§2326. Undefinitized contractual actions: restrictions

(a) In General.-The head of an agency may not enter into an undefinitized contractual action unless the request to the head of the agency for authorization of the contractual action includes a description of the anticipated effect on requirements of the military department concerned if a delay is incurred for purposes of determining contractual terms, specifications, and price before performance is begun under the contractual action.

(b) Limitations on Obligation of Funds.-(1) A contracting officer of the Department of Defense may not enter into an undefinitized contractual action unless the contractual action provides for agreement upon contractual terms, specifications, and price by the earlier of-

(A) the end of the 180-day period beginning on the date on which the contractor submits a qualifying proposal to definitize the contractual terms, specifications, and price; or

(B) the date on which the amount of funds obligated under the contractual action is equal to more than 50 percent of the negotiated overall ceiling price for the contractual action.

(2) Except as provided in paragraph (3), the contracting officer for an undefinitized contractual action may not obligate with respect to such contractual action an amount that is equal to more than 50 percent of the negotiated overall ceiling price until the contractual terms, specifications, and price are definitized for such contractual action.

(3) If a contractor submits a qualifying proposal (as defined in subsection (g)) to definitize an undefinitized contractual action before an amount equal to more than 50 percent of the negotiated overall ceiling price is obligated on such action, the contracting officer for such action may not obligate with respect to such contractual action an amount that is equal to more than 75 percent of the negotiated overall ceiling price until the contractual terms, specifications, and price are definitized for such contractual action.

(4) The head of an agency may waive the provisions of this subsection with respect to a contract of that agency if such head of an agency determines that the waiver is necessary in order to support a contingency operation.

(5) This subsection does not apply to an undefinitized contractual action for the purchase of initial spares.

(c) Inclusion of Non-Urgent Requirements.-Requirements for spare parts and support equipment that are not needed on an urgent basis may not be included in an undefinitized contractual action for spare parts and support equipment that are needed on an urgent basis unless the head of the agency approves such inclusion as being-

(1) good business practice; and

(2) in the best interests of the United States.

(d) Modification of Scope.-The scope of an undefinitized contractual action under which performance has begun may not be modified unless the head of the agency approves such modification as being-

(1) good business practice; and

(2) in the best interests of the United States.

(e) Allowable Profit.-The head of an agency shall ensure that the profit allowed on an undefinitized contractual action for which the final price is negotiated after a substantial portion of the performance required is completed reflects-

(1) the possible reduced cost risk of the contractor with respect to costs incurred during performance of the contract before the final price is negotiated; and

(2) the reduced cost risk of the contractor with respect to costs incurred during performance of the remaining portion of the contract.

(f) Applicability.-This section does not apply to the Coast Guard or the National Aeronautics and Space Administration.

(g) Definitions.-In this section:

(1) The term "undefinitized contractual action" means a new procurement action entered into by the head of an agency for which the contractual terms, specifications, or price are not agreed upon before performance is begun under the action. Such term does not include contractual actions with respect to the following:

(A) Foreign military sales.

(B) Purchases in an amount not in excess of the amount of the simplified acquisition threshold.

(C) Special access programs.

(D) Congressionally mandated long-lead procurement contracts.

(2) The term "qualifying proposal" means a proposal that contains sufficient information to enable the Department of Defense to conduct complete and meaningful audits of the information contained in the proposal and of any other information that the Department is entitled to review in connection with the contract, as determined by the contracting officer.

(Added Pub. L. 99–500, §101(c) [title X, §908(d)(1)(A)], Oct. 18, 1986, 100 Stat. 1783–82 , 1783-140, and Pub. L. 99–591, §101(c) [title X, §908(d)(1)(A)], Oct. 30, 1986, 100 Stat. 3341–82 , 3341-140; Pub. L. 99–661, div. A, title IX, formerly title IV, §908(d)(1)(A), Nov. 14, 1986, 100 Stat. 3920 , renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273 ; amended Pub. L. 101–189, div. A, title XVI, §1622(c)(6), Nov. 29, 1989, 103 Stat. 1604 ; Pub. L. 102–25, title VII, §701(d)(5), Apr. 6, 1991, 105 Stat. 114 ; Pub. L. 103–355, title I, §1505, Oct. 13, 1994, 108 Stat. 3298 .)

Codification

Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Pub. L. 99–500, Pub. L. 99–591, and Pub. L. 99–661 added identical sections.

Prior Provisions

A prior section 2326 was renumbered section 2346 of this title.

Amendments

1994-Subsec. (b). Pub. L. 103–355, §1505(a)(1), struck out "and expenditure" after "obligation" in heading.

Subsec. (b)(1)(B). Pub. L. 103–355, §1505(a)(2), struck out "or expended" after "obligated".

Subsec. (b)(2). Pub. L. 103–355, §1505(a)(3), substituted "obligate" for "expend".

Subsec. (b)(3). Pub. L. 103–355, §1505(a)(4), substituted "obligated" for "expended" and "obligate" for "expend".

Subsec. (b)(4), (5). Pub. L. 103–355, §1505(b), added par. (4) and redesignated former par. (4) as (5).

