B), respectively.

Subsec. (d)(2)(A). Pub. L. 116–283, §1831(g)(5)(F)(iii), substituted "section 3702(b) of this title" for "subsection (a)(2)".

Subsec. (d)(2)(B). Pub. L. 116–283, §1831(g)(5)(F)(iv), substituted "in paragraph (1)(B)" for "in subparagraph (A)(ii)" and "with subsection (a)(2)" for "with paragraph (1)(B)".

Statutory Notes and Related Subsidiaries

Effective Date

§3707. Interest and penalties for certain overpayments

(a) In General.—If the United States makes an overpayment to a contractor under a contract subject to this chapter and the overpayment was due to the submission by the contractor of defective cost or pricing data, the contractor shall be liable to the United States—

(1) for interest on the amount of such overpayment, to be computed—

(A) for the period beginning on the date the overpayment was made to the contractor and ending on the date the contractor repays the amount of such overpayment to the United States; and

(B) at the current rate prescribed by the Secretary of the Treasury under section 6621 of the Internal Revenue Code of 1986; and

(2) if the submission of such defective data was a knowing submission, for an additional amount equal to the amount of the overpayment.

(b) Liability Not Affected by Refusal to Submit Certification.—Any liability under this section of a contractor that submits cost or pricing data but refuses to submit the certification required by section 3702(b) of this title with respect to the cost or pricing data shall not be affected by the refusal to submit such certification.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1831(a), (h), Jan. 1, 2021, 134 Stat. 4209, 4216; Pub. L. 117–81, div. A, title XVII, §1701(b)(10)(H), Dec. 27, 2021, 135 Stat. 2134.)

Editorial Notes

References in Text

Section 6621 of the Internal Revenue Code of 1986, referred to in subsec. (a)(1)(B), is classified to section 6621 of Title 26, Internal Revenue Code.

Codification

The text of subsec. (f) of section 2306a of this title, which was transferred to this section and amended by Pub. L. 116–283, §1831(h), was based on Pub. L. 99–500, §101(c) [title X, §952(a)], Oct. 18, 1986, 100 Stat. 1783–82, 1783-166, and Pub. L. 99–591, §101(c) [title X, §952(a)], Oct. 30, 1986, 100 Stat. 3341–82, 3341-166; Pub. L. 99–661, div. A, title IX, formerly title IV, §952(a), Nov. 14, 1986, 100 Stat. 3945, renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273; Pub. L. 100–180, div. A, title VIII, §804(b)(2), Dec. 4, 1987, 101 Stat. 1125; Pub. L. 102–190, div. A, title X, §1061(a)(9), Dec. 5, 1991, 105 Stat. 1472; Pub. L. 103–355, title I, §§1204(1), 1209, Oct. 13, 1994, 108 Stat. 3275, 3277. Pub. L. 99–500, Pub. L. 99–591, and Pub. L. 99–661 added identical sections. Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Amendments

2021—Pub. L. 116–283, §1832(h)(1), transferred subsec. (f) of section 2306a of this title to this section, redesignated it as subsec. (a), and redesignated par. (2) as subsec. (b).

Subsec. (a). Pub. L. 116–283, §1831(h)(2), as amended by Pub. L. 117–81, §1701(b)(10)(H), after redesignation of section 2306a(f) of this title as subsec. (a) of this section, in heading, substituted "In General" for "Interest and Penalties for Certain Overpayments", in introductory provisions, struck out par. (1) designation at beginning and substituted "this chapter" for "this section", and redesignated subpar. (A), its cls. (i) and (ii), and subpar. (B) as par. (1), subpars. (A) and (B), and par. (2), respectively.

Subsec. (b). Pub. L. 116–283, §1831(h)(3), as amended by Pub. L. 117–81, §1701(b)(10)(H), after redesignation of section 2306a(f)(2) of this title as subsec. (b) of this section, inserted heading and substituted "this section" for "this subsection" and "section 3702(b) of this title" for "subsection (a)(2)".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

§3708. Right to examine contractor records

For the purpose of evaluating the accuracy, completeness, and currency of cost or pricing data required to be submitted by this chapter, the head of an agency shall have the authority provided by section 3841(b)(2) of this title.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1831(a), (i), Jan. 1, 2021, 134 Stat. 4209, 4216.)

Editorial Notes

Codification

The text of subsec. (g) of section 2306a of this title, which was transferred to this section and amended by Pub. L. 116–283, §1831(i), was based on Pub. L. 103–355, title I, §1205, Oct. 13, 1994, 108 Stat. 3276.

Amendments

2021—Pub. L. 116–283, §1831(i), transferred subsec. (g) of section 2306a of this title to this section, struck out subsec. (g) designation and heading "Right of United States To Examine Contractor Records" at beginning, and substituted "this chapter" for "this section" and "section 3841(b)(2)" for "section 2313(a)(2)".

Statutory Notes and Related Subsidiaries

Effective Date

CHAPTER 272—[Reserved]

Sec.

3721.

[Reserved].

3722.

[Reserved].

3723.

[Reserved].

3724.

[Reserved].

Editorial Notes

Amendments

2021—Pub. L. 117–81, div. A, title XVII, §1701(i)(6), Dec. 27, 2021, 135 Stat. 2141, amended Pub. L. 116–283, div. A, title XVIII, §1831(k), Jan. 1, 2021, 134 Stat. 4217, which added this analysis, by substituting "[Reserved]" for "OTHER PROVISIONS RELATING TO COST OR PRICING DATA" in chapter heading and "[Reserved]" for "Evaluating the reasonableness of price: guidance and training" in item 3721, for "Grants of exceptions to cost or pricing data certification requirements and waivers of cost accounting standards" in item 3722, for "Streamlining awards for innovative technology projects: pilot program" in item 3723, and for "Risk-based contracting for smaller contract actions under Truth in Negotiations Act: pilot program" in item 3724.

§3721. [Reserved]

(Added Pub. L. 116–283, div. A, title XVIII, §1831(k), Jan. 1, 2021, 134 Stat. 4217; amended Pub. L. 117–81, div. A, title XVII, §1701(i)(6)(B), Dec. 27, 2021, 135 Stat. 2141.)

Editorial Notes

Prior Provisions

A prior section 3721, act Aug. 10, 1956, ch. 1041, 70A Stat. 214; Pub. L. 85–861, §1(92)(A), Sept. 2, 1958, 72 Stat. 1482, related to hospital benefits for members of Army, other than of Regular Army, prior to repeal by Pub. L. 99–661, div. A, title VI, §604(f)(1)(A), (g), Nov. 14, 1986, 100 Stat. 3877, 3878, applicable with respect to persons who, after Nov. 14, 1986, incur or aggravate an injury, illness, or disease or die.

Amendments

2021—Pub. L. 117–81, §1701(i)(6)(B), amended Pub. L. 116–283, §1831(k), which enacted this section, by adding section 3721 designation and catchline "[Reserved]" and striking out former section 3721 designation and catchline "Evaluating the reasonableness of price: guidance and training".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Amendment made to Pub. L. 116–283 by Pub. L. 117–81, resulting in omission of this section, applicable as if included in the enactment of title XVIII of Pub. L. 116–283 as enacted, see section 1701(a)(2) of Pub. L. 117–81, set out in a note preceding section 3001 of this title and Effective Date note below.

Effective Date

Section effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as an Effective Date of 2021 Amendment note preceding section 3001 of this title.

§3722. [Reserved]

(Added Pub. L. 116–283, div. A, title XVIII, §1831(k), Jan. 1, 2021, 134 Stat. 4217; amended Pub. L. 117–81, div. A, title XVII, §1701(i)(6)(B), Dec. 27, 2021, 135 Stat. 2141.)

Editorial Notes

Prior Provisions

A prior section 3722, acts Aug. 10, 1956, ch. 1041, 70A Stat. 214; Sept. 2, 1958, Pub. L. 85–861, §1(92)(B), (C), 72 Stat. 1482, related to hospital and related benefits for members of a Citizens' Military Training Camp and for members of Army not covered by section 3721 of this title, prior to repeal by Pub. L. 99–661, div. A, title VI, §604(f)(1)(A), (g), Nov. 14, 1986, 100 Stat. 3877, 3878, applicable with respect to persons who, after Nov. 14, 1986, incur or aggravate an injury, illness, or disease or die.

Amendments

2021—Pub. L. 117–81, §1701(i)(6)(B), amended Pub. L. 116–283, §1831(k), which enacted this section, by adding section 3722 designation and catchline "[Reserved]" and striking out former section 3722 designation and catchline "Grants of exceptions to cost or pricing data certification requirements and waivers of cost accounting standards".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

§3723. [Reserved]

(Added Pub. L. 116–283, div. A, title XVIII, §1831(k), Jan. 1, 2021, 134 Stat. 4217; amended Pub. L. 117–81, div. A, title XVII, §1701(i)(6)(B), Dec. 27, 2021, 135 Stat. 2141.)

Editorial Notes

Prior Provisions

A prior section 3723 was renumbered section 7263 of this title.

Amendments

2021—Pub. L. 117–81, §1701(i)(6)(B), amended Pub. L. 116–283, §1831(k), which enacted this section, by adding section 3723 designation and catchline "[Reserved]" and striking out former section 3723 designation and catchline "Streamlining awards for innovative technology projects: pilot program".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

§3724. [Reserved]

(Added Pub. L. 116–283, div. A, title XVIII, §1831(k), Jan. 1, 2021, 134 Stat. 4217; amended Pub. L. 117–81, div. A, title XVII, §1701(i)(6)(B), Dec. 27, 2021, 135 Stat. 2141.)

Editorial Notes

Amendments

2021—Pub. L. 117–81, §1701(i)(6)(B), amended Pub. L. 116–283, §1831(k), which enacted this section, by adding section 3724 designation and catchline "[Reserved]" and striking out former section 3724 designation and catchline "Risk-based contracting for smaller contract actions under truth in negotiations act: pilot program".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

CHAPTER 273—ALLOWABLE COSTS

Subchapter

Sec.

General

3741

II.

Other Allowable Cost Provisions

3761

Editorial Notes

Prior Provisions

A prior chapter 273 "ALLOWABLE COSTS", as added by Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1828, and consisting of reserved section 3741, was repealed by Pub. L. 116–283, div. A, title XVIII, §1832(a), Jan. 1, 2021, 134 Stat. 4217.

SUBCHAPTER I—GENERAL

Sec.

3741.

Definitions.

3742.

Adjustment of threshold amount of covered contract.

3743.

Effect of submission of unallowable costs.

3744.

Specific costs not allowable.

3745.

Required regulations.

3746.

Applicability of regulations to subcontractors.

3747.

Contractor certification.

3748.

Penalties for submission of cost known as not allowable.

3749.

Burden of proof on contractor.

3750.

Proceeding costs not allowable.

§3741. Definitions

In this subchapter:

(1) Compensation.—The term "compensation", for a year, means the total amount of wages, salary, bonuses and deferred compensation for the year, whether paid, earned, or otherwise accruing, as recorded in an employer's cost accounting records for the year.

(2) Covered contract.—The term "covered contract" means a contract for an amount in excess of $500,000 that is entered into by the head of an agency, except that such term does not include a fixed-price contract without cost incentives or any firm fixed-price contract for the purchase of commercial products or commercial services.

(3) Fiscal year.—The term "fiscal year" means a fiscal year established by a contractor for accounting purposes.

(4) Head of the agency.—The term "head of the agency" or "agency head" does not include the Secretary of a military department.

(5) Agency.—The term "agency" means the Department of Defense, the Coast Guard, and the National Aeronautics and Space Administration.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (b)(1)–(3), Jan. 1, 2021, 134 Stat. 4218.)

Editorial Notes

Codification

The text of pars. (1)(A), (2)–(4), and (6) of subsec. (l) of section 2324 of this title, which were transferred to this section and amended by Pub. L. 116–283, §1832(b)(1)–(3), was based on Pub. L. 103–355, title II, §2101(d), Oct. 13, 1994, 108 Stat. 3308; Pub. L. 105–85, div. A, title VIII, §808(a)(2), Nov. 18, 1997, 111 Stat. 1836; Pub. L. 115–232, div. A, title VIII, §836(c)(9), Aug. 13, 2018, 132 Stat. 1866.

Prior Provisions

A prior section 3741 was renumbered section 7271 of this title.

Amendments

2021—Pub. L. 116–283, §1832(b)(1)–(3), redesignated pars. (4), (1)(A), (6), (2), and (3) of section 2324(l) of this title as pars. (1) to (5), respectively, of this section and inserted headings.

Statutory Notes and Related Subsidiaries

Effective Date

§3742. Adjustment of threshold amount of covered contract

Effective on October 1 of each year that is divisible by five, the amount set forth in section 3741(2) of this title shall be adjusted in accordance with section 1908 of title 41.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (b)(4), Jan. 1, 2021, 134 Stat. 4218, 4219.)

Editorial Notes

Codification

The text of par. (1)(B) of subsec. (l) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1832(b)(4), was based on Pub. L. 103–355, title II, §2101(d), Oct. 13, 1994, 108 Stat. 3308; Pub. L. 115–91, div. A, title VIII, §811(e), Dec. 12, 2017, 131 Stat. 1460.

Prior Provisions

A prior section 3742 was renumbered section 7272 of this title.

Amendments

2021—Pub. L. 116–283, §1832(b)(4), transferred subpar. (B) of section 2324(l)(1) of this title to this section, struck out subpar. (B) designation at beginning, and substituted "section 3741(2) of this title" for "subparagraph (A)".

Statutory Notes and Related Subsidiaries

Effective Date

§3743. Effect of submission of unallowable costs

(a) Indirect Cost That Violates a FAR Cost Principle.—The head of an agency shall require that a covered contract provide that if the contractor submits to the agency a proposal for settlement of indirect costs incurred by the contractor for any period after such costs have been accrued and if that proposal includes the submission of a cost which is unallowable because the cost violates a cost principle in the Federal Acquisition Regulation or applicable agency supplement to the Federal Acquisition Regulation, the cost shall be disallowed.

(b) Penalty for Violation of Cost Principle.—

(1) If the head of the agency determines that a cost submitted by a contractor in its proposal for settlement is expressly unallowable under a cost principle referred to in subsection (a) that defines the allowability of specific selected costs, the head of the agency shall assess a penalty against the contractor in an amount equal to—

(A) the amount of the disallowed cost allocated to covered contracts for which a proposal for settlement of indirect costs has been submitted; plus

(B) interest (to be computed based on provisions in the Federal Acquisition Regulation) to compensate the United States for the use of any funds which a contractor has been paid in excess of the amount to which the contractor was entitled.

(2) Cost determined to be unallowable before proposal submitted.—If the head of the agency determines that a proposal for settlement of indirect costs submitted by a contractor includes a cost determined to be unallowable in the case of such contractor before the submission of such proposal, the head of the agency shall assess a penalty against the contractor in an amount equal to two times the amount of the disallowed cost allocated to covered contracts for which a proposal for settlement of indirect costs has been submitted.

(c) Waiver of Penalty.—The Federal Acquisition Regulation shall provide for a penalty under subsection (b) to be waived in the case of a contractor's proposal for settlement of indirect costs when—

(1) the contractor withdraws the proposal before the formal initiation of an audit of the proposal by the Federal Government and resubmits a revised proposal;

(2) the amount of unallowable costs subject to the penalty is insignificant; or

(3) the contractor demonstrates, to the contracting officer's satisfaction, that—

(A) it has established appropriate policies and personnel training and an internal control and review system that provide assurances that unallowable costs subject to penalties are precluded from being included in the contractor's proposal for settlement of indirect costs; and

(B) the unallowable costs subject to the penalty were inadvertently incorporated into the proposal.

(d) Applicability of Contract Disputes Procedure to Disallowance of Cost and Assessment of Penalty.—An action of the head of an agency under subsection (a) or (b)—

(1) shall be considered a final decision for the purposes of section 7103 of title 41; and

(2) is appealable in the manner provided in section 7104(a) of title 41.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (c), Jan. 1, 2021, 134 Stat. 4218, 4219.)

Editorial Notes

Codification

The text of subsec. (a) of section 2324 of this title, which was transferred to this section by Pub. L. 116–283, §1832(c)(1), was based on Pub. L. 99–145, title IX, §911(a)(1), Nov. 8, 1985, 99 Stat. 682; Pub. L. 102–484, div. A, title VIII, §818(a)(1)(A), Oct. 23, 1992, 106 Stat. 2457; Pub. L. 103–355, title II, §2101(a), Oct. 13, 1994, 108 Stat. 3306.

The text of subsec. (b) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1832(c), was based on Pub. L. 99–145, title IX, §911(a)(1), Nov. 8, 1985, 99 Stat. 682; Pub. L. 102–484, div. A, title VIII, §818(a)(1)(B), (2), Oct. 23, 1992, 106 Stat. 2457, 2458; Pub. L. 103–355, title II, §2101(a)(2), Oct. 13, 1994, 108 Stat. 3306.

The text of subsec. (c) of section 2324 of this title, which was transferred to this section by Pub. L. 116–283, §1832(c)(1), was based on Pub. L. 102–484, div. A, title VIII, §818(a)(5), Oct. 23, 1992, 106 Stat. 2458; Pub. L. 103–355, title II, §2101(a)(3), Oct. 13, 1994, 108 Stat. 3307.

The text of subsec. (d) of section 2324 of this title, which was transferred to this section by Pub. L. 116–283, §1832(c)(1), was based on Pub. L. 99–145, title IX, §911(a)(1), Nov. 8, 1985, 99 Stat. 683; Pub. L. 102–484, div. A, title VIII, §818(a)(4), Oct. 23, 1992, 106 Stat. 2458; Pub. L. 103–355, title II, §2101(a)(4), Oct. 13, 1994, 108 Stat. 3307; Pub. L. 111–350, §5(b)(19)(A), (B), Jan. 4, 2011, 124 Stat. 3844.

Prior Provisions

A prior section 3743 was renumbered section 7273 of this title.

Amendments

2021—Pub. L. 116–283, §1832(c)(1), transferred subsecs. (a) to (d) of section 2324 of this title to this section.

Subsec. (b). Pub. L. 116–283, §1832(c)(2), realigned margins of pars. (1) and (2) and inserted par. (2) heading.

Statutory Notes and Related Subsidiaries

Effective Date

§3744. Specific costs not allowable

(a) Specific Costs.—The following costs are not allowable under a covered contract:

(1) Costs of entertainment, including amusement, diversion, and social activities and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities).

(2) Costs incurred to influence (directly or indirectly) legislative action on any matter pending before Congress, a State legislature, or a legislative body of a political subdivision of a State.

(3) Costs incurred in defense of any civil or criminal fraud proceeding or similar proceeding (including filing of any false certification) brought by the United States where the contractor is found liable or has pleaded nolo contendere to a charge of fraud or similar proceeding (including filing of a false certification).

(4) Payments of fines and penalties resulting from violations of, or failure to comply with, Federal, State, local, or foreign laws and regulations, except when incurred as a result of compliance with specific terms and conditions of the contract or specific written instructions from the contracting officer authorizing in advance such payments in accordance with applicable provisions of the Federal Acquisition Regulation.

(5) Costs of membership in any social, dining, or country club or organization.

(6) Costs of alcoholic beverages.

(7) Contributions or donations, regardless of the recipient.

(8) Costs of advertising designed to promote the contractor or its products.

(9) Costs of promotional items and memorabilia, including models, gifts, and souvenirs.

(10) Costs for travel by commercial aircraft which exceed the amount of the standard commercial fare.

(11) Costs incurred in making any payment (commonly known as a "golden parachute payment") which is—

(i) in an amount in excess of the normal severance pay paid by the contractor to an employee upon termination of employment; and

(ii) is paid to the employee contingent upon, and following, a change in management control over, or ownership of, the contractor or a substantial portion of the contractor's assets.

(12) Costs of commercial insurance that protects against the costs of the contractor for correction of the contractor's own defects in materials or workmanship.

(13) Costs of severance pay paid by the contractor to foreign nationals employed by the contractor under a service contract performed outside the United States, to the extent that the amount of severance pay paid in any case exceeds the amount paid in the industry involved under the customary or prevailing practice for firms in that industry providing similar services in the United States, as determined under the Federal Acquisition Regulation.

(14) Costs of severance pay paid by the contractor to a foreign national employed by the contractor under a service contract performed in a foreign country if the termination of the employment of the foreign national is the result of the closing of, or the curtailment of activities at, a United States military facility in that country at the request of the government of that country.

(15) Costs incurred by a contractor in connection with any criminal, civil, or administrative proceeding commenced by the United States or a State, to the extent provided in section 3750 of this title.

(16) ¹ Costs of compensation of any contractor employee for a fiscal year, regardless of the contract funding source, to the extent that such compensation exceeds $625,000 adjusted annually for the U.S. Bureau of Labor Statistics Employment Cost Index for total compensation for private industry workers, by occupational and industry group not seasonally adjusted, except that the Secretary of Defense may establish exceptions for positions in the science, technology, engineering, mathematics, medical, and cybersecurity fields and other fields requiring unique areas of expertise upon a determination that such exceptions are needed to ensure that the Department of Defense has continued access to needed skills and capabilities.

(16) ¹ Costs of compensation of contractor and subcontractor employees for a fiscal year, regardless of the contract funding source, to the extent that such compensation exceeds $487,000 per year, adjusted annually to reflect the change in the Employment Cost Index for all workers, as calculated by the Bureau of Labor Statistics, except that the head of an executive agency may establish one or more narrowly targeted exceptions for scientists, engineers, or other specialists upon a determination that such exceptions are needed to ensure that the executive agency has continued access to needed skills and capabilities.

(17) Costs incurred by a contractor in connection with a congressional investigation or inquiry into an issue that is the subject matter of a proceeding resulting in a disposition as described in section 3750(c) of this title.

(b) Waiver of Severance Pay Restrictions for Foreign Nationals.—

(1) Head of an agency determination.—Pursuant to the Federal Acquisition Regulation and subject to the availability of appropriations, the head of an agency awarding a covered contract (other than a contract to which subsection (d) applies) may waive the application of the provisions of subsections (a)(13) and (a)(14) to that contract if the head of the agency determines that—

(A) the application of such provisions to the contract would adversely affect the continuation of a program, project, or activity that provides significant support services for members of the armed forces stationed or deployed outside the United States;

(B) the contractor has taken (or has established plans to take) appropriate actions within the contractor's control to minimize the amount and number of incidents of the payment of severance pay by the contractor to employees under the contract who are foreign nationals; and

(C) the payment of severance pay is necessary in order to comply with a law that is generally applicable to a significant number of businesses in the country in which the foreign national receiving the payment performed services under the contract or is necessary to comply with a collective bargaining agreement.

(2) Solicitation to include statement about waiver.—The head of an agency shall include in the solicitation for a covered contract a statement indicating—

(A) that a waiver has been granted under paragraph (1) for the contract; or

(B) whether the head of the agency will consider granting such a waiver, and, if the agency head will consider granting a waiver, the criteria to be used in granting the waiver.

(3) Determination to be made before contract awarded.—The head of an agency shall make the final determination regarding whether to grant a waiver under paragraph (1) with respect to a covered contract before award of the contract.

(c) Establishment of Definitions, Exclusions, Limitations, and Qualifications.—The provisions of the Federal Acquisition Regulation implementing this subchapter may establish appropriate definitions, exclusions, limitations, and qualifications.

(d) Specific Costs Under Military Banking Contracts Relating to Foreign Nationals.—

(1) Authority.—The Secretary of Defense may provide in a military banking contract that the provisions of subsections (a)(13) and (a)(14) shall not apply to costs incurred under the contract by the contractor for payment of mandated foreign national severance pay. The Secretary may include such a provision in a military banking contract only if the Secretary determines, with respect to that contract, that the contractor has taken (or has established plans to take) appropriate actions within the contractor's control to minimize the amount and number of incidents of the payment of severance pay by the contractor to employees under the contract who are foreign nationals.

(2) Definitions.—In paragraph (1):

(A) Military banking contract.—The term "military banking contract" means a contract between the Secretary and a financial institution under which the financial institution operates a military banking facility outside the United States for use by members of the armed forces stationed or deployed outside the United States and other authorized personnel.

(B) Mandated foreign national severance pay.—The term "mandated foreign national severance pay" means severance pay paid by a contractor to a foreign national employee the payment of which by the contractor is required in order to comply with a law that is generally applicable to a significant number of businesses in the country in which the foreign national receiving the payment performed services under the contract.

(3) Exception for foreign-owned financial institutions.—Paragraph (1) does not apply to a contract with a financial institution that is owned or controlled by citizens or nationals of a foreign country, as determined by the Secretary of Defense. Such a determination shall be made in accordance with the criteria set out in paragraph (1) of section 4(g) of the Buy American Act (as added by section 7002(2) of the Omnibus Trade and Competitiveness Act of 1988) and the policy guidance referred to in paragraph (2)(A) of that section.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (d), Jan. 1, 2021, 134 Stat. 4218, 4219.)

Editorial Notes

References in Text

Section 4 of the Buy American Act (as added by section 7002(2) of the Omnibus Trade and Competitiveness Act of 1988), referred to in subsec. (d)(3), was section 4 of act Mar. 3, 1933, ch. 212, title III, as added Pub. L. 100–418, title VII, §7002(2), Aug. 23, 1988, 102 Stat. 1545. Section 4, which was classified to section 10b–1 of former Title 41, Public Contracts, was omitted from the Code in view of section 7004 of Pub. L. 100–418 which provided that the amendment by Pub. L. 100–418 which enacted section 4 ceased to be effective on Apr. 30, 1996. Section 4 was subsequently repealed by Pub. L. 111–350, §7(b), Jan. 4, 2011, 124 Stat. 3855, which Act enacted Title 41, Public Contracts.

Codification

The text of subsec. (e) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1832(d), was based on Pub. L. 99–145, title IX, §911(a)(1), Nov. 8, 1985, 99 Stat. 683; Pub. L. 99–190, §101(b) [title VIII, §8112(a)(1)], Dec. 19, 1985, 99 Stat. 1185, 1223; Pub. L. 100–180, div. A, title VIII, §805(a), Dec. 4, 1987, 101 Stat. 1126; Pub. L. 100–370, §1(f)(2)(A), July 19, 1988, 102 Stat. 846; Pub. L. 100–456, div. A, title III, §322(a), title VIII, §832(a), Sept. 29, 1988, 102 Stat. 1952, 2023; Pub. L. 100–700, §8(b)(1), Nov. 19, 1988, 102 Stat. 4636; Pub. L. 101–189, div. A, title III, §311(a)(1), Nov. 29, 1989, 103 Stat. 1411; Pub. L. 101–510, div. A, title XIII, §1301(10), Nov. 5, 1990, 104 Stat. 1668; Pub. L. 102–190, div. A, title III, §346(a), Dec. 5, 1991, 105 Stat. 1346; Pub. L. 102–484, div. A, title XIII, §1352(b), Oct. 23, 1992, 106 Stat. 2559; Pub. L. 103–355, title II, §2101(a)(5), (b), Oct. 13, 1994, 108 Stat. 3307, 3308; Pub. L. 104–106, div. D, title XLIII, §4321(b)(9)(A), Feb. 10, 1996, 110 Stat. 672; Pub. L. 105–85, div. A, title VIII, §808(a)(1), Nov. 18, 1997, 111 Stat. 1836; Pub. L. 111–350, §5(b)(19)(C), (D), Jan. 4, 2011, 124 Stat. 3844; Pub. L. 112–81, div. A, title VIII, §803(a), Dec. 31, 2011, 125 Stat. 1485; Pub. L. 113–66, div. A, title VIII, §811(a), Dec. 26, 2013, 127 Stat. 806; Pub. L. 113–67, div. A, title VII, §702(a)(2), Dec. 26, 2013, 127 Stat. 1189; Pub. L. 113–291, div. A, title VIII, §857, Dec. 19, 2014, 128 Stat. 3460.

Prior Provisions

A prior section 3744 was renumbered section 7274 of this title.

Amendments

2021—Pub. L. 116–283, §1832(d)(1), transferred subsec. (e) of section 2324 of this title to this section, struck out subsec. (e) designation and heading "Specific Costs Not Allowable" at beginning, and redesignated pars. (1), (3), (4), and (2) as subsecs. (a) to (d), respectively.

Subsec. (a). Pub. L. 116–283, §1832(d)(2)(A), (B), after redesignation of par. (1) of section 2324(e) of this title as subsec. (a) of this section, inserted heading and redesignated subpars. (A) to (Q) as pars. (1) to (17), respectively, including two subpars. (P) both redesignated par. (16).

Subsec. (a)(15). Pub. L. 116–283, §1832(d)(2)(C), substituted "section 3750 of this title" for "subsection (k)".

Subsec. (a)(17). Pub. L. 116–283, §1832(d)(2)(D), substituted "section 3750(c) of this title" for "subsection (k)(2)".

Subsec. (b). Pub. L. 116–283, §1832(d)(3)(A), (B), after redesignation of par. (3) of section 2324(e) of this title as subsec. (b) of this section, inserted heading and redesignated subpars. (A) to (C) as pars. (1) to (3), respectively.

Subsec. (b)(1). Pub. L. 116–283, §1832(d)(3)(A), (C), inserted heading, substituted "subsection (d)" for "paragraph (2)" and "subsections (a)(13) and (a)(14)" for "paragraphs (1)(M) and (1)(N)" in introductory provisions, and redesignated cls. (i) to (iii) of former section 2324(e)(3)(A) as subpars. (A) to (C), respectively.

Subsec. (b)(2). Pub. L. 116–283, §1832(d)(3)(D), inserted heading, realigned margin, redesignated cls. (i) and (ii) of former section 2324(e)(3)(B) as subpars. (A) and (B), respectively, and, in subpar. (A), substituted "paragraph (1)" for "subparagraph (A)".

Subsec. (b)(3). Pub. L. 116–283, §1832(d)(3)(E), inserted heading, realigned margin, and substituted "paragraph (1)" for "subparagraph (A)".

Subsec. (c). Pub. L. 116–283, §1832(d)(4), after redesignation of par. (4) of section 2324(e)(3) of this title as subsec. (c) of this section, inserted heading and substituted "this subchapter" for "this section".

Subsec. (d). Pub. L. 116–283, §1832(d)(5)(A), (B), after redesignation of par. (2) of section 2324(e)(3) of this title as subsec. (d) of this section, inserted heading, redesignated subpars. (A) to (C) as pars. (1) to (3), respectively, and realigned margins.

Subsec. (d)(1). Pub. L. 116–283, §1832(d)(5)(A), (C), inserted heading and substituted "subsections (a)(13) and (a)(14)" for "paragraphs (1)(M) and (1)(N)".

Subsec. (d)(2). Pub. L. 116–283, §1832(d)(5)(D), inserted par. heading, substituted "paragraph (1)" for "subparagraph (A)" in introductory provisions, redesignated cls. (i) and (ii) of former section 2324(e)(2)(B) as subpars. (A) and (B), respectively, and inserted subpar. headings.

Subsec. (d)(3). Pub. L. 116–283, §1832(d)(5)(E), inserted heading and substituted "Paragraph (1)" for "Subparagraph (A)".

Statutory Notes and Related Subsidiaries

Effective Date

Regulations

Pub. L. 99–145, title IX, §911(b), Nov. 8, 1985, 99 Stat. 685, provided that:

"(1) Not later than 150 days after the date of the enactment of this Act [Nov. 8, 1985], the Secretary of Defense shall prescribe the regulations required by subsections (e) and (f) of [former] section 2324 of title 10, United States Code [see 10 U.S.C. 3744, 3745], as added by subsection (a). Such regulations shall be published in accordance with section 22 of the Office of Federal Procurement Policy Act ([former] 41 U.S.C. 418b) [now 41 U.S.C. 1707].

"(2) The Secretary shall review such regulations at least once every five years. The results of each such review shall be made public."

¹ So in original. There are two pars. (16).

§3745. Required regulations

(a) In General.—The Federal Acquisition Regulation shall contain provisions on the allowability of contractor costs. Such provisions shall define in detail and in specific terms those costs which are unallowable, in whole or in part, under covered contracts.

(b) Specific Items.—The regulations shall, at a minimum, clarify the cost principles applicable to contractor costs of the following:

(1) Air shows.

(2) Membership in civic, community, and professional organizations.

(3) Recruitment.

(4) Employee morale and welfare.

(5) Actions to influence (directly or indirectly) executive branch action on regulatory and contract matters (other than costs incurred in regard to contract proposals pursuant to solicited or unsolicited bids).

(6) Community relations.

(7) Dining facilities.

(8) Professional and consulting services, including legal services.

(9) Compensation.

(10) Selling and marketing.

(11) Travel.

(12) Public relations.

(13) Hotel and meal expenses.

(14) Expense of corporate aircraft.

(15) Company-furnished automobiles.

(16) Advertising.

(17) Conventions.

(1) When questioned costs may be resolved.—The Federal Acquisition Regulation shall require that a contracting officer not resolve any questioned costs until he has obtained—

(A) adequate documentation with respect to such costs; and

(B) the opinion of the contract auditor on the allowability of such costs.

(2) Presence of contract auditor.—The Federal Acquisition Regulation shall provide that, to the maximum extent practicable, the contract auditor be present at any negotiation or meeting with the contractor regarding a determination of the allowability of indirect costs of the contractor.

(3) Settlement to reflect amount of individual questioned costs.—The Federal Acquisition Regulation shall require that all categories of costs designated in the report of the contract auditor as questioned with respect to a proposal for settlement be resolved in such a manner that the amount of the individual questioned costs that are paid will be reflected in the settlement.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (e), Jan. 1, 2021, 134 Stat. 4218, 4221.)

