10 USC 2461 - Sec. 2461. Commercial or industrial type functions: required studies and reports before conversion to contractor performance

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(a) Reporting and Analysis Requirements as Precondition to Change in Performance. - A commercial or industrial type function of the Department of Defense that, as of October 1, 1980, was being performed by Department of Defense civilian employees may not be changed to performance by the private sector until the Secretary of Defense fully complies with the reporting and analysis requirements specified in subsections (b) and (c). (b) Notification and Elements of Analysis. - (1) Before commencing to analyze a commercial or industrial type function described in subsection (a) for possible change to performance by the private sector, the Secretary of Defense shall submit to Congress a report containing the following: (A) The function to be analyzed for possible change. (B) The location at which the function is performed by Department of Defense civilian employees. (C) The number of civilian employee positions potentially affected. (D) The anticipated length and cost of the analysis, and a specific identification of the budgetary line item from which funds will be used to cover the cost of the analysis. (E) A certification that a proposed performance of the commercial or industrial type function by persons who are not civilian employees of the Department of Defense is not a result of a decision by an official of a military department or Defense Agency to impose predetermined constraints or limitations on such employees in terms of man years, end strengths, full-time equivalent positions, or maximum number of employees. (2) The duty to prepare a report under paragraph (1) may be delegated. A report prepared below the major command or claimant level of a military department, or below the equivalent level in a Defense Agency, pursuant to any such delegation shall be reviewed at the major command, claimant level, or equivalent level, as the case may be, before submission to Congress. (3) An analysis of a commercial or industrial type function for possible change to performance by the private sector shall include the following: (A) An examination of the cost of performance of the function by Department of Defense civilian employees and by one or more private contractors to demonstrate whether change to performance by the private sector will result in savings to the Government over the life of the contract, including in the examination the following: (i) The cost to the Government, estimated by the Secretary of Defense (based on offers received), for performance of the function by the private sector. (ii) The estimated cost to the Government of Department of Defense civilian employees performing the function. (iii) In addition to the costs referred to in clause (i), an estimate of all other costs and expenditures that the Government would incur because of the award of such a contract. (B) An examination of the potential economic effect of performance of the function by the private sector on the following: (i) Employees of the Department of Defense who would be affected by such a change in performance. (ii) The local community and the Government, if more than 50 employees of the Department of Defense perform the function. (C) An examination of the effect of performance of the function by the private sector on the military mission associated with the performance of the function. (4)(A) A representative individual or entity at a facility where a commercial or industrial type function is analyzed for possible change in performance may submit to the Secretary of Defense an objection to the analysis on the grounds that the report required by paragraph (1) has not been submitted or that the certification required by paragraph (1)(E) is not included in the report submitted as a condition for the analysis.

