FY 2016 NDAA Heads To POTUS For Likely Signature

FY 2016 National Defense Authorization Act Heads To POTUS For Likely SignatureLast week the U.S. Senate passed the FY 2016 National Defense Authorization Act (NDAA) by an overwhelming margin, 91-3.

The NDAA was amended into an unrelated Senate-passed bill, S 1356, the Border Patrol Agent Pay Reform Act of 2014. Since the Senate had adopted S. 1356 previously on May 14, only one, simple majority vote was required for passage.

The U.S. House adopted the NDAA on November 5 by a vote of 370-58.

NDAA Heads to White House For Signature

The House reconsidered and adopted by unanimous consent H Con Res 90, as amended by the Senate, allowing the Clerk of the House and Senate to make necessary corrections to the bill. The measure now heads to the White House where President Obama is expected to sign the bill into law during the week of November 16.

What Does the NDAA Do?

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  • The NDAA authorizes $607 billion in fiscal 2016 defense spending (that’s $5 billion less than the amount in the original conference report). The $5 billion cuts were agreed to in the recently negotiated budget deal between the White House and congressional Republicans.
  • The legislation includes nearly $60 billion for the Overseas Contingency Operations (OCO) account, an account that President Obama used as a partial excuse to veto the initial conference report (HR 1735).  The President argued that the funding exceeded the previously agreed-to spending caps without granting similar fiscal relief to domestic spending programs.

Other significant changes in the legislation include:

  • Changes to the military’s retirement system by including pension benefits that are similar to a 401(k) retirement plan,
  • A one-time increase in certain Tricare pharmacy co-pays,
  • A 1.3% pay raise, and
  • A gradual reduction in military housing subsidy by 1 percent per year over four years.

Significant changes and implications for defense contractors:

The FY 2016 NDAA included many reforms to the defense acquisition process that are intended to be an initial step in a multi-year, collaborative effort to improve processes.  Is most cases this should be good for defense contractors.  Here are a few things to consider:

1. Help is on the way.

Provisions in the NDAA should improve contract support operations by creating a dual-track career path for uniformed personnel to encompass acquisitions.   It also converts the Defense Acquisition Workforce Development Fund to a permanent organization within DOD and should improve program management and career development within  the acquisition workforce.

2. Decentralizes process for expedited decisions

The NDAA enhances the role of respective service Chiefs of Staff and the military departments in the acquisition process (Sections 801, 843, 849, and 851). It requires the Chief of Staff of the Army, the Chief of Naval Operations, the Chief of Staff of the Air Force, and the Commandant of the Marine Corps to review their current authorities provided in statutes and regulations related to defense acquisitions in order to develop recommendations that the Chief concerned or the Commandant considers necessary to further or strengthen the role of the Chief concerned or the Commandant in the development of requirements, acquisition processes, and the associated budget practices of the Department of Defense.  These reforms have the effect of being able to gather more, timely, relevant information and enhance personnel performance.  It also places more responsibility on service chiefs to be accountable for the progress of their respective programs.

3. Expedites “middle-tier” programs intended for completion within 5 years.

For ‘‘middle tier’’ acquisition programs that are intended to be completed within 5 years, the NDAA requires the Under Secretary of Defense for Acquisition, Technology, and Logistics to issue guidance for an expedited and streamlined process. Of note, these programs are different from ‘‘rapid acquisitions’’ that are generally completed within 6 months-to-2 years and ‘‘traditional’’ acquisitions that last much longer than 5 years.

4. Alternative acquisition processes for capital assets and services due May 2016.

The NDAA maintains a provision (sec. 805) that requires the Secretary of Defense to establish procedures and guidelines within 180 days of enactment for alternative acquisition pathways to acquire capital assets and services that meet critical national security needs.

5. Streamlined regulatory processes should ease acquisitions vital to U.S. interests.

Section 806 of the NDAA allows the Secretary of Defense to waive acquisition law or regulation when acquiring a capability that is considered a vital interest of the United States and is not otherwise available. The Secretary must notify the House and Senate Armed Services Committees within 30 days of exercising the waiver authority.  A senior official must be designated as the person accountable for the rapid and effective acquisition and deployment of the needed capability.

Also, the Under Secretary of Defense for Acquisition, Technology and Logistics is required to establish an advisory panel on streamlining acquisition regulations.

6. Multi-year contracts with significant savings streamlined

The NDAA emphasized that the government should seek to maximize savings whenever it pursues multi-year procurement. Significant savings are estimated to be $250 million and above.  Other savings could be achieved if it does not equate to a minimum of 10 percent savings over the cost of an annual contract. Requests for authority to enter into a multi-year contract must include:

(a) the estimated cost savings,

(b) the minimum quantity needed,

(c) confirmation that the design is stable and the technical risks are not excessive, and

(d) any other rationale for entering into such a contract.

7. Simple acquisition thresholds increased.

The NDAA (sec. 854) raises the simplified acquisition threshold from $100,000 to $500,000. For micro-purchases the threshold is increased from $3,000 to $5,000.  The special emergency procurement authority threshold for purchases inside the U.S. are increased from $250,000 to $750,000.  Purchases outside the U.S. are raised from $1 million to $1.5 million.  The small business reservation threshold is increased from $100,000 to $500,000.

8. Make sure your bids are accurate.

The NDAA contains a provision (sec. 849) that mandates respective military departments must pay an annual penalty of 3 percent of the cumulative cost overrun on all of its major defense acquisition programs (MDAPs).

Pentagon Update.

KellyKelly Porter, a strategic partner with Cansler Consulting, brings unique experience when it comes to defense issues. Kelly is very familiar with the new FY 2016 National Defense Authorization Act (NDAA) and changes in the acquisition processes.  She has multiple years of inside experience working at Joint Improvised Explosive Device Defeat Organization (JIEDDO).  JIEDDO essentially “wrote the book” on how to navigate the complex and cumbersome Pentagon acquisition processes.  Many of those effective methods are now codified into the new statute.

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