Editorial Notes

Codification

The text of subsec. (f) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1832(e), was based on Pub. L. 99–145, title IX, §911(a)(1), Nov. 8, 1985, 99 Stat. 683; Pub. L. 100–456, div. A, title VIII, §826(a), Sept. 29, 1988, 102 Stat. 1952; Pub. L. 100–463, title VIII, §8105(a), Oct. 1, 1988, 102 Stat. 2270–36; Pub. L. 100–526, title I, §106(a)(2), Oct. 24, 1988, 102 Stat. 2625; Pub. L. 102–484, div. A, title X, §1052(26)(A), Oct. 23, 1992, 106 Stat. 2500; Pub. L. 103–355, title II, §2101(a)(6), (c), Oct. 13, 1994, 108 Stat. 3307, 3308, as amended by Pub. L. 104–106, div. D, title XLIII, §4321(a)(5), Feb. 10, 1996, 110 Stat. 671.

Another section 1832(e) of Pub. L. 116–283 amended section 3746 of this title.

Prior Provisions

A prior section 3745 was renumbered section 7275 of this title.

Amendments

2021—Pub. L. 116–283, §1832(e)(1)(A), transferred subsec. (f) of section 2324 of this title to this section and struck out subsec. (f) designation and heading "Required Regulations" at beginning.

Subsec. (a). Pub. L. 116–283, §1832(e)(1)(B), (2), redesignated first two sentences of par. (1) of section 2324(f) of this title as subsec. (a) of this section and inserted heading. Third sentence designated subsec. (b).

Subsec. (b). Pub. L. 116–283, §1832(e)(1)(C), (3), designated third sentence of subsec. (a) as subsec. (b), inserted heading, and redesignated subpars. (A) to (Q) as pars. (1) to (17), respectively.

Subsec. (c). Pub. L. 116–283, §1832(e)(1)(D), (E), (4), redesignated pars. (2) to (4) of section 2324(f) of this title collectively as subsec. (c) of this section and individually as pars. (1) to (3), respectively, thereof, inserted subsec. and par. headings, and realigned margins.

Statutory Notes and Related Subsidiaries

Effective Date

Regulations

For requirement to prescribe and periodically review regulations required by this section (formerly subsec. (f) of section 2324 of this title), see section 911(b) of Pub. L. 99–145, set out as a note under section 3744 of this title.

§3746. Applicability of regulations to subcontractors

The regulations referred to in sections 3744 and 3745(a) and (b) of this title shall require prime contractors of a covered contract, to the maximum extent practicable, to apply the provisions of such regulations to all subcontractors of the covered contract.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (e), Jan. 1, 2021, 134 Stat. 4218, 4221.)

Editorial Notes

Codification

The text of subsec. (g) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1832(e), was based on Pub. L. 99–145, title IX, §911(a)(1), Nov. 8, 1985, 99 Stat. 684; Pub. L. 103–355, title II, §2101(a)(7), Oct. 13, 1994, 108 Stat. 3308.

Another section 1832(e) of Pub. L. 116–283 amended section 3745 of this title.

Prior Provisions

A prior section 3746 was renumbered section 7276 of this title.

Amendments

2021—Pub. L. 116–283, §1832(e), transferred subsec. (g) of section 2324 of this title to this section, struck out subsec. (g) designation and heading "Applicability of Regulations to Subcontractors" at beginning, and substituted "sections 3744 and 3745(a) and (b) of this title" for "subsections (e) and (f)(1)".

Statutory Notes and Related Subsidiaries

Effective Date

§3747. Contractor certification

(a) Content and Form.—A proposal for settlement of indirect costs applicable to a covered contract shall include a certification by an official of the contractor that, to the best of the certifying official's knowledge and belief, all indirect costs included in the proposal are allowable. Any such certification shall be in a form prescribed in the Federal Acquisition Regulation.

(b) Waiver.—The head of the agency or the Secretary of the military department concerned may, in an exceptional case, waive the requirement for certification under subsection (a) in the case of any contract if the head of the agency or the Secretary—

(1) determines in such case that it would be in the interest of the United States to waive such certification; and

(2) states in writing the reasons for that determination and makes such determination available to the public.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (f), Jan. 1, 2021, 134 Stat. 4218, 4221.)

Editorial Notes

Codification

The text of subsec. (h) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1832(f), was based on Pub. L. 99–145, title IX, §911(a)(1), Nov. 8, 1985, 99 Stat. 684; Pub. L. 99–190, §101(b) [title VIII, §8112(a)(2)], Dec. 19, 1985, 99 Stat. 1185, 1223; Pub. L. 103–355, title II, §2101(a)(8), Oct. 13, 1994, 108 Stat. 3308; Pub. L. 104–106, div. D, title XLIII, §4321(b)(9)(B), Feb. 10, 1996, 110 Stat. 672.

Prior Provisions

A prior section 3746 was renumbered section 7276 of this title.

Amendments

2021—Pub. L. 116–283, §1832(f)(1)(A), transferred subsec. (h) of section 2324 of this title to this section and struck out subsec. (h) designation and heading "Contractor Certification Required" at beginning.

Subsec. (a). Pub. L. 116–283, §1832(f)(1)(B), (2), redesignated par. (1) of section 2324(h) of this title as subsec. (a) of this section and inserted heading.

Subsec. (b). Pub. L. 116–283, §1832(f)(1)(B), (3), redesignated par. (2) of section 2324(h) of this title as subsec. (b) of this section, inserted heading, substituted "subsection (a)" for "paragraph (1)" in introductory provisions, and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively.

Statutory Notes and Related Subsidiaries

Effective Date

§3748. Penalties for submission of cost known as not allowable

The submission to an agency of a proposal for settlement of costs for any period after such costs have been accrued that includes a cost that is expressly specified by statute or regulation as being unallowable, with the knowledge that such cost is unallowable, shall be subject to the provisions of section 287 of title 18 and section 3729 of title 31.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (g), Jan. 1, 2021, 134 Stat. 4218, 4222.)

Editorial Notes

Codification

The text of subsec. (i) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1832(g), was based on Pub. L. 99–145, title IX, §911(a)(1), Nov. 8, 1985, 99 Stat. 684; Pub. L. 103–355, title II, §2101(a)(9), Oct. 13, 1994, 108 Stat. 3308.

Prior Provisions

A prior section 3748 was renumbered section 7278 of this title.

Amendments

2021—Pub. L. 116–283, §1832(g), transferred subsec. (i) of section 2324 of this title to this section and struck out subsec. (i) designation and heading "Penalties for Submission of Cost Known as Not Allowable" at beginning.

Statutory Notes and Related Subsidiaries

Effective Date

§3749. Burden of proof on contractor

In a proceeding before the Armed Services Board of Contract Appeals, the United States Court of Federal Claims, or any other Federal court in which the reasonableness of indirect costs for which a contractor seeks reimbursement from the Department of Defense is in issue, the burden of proof shall be upon the contractor to establish that those costs are reasonable.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (h), Jan. 1, 2021, 134 Stat. 4218, 4222.)

Editorial Notes

Codification

The text of subsec. (j) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1832(h), was based on Pub. L. 100–370, §1(f)(3)(A), July 19, 1988, 102 Stat. 846; Pub. L. 103–355, title II, §2101(a)(10), Oct. 13, 1994, 108 Stat. 3308.

Prior Provisions

A prior section 3749 was renumbered section 7279 of this title.

Amendments

2021—Pub. L. 116–283, §1832(h), transferred subsec. (j) of section 2324 of this title to this section and struck out subsec. (j) designation and heading "Contractor To Have Burden of Proof" at beginning.

Statutory Notes and Related Subsidiaries

Effective Date

§3750. Proceeding costs not allowable

(a) Definitions.—In this section:

(1) Costs.—The term "costs", with respect to a proceeding—

(A) means all costs incurred by a contractor or subcontractor, or personal services contractor, whether before or after the commencement of any such proceeding; and

(B) includes—

(i) administrative and clerical expenses;

(ii) the cost of legal services, including legal services performed by an employee of the contractor or subcontractor, or personal services contractor;

(iii) the cost of the services of accountants and consultants retained by the contractor or subcontractor, or personal services contractor; and

(iv) the pay of directors, officers, and employees of the contractor or subcontractor, or personal services contractor for time devoted by such directors, officers, and employees to such proceeding.

(2) Penalty.—The term "penalty" does not include restitution, reimbursement, or compensatory damages.

(3) Proceedings.—The term "proceeding" includes an investigation.

(b) In General.—Except as otherwise provided in this section, costs incurred by a contractor or subcontractor, or personal services contractor in connection with any criminal, civil, or administrative proceeding commenced by the United States, by a State, or by a contractor or subcontractor, or personal services contractor employee submitting a complaint under section 4701 of this title are not allowable as reimbursable costs under a covered contract, subcontract, or personal services contract if the proceeding—

(1) relates to a violation of, or failure to comply with, a Federal or State statute or regulation or to any other activity described in section 4701(a)(1) of this title; and

(2) results in a disposition described in subsection (c).

(1) In the case of a criminal proceeding, a conviction (including a conviction pursuant to a plea of nolo contendere) by reason of the violation or failure referred to in subsection (b).

(2) In the case of a civil or administrative proceeding involving an allegation of fraud or similar misconduct, a determination of contractor or subcontractor, or personal services contractor liability on the basis of the violation or failure referred to in subsection (b).

(3) In the case of any civil or administrative proceeding, the imposition of a monetary penalty or an order to take corrective action under section 4701 of this title by reason of the violation or failure referred to in subsection (b).

(4) A final decision—

(A) to debar or suspend the contractor or subcontractor, or personal services contractor;

(B) to rescind or void the contract, subcontract, or personal services contract; or

by reason of the violation or failure referred to in subsection (b).

(5) A disposition of the proceeding by consent or compromise if such action could have resulted in a disposition described in paragraphs (1), (2), (3), or (4).

(d) Costs Allowed by Settlement Agreement in Proceeding Commenced by United States.—In the case of a proceeding referred to in subsection (b) that is commenced by the United States and is resolved by consent or compromise pursuant to an agreement entered into by a contractor or subcontractor, or personal services contractor and the United States, the costs incurred by the contractor or subcontractor, or personal services contractor in connection with such proceeding that are otherwise not allowable as reimbursable costs under such subsection may be allowed to the extent specifically provided in such agreement.

(e) Costs Specifically Authorized in Proceeding Commenced by State.—In the case of a proceeding referred to in subsection (b) that is commenced by a State, the head of the agency or Secretary of the military department concerned that awarded the covered contract, subcontract, or personal services contract involved in the proceeding may allow the costs incurred by the contractor or subcontractor, or personal services contractor in connection with such proceeding as reimbursable costs if the agency head or Secretary determines, in accordance with the Federal Acquisition Regulation, that the costs were incurred as a result of (1) a specific term or condition of the contract, subcontract, or personal services contract, or (2) specific written instructions of the agency or military department.

(f) Other Allowable Costs.—

(1) In general.—Except as provided in paragraph (3), costs incurred by a contractor or subcontractor, or personal services contractor in connection with a criminal, civil, or administrative proceeding commenced by the United States or a State in connection with a covered contract, subcontract, or personal services contract may be allowed as reimbursable costs under the contract, subcontract, or personal services contract if such costs are not disallowable under subsection (b), but only to the extent provided in paragraph (2).

(2) Amount of Allowable Costs.—

(A) Maximum amount allowed.—The amount of the costs allowable under paragraph (1) in any case may not exceed the amount equal to 80 percent of the amount of the costs incurred, to the extent that such costs are determined to be otherwise allowable and allocable under the Federal Acquisition Regulation.

(B) Content of regulations.—Regulations issued for the purpose of subparagraph (A) shall provide for appropriate consideration of—

(i) the complexity of procurement litigation;

(ii) generally accepted principles governing the award of legal fees in civil actions involving the United States as a party; and

(iii) such other factors as may be appropriate.

(3) When otherwise allowable costs are not allowable.—In the case of a proceeding referred to in paragraph (1), contractor or subcontractor, or personal services contractor costs otherwise allowable as reimbursable costs under this subsection are not allowable if—

(A) such proceeding involves the same contractor or subcontractor, or personal services contractor misconduct alleged as the basis of another criminal, civil, or administrative proceeding; and

(B) the costs of such other proceeding are not allowable under subsection (b).

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1832(a), (i), Jan. 1, 2021, 134 Stat. 4218, 4222; Pub. L. 117–81, div. A, title XVII, §1701(b)(11), Dec. 27, 2021, 135 Stat. 2134.)

Editorial Notes

Codification

The text of subsec. (k) of section 2324 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1832(i), was based on Pub. L. 100–700, §8(b), Nov. 19, 1988, 102 Stat. 4636; Pub. L. 101–189, div. A, title VIII, §853(a)(1)(A), (b)(3), Nov. 29, 1989, 103 Stat. 1518; Pub. L. 103–355, title II, §2101(a)(11), Oct. 13, 1994, 108 Stat. 3308; Pub. L. 112–239, div. A, title VIII, §827(g), Jan. 2, 2013, 126 Stat. 1836; Pub. L. 114–261, §1(b)(1), Dec. 14, 2016, 130 Stat. 1362.

Prior Provisions

Prior sections 3750 to 3756 were renumbered sections 7280 to 7286 of this title, respectively.

Amendments

2021—Subsec. (a). Pub. L. 116–283, §1832(i)(1)(A), (B), redesignated par. (6) of section 2324(k) of this title as subsec. (a) of this section, inserted heading, substituted "In this section" for "In this subsection" in introductory provisions, and redesignated subpars. (B), (C), and (A) as pars. (1) to (3), respectively.

Subsec. (a)(1). Pub. L. 116–283, §1832(i)(1)(C), inserted heading and redesignated cls. (i) and (ii) and its subcls. (I) to (IV) as subpars. (A) and (B) and cls. (i) to (iv), respectively.

Subsec. (a)(2), (3). Pub. L. 116–283, §1832(i)(1)(D), (E), inserted heading.

Subsec. (b). Pub. L. 116–283, §1832(i)(2), (3), redesignated par. (1) of subsec. (k) of section 2324 of this title as subsec. (b) of this section, inserted heading, substituted "this section" for "this subsection" and "section 4701" for "section 2409", redesignated inline subpars. (A) and (B) as pars. (1) and (2), respectively, and reformatted text, and substituted "in section 4701(a)(1)" for "in subparagraphs (A) through (C) of section 2409(a)(1)" in par. (1) and "subsection (c)" for "paragraph (2)"in par. (2).

Subsec. (c). Pub. L. 116–283, §1832(i)(2), (4)(A)–(D), redesignated par. (2) of section 2324(k) of this title as subsec. (c) of this section, inserted heading, substituted "subsection (b)(2)" for "paragraph (1)(B)" in introductory provisions, and "subsection (b)" for "paragraph (1)" wherever appearing, and redesignated subpars. (A) to (E) as pars. (1) to (5), respectively.

Subsec. (c)(3). Pub. L. 116–283, §1832(i)(4)(E), substituted "section 4701" for "section 2409".

Subsec. (c)(4). Pub. L. 116–283, §1832(i)(4)(F), redesignated cls. (i) to (iii) as subpars. (A) to (C), respectively.

Subsec. (c)(5). Pub. L. 116–283, §1832(i)(4)(G), substituted "paragraphs (1), (2), (3), or (4)" for "subparagraph (A), (B), (C), or (D)".

Subsec. (d). Pub. L. 116–283, §1832(i)(2), (5), redesignated par. (3) of section 2324(k) of this title as subsec. (d) of this section, inserted heading, and substituted "subsection (b)" for "paragraph (1)" and "such subsection" for "such paragraph".

Subsec. (e). Pub. L. 116–283, §1832(i)(2), (6), redesignated par. (4) of section 2324(k) of this title as subsec. (e) of this section, inserted heading, and substituted "subsection (b)" for "paragraph (1)", "(1)" for "(A)", and "(2)" for "(B)".

Subsec. (f). Pub. L. 116–283, §1832(i)(2), (7)(A), (B), redesignated par. (5) of section 2324(k) of this title as subsec. (f) of this section, inserted heading, and redesignated subpars. (A) to (C) as pars. (1) to (3), respectively, and realigned margins.

Subsec. (f)(1). Pub. L. 116–283, §1832(i)(7)(A), (C), inserted heading and substituted "paragraph (3)" for "subparagraph (C)", "subsection (b)" for "paragraph (1)", and "paragraph (2)" for "subparagraph (B)".

Subsec. (f)(2). Pub. L. 116–283, §1832(i)(7)(D)(i), (ii), inserted heading and redesignated cls. (i) and (ii) as subpars. (A) and (B), respectively.

Subsec. (f)(2)(A). Pub. L. 116–283, §1832(i)(7)(D)(i), (iii), inserted heading and substituted "paragraph (1)" for "subparagraph (A)".

Subsec. (f)(2)(B). Pub. L. 116–283, §1832(i)(7)(D)(iv), (E), inserted heading, substituted "subparagraph (A)" for "clause (i)", inserted dash after "consideration of", and reorganized remainder of existing text into designated cls. (i) to (iii).

Subsec. (f)(3). Pub. L. 116–283, §1832(i)(7)(F), as amended by Pub. L. 117–81, §1701(b)(11), inserted heading, substituted "paragraph (1)" for "subparagraph (A)" and "under this subsection" for "under this paragraph", inserted dash after "not allowable if", redesignated inline cls. (i) and (ii) as subpars. (A) and (B), respectively, and reformatted text, and, in subpar. (B), substituted "subsection (b)" for "paragraph (1)".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

Regulations

Pub. L. 100–700, §8(d), Nov. 19, 1988, 102 Stat. 4638, provided that: "The regulations necessary for the implementation of section 306(e) of the Federal Property and Administrative Services Act of 1949 [now 41 U.S.C. 4304] (as added by subsection (a)) and section 2324(k)(5) of title 10, United States Code [see 10 U.S.C. 3750(f)] (as added by subsection (b))—

"(1) shall be prescribed not later than 120 days after the date of the enactment of this Act [Nov. 19, 1988]; and

"(2) shall apply to contracts entered into more than 30 days after the date on which such regulations are issued."

SUBCHAPTER II—OTHER ALLOWABLE COST PROVISIONS

Sec.

3761.

Restructuring costs.

3762.

Independent research and development costs: allowable costs.

3763.

Bid and proposal costs: allowable costs.

[3764, 3765. Repealed.]

Editorial Notes

Amendments

2021—Pub. L. 117–81, div. A, title XVII, §1701(f)(5), (h)(2), Dec. 27, 2021, 135 Stat. 2139, 2140, amended subchapter heading generally and struck out items 3764 "Excessive pass-through charges" and 3765 "Institutions of higher education: reimbursement of indirect costs under Department of Defense contracts". Prior to amendment, subchapter heading read as follows: "SUBCHAPTER II—OTHER ALLOWABLE COST PROVISIONS".

Statutory Notes and Related Subsidiaries

Report and Regulations on Excessive Pass-Through Charges

Pub. L. 109–364, div. A, title VIII, §852, Oct. 17, 2006, 120 Stat. 2340, as amended by Pub. L. 113–291, div. A, title X, §1071(b)(3)(B), Dec. 19, 2014, 128 Stat. 3506; Pub. L. 115–232, div. A, title VIII, §836(f)(5), Aug. 13, 2018, 132 Stat. 1871, provided that:

"(a) Comptroller General Report on Excessive Pass-Through Charges.—

"(1) In general.—Not later than 180 days after the date of the enactment of this Act [Oct. 17, 2006], the Comptroller General shall issue a report on pass-through charges on contracts or subcontracts (or task or delivery orders) that are entered into for or on behalf of the Department of Defense.

"(2) Matters covered.—The report issued under this subsection—

"(A) shall assess the extent to which the Department of Defense has paid excessive pass-through charges to contractors who provided little or no value to the performance of the contract;

"(B) shall assess the extent to which the Department has been particularly vulnerable to excessive pass-through charges on any specific category of contracts or by any specific category of contractors (including any category of small business); and

"(C) shall determine the extent to which any prohibition on excessive pass-through charges would be inconsistent with existing commercial practices for any specific category of contracts or have an unjustified adverse effect on any specific category of contractors (including any category of small business).

"(b) Regulations Required.—

"(1) In general.—Not later than May 1, 2007, the Secretary of Defense shall prescribe regulations to ensure that pass-through charges on contracts or subcontracts (or task or delivery orders) that are entered into for or on behalf of the Department of Defense are not excessive in relation to the cost of work performed by the relevant contractor or subcontractor.

"(2) Scope of regulations.—The regulations prescribed under this subsection—

"(A) shall not apply to any firm, fixed-price contract or subcontract (or task or delivery order) that is—

"(i) awarded on the basis of adequate price competition; or

"(ii) for the acquisition of a commercial product or a commercial service, as defined in sections 103 and 103a, respectively, of title 41, United States Code; and

"(B) may include such additional exceptions as the Secretary determines to be necessary in the interest of the national defense.

"(3) Definition.—In this section, the term 'excessive pass-through charge', with respect to a contractor or subcontractor that adds no, or negligible, value to a contract or subcontract, means a charge to the Government by the contractor or subcontractor that is for overhead or profit on work performed by a lower-tier contractor or subcontractor (other than charges for the direct costs of managing lower-tier contracts and subcontracts and overhead and profit based on such direct costs).

"(4) Report.—Not later than one year after the date of the enactment of this Act [Oct. 17, 2006], the Secretary of Defense shall submit to the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] a report on the steps taken to implement the requirements of this subsection, including—

"(A) any standards for determining when no, or negligible, value has been added to a contract by a contractor or subcontractor;

"(B) any procedures established for preventing excessive pass-through charges; and

"(C) any exceptions determined by the Secretary to be necessary in the interest of the national defense.

"(5) Effective date.—The regulations prescribed under this subsection shall apply to contracts awarded for or on behalf of the Department of Defense on or after May 1, 2007."

Reimbursement of Indirect Costs of Institutions of Higher Education Under Department of Defense Contracts

Pub. L. 103–160, div. A, title VIII, §841, Nov. 30, 1993, 107 Stat. 1719, as amended by Pub. L. 105–244, title I, §102(a)(2)(C), Oct. 7, 1998, 112 Stat. 1617, provided that:

"(a) Prohibition.—The Secretary of Defense may not by regulation place a limitation on the amount that the Department of Defense may reimburse an institution of higher education for allowable indirect costs incurred by the institution for work performed for the Department of Defense under a Department of Defense contract unless that same limitation is applied uniformly to all other organizations performing similar work for the Department of Defense under Department of Defense contracts.

"(b) Waiver.—The Secretary of Defense may waive the application of the prohibition in subsection (a) in the case of a particular institution of higher education if the governing body of the institution requests the waiver in order to simplify the overall management by that institution of cost reimbursements by the Department of Defense for contracts awarded by the Department to the institution.

"(c) Definitions.—In this section:

"(1) The term 'allowable indirect costs' means costs that are generally considered allowable as indirect costs under regulations that establish the cost reimbursement principles applicable to an institution of higher education for purposes of Department of Defense contracts.

"(2) The term 'institution of higher education' has the meaning given such term in section 101 of the Higher Education Act of 1965 [20 U.S.C. 1001]."

§3761. Restructuring costs

(a) Limitation on Payment of Restructuring Costs.—The Secretary of Defense may not pay, under subchapter I, a defense contractor for restructuring costs associated with a business combination of the contractor that occurs after November 18, 1997, unless the Secretary determines in writing either—

(1) that the amount of projected savings for the Department of Defense associated with the restructuring will be at least twice the amount of the costs allowed; or

(2) that the amount of projected savings for the Department of Defense associated with the restructuring will exceed the amount of the costs allowed and that the business combination will result in the preservation of a critical capability that otherwise might be lost to the Department.

(b) Limitation on Delegation.—The Secretary may not delegate the authority to make a determination under subsection (a), with respect to a business combination, to an official of the Department of Defense—

(1) below the level of an Assistant Secretary of Defense for cases in which the amount of restructuring costs is expected to exceed $25,000,000 over a 5-year period; or

(2) below the level of the Director of the Defense Contract Management Agency for all other cases.

(Added Pub. L. 105–85, div. A, title VIII, §804(a)(1), Nov. 18, 1997, 111 Stat. 1832, §2325; amended Pub. L. 106–65, div. A, title X, §1066(a)(19), Oct. 5, 1999, 113 Stat. 771; Pub. L. 108–375, div. A, title VIII, §819, Oct. 28, 2004, 118 Stat. 2016; Pub. L. 112–239, div. A, title X, §1076(g)(2), Jan. 2, 2013, 126 Stat. 1955; renumbered §3761 and amended Pub. L. 116–283, div. A, title XVIII, §1832(j)(2), (3), Jan. 1, 2021, 134 Stat. 4225.)

Editorial Notes

Amendments

2021—Pub. L. 116–283, §1832(j)(2), renumbered section 2325 of this title as this section.

Subsec. (a). Pub. L. 116–283, §1832(j)(3)(B), (E), in introductory provisions, struck out par. (1) designation before "The Secretary" and substituted "subchapter I" for "section 2324 of this title" and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively. Former par. (2) of subsec. (a) redesignated subsec. (b).

Subsec. (b). Pub. L. 116–283, §1832(j)(3)(C)–(E), redesignated par. (2) of subsec. (a) as subsec. (b), inserted heading, substituted "subsection (a)" for "paragraph (1)" in introductory provisions, and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively. Former subsec. (b) redesignated (c).

Subsec. (c). Pub. L. 116–283, §1832(j)(3)(A), redesignated subsec. (b) as (c).

2013—Subsec. (b). Pub. L. 112–239 redesignated subsec. (c) as (b) and struck out former subsec. (b) which required reports relating to business combinations occurring on or after August 15, 1994.

2004—Subsec. (a)(2). Pub. L. 108–375 substituted "paragraph (1), with respect to a business combination, to an official of the Department of Defense—" for "paragraph (1) to an official of the Department of Defense below the level of an Assistant Secretary of Defense." and added subpars. (A) and (B).

1999—Subsec. (a)(1). Pub. L. 106–65 inserted "that occurs after November 18, 1997," after "of the contractor" in introductory provisions.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Amendment by Pub. L. 116–283 effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as a note preceding section 3001 of this title.

Effective Date

Pub. L. 105–85, div. A, title VIII, §804(c), Nov. 18, 1997, 111 Stat. 1834, provided that: "Section 2325(a) of title 10, United States Code [now 10 U.S.C. 3761(a)], as added by subsection (a), shall apply with respect to business combinations that occur after the date of the enactment of this Act [Nov. 18, 1997]."

§3762. Independent research and development costs: allowable costs

(a) Regulations.—The Secretary of Defense shall prescribe regulations governing the payment by the Department of Defense of expenses incurred by contractors for independent research and development costs. Such regulations shall provide that expenses incurred for independent research and development shall be reported independently from other allowable indirect costs.

(b) Costs Treated as Fair and Reasonable, and Allowable, Expenses.—The regulations prescribed under subsection (a) shall provide that independent research and development costs shall be considered a fair and reasonable, and allowable, indirect expense on Department of Defense contracts.

(c) Additional Controls.—Subject to subsection (d), the regulations prescribed under subsection (a) may include the following provisions:

(1) Controls on the reimbursement of costs to the contractor for expenses incurred for independent research and development to ensure that such costs were incurred for independent research and development.

(2) Implementation of regular methods for transmission—

(A) from the Department of Defense to contractors, in a reasonable manner, of timely and comprehensive information regarding planned or expected needs of the Department of Defense for future technology and advanced capability; and

(B) from contractors to the Department of Defense, in a reasonable manner, of information regarding progress by the contractor on the independent research and development programs of the contractor.

(d) Limitations on Regulations.—Regulations prescribed under subsection (a) may not include provisions that would infringe on the independence of a contractor to choose which technologies to pursue in its independent research and development program if the chief executive officer of the contractor determines that expenditures will advance the needs of the Department of Defense for future technology and advanced capability as transmitted pursuant to subsection (c)(2)(A).

(e) Effective Date.—The regulations prescribed under subsection (a) shall apply to indirect costs incurred on or after October 1, 2017.

(Added Pub. L. 101–510, div. A, title VIII, §824(a)(1), Nov. 5, 1990, 104 Stat. 1603, §2372; amended Pub. L. 102–25, title VII, §701(c), Apr. 6, 1991, 105 Stat. 113; Pub. L. 102–190, div. A, title VIII, §802(a)(1), Dec. 5, 1991, 105 Stat. 1412; Pub. L. 102–484, div. A, title X, §1052(27), Oct. 23, 1992, 106 Stat. 2500; Pub. L. 103–35, title II, §201(c)(5), May 31, 1993, 107 Stat. 98; Pub. L. 104–106, div. D, title XLIII, §4321(b)(11), Feb. 10, 1996, 110 Stat. 672; Pub. L. 114–328, div. A, title VIII, §824(a)(1), Dec. 23, 2016, 130 Stat. 2277; Pub. L. 115–91, div. A, title X, §1081(a)(35), Dec. 12, 2017, 131 Stat. 1596; renumbered §3762, Pub. L. 116–283, div. A, title XVIII, §1832(j)(2), Jan. 1, 2021, 134 Stat. 4225.)

Editorial Notes

Amendments

2021—Pub. L. 116–283 renumbered section 2372 of this title as this section.

2017—Subsec. (d). Pub. L. 115–91 substituted "subsection (c)(2)(A)" for "subsection (c)(3)(A)".

2016—Pub. L. 114–328 amended section generally. Prior to amendment, section related to payments to contractors for independent research and development and bid and proposal costs.

1996—Subsec. (i)(1). Pub. L. 104–106 substituted "2324(l)" for "2324(m)".

1993—Subsec. (g)(5). Pub. L. 103–35 substituted "section 2506" for "section 2522".

1992—Subsec. (e)(1). Pub. L. 102–484 substituted "on December 4, 1991" for "on the day before the date of the enactment of the National Defense Authorization Act for Fiscal Years 1992 and 1993".

1991—Pub. L. 102–190 substituted section catchline for one which read "Independent research and development" and amended text generally, substituting present provisions for provisions authorizing payment of independent research and development or bid and proposal costs, encouraging contractors to engage in research and development activities, and authorizing advance agreements regarding the manner and extent in which the Department of Defense may pay independent research and development costs or bid and proposal costs.

Subsec. (d)(2)(B). Pub. L. 102–25 substituted "subsection (b), including" for "subsection (b) or".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date of 1996 Amendment

For effective date and applicability of amendment by Pub. L. 104–106, see section 4401 of Pub. L. 104–106, set out as a note under section 2220 of this title.

Effective Date of 1991 Amendment

Pub. L. 102–190, div. A, title VIII, §802(e), Dec. 5, 1991, 105 Stat. 1414, provided that: "The amendments made by this section [amending this section and section 4501 of this title] shall take effect on October 1, 1992, and shall apply to independent research and development and bid and proposal costs incurred by a contractor during fiscal years of that contractor that begin on or after that date."

Regulations

Pub. L. 102–190, div. A, title VIII, §802(b), Dec. 5, 1991, 105 Stat. 1414, provided that: "The Secretary of Defense shall prescribe proposed regulations to implement the amendment made by subsection (a)(1) [amending this section] not later than April 1, 1992, and shall prescribe final regulations for that purpose not later than June 1, 1992."

§3763. Bid and proposal costs: allowable costs

(a) Regulations.—The Secretary of Defense shall prescribe regulations governing the payment by the Department of Defense of expenses incurred by contractors for bid and proposal costs. Such regulations shall provide that expenses incurred for bid and proposal costs shall be reported independently from other allowable indirect costs.

(b) Costs Allowable as Indirect Expenses.—The regulations prescribed under subsection (a) shall provide that bid and proposal costs shall be allowable as indirect expenses on covered contracts, as defined in section 3741 of this title, to the extent that those costs are allocable, reasonable, and not otherwise unallowable by law or under the Federal Acquisition Regulation.

(c) Goal for Reimbursable Bid and Proposal Costs.—The Secretary shall establish a goal each fiscal year limiting the amount of reimbursable bid and proposal costs paid by the Department of Defense to an amount equal to not more than one percent of the total aggregate industry sales to the Department of Defense. To achieve such goal, the Secretary may not limit the payment of allowable bid and proposal costs for the covered year.

(d) Panel.—(1) If the Department of Defense exceeds the goal established under subsection (c) for a fiscal year, within 180 days after exceeding the goal, the Secretary shall establish an advisory panel. The panel shall be supported by the Defense Acquisition University and the National Defense University, including administrative support.

(2) The panel shall be composed of nine individuals who are recognized experts in acquisition and procurement policy appointed by the Secretary. In making such appointments, the Secretary shall ensure that the members of the panel reflect diverse experiences in the public and private sector.

(3) The panel shall review laws, regulations, and practices that contribute to the expenses incurred by contractors for bids and proposals in the fiscal year concerned and recommend changes to such laws, regulations, and practices that may reduce expenses incurred by contractors for bids and proposals.

(4)(A) Not later than six months after the establishment of the panel, the panel shall submit to the Secretary and the congressional defense committees an interim report on the findings of the panel.

(B) Not later than one year after the establishment of the panel, the panel shall submit to the Secretary and the congressional defense committees a final report on the findings of the panel.

(5) The panel shall terminate on the day the panel submits the final report under paragraph (4)(B).

(6) The Secretary of Defense may use amounts available in the Department of Defense Acquisition Workforce Development Fund established under section 1705 of this title to support the activities of the panel established under this subsection.

(e) Effective Date.—The regulations prescribed under subsection (a) shall apply to indirect costs incurred on or after October 1, 2017.

(Added Pub. L. 114–328, div. A, title VIII, §824(b)(1), Dec. 23, 2016, 130 Stat. 2278, §2372a; renumbered §3763 and amended Pub. L. 116–283, div. A, title XVIII, §1832(j)(2), (4), Jan. 1, 2021, 134 Stat. 4225.)

Editorial Notes

Amendments

2021—Pub. L. 116–283, §1832(j)(2), renumbered section 2372a of this title as this section.

Subsec. (b). Pub. L. 116–283, §1832(j)(4), substituted "section 3741" for "section 2324(l)".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

CHAPTER 275—PROPRIETARY CONTRACTOR DATA AND RIGHTS IN TECHNICAL DATA

Subchapter

Sec.

Rights in Technical Data

3771

II.

