SASC Driving Reform to DoD in NDAA
Streamline, delegate, and yes more reports to Congress
The SASC published the full FY25 NDAA Bill and Report culminating in nearly 2,000 pages of direction, statutory changes, and views of the committee. We digested it all for you to highlight the major efforts around defense tech and acquisition along with our own analysis and insights. Enjoy!
Compelling Report Language
Civilian Oversight of SOCOM Acquisitions
The committee is concerned about the current ability of the ASD(SOLIC) to effectively exercise their service secretary-like role in providing oversight and support of SOCOM’s acquisition programs, especially those that involve special operations-peculiar platforms. Therefore, the committee directs GAO to conduct a review of civilian oversight of SOCOM’s acquisitions.
GAO Report on LPTA Contracting Procedures
The committee is concerned that the Navy is inadequately applying the use of LPTA source selection procedures for the pricing of labor rates for professional support services.
By doing so, the committee is concerned the Navy has depressed the professional support services marketplace, creating challenges to executing professional support services contracts in support of Navy missions.
The committee directs the GAO to provide an assessment to Congress on the health of the professional support services providers of NAVSEA and its supporting Warfare Centers.
The assessment shall include contracts awarded over FY10-23.
Critical Precursor Chemicals Supply Chain Vulnerabilities
The committee is concerned that more than one-third of critical precursor chemicals are sourced from China, threatening the supply chains and readiness of the DOD.
The committee urges DOD to identify vulnerable active and inert precursor chemical supply chains for energetic materials and munitions, and to work with industry to identify and expand domestic production.
Requires SECDEF to provide a report that includes:
An analysis of the vulnerabilities of DOD's supply chains for active and inert precursor chemicals for energetic materials and munitions including CL-20, TNT, BTTN (Butanetriol Trinitrate), HMX (High Melting Explosive), and RDX (Royal Demolition Explosive);
A review of the volumes of those active and inert precursor chemicals which were consumed by DOD and vendors in the last 5 years;
An analysis of domestic manufacturing capabilities and projected future demand of the precursor chemicals; and
A range of options to incorporate domestic manufacturing capabilities, including new manufacturing processes such as biomanufacturing, to cover the identified vulnerabilities.
Defense Civilian Training Corps (DCTC)
The committee applauds DoD for quickly implementing the DCTC program.
The committee believes DCTC provides a unique pathway for DOD to introduce college students to a career in national security, especially in career fields that are adjacent to scientific and engineering disciplines but that are still critical to the defense acquisition workforce.
The committee is looking forward to the graduation of the initial cohort of DCTC scholars, and encourages DOD to continue to improve and refine the program based on feedback of these initial scholars.
The committee also believes there is great promise in expansion of this program to a wider set of institutions, to provide discipline as well as geographic diversity.
With such expansion, the committee encourages DOD to also expand its outreach to help create a demand signal for this workforce within the various components, and to support acquisition-adjacent areas like testing, requirements generation, finance and contracting.
Finally, the committee believes DOD should explore opportunities to leverage DCTC as broadly as possible through the types on internships offered to students through the program, in emerging career fields such as advanced manufacturing, AI, testing, IP and data rights that are becoming more important to the defense acquisition workforce.
Defense Industrial Alliances
The magnitude of workforce challenges for the defense industry requires a coordinated approach between federal, state, and local government and industry solutions to address these problems.
The committee encourages the approach taken by regional defense industrial alliances to partner with DOD, state and local governments, and industry to ensure a feeder system for skilled workers, a continuing upgrading of incumbent workers, and a governance structure that has effective oversight and strategic direction with all stakeholders to ensure the alliance’s activities are aligned with the broader roadmap and evolving national security and industry needs.
Defense Production Act for Shipbuilding
The committee commends the work the DoD to invest in shipbuilding capacity and sub-tier suppliers through efforts such as the Industrial Base Analysis and Sustainment (IBAS) program. The committee encourages DOD to use all available authorities and tools to support domestic shipbuilding and the industries that support it.
SECDEF to provide a briefing to the Congress describing the feasibility and advisability of DOD to use authorities available under DPA Title III to:
Support Navy shipbuilding and ship repair, including supporting critical subtier industries such as castings and forgings
Establish, improve, or enhance both the public and private shipyard infrastructure of the U.S.
National Technology and Industrial Base Consideration Process
The committee notes that the FY19 NDAA required the SECDEF to administer a process to analyze and assess potential items for consideration to be added to the list of items procured from a manufacturer in the National Technology and Industrial Base (NTIB).
The committee is not certain that DoD has implemented this guidance in a way appropriate for addressing the concerns about protecting critical equipment through reliance on the NTIB.
For example, the committee has heard anecdotal evidence that the application process for consideration has been opaque and lacking any mechanism for considering vendors who do not have a current contract.
Therefore, the committee directs SECDEF to submit a report with a number of details including recommendations for improving access for suppliers to make applications under this process.
Promoting Innovative Acquisition
The committee notes the complexity of U.S. government acquisition and how a growing culture of compliance and process disincentivizes the acquisition workforce to take appropriate risks or pursue innovative acquisition strategies.
The committee believes it is possible to simultaneously safeguard the interests of the taxpayer through adherence of regulations while also promoting innovation and appropriate risk-taking to increase capability.
The committee believes that incentives play a crucial role in shaping culture.
Therefore, the committee directs GAO to provide a report to Congress on the methodologies utilized by the DoD and the public sector to incentivize and reward innovative contracting approaches and recommend viable options for Congress and the DoD to consider that would improve the capability to increase innovative thinking while safeguarding the taxpayer.
