
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-107 Section 344]
[Document affected by Public Law 107-107 Section 345(a)-(c)]
[Document affected by Public Law 107-107 Section 345(a)-(c)]
[CITE: 10USC2461]

 
                         TITLE 10--ARMED FORCES
 
                    Subtitle A--General Military Law
 
                PART IV--SERVICE, SUPPLY, AND PROCUREMENT
 
   CHAPTER 146--CONTRACTING FOR PERFORMANCE OF CIVILIAN COMMERCIAL OR 
                        INDUSTRIAL TYPE FUNCTIONS
 
Sec. 2461. Commercial or industrial type functions: required 
        studies and reports before conversion to contractor performance
        
    (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) Notification of Decision.--(1) If, as a result of the completion 
of the examinations under subsection (b)(3), 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 Secretary of 
Defense shall submit to Congress a report describing that decision. The 
report shall contain the following:
        (A) The date when the analysis of that commercial or industrial 
    type function for possible change to performance by the private 
    sector was commenced.
        (B) An indication that the examinations required under 
    subsection (b)(3) have been completed.
        (C) 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.
        (D) The number of Department of Defense civilian employees who 
    were performing the function when the analysis was commenced, the 
    number of such employees whose employment was terminated or 
    otherwise affected in implementing the most efficient organization 
    of the function, and the number of such employees whose employment 
    would be terminated or otherwise affected by changing to performance 
    of the function by the private sector.
        (E) The Secretary's certification that the factors considered in 
    the examinations performed under subsection (b)(3), and in the 
    making of the decision to change performance, 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.
        (F) The Secretary's certification that the examination required 
    by subsection (b)(3)(A) as part of the analysis demonstrates that 
    the performance of the function by the private sector will result in 
    savings to the Government over the life of the contract.
        (G) A statement of the potential economic effect of the change 
    on each affected local community, as determined in the examination 
    under subsection (b)(3)(B)(ii).
        (H) The Secretary's certification that the entire analysis is 
    available for examination.
        (I) A schedule for completing the change to performance of the 
    function by the private sector.

    (2) If the commercial or industrial type function to be changed to 
performance by the private sector is performed at a Center of Industrial 
and Technical Excellence designated under section 2474(a) of this title 
or an Army ammunition plant--
        (A) the report required by this subsection shall also include a 
    description of the effect that the performance and administration of 
    the resulting contract will have on the overhead costs of the center 
    or ammunition plant, as the case may be; and
        (B) notwithstanding paragraph (3), the change of the function to 
    contractor performance may not begin until at least 60 days after 
    the submission of the report.

    (3) The change of the function to contractor performance may not 
begin until after the submission of the report required by this 
subsection.
    (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 February 1 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.

(Added Pub. L. 100-370, Sec. 2(a)(1), July 19, 1988, 102 Stat. 851; 
amended Pub. L. 101-189, div. A, title XI, Sec. 1132, Nov. 29, 1989, 103 
Stat. 1561; Pub. L. 104-106, div. D, title XLIII, Sec. 4321(b)(19), Feb. 
10, 1996, 110 Stat. 673; Pub. L. 105-85, div. A, title III, Sec. 384, 
Nov. 18, 1997, 111 Stat. 1711; Pub. L. 105-261, div. A, title III, 
Sec. 342(a)-(c), Oct. 17, 1998, 112 Stat. 1974-1976; Pub. L. 106-65, 
div. A, title III, Sec. 341, Oct. 5, 1999, 113 Stat. 568; Pub. L. 106-
398, Sec. 1 [[div. A], title III, Secs. 351, 352], Oct. 30, 2000, 114 
Stat. 1654, 1654A-71, 1654A-72.)


                      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

    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.


                  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.''


 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.''