Validation of Proprietary Data Restrictions

3781

III.

Other Provisions Relating to Proprietary Contractor Data and Rights in Technical Data

3791

Editorial Notes

Prior Provisions

A prior chapter 275 "PROPRIETARY CONTRACTOR DATA AND TECHNICAL DATA", as added by Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1828, and consisting of reserved section 3771, was repealed by Pub. L. 116–283, div. A, title XVIII, §1833(a)(1), Jan. 1, 2021, 134 Stat. 4225.

SUBCHAPTER I—RIGHTS IN TECHNICAL DATA

Sec.

3771.

Rights in technical data: regulations.

3772.

Rights in technical data: provisions required in contracts.

3773.

Domestic business concerns: programs for replenishment parts.

3774.

Major weapon systems and subsystems: long-term technical data needs.

3775.

Definitions.

§3771. Rights in technical data: regulations

(a) Regulations Required.—

(1) In general.—The Secretary of Defense shall prescribe regulations to define the legitimate interest of the United States and of a contractor or subcontractor in technical data pertaining to an item or process. Such regulations shall be included in regulations of the Department of Defense prescribed as part of the Federal Acquisition Regulation.

(2) Other rights not impaired.—Regulations prescribed under paragraph (1) may not impair—

(A) any right of the United States or of any contractor or subcontractor with respect to patents or copyrights or any other right in technical data otherwise established by law; or

(B) the right of a contractor or subcontractor to receive from a third party a fee or royalty for the use of technical data pertaining to an item or process developed exclusively at private expense by the contractor or subcontractor, except as otherwise specifically provided by law.

(b) Required Provisions.—Regulations prescribed under subsection (a) shall include the following provisions:

(1) Development exclusively with federal funds.—In the case of an item or process that is developed by a contractor or subcontractor exclusively with Federal funds (other than an item or process developed under a contract or subcontract to which regulations under section 9(j)(2) of the Small Business Act (15 U.S.C. 638(j)(2)) apply), the United States shall have the unlimited right to—

(A) use technical data pertaining to the item or process; or

(B) release or disclose the technical data to persons outside the government or permit the use of the technical data by such persons.

(2) Development exclusively at private expense.—Except as provided in paragraphs (3), (4), and (7), in the case of an item or process that is developed by a contractor or subcontractor exclusively at private expense, the contractor or subcontractor may restrict the right of the United States to release or disclose technical data pertaining to the item or process to persons outside the government or permit the use of the technical data by such persons.

(3) Exception to paragraph (2).—Paragraph (2) does not apply to technical data that—

(A) constitutes a correction or change to data furnished by the United States;

(B) relates to form, fit, or function;

(C) is necessary for operation, maintenance, installation, or training (other than detailed manufacturing or process data, including such data pertaining to a major system component); or

(D) is otherwise publicly available or has been released or disclosed by the contractor or subcontractor without restriction on further release or disclosure.

(4) Exception to paragraph (2).—Notwithstanding paragraph (2), the United States may release or disclose technical data to persons outside the Government, or permit the use of technical data by such persons, if—

(A) such release, disclosure, or use—

(i) is necessary for emergency repair and overhaul;

(ii) is a release, disclosure, or use of technical data pertaining to an interface between an item or process and other items or processes necessary for the segregation of an item or process from, or the reintegration of that item or process (or a physically or functionally equivalent item or process) with, other items or processes; or

(iii) is a release or disclosure of technical data (other than detailed manufacturing or process data) to, or use of such data by, a foreign government that is in the interest of the United States and is required for evaluational or informational purposes;

(B) such release, disclosure, or use is made subject to a prohibition that the person to whom the data is released or disclosed may not further release, disclose, or use such data; and

(5) Development with mixed funding.—

(A) In general.—Except as provided in paragraphs (6) and (7), in the case of an item or process that is developed in part with Federal funds and in part at private expense, the respective rights of the United States and of the contractor or subcontractor in technical data pertaining to such item or process shall be established as early in the acquisition process as practicable (preferably during contract negotiations) and shall be based on negotiations between the United States and the contractor, except in any case in which the Secretary of Defense determines, on the basis of criteria established in the regulations, that negotiations would not be practicable.

(B) Factors to be considered.—The establishment of such rights shall be based upon consideration of all of the following factors:

(i) The statement of congressional policy and objectives in section 200 of title 35, the statement of purposes in section 2(b) of the Small Business Innovation Development Act of 1982 (15 U.S.C. 638 note), and the declaration of policy in section 2 of the Small Business Act (15 U.S.C. 631).

(ii) The interest of the United States in increasing competition and lowering costs by developing and locating alternative sources of supply and manufacture.

(iii) The interest of the United States in encouraging contractors to develop at private expense items for use by the Government.

(iv) Such other factors as the Secretary of Defense may prescribe.

(6) Interfaces developed with mixed funding.—Notwithstanding paragraph (5), the United States shall have government purpose rights in technical data pertaining to an interface between an item or process and other items or processes that was developed in part with Federal funds and in part at private expense, except in any case in which the Secretary of Defense determines, on the basis of criteria established in the regulations, that negotiation of different rights in such technical data would be in the best interest of the United States.

(7) Modular system interfaces developed exclusively at private expense or with mixed funding.—

(A) Notwithstanding paragraphs (2) and (5), the United States shall have government purpose rights in technical data pertaining to a modular system interface developed exclusively at private expense or in part with Federal funds and in part at private expense and used in a modular open system approach pursuant to section 4401 of this title, except in any case in which the Secretary of Defense determines that negotiation of different rights in such technical data would be in the best interest of the United States.

(B) Such modular system interface shall be identified in the contract solicitation and the contract.

(C) For technical data pertaining to a modular system interface developed exclusively at private expense for which the United States asserts government purpose rights, the Secretary of Defense shall negotiate with the contractor the appropriate and reasonable compensation for such technical data.

(8) Limitations on requirements related to contractor or subcontractor rights in technical data.—A contractor or subcontractor (or a prospective contractor or subcontractor) may not be required, as a condition of being responsive to a solicitation or as a condition for the award of a contract—

(A) to sell or otherwise relinquish to the United States any rights in technical data except—

(i) rights in technical data described in paragraph (1) for which a use or release restriction has been erroneously asserted by a contractor or subcontractor;

(ii) rights in technical data described in paragraph (3); or

(iii) under the conditions described in paragraph (4); or

(B) to refrain from offering to use, or from using, an item or process to which the contractor is entitled to restrict rights in data under paragraph (2).

(9) Actions authorized if necessary to develop alternative sources of supply and manufacture.—The Secretary of Defense may—

(A) negotiate and enter into a contract with a contractor or subcontractor for the acquisition of rights in technical data not otherwise provided under paragraph (3) or (4), if necessary to develop alternative sources of supply and manufacture;

(B) agree to restrict rights in technical data otherwise accorded to the United States under this subchapter if the United States receives a royalty-free license to use, release, or disclose the data for purposes of the United States (including purposes of competitive procurement); or

(C) permit a contractor or subcontractor to license directly to a third party the use of technical data which the contractor is otherwise allowed to restrict, if necessary to develop alternative sources of supply and manufacture.

(c) Secretary of Defense to Define Terms.—The Secretary of Defense shall define the terms "developed", "exclusively with Federal funds", and "exclusively at private expense" in regulations prescribed under subsection (a). In defining such terms, the Secretary—

(1) shall specify the manner in which indirect costs shall be treated; and

(2) shall specify that amounts spent for independent research and development and bid and proposal costs shall not be considered to be Federal funds for the purposes of the definitions under this subsection.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(a)(1), (b), Jan. 1, 2021, 134 Stat. 4226.)

Editorial Notes

Codification

The text of subsec. (a) of section 2320 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1833(b), was based on Pub. L. 98–525, title XII, §1216(a), Oct. 19, 1984, 98 Stat. 2595; Pub. L. 98–577, title III, §301(b), Oct. 30, 1984, 98 Stat. 3076; Pub. L. 99–145, title IX, §961(d)(1), Nov. 8, 1985, 99 Stat. 703; Pub. L. 99–500, §101(c) [title X, §953(a)], Oct. 18, 1986, 100 Stat. 1783–82, 1783-169, and Pub. L. 99–591, §101(c) [title X, §953(a)], Oct. 30, 1986, 100 Stat. 3341–82, 3341-169; Pub. L. 99–661, div. A, title IX, formerly title IV, §953(a), Nov. 14, 1986, 100 Stat. 3949, renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273; Pub. L. 100–26, §7(a)(4), Apr. 21, 1987, 101 Stat. 275; Pub. L. 100–180, div. A, title VIII, §808(a), Dec. 4, 1987, 101 Stat. 1128; Pub. L. 101–189, div. A, title VIII, §853(b)(2), Nov. 29, 1989, 103 Stat. 1518; Pub. L. 111–383, div. A, title VIII, §824(b), Jan. 7, 2011, 124 Stat. 4269; Pub. L. 112–81, div. A, title VIII, §815(a)(1), Dec. 31, 2011, 125 Stat. 1491; Pub. L. 114–328, div. A, title VIII, §809(a), (b), (e), Dec. 23, 2016, 130 Stat. 2266, 2267; Pub. L. 116–283, div. A, title VIII, §804(b)(2)(A)(i), Jan. 1, 2021, 134 Stat. 3738. Pub. L. 99–500, Pub. L. 99–591, and Pub. L. 99–661 generally amended section 2320(a) substantially identically; as executed, text reflected amendment by Pub. L. 99–661.

Amendments

2021—Pub. L. 116–283, §1833(b)(1), (2)(A), transferred subsec. (a) of section 2320 of this title to this section, effectively redesignated par. (1) as subsec. (a), and redesignated pars. (2) and (3) as subsecs. (b) and (c), respectively.

Subsec. (a). Pub. L. 116–283, §1833(b)(2)(A), (B)(i), after redesignation of par. (1) of section 2320(a) of this title as subsec. (a) of this section, inserted subsec. heading and, in existing provisions, designated first two sentences as par. (1) and the remainder as par. (2) and inserted par. headings. Amendment designating "the third sentence as paragraph (2)" was executed by including the fourth sentence within par. (2) as well, to reflect the probable intent of Congress.

Subsec. (a)(2). Pub. L. 116–283, §1833(b)(2)(B), substituted "Regulations prescribed under paragraph (1) may not" for "Such regulations may not", inserted dash after "impair", reorganized remainder of text into designated subpars. (A) and (B), and, at end of subpar. (A), substituted "by law; or" for "by law. Such regulations also may not impair".

Subsec. (b). Pub. L. 116–283, §1833(b)(3)(A), (B), after redesignation of par. (2) of section 2320(a) of this title as subsec. (b) of this section, inserted heading, substituted "Regulations prescribed under subsection (a)" for "Such regulations" in introductory provisions, and redesignated subpars. (A) to (I) as pars. (1) to (9), respectively.

Subsec. (b)(1). Pub. L. 116–283, §1833(b)(3)(C), redesignated cls. (i) and (ii) as subpars. (A) and (B), respectively.

Subsec. (b)(2). Pub. L. 116–283, §1833(b)(3)(D), substituted "paragraphs (3), (4), and (7)" for "subparagraphs (C), (D), and (G)".

Subsec. (b)(3). Pub. L. 116–283, §1833(b)(3)(E), substituted "paragraph (2)" for "subparagraph (b)" in heading and "Paragraph (2) does not" for "Subparagraph (B) does not" in introductory provisions and redesignated cls. (i) to (iv) as subpars. (A) to (D), respectively.

Subsec. (b)(4). Pub. L. 116–283, §1833(b)(3)(F), substituted "paragraph (2)" for "subparagraph (b)" in heading and "Notwithstanding paragraph (2)" for "Notwithstanding subparagraph (B)" in introductory provisions and redesignated cl. (i), its subcls. (I) to (III), cl. (ii), and cl. (iii) as subpar. (A), cls. (i) to (iii), subpar. (B), and subpar. (C), respectively.

Subsec. (b)(5). Pub. L. 116–283, §1833(b)(3)(G), in existing provisions, designated first sentence as subpar. (A), inserted heading, and substituted "Except as provided in paragraphs (6) and (7)," for "Except as provided in subparagraphs (F) and (G)," and designated second sentence as subpar. (B), inserted heading, and realigned margin.

Subsec. (b)(6). Pub. L. 116–283, §1833(b)(3)(H), substituted "paragraph (5)" for "subparagraph (E)".

Subsec. (b)(7). Pub. L. 116–283, §1833(b)(3)(I), in existing provisions, designated first sentence as subpar. (A) and substituted "Notwithstanding paragraphs (2) and (5)" for "Notwithstanding subparagraphs (B) and (E)" and "section 4401" for "section 2446a" and designated second and third sentences as subpars. (B) and (C), respectively.

Subsec. (b)(8). Pub. L. 116–283, §1833(b)(3)(J)(i), (ii), inserted heading and redesignated cls. (i) and (ii) as subpars. (A) and (B), respectively.

Subsec. (b)(8)(A). Pub. L. 116–283, §1833(b)(3)(J)(iii)–(vi), redesignated subcl. (I) as cl. (i) and substituted "paragraph (1)" for "subparagraph (A)", redesignated subcl. (II) as cl. (ii) and substituted "paragraph (3)" for "subparagraph (C)", and redesignated subcl. (III) as cl. (iii) and substituted "paragraph (4)" for "subparagraph (D)".

Subsec. (b)(8)(B). Pub. L. 116–283, §1833(b)(3)(J)(vii), substituted "paragraph (2)" for "subparagraph (B)".

Subsec. (b)(9). Pub. L. 116–283, §1833(b)(3)(K), inserted heading, redesignated cl. (i) as subpar. (A) and substituted "paragraph (3) or (4)" for "subparagraph (C) or (D)", redesignated cl. (ii) as subpar. (B) and substituted "this subchapter" for "this section", and redesignated cl. (iii) as subpar. (C).

Subsec. (c). Pub. L. 116–283, §1833(b)(4), inserted heading, substituted "subsection (a)" for "paragraph (1)" and "this subsection" for "this paragraph", inserted dash after "terms, the Secretary", and reorganized remainder of text into designated pars. (1) and (2).

Statutory Notes and Related Subsidiaries

Effective Date

§3772. Rights in technical data: provisions required in contracts

(a) Contract Provisions Relating to Technical Data.—Regulations prescribed under section 3771 of this title shall require that, whenever practicable, a contract for supplies or services entered into by an agency named in section 3063 of this title contain appropriate provisions relating to technical data, including provisions—

(1) defining the respective rights of the United States and the contractor or subcontractor (at any tier) regarding any technical data to be delivered under the contract and providing that, in the case of a contract for a commercial product, the product shall be presumed to be developed at private expense unless shown otherwise in accordance with section 3784;

(2) specifying the technical data, if any, to be delivered under the contract and delivery schedules for such delivery;

(3) establishing or referencing procedures for determining the acceptability of technical data to be delivered under the contract;

(4) establishing separate contract line items for the technical data, if any, to be delivered under the contract;

(5) to the maximum practicable extent, identifying, in advance of delivery, technical data which is to be delivered with restrictions on the right of the United States to use such data;

(6) requiring the contractor—

(A) to revise any technical data delivered under the contract to reflect engineering design changes made during the performance of the contract and affecting the form, fit, and function of the items specified in the contract; and

(B) to deliver such revised technical data to an agency within a time specified in the contract;

(7) establishing remedies to be available to the United States when technical data required to be delivered or made available under the contract is found—

(A) to be incomplete or inadequate; or

(B) to not satisfy the requirements of the contract concerning technical data;

(8) authorizing the head of the agency to withhold payments under the contract (or exercise such other remedies as the head of the agency considers appropriate) during any period if the contractor does not meet the requirements of the contract pertaining to the delivery of technical data;

(9) providing that, in addition to technical data that is already subject to a contract delivery requirement, the United States may require, until the date occurring six years after acceptance of the last item (other than technical data) under a contract or the date of contract termination, whichever is later, the delivery of technical data that has been generated in the performance of the contract, and compensate the contractor only for reasonable costs incurred for having converted and delivered the data in the required form, upon a determination that—

(A) the technical data is needed for the purpose of reprocurement, sustainment, modification, or upgrade (including through competitive means) of a major system or subsystem thereof, a weapon system or subsystem thereof, or any noncommercial product or process; and

(B) the technical data—

(i) pertains to an item or process developed in whole or in part with Federal funds; or

(ii) is described in paragraphs (4)(A)(ii), (6), and (7) of section 3771(b) of this title; and

(10) providing that the United States is not foreclosed from requiring the delivery of the technical data by a failure to challenge, in accordance with the requirements of section 3782 of this title, the contractor's assertion of a use or release restriction on the technical data.

(b) Nothing in this subchapter or in section 3208 of this title prohibits the Secretary of Defense from—

(1) prescribing standards for determining whether a contract entered into by the Department of Defense shall provide for a time to be specified in the contract after which the United States shall have the right to use (or have used) for any purpose of the United States all technical data required to be delivered to the United States under the contract or providing for such a period of time (not to exceed 7 years) as a negotiation objective;

(2) notwithstanding any limitation upon the license rights conveyed under section 3771 of this title, allowing a covered Government support contractor access to and use of any technical data delivered under a contract for the sole purpose of furnishing independent and impartial advice or technical assistance directly to the Government in support of the Government's management and oversight of the program or effort to which such technical data relates; or

(3) prescribing reasonable and flexible guidelines, including negotiation objectives, for the conduct of negotiations regarding the respective rights in technical data of the United States and the contractor.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(a)(1), (c), Jan. 1, 2021, 134 Stat. 4226, 4228.)

Editorial Notes

Codification

The text of subsec. (b) of section 2320 of this title, which was transferred to this section, redesignated as subsec. (a), and amended by Pub. L. 116–283, §1833(c)(1), (2), was based on Pub. L. 98–525, title XII, §1216(a), Oct. 19, 1984, 98 Stat. 2596; Pub. L. 103–355, title VIII, §8106(a), Oct. 13, 1994, 108 Stat. 3393; Pub. L. 108–136, div. A, title VIII, §844, Nov. 24, 2003, 117 Stat. 1553; Pub. L. 112–81, div. A, title VIII, 815(a), Dec. 31, 2011, 125 Stat. 1492; Pub. L. 114–328, div. A, title VIII, §809(c), Dec. 23, 2016, 130 Stat. 2267; Pub. L. 115–232, div. A, title VIII, §836(c)(7), Aug. 13, 2018, 132 Stat. 1866.

The text of subsec. (c) of section 2320 of this title, which was transferred to this section, redesignated as subsec. (b), and amended by Pub. L. 116–283, §1833(c)(1), (3), was based on Pub. L. 98–525, title XII, §1216(a), Oct. 19, 1984, 98 Stat. 2596; Pub. L. 100–180, div. A, title VIII, §808(b), Dec. 4, 1987, 101 Stat. 1130; Pub. L. 111–84, div. A, title VIII, §821(a), Oct. 28, 2009, 123 Stat. 2411; Pub. L. 111–383, div. A, title VIII, §801(a)(1), Jan. 7, 2011, 124 Stat. 4253; Pub. L. 112–81, div. A, title VIII, §802(b)(1), Dec. 31, 2011, 125 Stat. 1485.

Amendments

2021—Subsec. (a). Pub. L. 116–283, §1833(c)(1), (2)(A)–(C), redesignated subsec. (b) of section 2320 of this title as subsec. (a) of this section, inserted heading, and substituted "section 3771 of this title" for "subsection (a)" and "section 3063" for "section 2303" in introductory provisions.

Subsec. (a)(1). Pub. L. 116–283, §1833(c)(2)(D), substituted "section 3784" for "section 2321(f)".

Subsec. (a)(6). Pub. L. 116–283, §1833(c)(2)(E), inserted dash after "the contractor" and reorganized remainder of text into designated subpars. (A) and (B).

Subsec. (a)(7). Pub. L. 116–283, §1833(c)(2)(F), inserted dash after "is found" and reorganized remainder of text into designated subpars. (A) and (B).

Subsec. (a)(9)(B)(ii). Pub. L. 116–283, §1833(c)(2)(G), substituted "paragraphs (4)(A)(ii), (6), and (7) of section 3771(b) of this title" for "subparagraphs (D)(i)(II), (F), and (G) of subsection (a)(2)".

Subsec. (a)(10). Pub. L. 116–283, §1833(c)(2)(H), substituted "section 3782" for "section 2321(d)".

Subsec. (b). Pub. L. 116–283, §1833(c)(3)(A), which directed substitution of "in this subchapter or in section 3208" for "in this section or in section 2305(a)", was executed by making the substitution for "in this section or in section 2305(d)" in introductory provisions to reflect the probable intent of Congress.

Pub. L. 116–283, §1833(c)(1) redesignated subsec. (c) of section 2320 of this title as subsec. (b) of this section.

Subsec. (b)(2). Pub. L. 116–283, §1833(c)(3)(B), substituted "section 3771 of this title" for "subsection (a)".

Statutory Notes and Related Subsidiaries

Effective Date

§3773. Domestic business concerns: programs for replenishment parts

The Secretary of Defense shall by regulation establish programs which provide domestic business concerns an opportunity to purchase or borrow replenishment parts from the United States for the purpose of design replication or modification, to be used by such concerns in the submission of subsequent offers to sell the same or like parts to the United States. Nothing in this section limits the authority of the head of an agency to impose restrictions on such a program related to national security considerations, inventory needs of the United States, the improbability of future purchases of the same or like parts, or any additional restriction otherwise required by law.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(a)(1), (d), Jan. 1, 2021, 134 Stat. 4226, 4229.)

Editorial Notes

Codification

The text of subsec. (d) of section 2320 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1833(d), was based on Pub. L. 98–525, title XII, §1216(a), Oct. 19, 1984, 98 Stat. 2597.

Amendments

2021—Pub. L. 116–283, §1833(d), transferred subsec. (d) of section 2320 of this title to this section, struck out subsec. (d) designation at beginning, and substituted "this section" for "this subsection".

Statutory Notes and Related Subsidiaries

Effective Date

§3774. Major weapon systems and subsystems: long-term technical data needs

(a) Assessments and Acquisitions Strategies.—

(1) The Secretary of Defense shall require program managers for major weapon systems and subsystems of major weapon systems to—

(A) assess the long-term technical data needs of such systems and subsystems; and

(B) establish corresponding acquisition strategies that provide for technical data rights needed to sustain such systems and subsystems over their life cycle.

(2) Such strategies may include—

(A) the development of maintenance capabilities within the Department of Defense; or

(B) competition for contracts for sustainment of such systems or subsystems.

(b) Requirements Relating to Assessments and Acquisition Strategies.—Assessments and corresponding acquisition strategies developed under subsection (a) with respect to a weapon system or subsystem shall—

(1) be developed before issuance of a contract solicitation for the weapon system or subsystem;

(2) address the merits of including a priced contract option for the future delivery of technical data that were not acquired upon initial contract award;

(3) address the potential for changes in the sustainment plan over the life cycle of the weapon system or subsystem; and

(4) apply to weapon systems and subsystems that are to be supported by performance-based logistics arrangements as well as to weapons systems and subsystems that are to be supported by other sustainment approaches.

(1) The Secretary of Defense shall, to the maximum extent practicable, negotiate and enter into a contract with a contractor for a specially negotiated license for technical data to support the product support strategy of a major weapon system or subsystem of a major weapon system.

(2) In performing the assessment and developing the corresponding strategy required under subsection (a) for such a system or subsystem, a program manager shall consider the use of specially negotiated licenses to acquire customized technical data appropriate for the particular elements of the product support strategy.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(a)(1), (e), Jan. 1, 2021, 134 Stat. 4226, 4229.)

Editorial Notes

Codification

The text of subsec. (e) of section 2320 of this title, which was transferred to this section, redesignated as subsecs. (a) and (b), and amended by Pub. L. 116–283, §1833(e)(1)–(4), was based on Pub. L. 109–364, div. A, title VIII, §802(a), Oct. 17, 2006, 120 Stat. 2312.

The text of subsec. (f) of section 2320 of this title, which was transferred to this section, redesignated as subsec. (c), and amended by Pub. L. 116–283, §1833(e)(1), (5), was based on Pub. L. 115–91, div. A, title VIII, §835(c)(2), Dec. 12, 2017, 131 Stat. 1471.

Amendments

2021—Subsec. (a). Pub. L. 116–283, §1833(e)(1), (3)(A), (B), redesignated subsec. (e) of section 2320 of this title as subsec. (a) of this section, inserted heading, and designated first and second sentences of existing provisions as pars. (1) and (2), respectively. Third sentence of subsec. (a) designated subsec. (b).

Subsec. (a)(1). Pub. L. 116–283, §1833(e)(3)(C), inserted dash after "major weapon systems to" and reorganized remainder of text into designated subpars. (A) and (B).

Subsec. (a)(2). Pub. L. 116–283, §1833(e)(3)(D), inserted dash after "may include" and reorganized remainder of text into designated subpars. (A) and (B).

Subsec. (b). Pub. L. 116–283, §1833(e)(2), (4), designated third sentence of subsec. (a) as subsec. (b), inserted heading, and substituted "developed under subsection (a) with respect to" for "developed under this section with respect to" in introductory provisions.

Subsec. (c). Pub. L. 116–283, §1833(e)(1), (5), redesignated subsec. (f) of section 2320 of this title as subsec. (c) of this section, designated first and second sentences of existing provisions as pars. (1) and (2), respectively, and, in par. (2), substituted "subsection (a)" for "subsection (e)".

Statutory Notes and Related Subsidiaries

Effective Date

Regulations

Pub. L. 109–364, div. A, title VIII, §802(c), Oct. 17, 2006, 120 Stat. 2313, provided that: "Not later than 180 days after the date of the enactment of this Act [Oct. 17, 2006], the Secretary of Defense shall revise regulations under section 2320 of title 10, United States Code [see 10 U.S.C. 3771 et seq.], to implement subsection (e) of such section [see 10 U.S.C. 3774(a), (b)] (as added by this section), including incorporating policy changes developed under such subsection into Department of Defense Directive 5000.1 and Department of Defense Instruction 5000.2."

Guidance Relating to Rights in Technical Data

Pub. L. 111–383, div. A, title VIII, §824(a), Jan. 7, 2011, 124 Stat. 4269, provided that: "Not later than 180 days after the date of the enactment of this Act [Jan. 7, 2011], the Secretary of Defense shall review guidance issued by the military departments on the implementation of section 2320(e) of title 10, United States Code [see 10 U.S.C. 3774(a), (b)], to ensure that such guidance is consistent with the guidance issued by the Under Secretary of Defense for Acquisition, Technology, and Logistics and the requirements of this section [amending former sections 2320 and 2321 of this title]. Such guidance shall be designed to ensure that the United States—

"(1) preserves the option of competition for contracts for the production and sustainment of systems or subsystems that are developed exclusively with Federal funds as defined in accordance with the amendments made by this section; and

"(2) is not required to pay more than once for the same technical data."

§3775. Definitions

(a) Covered Government Support Contractor Defined.—In this subchapter, the term "covered Government support contractor" means a contractor under a contract the primary purpose of which is to furnish independent and impartial advice or technical assistance directly to the Government in support of the Government's management and oversight of a program or effort (rather than to directly furnish an end item or service to accomplish a program or effort), which contractor—

(1) is not affiliated with the prime contractor or a first-tier subcontractor on the program or effort, or with any direct competitor of such prime contractor or any such first-tier subcontractor in furnishing end items or services of the type developed or produced on the program or effort; and

(2) executes a contract with the Government agreeing to and acknowledging—

(A) that proprietary or nonpublic technical data furnished will be accessed and used only for the purposes stated in that contract;

(B) that the covered Government support contractor will enter into a non-disclosure agreement with the contractor to whom the rights to the technical data belong;

(C) that the covered Government support contractor will take all reasonable steps to protect the proprietary and nonpublic nature of the technical data furnished to the covered Government support contractor during the program or effort for the period of time in which the Government is restricted from disclosing the technical data outside of the Government;

(D) that a breach of that contract by the covered Government support contractor with regard to a third party's ownership or rights in such technical data may subject the covered Government support contractor—

(i) to criminal, civil, administrative, and contractual actions in law and equity for penalties, damages, and other appropriate remedies by the United States; and

(ii) to civil actions for damages and other appropriate remedies by the contractor or subcontractor whose technical data is affected by the breach; and

(E) that such technical data provided to the covered Government support contractor under the authority of this section shall not be used by the covered Government support contractor to compete against the third party for Government or non-Government contracts.

(b) Additional Definitions.—In this subchapter, the terms "major system component", "modular system interface", and "modular open system approach" have the meanings provided in section 4401 of this title.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(a)(1), (f), Jan. 1, 2021, 134 Stat. 4226, 4230.)

Editorial Notes

Codification

The text of subsec. (g) of section 2320 of this title, which was transferred to this section, redesignated as subsec. (a), and amended by Pub. L. 116–283, §1833(f)(1), (2)(A), was based on Pub. L. 111–84, div. A, title VIII, §821(b), Oct. 28, 2009, 123 Stat. 2411; Pub. L. 114–328, div. A, title VIII, §809(d)(1), Dec. 23, 2016, 130 Stat. 2267; Pub. L. 115–91, div. A, title VIII, §835(c)(1), Dec. 12, 2017, 131 Stat. 1471.

The text of subsec. (h) of section 2320 of this title, which was transferred to this section, redesignated as subsec. (b), and amended by Pub. L. 116–283, §1833(f), was based on Pub. L. 114–328, div. A, title VIII, §809(d)(2), Dec. 23, 2016, 130 Stat. 2267; Pub. L. 115–91, div. A, title VIII, §835(c)(1), Dec. 12, 2017, 131 Stat. 1471; Pub. L. 116–283, div. A, title VIII, §804(b)(2)(A)(ii), Jan. 1, 2021, 134 Stat. 3739.

Amendments

2021—Subsec. (a). Pub. L. 116–283, §1833(f)(1), (2)(A), redesignated subsec. (g) of section 2320 of this title as subsec. (a) of this section and substituted "In this subchapter," for "In this section," in introductory provisions.

Subsec. (b). Pub. L. 116–283, §1833(f), redesignated subsec. (h) of section 2320 of this title as subsec. (b) of this section and substituted "In this subchapter," for "In this section," and "section 4401" for "section 2446a".

Statutory Notes and Related Subsidiaries

Effective Date

SUBCHAPTER II—VALIDATION OF PROPRIETARY DATA RESTRICTIONS

Sec.

3781.

Technical data: contractor justification for restrictions; review of restrictions.

3782.

Technical data: challenges to contractor restrictions.

3783.

Technical data: time for contractors to submit justifications.

3784.

Technical data under contracts for commercial items: presumption of development exclusively at private expense.

3785.

Technical data: decision by contracting officer; claims; rights and liability upon final disposition.

3786.

Use or release restriction: definition.

§3781. Technical data: contractor justification for restrictions; review of restrictions

(a) Contracts Covered by Subchapter.—This subchapter applies to any contract for supplies or services entered into by the Department of Defense that includes provisions for the delivery of technical data.

(b) Contractor Justification for Restrictions.—A contract subject to this subchapter shall provide that a contractor under the contract and any subcontractor under the contract at any tier shall be prepared to furnish to the contracting officer a written justification for any use or release restriction (as defined in section 3786 of this title) asserted by the contractor or subcontractor.

(1) The Secretary of Defense shall ensure that there is a thorough review of the appropriateness of any use or release restriction asserted with respect to technical data by a contractor or subcontractor at any tier under a contract subject to this subchapter.

(2) The review of an asserted use or release restriction under paragraph (1) shall be conducted before the end of the three-year period beginning on the later of—

(A) the date on which final payment is made on the contract under which the technical data is required to be delivered; or

(B) the date on which the technical data is delivered under the contract.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(g), (h), Jan. 1, 2021, 134 Stat. 4231.)

Editorial Notes

Codification

The text of subsecs. (a), (b), and (c) of section 2321 of this title, which were transferred to this section and amended by Pub. L. 116–283, §1833(h), was based on Pub. L. 100–26, §7(a)(5)(A)(ii), Apr. 21, 1987, 101 Stat. 276.

Prior Provisions

A prior section 3781, act Aug. 10, 1956, ch. 1041, 70A Stat. 218; Pub. L. 86–616, §2(a), July 12, 1960, 74 Stat. 386, authorized Secretary of the Army to convene at any time a board of officers to review record of any commissioned officer on active list of Regular Army to determine whether he should be required, because of substandard performance of duty, to show cause for his retention on active list, prior to repeal by Pub. L. 96–513, title II, §213, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981. See section 1181(a) of this title.

Amendments

2021—Subsec. (a). Pub. L. 116–283, §1833(h)(1), (2), transferred subsec. (a) of section 2321 of this title to this section and substituted "by Subchapter" for "by Section" in heading and "This subchapter" for "This section" in text.

Subsec. (b). Pub. L. 116–283, §1833(h)(1), (3), transferred subsec. (b) of section 2321 of this title to this section and substituted "this subchapter" for "this section" and "(as defined in section 3786 of this title) asserted" for "(as defined in subsection (i)) asserted".

Subsec. (c). Pub. L. 116–283, §1833(h)(1), (4)(A), (C), transferred subsec. (c) of section 2321 of this title to this section and realigned margins of pars. (1) and (2).

Subsec. (c)(1). Pub. L. 116–283, §1833(h)(4)(B), substituted "this subchapter" for "this section".

Statutory Notes and Related Subsidiaries

Effective Date

§3782. Technical data: challenges to contractor restrictions

(a) Challenges by Secretary of Defense.—The Secretary of Defense may challenge a use or release restriction asserted with respect to technical data by a contractor or subcontractor at any tier under a contract subject to this subchapter if the Secretary finds that—

(1) reasonable grounds exist to question the current validity of the asserted restriction; and

(2) the continued adherence by the United States to the asserted restriction would make it impracticable to procure the item to which the technical data pertain competitively at a later time.

