United States: The 2018 NDAA In Detail

On Tuesday, December 12, 2017, President Trump signed the fiscal year 2018 (FY18) National Defense Authorization Act (NDAA) into law (Pub. L. 115-91). An annual defense policy bill, the NDAA is a critical piece of legislation for the contracting community because it provides the funding authority for programs and activities of the Department of Defense (DoD), the largest procurer of goods and services within the US government. In addition, the NDAA is a vehicle for encouraging in some cases, and requiring in others, changes to both DoD and government-wide procurement practices. As the NDAA moved through the legislative process, Dentons and other commentators analyzed proposed provisions, some of which were adopted as written or in a revised form, and many of which were not included in the final bill. It is critical for the contracting community to understand the provisions of the NDAA, as enacted.

Budget/Funding

The NDAA provides over $700 billion in funding for the DoD, defense-related programs of the Department of Energy, and defense-related activities of other federal agencies. This amount reflects a significant investment in the DoD and exceeds the Trump administration's budget request by billions of dollars. The increase reflects Congressional concerns that the DoD requires significant investment to rebuild and improve the readiness of US military forces after years of protracted engagements in the Middle East and South Asia, amid rising tensions on the Korean peninsula and to counter a resurgent Russian Federation and its growing geopolitical influence, among a host of other US national security issues and needs the bill seeks to address. Notably, the spending authorized in the NDAA exceeds the $549 billion defense spending cap for FY18 imposed by the 2011 Budget Control Act (BCA). Congressional Republicans and Democrats must strike a compromise to raise the BCA-imposed caps on defense and domestic spending to permit FY18 funding for the DoD at the full authorized amount without triggering automatic sequestration in January 2018.

Commercial items

The NDAA includes a number of provisions that reinforce the Congress' commitment to the acquisition of commercial items under commercial terms. These include requirements for a reassessment of what general procurement statutes should apply to commercial items and the establishment of a so-called "Amazon for Government" online portal for the acquisition of commercial off-the-shelf or COTS items.

  • Section 846 requires the DoD to adopt a phased approach to begin procurement of certain commercial items via multiple online marketplaces. No later than 90 days after the date of enactment of the NDAA, the Office of Management and Budget (OMB) and General Services Administration (GSA) must submit an implementation plan to Congress. No later than one year after submission of the implementation plan, the OMB and GSA must conduct a market analysis of commercial e-commerce portal providers and recommend "any changes to, or exemptions from, laws necessary for effective implementation" of the program. No later than two years after the date of submission of the implementation plan, the OMB and GSA must issue guidance to implement and govern the use of the program, such as protocols for compliance with product screening requirements, data security and data analytics. The delay in full implementation of the program was incorporated into the provision during conference consideration of the NDAA to address concerns from various segments of the contracting community. The goal of the provision, originally introduced by House Armed Services Committee Chairman Mac Thornberry (R-TX 13th), is to streamline and simplify the DoD's acquisition of many COTS items, while creating cost-savings and promoting increased transparency and accountability.
  • Section 848 provides that the DoD's acquisition of an item through commercial item procedures constitutes a "prior determination" that the item is a commercial item that is binding on future DoD acquisitions unless (i) the head of contracting authority determines that the prior determination was improper or (ii) the senior procurement executive for a military service or the DoD determines that it is no longer appropriate to acquire the item under commercial item procedures. This change may improve consistency within the DoD acquisitions system and streamline the determination process for future acquisitions.
  • Section 849 requires the Secretary of Defense to engage in a comprehensive review of the procurement statutes and regulations that are not required by statute to be applied to commercial item acquisitions but have nevertheless been applied through the DoD Federal Acquisition Regulation Supplement (DFARS) based on a determination that it is in the government's interest to do so. The Secretary of Defense is required to review each provision and provide an exemption from the statute or regulation for commercial item acquisitions unless he or she "determines there is a specific reason not to provide the exemption." This effort must be completed by December 12, 2018. The inclusion of this provision provides a strong signal to the DoD that Congress wants the number of provisions applicable to commercial item acquisitions to be reduced.   

Cost and pricing

The NDAA includes a number of provisions that raise the thresholds for application of a number of procurement regulations, including the thresholds for micro-purchases, simplified acquisitions and the submission of cost or pricing data. These provisions reflect a recognition that more onerous or complex acquisition regulations should be limited to more costly procurements. The NDAA also reflects an emphasis on the use of commercial risk metrics when auditing contractors, and the use of non-government auditors to eliminate the backlog of pending incurred cost audits.  

