The Senate passed the Carl Levin and Howard P. “Buck” McKeon National Defense Authorization Act for Fiscal Year 2015 [pdf] on Friday, December 12, 2015. President Obama is expected to sign the bill into law. The $585 billion bill authorizes the Pentagon’s activities in FY 2015. It includes $521.3 billion in base defense spending and another $64 billion in war funding. Here is a summary of the procurement reform initiatives that will be relevant to contractors in the upcoming year:

  1. Cyber incident reporting for operationally critical contractors. Section 1632 of the 2015 NDAA directs the Secretary of Defense to designate and notify “operationally critical contractors,” a term narrowly defined in the bill. After notification, designated contractors will be required to report to the Department of Defense each cyber incident with respect to any network or information system of such contractor. Reports must include: an assessment of the effect on the contractor’s ability to meet the Department’s contractual requirements; the technique used in the cyber incident; any sample of malicious software obtained; and a summary of information compromised by the incident. Despite the disclosure requirement, section 1632 provides for protection of contractor trade secrets and confidential commercial or financial information. It also limits the dissemination of information obtained to relevant entities and agencies.
  2. Enhanced authority for non-DOD Chief Information Officers. Section 831 of the NDAA increases the role of Chief Information Officers of agencies other than the Department of Defense. It provides that an agency may not enter into a contract for information technology unless the contract has first been reviewed and approved by the agency’s Chief Information Officer. The head of each covered agency must ensure that its Chief Information Officer has a significant role in all annual and multi-year planning, budgeting, and reporting related to information technology. The bill requires the Director of OMB and the Chief Information Officers of appropriate agencies to increase the efficiency and effectiveness of information technology investments and to develop opportunities to consolidate the acquisition and management of information technology services. The Chief Information Officer of each covered agency is directed to inventory agency data centers and develop a multi-year strategy for consolidation and optimization of those data centers inventoried.
  3. DOD CIO positions consolidated. Section 901 of the 2015 NDAA incorporates a DOD proposal to combine the positions of Chief Information Officer and Deputy Chief Management Officer into the position of Under Secretary of Defense for Business Management and Information. The new Under Secretary will oversee business operations, personnel, and IT projects and will be appointed by the President with the advice and consent of the Senate. This change will not take place until the next administration.
  4. Procurement of defense design-build construction services. Section 814 of the 2015 NDAA simplifies the process of design-build contracting. Existing law requires the solicitation in a two-phase procurement to state the maximum number of qualified offerors that will be permitted to submit proposals for the second phase of the procurement. The default limit on the number of offerors is five, which applies “unless the agency determines with respect to an individual solicitation that a specified number greater than 5 is in the Government’s interest and is consistent with the purposes and objectives of the two-phase selection process.” 10 U.S.C. § 2305a(d). Section 814 of the 2015 NDAA replaces this agency determination with a written justification by the contracting officer, which then must be approved by “the head of the contracting activity, delegable to a level no lower than the senior contracting official within the contracting activity.” Section 824 of the NDAA bans the use of reverse auctions for the procurement of design-build construction unless specifically authorized in another law.
  5. Reimbursement ban for contractor Congressional investigations. Section 857 prohibits reimbursement of contractor costs incurred in conjunction with Congressional investigations or inquiries into issues that are the subject matter of a proceeding that results in a disposition.
  6. Extension of contractor services spending restrictions. Section 813 of the 2015 NDAA extends for another year the aggregate annual cap on amounts spent on contract services. This provision mimics section 802 of the FY 2014 NDAA [pdf] and limits the amount spent on these contracts to the amount requested in the President’s budget for FY 2010. Additionally, the Secretaries of the military departments and heads of Defense Agencies must continue their 10-percent-per-fiscal-year spending reductions in contracts for inherently governmental functions and staff augmentation. Section 813 also requires reductions from FY 2012 and FY 2013 that have not yet been implemented to be implemented in FY 2015.