(b) Time Limit for Challenges; Exceptions.—

(1) A challenge to a use or release restriction asserted by the contractor in accordance with applicable regulations may not be made under subsection (a) after the end of the six-year period described in paragraph (2) unless the technical data involved—

(A) are publicly available;

(B) have been furnished to the United States without restriction;

(D) are the subject of a fraudulently asserted use or release restriction.

(2) The six-year period referred to in paragraph (1) is the six-year period beginning on the later of—

(A) the date on which final payment is made on the contract under which the technical data are required to be delivered; or

(B) the date on which the technical data are delivered under the contract.

(c) Written Notice to Contractor or Subcontractor.—If the Secretary challenges an asserted use or release restriction under subsection (a), the Secretary shall provide written notice of the challenge to the contractor or subcontractor asserting the restriction. Any such notice shall—

(1) state the specific grounds for challenging the asserted restriction;

(2) require a response within 60 days justifying the current validity of the asserted restriction; and

(3) state that evidence of a justification described in subsection (d) may be submitted.

(d) Justification.—It is a justification of an asserted use or release restriction challenged under subsection (a) that, within the three-year period preceding the challenge to the restriction, the Department of Defense validated a restriction identical to the asserted restriction if—

(1) such validation occurred after a challenge to the validated restriction under this section; and

(2) the validated restriction was asserted by the same contractor or subcontractor (or a licensee of such contractor or subcontractor).

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(g), (i), Jan. 1, 2021, 134 Stat. 4231.)

Editorial Notes

Codification

The text of subsec. (d) of section 2321 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1833(i), was based on Pub. L. 100–26, §7(a)(5)(A)(ii), Apr. 21, 1987, 101 Stat. 276; Pub. L. 100–180, div. A, title XII, §1231(6)(A), Dec. 4, 1987, 101 Stat. 1160; Pub. L. 103–35, title II, §201(g)(4), May 31, 1993, 107 Stat. 100; Pub. L. 111–383, div. A, title VIII, §824(c), Jan. 7, 2011, 124 Stat. 4269; Pub. L. 112–81, div. A, title VIII, §815(b), Dec. 31, 2011, 125 Stat. 1492.

Prior Provisions

A prior section 3782, act Aug. 10, 1956, ch. 1041, 70A Stat. 218; Pub. L. 86–616, §2(a), July 12, 1960, 74 Stat. 387, provided for boards of inquiry, composed of three or more officers, to be convened at such places as Secretary of the Army prescribes, to receive evidence and make findings and recommendations whether an officer, required to show cause under section 3781 of this title, should be retained on active list of Regular Army, prior to repeal by Pub. L. 96–513, title II, §213, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981. See section 1182 of this title.

Amendments

2021—Pub. L. 116–283, §1833(i)(1)(A), transferred subsec. (d) of section 2321 of this title to this section and struck out subsec. (d) designation and heading "Challenges to Restrictions" at beginning.

Subsec. (a). Pub. L. 116–283, §1833(i)(1)(B), (2), redesignated par. (1) of section 2321(d) of this title as subsec. (a) of this section, inserted heading, substituted "this subchapter" for "this section" in introductory provisions, and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively.

Subsec. (b). Pub. L. 116–283, §1833(i)(1)(B), (3)(A), (B), redesignated par. (2) of section 2321(d) of this title as subsec. (b) of this section, inserted heading, and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively, and realigned margins.

Subsec. (b)(1). Pub. L. 116–283, §1833(i)(3)(C), substituted "subsection (a)" for "paragraph (1)" and "paragraph (2)" for "subparagraph (B)" in introductory provisions and redesignated cls. (i) to (iv) as subpars. (A) to (D), respectively.

Subsec. (b)(2). Pub. L. 116–283, §1833(i)(3)(D), substituted "paragraph (1)" for "subparagraph (A)" in introductory provisions and redesignated cls. (i) and (ii) as subpars. (A) and (B), respectively.

Subsec. (c). Pub. L. 116–283, §1833(i)(1)(B), (4)(A)–(C), redesignated par. (3) of section 2321(d) of this title as subsec. (c) of this section, inserted heading, substituted "subsection (a)" for "paragraph (1)" in introductory provisions, and redesignated subpars. (A) to (C) as pars. (1) to (3), respectively.

Subsec. (c)(3). Pub. L. 116–283, §1833(i)(4)(D), substituted "subsection (d)" for "paragraph (4)".

Subsec. (d). Pub. L. 116–283, §1833(i)(1)(B), (5)(A)–(C), redesignated par. (4) of section 2321(d) of this title as subsec. (d) of this section, inserted heading, substituted "subsection (a)" for "paragraph (1)" in introductory provisions, and redesignated subparagraphs (A) and (B) as pars. (1) and (2), respectively.

Subsec. (d)(1). Pub. L. 116–283, §1833(i)(5)(D), substituted "this section" for "this subsection".

Statutory Notes and Related Subsidiaries

Effective Date

§3783. Technical data: time for contractors to submit justifications

(a) Additional Time to Submit Justifications.—If a contractor or subcontractor asserting a use or release restriction submits to the contracting officer a written request, showing the need for additional time to comply with the requirement to justify the current validity of the asserted restriction, additional time to adequately permit the submission of such justification shall be provided by the contracting officer as appropriate.

(b) Multiple Challenges; Schedule of Responses.—If a party asserting a restriction receives notices of challenges to restrictions on technical data from more than one contracting officer, and notifies each contracting officer of the existence of more than one challenge, the contracting officer initiating the first in time challenge, after consultation with the party asserting the restriction and the other contracting officers, shall formulate a schedule of responses to each of the challenges that will afford the party asserting the restriction with an equitable opportunity to respond to each such challenge.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(g), (j), Jan. 1, 2021, 134 Stat. 4231, 4232.)

Editorial Notes

Codification

The text of subsec. (e) of section 2321 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1833(j), was based on Pub. L. 98–525, title XII, §1216(a), Oct. 19, 1984, 98 Stat. 2597; Pub. L. 100–26, §7(a)(5)(A)(i), (B), Apr. 21, 1987, 101 Stat. 276, 277.

Prior Provisions

A prior section 3783, act Aug. 10, 1956, ch. 1041, 70A Stat. 218; Pub. L. 86–616, §2(a), July 12, 1960, 74 Stat. 387, provided for boards of review, composed of three or more officers, to be convened by Secretary of the Army, at such places as he prescribes, to review records of cases of officers recommended by boards of inquiry for removal from active list of Regular Army, prior to repeal by Pub. L. 96–513, title II, §213, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981.

Amendments

2021—Pub. L. 116–283, §1833(j), transferred subsec. (e) of section 2321 of this title to this section, struck out subsec. (e) designation and heading "Time for Contractors to Submit Justifications" at beginning, and designated first and second sentences of existing provisions as subsecs. (a) and (b), respectively, and inserted headings.

Statutory Notes and Related Subsidiaries

Effective Date

§3784. Technical data under contracts for commercial items: presumption of development exclusively at private expense

In the case of a challenge to a use or release restriction that is asserted with respect to technical data of a contractor or subcontractor under a contract for commercial products, the contracting officer shall presume that the contractor or subcontractor has justified the restriction on the basis that the commercial product was developed exclusively at private expense, whether or not the contractor or subcontractor submits a justification in response to the notice provided pursuant to section 3782(c) of this title. In such a case, the challenge to the use or release restriction may be sustained only if information provided by the Department of Defense demonstrates that the commercial product was not developed exclusively at private expense.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(g), (k), Jan. 1, 2021, 134 Stat. 4231, 4233.)

Editorial Notes

Codification

The text of subsec. (f) of section 2321 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1833(k), was based on Pub. L. 103–355, title VIII, §8106(b)(2), Oct. 13, 1994, 108 Stat. 3394; Pub. L. 109–364, div. A, title VIII, §802(b), Oct. 17, 2006, 120 Stat. 2313; Pub. L. 110–181, div. A, title VIII, §815(a)(2), Jan. 28, 2008, 122 Stat. 223; Pub. L. 113–291, div. A, title X, §1071(a)(5), Dec. 19, 2014, 128 Stat. 3504; Pub. L. 114–92, div. A, title VIII, §813(a), Nov. 25, 2015, 129 Stat. 891; Pub. L. 115–232, div. A, title VIII, §§836(c)(8), 865, Aug. 13, 2018, 132 Stat. 1866, 1901, as amended by Pub. L. 116–283, div. A, title X, §1081(d)(4)(B)(ii), Jan. 1, 2021, 134 Stat. 3874; Pub. L. 117–81, div. A, title X, §1081(a)(28), Dec. 27, 2021, 135 Stat. 1921.

Prior Provisions

A prior section 3784, act Aug. 10, 1956, ch. 1041, 70A Stat. 219; Pub. L. 86–616, §2(a), July 12, 1960, 74 Stat. 387, authorized Secretary of the Army to remove an officer from active list of Regular Army if his removal is recommended by a board of review and provided that decision of Secretary in such a case is final and conclusive, prior to repeal by Pub. L. 96–513, title II, §213, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981. See section 1184 of this title.

Amendments

2021—Pub. L. 116–283, §1833(k), transferred subsec. (f) of section 2321 of this title to this section, struck out subsec. (f) designation and heading "Presumption of Development Exclusively at Private Expense" at beginning, and substituted "section 3782(c) of this title" for "subsection (d)(3)".

Statutory Notes and Related Subsidiaries

Effective Date

§3785. Technical data: decision by contracting officer; claims; rights and liability upon final disposition

(a) Decision by Contracting Officer.—

(1) Upon failure by the contractor or subcontractor to submit any response under section 3782(c) of this title, the contracting officer shall issue a decision pertaining to the validity of the asserted restriction.

(2) After review of any justification submitted in response to the notice provided pursuant to section 3782(c) of this title, the contracting officer shall, within 60 days of receipt of any justification submitted, issue a decision or notify the party asserting the restriction of the time within which a decision will be issued.

(b) Claims.—If a claim pertaining to the validity of the asserted restriction is submitted in writing to a contracting officer by a contractor or subcontractor at any tier, such claim shall be considered a claim within the meaning of chapter 71 of title 41.

(1) If, upon final disposition, the contracting officer's challenge to the use or release restriction is sustained—

(A) the restriction shall be cancelled; and

(B) if the asserted restriction is found not to be substantially justified, the contractor or subcontractor asserting the restriction shall be liable to the United States for payment of the cost to the United States of reviewing the asserted restriction and the fees and other expenses (as defined in section 2412(d)(2)(A) of title 28) incurred by the United States in challenging the asserted restriction, unless special circumstances would make such payment unjust.

(2) If, upon final disposition, the contracting officer's challenge to the use or release restriction is not sustained—

(A) the United States shall continue to be bound by the restriction; and

(B) the United States shall be liable for payment to the party asserting the restriction for fees and other expenses (as defined in section 2412(d)(2)(A) of title 28) incurred by the party asserting the restriction in defending the asserted restriction if the challenge by the United States is found not to be made in good faith.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(g), (l), Jan. 1, 2021, 134 Stat. 4231, 4233.)

Editorial Notes

Codification

The text of subsec. (g) of section 2321 of this title, which was transferred to this section, redesignated as subsec. (a), and amended by Pub. L. 116–283, §1833(l)(1), (2), was based on Pub. L. 98–525, title XII, §1216(a), Oct. 19, 1984, 98 Stat. 2597; Pub. L. 100–26, §7(a)(5)(A)(i), (C), Apr. 21, 1987, 101 Stat. 276, 277; Pub. L. 103–355, title VIII, §8106(b)(1), Oct. 13, 1994, 108 Stat. 3393.

The text of subsec. (h) of section 2321 of this title, which was transferred to this section, redesignated as subsec. (b), and amended by Pub. L. 116–283, §1833(l)(1), was based on Pub. L. 98–525, title XII, §1216(a), Oct. 19, 1984, 98 Stat. 2598; Pub. L. 100–26, §7(a)(5)(A)(i), (D), Apr. 21, 1987, 101 Stat. 276, 277; Pub. L. 103–355, title VIII, §8106(b)(1), Oct. 13, 1994, 108 Stat. 3393; Pub. L. 111–350, §5(b)(18), Jan. 4, 2011, 124 Stat. 3844.

The text of subsec. (i) of section 2321 of this title, which was transferred to this section, redesignated as subsec. (c), and amended by Pub. L. 116–283, §1833(l)(1), (3), was based on Pub. L. 98–525, title XII, §1216(a), Oct. 19, 1984, 98 Stat. 2598; Pub. L. 100–26, §7(a)(5)(A)(i), (E), Apr. 21, 1987, 101 Stat. 276, 277; Pub. L. 103–355, title VIII, §8106(b)(1), Oct. 13, 1994, 108 Stat. 3393; Pub. L. 115–232, div. A, title VIII, 866(a), Aug. 13, 2018, 132 Stat. 1901; Pub. L. 116–92, div. A, title VIII, §808(b), Dec. 20, 2019, 133 Stat. 1486.

Prior Provisions

A prior section 3785, act Aug. 10, 1956, ch. 1041, 70A Stat. 219; Pub. L. 86–616, §2(a), July 12, 1960, 74 Stat. 387, provided that each officer under consideration for removal from active list of Regular Army under this chapter be given written notification, at least 30 days prior to a board of inquiry hearing, that he is being required to show cause for retention on active list, be allowed reasonable time to prepare a defense, be allowed to appear in person and by counsel at proceedings before a board of inquiry, and be allowed full access to, and furnished copies of, records relevant to his case at all stages of proceeding, prior to repeal by Pub. L. 96–513, title II, §213, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981. See section 1185 of this title.

Amendments

2021—Subsec. (a). Pub. L. 116–283, §1833(l)(1), (2), redesignated subsec. (g) of section 2321 of this title as subsec. (a) of this section, substituted "section 3782(c) of this title" for "subsection (d)(3)" in two places, and realigned margins of pars. (1) and (2). Amendment directing substitution of "(1) Upon failure" for "(1) Upon failure" as part of margin realignment was executed by substituting "(1) Upon failure" for "(1) Upon a failure" to reflect the probable intent of Congress.

Subsec. (b). Pub. L. 116–283, §1833(l)(1), redesignated subsec. (h) of section 2321 of this title as subsec. (b) of this section.

Subsec. (c). Pub. L. 116–283, §1833(l)(3), which directed amendment of subsec. (c) of section 3786 of this title by realigning the margins of pars. (1) and (2), was executed to subsec. (c) of this section to reflect the probable intent of Congress.

Pub. L. 116–283, §1833(l)(1), redesignated subsec. (i) of section 2321 of this title as subsec. (c) of this section.

Statutory Notes and Related Subsidiaries

Effective Date

§3786. Use or release restriction: definition

In this subchapter, the term "use or release restriction", with respect to technical data delivered to the United States under a contract subject to this section, means a restriction by the contractor or subcontractor on the right of the United States—

(1) to use such technical data; or

(2) to release or disclose such technical data to persons outside the Government or permit the use of such technical data by persons outside the Government.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(g), (m), Jan. 1, 2021, 134 Stat. 4231, 4233.)

Editorial Notes

Codification

The text of subsec. (j) of section 2321 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1833(m), was based on Pub. L. 100–26, §7(a)(5), Apr. 21, 1987, 101 Stat. 277; Pub. L. 100–180, div. A, title XII, §1231(6), Dec. 4, 1987, 101 Stat. 1160; Pub. L. 103–355, title VIII, §8106(b)(1), Oct. 13, 1994, 108 Stat. 3393.

Prior Provisions

Prior sections 3786 and 3787 were repealed by Pub. L. 96–513, title II, §213, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981.

Section 3786, acts Aug. 10, 1956, ch. 1041, 70A Stat. 219; July 12, 1960, Pub. L. 86–616, §2(a), 74 Stat. 387, authorized Secretary of the Army, at any time during proceedings under this chapter and before removal of an officer from active list of Regular Army, to grant that officer's request for voluntary retirement, if he is otherwise qualified therefor, or for honorable discharge with severance benefits. See section 1186 of this title.

Section 3787, added Pub. L. 86–616, §2(a), July 12, 1960, 74 Stat. 388, provided that no officer serve on a board under this chapter unless he holds a regular or temporary grade above lieutenant colonel, and is senior in regular grade to, and outranks, any officer considered by board and that no person be a member of more than one board convened under this chapter for same officer. See section 1187 of this title.

Amendments

2021—Pub. L. 116–283, §1833(m), transferred subsec. (j) of section 2321 of this title to this section, struck out subsec. (j) designation and heading "Use or Release Restriction Defined" at beginning, and substituted "In this subchapter" for "In this section" in introductory provisions.

Statutory Notes and Related Subsidiaries

Effective Date

SUBCHAPTER III—OTHER PROVISIONS RELATING TO PROPRIETARY CONTRACTOR DATA AND RIGHTS IN TECHNICAL DATA

Sec.

3791.

Management of intellectual property matters within the Department of Defense.

3792.

[Reserved].

3793.

Copyrights, patents, designs, etc.; acquisition.

3794.

Release of technical data under Freedom of Information Act: recovery of costs.

Editorial Notes

Amendments

2021—Pub. L. 117–81, div. A, title XVII, §1701(b)(12)(A), (f)(6), Dec. 27, 2021, 135 Stat. 2134, 2139, made technical amendment to Pub. L. 116–283, div. A, title XVIII, §1833(n), Jan. 1, 2021, 134 Stat. 4233, which added this analysis, added "[Reserved]" for item 3792, and struck out former item 3792 "Technical data rights: non-FAR agreements".

Statutory Notes and Related Subsidiaries

Technical Data Rights Under Non-FAR Agreements

Pub. L. 110–417, [div. A], title VIII, §822, Oct. 14, 2008, 122 Stat. 4532, as amended by Pub. L. 111–383, div. A, title X, §1075(e)(13), Jan. 7, 2011, 124 Stat. 4375, provided that:

"(a) Policy Guidance.—Not later than 270 days after the date of the enactment of this Act [Oct. 14, 2008], the Secretary of Defense shall issue policy guidance with respect to rights in technical data under a non-FAR agreement. The guidance shall—

"(1) establish criteria for defining the legitimate interests of the United States and the party concerned in technical data pertaining to an item or process to be developed under the agreement;

"(2) require that specific rights in technical data be established during agreement negotiations and be based upon negotiations between the United States and the potential party to the agreement, except in any case in which the Secretary of Defense determines, on the basis of criteria established in such policy guidance, that the establishment of rights during or through agreement negotiations would not be practicable; and

"(3) require the program manager for a major weapon system or an item of personnel protective equipment that is to be developed using a non-FAR agreement to assess the long-term technical data needs of such system or item.

"(b) Requirement to Include Provisions in Non-FAR Agreements.—A non-FAR agreement shall contain appropriate provisions relating to rights in technical data consistent with the policy guidance issued pursuant to subsection (a).

"(c) Definitions.—In this section:

"(1) The term 'non-FAR agreement' means an agreement that is not subject to laws pursuant to which the Federal Acquisition Regulation is prescribed, including—

"(A) a transaction authorized under section 2371 of title 10, United States Code [now 10 U.S.C. 4021]; and

"(B) a cooperative research and development agreement.

"(2) The term 'party', with respect to a non-FAR agreement, means a non-Federal entity and includes any of the following:

"(A) A contractor and its subcontractors (at any tier).

"(B) A joint venture.

"(C) A consortium.

"(d) Report on Life Cycle Planning for Technical Data Needs.—Not later than 270 days after the date of enactment of this Act [Oct. 14, 2008], the Secretary of Defense shall submit to the Committees on Armed Services of the Senate and the House of Representatives a report on the implementation of the requirements in section 2320(e) of title 10, United States Code [see 10 U.S.C. 3774(a), (b)], for the assessment of long-term technical data needs to sustain major weapon systems. Such report shall include—

"(1) a description of all relevant guidance or policies issued;

"(2) a description of the extent to which program managers have received training to better assess the long-term technical data needs of major weapon systems and subsystems; and

"(3) a description of one or more examples, if any, where a priced contract option has been used on major weapon systems for the future delivery of technical data and one or more examples, if any, where all relevant technical data were acquired upon contract award."

§3791. Management of intellectual property matters within the Department of Defense

(a) Policy Required.—The Secretary of Defense, acting through the Under Secretary of Defense for Acquisition and Sustainment, shall develop policy on the acquisition or licensing of intellectual property—

(1) to enable coordination and consistency across the military departments and the Department of Defense in strategies for acquiring or licensing intellectual property and communicating with industry;

(2) to ensure that program managers are aware of the rights afforded the Federal Government and contractors in intellectual property and that program managers fully consider and use all available techniques and best practices for acquiring or licensing intellectual property early in the acquisition process; and

(3) to encourage customized intellectual property strategies for each system based on, at a minimum, the unique characteristics of the system and its components, the product support strategy for the system, the organic industrial base strategy of the military department concerned, and the commercial market.

(b) Cadre of Intellectual Property Experts.—For a provision requiring establishment of a cadre of personnel who are experts in intellectual property matters, see section 1707 of this title.

(1) In general.—The Secretary of Defense, acting through the Under Secretary of Defense for Acquisition and Sustainment, shall develop guidelines and resources on the acquisition or licensing of intellectual property, including—

(A) intellectual property strategies and other mechanisms supporting the use of modular open system approaches (as defined in section 4401(b) of this title);

(B) evaluation and negotiation of intellectual property licenses in competitive and non-competitive awards;

(C) models and best practices for specially negotiated licenses, including specially negotiated licenses described in section 3774(c) of this title; and

(D) definitions, key terms, examples, and case studies that clarify differences between—

(i) detailed manufacturing and process data;

(ii) form, fit, and function data;

(iii) data required for operations, maintenance, installation, and training;

(iv) modular system interfaces (as defined in section 4401(b) of this title); and

(v) technical data pertaining to an interface between an item or process and other items or processes necessary for the segregation of an item or process from, or the reintegration of that item or process (or a functionally equivalent item or process) with, other items or processes.

(2) Guidelines and resources limit.—The guidelines and resources developed under paragraph (1) may not alter or affect any authority or duty under this section or section 1707 of this title.

(3) Review and consultation.—In developing the guidelines and resources described in paragraph (1), the Secretary shall—

(A) review the applicable statutory and regulatory history, including among the definitions and key terms in section 3771 of this title, to ensure consistency; and

(B) regularly consult with appropriate government and industry persons and organizations.

(4) Training.—The Secretary of Defense shall ensure that the acquisition workforce receives training on the guidelines and resources developed under paragraph (1).

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1833(n), (o)(1), Jan. 1, 2021, 134 Stat. 4234; Pub. L. 117–81, div. A, title XVII, §1701(b)(12)(A), Dec. 27, 2021, 135 Stat. 2134; Pub. L. 117–263, div. A, title VIII, §841, Dec. 23, 2022, 136 Stat. 2716.)

Editorial Notes

Codification

The text of subsec. (a) of section 2322 of this title, which was transferred to this section by Pub. L. 116–283, §1833(o)(1), was based on Pub. L. 115–91, div. A, title VIII, §802(a)(1), Dec. 12, 2017, 131 Stat. 1450.

Prior Provisions

Prior sections 3791 and 3792 were repealed by Pub. L. 96–513, title II, §213, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981.

Section 3791, added Pub. L. 86–616, §3(a), July 12, 1960, 74 Stat. 388, authorized Secretary of the Army to convene at any time a board of general officers to review record of any commissioned officer on active list of Regular Army to determine whether he should be required, because of moral dereliction, professional dereliction, or because his retention is not clearly consistent with interests of national security, to show cause for his retention on active list. See section 1181(b) of this title.

Section 3792, added Pub. L. 86–616, §3(a), July 12, 1960, 74 Stat. 388, provided for boards of inquiry, composed of three or more general officers, to be convened at such places as Secretary of the Army prescribes, to receive evidence and make findings and recommendations whether an officer, required to show cause under section 3791 of this title, should be retained on active list of Regular Army. See section 1182 of this title.

Amendments

2022—Pub. L. 117–263, §841(1), substituted "Department of Defense" for "department of defense" in section catchline.

Subsec. (c). Pub. L. 117–263, §841(2), added subsec. (c).

2021—Pub. L. 117–81, §1701(b)(12)(A), which directed amendment of section 1833(n) of Pub. L. 116–283, which enacted this section, by substituting "DEPARTMENT OF DEFENSE" for "DEPARTMENT OF DEFENSE" in text of section catchline, could not be executed.

Subsec. (a). Pub. L. 116–283, §1833(o)(1), transferred subsec. (a) of section 2322 of this title to this section.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

Pilot Program for the Use of Innovative Intellectual Property Strategies

Pub. L. 118–31, div. A, title VIII, §808, Dec. 22, 2023, 137 Stat. 319, provided that:

"(a) Establishment.—The Secretary of Defense shall establish a pilot program for the use of innovative intellectual property strategies that meet the criteria described in subsection (b) to acquire the necessary technical data rights required for the operation, maintenance, and installation of, and training for, covered programs designated under subsection (c).

"(b) Criteria for Strategies.—The innovative intellectual property strategies used in a pilot program established under this section may include the following:

"(1) The use of an escrow account to verify and hold intellectual property data.

"(2) The use of royalties or licenses.

"(3) Other strategies, as determined by the Secretary.

"(c) Designation of Covered Programs.—Not later than May 1, 2024, and with respect to the pilot program established under this section—

"(1) the Secretary of each military department shall designate one covered program within the military department under the jurisdiction of such Secretary; and

"(2) the Under Secretary of Defense for Acquisition and Sustainment shall designate one covered program within the Defense Agencies or Department of Defense Field Activities (as defined, respectively, in section 101 of title 10, United States Code).

"(d) Briefing Requirement.—Not later than 180 days after the date of the enactment of this Act [Dec. 22, 2023], the Under Secretary of Defense for Acquisition and Sustainment, in coordination with the Secretaries of the military departments, shall provide a briefing to the Committees on Armed Services of the Senate and the House of Representatives with a detailed plan to implement the pilot program required under this section.

"(e) Annual Report.—Beginning on the date on which the first program is designated under subsection (c) and until the termination date in subsection (f), the Under Secretary of Defense for Acquisition and Sustainment, in coordination with the Secretaries of the military departments, shall provide an annual report to the Committees on Armed Services of the Senate and the House of Representatives on—

"(1) the effectiveness of the pilot program in acquiring the necessary technical data rights necessary to support timely, cost-effective maintenance and sustainment of the acquisition programs designated under subsection (c); and

"(2) any recommendations for the applicability of lessons learned from the pilot program.

"(f) Termination.—The authority to carry out the pilot program established under this section shall terminate on December 31, 2028.

"(g) Definitions.—In this section:

"(1) The term 'covered program' means an acquisition program under which procurements are conducted using a pathway of the adaptive acquisition framework (as described in Department of Defense Instruction 5000.02, 'Operation of the Adaptive Acquisition Framework').

"(2) The term 'technical data rights' has the meaning given in section 3771 of title 10, United States Code."

§3793. Copyrights, patents, designs, etc.; acquisition

Funds appropriated for a military department available for making or procuring supplies may be used to acquire any of the following if the acquisition relates to supplies or processes produced or used by or for, or useful to, that department:

(1) Copyrights, patents, and applications for patents.

(2) Licenses under copyrights, patents, and applications for patents.

(3) Design and process data, technical data, and computer software.

(4) Releases for past infringement of patents or copyrights or for unauthorized use of technical data or computer software.

(Aug. 10, 1956, ch. 1041, 70A Stat. 137, §2386; Pub. L. 86–726, §3, Sept. 8, 1960, 74 Stat. 855; Pub. L. 103–355, title III, §3063, Oct. 13, 1994, 108 Stat. 3337; Pub. L. 104–106, div. A, title VIII, §813, Feb. 10, 1996, 110 Stat. 395; renumbered §3793, Pub. L. 116–283, div. A, title XVIII, §1833(o)(2), Jan. 1, 2021, 134 Stat. 4234; Pub. L. 117–81, div. A, title XVII, §1701(b)(12)(B), Dec. 27, 2021, 135 Stat. 2134.)

Historical and Revision Notes
Revised section	Source (U.S. Code)	Source (Statutes at Large)
2386	31:649b.	Aug. 1, 1953, ch. 305, §609, 67 Stat. 350.

The words "equipment, and materials" are omitted as covered by the word "supplies". The word "hereafter" is omitted as executed. The words "may be used" are substituted for the words "shall * * * be available". The words "if the acquisition relates to" are substituted for 31:649b (1st 8 words of last sentence). In clauses (1), (2), and (4), the word "patents" is substituted for the words "letters patent".

Editorial Notes

Prior Provisions

A prior section 3793, added Pub. L. 86–616, §3(a), July 12, 1960, 74 Stat. 389, provided for boards of review, composed of three or more general officers, to be convened by Secretary of the Army, at such places as he prescribes, to review records of cases of officers recommended by boards of inquiry for removal from active list of Regular Army, prior to repeal by Pub. L. 96–513, title II, §213, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981.

Amendments

2021—Pub. L. 116–283, §1833(o)(2), as amended by Pub. L. 117–81, §1701(b)(12)(B), renumbered section 2386 of this title as this section.

1996—Par. (3). Pub. L. 104–106 amended par. (3) generally, substituting "Design and process data, technical data, and computer software" for "Technical data and computer software".

1994—Pars. (3), (4). Pub. L. 103–355 added pars. (3) and (4) and struck out former pars. (3) and (4) which read as follows:

"(3) Designs, processes, and manufacturing data.

"(4) Releases, before suit is brought, for past infringement of patents or copyrights."

1960—Pub. L. 86–726 inserted "or copyrights" after "patents" in cl. (4).

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

§3794. Release of technical data under Freedom of Information Act: recovery of costs

(a) In General.—(1) The Secretary of Defense shall, if required to release technical data under section 552 of title 5 (relating to the Freedom of Information Act), release such technical data to the person requesting the release if the person pays all reasonable costs attributable to search, duplication, and review.

(2) The Secretary of Defense shall prescribe regulations, pursuant to notice and receipt of public comment, specifying a uniform schedule of fees under this section.

(b) Crediting of Receipts.—An amount received under this section—

(1) shall be retained by the Department of Defense or the element of the Department of Defense receiving the amount; and

(2) shall be merged with and available for the same purpose and the same time period as the appropriation from which the costs incurred in complying with requests for technical data were paid.

(c) Waiver.—The Secretary of Defense shall waive the payment of costs required by subsection (a) which are in an amount greater than the costs that would be required for such a release of information under section 552 of title 5 if—

(1) the request is made by a citizen of the United States or a United States corporation, and such citizen or corporation certifies that the technical data requested is required to enable such citizen or corporation to submit an offer or determine whether it is capable of submitting an offer to provide the product to which the technical data relates to the United States or a contractor with the United States (except that the Secretary may require the citizen or corporation to pay a deposit in an amount equal to not more than the cost of complying with the request, to be refunded upon submission of an offer by the citizen or corporation);

(2) the release of technical data is requested in order to comply with the terms of an international agreement; or

(3) the Secretary determines, in accordance with section 552(a)(4)(A)(iii) of title 5, that such a waiver is in the interests of the United States.

(Added Pub. L. 99–500, §101(c) [title X, §954(a)(1)], Oct. 18, 1986, 100 Stat. 1783–82, 1783-172, and Pub. L. 99–591, §101(c) [title X, §954(a)(1)], Oct. 30, 1986, 100 Stat. 3341–82, 3341-172, §2328; Pub. L. 99–661, div. A, title IX, formerly title IV, §954(a)(1), Nov. 14, 1986, 100 Stat. 3952, renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273; amended Pub. L. 100–26, §7(a)(7)(A), (B)(i), Apr. 21, 1987, 101 Stat. 278; renumbered §3794, Pub. L. 116–283, div. A, title XVIII, §1833(o)(2), Jan. 1, 2021, 134 Stat. 4234; Pub. L. 117–81, div. A, title XVII, §1701(b)(12)(B), Dec. 27, 2021, 135 Stat. 2134.)

Editorial Notes

Codification

Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Pub. L. 99–500, Pub. L. 99–591, and Pub. L. 99–661 added identical sections.

Prior Provisions

Prior sections 3794 to 3797 were repealed by Pub. L. 96–513, title II, §213, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981.

Section 3794, added Pub. L. 86–616, §3(a), July 12, 1960, 74 Stat. 389, authorized Secretary of the Army to remove an officer from active list of Regular Army if his removal is recommended by a board of review and provided that decision of Secretary in such a case is final and conclusive. See section 1184 of this title.

Section 3795, added Pub. L. 86–616, §3(a), July 12, 1960, 74 Stat. 389, provided that each officer under consideration for removal from active list of Regular Army under this chapter be given written notification, at least 30 days prior to a board of inquiry hearing, that he is being required to show cause for retention on active list, be allowed reasonable time to prepare a defense, be allowed to appear in person and by counsel at proceedings before board of inquiry, and be allowed full access to, and furnished copies of, records relevant to his case at all stages of proceedings, except records that Secretary determines be withheld in interests of national security, in which case, a summary, to extent national security permits, be furnished. See section 1185 of this title.

Section 3796, added Pub. L. 86–616, §3(a), July 12, 1960, 74 Stat. 389, authorized Secretary of the Army, at any time during proceedings under this chapter and before removal of an officer from active list of Regular Army, to grant that officer's request for voluntary retirement, if he is otherwise qualified therefor, or for honorable discharge with severance benefits. See section 1186 of this title.

Section 3797, added Pub. L. 86–616, §3(a), July 12, 1960, 74 Stat. 390, provided that no officer serve on a board under this chapter unless he holds a regular or temporary grade above lieutenant colonel, and is senior in regular grade to, and outranks, any officer considered by that board and that no person be a member of more than one board convened under this chapter for same officer. See section 1187 of this title.

Amendments

2021—Pub. L. 116–283, §1833(o)(2), as amended by Pub. L. 117–81, §1701(b)(12)(B), renumbered section 2328 of this title as this section.

1987—Pub. L. 100–26, §7(a)(7)(B)(i), substituted "Release of technical data under Freedom of Information Act: recovery of costs" for "Release of technical data" in section catchline.

Subsec. (a)(1). Pub. L. 100–26, §7(a)(7)(A)(i)(I), substituted "such technical data to the person requesting the" for "technical data to a person requesting such a".

Pub. L. 100–26, §7(a)(7)(A)(i)(II), substituted "search, duplication, and review" for "search and duplication".

Subsec. (b). Pub. L. 100–26, §7(a)(7)(A)(ii), substituted "Crediting of receipts" for "Disposition of costs" in heading.

Subsec. (c)(3). Pub. L. 100–26, §7(a)(7)(A)(iii), substituted "section 552(a)(4)(A)(iii)" for "section 552(a)(4)(A)".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date of 1987 Amendment

Pub. L. 100–26, §12(d)(2), Apr. 21, 1987, 101 Stat. 289, provided that: "The amendment to section 2328 of such title [now 10 U.S.C. 3794] made by section 7(a)(7)(A)(i)(II) shall take effect on the same date and in the same manner as provided in section 1804(b) of Public Law 99–570 [set out as an Effective Date of 1986 Amendment note under section 552 of Title 5, Government Organization and Employees] for the amendment made by section 1803 of that Public Law to section 552a of title 5, United States Code [probably means amendment by section 1803 of Pub. L. 99–570 to section 552(a) of Title 5]."

Effective Date

Pub. L. 99–500, §101(c) [title X, §954(b)], Oct. 18, 1986, 100 Stat. 1783–82, 1783-173, Pub. L. 99–591, §101(c) [title X, §954(b)], Oct. 30, 1986, 100 Stat. 3341–82, 3341-173, and Pub. L. 99–661, div. A, title IX, formerly title IV, §954(b), Nov. 14, 1986, 100 Stat. 3953, renumbered title IX by Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273, provided that: "The amendments made by this section [enacting this section] shall take effect at the end of the 90-day period beginning on the date of the enactment of this Act [Oct. 18, 1986]."

CHAPTER 277—CONTRACT FINANCING

Sec.

3801.

Authority of agency.

3802.

Payment.

3803.

Security for advance payments.

3804.

Conditions for progress payments.

3805.

Payments for commercial products and commercial services.

3806.

Action in case of fraud.

3807.

Vesting of title in the United States.

3808.

Certain Navy contracts.

Editorial Notes

Prior Provisions

A prior chapter 277 "CONTRACT FINANCING", as added by Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1828, and consisting of reserved section 3801, was repealed by Pub. L. 116–283, div. A, title XVIII, §1834(a), Jan. 1, 2021, 134 Stat. 4234.

Amendments

2021—Pub. L. 117–81, div. A, title XVII, §1701(n)(1)(A), Dec. 27, 2021, 135 Stat. 2145, amended Pub. L. 116–283, div. A, title XVIII, §1834(a), Jan. 1, 2021, 134 Stat. 4234, which added this analysis, by adding item 3808. Amendment directing "adding at the following new item" was executed as if it had read "adding at the end the following new item" to reflect the probable intent of Congress.

§3801. Authority of agency

(a) Payment Authority.—The head of any agency may—

(1) make advance, partial, progress, or other payments under contracts for property or services made by the agency; and

(2) insert in solicitations for procurement of property or services a provision limiting to small business concerns advance or progress payments.

(b) Payment Dates for Contractors That Are Small Business Concerns.—

(1) Prime contractors.—For a prime contractor (as defined in section 8701 of title 41) that is a small business concern (as defined in section 3 of the Small Business Act (15 U.S.C. 632)), the Secretary of Defense shall, to the fullest extent permitted by law, establish an accelerated payment date with a goal of 15 days after receipt of a proper invoice for the amount due.

(2) Subcontractors.—For a prime contractor that subcontracts with a small business concern, the Secretary of Defense shall, to the fullest extent permitted by law, establish an accelerated payment date with a goal of 15 days after receipt of a proper invoice for the amount due if the prime contractor agrees to make payments to the subcontractor in accordance with the accelerated payment date, to the maximum extent practicable, without any further consideration from or fees charged to the subcontractor.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1834(a), (b), Jan. 1, 2021, 134 Stat. 4234.)

Editorial Notes

Codification

The text of subsec. (a) of section 2307 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1834(b), was based on act Aug. 10, 1956, ch. 1041, 70A Stat. 131; Pub. L. 85–800, §9, Aug. 28, 1958, 72 Stat. 967; Pub. L. 103–355, title II, §2001(a)(2), (c), Oct. 13, 1994, 108 Stat. 3301, 3302; Pub. L. 115–232, div. A, title VIII, §852, Aug. 13, 2018, 132 Stat. 1884; Pub. L. 116–92, div. A, title XVII, §1731(a)(40), Dec. 20, 2019, 133 Stat. 1814; Pub. L. 116–283, div. A, title VIII, §815, Jan. 1, 2021, 134 Stat. 3750; Pub. L. 117–81, div. A, title VIII, §814, Dec. 27, 2021, 135 Stat. 1823.

Amendments

2021—Subsec. (a). Pub. L. 116–283, §1834(b)(1)(A), (2), transferred subsec. (a) of section 2307 of this title to this section, struck out par. (1) designation before "The head of", and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively. Former par. (2) of subsec. (a) redesignated subsec. (b).

Subsec. (b). Pub. L. 116–283, §1834(b)(1)(B), (3)(A)–(C)(i), redesignated par. (2) of subsec. (a) as subsec. (b), inserted subsec. heading, and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively, and inserted par. headings.

Subsec. (b)(2). Pub. L. 116–283, §1834(b)(3)(C)(ii), which directed amendment of par. (2) by redesignating cls. (i) and (ii) as subpars. (A) and (B), respectively, could not be executed because of the amendment made by section 815(2) of Pub. L. 116–283, which struck out cls. (i) and (ii) in section 2307(a)(2)(B) of this title prior to its transfer and redesignation as subsec. (b)(2) of this section.

Statutory Notes and Related Subsidiaries

Effective Date

§3802. Payment

(a) Preference for Performance-Based Payments.—Whenever practicable, payments under section 3801 of this title shall be made using performance-based payments on any of the following bases:

(1) Performance measured by objective, quantifiable methods such as delivery of acceptable items, work measurement, or statistical process controls.

(2) Accomplishment of events defined in the program management plan.

(3) Other quantifiable measures of results.

(b) Basis for performance-based payments.—Performance-based payments shall not be conditioned upon costs incurred in contract performance but on the achievement of performance outcomes listed in subsection (a).

(1) In order to receive performance-based payments, a contractor's accounting system shall be in compliance with Generally Accepted Accounting Principles, and there shall be no requirement for a contractor to develop Government-unique accounting systems or practices as a prerequisite for agreeing to receive performance-based payments.

(2) Nothing in this chapter shall be construed to grant the Defense Contract Audit Agency the authority to audit compliance with Generally Accepted Accounting Principles.

(d) Payment Amount.—Payments made under section 3801 of this title may not exceed the unpaid contract price.

(e) Eligibility of Nontraditional Defense Contractors.—The Secretary of Defense shall ensure that nontraditional defense contractors and other private sector companies are eligible for performance-based payments, consistent with best commercial practices.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1834(a), (c), Jan. 1, 2021, 134 Stat. 4234, 4235.)

Editorial Notes

Codification

The text of subsec. (b) of section 2307 of this title, which was transferred to this section, redesignated as subsecs. (a), (b), (c), and (e), and amended by Pub. L. 116–283, §1834(c)(1)–(5), (7), was based on Pub. L. 103–355, title II, §2001(b), Oct. 13, 1994, 108 Stat. 3302; Pub. L. 114–328, div. A, title VIII, §831(a), Dec. 23, 2016, 130 Stat. 2282.

The text of subsec. (c) of section 2307 of this title, which was transferred to this section, redesignated as subsec. (d), and amended by Pub. L. 116–283, §1834(c)(1), (6), was based on act Aug. 10, 1956, ch. 1041, 70A Stat. 131; Pub. L. 85–800, §9, Aug. 28, 1958, 72 Stat. 967; Pub. L. 103–355, title II, §2001(a)(3), (7), Oct. 13, 1994, 108 Stat. 3301.

Amendments

2021—Subsec. (a). Pub. L. 116–283, §1834(c)(1)–(3), redesignated subsec. (b) of section 2307 of this title as subsec. (a) of this section, struck out par. (1) designation before "Whenever practicable", substituted "section 3801 of this title" for "subsection (a)" in introductory provisions, and redesignated subpars. (A) to (C) as pars. (1) to (3), respectively. Amendment directing striking out par. (1) designation before "Whenever possible" was executed by striking it out before "Whenever practicable" to reflect the probable intent of Congress. Former pars. (2) to (4) of subsec. (a) redesignated subsecs. (b), (e), and (c), respectively.

Subsec. (b). Pub. L. 116–283, §1834(c)(2)(B), (4), after redesignation of section 2307(b) of this title as subsec. (a) of this section, redesignated par. (2) of subsec. (a) as subsec. (b), inserted heading, and substituted "subsection (a)" for "paragraph (1)".

Subsec. (c). Pub. L. 116–283, §1834(c)(2)(D), (5), after redesignation of section 2307(b) of this title as subsec. (a) of this section, redesignated par. (4) of subsec. (a) as subsec. (c), inserted heading, redesignated subpars. (A) and (B) as pars. (1) and (2), respectively, and realigned margins, and, in par. (2), substituted "this chapter" for "this section".

Subsec. (d). Pub. L. 116–283, §1834(c)(1), (6), redesignated subsec. (c) of section 2307 of this title as subsec. (d) of this section and substituted "section 3801 of this title" for "subsection (a)".

Subsec. (e). Pub. L. 116–283, §1834(c)(2)(C), (7), after redesignation of section 2307(b) of this title as subsec. (a) of this section, redesignated par. (3) of subsec. (a) as subsec. (e), moved it to the end of the section, and inserted heading.

Statutory Notes and Related Subsidiaries

Effective Date

Regulations

Pub. L. 114–328, div. A, title VIII, §831(b), Dec. 23, 2016, 130 Stat. 2283, provided that: "Not later than 120 days after the date of the enactment of this Act [Dec. 23, 2016], the Secretary of Defense shall revise the Department of Defense Federal Acquisition Regulation Supplement to conform with section 2307(b) of title 10, United States Code [see 10 U.S.C. 3802(a)–(c), (e)], as amended by subsection (a)."

§3803. Security for advance payments

Advance payments made under section 3801 of this title may be made only if the contractor gives adequate security and after a determination by the head of the agency that to do so would be in the public interest. Such security may be in the form of a lien in favor of the United States on the property contracted for, on the balance in an account in which such payments are deposited, and on such of the property acquired for performance of the contract as the parties may agree. This lien is paramount to any other liens and is effective immediately upon the first advancement of funds without filing, notice, or any other action by the United States.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1834(a), (d), Jan. 1, 2021, 134 Stat. 4234, 4236.)

Editorial Notes

Codification

The text of subsec. (d) of section 2307 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1834(d), was based on act Aug. 10, 1956, ch. 1041, 70A Stat. 131; Pub. L. 85–800, §9, Aug. 28, 1958, 72 Stat. 967; Pub. L. 103–355, title II, §2001(a)(4), (7), (d), Oct. 13, 1994, 108 Stat. 3301, 3302.

Amendments

2021—Pub. L. 116–283, §1834(d), transferred subsec. (d) of section 2307 of this title to this section, struck out subsec. (d) designation and heading "Security for Advance Payments" at beginning, and substituted "section 3801 of this title" for "subsection (a)".

Statutory Notes and Related Subsidiaries

Effective Date

§3804. Conditions for progress payments

(a) Payment Commensurate With Work.—The Secretary of Defense shall ensure that any payment for work in progress (including materials, labor, and other items) under a defense contract that provides for such payments is commensurate with the work accomplished that meets standards established under the contract. The contractor shall provide such information and evidence as the Secretary of Defense determines necessary to permit the Secretary to carry out the preceding sentence.

(b) Limitation.—The Secretary shall ensure that progress payments referred to in subsection (a) are not made for more than 80 percent of the work accomplished under a defense contract so long as the Secretary has not made the contractual terms, specifications, and price definite.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1834(a), (e), Jan. 1, 2021, 134 Stat. 4234, 4236.)

Editorial Notes

Codification

The text of subsec. (e) of section 2307 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1834(e), was based on Pub. L. 100–370, §1(f)(1)(A), July 19, 1988, 102 Stat. 846; Pub. L. 101–510, div. A, title XIII, §1322(a)(4)(B), Nov. 5, 1990, 104 Stat. 1671; Pub. L. 102–25, title VII, §701(d)(4), Apr. 6, 1991, 105 Stat. 114; Pub. L. 103–355, title II, §2001(a)(5), (7), (e), Oct. 13, 1994, 108 Stat. 3301, 3302.

Amendments

2021—Pub. L. 116–283, §1834(e)(1), transferred subsec. (e) of section 2307 of this title to this section and struck out subsec. (e) designation and heading "Conditions for Progress Payments" at beginning.

Subsec. (a). Pub. L. 116–283, §1834(e)(1)(B), (2), after transfer of section 2307(e) of this title to this section, redesignated par. (1) as subsec. (a) and inserted heading.

Subsec. (b). Pub. L. 116–283, §1834(e)(1)(B), (3), after transfer of section 2307(e) of this title to this section, redesignated par. (2) as subsec. (b), inserted heading, and substituted "subsection (a)" for "paragraph (1)".

Subsec. (c). Pub. L. 116–283, §1834(e)(1)(B), (4), after transfer of section 2307(e) of this title to this section, redesignated par. (3) as subsec. (c), inserted heading, and substituted "This section" for "This subsection".

Statutory Notes and Related Subsidiaries

Effective Date

Pilot Program To Incentivize Progress Payments

Pub. L. 118–31, div. A, title VIII, §874, Dec. 22, 2023, 137 Stat. 352, provided that:

"(a) Pilot Program.—The Under Secretary of Defense for Acquisition and Sustainment shall establish and implement a pilot program to incentivize contractor performance by paying covered contractors a progress payment rate that is up to 10 percent higher than the customary progress payment rate on a contract-by-contract basis.

"(b) Incentive Criteria.—The Under Secretary shall develop and establish clear and measurable criteria for the payment to contractors of higher progress payments as described in subsection (a), including criteria for qualifying for such payments and the amount of such payments.

"(c) Applicability.—The Under Secretary shall apply the criteria established under subsection (b) and any associated incentive on a contract-by-contract basis when determining whether to pay a contractor a higher progress payment under the pilot program established under subsection (a) and the amount of such payment.

"(d) Participation Voluntary.—Participation in the pilot program established under subsection (a) shall be on a voluntary basis.

"(e) Notice and Comment.—The Under Secretary shall issue the regulations implementing the pilot program established under subsection (a) and establishing the criteria required by subsection (b) after notice and an opportunity for public comment of not more than 30 days.

"(f) Report.—Not later than September 30, 2024, and annually thereafter, the Under Secretary for Acquisition and Sustainment shall submit to the Committees on Armed Services of the Senate and House of Representatives a report on the implementation and activities of the pilot program established under subsection (a), including a comprehensive list of contractors that received increased progress payments under the pilot program and the contracts with respect to which such increased progress payments were made.

"(g) Definitions.—In this section:

"(1) Covered contractor.—The term 'covered contractor' means a contractor of the Department of Defense that is eligible for progress payments under section 3804 of title 10, United States Code.

"(2) Customary progress payment rate.—The term 'customary progress payment rate' refers to the rate of progress payments provided for under section 3804 of title 10, United States Code, and payable in accordance with the applicable provisions of the Federal Acquisition Regulation and the Defense Federal Acquisition Regulation Supplement.

"(3) Under secretary.—The term 'Under Secretary' means the Under Secretary for Acquisition and Sustainment.

"(h) Sunset.—

"(1) In general.—Except as provided by paragraph (2), the authority to carry out the pilot program established under subsection (a) shall terminate on January 1, 2029.

"(2) Existing contracts.—Notwithstanding paragraph (1), a contractor that the Under Secretary determines under the pilot program established under subsection (a) shall be paid a higher progress payment under such pilot program with respect to a contract in effect as of the date described in paragraph (1) shall receive such higher progress payments until the earlier of—

"(A) the termination or expiration of the contract; or

"(B) the date on which the contractor becomes ineligible for progress payments or higher progress payments under such pilot program."

Waivers of Certain Conditions for Progress Payments Under Certain Contracts During the COVID–19 National Emergency

Pub. L. 116–283, div. A, title VIII, §891, Jan. 1, 2021, 134 Stat. 3793, provided that:

"(a) Waiver of Progress Payments Requirements.—The Secretary of Defense may waive the requirements of section 2307(e)(2) of title 10, United States Code [now 10 U.S.C. 3804(b)], with respect to progress payments for any undefinitized contractual action (as defined in section 2326 of title 10, United States Code [see 10 U.S.C. 3377(b)(1)]; in this section referred to as 'UCA') if the Secretary determines that the waiver is necessary due to the national emergency for the Coronavirus Disease 2019 (COVID–19) and—

"(1) a contractor performing the contract for which a UCA is entered into has not already received increased progress payments from the Secretary of Defense on contractual actions other than UCAs; or

"(2) a contractor performing the contract for which a UCA is entered into, and that has received increased progress payments from the Secretary of Defense on contractual actions other than UCAs, can demonstrate that the contractor has promptly provided the amount of the increase to any subcontractors (at any tier), small business concerns (as defined under section 3 of the Small Business Act (15 U.S.C. 632)), or suppliers of the contractor.

"(b) Definitization.—With respect to a UCA that not been definitized for a period of 180 days beginning on the date on which such UCA was entered into, the Secretary of Defense may only use the waiver authority described in subsection (a) if the Secretary (or a designee at a level not below the head of a contracting activity) provides a certification to the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] that such UCA will be definitized within 60 days after the date on which the waiver is issued.

"(c) Submission.—For each use of the waiver authority under subsection (a), the Secretary of Defense shall submit to the congressional defense committees an estimate of the amounts to be provided to subcontractors (at any tier), small business concerns, and suppliers, including an identification of the specific entities receiving an amount from an increased progress payment described under such subsection (a)."

§3805. Payments for commercial products and commercial services

(a) Terms and Conditions for Payments.—Payments under section 3801 of this title for commercial products and commercial services may be made under such terms and conditions as the head of the agency determines are appropriate or customary in the commercial marketplace and are in the best interests of the United States.

(b) Security for Payments.—The head of the agency shall obtain adequate security for such payments. If the security is in the form of a lien in favor of the United States, such lien is paramount to all other liens and is effective immediately upon the first payment, without filing, notice, or other action by the United States.

(c) Limitation on Advance Payments.—Advance payments made under section 3801 of this title for commercial products and commercial services may include payments, in a total amount of not more than 15 percent of the contract price, in advance of any performance of work under the contract.

(d) Nonapplication of Certain Conditions.—The conditions of sections 3803 and 3804 of this title need not be applied if they would be inconsistent, as determined by the head of the agency, with commercial terms and conditions pursuant to this section.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1834(a), (f), Jan. 1, 2021, 134 Stat. 4234, 4236.)

Editorial Notes

Codification

The text of subsec. (f) of section 2307 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1834(f), was based on Pub. L. 103–355, title II, §2001(f), Oct. 13, 1994, 108 Stat. 3302; Pub. L. 115–232, div. A, title VIII, §836(c)(6), Aug. 13, 2018, 132 Stat. 1866.

Amendments

2021—Pub. L. 116–283, §1834(f)(1)(A), transferred subsec. (f) of section 2307 of this title to this section and struck out subsec. (f) designation and heading "Conditions for Payments for Commercial Products and Commercial Services" at beginning.

Subsec. (a). Pub. L. 116–283, §1834(f)(1)(B), (4), after transfer of section 2307(f) of this title to this section, redesignated par. (1) as subsec. (a), inserted heading, and substituted "section 3801 of this title" for "subsection (a)".

Subsec. (b). Pub. L. 116–283, §1834(f)(4), inserted heading.

Pub. L. 116–283, §1834(f)(2), which directed the designation of "the second sentence of subsection (a) as subsection (b)", was executed by designating the second and third sentences of subsec. (a) as (b), to reflect the probable intent of Congress.

Subsec. (c). Pub. L. 116–283, §1834(f)(1)(B), (5), after transfer of section 2307(f) of this title to this section, redesignated par. (2) as subsec. (c), inserted heading, and substituted "section 3801 of this title" for "subsection (a)".

Subsec. (d). Pub. L. 116–283, §1834(f)(1)(B), (6), after transfer of section 2307(f) of this title to this section, redesignated par. (3) as subsec. (d), inserted heading, and substituted "sections 3803 and 3804 of this title" for "subsections (d) and (e)" and "this section" for "paragraphs (1) and (2)".

Statutory Notes and Related Subsidiaries

Effective Date

§3806. Action in case of fraud

(a) Remedy Coordination Official Defined.—In this section, the term "remedy coordination official", with respect to an agency, means the person or entity in that agency who coordinates within that agency the administration of criminal, civil, administrative, and contractual remedies resulting from investigations of fraud or corruption related to procurement activities.

(b) Recommendation to Reduce or Suspend Payments.—In any case in which the remedy coordination official of an agency finds that there is substantial evidence that the request of a contractor for advance, partial, or progress payment under a contract awarded by that agency is based on fraud, the remedy coordination official shall recommend that the head of the agency reduce or suspend further payments to such contractor.

(c) Reduction or Suspension of Payments.—The head of an agency receiving a recommendation under subsection (b) in the case of a contractor's request for payment under a contract shall determine whether there is substantial evidence that the request is based on fraud. Upon making such a determination, the agency head may reduce or suspend further payments to the contractor under such contract.

(d) Extent of Reduction or Suspension.—The extent of any reduction or suspension of payments by the head of an agency under subsection (c) on the basis of fraud shall be reasonably commensurate with the anticipated loss to the United States resulting from the fraud.

(e) Written Justification.—A written justification for each decision of the head of an agency whether to reduce or suspend payments under subsection (c) and for each recommendation received by such agency head in connection with such decision shall be prepared and be retained in the files of such agency.

(f) Notice.—The head of an agency shall prescribe procedures to ensure that, before such agency head decides to reduce or suspend payments in the case of a contractor under subsection (c), the contractor is afforded notice of the proposed reduction or suspension and an opportunity to submit matters to the head of the agency in response to such proposed reduction or suspension.

(g) Review.—Not later than 180 days after the date on which the head of an agency reduces or suspends payments to a contractor under subsection (c), the remedy coordination official of such agency shall—

(1) review the determination of fraud on which the reduction or suspension is based; and

(2) transmit a recommendation to the head of such agency whether the suspension or reduction should continue.

(h) Annual Report.—The head of an agency shall prepare for each year a report containing the recommendations made by the remedy coordination official of that agency to reduce or suspend payments under subsection (c), the actions taken on the recommendations and the reasons for such actions, and an assessment of the effects of such actions on the Federal Government. The Secretary of each military department shall transmit the annual report of such department to the Secretary of Defense. Each such report shall be available to any member of Congress upon request.

(i) Restriction on Delegation.—The head of an agency may not delegate responsibilities under this section to any person in a position below level IV of the Executive Schedule.

(j) Inapplicability to Coast Guard.—This section applies to the agencies named in paragraphs (1), (2), (3), (4), and (6) of section 3063 of this title.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1834(a), (g), Jan. 1, 2021, 134 Stat. 4234, 4237.)

Editorial Notes

References in Text

Level IV of the Executive Schedule, referred to in subsec. (i), is set out in section 5315 of Title 5, Government Organization and Employees.

Codification

The text of subsec. (i) of section 2307 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1834(g), was based on Pub. L. 101–510, div. A, title VIII, §836(a), Nov. 5, 1990, 104 Stat. 1615; Pub. L. 102–25, title VII, §701(j)(2)(A), Apr. 6, 1991, 105 Stat. 116; Pub. L. 102–484, div. A, title X, §1052(24), Oct. 23, 1992, 106 Stat. 2500; Pub. L. 103–355, title II, §2001(a)(7), Oct. 13, 1994, 108 Stat. 3301; Pub. L. 105–85, div. A, title VIII, §802(1), Nov. 18, 1997, 111 Stat. 1831; Pub. L. 106–391, title III, §306, Oct. 30, 2000, 114 Stat. 1592.

Amendments

2021—Pub. L. 116–283, §1834(g)(1), (2), (11), transferred subsec. (i) of section 2307 of this title to this section, struck out subsec. (i) designation and heading "Action in Case of Fraud" at beginning, and redesignated par. (10) as subsec. (a), pars. (1) to (7) as subsecs. (b) to (h), respectively, and pars. (9) and (8) as subsecs. (i) and (j), respectively.

Subsec. (a). Pub. L. 116–283, §1834(g)(3), inserted heading and substituted "this section" for "this subsection".

Subsec. (b). Pub. L. 116–283, §1834(g)(4), inserted heading.

Subsec. (c). Pub. L. 116–283, §1834(g)(5), inserted heading and substituted "subsection (b)" for "paragraph (1)".

Subsec. (d). Pub. L. 116–283, §1834(g)(6), inserted heading and substituted "subsection (c)" for "paragraph (2)".

Subsec. (e). Pub. L. 116–283, §1834(g)(7), inserted heading and substituted "subsection (c)" for "paragraph (2)".

Subsec. (f). Pub. L. 116–283, §1834(g)(8), inserted heading and substituted "subsection (c)" for "paragraph (2)".

Subsec. (g). Pub. L. 116–283, §1834(g)(9), inserted heading, substituted "subsection (c)" for "paragraph (2)" in introductory provisions, and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively.

Subsec. (h). Pub. L. 116–283, §1834(g)(10), inserted heading and substituted "subsection (c)" for "paragraph (2)".

Subsec. (i). Pub. L. 116–283, §1834(g)(12), inserted heading and substituted "this section" for "this subsection".

Subsec. (j). Pub. L. 116–283, §1834(g)(13), inserted heading and substituted "section applies" for "subsection applies" and "section 3063" for "section 2303(a)".

Statutory Notes and Related Subsidiaries

Effective Date

§3807. Vesting of title in the United States

If a contract paid by a method authorized under section 3801(a) of this title provides for title to property to vest in the United States, the title to the property shall vest in accordance with the terms of the contract, regardless of any security interest in the property that is asserted before or after the contract is entered into.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1834(a), (h), Jan. 1, 2021, 134 Stat. 4234, 4239; Pub. L. 117–81, div. A, title XVII, §1701(b)(13), Dec. 27, 2021, 135 Stat. 2134.)

Editorial Notes

Codification

The text of subsec. (h) of section 2307 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1834(h), was based on Pub. L. 105–85, div. A, title VIII, §802(2), Nov. 18, 1997, 111 Stat. 1831.

Amendments

2021—Pub. L. 116–283, §1834(h), as amended by Pub. L. 117–81, §1701(b)(13), transferred subsec. (h) of section 2307 of this title to this section, struck out subsec. (h) designation and heading "Vesting of Title in the United States" at beginning, and substituted "section 3801(a) of this title" for "subsection (a)(1)".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

§3808. Certain Navy contracts

(a) Repair, Maintenance, or Overhaul of Naval Vessels: Rate for Progress Payments.—The Secretary of the Navy shall provide that the rate for progress payments on any contract awarded by the Secretary for repair, maintenance, or overhaul of a naval vessel shall be not less than—

(1) 95 percent, in the case of a firm considered to be a small business; and

(2) 90 percent, in the case of any other firm.

(b) Authority to Advance Funds for Immediate Salvage Operations.—The Secretary of the Navy may advance to private salvage companies such funds as the Secretary considers necessary to provide for the immediate financing of salvage operations. Advances under this subsection shall be made on terms that the Secretary considers adequate for the protection of the United States.

(c) Security for Construction and Conversion of Naval Vessels.—The Secretary of the Navy shall provide, in each contract for construction or conversion of a naval vessel, that, when partial, progress, or other payments are made under such contract, the United States is secured by a lien upon work in progress and on property acquired for performance of the contract on account of all payments so made. The lien is paramount to all other liens.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1834(a), (i)(1)–(4), as added and amended Pub. L. 117–81, div. A, title XVII, §1701(n)(1)(B), (2), Dec. 27, 2021, 135 Stat. 2145.)

Editorial Notes

Codification

The text of subsec. (g) of section 2307 of this title, which was transferred to this section and amended by Pub. L. 116–283, §1834(i)(1)–(4), as added by Pub. L. 117–81, §1701(n)(2), was based on Pub. L. 103–355, title II, §2001(g), Oct. 13, 1994, 108 Stat. 3302.

Prior Provisions

Prior sections 3811 to 3813 were repealed by Pub. L. 90–235, §3(a)(2), (b)(1), Jan. 2, 1968, 81 Stat. 757, 758.

Section 3811, act Aug. 10, 1956, ch. 1041, 70A Stat. 220, provided for discharge of enlisted members of Army and limitations thereon, and for issuance of discharge certificates. See section 1169 of this title.

Section 3812, act Aug. 1956, ch. 1041, 70A Stat. 220, provided for the discharge of members of the Army enlisted during war or emergency. See section 1172 of this title.

Section 3813, act Aug. 10, 1956, ch. 1041, 70A Stat. 220, provided for dependency discharges for enlisted members of the Army.

A prior section 3814, act Aug. 10, 1956, ch. 1041, 70A Stat. 220, authorized Secretary of the Army to discharge a regular commissioned officer who has less than three years of continuous service as a commissioned officer therein, provided that such officer not be dismissed because of his marriage, unless marriage occurred within one year after date of his original appointment, prior to repeal by Pub. L. 96–513, title II, §214, title VII, §701, Dec. 12, 1980, 94 Stat. 2885, 2955, effective Sept. 15, 1981. See section 630 of this title.

A prior section 3814a, added Pub. L. 93–558, §1, Dec. 30, 1974, 88 Stat. 1793, related to discharge, during a reduction in force, of regular commissioned officers, second lieutenants, first lieutenants, and captains, expired three years after its effective date, Dec. 30, 1974, in accordance with section 2 of Pub. L. 93–558, and was repealed by Pub. L. 103–337, div. A, title XVI, §§1629(a)(2), 1691(b)(1), Oct. 5, 1994, 108 Stat. 2963, 3026, effective Oct. 1, 1996.

Prior sections 3815 and 3816 were repealed by Pub. L. 90–235, §3(a)(2), (b)(1), Jan. 2, 1968, 81 Stat. 757, 758.

Section 3815, act Aug. 10, 1956, ch. 1041, 70A Stat. 220, provided for resignation of regular enlisted members of Army enlisted on a career basis and limitations thereon.

Section 3816, act Aug. 10, 1956, ch. 1041, 70A Stat. 221, provided for minority discharges for regular enlisted members of Army. See section 1170 of this title.

A prior section 3818, acts Aug. 10, 1956, ch. 1041, 70A Stat. 221; Oct. 20, 1978, Pub. L. 95–485, title VIII, §820(g), 92 Stat. 1627, authorized the Secretary of the Army to terminate appointment of a female commissioned officer of Regular Army, other than by dismissal, under regulations prescribed by President, or to terminate the appointment of a female warrant officer or enlistment of a female member of Regular Army by discharge from the Army, prior to repeal by Pub. L. 96–513, title II, §236, title VII, §701, Dec. 12, 1980, 94 Stat. 2887, 2955, effective Sept. 15, 1981.

Prior sections 3819 and 3820 were repealed by Pub. L. 103–337, div. A, title XVI, §§1629(a)(2), 1691(b)(1), Oct. 5, 1994, 108 Stat. 2963, 3026, effective Oct. 1, 1996.

Section 3819, added Pub. L. 85–861, §1(93)(A), Sept. 2, 1958, 72 Stat. 1482; amended Pub. L. 98–525, title V, §528(b), Oct. 19, 1984, 98 Stat. 2526, related to discharge of Army Reserve officers for failure of promotion to first lieutenant. See section 14503 of this title.

Section 3820, acts Aug. 10, 1956, ch. 1041, 70A Stat. 221; Sept. 2, 1958, Pub. L. 85–861, §1(93)(B), 72 Stat. 1482, related to discharge and withdrawal of Federal recognition of officers of Army National Guard of United States absent without leave. See section 14907 of this title.

Amendments

2021—Pub. L. 116–283, §1834(i)(1), as added by Pub. L. 117–81, §1701(n)(2), transferred subsec. (g) of section 2307 of this title to this section, struck out subsec. (g) designation and heading "Certain Navy Contracts" at beginning, and redesignated pars. (1) to (3) as subsecs. (a) to (c), respectively.

Subsec. (a). Pub. L. 116–283, §1834(i)(2), as added by Pub. L. 117–81, §1701(n)(2), inserted heading and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively.

Subsec. (b). Pub. L. 116–283, §1834(i)(3), as added by Pub. L. 117–81, §1701(n)(2), inserted heading and substituted "this subsection" for "this paragraph" in second sentence.

Subsec. (c). Pub. L. 116–283, §1834(i)(4), as added by Pub. L. 117–81, §1701(n)(2), inserted heading.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

CHAPTER 279—CONTRACTOR AUDITS AND ACCOUNTING

Sec.

3841.

Examination of records of contractor.

3842.

Performance of incurred cost audits.

3843.

[Reserved].

3844.

[Reserved].

3845.

Contractor inventory accounting systems: standards.

3846.

[Reserved].

3847.

Defense Contract Audit Agency: annual report.

3848.

Defense audit agencies: Small Business Ombudsmen.

Editorial Notes

Prior Provisions

A prior chapter 279 "CONTRACTOR AUDITS AND ACCOUNTING", as added by Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1828, and consisting of reserved section 3841, was repealed by Pub. L. 116–283, div. A, title XVIII, §1835(a), Jan. 1, 2021, 134 Stat. 4239.