The objection shall be in writing and shall be submitted within 90 days after the following date: (i) In the case of a failure to submit the report when required, the date on which the representative individual or an official of the representative entity authorized to pose the objection first knew or should have known of that failure. (ii) In the case of a failure to include the certification in a submitted report, the date on which the report was submitted to Congress. (B) If the Secretary determines that the report required by paragraph (1) was not submitted or that the required certification was not included in the submitted report, the commercial or industrial type function covered by the analysis to which objected may not be the subject of a solicitation of offers for, or award of, a contract until, respectively, the report is submitted or a report containing the certification in full compliance with the certification requirement is submitted. (c) Submission of Analysis Results. - (1) Upon the completion of an analysis of a commercial or industrial type function described in subsection (a) for possible change to performance by the private sector, the Secretary of Defense shall submit to Congress a report containing the results of the analysis, including the results of the examinations required by subsection (b)(3). (2) The report shall also contain the following: (A) The date when the analysis of the function was commenced. (B) The Secretary's certification that the Government calculation of the cost of performance of the function by Department of Defense civilian employees is based on an estimate of the most cost effective manner for performance of the function by Department of Defense civilian employees. (C) The number of Department of Defense civilian employees who were performing the function when the analysis was commenced and the number of such employees whose employment was or will be terminated or otherwise affected by changing to performance of the function by the private sector or by implementation of the most efficient organization of the function. (D) The Secretary's certification that the factors considered in the examinations performed under subsection (b)(3), and in the making of the decision regarding changing to performance of the function by the private sector or retaining performance in the most efficient organization of the function, did not include any predetermined personnel constraint or limitation in terms of man years, end strength, full-time equivalent positions, or maximum number of employees. (E) A statement of the potential economic effect of implementing the decision regarding changing to performance of the function by the private sector or retaining performance in the most efficient organization of the function on each affected local community, as determined in the examination under subsection (b)(3)(B)(ii). (F) A schedule for completing the change to performance of the function by the private sector or implementing the most efficient organization of the function. (G) In the case of a commercial or industrial type function performed at a Center of Industrial and Technical Excellence designated under section 2474(a) of this title or an Army ammunition plant, a description of the effect that the manner of performance of the function, and administration of the resulting contract if any, will have on the overhead costs of the center or ammunition plant, as the case may be. (H) The Secretary's certification that the entire analysis is available for examination. (3)(A) If a decision is made to change the commercial or industrial type function that was the subject of the analysis to performance by the private sector, the change of the function to contractor performance may not begin until after the submission of the report required by paragraph (1). (B) Notwithstanding subparagraph (A), in the case of a commercial or industrial type function performed at a Center of Industrial and Technical Excellence designated under section 2474(a) of this title or an Army ammunition plant, the change of the function to contractor performance may not begin until at least 60 days after the submission of the report. (d) Waiver for Small Functions. - Subsections (a) through (c) and subsection (g) shall not apply to a commercial or industrial type function of the Department of Defense that is being performed by 50 or fewer Department of Defense civilian employees. (e) Waiver for the Purchase of Products and Services of the Blind and Other Severely Handicapped Persons. - Subsections (a) through (c) and subsection (g) shall not apply to a commercial or industrial type function of the Department of Defense that - (1) is included on the procurement list established pursuant to section 2 of the Javits-Wagner-O'Day Act (41 U.S.C. 47); or (2) is planned to be changed to performance by a qualified nonprofit agency for the blind or by a qualified nonprofit agency for other severely handicapped persons in accordance with that Act. (f) Additional Limitations. - (1) A commercial or industrial type function of the Department of Defense that on October 1, 1980, was being performed by Department of Defense civilian employees may not be changed to performance by a private contractor to circumvent a civilian personnel ceiling. (2) In no case may a commercial or industrial type function being performed by Department of Defense personnel be modified, reorganized, divided, or in any way changed for the purpose of exempting from the requirements of subsection (a) the change of all or any part of such function to performance by a private contractor. (g) Annual Reports. - Not later than June 30 of each fiscal year, the Secretary of Defense shall submit to Congress a written report describing the extent to which commercial and industrial type functions were performed by Department of Defense contractors during the preceding fiscal year. The Secretary shall include in each such report an estimate of the percentage of commercial and industrial type functions of the Department of Defense that will be performed by Department of Defense civilian employees, and the percentage of such functions that will be performed by private contractors, during the fiscal year during which the report is submitted. (h) Inapplicability During War or Emergency. - The provisions of this section shall not apply during war or during a period of national emergency declared by the President or Congress.

Historical And Revision Notes

Section is based on Pub. L. 96-342, title V, Sec. 502, Sept. 8, 1980, 94 Stat. 1086, as amended by Pub. L. 97-252, title XI, Sec. 1112(a), Sept. 8, 1982, 96 Stat. 747; Pub. L. 99-145, title XII, Sec. 1234(a), Nov. 8, 1985, 99 Stat. 734; Pub. L. 99-661, div. A, title XII, Sec. 1221, Nov. 14, 1986, 100 Stat. 3976.

References In Text

The Javits-Wagner-O'Day Act, referred to in subsec. (e), is act June 25, 1938, ch. 697, 52 Stat. 1196, as amended, which is classified to sections 46 to 48c of Title 41, Public Contracts.

For complete classification of this Act to the Code, see Short Title note set out under section 46 of Title 41 and Tables.

Amendments

2002 - Subsec. (c). Pub. L. 107-314 amended heading and text of subsec. (c) generally.

Prior to amendment, text related to the report to Congress by the Secretary of Defense upon a decision to change the commercial or industrial type function that was the subject of the analysis to performance by the private sector, with requirements for contents of the report and submission of the report prior to the change of the function to contractor performance. 2001 - Subsec. (g). Pub. L. 107-107 substituted "June 30" for "February 1". 2000 - Subsec. (b)(1)(D). Pub. L. 106-398, Sec. 1 [[div. A], title III, Sec. 351(a)], inserted before period ", and a specific identification of the budgetary line item from which funds will be used to cover the cost of the analysis". Subsec. (c)(1). Pub. L. 106-398, Sec. 1 [[div. A], title III, Sec. 351(b)], added subpars. (A), (D), (E), and (G) and redesignated former subpars. (A), (B), (C), (D), and (E) as (B), (C), (F), (H), and (I), respectively.