  • Section 803 requires the DoD, by October 1, 2020, (i) to comply with "commercially accepted standards of risk and materiality" in the performance of incurred cost audits and (ii) to begin using private auditors "to perform a sufficient number" of such audits. Among Congress' stated goals in requiring the DoD to begin using private auditors are (i) the elimination, by October 1, 2020, of the Defense Contract Audit Agency's incurred cost audit backlog and (ii) the completion of all incurred cost audits within one year or less from the date of receipt of a qualified incurred cost submission.
  • Section 805 increases the simplified acquisition threshold to $250,000 from $100,000, and Section 806 increases the micro-purchase threshold to $10,000 from $3,000.
  • Section 811 increases to $2 million from $750,000 the threshold for the submission of cost or pricing data for prime contracts awarded after June 30, 2018. The threshold for modifications to those prime contracts, subcontracts awarded under those prime contracts, and modifications to those subcontracts also increases to $2 million. The new threshold will be subject to periodic updating to keep pace with inflation pursuant to 41 USC § 1908. This provision should reduce the number of contracts and subcontracts, and modifications thereto, that are subject to the Truthful Cost or Pricing Data statute (formerly known as the Truth in Negotiations Act, or TINA) and reduce the associated liability for alleged defective pricing.
  • Section 815 limits a contracting officer's ability to unilaterally definitize any undefinitized contract action with a value greater than $50 million. If the contractor objects to any element of definitization, including price and specifications, the matter must be referred to the service acquisition executive for the military service or the DoD Undersecretary of Defense for Acquisition and Sustainment (a position that will be created effective February 1, 2018, and filled by current Undersecretary of Defense for Acquisition, Technology, and Logistics Ellen Lord). This section (i) signals to the DoD acquisition community that Congress expects the parties to reach a bilateral definitization and (ii) incentivizes the contracting officer to reach a compromise rather than seek high-level approval for a unilateral definitization.  
  • Section 820 modifies the definition of "subcontractor" to clarify that agreements for the purchase of commodity items that are not identified with a particular contract and that support contracts with the federal government and other parties are not "subcontracts" for purposes of government acquisition requirements. This is a welcome clarification that will likely exclude a number of agreements from flow-down and other subcontract requirements and allow for the acquisition of these materials under standard industry terms.

Competition/Bid protests

The NDAA includes two significant provisions affecting disappointed offerors and their ability to seek redress through a bid protest. In addition, the NDAA reflects a continued congressional view that lowest-price technically acceptable (LPTA) acquisition methodologies should be restricted to commodity or nontechnical items.

  • Section 818 provides for enhanced debriefing of disappointed offerors after a contract award. First, disappointed offerors in an acquisition that exceeds $100 million will be provided, as part of their debriefing, a redacted source selection decision document. The actual scope of the redactions, of course, will affect the usefulness of this provision (and may pose some concern to the awardee that its proprietary materials will be released despite the requirement for redactions). An unredacted version of the source selection decision is typically part of the administrative record in protests when a protective order is in place. Small businesses and nontraditional contractors may request this disclosure in acquisitions exceeding $10 million. Second, a debriefing is required for all contract and task order awards for contracts valued at $10 million or greater. Third, within two business days of the debriefing, the offeror will have an opportunity to pose additional questions in writing, and the agency will have five business days to respond to the questions. The debriefing is not considered to be "concluded"—the triggering event for the five-day time period to submit a protest to the Government Accountability Office (GAO) that requires the contract award to be stopped—until the agency's responses are provided.
  • Section 822 expands the limitations on the use of LPTA acquisition methodologies that were enacted in the FY17 National Defense Authorization Act (Pub. L. 114-328). Specifically, the additional provisions limit the use of LPTA to acquisitions where: (i) the DoD will not realize any (or only minimal) additional innovation or future technological advantage by using a different acquisition methodology; and (ii) the goods that are being acquired are predominantly expendable in nature, nontechnical or have a short life expectancy or shelf life. This provision appears to be a response to a recent increase in the DoD's use of LPTA acquisitions, including for more complicated or technical acquisitions, as a strategy to limit or avoid protests. Notably, the NDAA also includes Section 832, which outright prohibits the use of LPTA acquisitions for an "engineering and manufacturing development contract of a major defense acquisition program." 
  • Section 827 establishes a pilot program that will effectively run between October 1, 2019 and September 30, 2022, which will require certain unsuccessful protestors before the GAO to reimburse the DoD for its costs incurred defending against the protest. The pilot program will only cover protestors who: (i) had $250 million in revenues (in 2017 dollars) in the preceding year; and (ii) had a protest denied in an opinion issued by GAO. Importantly, the pilot program does not apply to protests that are brought before the US Court of Federal Claims. Affected contractors, therefore, may consider filing their protests with the Court of Federal Claims rather than with the GAO in order to avoid this fee-shifting provision. The contracting community will likely have to wait until the program is implemented in order to assess how the DoD will determine its costs, and more importantly, whether the existence of this pilot program will affect the DoD's decisions to take corrective actions versus litigating a protest.

Conclusion

The FY18 NDAA includes wide-ranging and complex changes to the DoD acquisition process and related procedures. Contractors doing business with the DoD or seeking to do business with the DoD must stay apprised of the evolving acquisition landscape to best position themselves for successful partnerships with the agency in 2018.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
22 Jan 2019, Seminar, San Francisco, United States

Dentons is pleased to offer a full day of classes, just in time for the California MCLE compliance period deadline of January 31, 2019.*

30 Jan 2019, Other, Chicago, United States

Please join us on January 30, 2019, for the Fifth Annual Courageous Counsel Leadership Institute. This year's theme is "Risk and reward: Creating a culture that promotes innovation, change and growth.

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions