Select Contracting Provisions in the FY 2024 Senate Defense Appropriations Act

Last week, the U.S. Senate passed a funding bill for the Department of Defense (DOD) for fiscal year 2024. This bill contains sections of interest to businesses working with the DOD. Several factors, including inflation, supply chain disruptions, and workforce-related concerns have beset the Defense Industrial Base in recent years. These factors have created an increasingly difficult environment that has forced many firms (especially small firms) to close up shop or to simply stop working with the DOD.

The challenge to the DOD has become critical because it is often small businesses that do cutting edge research and development or which provide innovative technology solutions. As a result, the DOD and the Congress have been taking steps to ease the burden on small businesses in particular and to support their continued participation in the Defense Industrial Base.

Here are two sections in the coming year’s Senate funding bill for the DOD (S. 2587). One is related to small business. The other is relevant to the contracting community as a whole.

Section 851: Set-Asides Under the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) Program

This provision requires that SBIR/STTR set-aside efforts be taken proportionally from all programs, projects, or activities across the DOD. To that end, it directs the secretary of each military department, the director of each defense agency, and the head of other relevant DOD components to submit to congressional defense committees a list of the programs each organization set-aside for SBIR/STTR awards during the previous fiscal year. The list is to be submitted annually with the next year’s budget request.

Implications: This provision will not lead to specific procurements, but it does indicate that the Senate intends to keep track of the extent to which the DOD is utilizing the SBIR/STTR program. Readers will recall that within the last year, Congress took steps to fund the SBIR/STTR program after funding for it had been zeroed out. It looks for the moment as if congressional oversight will ensure that funding continues in the years to come.

Section 8044: Contracting for Tasks Currently Performed by the Defense Civilian Workforce

This section mandates that the funding for tasks currently performed by the defense civilian workforce cannot be converted to contracted efforts unless

• The conversion is based on a public-private competition that includes a most efficient and cost effective organization plan developed by the administering activity.
• The responsible Competitive Sourcing Official determines that a contractor could perform the work for at least 10% less than the most efficient organization’s personnel-related costs for the performance of that task by federal employees.
  • Another stipulation states that the contractor selected for the work cannot derive an advantage from not making an employer-sponsored health insurance plan available or by offering an employer-sponsored health plan that requires the employer to contribute less toward the premium than is currently paid by the DOD for health benefits for federal civilian employees.

Implications: While to a certain extent limiting the ability of DOD officials to convert some work currently being performed by federal employees to contracted efforts, this section also provides a baseline for converting such work. Contractors will need to research what current federal pay scales are for positions related to the work in question and then determine if they can perform the same tasks for at least 10% less.