Amendments

2021—Pub. L. 117–81, div. A, title XVII, §1701(i)(7)(A), Dec. 27, 2021, 135 Stat. 2142, amended Pub. L. 116–283, div. A, title XVIII, §1835(a), Jan. 1, 2021, 134 Stat. 4239, which added this analysis, by substituting "[Reserved]" for "Contractor internal audit reports: Department of Defense access to, use of, and safeguards and protections for" in item 3843, for "Contractor business systems" in item 3844, and for "Defense Contract Audit Agency: legal resources and expertise" in item 3846.

Statutory Notes and Related Subsidiaries

Contractor Business Systems

Pub. L. 115–232, div. A, title VIII, §824(b), Aug. 13, 2018, 132 Stat. 1856, provided that: "Not later than 120 days after the date of the enactment of this Act [Aug. 13, 2018], the Secretary of Defense shall revise the Defense Federal Acquisition Regulation Supplement to conform with the amendments to section 893 of the Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (Public Law 111–383; 10 U.S.C. 2302 note [now 10 U.S.C. 3841 note prec.]) made by this section."

Pub. L. 111–383, div. A, title VIII, §893, Jan. 7, 2011, 124 Stat. 4311, as amended by Pub. L. 112–81, div. A, title VIII, §816, Dec. 31, 2011, 125 Stat. 1493; Pub. L. 113–291, div. A, title X, §1071(b)(1)(C), Dec. 19, 2014, 128 Stat. 3505; Pub. L. 114–328, div. A, title VIII, §893, Dec. 23, 2016, 130 Stat. 2324; Pub. L. 115–91, div. A, title X, §1081(d)(8), Dec. 12, 2017, 131 Stat. 1600; Pub. L. 115–232, div. A, title VIII, §824(a), Aug. 13, 2018, 132 Stat. 1856; Pub. L. 116–283, div. A, title VIII, §806, Jan. 1, 2021, 134 Stat. 3742, provided that:

"(a) Improvement Program.—The Secretary of Defense shall develop and initiate a program for the improvement of contractor business systems to ensure that such systems provide timely, reliable information for the management of Department of Defense programs by the contractor and by the Department.

"(b) Approval or Disapproval of Business Systems.—The program developed pursuant to subsection (a) shall—

"(1) include clear and specific business system requirements that are identified and made publicly available for each type of contractor business system covered by the program;

"(2) establish a process for reviewing contractor business systems and identifying material weaknesses in such systems;

"(3) identify officials of the Department of Defense who are responsible for the approval or disapproval of contractor business systems;

"(4) provide for the approval of any contractor business system that does not have a material weakness; and

"(5) provide for—

"(A) the disapproval of any contractor business system that has a material weakness; and

"(B) reduced reliance on, and enhanced scrutiny of, data provided by a contractor business system that has been disapproved.

"(c) Review by Third-party Independent Auditors.—The review process for contractor business systems pursuant to subsection (b)(2) shall—

"(1) if a registered public accounting firm attests to the internal control assessment of a contractor, pursuant to section 404(b) of the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7262(b)), allow the contractor, subject to paragraph (3), to submit certified documentation from such registered public accounting firm that the contractor business systems of the contractor meet the business system requirements referred to in subsection (b)(1) and to thereby eliminate the need for further review of the contractor business systems by the Secretary of Defense;

"(2) limit the review, subject to paragraph (3), of the contractor business systems of a contractor that is not a covered contractor to confirming that the contractor uses the same contractor business system for its Government and commercial work and that the outputs of the contractor business system based on statistical sampling are reasonable; and

"(3) allow a milestone decision authority to require a review of a contractor business system of a contractor that submits documentation pursuant to paragraph (1) or that is not a covered contractor after determining in writing that such a review is necessary to appropriately manage contractual risk.

"(d) Remedial Actions.—The program developed pursuant to subsection (a) shall provide the following:

"(1) In the event a contractor business system is disapproved pursuant to subsection (b)(5), appropriate officials of the Department of Defense will be available to work with the contractor to develop a corrective action plan defining specific actions to be taken to address the material weaknesses identified in the system and a schedule for the implementation of such actions.

"(2) An appropriate official of the Department of Defense may withhold up to 10 percent of progress payments, performance-based payments, and interim payments under covered contracts from a covered contractor, as needed to protect the interests of the Department and ensure compliance, if one or more of the contractor business systems of the contractor has been disapproved pursuant to subsection (b)(5) and has not subsequently received approval.

"(3) The amount of funds to be withheld under paragraph (2) shall be reduced if a contractor adopts an effective corrective action plan pursuant to paragraph (1) and is effectively implementing such plan.

"(e) Guidance and Training.—The program developed pursuant to subsection (a) shall provide guidance and training to appropriate government officials on the data that is produced by contractor business systems and the manner in which such data should be used to effectively manage Department of Defense programs.

"(f) Rule of Construction.—Nothing in this section shall be construed to prohibit an official of the Department of Defense from reviewing, approving, or disapproving a contractor business system pursuant to any applicable law or regulation in force as of the date of the enactment of this Act during the period between the date of the enactment of this Act and the date on which the Secretary implements the requirements of this section with respect to such system.

"(g) Definitions.—In this section:

"(1) The term 'contractor business system' means an accounting system, estimating system, purchasing system, earned value management system, material management and accounting system, or property management system of a contractor.

"(2) The term 'covered contractor' means a contractor that has covered contracts with the United States Government accounting for greater than 1 percent of its total gross revenue, except that the term does not include any contractor that is exempt, under section 1502 of title 41, United States Code, or regulations implementing that section, from using full cost accounting standards established in that section.

"(3) The term 'covered contract' means a contract that is subject to the cost accounting standards promulgated pursuant to section 1502 of title 41, United States Code, that could be affected if the data produced by a contractor business system has a material weakness.

"(4) The term 'material weakness' means a deficiency or combination of deficiencies in the internal control over information in contractor business systems, such that there is a reasonable possibility that a material misstatement of such information will not be prevented, or detected and corrected, on a timely basis. For purposes of this paragraph, a reasonable possibility exists when the likelihood of an event occurring—

"(A) is probable; or

"(B) is more than remote but less than likely.

"(5) The term 'approved purchasing system' has the meaning given the term in section 44.101 of the Federal Acquisition Regulation (or any similar regulation).

"(h) Defense Contract Audit Agency Legal Resources and Expertise.—

"(1) Requirement.—The Secretary of Defense shall ensure that—

"(A) the Defense Contract Audit Agency has sufficient legal resources and expertise to conduct its work in compliance with applicable Department of Defense policies and procedures; and

"(B) such resources and expertise are provided in a manner that is consistent with the audit independence of the Defense Contract Audit Agency.

"(2) Report.—Not later than 180 days after the date of the enactment of this Act, the Secretary shall submit to the Committees on Armed Services of the Senate and the House of Representatives a report on the steps taken to comply with the requirements of this subsection.

"(i) Consent to Subcontract.—If the contractor on a Department of Defense contract requiring a contracting officer's written consent prior to the contractor entering into a subcontract has an approved purchasing system, the contracting officer may not withhold such consent without the written approval of the program manager."

[Pub. L. 115–91, div. A, title X, §1081(d), Dec. 12, 2017, 131 Stat. 1599, provided that the amendment made by section 1081(d)(8) to section 893(c) of Pub. L. 114–328 (which amended section 893 of Pub. L. 111–383, set out above) is effective as of Dec. 23, 2016, and as if included in Pub. L. 114–328 as enacted.]

§3841. Examination of records of contractor

(a) Records Defined.—In this section, the term "records" includes books, documents, accounting procedures and practices, and other data, regardless of type and regardless of whether such items are in written form, in the form of computer data, or in any other form.

(b) Agency Authority.—

(1) The head of an agency, acting through an authorized representative, is authorized to inspect the plant and audit the records of—

(A) a contractor performing a cost-reimbursement, incentive, time-and-materials, labor-hour, or price-redeterminable contract, or any combination of such contracts, made by that agency under a chapter 137 legacy provision; and

(B) a subcontractor performing any cost-reimbursement, incentive, time-and-materials, labor-hour, or price-redeterminable subcontract or any combination of such subcontracts under a contract referred to in subparagraph (A).

(2) The head of an agency, acting through an authorized representative, is authorized, for the purpose of evaluating the accuracy, completeness, and currency of certified cost or pricing data required to be submitted pursuant to chapter 271 of this title with respect to a contract or subcontract, to examine all records of the contractor or subcontractor related to—

(A) the proposal for the contract or subcontract;

(B) the discussions conducted on the proposal;

(D) performance of the contract or subcontract.

(1) Authority to require the production of records.—The Director of the Defense Contract Audit Agency (or any successor agency) may require by subpoena the production of any records of a contractor that the Secretary of Defense is authorized to audit or examine under subsection (b).

(2) Enforcement of subpoena.—Any such subpoena, in the case of contumacy or refusal to obey, shall be enforceable by order of an appropriate United States district court.

(3) Authority not delegable.—The authority provided by paragraph (1) may not be redelegated.

(d) Comptroller General Authority.—

(1) In general.—Except as provided in paragraph (2), each contract awarded after using procedures other than sealed bid procedures shall provide that the Comptroller General and his representatives are authorized to examine any records of the contractor, or any of its subcontractors, that directly pertain to, and involve transactions relating to, the contract or subcontract and to interview any current employee regarding such transactions.

(2) Exception for foreign contractor or subcontractor.—Paragraph (1) does not apply to a contract or subcontract with a foreign contractor or foreign subcontractor if the head of the agency concerned determines, with the concurrence of the Comptroller General or his designee, that the application of that paragraph to the contract or subcontract would not be in the public interest. However, the concurrence of the Comptroller General or his designee is not required—

(A) where the contractor or subcontractor is a foreign government or agency thereof or is precluded by the laws of the country involved from making its records available for examination; and

(B) where the head of the agency determines, after taking into account the price and availability of the property and services from United States sources, that the public interest would be best served by not applying paragraph (1).

(3) Additional records not required.—Paragraph (1) may not be construed to require a contractor or subcontractor to create or maintain any record that the contractor or subcontractor does not maintain in the ordinary course of business or pursuant to another provision of law.

(e) Limitation on Audits Relating to Indirect Costs.—The head of an agency may not perform an audit of indirect costs under a contract, subcontract, or modification before or after entering into the contract, subcontract, or modification in any case in which the contracting officer determines that the objectives of the audit can reasonably be met by accepting the results of an audit that was conducted by any other department or agency of the Federal Government within one year preceding the date of the contracting officer's determination.

(f) Limitation.—The authority of the head of an agency under subsection (b), and the authority of the Comptroller General under subsection (d), with respect to a contract or subcontract shall expire three years after final payment under such contract or subcontract.

(g) Inapplicability to Certain Contracts.—This section does not apply to the following contracts:

(1) Contracts for utility services at rates not exceeding those established to apply uniformly to the public, plus any applicable reasonable connection charge.

(2) A contract or subcontract that is for an amount not greater than the simplified acquisition threshold.

(h) Forms of Original Record Storage.—Nothing in this section shall be construed to preclude a contractor from duplicating or storing original records in electronic form.

(i) Use of Images of Original Records.—The head of an agency shall not require a contractor or subcontractor to provide original records in an audit carried out pursuant to this section if the contractor or subcontractor provides photographic or electronic images of the original records and meets the following requirements:

(1) The contractor or subcontractor has established procedures to ensure that the imaging process preserves the integrity, reliability, and security of the original records.

(2) The contractor or subcontractor maintains an effective indexing system to permit timely and convenient access to the imaged records.

(3) The contractor or subcontractor retains the original records for a minimum of one year after imaging to permit periodic validation of the imaging systems.

(Added and amended Pub. L. 116–283, div. A, title XVIII, §1835(a), (b), Jan. 1, 2021, 134 Stat. 4239.)

Editorial Notes

Codification

The text of subsecs. (a), (e), (g), (h), and (i) of section 2313 of this title, which were transferred to this section, redesignated as subsecs. (b), (f), (h), (i), and (j), respectively, and amended by Pub. L. 116–283, §1835(b)(1)–(3), (6), was based on Pub. L. 103–355, title II, §2201(a)(1), Oct. 13, 1994, 108 Stat. 3316, which amended section 2313 generally.

The text of subsec. (b) of section 2313 of this title, which was transferred to this section, redesignated as subsec. (c), and amended by Pub. L. 116–283, §1835(b)(1), (4), was based on Pub. L. 103–355, title II, §2201(a)(1), Oct. 13, 1994, 108 Stat. 3316; Pub. L. 104–106, div. A, title XV, §1502(a)(1), Feb. 10, 1996, 110 Stat. 502; Pub. L. 106–65, div. A, title X, §1032(a)(2), Oct. 5, 1999, 113 Stat. 751.

The text of subsec. (c) of section 2313 of this title, which was transferred to this section, redesignated as subsec. (d), and amended by Pub. L. 116–283, §1835(b)(1), (5), was based on Pub. L. 103–355, title II, §2201(a)(1), Oct. 13, 1994, 108 Stat. 3317; Pub. L. 110–417, [div. A], title VIII, §871(b), Oct. 14, 2008, 122 Stat. 4555.

The text of subsec. (d) of section 2313 of this title, which was transferred to this section and redesignated as subsec. (e) by Pub. L. 116–283, §1835(b)(1), was based on Pub. L. 104–201, div. A, title VIII, §808(a), Sept. 23, 1996, 110 Stat. 2607, which amended subsec. (d) generally.

The text of subsec. (f) of section 2313 of this title, which was transferred to this section and redesignated as subsec. (e) by Pub. L. 116–283, §1835(b)(1), was based on Pub. L. 103–355, title II, §2201(a)(1), title IV, §4102(c), Oct. 13, 1994, 108 Stat. 3317, 3340.

Prior Provisions

A prior section 3841, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1483, related to separation or transfer to retired reserve of reserve nurses and medical specialists at age 50 if in a reserve grade below major, prior to repeal by Pub. L. 86–559, §1(22), June 30, 1960, 74 Stat. 271.

Amendments

2021—Subsec. (a). Pub. L. 116–283, §1835(b)(2), redesignated subsec. (i) of section 2313 of this title as subsec. (a) of this section.

Subsec. (b). Pub. L. 116–283, §1835(b)(1), (3), redesignated subsec. (a) of section 2313 of this title as subsec. (b) of this section, realigned margins of pars. (1) and (2), and substituted "made by that agency under a chapter 137 legacy provision" for "made by that agency under this chapter" in par. (1)(A) and "chapter 271" for "section 2306a" in par. (2).

Subsec. (c). Pub. L. 116–283, §1835(b)(1), (4), redesignated subsec. (b) of section 2313 of this title as subsec. (c) of this section, inserted heading and substituted "subsection (b)" for "subsection (a)" in par. (1), and inserted headings and realigned margins of pars. (2) and (3).

Subsec. (d). Pub. L. 116–283, §1835(b)(1), (5), redesignated subsec. (c) of section 2313 of this title as subsec. (d) of this section and inserted headings and realigned margins of pars. (1) to (3).

Subsec. (e). Pub. L. 116–283, §1835(b)(1), redesignated subsec. (d) of section 2313 of this title as subsec. (e) of this section.

Subsec. (f). Pub. L. 116–283, §1835(b)(1), (6), redesignated subsec. (e) of section 2313 of this title as subsec. (f) of this section and substituted "subsection (b)" for "subsection (a)" and "subsection (d)" for "subsection (c)".

Subsecs. (g) to (i). Pub. L. 116–283, §1835(b)(1), redesignated subsecs. (f) to (h) of section 2313 of this title as subsecs. (g) to (i), respectively, of this section.

Statutory Notes and Related Subsidiaries

Effective Date

Exception From Records Examination Requirement

Requirements under subsecs. (b)(2)(A)–(C) and (c) of this section (former subsecs. (a)(2)(A)–(C) and (b) of section 2313 of this title) not applicable to certain contracts valued at less than $7,500,000 awarded to small business or nontraditional defense contractors, with certain exceptions, see section 873(b) of Pub. L. 114–92, set out in a Pilot Program for Streamlining Awards for Innovative Technology Projects note under section 3702 of this title.

Department of Defense Access to, Use of, and Safeguards and Protections for Contractor Internal Audit Reports

Pub. L. 112–239, div. A, title VIII, §832, Jan. 2, 2013, 126 Stat. 1844, provided that:

"(a) Revised Guidance Required.—Not later than 180 days after the date of the enactment of this Act [Jan. 2, 2013], the Director of the Defense Contract Audit Agency shall revise guidance on access to defense contractor internal audit reports (including the Contract Audit Manual) to incorporate the requirements of this section.

"(b) Documentation Requirements.—The revised guidance shall ensure that requests for access to defense contractor internal audit reports are appropriately documented. The required documentation shall include, at a minimum, the following:

"(1) Written determination that access to such reports is necessary to complete required evaluations of contractor business systems.

"(2) A copy of any request from the Defense Contract Audit Agency to a contractor for access to such reports.

"(3) A record of response received from the contractor, including the contractor's rationale or justification if access to requested reports was not granted.

"(b) [sic] Safeguards and Protections.—The revised guidance shall include appropriate safeguards and protections to ensure that contractor internal audit reports cannot be used by the Defense Contract Audit Agency for any purpose other than evaluating and testing the efficacy of contractor internal controls and the reliability of associated contractor business systems.

"(c) Risk-based Auditing.—A determination by the Defense Contract Audit Agency that a contractor has a sound system of internal controls shall provide the basis for increased reliance on contractor business systems or a reduced level of testing with regard to specific audits, as appropriate. Internal audit reports provided by a contractor pursuant to this section may be considered in determining whether or not a contractor has a sound system of internal controls, but shall not be the sole basis for such a determination.

"(d) Comptroller General Review.—Not later than one year after the date of the enactment of this Act, the Comptroller General of the United States shall initiate a review of the documentation required by subsection (a). Not later than 90 days after completion of the review, the Comptroller General shall submit to the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] a report on the results of the review, with findings and recommendations for improving the audit processes of the Defense Contract Audit Agency."

Executive Documents

Exemption of Functions

Functions with respect to purchases authorized to be made outside limits of United States or District of Columbia under Foreign Assistance Act of 1961, as amended, as exempt, see Ex. Ord. No. 11223, May 12, 1965, 30 F.R. 6635, set out as a note under section 2393 of Title 22, Foreign Relations and Intercourse.

Foreign Contractors

Secretaries of Defense, Army, Navy, or Air Force, or their designees, to determine, prior to exercising authority provided in amendment of this section by Pub. L. 89–607 to exempt certain contracts with foreign contractors from requirement of an examination-of-records clause, that all reasonable efforts have been made to include such examination-of-records clause, as required by par. (11) of Part I of Ex. Ord. No. 10789, and that alternate sources of supply are not reasonably available, see par. (11) of Part I of Ex. Ord. No. 10789, Nov. 14, 1958, 23 F.R. 8897, as amended, set out as a note under section 1431 of Title 50, War and National Defense.

§3842. Performance of incurred cost audits

(a) Compliance With Standards of Risk and Materiality.—Not later than October 1, 2020, the Secretary of Defense shall comply with commercially accepted standards of risk and materiality in the performance of each incurred cost audit of costs associated with a contract of the Department of Defense.

(b) Conditions for the Use of Qualified Auditors to Perform Incurred Cost Audits.—(1) To support the need of the Department of Defense for timely and effective incurred cost audits, and to ensure that the Defense Contract Audit Agency is able to allocate resources to higher-risk and more complex audits, the Secretary of Defense shall use qualified private auditors to perform a sufficient number of incurred cost audits of contracts of the Department of Defense to—

(A) eliminate, by October 1, 2020, any backlog of incurred cost audits of the Defense Contract Audit Agency;

(B) ensure that incurred cost audits are completed not later than one year after the date of receipt of a qualified incurred cost submission;

(C) maintain an appropriate mix of Government and private sector capacity to meet the current and future needs of the Department of Defense for the performance of incurred cost audits;

(D) ensure that qualified private auditors perform incurred cost audits on an ongoing basis to improve the efficiency and effectiveness of the performance of incurred cost audits; and

(E) limit multiyear auditing to ensure that multiyear auditing is conducted only—

(i) to address outstanding incurred cost audits for which a qualified incurred cost submission was submitted to the Defense Contract Audit Agency more than 12 months before the date of the enactment of this section; or

(ii) when the contractor being audited submits a written request, including a justification for the use of multiyear auditing, to the Under Secretary of Defense (Comptroller).

(2) The Secretary of Defense shall consult with Federal agencies that have awarded contracts or task orders to qualified private auditors to ensure that the Department of Defense is using, as appropriate, best practices relating to contracting with qualified private auditors.

(3) The Secretary of Defense shall ensure that a qualified private auditor performing an incurred cost audit under this section—

(A) has no conflict of interest in performing such an audit, as defined by generally accepted government auditing standards;

(B) possesses the necessary independence to perform such an audit, as defined by generally accepted government auditing standards;

(D) accesses and uses proprietary or nonpublic data furnished to the qualified private auditor only for the purposes stated in the contract;

(E) takes all reasonable steps to protect proprietary and nonpublic data furnished during the audit; and

(F) does not use proprietary or nonpublic data provided to the qualified private auditor under the authority of this section to compete for Government or nongovernment contracts.

(c) Procedures for the Use of Qualified Private Auditors.—(1) Not later than October 1, 2018, the Secretary of Defense shall submit to the congressional defense committees a plan to implement the requirements of subsection (b). Such plan shall include, at a minimum—

(A) a description of the incurred cost audits that the Secretary determines are appropriate to be conducted by qualified private auditors, including the approximate number and dollar value of such incurred cost audits;

(B) an estimate of the number and dollar value of incurred cost audits to be conducted by qualified private auditors for each of the fiscal years 2019 through 2025 necessary to meet the requirements of subsection (b); and

(2) Not later than April 1, 2019, the Secretary of Defense or a Federal department or agency authorized by the Secretary shall award a contract or issue a task order under an existing contract to two or more qualified private auditors to perform incurred cost audits of costs associated with contracts of the Department of Defense. The Defense Contract Management Agency or a contract administration office of a military department shall use a contract or a task order awarded or issued pursuant to this paragraph for the performance of an incurred cost audit, if doing so will assist the Secretary in meeting the requirements in subsection (b).

(3) To improve the quality of incurred cost audits and reduce duplication of performance of such audits, the Secretary of Defense may provide a qualified private auditor with information on past or ongoing audit results or other relevant information on the entities the qualified private auditor is auditing.

(4) The Secretary of Defense shall consider the results of an incurred cost audit performed under this section without regard to whether the Defense Contract Audit Agency or a qualified private auditor performed the audit.

(5) The contracting officer for a contract that is the subject of an incurred cost audit shall have the sole discretion to determine what action should be taken based on an audit finding on direct costs of the contract.

(d) Qualified Private Auditor Requirements.—(1) A qualified private auditor awarded a contract or issued a task order under subsection (c)(2) shall conduct an incurred cost audit in accordance with the generally accepted government auditing standards.

(2) A qualified private auditor awarded a contract or issued a task order under subsection (c)(2) shall develop and maintain complete and accurate working papers on each incurred cost audit. All working papers and reports on the incurred cost audit prepared by such qualified private auditor shall be the property of the Department of Defense, except that the qualified private auditor may retain a complete copy of all working papers to support such reports made pursuant to this section.

(3) A breach of contract by a qualified private auditor with respect to use of proprietary or nonpublic data may subject the qualified private auditor to—

(A) criminal, civil, administrative, and contractual actions for penalties, damages, and other appropriate remedies by the United States; and

(B) civil actions for damages and other appropriate remedies by the contractor or subcontractor whose data are affected by the breach.

(e) Peer Review.—(1) Effective October 1, 2022, the Defense Contract Audit Agency may issue unqualified audit findings for an incurred cost audit only if the Defense Contract Audit Agency is peer reviewed by a commercial auditor and passes such peer review. Such peer review shall be conducted in accordance with the peer review requirements of generally accepted government auditing standards, including the requirements related to frequency of peer reviews, and shall be deemed to meet the requirements of the Defense Contract Audit Agency for a peer review under such standards.

(2) Not later than October 1, 2019, the Secretary of Defense shall provide to the Committees on Armed Services of the Senate and the House of Representatives an update on the process of securing a commercial auditor to perform the peer review referred to in paragraph (1).

(f) Numeric Materiality Standards for Incurred Cost Audits.—(1) Not later than October 1, 2020, the Department of Defense shall implement numeric materiality standards for incurred cost audits to be used by auditors that are consistent with commercially accepted standards of risk and materiality.

(2) Not later than October 1, 2019, the Secretary of Defense shall submit to the congressional defense committees a report containing proposed numeric materiality standards required under paragraph (1). In developing such standards, the Secretary shall consult with commercial auditors that conduct incurred cost audits, the advisory panel authorized under section 809 of the National Defense Authorization Act for Fiscal Year 2016 (Public Law 114–92; 129 Stat. 889), and other governmental and nongovernmental entities with relevant expertise.

(g) Timeliness of Incurred Cost Audits.—(1) The Secretary of Defense shall ensure that all incurred cost audits performed by qualified private auditors or the Defense Contract Audit Agency are performed in a timely manner.

(2) The Secretary of Defense shall notify a contractor of the Department of Defense within 60 days after receipt of an incurred cost submission from the contractor whether the submission is a qualified incurred cost submission.

(3) With respect to qualified incurred cost submissions received on or after the date of the enactment of this section, audit findings shall be issued for an incurred cost audit not later than one year after the date of receipt of such qualified incurred cost submission.

(4) Not later than October 1, 2020, and subject to paragraph (5), if audit findings are not issued within one year after the date of receipt of a qualified incurred cost submission, the audit shall be considered to be complete and no additional audit work shall be conducted.

(5) The Under Secretary of Defense (Comptroller) may waive the requirements of paragraph (4) on a case-by-case basis if the Director of the Defense Contract Audit Agency submits a written request. The Director of the Defense Contract Audit Agency shall include in the report required under section 3847 of this title the total number of waivers issued and the reasons for issuing each such waiver.

(h) Review of Audit Performance.—Not later than April 1, 2025, the Comptroller General of the United States shall submit to the congressional defense committees a report that evaluates for the period beginning on October 1, 2019, and ending on August 31, 2023—

(1) the timeliness, individual cost, and quality of incurred cost audits, set forth separately by incurred cost audits performed by the Defense Contract Audit Agency and by qualified private auditors;

(2) the cost to contractors of the Department of Defense for incurred cost audits, set forth separately by incurred cost audits performed by the Defense Contract Audit Agency and by qualified private auditors;

(3) the effect, if any, on other types of audits conducted by the Defense Contract Audit Agency that results from incurred cost audits conducted by qualified private auditors; and

(4) the capability and capacity of qualified private auditors to conduct incurred cost audits for the Department of Defense.

(i) Definitions.—In this section:

(1) The term "commercial auditor" means a private entity engaged in the business of performing audits.

(2) The term "incurred cost audit" means an audit of charges to the Government by a contractor under a flexibly priced contract.

(3) The term "flexibly priced contract" has the meaning given the term "flexibly-priced contracts and subcontracts" in part 30 of the Federal Acquisition Regulation (section 30.001 of title 48, Code of Federal Regulations).

(4) The term "generally accepted government auditing standards" means the generally accepted government auditing standards of the Comptroller General of the United States.

(5) The term "numeric materiality standard" means a dollar amount of misstatements, including omissions, contained in an incurred cost audit that would be material if the misstatements, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the Government made on the basis of the incurred cost audit.

(6) The term "qualified incurred cost submission" means a submission by a contractor of costs incurred under a flexibly priced contract that has been qualified by the Department of Defense as sufficient to conduct an incurred cost audit.

(7) The term "qualified private auditor" means a commercial auditor—

(A) that performs audits in accordance with generally accepted government auditing standards; and

(B) that has received a passing peer review rating, as defined by generally accepted government auditing standards.

(Added Pub. L. 115–91, div. A, title VIII, §803(a), Dec. 12, 2017, 131 Stat. 1451, §2313b; amended Pub. L. 115–232, div. A, title X, §1081(a)(19), Aug. 13, 2018, 132 Stat. 1984; Pub. L. 116–92, div. A, title XVII, §1731(a)(41), Dec. 20, 2019, 133 Stat. 1814; renumbered §3842 and amended Pub. L. 116–283, div. A, title XVIII, §1835(c), (d)(1), Jan. 1, 2021, 134 Stat. 4240.)

Editorial Notes

References in Text

The date of the enactment of this section, referred to in subsecs. (b)(1)(E)(i) and (g)(3), is the date of enactment of Pub. L. 115–91, which was approved Dec. 12, 2017.

Section 809 of the National Defense Authorization Act for Fiscal Year 2016, referred to in subsec. (f)(2), is section 809 of Pub. L. 114–92, div. A, title VIII, Nov. 25, 2015, 129 Stat. 889, which relates to the establishment of an advisory panel on streamlining acquisition regulations and is not classified to the Code.

Prior Provisions

A prior section 3842, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1483, related to separation or transfer to Retired Reserve of Reserve nurses and medical specialists at age 55 if in a reserve grade above captain, prior to repeal by Pub. L. 86–559, §1(22), June 30, 1960, 74 Stat. 271.

Amendments

2021—Pub. L. 116–283, §1835(c), renumbered section 2313b of this title as this section.

Subsec. (g)(5). Pub. L. 116–283, §1835(d)(1), substituted "section 3847" for "section 2313a".

2019—Subsec. (d)(1), (2). Pub. L. 116–92 substituted "a task order" for "an task order".

2018—Subsec. (b)(1)(E). Pub. L. 115–232 redesignated cls. (A) and (B) as (i) and (ii), respectively.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

§3843. [Reserved]

(Added Pub. L. 116–283, div. A, title XVIII, §1835(e)(1), Jan. 1, 2021, 134 Stat. 4241; amended Pub. L. 117–81, div. A, title XVII, §1701(i)(7)(B)(i), Dec. 27, 2021, 135 Stat. 2142.)

Editorial Notes

Prior Provisions

A prior section 3843, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1483; amended Pub. L. 86–559, §1(23), June 30, 1960, 74 Stat. 271; Pub. L. 99–145, title XIII, §1303(a)(20)(A), Nov. 8, 1985, 99 Stat. 739, related to transfer or discharge of reserve commissioned officers below grade of major general, prior to repeal by Pub. L. 103–337, div. A, title XVI, §§1629(a)(3), 1691(b)(1), Oct. 5, 1994, 108 Stat. 2963, 3026, effective Oct. 1, 1996. See sections 14509 and 14510 of this title.

Amendments

2021—Pub. L. 117–81, §1701(i)(7)(B)(i), amended Pub. L. 116–283, §1835(e)(1), which enacted this section, by adding section 3843 designation and catchline "[Reserved]" and striking out former section 3843 designation and catchline "Contractor internal audit reports: Department of Defense access to, use of, and safeguards and protections for".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

§3844. [Reserved]

(Added Pub. L. 116–283, div. A, title XVIII, §1835(e)(1), Jan. 1, 2021, 134 Stat. 4241; amended Pub. L. 117–81, div. A, title XVII, §1701(i)(7)(B)(i), Dec. 27, 2021, 135 Stat. 2142.)

Editorial Notes

Prior Provisions

A prior section 3844, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1484; amended Pub. L. 86–559, §1(24), June 30, 1960, 74 Stat. 271, related to transfer or discharge of certain reserve major generals and brigadier generals who are 62 years old, prior to repeal by Pub. L. 103–337, div. A, title XVI, §§1629(a)(3), 1691(b)(1), Oct. 5, 1994, 108 Stat. 2963, 3026, effective Oct. 1, 1996. See section 14511 of this title.

Amendments

2021—Pub. L. 117–81, §1701(i)(7)(B)(i), amended Pub. L. 116–283, §1835(e)(1), which enacted this section, by adding section 3844 designation and catchline "[Reserved]" and striking out former section 3844 designation and catchline "Contractor business systems".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

§3845. Contractor inventory accounting systems: standards

(a) The Secretary of Defense shall prescribe in regulations—

(1) standards for inventory accounting systems used by contractors under contract with the Department of Defense; and

(2) appropriate enforcement requirements with respect to such standards.

(b) The regulations prescribed pursuant to subsection (a) shall not apply to a contract that is for an amount not greater than the simplified acquisition threshold.

(c) The regulations prescribed pursuant to subsection (a) shall not apply to a contract for the purchase of commercial products.

(Added Pub. L. 100–456, div. A, title VIII, §834(a)(1), Sept. 29, 1988, 102 Stat. 2024, §2410b; amended Pub. L. 103–355, title IV, §4102(h), title VIII, §8105(i), Oct. 13, 1994, 108 Stat. 3341, 3393; Pub. L. 104–106, div. D, title XLIII, §4301(a)(1), Feb. 10, 1996, 110 Stat. 656; Pub. L. 104–201, div. A, title X, §1074(b)(3), Sept. 23, 1996, 110 Stat. 2660; Pub. L. 111–350, §5(b)(28), Jan. 4, 2011, 124 Stat. 3845; Pub. L. 115–232, div. A, title VIII, §836(e)(6), Aug. 13, 2018, 132 Stat. 1870; renumbered §3845 and amended Pub. L. 116–283, div. A, title XVIII, §1835(c), (d)(2), Jan. 1, 2021, 134 Stat. 4240.)

Editorial Notes

Prior Provisions

A prior section 3845, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1484; amended Pub. L. 100–456, div. A, title XII, §1234(a)(1), Sept. 29, 1988, 102 Stat. 2059, related to transfer or discharge of certain officers of Army National Guard of United States who are 64 years of age, prior to repeal Pub. L. 103–337, div. A, title XVI, §§1629(a)(3), 1691(b)(1), Oct. 5, 1994, 108 Stat. 2963, 3026, effective Oct. 1, 1996. See section 14512(a) of this title.

Amendments

2021—Pub. L. 116–283, §1835(c), renumbered section 2410b of this title as this section.

Subsec. (c). Pub. L. 116–283, §1835(d)(2), struck out "(as defined in section 103 of title 41)" after "commercial products".

2018—Subsec. (c). Pub. L. 115–232 substituted "commercial products" for "commercial items".

2011—Subsec. (c). Pub. L. 111–350 substituted "section 103 of title 41)" for "section 4(12) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(12)))".

1996—Subsec. (a)(2). Pub. L. 104–106, as amended by Pub. L. 104–201, struck out "certification and" after "appropriate".

1994—Subsecs. (a), (b). Pub. L. 103–355, §4102(h), designated existing provisions as subsec. (a) and added subsec. (b).

Subsec. (c). Pub. L. 103–355, §8105(i), added subsec. (c).

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date of 2018 Amendment

Amendment by Pub. L. 115–232 effective Jan. 1, 2020, subject to a savings provision, see section 836(h) of Pub. L. 115–232, set out as an Effective Date of 2018 Amendment; Savings Provision note under section 453b of Title 6, Domestic Security.

Effective Date of 1996 Amendment

For effective date and applicability of amendment by Pub. L. 104–106, see section 4401 of Pub. L. 104–106, set out as a note under section 2220 of this title.

Effective Date of 1994 Amendment

For effective date and applicability of amendment by Pub. L. 103–355, see section 10001 of Pub. L. 103–355, set out as a note under section 8752 of this title.

Regulations

Pub. L. 100–456, div. A, title VIII, §834(b), Sept. 29, 1988, 102 Stat. 2025, provided that:

"(1) The Secretary of Defense shall prescribe the regulations required by paragraph (1) of section 2410b of title 10, United States Code [now 10 U.S.C. 3845(a)(1)], as added by subsection (a), not later than 30 days after the date of the enactment of this Act [Sept. 29, 1988].

"(2) The Secretary of Defense shall prescribe the regulations required by paragraph (2) of section 2410b of title 10, United States Code [now 10 U.S.C. 3845(a)(2)], as added by subsection (a), not later than 180 days after the date of the enactment of this Act."

§3846. [Reserved]

(Added Pub. L. 116–283, div. A, title XVIII, §1835(e)(2), Jan. 1, 2021, 134 Stat. 4241; amended Pub. L. 117–81, div. A, title XVII, §1701(i)(7)(B)(ii), Dec. 27, 2021, 135 Stat. 2142.)

Editorial Notes

Prior Provisions

A prior section 3846, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1484, related to transfer or discharge of reserve first lieutenants, captains, and majors not recommended for promotion by two selection boards, prior to repeal by Pub. L. 103–337, div. A, title XVI, §§1629(a)(3), 1691(b)(1), Oct. 5, 1994, 108 Stat. 2963, 3026, effective Oct. 1, 1996. See section 14501 et seq. of this title.

Amendments

2021—Pub. L. 117–81, §1701(i)(7)(B)(ii), amended Pub. L. 116–283, §1835(e)(1), which enacted this section, by adding section 3846 designation and catchline "[Reserved]" and striking out former section 3846 designation and catchline "Defense Contract Audit Agency: legal resources and expertise".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

§3847. Defense Contract Audit Agency: annual report

(a) Required Report.—The Director of the Defense Contract Audit Agency shall prepare an annual report of the activities of the Agency during the previous fiscal year. The report shall include, at a minimum—

(1) a description of significant problems, abuses, and deficiencies encountered during the conduct of contractor audits;

(2) statistical tables showing—

(A) the total number and dollar value of audit reports completed and pending, set forth separately by type of audit;

(B) the priority given to each type of audit;

(C) the length of time taken for each type of audit, both from the date of receipt of a qualified incurred cost submission and from the date the audit begins;

(D) the sustained questioned costs, set forth separately by type of audit, both as a total value and as a percentage of the total questioned costs for the audit;

(E) the total number and dollar value of incurred cost audits completed, and the method by which such incurred cost audits were completed;

(F) the aggregate cost of performing audits, set forth separately by type of audit;

(G) the ratio of sustained questioned costs to the aggregate costs of performing audits, set forth separately by type of audit; and

(H) the total number and dollar value of audits that are pending for a period longer than one year as of the end of the fiscal year covered by the report, and the fiscal year in which the qualified submission was received, set forth separately by type of audit;

(3) a summary of any recommendations of actions or resources needed to improve the audit process;

(4) a summary, set forth separately by dollar amount and percentage, of indirect costs for independent research and development incurred by contractors in the previous fiscal year;

(5) a summary, set forth separately by dollar amount and percentage, of indirect costs for bid and proposal costs incurred by contractors in the previous fiscal year;

(6) a description of outreach actions toward industry to promote more effective use of audit resources; and

(7) any other matters the Director considers appropriate.

(b) Submission of Annual Report.—Not later than March 30 of each year, the Director shall submit to the congressional defense committees the report required by subsection (a).

(c) Public Availability.—Not later than 60 days after the submission of an annual report to the congressional defense committees under subsection (b), the Director shall make the report available on the publicly available website of the Agency or such other publicly available website as the Director considers appropriate.

(d) Definitions.—

(1) The terms "incurred cost audit" and "qualified incurred cost submission" have the meaning given those terms in section 3842 of this title.

(2) The term "sustained questioned costs" means questioned costs that were recovered by the Federal Government as a result of contract negotiations related to such questioned costs.

(Added Pub. L. 112–81, div. A, title VIII, §805(a), Dec. 31, 2011, 125 Stat. 1486, §2313a; amended Pub. L. 114–92, div. A, title VIII, §893(b), Nov. 25, 2015, 129 Stat. 952; Pub. L. 114–328, div. A, title VIII, §824(d)(1), Dec. 23, 2016, 130 Stat. 2279; Pub. L. 115–91, div. A, title VIII, §811(d)(1), title X, §1081(d)(5), Dec. 12, 2017, 131 Stat. 1460, 1600; renumbered §3847 and amended Pub. L. 116–283, div. A, title XVIII, §1835(c), (d)(3), Jan. 1, 2021, 134 Stat. 4240.)

Editorial Notes

Prior Provisions

A prior section 3847, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1484; Pub. L. 86–559, §1(25), June 30, 1960, 74 Stat. 272, provided for transfer to Retired Reserve or discharge from his reserve appointment, after July 1, 1960, of each officer in a reserve grade below lieutenant colonel with 25 years service assigned to Army Nurse Corps, Army Medical Specialist Corps, or Women's Army Corps who had not been recommended for promotion to reserve grade of lieutenant colonel or who has not remained on active duty since such a recommendation, prior to repeal by Pub. L. 90–130, §1(12)(A), Nov. 8, 1967, 81 Stat. 376.

Amendments

2021—Pub. L. 116–283, §1835(c), renumbered section 2313a of this title as this section.

Subsec. (d)(1). Pub. L. 116–283, §1835(d)(3), substituted "section 3842" for "section 2313b".

2017—Subsec. (a)(2)(A). Pub. L. 115–91, §811(d)(1)(A)(i), inserted "and dollar value" after "number" and ", set forth separately by type of audit" after "pending".

Subsec. (a)(2)(C). Pub. L. 115–91, §811(d)(1)(A)(ii), inserted ", both from the date of receipt of a qualified incurred cost submission and from the date the audit begins" after "audit".

Subsec. (a)(2)(D). Pub. L. 115–91, §811(d)(1)(A)(iii), amended subpar. (D) generally. Prior to amendment, subpar. (D) read as follows: "the total costs of sustained or recovered costs both as a total number and as a percentage of questioned costs; and".

Subsec. (a)(2)(E) to (H). Pub. L. 115–91, §811(d)(1)(A)(iv), (v), added subpars. (E) to (H) and struck out former subpar. (E) which read as follows: "an assessment of the number and types of audits pending for a period longer than allowed pursuant to guidance of the Defense Contract Audit Agency;".

Subsec. (a)(4), (5). Pub. L. 115–91, §1081(d)(5), amended Pub. L. 114–328, §824(d)(1)(B). See 2016 Amendment note below.

Subsec. (d). Pub. L. 115–91, §811(d)(1)(B), added subsec. (d).

2016—Subsec. (a)(4), (5). Pub. L. 114–328, §824(d)(1)(B), as amended by Pub. L. 115–91, §1081(d)(5), added pars. (4) and (5). Former pars. (4) and (5) redesignated (6) and (7), respectively.

Subsec. (a)(6), (7). Pub. L. 114–328, §824(d)(1)(A), redesignated pars. (4) and (5) as (6) and (7), respectively.

2015—Subsec. (a)(2)(D). Pub. L. 114–92, §893(b)(1), amended subpar. (D) generally. Prior to amendment, subpar. (D) read as follows: "the total dollar value of questioned costs (including a separate category for the dollar value of unsupported costs); and".

Subsec. (a)(4), (5). Pub. L. 114–92, §893(b)(2)–(4), added par. (4) and redesignated former par. (4) as (5).

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date of 2017 Amendment

Pub. L. 115–91, div. A, title X, §1081(d), Dec. 12, 2017, 131 Stat. 1599, provided that the amendment made by section 1081(d)(5) is effective as of Dec. 23, 2016, and as if included in Pub. L. 114–328 as enacted.

Effective Date of 2016 Amendment

Pub. L. 114–328, div. A, title VIII, §824(d)(2), Dec. 23, 2016, 130 Stat. 2279, provided that: "The amendments made by this subsection [amending this section] shall take effect on October 1, 2018."

§3848. Defense audit agencies: Small Business Ombudsmen

(a) Small Business Ombudsman.—The Secretary of Defense shall designate within each defense audit agency an official as the Small Business Ombudsman to have the duties described in subsection (b) and such other responsibilities as may be determined by the Secretary.

(b) Duties.—The Small Business Ombudsman of a defense audit agency shall—

(1) advise the Director of the defense audit agency on policy issues related to small business concerns;

(2) serve as the defense audit agency's primary point of contact and source of information for small business concerns;

(3) collect and monitor relevant data regarding the defense audit agency's conduct of audits of small business concerns, including—

(A) data regarding the timeliness of audit closeouts for small business concerns; and

(B) data regarding the responsiveness of the defense audit agency to issues or other matters raised by small business concerns; and

(4) make recommendations to the Director regarding policies, processes, and procedures related to the timeliness of audits of small business concerns and the responsiveness of the defense audit agency to issues or other matters raised by small business concerns.

(c) Audit Independence.—The Small Business Ombudsman of a defense audit agency shall be segregated from ongoing audits in the field and shall not engage in activities with regard to particular audits that could compromise the independence of the defense audit agency or undermine compliance with applicable audit standards.

(d) Defense Audit Agency Defined.—In this section, the term "defense audit agency" means the Defense Contract Audit Agency and the Defense Contract Management Agency.

(Added Pub. L. 112–239, div. A, title XVI, §1612(a), Jan. 2, 2013, 126 Stat. 2064, §204; renumbered §3848 and amended Pub. L. 116–283, div. A, title XVIII, §1835(c), (d)(4), Jan. 1, 2021, 134 Stat. 4240.)

Editorial Notes

Prior Provisions

A prior section 3848, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1485; amended Pub. L. 86–559, §1(26), June 30, 1960, 74 Stat. 272; Pub. L. 90–130, §1(12)(B), Nov. 8, 1967, 81 Stat. 376; Pub. L. 90–486, §9(1), Aug. 13, 1968, 82 Stat. 760; Pub. L. 95–485, title VIII, §820(h), Oct. 20, 1978, 92 Stat. 1627; Pub. L. 96–513, title V, §512(8), Dec. 12, 1980, 94 Stat. 2929; Pub. L. 99–145, title V, §522(a)(1), title XIII, §1303(a)(20)(B), Nov. 8, 1985, 99 Stat. 631, 739; Pub. L. 100–456, div. A, title XII, §1234(a)(1), Sept. 29, 1988, 102 Stat. 2059, related to transfer or discharge of reserve first lieutenants, captains, majors, and lieutenant colonels with 28 years of service, prior to repeal by Pub. L. 103–337, div. A, title XVI, §§1629(a)(3), 1691(b)(1), Oct. 5, 1994, 108 Stat. 2963, 3026, effective Oct. 1, 1996. See section 14501 et seq. of this title.

A prior section 3849, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1485, related to separation or transfer to retired reserve of officers in the reserve grade of lieutenant colonel assigned to the Women's Army Corps upon completion of 28 years of service, prior to repeal by Pub. L. 86–559, §1(27), June 30, 1960, 74 Stat. 272.

Prior sections 3850 to 3855 were repealed by Pub. L. 103–337, div. A, title XVI, §§1629(a)(3), 1691(b)(1), Oct. 5, 1994, 108 Stat. 2963, 3026, effective Oct. 1, 1996.

Section 3850, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1485; amended Pub. L. 104–106, div. A, title XV, §1501(c)(25), Feb. 10, 1996, 110 Stat. 499, related to transfer or discharge of excessive reserve commissioned officers in active status with thirty or more years of service. See sections 14514 and 14704 of this title.

Section 3851, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1486; amended Pub. L. 86–559, §1(28), June 30, 1960, 74 Stat. 272; Pub. L. 90–486, §9(1), Aug. 13, 1968, 82 Stat. 760; Pub. L. 96–513, title V, §512(8), Dec. 12, 1980, 94 Stat. 2929; Pub. L. 98–525, title V, §513, Oct. 19, 1984, 98 Stat. 2522; Pub. L. 99–145, title V, §522(a)(2), title XIII, §1303(a)(20)(B), Nov. 8, 1985, 99 Stat. 631, 739; Pub. L. 99–661, div. A, title XIII, §1342(g), Nov. 14, 1986, 100 Stat. 3992; Pub. L. 100–456, div. A, title XII, §1234(a)(1), Sept. 29, 1988, 102 Stat. 2059, related to transfer or discharge of reserve colonels and brigadier generals with 30 years of service or five years in grade. See section 14508(a), (e) of this title.

Section 3852, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1486; amended Pub. L. 86–559, §1(29), June 30, 1960, 74 Stat. 272; Pub. L. 99–145, title V, §523, title XIII, §1303(a)(20)(B), Nov. 8, 1985, 99 Stat. 632, 739; Pub. L. 100–456, div. A, title XII, §1234(a)(1), Sept. 29, 1988, 102 Stat. 2059, related to transfer or discharge of reserve major generals with 35 years of service or five years in grade. See section 14508(b), (f) of this title.

Section 3853, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1486; amended Pub. L. 86–559, §1(30), June 30, 1960, 74 Stat. 273; Pub. L. 86–651, title I, §115, Sept. 7, 1962, 76 Stat. 513; Pub. L. 96–513, title V, §512(9), Dec. 12, 1980, 94 Stat. 2929; Pub. L. 98–94, title X, §1016(a), Sept. 24, 1983, 97 Stat. 668; Pub. L. 103–337, div. A, title XVI, §1635(a), Oct. 5, 1994, 108 Stat. 2968, related to computation of years of service. See section 14706 of this title.

Section 3854, added Pub. L. 85–861, §1(94), Sept. 2, 1958, 72 Stat. 1486, authorized Secretary of the Army to prescribe regulations to carry out this chapter.

Section 3855, added Pub. L. 86–559, §1(31), June 30, 1960, 74 Stat. 273; amended Pub. L. 96–107, title IV, §403(a), Nov. 9, 1979, 93 Stat. 808; Pub. L. 96–513, title II, §215(a), Dec. 12, 1980, 94 Stat. 2885; Pub. L. 100–180, div. A, title VII, §717(a), (d)(1)(A), Dec. 4, 1987, 101 Stat. 1113, 1114; Pub. L. 101–189, div. A, title VII, §§710(a), 711(a), Nov. 29, 1989, 103 Stat. 1476, 1477, related to retention in active status of certain reserve officers. See section 14703(a)(1), (b) of this title.

Amendments

2021—Pub. L. 116–283 renumbered section 204 of this title as this section and substituted "Defense audit agencies: Small Business Ombudsmen" for "Small Business Ombudsman for defense audit agencies" in section catchline.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

CHAPTER 281—CLAIMS AND DISPUTES

Sec.

3861.

Research and development contracts: indemnification provisions.

3862.

Requests for equitable adjustment or other relief.

3863.

Retention of amounts collected from contractor during the pendency of contract dispute.

Editorial Notes

Prior Provisions

A prior chapter 281 "CLAIMS AND DISPUTES", as added by Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1828, and consisting of reserved section 3861, was repealed by Pub. L. 116–283, div. A, title XVIII, §1836(a), Jan. 1, 2021, 134 Stat. 4241.

Amendments

2022—Pub. L. 117–263, div. A, title VIII, §805(b), Dec. 23, 2022, 136 Stat. 2702, added item 3862 and struck out former item 3862 "Requests for equitable adjustment or other relief: certification".

§3861. Research and development contracts: indemnification provisions

(a) With the approval of the Secretary of the military department concerned, any contract of a military department for research or development, or both, may provide that the United States will indemnify the contractor against either or both of the following, but only to the extent that they arise out of the direct performance of the contract and to the extent not compensated by insurance or otherwise:

(1) Claims (including reasonable expenses of litigation or settlement) by third persons, including employees of the contractor, for death, bodily injury, or loss of or damage to property, from a risk that the contract defines as unusually hazardous.

(2) Loss of or damage to property of the contractor from a risk that the contract defines as unusually hazardous.

(b) A contract, made under subsection (a), that provides for indemnification must also provide for—

(1) notice to the United States of any claim or suit against the contractor for the death, bodily injury, or loss of or damage to property; and

(2) control of or assistance in the defense by the United States, at its election, of that suit or claim.

(c) No payment may be made under subsection (a) unless the Secretary of the department concerned, or an officer or official of his department designated by him, certifies that the amount is just and reasonable.

(d) Upon approval by the Secretary concerned, payments under subsection (a) may be made from—

(1) funds obligated for the performance of the contract concerned;

(2) funds available for research or development, or both, and not otherwise obligated; or

(3) funds appropriated for those payments.

(Aug. 10, 1956, ch. 1041, 70A Stat. 134, §2354; renumbered §3861 and amended Pub. L. 116–283, div. A, title XVIII, §1836(b), (c), Jan. 1, 2021, 134 Stat. 4241.)

Editorial Notes

Amendments

2021—Pub. L. 116–283 renumbered section 2354 of this title as this section and substituted "Research and development contracts: indemnification provisions" for "Contracts: indemnification provisions" in section catchline.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

§3862. Requests for equitable adjustment or other relief

(a) Certification Requirement.—A request for equitable adjustment to contract terms or request for relief under Public Law 85–804 (50 U.S.C. 1431 et seq.) that exceeds the simplified acquisition threshold may not be paid unless a person authorized to certify the request on behalf of the contractor certifies, at the time the request is submitted, that—

(1) the request is made in good faith, and

(2) the supporting data are accurate and complete to the best of that person's knowledge and belief.

(b) Restriction on Legislative Payment of Claims.—In the case of a contract of an agency named in section 3063 of this title, no provision of a law enacted after September 30, 1994, that directs the payment of a particular claim under such contract, a particular request for equitable adjustment to any term of such contract, or a particular request for relief under Public Law 85–804 (50 U.S.C. 1431 et seq.) regarding such contract may be implemented unless such provision of law—

(1) specifically refers to this subsection; and

(2) specifically states that this subsection does not apply with respect to the payment directed by that provision of law.

(c) Treatment of Certain Clauses Implementing Executive Orders.—The unilateral insertion of a covered clause into an existing Department of Defense contract, order, or other transaction by a contracting officer shall be treated as a change directed by the contracting officer pursuant to, and subject to, the Changes clause of the underlying contract, order, or other transaction.

(d) Definitions.—In this section:

(1) The term "simplified acquisition threshold" has the meaning given that term in section 134 of title 41.

(2) The term "Changes clause" means the clause described in part 52.243–4 of the Federal Acquisition Regulation or any successor regulation.

(3) The term "covered clause" means any clause implementing the requirements of an Executive order issued by the President.

(Added Pub. L. 103–355, title II, §2301(a), Oct. 13, 1994, 108 Stat. 3320, §2410; amended Pub. L. 111–350, §5(b)(27), Jan. 4, 2011, 124 Stat. 3845; renumbered §3862 and amended Pub. L. 116–283, div. A, title XVIII, §§1836(b), 1883(b)(2), Jan. 1, 2021, 134 Stat. 4241, 4294; Pub. L. 117–81, div. A, title XVII, §1701(d)(6), Dec. 27, 2021, 135 Stat. 2136; Pub. L. 117–263, div. A, title VIII, §805(a), Dec. 23, 2022, 136 Stat. 2701.)

Editorial Notes

References in Text

Public Law 85–804, referred to in subsecs. (a) and (b), is Pub. L. 85–804, Aug. 28, 1958, 72 Stat. 972, which is classified generally to chapter 29 (§1431 et seq.) of Title 50, War and National Defense. For complete classification of this Act to the Code, see Tables.

Amendments

2022—Pub. L. 117–263, §805(a)(1), struck out ": certification" after "relief" in section catchline.

Subsec. (c). Pub. L. 117–263, §805(a)(3), added subsec. (c). Former subsec. (c) redesignated (d).

Subsec. (d). Pub. L. 117–263, §805(a)(2), (4), redesignated subsec. (c) as (d), substituted "Definitions" for "Definition" in heading, substituted "In this section:" for "In this section,", designated remainder of existing provisions as par. (1), substituted "The term" for "the term", and added pars. (2) and (3).

2021—Pub. L. 116–283, §1836(b), renumbered section 2410 of this title as this section.

Subsec. (b). Pub. L. 117–81 substituted "section 3063" for "section 2303(a)" in introductory provisions.

Pub. L. 116–283, §1883(b)(2), which directed that each reference in the text of title 10 to a section that was redesignated by title XVIII of Pub. L. 116–283, as such section was in effect before the redesignation, be amended by striking such reference and inserting a reference to the appropriate redesignated section, was not executed with respect to "section 2303(a)", which was redesignated as multiple sections.

2011—Subsec. (c). Pub. L. 111–350 substituted "section 134 of title 41" for "section 4(11) of the Office of Federal Procurement Policy Act".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Amendment by Pub. L. 117–81 to take effect immediately after the amendments made by title XVIII of Pub. L. 116–283 have taken effect, see section 1701(a)(3) of Pub. L. 117–81, set out in a note preceding section 3001 of this title and note below.

Effective Date

For effective date and applicability of section, see section 10001 of Pub. L. 103–355, set out as an Effective Date of 1994 Amendment note under section 8752 of this title.

Conforming Regulations

Pub. L. 117–263, div. A, title VIII, §805(c), Dec. 23, 2022, 136 Stat. 2702, provided that: "Not later than 120 days after the date of the enactment of this Act [Dec. 23, 2022], the Secretary of Defense shall revise the Department of Defense Supplement to the Federal Acquisition Regulation to implement the requirements of section 3862 of title 10, United States Code, as amended by subsection (a)."

Conforming Policy Guidance

Pub. L. 117–263, div. A, title VIII, §805(d), Dec. 23, 2022, 136 Stat. 2702, provided that: "Not later than 120 days after the date of the enactment of this Act [Dec. 23, 2022], the Secretary of Defense shall revise applicable policy guidance on other transactions to implement the requirements of section 3862 of title 10, United States Code, as amended by subsection (a)."

§3863. Retention of amounts collected from contractor during the pendency of contract dispute

(a) Retention of Funds.—Notwithstanding sections 1552(a) and 3302(b) of title 31, any amount, including interest, collected from a contractor as a result of a claim made by a military department or Defense Agency under chapter 71 of title 41, shall remain available in accordance with this section to pay—

(1) any settlement of the claim by the parties;

(2) any judgment rendered in the contractor's favor on an appeal of the decision on that claim to the Armed Services Board of Contract Appeals under section 7104(a) of title 41; or

(3) any judgment rendered in the contractor's favor in an action on that claim in a court of the United States.

(b) Period of Availability.—(1) The period of availability of an amount under subsection (a), in connection with a claim—

(A) expires 180 days after the expiration of the period for bringing an action on that claim in the United States Court of Federal Claims under section 7104(b) of title 41 if, within that 180-day period—

(i) no appeal on the claim is commenced at the Armed Services Board of Contract Appeals under section 7104(a) of such title; and

(ii) no action on the claim is commenced in a court of the United States; or

(B) if not expiring under subparagraph (A), expires—

(i) in the case of a settlement of the claim, 180 days after the date of the settlement; or

(ii) in the case of a judgment rendered on the claim in an appeal to the Armed Services Board of Contract Appeals under section 7104(a) of title 41 or an action in a court of the United States, 180 days after the date on which the judgment becomes final and not appealable.

(2) While available under this section, an amount may be obligated or expended only for a purpose described in subsection (a).

(3) Upon the expiration of the period of availability of an amount under paragraph (1), the amount shall be covered into the Treasury as miscellaneous receipts.

(Added Pub. L. 105–85, div. A, title VIII, §831(a), Nov. 18, 1997, 111 Stat. 1841, §2410m; amended Pub. L. 108–136, div. A, title X, §1031(a)(21), Nov. 24, 2003, 117 Stat. 1598; Pub. L. 111–350, §5(b)(32), Jan. 4, 2011, 124 Stat. 3845; Pub. L. 112–81, div. A, title X, §1061(15), Dec. 31, 2011, 125 Stat. 1583; Pub. L. 113–291, div. A, title X, §1071(a)(8), Dec. 19, 2014, 128 Stat. 3504; renumbered §3863, Pub. L. 116–283, div. A, title XVIII, §1836(b), Jan. 1, 2021, 134 Stat. 4241.)

Editorial Notes

Prior Provisions

Prior sections 3881 and 3882 were repealed by Pub. L. 85–155, title IV, §401(1), Aug. 21, 1957, 71 Stat. 390.

Section 3881, act Aug. 10, 1956, ch. 1041, 70A Stat. 222, authorized Secretary of the Army to retire regular commissioned officers of Army Nurse Corps or Women's Medical Specialist Corps whose regular grade is below major.

Section 3882, act Aug. 10, 1956, ch. 1041, 70A Stat. 222, authorized Secretary of the Army to retire regular commissioned officers of Army Nurse Corps or Women's Medical Specialist Corps whose regular grade is above captain.

Prior sections 3883 to 3886 were repealed by Pub. L. 96–513, title II, §216, title VII, §701, Dec. 12, 1980, 94 Stat. 2886, 2955, effective Sept. 15, 1981.

Section 3883, acts Aug. 10, 1956, ch. 1041, 70A Stat. 222; Aug. 6, 1958, Pub. L. 85–600, §1(6), 72 Stat. 522; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115; Oct. 30, 1978, Pub. L. 95–551, §2, 92 Stat. 2069, provided that, unless retired or separated at an earlier date, each commissioned officer whose regular grade is below major general, other than a professor or the director of admissions of the United States Military Academy, be retired when he becomes 60 years of age, except as provided by section 8301 of title 5. See section 1251 of this title.

Section 3884, acts Aug. 10, 1956, ch. 1041, 70A Stat. 222; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115, provided that, unless retired or separated at an earlier date, each commissioned officer whose regular grade is major general, and whose retirement under section 3923 of this title has been deferred under cl. (1) of that section, be retired when he becomes 60 years of age, except as provided by section 8301 of title 5. See section 1251 of this title.

Section 3885, acts Aug. 10, 1956, ch. 1041, 70A Stat. 222; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115, provided that, unless retired or separated at an earlier date or unless retained under section 3923(2) of this title, each commissioned officer whose regular grade is major general be retired when he becomes 62 years of age, except as provided by section 8301 of title 5. See section 1251 of this title.

Section 3886, acts Aug. 10, 1956, ch. 1041, 70A Stat. 222; Aug. 6, 1958, Pub. L. 85–600, §1(7), 72 Stat. 522; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115; Oct. 30, 1978, Pub. L. 95–551, §2, 92 Stat. 2069, provided that, unless retired or separated at an earlier date, each commissioned officer whose regular grade is major general, and whose retirement under section 3923 of this title has been deferred under cl. (2) of that section, and each permanent professor and the director of admissions of the United States Military Academy, be retired when he becomes 64 years of age, except as provided by section 8301 of title 5. See section 1251 of this title.

A prior section 3887, act Aug. 10, 1956, ch. 1041, 70A Stat. 223, related to computation of years of service of commissioned officers of Army Nurse Corps or Women's Medical Specialist Corps for purposes of retirement under former sections 3881 or 3882 of this title, or retirement pay under section 3991 of this title, prior to repeal by Pub. L. 85–155, title IV, §401(1), Aug. 21, 1957, 71 Stat. 390.

Prior sections 3888 and 3889 were repealed by Pub. L. 96–513, title II, §216, title VII, §701, Dec. 12, 1980, 94 Stat. 2886, 2955, effective Sept. 15, 1981.

Section 3888, acts Aug. 10, 1956, ch. 1041, 70A Stat. 223; Aug. 21, 1957, Pub. L. 85–155, title I, §101(18), 71 Stat. 379; May 20, 1958, Pub. L. 85–422, §11(a)(3), 72 Stat. 131; Sept. 2, 1958, Pub. L. 85–861, §1(96), 72 Stat. 1487, related to computation of service for determining retired pay of a commissioned officer of Regular Army retired under former section 3883, 3884, 3885, or 3886 of this title.

Section 3889, act Aug. 10, 1956, ch. 1041, 70A Stat. 224, provided that a member of Army retired under this chapter be entitled to retired pay computed under chapter 745 of this title.

Amendments

2021—Pub. L. 116–283 renumbered section 2410m of this title as this section.

2014—Subsec. (b)(1)(A)(i). Pub. L. 113–291, §1071(a)(8)(A), substituted "section 7104(a) of such title" for "section 7 of such Act".

Subsec. (b)(1)(B)(ii). Pub. L. 113–291, §1071(a)(8)(B), substituted "section 7104(a) of title 41" for "section 7 of the Contract Disputes Act of 1978".

2011—Subsec. (a). Pub. L. 111–350, §5(b)(32)(A), substituted "chapter 71 of title 41" for "the Contract Disputes Act of 1978 (41 U.S.C. 601 et seq.)" in introductory provisions.

Subsec. (a)(2). Pub. L. 111–350, §5(b)(32)(B), substituted "section 7104(a) of title 41" for "section 7 of such Act (41 U.S.C. 606)".

Subsec. (b)(1)(A). Pub. L. 111–350, §5(b)(32)(C), substituted "section 7104(b) of title 41" for "section 10(a) of the Contract Disputes Act of 1978 (41 U.S.C. 609(a))" in introductory provisions.

Subsec. (c). Pub. L. 112–81 struck out subsec. (c), which required submission of annual report on amounts available for obligation.

2003—Subsec. (c). Pub. L. 108–136, §1031(a)(21)(A), substituted "Annual Report" for "Reporting Requirement" in heading and "Not later than 60 days after the end of each fiscal year" for "Each year" in introductory provisions.

Subsec. (c)(1). Pub. L. 108–136, §1031(a)(21)(B), inserted "at the end of such fiscal year" before period at end.

Subsec. (c)(2). Pub. L. 108–136, §1031(a)(21)(C), substituted "under this section during that fiscal year" for "during the year preceding the year in which the report is submitted".

Subsec. (c)(3). Pub. L. 108–136, §1031(a)(21)(D), substituted "under this section during that fiscal year" for "in such preceding year".

Subsec. (c)(4). Pub. L. 108–136, §1031(a)(21)(E), substituted "under this section during that fiscal year" for "in such preceding year".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

CHAPTER 283—[RESERVED]

Editorial Notes

Prior Provisions

A prior chapter 283 "FOREIGN ACQUISITIONS", as added by Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1828, and consisting of reserved section 3881, was repealed by Pub. L. 116–283, div. A, title XVIII, §1837, Jan. 1, 2021, 134 Stat. 4241, as amended by Pub. L. 117–81, div. A, title XVII, §1701(i)(8)(B), Dec. 27, 2021, 135 Stat. 2142.

Codification

Pub. L. 116–283, div. A, title XVIII, §1837, Jan. 1, 2021, 134 Stat. 4241, enacted this chapter "FOREIGN ACQUISITIONS", which consisted of subchapters I "General" and II "Prohibition on Contracting with the Enemy". Subchapter I consisted of section 3881 "Contracts: consideration of national security objectives", as transferred from section 2327 of this title, and subchapter II consisted of reserved sections 3891 to 3893. Subsequently, Pub. L. 117–81, div. A, title XVII, §1701(i)(8)(B), Dec. 27, 2021, 135 Stat. 2142, generally amended section 1837 of Pub. L. 116–283, effective as if included therein, so that this chapter would consist only of the chapter 283 designation and "[RESERVED]", thereby omitting the contents of this chapter in their entirety.

CHAPTER 287—OTHER CONTRACTING PROGRAMS

Sec.

3901.

Contracts: prohibition on competition between Department of Defense and small businesses.

3902.

Credit for Indian contracting in meeting certain subcontracting goals for small disadvantaged businesses.

3903.

Subcontracting plans: credit for certain purchases.

3904.

[Reserved].

3905.

Products of Federal Prison Industries: procedural requirements.

Editorial Notes

Prior Provisions

A prior chapter 285 "SMALL BUSINESS PROGRAMS", as added by Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1828, and consisting of reserved section 3901, was repealed by Pub. L. 116–283, div. A, title XVIII, §1871(a)(1), Jan. 1, 2021, 134 Stat. 4287.

A prior chapter 287 "SOCIOECONOMIC PROGRAMS", as added by Pub. L. 115–232, div. A, title VIII, §801(a), Aug. 13, 2018, 132 Stat. 1829, and consisting of reserved section 3961, was repealed by Pub. L. 116–283, div. A, title XVIII, §1838(a), Jan. 1, 2021, 134 Stat. 4242.

Amendments

2021—Pub. L. 117–81, div. A, title XVII, §1701(l)(1)(B), (v)(2)(B), Dec. 27, 2021, 135 Stat. 2144, 2154, amended Pub. L. 116–283, div. A, title XVIII, §1838(a), Jan. 1, 2021, 134 Stat. 4242, which added this analysis, by substituting "OTHER CONTRACTING" for "SOCIOECONOMIC" in chapter heading and "[Reserved]" for "Research and educational programs and activities: historically black colleges and universities and minority-serving institutions of higher education" in item 3904.