Our Take: To understand why DoD doesn’t have a more innovative, risk-averse culture in acquisition, Congress is tasking GAO to audit DoD’s methodologies to reward innovative contracting.
Report on Advisability and Feasibility of Scale-Up Business Contracting Goal
The committee recognizes the importance of bringing new entrants, especially startup businesses, into the defense industrial base to work with DoD.
The committee is aware that DOD has attempted to make itself a better customer for these innovative companies by establishing new organizations such as DIU, CDAO, OSC, AFWERX, AAL among others to lower the barrier to entry and take advantage of private capital.
These DOD organizations help attract significant interest among the VC and third-party capital providers to invest in defense technology startups.
The committee, however, is concerned that if an inadequate number of startups achieve growth working with DOD, private funding could be reduced in search of opportunities in other sectors and DOD’s access to innovative competition will be disadvantaged.
Directs USD(R&E), in consultation with USD(A&S) to provide a report to Congress on the feasibility and advisability of creating minimum procurement goals to support startup companies designed to grow beyond the respective sizing criteria for small business concerns.
This report shall include the following:
The feasibility and advisability of defining startup business concerns that are a subset of nontraditional defense contractors and incorporating one or more metrics such as demonstrated revenue growth or having recently raised funding through third-party equity;
The feasibility of identifying business concerns such as through representations and certifications in the System for Award Management; and
The advisability of creating minimum procurement goals to business concerns including recommended percentages at the prime contractor and subcontractor level.
Report on Feasibility of Replicating the Accelerated Training in Defense Manufacturing Model to Address Submarine Industrial Base Workforce Shortages
The committee is concerned that the submarine industrial base workforce is not sufficiently large enough to support current submarine production, let alone the increased production needed to be able to build two Virginia-class and one Columbia class submarine per year.
The committee recognizes the excellent work the Navy has done to increase the training pipeline for this workforce at its Additive Manufacturing Center of Excellence through the Accelerated Training in Defense Manufacturing (ATDM) program.
The committee believes there are opportunities to expand this model to increase the number of workers participating in this program.
Directs the SECNAV to provide a briefing to the congressional defense committees on the advisability and feasibility of creating a second location for the ATDM program to address workforce shortages across the submarine industrial base through collaboration with relevant industry partners and academic institutions.
Report on Impact of Reciprocal Defense Procurement Agreement Countries on Defense Industrial Base
The committee notes the important role that allies play in providing secure sources of critical materials, such as rare earth elements, to the DIB.
However, the committee also believes that the defense industries of our allies can provide other valuable contributions to the U.S. defense industrial base that are often overlooked.
Companies from allied nations with Reciprocal Defense Procurement (RDP) Agreements are playing an increased role in DoD acquisition programs, and are increasing their physical footprint within the U.S.
For example, winners of the recent Air Force trainer aircraft and Navy frigate competitions were foreign-headquartered companies that partnered with U.S. firms, and three of the five teams that competed for the Optionally-Manned Fighting Vehicle competition included foreign companies playing leading roles.
The committee commends these efforts, and believes that allied contributions to the defense industrial base have been historically underrepresented in assessments of competition and health in the defense industrial base.
Directs USD(A&S) to commission a report by an Acquisition Innovation Research Center university, to be delivered to Congress on the contributions of allies with RDP Agreements to the health of the U.S. defense industrial base.
This report shall include:
An assessment of the economic impact of RDP countries on the U.S. defense industrial base including: (a) the number of employees and average sales of U.S. subsidiaries; (b) contracted DOD work performed in RDP countries; and (c) average annual purchases of U.S. military items through foreign military or direct commercial sales by RDP countries; and
Recommendations to increase allied defense contractor participation with the U.S. defense industrial base.
Review of Army Software Acquisition
The committee applauds the efforts of the Army to modernize software development to align more with commercial software practices. As noted in Army Directive 2024-02, "Enabling Modern Software Development and Acquisition Pathways", software is a “national security imperative” and there are important advancements in the Directive that help support agile development and faster delivery for critical mission needs.
However, the committee wants to ensure that the language in the Directive will not decrease competition and create a non-permissive environment for small businesses and nontraditional defense contractors that should be included in the Army’s modernization efforts.
Specifically, the committee notes that language in the Directive regarding appropriate contract terms for software development efforts appears to deviate from the 10 USC 3453 commercial software development approaches; and recent DoD acquisition policy guidance by mandating minimal use of firm fixed price-type contract clause provisions for software development activities.
Further, the committee is also concerned that language limiting customization of commercial software would make it challenging for commercial companies to work with the Army when needing to adapt their software for government use, thus limiting both competition and the ability to fulfill the intent of the Directive to meet the near-term operational needs for the U.S. Army.
Therefore, the committee directs the Secretary of the Army to conduct a review and submit to the congressional defense committees a report on how the Secretary will implement the Directive in a manner that supports the participation of small businesses and nontraditional defense contractors.
The review and report required shall include the following elements:
An explanation of the driving factors behind the choice to shift policy toward cost reimbursement-type and labor hour contract clauses and provisions for software development, when the commercial sector develops and sells software using a firm fixed price contracting approach. This description should include how the Army weighed the costs and benefits of such a shift
A plan for how program managers will encourage full industry participation in sources sought, including small businesses and nontraditional defense contractors that use firm fixed price contracting structures
A description of why the Army is directing that customization of commercial software be minimized and how that accounts for any risk assumed when building custom software solutions
Any revisions the Army plans to issue for the Directive after conducting this review.
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