Subsec. (c)(2), (3). Pub. L. 106-398, Sec. 1 [[div. A], title III, Sec. 352], added par. (2) and redesignated former par. (2) as (3). 1999 - Subsec. (b)(3)(B)(ii). Pub. L. 106-65 substituted "50 employees" for "75 employees". 1998 - Subsec. (a). Pub. L. 105-261, Sec. 342(a)(2), added subsec. (a) and struck out former subsec. (a) which provided that commercial or industrial type functions of the Department of Defense that on Oct. 1, 1980, were being performed by Department of Defense civilian employees could not be converted to performance by private contractors unless the Secretary of Defense provided certain notices, information, certifications, and reports to Congress.

Subsec. (b). Pub. L. 105-261, Sec. 342(a)(2), added subsec. (b) and struck out heading and text of former subsec. (b). Text read as follows: "If, after completion of the studies required for completion of the certification and report required by paragraphs (3) and (4) of subsection (a), a decision is made to convert the function to contractor performance, the Secretary of Defense shall notify Congress of such decision.

The notification shall include the timetable for completing conversion of the function to contractor performance." Subsec. (c). Pub. L. 105-261, Sec. 342(a)(2), added subsec. (c). Former subsec. (c) redesignated (g). Subsec. (d). Pub. L. 105-261, Sec. 342(b), (c)(1), substituted "50" for "20" and inserted "and subsection (g)" after "Subsections (a) through (c)". Subsec. (e). Pub. L. 105-261, Sec. 342(c)(1), (2), inserted "and subsection (g)" after "Subsections (a) through (c)" in introductory provisions and substituted "changed" for "converted" in par. (2). Subsec. (f). Pub. L. 105-261, Sec. 342(c)(2), (3), substituted "changed" for "converted" in par. (1) and "change" for "conversion" in par. (2). Subsecs. (g), (h). Pub. L. 105-261, Sec. 342(a)(1), redesignated subsecs. (c) and (g) as (g) and (h), respectively. 1997 - Subsec. (a)(1). Pub. L. 105-85, Sec. 384(a), inserted "and the anticipated length and cost of the study" before semicolon at end. Subsec. (b). Pub. L. 105-85, Sec. 384(b), inserted at end "The notification shall include the timetable for completing conversion of the function to contractor performance." Subsec. (d). Pub. L. 105-85, Sec. 384(c), substituted "20 or fewer" for "45 or fewer". 1996 - Subsec. (e)(1). Pub. L. 104-106 substituted "the Javits-Wagner-O'Day Act (41 U.S.C. 47)" for "the Act of June 25, 1938 (41 U.S.C. 47), popularly referred to as the Wagner-O'Day Act". 1989 - Subsecs. (e) to (g). Pub. L. 101-189 added subsec. (e) and redesignated former subsecs. (e) and (f) as (f) and (g), respectively.

EFFECTIVE DATE OF 1998 AMENDMENT

Pub. L. 105-261, div. A, title III, Sec. 342(d), Oct. 17, 1998, 112 Stat. 1976, provided that: "The amendments made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 17, 1998], but the amendments shall not apply with respect to a conversion of a function of the Department of Defense to performance by a private contractor concerning which the Secretary of Defense provided to Congress, before the date of the enactment of this Act, a notification under paragraph (1) of section 2461(a) of title 10, United States Code, as in effect on the day before the date of the enactment of this Act."

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 251 of Title 41, Public Contracts.