Subsec. (g)(1)(B). Pub. L. 103–355, §1505(c), substituted "simplified acquisition threshold" for "small purchase threshold".

1991-Subsec. (g)(1)(B). Pub. L. 102–25 substituted "in an amount not in excess of the amount of the small purchase threshold" for "of less than $25,000".

1989-Subsec. (g)(1)(D). Pub. L. 101–189 substituted "Congressionally mandated" for "Congressionally-mandated".

Effective Date of 1994 Amendment

For effective date and applicability of amendment by Pub. L. 103–355, see section 10001 of Pub. L. 103–355, set out as a note under section 251 of Title 41, Public Contracts.

Effective Date

Section 101(c) [title X, §908(d)(2)] of Pub. L. 99–500 and Pub. L. 99–591, and section 908(d)(2) of title IX, formerly title IV, of Pub. L. 99–661, renumbered title IX, Pub. L. 100–26, §3(5), Apr. 21, 1987, 101 Stat. 273 , provided that: "Section 2326 of title 10, United States Code (as added by subsection (d)(1)), applies to undefinitized contractual actions that are entered into after the end of the 180-day period beginning on the date of the enactment of this Act [Oct. 18, 1986]."

Limitation on Use of Funds for Undefinitized Contractual Actions; Oversight by Inspector General; Waiver Authority

Section 101(c) [title X, §908(a)–(c), (e)] of Pub. L. 99–500 and Pub. L. 99–591, and section 908(a)–(c), (e) of title IX, formerly title IV, of Pub. L. 99–661, renumbered title IX and amended by Pub. L. 100–26, §§3(5), 5(2), Apr. 21, 1987, 101 Stat. 273 , 274, provided that:

"(a) Limitation on Use of Funds for Undefinitized Contractual Actions.-(1) On the last day of each six-month period described in paragraph (4), the Secretary of Defense (with respect to the Defense Logistics Agency) and the Secretary of each military department shall determine-

"(A) the total amount of funds obligated for contractual actions during the six-month period;

"(B) the total amount of funds obligated during the six-month period for undefinitized contractual actions; and

"(C) the total amount of funds obligated during the six-month period for undefinitized contractual actions that are not definitized on or before the last day of such period.

"(2) On the last day of each six-month period described in paragraph (4), the amount of funds obligated for undefinitized contractual actions entered into by the Secretary of Defense (with respect to the Defense Logistics Agency) or the Secretary of a military department during the six-month period that are not definitized on or before such day may not exceed 10 percent of the amount of funds obligated for all contractual actions entered into by the Secretary during the six-month period.

"(3) If on the last day of a six-month period described in paragraph (4) the total amount of funds obligated for undefinitized contractual actions under the jurisdiction of a Secretary that were entered into during the six-month period exceeds the limit established in paragraph (2), the Secretary-

"(A) shall, not later than the end of the 45-day period beginning on the first day following the six-month period, submit to the defense committees an unclassified report concerning-

"(i) the amount of funds obligated for contractual actions under the jurisdiction of the Secretary that were entered into during the six-month period with respect to which the report is submitted; and

"(ii) the amount of such funds obligated for undefinitized contractual actions; and

"(B) except with respect to the six-month period described in paragraph (4)(A), may not enter into any additional undefinitized contractual actions until the date on which the Secretary certifies to Congress that such limit is not exceeded by the cumulative amount of funds obligated for undefinitized contractual actions under the jurisdiction of the Secretary that are not definitized on or before such date and were entered into-

"(i) during the six-month period for which such limit was exceeded; or

"(ii) after the end of such six-month period.

"(4) This subsection applies to the following six-month periods:

"(A) The period beginning on October 1, 1986, and ending on March 31, 1987.

"(B) The period beginning on April 1, 1987, and ending on September 30, 1987.

"(C) The period beginning on October 1, 1987, and ending on March 31, 1988.

"(D) The period beginning on April 1, 1988, and ending on September 30, 1988.

"(E) The period beginning on October 1, 1988, and ending on March 31, 1989.

"(b) Oversight by Inspector General.-The Inspector General of the Department of Defense shall-

"(1) periodically conduct an audit of contractual actions under the jurisdiction of the Secretary of Defense (with respect to the Defense Logistics Agency) and the Secretaries of the military departments; and

"(2) after each audit, submit to Congress a report on the management of undefinitized contractual actions by each Secretary, including the amount of contractual actions under the jurisdiction of each Secretary that is represented by undefinitized contractual actions.

"(c) Waiver Authority.-The Secretary of Defense may waive the application of subsections (a) and (b) for urgent and compelling considerations relating to national security or public safety if the Secretary notifies the Committees on Armed Services of the Senate and House of Representatives [now Committee on Armed Services of the Senate and Committee on National Security of the House of Representatives] of such waiver before the end of the 30-day period beginning on the date that the waiver is made.

"(e) Definition.-For purposes of this section, the term 'undefinitized contractual action' has the meaning given such term in section 2325(g) of title 10, United States Code (as added by subsection (d)(1))."