Statutory Notes and Related Subsidiaries

Demonstration Project for Contractors Employing Persons With Disabilities

Pub. L. 115–232, div. A, title VIII, §888, Aug. 13, 2018, 132 Stat. 1916, provided that: "Not later than 180 days after the date of the enactment of this Act [Aug. 13, 2018], the Secretary of Defense shall update the Defense Federal Acquisition Regulatory Supplement to include an instruction on the pilot program regarding employment of persons with disabilities authorized under section 853 of the National Defense Authorization Act for Fiscal Year 2004 (Public Law 108–136; 10 U.S.C. 2302 note)."

Pub. L. 108–136, div. A, title VIII, §853, Nov. 24, 2003, 117 Stat. 1557, as amended by Pub. L. 108–199, div. H, §110, Jan. 23, 2004, 118 Stat. 438; Pub. L. 115–232, div. A, title VIII, §812(a)(2)(C)(i), Aug. 13, 2018, 132 Stat. 1846, provided that:

"(a) Authority.—The Secretary of Defense may carry out a demonstration project by entering into one or more contracts with an eligible contractor for the purpose of providing defense contracting opportunities for severely disabled individuals.

"(b) Evaluation Factor.—In evaluating an offer for a contract under the demonstration program, the percentage of the total workforce of the offeror consisting of severely disabled individuals employed by the offeror shall be one of the evaluation factors.

"(c) Credit Toward Certain Small Business Contracting Goals.—Department of Defense contracts entered into with eligible contractors under the demonstration project under this section, and subcontracts entered into with eligible contractors under such contracts, shall be credited toward the attainment of goals established under section 15(g)(1) of the Small Business Act (15 U.S.C. 644(g)(1)) regarding the extent of the participation of disadvantaged small business concerns in contracts of the Department of Defense and subcontracts under such contracts.

"(d) Definitions.—In this section:

"(1) Eligible contractor.—The term 'eligible contractor' means a business entity operated on a for-profit or nonprofit basis that—

"(A) employs severely disabled individuals at a rate that averages not less than 33 percent of its total workforce over a period prescribed by the Secretary;

"(B) pays not less than the minimum wage prescribed pursuant to section 6 of the Fair Labor Standards Act of 1938 (29 U.S.C. 206) to the employees who are severely disabled individuals; and

"(C) provides for its employees health insurance and a retirement plan comparable to those provided for employees by business entities of similar size in its industrial sector or geographic region.

"(2) Severely disabled individual.—The term 'severely disabled individual' means an individual with a disability (as defined in section 3 of the Americans with Disabilities Act of 1990 (42 U.S.C. 12102)) who has a severe physical or mental impairment that seriously limits one or more functional capacities."

§3901. Contracts: prohibition on competition between Department of Defense and small businesses

(a) Exclusion.—In any case in which the Secretary of Defense plans to use competitive procedures for a procurement, if the procurement is to be conducted as described in subsection (b), then the Secretary shall exclude the Department of Defense from competing in the procurement.

(b) Procurement Description.—The requirement to exclude the Department of Defense under subsection (a) applies in the case of a procurement to be conducted by excluding from competition entities in the private sector other than small business concerns in furtherance of section 8 or 15 of the Small Business Act (15 U.S.C. 637 or 644).

(Added Pub. L. 103–160, div. A, title VIII, §848(a)(1), Nov. 30, 1993, 107 Stat. 1724, §2304a; renumbered §2304e, Pub. L. 104–106, div. D, title XLIII, §4321(b)(6)(A), Feb. 10, 1996, 110 Stat. 672; amended Pub. L. 115–232, div. A, title VIII, §812(a)(2)(C)(vi), Aug. 13, 2018, 132 Stat. 1847; Pub. L. 116–92, div. A, title XVII, §1731(a)(39)(A), Dec. 20, 2019, 133 Stat. 1814; renumbered §3901, Pub. L. 116–283, div. A, title XVIII, §1838(b), Jan. 1, 2021, 134 Stat. 4242; Pub. L. 117–81, div. A, title XVII, §1701(v)(2)(A), Dec. 27, 2021, 135 Stat. 2154.)

Editorial Notes

Amendments

2021—Pub. L. 116–283, §1838(b), as amended by Pub. L. 117–81, §1701(v)(2)(A), renumbered section 2304e of this title as this section.

2018—Subsec. (b). Pub. L. 115–232 substituted "other than" for "other than—", struck out par. (1) designation before "small business", and struck out par. (2) which read as follows: "entities described in subsection (a)(1) of section 2323 of this title in furtherance of the goal specified in that subsection."

1996—Pub. L. 104–106 renumbered section 2304a of this title as this section.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date

Pub. L. 103–160, div. A, title VIII, §848(b), Nov. 30, 1993, 107 Stat. 1725, provided that: "Section 2304a of title 10, United States Code [now 10 U.S.C. 3901], as added by subsection (a), shall take effect on the date of the enactment of this Act [Nov. 30, 1993]."

§3902. Credit for Indian contracting in meeting certain subcontracting goals for small disadvantaged businesses

(a) Regulations.—Subject to subsections (b) and (c), in any case in which a subcontracting goal is specified in a Department of Defense contract in the implementation of section 8(d) of the Small Business Act (15 U.S.C. 637(d)), credit toward meeting that subcontracting goal shall be given for—

(1) work performed in connection with that Department of Defense contract, and work performed in connection with any subcontract awarded under that Department of Defense contract, if such work is performed on any Indian lands and meets the requirements of paragraph (1) of subsection (b); or

(2) work performed in connection with that Department of Defense contract, and work performed in connection with any subcontract awarded under that Department of Defense contract, if the performance of such contract or subcontract is undertaken as a joint venture that meets the requirements of paragraph (2) of that subsection.

(b) Eligible Work.—(1) Work performed on Indian lands meets the requirements of this paragraph if—

(A) not less than 40 percent of the workers directly engaged in the performance of the work are Indians; or

(B) the contractor or subcontractor has an agreement with the tribal government having jurisdiction over such Indian lands that provides goals for training and development of the Indian workforce and Indian management.

(2) A joint venture undertaking to perform a contract or subcontract meets the requirements of this paragraph if—

(A) an Indian tribe or tribally owned corporation owns at least 50 percent of the joint venture;

(B) the activities of the joint venture under the contract or subcontract provide employment opportunities for Indians either directly or through the purchase of products or services for the performance of such contract or subcontract; and

(c) Extent of Credit.—The amount of the credit given toward the attainment of any subcontracting goal under subsection (a) shall be—

(1) in the case of work performed as described in subsection (a)(1), the value of the work performed; and

(2) in the case of a contract or subcontract undertaken to be performed by a joint venture as described in subsection (a)(2), an amount equal to the amount of the contract or subcontract multiplied by the percentage of the tribe's or tribally owned corporation's ownership interest in the joint venture.

(d) Regulations.—The Secretary of Defense shall prescribe regulations for the implementation of this section.

(e) Definitions.—In this section:

(1) The term "Indian lands" has the meaning given that term by section 4(4) of the Indian Gaming Regulatory Act (25 U.S.C. 2703(4)).

(2) The term "Indian" has the meaning given that term by section 4(d) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 5304(d)).

(3) The term "Indian tribe" has the meaning given that term by section 4(e) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 5304(e)).

(4) The term "tribally owned corporation" means a corporation owned entirely by an Indian tribe.

(Added Pub. L. 102–484, div. A, title VIII, §801(g)(1), Oct. 23, 1992, 106 Stat. 2445, §2323a; amended Pub. L. 104–201, div. A, title X, §1074(a)(13), Sept. 23, 1996, 110 Stat. 2659; Pub. L. 115–232, div. A, title VIII, §812(a)(2)(C)(vii), Aug. 13, 2018, 132 Stat. 1847; Pub. L. 116–92, div. A, title XVII, §1731(a)(39)(B), Dec. 20, 2019, 133 Stat. 1814; renumbered §3902, Pub. L. 116–283, div. A, title XVIII, §1838(b), Jan. 1, 2021, 134 Stat. 4242; Pub. L. 117–81, div. A, title XVII, §1701(v)(2)(A), Dec. 27, 2021, 135 Stat. 2154.)

Editorial Notes

Codification

Section, as added by Pub. L. 102–484, consists of text of Pub. L. 101–189, div. A, title VIII, §832, Nov. 29, 1989, 103 Stat. 1508, revised by Pub. L. 102–484 by substituting "section 2323 of this title" for "section 1207 of the National Defense Authorization Act for Fiscal Year 1987 (10 U.S.C. 2301 note)" in subsec. (a). Section 832 of Pub. L. 101–189, which was formerly set out as a note under section 2301 of this title, was repealed by Pub. L. 102–484, div. A, title VIII, §801(h)(5), Oct. 23, 1992, 106 Stat. 2445.

Amendments

2021—Pub. L. 116–283, §1838(b), as amended by Pub. L. 117–81, §1701(v)(2)(A), renumbered section 2323a of this title as this section.

2019—Pub. L. 116–92, §1731(a)(39)(B)(i), struck out "and certain institutions of higher education" after "businesses" in section catchline.

Subsec. (e)(1). Pub. L. 116–92, §1731(a)(39)(B)(ii)(I), struck out "102 Stat. 2468;" before "25 U.S.C. 2703(4))."

Subsec. (e)(2). Pub. L. 116–92, §1731(a)(39)(B)(ii)(II), substituted "(25 U.S.C. 5304(d))" for "(25 U.S.C. 450b(d))".

Subsec. (e)(3). Pub. L. 116–92, §1731(a)(39)(B)(ii)(III), substituted "(25 U.S.C. 5304(e))" for "(25 U.S.C. 450b(e))".

2018—Subsec. (a). Pub. L. 115–232 struck out "section 2323 of this title and" after "implementation of".

1996—Subsec. (a). Pub. L. 104–201, which directed amendment of subsec. (a) by substituting "section 2323 of this title" for "section 1207 of the National Defense Authorization Act for Fiscal Year 1987 (10 U.S.C. 2301 note)", could not be executed because the language "section 1207 of the National Defense Authorization Act for Fiscal Year 1987 (10 U.S.C. 2301 note)" did not appear. See Codification note above.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

§3903. Subcontracting plans: credit for certain purchases

(a) Purchases Benefiting Severely Handicapped Persons.—In the case of a business concern that has negotiated a small business subcontracting plan with a military department or a Defense Agency, purchases made by that business concern from qualified nonprofit agencies for the blind or other severely handicapped shall count toward meeting the subcontracting goal provided in that plan.

(b) Definitions.—In this section:

(1) The term "small business subcontracting plan" means a plan negotiated pursuant to section 8(d) of the Small Business Act (15 U.S.C. 637(d)) that establishes a goal for the participation of small business concerns as subcontractors under a contract.

(2) The term "qualified nonprofit agency for the blind or other severely handicapped" means—

(A) a qualified nonprofit agency for the blind, as defined in section 8501(7) of title 41;

(B) a qualified nonprofit agency for other severely disabled, as defined in section 8501(6) of title 41; and

(C) a central nonprofit agency designated by the Committee for Purchase from People Who Are Blind or Severely Disabled under section 8503(c) of title 41.

(Added Pub. L. 102–484, div. A, title VIII, §808(b)(1), Oct. 23, 1992, 106 Stat. 2449, §2410d; amended Pub. L. 103–337, div. A, title VIII, §804, Oct. 5, 1994, 108 Stat. 2815; Pub. L. 104–106, div. D, title XLIII, §4321(b)(15), Feb. 10, 1996, 110 Stat. 673; Pub. L. 105–85, div. A, title VIII, §835, Nov. 18, 1997, 111 Stat. 1843; Pub. L. 106–65, div. A, title VIII, §807, Oct. 5, 1999, 113 Stat. 705; Pub. L. 111–350, §5(b)(29), Jan. 4, 2011, 124 Stat. 3845; renumbered §3903, Pub. L. 116–283, div. A, title XVIII, §1838(b), Jan. 1, 2021, 134 Stat. 4242; Pub. L. 117–81, div. A, title XVII, §1701(v)(2)(A), Dec. 27, 2021, 135 Stat. 2154.)

Editorial Notes

Amendments

2021—Pub. L. 116–283, §1838(b), as amended by Pub. L. 117–81, §1701(v)(2)(A), renumbered section 2410d of this title as this section.

2011—Subsec. (b)(2)(A). Pub. L. 111–350, §5(b)(29)(A), substituted "section 8501(7) of title 41" for "section 5(3) of the Javits-Wagner-O'Day Act (41 U.S.C. 48b(3))".

Subsec. (b)(2)(B). Pub. L. 111–350, §5(b)(29)(B), substituted "disabled, as defined in section 8501(6) of title 41" for "handicapped, as defined in section 5(4) of such Act (41 U.S.C. 48b(4))".

Subsec. (b)(2)(C). Pub. L. 111–350, §5(b)(29)(C), substituted "section 8503(c) of title 41" for "section 2(c) of such Act (41 U.S.C. 47(c))".

1999—Subsec. (c). Pub. L. 106–65 struck out heading and text of subsec. (c). Text read as follows: "Subsection (a) shall cease to be effective at the end of September 30, 1999."

1997—Subsec. (c). Pub. L. 105–85 substituted "September 30, 1999" for "September 30, 1997".

1996—Subsec. (b)(3). Pub. L. 104–106 struck out par. (3) which read as follows: "The term 'Javits-Wagner-O'Day Act' means the Act entitled 'An Act to create a Committee on Purchases of Blind-made Products, and for other purposes', approved June 25, 1938 (41 U.S.C. 46–48c), commonly referred to as the Wagner-O'Day Act, that was revised and reenacted in the Act of June 23, 1971 (85 Stat. 77), commonly referred to as the Javits-Wagner-O'Day Act."

1994—Subsec. (b)(2)(C). Pub. L. 103–337, §804(1)(A), added subpar. (C).

Subsec. (b)(3), (4). Pub. L. 103–337, §804(1)(B), (C), redesignated par. (4) as (3) and struck out former par. (3) which read as follows: "The terms 'approved commodity' and 'approved service' mean a commodity and a service, respectively, that has been determined by the Committee for Purchase from the Blind and Other Severely Handicapped under section 2 of such Act (41 U.S.C. 47) to be suitable for procurement by the Federal Government."

Subsec. (c). Pub. L. 103–337, §804(2), substituted "September 30, 1997" for "September 30, 1994".

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date of 1997 Amendment

Pub. L. 105–85, div. A, title VIII, §835, Nov. 18, 1997, 111 Stat. 1843, provided that the amendment made by that section is effective as of Sept. 30, 1997.

Effective Date of 1996 Amendment

For effective date and applicability of amendment by Pub. L. 104–106, see section 4401 of Pub. L. 104–106, set out as a note under section 2220 of this title.

Effective Date

Pub. L. 102–484, div. A, title VIII, §808(c), Oct. 23, 1992, 106 Stat. 2450, provided that: "Sections 2301(d) [repealed] and 2410d [now 10 U.S.C. 3903] of title 10, United States Code (as added by subsections (a) and (b), respectively), shall take effect on October 1, 1993."

Contract Participation by Agencies for the Blind or Other Severely Handicapped

Pub. L. 108–87, title VIII, §8025, Sept. 30, 2003, 117 Stat. 1077, as amended by Pub. L. 113–291, div. A, title X, §1071(b)(6), Dec. 19, 2014, 128 Stat. 3507, provided that:

"(a) Of the funds for the procurement of supplies or services appropriated by this Act [see Tables for classification] and hereafter, qualified nonprofit agencies for the blind or other severely handicapped shall be afforded the maximum practicable opportunity to participate as subcontractors and suppliers in the performance of contracts let by the Department of Defense.

"(b) During the current fiscal year and hereafter, a business concern which has negotiated with a military service or defense agency a subcontracting plan for the participation by small business concerns pursuant to section 8(d) of the Small Business Act (15 U.S.C. 637(d)) shall be given credit toward meeting that subcontracting goal for any purchases made from qualified nonprofit agencies for the blind or other severely handicapped.

"(c) For the purpose of this section, the phrase 'qualified nonprofit agency for the blind or other severely handicapped' means a nonprofit agency for the blind or other severely handicapped that has been approved by the Committee for the Purchase from the Blind and Other Severely Handicapped under chapter 85 of title 41, United States Code."

Similar provisions were contained in the following prior appropriation acts:

Pub. L. 107–248, title VIII, §8025, Oct. 23, 2002, 116 Stat. 1542.

Pub. L. 107–117, div. A, title VIII, §8028, Jan. 10, 2002, 115 Stat. 2253.

Pub. L. 106–259, title VIII, §8028, Aug. 9, 2000, 114 Stat. 680.

Pub. L. 106–79, title VIII, §8030, Oct. 25, 1999, 113 Stat. 1237.

Pub. L. 105–262, title VIII, §8030, Oct. 17, 1998, 112 Stat. 2303.

Pub. L. 105–56, title VIII, §8031, Oct. 8, 1997, 111 Stat. 1226.

Pub. L. 104–208, div. A, title I, §101(b) [title VIII, §8033], Sept. 30, 1996, 110 Stat. 3009–71, 3009-95.

Pub. L. 104–61, title VIII, §8042, Dec. 1, 1995, 109 Stat. 660.

Pub. L. 103–335, title VIII, §8048, Sept. 30, 1994, 108 Stat. 2628.

Pub. L. 103–139, title VIII, §8055, Nov. 11, 1993, 107 Stat. 1452.

Pub. L. 102–396, title IX, §9077, Oct. 6, 1992, 106 Stat. 1918.

Pub. L. 102–172, title VIII, §8082, Nov. 26, 1991, 105 Stat. 1190.

Pub. L. 101–511, title VIII, §8117, Nov. 5, 1990, 104 Stat. 1905.

[§3904. Omitted]

Editorial Notes

Codification

Pub. L. 116–283, div. A, title XVIII, §1838(b), Jan. 1, 2021, 134 Stat. 4242, initially transferred section 2362 of this title to this section, to become effective Jan. 1, 2022. Subsequently, Pub. L. 117–81, div. A, title XVII, §1701(v)(2)(A), Dec. 27, 2021, 135 Stat. 2154, amended section 1838(b) of Pub. L. 116–283, effective as if included therein, by striking out the directive to make the transfer, thereby omitting this section before it took effect. Another amendment by Pub. L. 117–81 resulted in the transfer of section 2362 to section 4144 of this title.

§3905. Products of Federal Prison Industries: procedural requirements

(a) Products for Which Federal Prison Industries Does Not Have Significant Market Share.—(1) Before purchasing a product listed in the latest edition of the Federal Prison Industries catalog under section 4124(d) of title 18 for which Federal Prison Industries does not have a significant market share, the Secretary of Defense shall conduct market research to determine whether the product is comparable to products available from the private sector that best meet the needs of the Department in terms of price, quality, and time of delivery.

(2) If the Secretary determines that a Federal Prison Industries product described in paragraph (1) is not comparable in price, quality, or time of delivery to products of the private sector that best meets the needs of the Department in terms of price, quality, and time of delivery, the Secretary shall use competitive procedures for the procurement of the product, or shall make an individual purchase under a multiple award contract in accordance with the competition requirements applicable to such contract. In conducting such a competition, the Secretary shall consider a timely offer from Federal Prison Industries.

(b) Products for Which Federal Prison Industries Has Significant Market Share.—(1) The Secretary of Defense may purchase a product listed in the latest edition of the Federal Prison Industries catalog for which Federal Prison Industries has a significant market share only if the Secretary uses competitive procedures for the procurement of the product or makes an individual purchase under a multiple award contract in accordance with the competition requirements applicable to such contract. In conducting such a competition, the Secretary shall consider a timely offer from Federal Prison Industries.

(2) For purposes of this subsection, Federal Prison Industries shall be treated as having a significant share of the market for a product if the Secretary, in consultation with the Administrator of Federal Procurement Policy, determines that the Federal Prison Industries share of the Department of Defense market for the category of products including such product is greater than 5 percent.

(1) the Department of Defense does not purchase a Federal Prison Industries product or service unless a contracting officer of the Department determines that the product or service is comparable to products or services available from the private sector that best meet the Department's needs in terms of price, quality, and time of delivery; and

(2) Federal Prison Industries performs its contractual obligations to the same extent as any other contractor for the Department of Defense.

(d) Market Research Determination Not Subject to Review.—A determination by a contracting officer regarding whether a product or service offered by Federal Prison Industries is comparable to products or services available from the private sector that best meet the Department's needs in terms of price, quality, and time of delivery shall not be subject to review pursuant to section 4124(b) of title 18.

(e) Performance as a Subcontractor.—(1) A contractor or potential contractor of the Department of Defense may not be required to use Federal Prison Industries as a subcontractor or supplier of products or provider of services for the performance of a Department of Defense contract by any means, including means such as—

(A) a contract solicitation provision requiring a contractor to offer to make use of products or services of Federal Prison Industries in the performance of the contract;

(B) a contract specification requiring the contractor to use specific products or services (or classes of products or services) offered by Federal Prison Industries in the performance of the contract; or

(C) any contract modification directing the use of products or services of Federal Prison Industries in the performance of the contract.

(2) In this subsection, the term "contractor", with respect to a contract, includes a subcontractor at any tier under the contract.

(f) Protection of Classified and Sensitive Information.—The Secretary of Defense may not enter into any contract with Federal Prison Industries under which an inmate worker would have access to—

(1) any data that is classified;

(2) any geographic data regarding the location of—

(A) surface and subsurface infrastructure providing communications or water or electrical power distribution;

(B) pipelines for the distribution of natural gas, bulk petroleum products, or other commodities; or

(3) any personal or financial information about any individual private citizen, including information relating to such person's real property however described, without the prior consent of the individual.

(g) Definitions.—In this section:

(1) The term "competitive procedures" has the meaning given such term in section 3012 of this title.

(2) The term "market research" means obtaining specific information about the price, quality, and time of delivery of products available in the private sector through a variety of means, which may include—

(A) contacting knowledgeable individuals in government and industry;

(B) interactive communication among industry, acquisition personnel, and customers; and

(Added Pub. L. 107–107, div. A, title VIII, §811(a)(1), Dec. 28, 2001, 115 Stat. 1180, §2410n; amended Pub. L. 107–314, div. A, title VIII, §819(a)(1), Dec. 2, 2002, 116 Stat. 2612; Pub. L. 109–163, div. A, title X, §1056(c)(4), Jan. 6, 2006, 119 Stat. 3439; Pub. L. 110–181, div. A, title VIII, §827(a)(1), Jan. 28, 2008, 122 Stat. 228; renumbered §3905 and amended Pub. L. 116–283, div. A, title XVIII, §§1838(b), 1883(b)(2), Jan. 1, 2021, 134 Stat. 4242, 4294; Pub. L. 117–81, div. A, title XVII, §1701(v)(2)(A), Dec. 27, 2021, 135 Stat. 2154.)

Editorial Notes

Prior Provisions

A prior section 3911 was renumbered section 7311 of this title.

A prior section 3912, act Aug. 10, 1956, ch. 1041, 70A Stat. 225, permitted the Secretary of the Army, upon the officer's request, to retire a commissioned officer of the Regular Army in the Army Nurse Corps or Women's Medical Specialist Corps who has at least 20 years of service computed under former section 3928 of this title, prior to repeal by Pub. L. 85–155, title IV, §401(1), Aug. 21, 1957, 71 Stat. 390.

A prior section 3913, acts Aug. 10, 1956, ch. 1041, 70A Stat. 225; July 12, 1960, Pub. L. 86–616, §4, 74 Stat. 390; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115, provided for retirement of deferred officers not recommended for promotion after twenty years or more of service, except as provided in section 8301 of title 5, prior to repeal by Pub. L. 96–513, title II, §217(a), title VII, §701, Dec. 12, 1980, 94 Stat. 2886, 2955, effective Sept. 15, 1981. See section 627 et seq. of this title.

A prior section 3914 was renumbered section 7314 of this title.

A prior section 3915, acts Aug. 10, 1956, ch. 1041, 70A Stat. 225; Aug. 21, 1967, Pub. L. 85–155, title I, §101(19), 71 Stat. 379; Sept. 30, 1966, Pub. L. 89–609, §1(5), 80 Stat. 852; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115, provided for retirement after 25 years' service of regular majors in Women's Army Corps, Army Nurse Corps, and Army Medical Specialist Corps, prior to repeal by Pub. L. 90–130, §1(13), Nov. 8, 1967, 81 Stat. 376.

A prior section 3916, acts Aug. 10, 1956, ch. 1041, 70A Stat. 226; Aug. 21, 1957, Pub. L. 85–155, title I, §101(21), 71 Stat. 380; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115; Oct. 20, 1978, Pub. L. 95–485, title VIII, §820(i), 92 Stat. 1628, provided for retirement of a promotion-list lieutenant colonel, except as provided by section 8301 of title 5, on 30th day after he completes 28 years of service, with authority for Secretary of the Army to defer retirement in certain cases, prior to repeal by Pub. L. 96–513, title II, §217(a), title VII, §701, Dec. 12, 1980, 94 Stat. 2886, 2955, effective Sept. 15, 1981. See section 633 of this title.

Prior sections 3917 and 3918 were renumbered sections 7317 and 7318 of this title, respectively.

A prior section 3919, act Aug. 10, 1956, ch. 1041, 70A Stat. 226, authorized Secretary of the Army, when he determined that there were too many commissioned officers on active list of Regular Army in any grade who have at least 30 years of service, to convene a board of at least five general officers of Regular Army to make recommendations for retirement and to retire any officer so recommended, prior to repeal by Pub. L. 96–513, title II, §217(a), title VII, §701, Dec. 12, 1980, 94 Stat. 2886, 2955, effective Sept. 15, 1981.

A prior section 3920 was renumbered section 7320 of this title.

A prior section 3921 was renumbered section 7321 of this title.

Another prior section 3921, acts Aug. 10, 1956, ch. 1041, 70A Stat. 226; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115, provided for retirement of a promotion-list colonel, except as provided by section 8301 of title 5, on the 30th day after he completes 30 years of service or the 5th anniversary of the date of his appointment in that regular grade, whichever is later, with authority for the Secretary of the Army to defer retirement in certain cases, prior to repeal by Pub. L. 96–513, title II, §217(a), title VII, §701, Dec. 12, 1980, 94 Stat. 2886, 2955, effective Sept. 15, 1981. See section 634 of this title.

Prior sections 3922 and 3923 were repealed by Pub. L. 96–513, title II, §217(a), title VII, §701, Dec. 12, 1980, 94 Stat. 2886, 2955, effective Sept. 15, 1981.

Section 3922, acts Aug. 10, 1956, ch. 1041, 70A Stat. 227; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115, provided for retirement of a regular grade brigadier general, other than a professor of the United States Military Academy, except as provided by section 8301 of title 5, on the 30th day after he completes 30 years of service or the 5th anniversary of the date of his appointment in that regular grade, whichever is later, with authority for the Secretary of the Army to defer retirement in certain cases. See section 635 of this title.

Section 3923, acts Aug. 10, 1956, ch. 1041, 70A Stat. 227; Nov. 2, 1966, Pub. L. 89–718, §3, 80 Stat. 1115, provided for retirement of a regular grade major general, except as provided by section 8301 of title 5, on the 30th day after he completes 35 years of service or the 5th anniversary of his appointment in that regular grade, whichever is later, with authority for the Secretary of the Army to defer retirement in certain cases. See section 636 of this title.

Prior sections 3924 to 3926 were renumbered sections 7324 to 7326 of this title, respectively.

A prior section 3927, acts Aug. 10, 1956, ch. 1041, 70A Stat. 228; Aug. 21, 1957, Pub. L. 85–155, title I, §101(22), 71 Stat. 380; May 20, 1958, Pub. L. 85–422, §11(a)(4), 72 Stat. 131; Sept. 2, 1958, Pub. L. 85–861, §1(98), 72 Stat. 1488, related to computation of years of service for determining whether a regular commissioned officer should be retired under section 3913, 3915, 3916, 3919, 3921, 3922, or 3923 of this title and for determining the retired pay of officers of the Regular Army retired under section 3913, 3915, 3916, 3919, 3921, 3922, or 3923 of this title, prior to repeal by Pub. L. 96–513, title II, §217(a), title VII, §701, Dec. 12, 1980, 94 Stat. 2886, 2955, effective Sept. 15, 1981. See section 1405 of this title.

A prior section 3928, act Aug. 10, 1956, ch. 1041, 70A Stat. 229, related to computation of years of service of commissioned officers of the Army Nurse Corps or Women's Medical Specialist Corps for the purposes of retirement under former section 3912 of this title, or retirement pay under section 3991 of this title, prior to repeal by Pub. L. 85–155, title IV, §401(1), Aug. 21, 1957, 71 Stat. 390.

A prior section 3929 was renumbered section 7329 of this title.

Prior sections 3961 and 3962 were renumbered sections 7341 and 7342 of this title, respectively.

A prior section 3963 was renumbered section 7343 of this title.

Another prior section 3963, acts Aug. 10, 1956, ch. 1041, 70A Stat. 230; Sept. 2, 1958, Pub. L. 85–861, §1(60), (100), 72 Stat. 1462, 1489; Dec. 12, 1980, Pub. L. 96–513, title V, §502(20), 94 Stat. 2910, related to higher grade for service during certain periods for regular and reserve commissioned officers, prior to repeal by Pub. L. 99–145, title XIII, §1301(b)(2)(A), (C), Nov. 8, 1985, 99 Stat. 735, with such repeal not applicable in the case of a member of the Regular Army described in section 3963 of this title, as such section was in effect on the day before Nov. 8, 1985.

Prior sections 3964 to 3966, 3991, and 3992 were renumbered sections 7344 to 7346, 7361, and 7362 of this title, respectively.

Amendments

2021—Pub. L. 116–283, §1838(b), as amended by Pub. L. 117–81, §1701(v)(2)(A), renumbered section 2410n of this title as this section.

Subsec. (g)(1). Pub. L. 116–283, §1883(b)(2), substituted "section 3012" for "section 2302(2)".

2008—Subsecs. (a), (b). Pub. L. 110–181 added subsecs. (a) and (b) and struck out former subsecs. (a) and (b) which read as follows:

"(a) Market Research.—Before purchasing a product listed in the latest edition of the Federal Prison Industries catalog under section 4124(d) of title 18, the Secretary of Defense shall conduct market research to determine whether the Federal Prison Industries product is comparable to products available from the private sector that best meet the Department's needs in terms of price, quality, and time of delivery.

"(b) Competition Requirement.—If the Secretary determines that a Federal Prison Industries product is not comparable in price, quality, or time of delivery to products available from the private sector that best meet the Department's needs in terms of price, quality, and time of delivery, the Secretary shall use competitive procedures for the procurement of the product or shall make an individual purchase under a multiple award contract. In conducting such a competition or making such a purchase, the Secretary shall consider a timely offer from Federal Prison Industries."

2006—Subsec. (b). Pub. L. 109–163 substituted "competition" for "compeititon" in text.

2002—Subsec. (a). Pub. L. 107–314, §819(a)(1)(A), substituted "Market Research" for "Market Research Before Purchase" in heading and "comparable to products available from the private sector that best meet the Department's needs in terms of price, quality, and time of delivery" for "comparable in price, quality, and time of delivery to products available from the private sector".

Subsec. (b). Pub. L. 107–314, §819(a)(1)(B), added subsec. (b) and struck out heading and text of former subsec. (b). Text read as follows: "If the Secretary determines that a Federal Prison Industries product is not comparable in price, quality, and time of delivery to products available from the private sector, the Secretary shall use competitive procedures for the procurement of the product. In conducting such a competition, the Secretary shall consider a timely offer from Federal Prison Industries for award in accordance with the specifications and evaluation factors specified in the solicitation."

Subsecs. (c) to (g). Pub. L. 107–314, §819(a)(1)(C), added subsecs. (c) to (g).

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Effective Date of 2008 Amendment

Pub. L. 110–181, div. A, title VIII, §827(a)(2), Jan. 28, 2008, 122 Stat. 228, as amended by Pub. L. 111–383, div. A, title X, §1075(f)(4), Jan. 7, 2011, 124 Stat. 4376, provided that: "The amendment made by paragraph (1) [amending this section] shall take effect 60 days after the date of the enactment of this Act [Jan. 28, 2008]."

Effective Date of 2002 Amendment

Pub. L. 107–314, div. A, title VIII, §819(a)(2), Dec. 2, 2002, 116 Stat. 2613, provided that: "Paragraph (1) [amending this section] and the amendments made by such paragraph shall take effect as of October 1, 2001."

Effective Date

Pub. L. 107–107, div. A, title VIII, §811(b), Dec. 28, 2001, 115 Stat. 1181, provided that: "Section 2410n of title 10, United States Code [now 10 U.S.C. 3905] (as added by subsection (a)), shall apply to purchases initiated on or after October 1, 2001."

Regulatory Implementation

Pub. L. 107–314, div. A, title VIII, §819(b), Dec. 2, 2002, 116 Stat. 2613, provided that:

"(1) Proposed revisions to the Department of Defense Supplement to the Federal Acquisition Regulation to implement this section shall be published not later than 90 days after the date of the enactment of this Act [Dec. 2, 2002], and not less than 60 days shall be provided for public comment on the proposed revisions.

"(2) Final regulations shall be published not later than 180 days after the date of the enactment of this Act and shall be effective on the date that is 30 days after the date of the publication."

List of Products for Which Federal Prison Industries Has Significant Market Share

Pub. L. 110–181, div. A, title VIII, §827(b), Jan. 28, 2008, 122 Stat. 228, provided that:

"(1) Initial list.—Not later than 60 days after the date of the enactment of this Act [Jan. 28, 2008], the Secretary of Defense shall publish a list of product categories for which Federal Prison Industries' share of the Department of Defense market is greater than 5 percent, based on the most recent fiscal year for which data is available.

"(2) Modification.—The Secretary may modify the list published under paragraph (1) at any time if the Secretary determines that new data require adding a product category to the list or omitting a product category from the list.

"(3) Consultation.—The Secretary shall carry out this subsection in consultation with the Administrator for Federal Procurement Policy."