DELAYED IMPLEMENTATION OF REVISED OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-76 BY DEPARTMENT OF DEFENSE Pub. L. 108-136, div. A, title III, Sec. 335, Nov. 24, 2003, 117 Stat. 1443, provided that: "(a) Limitation Pending Report. - No studies or competitions may be conducted under the policies and procedures contained in the revised Office of Management and Budget Circular A-76 dated May 29, 2003 (68 Fed. Reg. 32134), relating to the possible contracting out of commercial activities being performed, as of such date, by employees of the Department of Defense, until the end of the 45-day period beginning on the date on which the Secretary of Defense submits to Congress a report on the effects of the revisions. "(b) Content of Report. - The report required by subsection (a) shall contain, at a minimum, specific information regarding the following: "(1) The extent to which the revised circular will ensure that employees of the Department of Defense have the opportunity to compete to retain their jobs. "(2) The extent to which the revised circular will provide appeal and protest rights to employees of the Department of Defense. "(3) Identify safeguards in the revised circular to ensure that all public-private competitions are fair, appropriate, and comply with requirements of full and open competition. "(4) The plans of the Department to ensure an appropriate phase-in period for the revised circular, as recommended by the Commercial Activities Panel of the Government Accounting Office in its April 2002 report to Congress, including recommendations for any legislative changes that may be required to ensure a smooth and efficient phase-in period. "(5) The plans of the Department to provide training to employees of the Department of Defense regarding the revised circular, including how the training will be funded, how employees will be selected to receive the training, and the number of employees likely to receive the training. "(6) The plans of the Department to collect and analyze data on the costs and quality of work contracted out or retained in-house as a result of a sourcing process conducted under the revised circular." PILOT PROGRAM FOR BEST-VALUE SOURCE SELECTION FOR PERFORMANCE OF INFORMATION TECHNOLOGY SERVICES Pub. L. 108-136, div. A, title III, Sec. 336, Nov. 24, 2003, 117 Stat. 1444, provided that: "(a) Authority to Use Best-Value Criterion. - The Secretary of Defense may carry out a pilot program for the procurement of information technology services for the Department of Defense that uses a best-value criterion in the selection of the source for the performance of the information technology services. "(b) Required Examination Under Pilot Project. - Under the pilot program, the Secretary of Defense shall modify the examination otherwise required by section 2461(b)(3)(A) of title 10, United States Code, to be an examination of the performance of an information technology services function by Department of Defense civilian employees and by one or more private contractors to demonstrate whether - "(1) a change to performance by the private sector will result in the best value to the Government over the life of the contract, as determined in accordance with the competition requirements of Office of Management and Budget Circular A-76; and "(2) certain benefits exist, in addition to price, that warrant performance of the function by a private sector source at a cost higher than that of performance by Department of Defense civilian employees. "(c) Exemption for Pilot Program. - Section 2462(a) of title 10, United States Code, does not apply to the procurement of information technology services under the pilot program. "(d) Duration of Pilot Program. - (1) The authority to carry out the pilot program begins on the date on which the Secretary of Defense submits to Congress the report on the effect of the recent revisions to Office of Management and Budget Circular A-76, as required by section 335 of this Act [set out above], and expires on September 30, 2008. "(2) The expiration of the pilot program shall not affect the selection of the source for the performance of an information technology services function for the Department of Defense for which the analysis required by section 2461(b)(3) of title 10, United States Code, has been commenced before the expiration date or for which a solicitation has been issued before the expiration date. "(e) GAO Review. - Not later than February 1, 2008, the Comptroller General shall submit to Congress a report containing - "(1) a review of the pilot program to assess the extent to which the pilot program is effective and is equitable for the potential public sources and the potential private sources of information technology services for the Department of Defense; and "(2) any other conclusions of the Comptroller General resulting from the review. "(f) Information Technology Service Defined. - In this section, the term 'information technology service' means any service performed in the operation or maintenance of information technology (as defined in section 11101 of title 40, United States Code) that is necessary for or beneficial to the accomplishment of the authorized functions of the Department of Defense (other than functions which the Secretary of Defense determines must be performed by military or Government personnel)." PILOT MANPOWER REPORTING SYSTEM IN DEPARTMENT OF THE ARMY Pub. L. 107-107, div. A, title III, Sec. 345(a)-(c), Dec. 28, 2001, 115 Stat. 1061, 1062, provided that: "(a) Annual Reporting Requirement. - Not later than March 1 of each of the fiscal years 2002 through 2004, the Secretary of the Army shall submit to Congress a report describing the use during the previous fiscal year of non-Federal entities to provide services to the Department of the Army. "(b) Content of Report. - Using information available from existing data collection and reporting systems available to the Department of the Army and the non-Federal entities referred to in subsection (a), the report shall - "(1) specify the number of work year equivalents performed by individuals employed by non-Federal entities in providing services to the Department; "(2) categorize the information by Federal supply class or service code; and "(3) indicate the appropriation from which the services were funded and the major organizational element of the Department procuring the services. "(c) Limitation on Requirement for Non-Federal Entities To Provide Information. - For the purposes of meeting the requirements set forth in subsection (b), the Secretary of the Army may not require the provision of information beyond the information that is currently provided to the Department of the Army by the non-Federal entities referred to in subsection (a), except for the number of work year equivalents associated with Department of the Army contracts, identified by contract number, to the extent this information is available to the contractor from existing data collection systems." PILOT PROGRAM FOR COMMERCIAL SERVICES Pub. L. 106-65, div. A, title VIII, Sec. 814, Oct. 5, 1999, 113 Stat. 711, provided that: "(a) Program Authorized. - The Secretary of Defense may carry out a pilot program to treat procurements of commercial services as procurements of commercial items. "(b) Designation of Pilot Program Categories. - The Secretary of Defense may designate the following categories of services as commercial services covered by the pilot program: "(1) Utilities and housekeeping services. "(2) Education and training services. "(3) Medical services. "(c) Treatment as Commercial Items. - A Department of Defense contract for the procurement of commercial services designated by the Secretary for the pilot program shall be treated as a contract for the procurement of commercial items, as defined in section 4(12) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(12)), if the source of the services provides similar services contemporaneously to the general public under terms and conditions similar to those offered to the Federal Government. "(d) Guidance. - Not later than 90 days after the date of the enactment of this Act [Oct. 5, 1999], the Secretary shall issue guidance to procurement officials on contracting for commercial services under the pilot program.

The guidance shall place particular emphasis on ensuring that negotiated prices for designated services, including prices negotiated without competition, are fair and reasonable. "(e) Unified Management of Procurements. - The Secretary of Defense shall develop and implement procedures to ensure that, whenever appropriate, a single item manager or contracting officer is responsible for entering into all contracts from a single contractor for commercial services under the pilot program. "(f) Duration of Pilot Program. - (1) The pilot program shall begin on the date that the Secretary issues the guidance required by subsection (d) and may continue for a period, not in excess of five years, that the Secretary shall establish. "(2) The pilot program shall cover Department of Defense contracts for the procurement of commercial services designated by the Secretary under subsection (b) that are awarded or modified during the period of the pilot program, regardless of whether the contracts are performed during the period. "(g) Report to Congress. - (1) The Secretary shall submit to Congress a report on the impact of the pilot program on - "(A) prices paid by the Federal Government under contracts for commercial services covered by the pilot program; "(B) the quality and timeliness of the services provided under such contracts; and "(C) the extent of competition for such contracts. "(2) The Secretary shall submit the report - "(A) not later than 90 days after the end of the third full fiscal year for which the pilot program is in effect; or "(B) if the period established for the pilot program under subsection (f)(1) does not cover three full fiscal years, not later than 90 days after the end of the designated period. "(h) Price Trend Analysis. - The Secretary of Defense shall apply the procedures developed pursuant to section 803(c) of the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 (Public Law 105-261; 112 Stat. 2081; 10 U.S.C. 2306a note) to collect and analyze information on price trends for all services covered by the pilot program and for the services in such categories of services not covered by the pilot program to which the Secretary considers it appropriate to apply those procedures." PUBLIC AVAILABILITY OF OPERATING AGREEMENTS BETWEEN MILITARY INSTALLATIONS AND FINANCIAL INSTITUTIONS Pub. L. 105-261, div. A, title III, Sec. 379, Oct. 17, 1998, 112 Stat. 1995, provided that: "With respect to an agreement between the commander of a military installation in the United States (or the designee of such an installation commander) and a financial institution that permits, allows, or otherwise authorizes the provision of financial services by the financial institution on the military installation, nothing in the terms or nature of such an agreement shall be construed to exempt the agreement from the provisions of sections 552 and 552a of title 5, United States Code." DEVELOPMENT OF STANDARD FORMS REGARDING PERFORMANCE WORK STATEMENT AND REQUEST FOR PROPOSAL FOR CONVERSION OF CERTAIN OPERATIONAL FUNCTIONS OF MILITARY INSTALLATIONS Section 389 of Pub. L. 105-85, as amended by Pub. L. 105-261, div. A, title X, Sec. 1069(b)(1), Oct. 17, 1998, 112 Stat. 2136, provided that: "(a) Standardization of Requirements. - The Secretary of Defense is authorized and encouraged to develop standard forms (to be known as a 'standard performance work statement' and a 'standard request for proposal') for use in the consideration for conversion to contractor performance of commercial services and functions at military installations. A separate standard form shall be developed for each service and function. "(b) Relationship to OMB Requirements. - A standard performance work statement or a standard request for proposal developed under subsection (a) must fulfill the basic requirements of the performance work statement or request for proposal otherwise required under the procedures and requirements of Office of Management and Budget Circular A-76 (or any successor administrative regulation or policy) in effect at the time the standard form will be used. "(c) Priority Development of Certain Forms. - In developing standard performance work statements and standard requests for proposal, the Secretary shall give first priority to those commercial services and functions that the Secretary determines have been successfully converted to contractor performance on a repeated basis. "(d) Incentive for Use. - Beginning not later than October 1, 1998, if a standard performance work statement or a standard request for proposal is developed under subsection (a) for a particular service and function, the standard form may be used in lieu of the performance work statement or request for proposal otherwise required under the procedures and requirements of Office of Management and Budget Circular A-76 in connection with the consideration for conversion to contractor performance of that service or function at a military installation. "(e) Exclusion of Multifunction Conversion. - If a commercial service or function for which a standard form is developed under subsection (a) is combined with another service or function (for which such a form has not yet been developed) for purposes of considering the services and functions at the military installation for conversion to contractor performance, a standard performance work statement or a standard request for a proposal developed under subsection (a) may not be used in the conversion process in lieu of the procedures and requirements of Office of Management and Budget Circular A-76. "(f) Effect on Other Laws. - Nothing in this section shall be construed to supersede any other requirements or limitations, specifically contained in chapter 146 of title 10, United States Code, on the conversion to contractor performance of activities performed by civilian employees of the Department of Defense. "(g) GAO Report. - Not later than June 1, 1999, the Comptroller General shall submit to Congress a report reviewing the implementation of this section. "(h) Military Installation Defined. - For purposes of this section, the term 'military installation' means a base, camp, post, station, yard, center, homeport facility for any ship, or other activity under the jurisdiction of the Department of Defense, including any leased facility." [Pub. L. 105-261, div. A, title X, Sec. 1069(b), Oct. 17, 1998, 112 Stat. 2136, provided that the amendment made by that section to section 389 of Pub. L. 105-85, set out above, is effective as of Nov. 18, 1997, and as if included in the National Defense Authorization Act for Fiscal Year 1998, Pub. L. 105-85, as enacted.] PRIVATE-SECTOR OPERATION OF CERTAIN PAYROLL, FINANCE, AND ACCOUNTING FUNCTIONS OF DEPARTMENT OF DEFENSE; PLAN; REPORT Section 353(a) of Pub. L. 104-106 provided that: "(1) Not later than October 1, 1996, the Secretary of Defense shall submit to Congress a plan for the performance by private-sector sources of payroll functions for civilian employees of the Department of Defense other than employees paid from nonappropriated funds. "(2)(A) The Secretary shall implement the plan referred to in paragraph (1) if the Secretary determines that the cost of performance by private-sector sources of the functions referred to in that paragraph does not exceed the cost of performance of those functions by employees of the Federal Government. "(B) In computing the total cost of performance of such functions by employees of the Federal Government, the Secretary shall include the following: "(i) Managerial and administrative costs. "(ii) Personnel costs, including the cost of providing retirement benefits for such personnel. "(iii) Costs associated with the provision of facilities and other support by Federal agencies. "(C) The Defense Contract Audit Agency shall verify the costs computed for the Secretary under this paragraph by others. "(3) At the same time the Secretary submits the plan required by paragraph (1), the Secretary shall submit to Congress a report on other accounting and finance functions of the Department that are appropriate for performance by private-sector sources." PILOT PROGRAM FOR PRIVATE-SECTOR OPERATION OF NAFI FUNCTIONS Section 353(b) of Pub. L. 104-106 provided that: "(1) The Secretary shall carry out a pilot program to test the performance by private-sector sources of payroll and other accounting and finance functions of nonappropriated fund instrumentalities and to evaluate the extent to which cost savings and efficiencies would result from the performance of such functions by those sources. "(2) The payroll and other accounting and finance functions designated by the Secretary for performance by private-sector sources under the pilot program shall include at least one major payroll, accounting, or finance function. "(3) To carry out the pilot program, the Secretary shall enter into discussions with private-sector sources for the purpose of developing a request for proposals to be issued for performance by those sources of functions designated by the Secretary under paragraph (2). The discussions shall be conducted on a schedule that accommodates issuance of a request for proposals within 60 days after the date of the enactment of this Act [Feb. 10, 1996]. "(4) A goal of the pilot program is to reduce by at least 25 percent the total costs incurred by the Department annually for the performance of a function referred to in paragraph (2) through the performance of that function by a private-sector source. "(5) Before conducting the pilot program, the Secretary shall develop a plan for the program that addresses the following: "(A) The purposes of the program. "(B) The methodology, duration, and anticipated costs of the program, including the cost of an arrangement pursuant to which a private-sector source would receive an agreed-upon payment plus an additional negotiated amount not to exceed 50 percent of the dollar savings achieved in excess of the goal specified in paragraph (4). "(C) A specific citation to any provisions of law, rule, or regulation that, if not waived, would prohibit the conduct of the program or any part of the program. "(D) A mechanism to evaluate the program. "(E) A provision for all payroll, accounting, and finance functions of nonappropriated fund instrumentalities of the Department of Defense to be performed by private-sector sources, if determined advisable on the basis of a final assessment of the results of the program. "(6) The Secretary shall act through the Under Secretary of Defense (Comptroller) in the performance of the Secretary's responsibilities under this subsection." DEMONSTRATION PROGRAM TO IDENTIFY OVERPAYMENTS MADE TO VENDORS Section 388(c) of Pub. L. 105-85 provided that: "Not later than December 31, 1998, the Comptroller General shall submit to Congress a report containing the results of a review by the Comptroller General of the demonstration program conducted under section 354 of the National Defense Authorization Act for Fiscal Year 1996 (Public Law 104-106; 10 U.S.C. 2461 note). In the review, the Comptroller General shall - "(1) assess the success of the methods used in the demonstration program to identify overpayments made to vendors; "(2) consider the types of overpayments identified and the feasibility of avoiding such overpayments through contract adjustments; "(3) determine the total amount of overpayments recovered under the demonstration program; and "(4) develop recommendations for improving the process by which overpayments are recovered by the Department of Defense." Section 354 of Pub. L. 104-106, as amended by Pub. L. 105-85, div. A, title III, Sec. 388(a), (b), Nov. 18, 1997, 111 Stat. 1713, 1714, provided that: "(a) In General. - The Secretary of Defense shall conduct a demonstration program to evaluate the feasibility of using private contractors to audit accounting and procurement records of the Department of Defense in order to identify overpayments made to vendors by the Department. "(b) Program Requirements. - (1) Under the demonstration program, the Secretary shall, by contract, provide for one or more persons to audit the accounting and procurement records relating to fiscal years after fiscal year 1993 of the working-capital funds and industrial, commercial, and support type activities managed through the Defense Business Operations Fund, except the Defense Logistics Agency to the extent such records have already been audited.

The Secretary may enter into more than one contract under the program. "(2) A contract under the demonstration program shall require the contractor to use data processing techniques that are generally used in audits of private-sector records similar to the records audited under the contract. "(c) Audit Requirements. - In conducting an audit under the demonstration program, a contractor shall compare Department of Defense purchase agreements (and related documents) with invoices submitted by vendors under the purchase agreements. A purpose of the comparison is to identify, in the case of each audited purchase agreement, the following: "(1) Any payments to the vendor for costs that are not allowable under the terms of the purchase agreement or by law. "(2) Any amounts not deducted from the total amount paid to the vendor under the purchase agreement that should have been deducted from that amount on account of goods and services provided to the vendor by the Department. "(3) Duplicate payments. "(4) Unauthorized charges. "(5) Other discrepancies between the amount paid to the vendor and the amount actually due the vendor under the purchase agreement. "(d) Collection Method. - (1) In the case of an overpayment to a vendor identified under the demonstration program, the Secretary shall consider the use of the procedures specified in section 32.611 of the Federal Acquisition Regulation, regarding a setoff against existing invoices for payment to the vendor, as the first method by which the Department seeks to recover the amount of the overpayment (and any applicable interest and penalties) from the vendor. "(2) The Secretary of Defense shall be solely responsible for notifying a vendor of an overpayment made to the vendor and identified under the demonstration program and for recovering the amount of the overpayment (and any applicable interest and penalties) from the vendor. "(e) Fees for Contractor. - The Secretary shall pay to the contractor under the contract entered into under the demonstration program an amount not to exceed 25 percent of the total amount recovered by the Department (through the collection of overpayments and the use of setoffs) solely on the basis of information obtained as a result of the audits performed by the contractor under the program.

When an overpayment is recovered through the use of a setoff, amounts for the required payment to the contractor shall be derived from funds available to the working-capital fund or industrial, commercial, or support type activity for which the overpayment is recovered." PROGRAM FOR IMPROVED TRAVEL PROCESS FOR DEPARTMENT OF DEFENSE Section 356 of Pub. L. 104-106, as amended by Pub. L. 105-85, div. A, title X, Sec. 1073(d)(1)(B), Nov. 18, 1997, 111 Stat. 1905, provided that: "(a) In General. - (1) The Secretary of Defense shall conduct a program to evaluate options to improve the Department of Defense travel process.

To carry out the program, the Secretary shall compare the results of the tests conducted under subsection (b) to determine which travel process tested under such subsection is the better option to effectively manage travel of Department personnel. "(2) The program shall be conducted at not less than three and not more than six military installations, except that an installation may be the subject of only one test conducted under the program. "(3) The Secretary shall act through the Under Secretary of Defense (Comptroller) in the performance of the Secretary's responsibilities under this section. "(b) Conduct of Tests. - (1) The Secretary shall conduct a test at an installation referred to in subsection (a)(2) under which the Secretary - "(A) implements the changes proposed to be made with respect to the Department of Defense travel process by the task force on travel management that was established by the Secretary in July 1994; "(B) manages and uniformly applies that travel process (including the implemented changes) throughout the Department; and "(C) provides opportunities for private-sector sources to provide travel reservation services and credit card services to facilitate that travel process. "(2) The Secretary shall conduct a test at an installation referred to in subsection (a)(2) under which the Secretary - "(A) enters into one or more contracts with a private-sector source pursuant to which the private-sector source manages the Department of Defense travel process (except for functions referred to in subparagraph (B)), provides for responsive, reasonably priced services as part of the travel process, and uniformly applies the travel process throughout the Department; and "(B) provides for the performance by employees of the Department of only those travel functions, such as travel authorization, that the Secretary considers to be necessary to be performed by such employees. "(3) Each test required by this subsection shall begin not later than 60 days after the date of the enactment of this Act [Feb. 10, 1996] and end two years after the date on which it began.

