Acquisition Provisions in the Senate Draft of the FY 2020 National Defense Authorization Act

Following on last week’s post concerning cloud computing provisions in S. 1790, the draft Senate National Defense Authorization Act, this week’s post examines potentially important acquisition provisions in that legislation, including the implications for federal contractors if these provisions are passed in the bill’s final version.

Fixed Price Contracts

Section 806 directs the Under Secretary of Defense for Acquisition and Sustainment to review how the  Department of Defense uses fixed-price contracts. The Senate-ordered review is to result in a briefing of Congressional defense committees on DOD’s findings that includes 1) a description of the extent  to which fixed-price contracts have been used over time and the conditions under which they are used; 2) an assessment of the effects of using fixed-price contracts, such as additional costs incurred or, conversely, savings or efficiencies in contract administration; and 3) an assessment of how decisions to  use fixed-price contracts affects the contract close-out process.

Contractor Implications: This provision continues the Senate’s multi-year focus on DOD service contracting. The Senate is seeking ways to improve, streamline, and make DOD services contracting more efficient. Potentially, fixed-price contracts make it possible to break DOD services contracts into smaller pieces for more distinctly defined portions of work. First the Senate wants to get a handle on how DOD fixed-price contracting works. Adopting a fixed-price approach to services has the potential to result in lower-value contract awards executed over shorter periods of time.

Modernization of Acquisition Processes to Ensure Integrity of Industrial Base

Section 831 directs the Secretary of Defense to streamline and digitize the DOD’s current approach to identifying and mitigating risks to the defense industrial base across the acquisition process. It calls on the USD for Acquisition and Sustainment to work with the Defense Security Service on an analytical  framework for risk mitigation.

Contractor Implications: In plain English, the Senate is expressing concern about the integrity of DOD’s industrial supply chain. Supply chain issues have been of growing concern since the Senate finally realized the DOD should not depend on foreign suppliers of important components. The demand for creation of a digital process or capability for tracking supply chain issues could result in contracts for consulting services to design the analytical framework the Senate demands and, potentially, a contract for the new digital analytics dashboard or interface that tracks risks across the defense industrial base. The DOD’s Chief Data Officer will be involved in this project, if the provision makes it into the final version of the FY 2020 NDAA.

Special Pathways for Rapid Acquisition of Software Applications and Upgrades

Section 852 directs the Secretary of Defense to establish guidance authorizing the use of special pathways for software purchases that are scheduled for fielding within short (i.e., one year) timeframes. The guidance provides for the use of proven technologies and solutions to continuously engineer and deliver software capabilities.

Contractor Implications: The Senate is trying to speed up the engineering of new software capabilities by the DOD. In doing so it wants the DOD to provide two rapid acquisition pathways: 1) one for applications that uses rapid development methods for software running on commercial commodity hardware operated by the DOD, and 2) one that provides the rapid insertion of upgrades and improvements for software embedded in weapon systems and other military-unique hardware systems.

DOD’s new guidance is supposed to inform streamlined requirements and acquisition processes that result in deployment of procured capabilities within one year after initiation. Here the Senate is responding to DOD’s need to leverage agile development and to modernize legacy software capabilities that are highly vulnerable to cyber attack. Contractors could see more software development related Other Transaction Agreements resulting from this.