Each such test shall also be conducted in accordance with the guidelines for travel management issued for the Department by the Under Secretary of Defense (Comptroller). "(c) Evaluation Criteria. - The Secretary shall establish criteria to evaluate the travel processes tested under subsection (b). The criteria shall, at a minimum, include the extent to which a travel process provides for the following: "(1) The coordination, at the time of a travel reservation, of travel policy and cost estimates with the mission which necessitates the travel. "(2) The use of fully integrated travel solutions envisioned by the travel reengineering report of the Department of Defense dated January 1995. "(3) The coordination of credit card data and travel reservation data with cost estimate data. "(4) The elimination of the need for multiple travel approvals through the coordination of such data with proposed travel plans. "(5) A responsive and flexible management information system that enables the Under Secretary of Defense (Comptroller) to monitor travel expenses throughout the year, accurately plan travel budgets for future years, and assess, in the case of travel of an employee on temporary duty, the relationship between the cost of the travel and the value of the travel to the accomplishment of the mission which necessitates the travel. "(d) Plan for Program. - Before conducting the program, the Secretary shall develop a plan for the program that addresses the following: "(1) The purposes of the program, including the achievement of an objective of reducing by at least 50 percent the total cost incurred by the Department annually to manage the Department of Defense travel process. "(2) The methodology and anticipated cost of the program, including the cost of an arrangement pursuant to which a private-sector source would receive an agreed-upon payment plus an additional negotiated amount that does not exceed 50 percent of the total amount saved in excess of the objective specified in paragraph (1). "(3) A specific citation to any provision of law, rule, or regulation that, if not waived, would prohibit the conduct of the program or any part of the program. "(4) The evaluation criteria established pursuant to subsection (c). "(5) A provision for implementing throughout the Department the travel process determined to be the better option to effectively manage travel of Department personnel on the basis of a final assessment of the results of the program. "(e) Report. - After the first full year of the conduct of the tests required by subsection (b), the Secretary shall submit to the Committee on Armed Services of the Senate and the Committee on National Security of the House of Representatives a report on the implementation of the program.

The report shall include an analysis of the evaluation criteria established pursuant to subsection (c)." INCREASED RELIANCE ON PRIVATE-SECTOR SOURCES FOR COMMERCIAL PRODUCTS AND SERVICES Section 357 of Pub. L. 104-106 provided that: "(a) In General. - The Secretary of Defense shall endeavor to carry out through a private-sector source any activity to provide a commercial product or service for the Department of Defense if - "(1) the product or service can be provided adequately through such a source; and "(2) an adequate competitive environment exists to provide for economical performance of the activity by such a source. "(b) Applicability. - (1) Subsection (a) shall not apply to any commercial product or service with respect to which the Secretary determines that production, manufacture, or provision of that product or service by the Government is necessary for reasons of national security. "(2) A determination under paragraph (1) shall be made in accordance with regulations prescribed under subsection (c). "(c) Regulations. - The Secretary shall prescribe regulations to carry out this section.

Such regulations shall be prescribed in consultation with the Director of the Office of Management and Budget. "(d) Report. - (1) The Secretary shall identify activities of the Department (other than activities specified by the Secretary pursuant to subsection (b)) that are carried out by employees of the Department to provide commercial-type products or services for the Department. "(2) Not later than April 15, 1996, the Secretary shall transmit to the congressional defense committees [Committees on Armed Services and on Appropriations of the Senate and Committees on National Security and Appropriations of the House of Representatives] a report on opportunities for increased use of private-sector sources to provide commercial products and services for the Department. "(3) The report required by paragraph (2) shall include the following: "(A) A list of activities identified under paragraph (1) indicating, for each activity, whether the Secretary proposes to convert the performance of that activity to performance by private-sector sources and, if not, the reasons why. "(B) An assessment of the advantages and disadvantages of using private-sector sources, rather than employees of the Department, to provide commercial products and services for the Department that are not essential to the warfighting mission of the Armed Forces. "(C) A specification of all legislative and regulatory impediments to converting the performance of activities identified under paragraph (1) to performance by private-sector sources. "(D) The views of the Secretary on the desirability of terminating the applicability of OMB Circular A-76 to the Department. "(4) The Secretary shall carry out paragraph (1) in consultation with the Director of the Office of Management and Budget and the Comptroller General of the United States.

In carrying out that paragraph, the Secretary shall consult with, and seek the views of, representatives of the private sector, including organizations representing small businesses."