ALLOWABLE CONTRACT COSTS.

SEC. 2101. ALLOWABLE CONTRACT COSTS. (a) Extension of Coverage to Coast Guard and NASA; Other Miscellaneous Amendments.— Section 2324 of title 10, United States Code, is amended as follows: (1) Subsection (a) is amended— (A) by inserting after “(a)” the following: “Indirect Cost That Violates a FAR Cost Principle.—”; (B) by striking out “Secretary of Defense” and inserting in lieu thereof “head of an agency”; (C) by striking out “Department of Defense” and inserting in lieu thereof“agency”; and (D) by striking out “the Department of Defense Supplement” and inserting in lieu thereof “applicable agency supplement”. (2) Subsection (b) is amended— 108 STAT. 3307 (A) by inserting after “(b)” the following: “Penalty for Violation of Cost Principle.—”; (B) in subparagraph (B) of paragraph (1) by striking out “regulations issued by the Secretary” and inserting in lieu thereof “provisions in the Federal Acquisition Regulation”; and (C) by striking out “Secretary” each place it appears and inserting in lieu thereof “head of the agency”. (3) Subsection (c) is amended— (A) by inserting after “(c)” the following: “Waiver of Penalty.—”; and (B) by striking out “The Secretary shall prescribe regulations providing” in the first sentence and inserting in lieu thereof “The Federal Acquisition Regulation shall provide”. (4) Subsection (d) is amended— (A) by inserting after “(d)” the following: “Applicability of Contract Disputes Procedure to Disallowance of Cost and Assessment of Penalty.—”; and (B) by striking out “the Secretary” and inserting in lieu thereof “the head of an agency”. (5) Subsection (e) is amended— (A) by inserting after “(e)” the following: “Specific Costs Not Allowable.—”; (B) in subparagraph (D) of paragraph (1), by striking out “regulations of the Secretary of Defense” and inserting in lieu thereof “provisions of the Federal Acquisition Regulation”; (C) in subparagraph (M) of paragraph (1), by striking out “regulations prescribed by the Secretary of Defense” and inserting in lieu thereof “the Federal Acquisition Regulation”; (D) in subparagraph (A) of paragraph (2), by inserting “of Defense” after “Secretary” the first place it occurs; (E) in subparagraph (C) of paragraph (2), by striking out “head of the agency” in the first sentence and inserting in lieu thereof “Secretary of Defense”; (F) in subparagraph (A) of paragraph (3), by striking out “regulations prescribed by the Secretary” and inserting in lieu thereof “the Federal Acquisition Regulation”; and (G) by amending paragraph (4) to read as follows: “(4) The provisions of the Federal Acquisition Regulation implementing this section may establish appropriate definitions, exclusions, limitations, and qualifications.”. (6) Subsection (f) is amended— (A) in paragraph (1)— (i) by striking out “(1)” and all that follows through “The amendments” and inserting in lieu thereof the following: “Required Regulations.—(1) The Federal Acquisition Regulation shall contain provisions on the allowability of contractor costs. Such provisions”, and (ii) by striking out “These regulations” and inserting in lieu thereof “The regulations”; and (B) in paragraphs (2), (3), and (4)— (i) by striking out “defense” before “contract auditor” each place it appears, and 108 STAT. 3308 (ii) by striking out “regulation” each place it appears and inserting in lieu thereof “Federal Acquisition Regulation”. (7) Subsection (g) is amended to read as follows: “(g) Applicability of Regulations to Subcontractors.— The regulations referred to in subsections (e) and (f)(1) shall require prime contractors of a covered contract, to the maximum extent practicable, to apply the provisions of such regulations to all subcontractors of the covered contract.”. (8) Subsection (h) is amended— (A) by inserting after “(h)” the following: “Contractor Certification Required.—”; (B) by striking out “by the Secretary” in paragraph (1) and inserting in lieu thereof “in the Federal Acquisition Regulation”; and (C) by striking out “Secretary of Defense” in paragraph (2) and inserting in lieu thereof “head of the agency”. (9) Subsection (i) is amended by striking out “The submission to the Department of Defense” and inserting in lieu thereof “Penalties for Submission of Cost Known as Not Allowable.—The submission to an agency”. (10) Subsection (j) is amended— (A) by inserting after “(j)” the following: “Contractor To Have Burden of Proof.—”; and (B) by striking out “United States Claims Court” and inserting in lieu thereof “United States Court of Federal Claims”. (11) Subsection (k) is amended— (A) by inserting after “(k)” the following: “Proceeding Costs Not Allowable.—”; (B) in paragraph (2), by striking out “decision by the Department of Defense—” and inserting in lieu thereof “decision—”; and (C) in paragraph (4)— (i) by inserting after “head of the agency” the following: “or Secretary of the military department concerned”, (ii) by striking out “under regulations prescribed by such agency head” and inserting in lieu thereof “in accordance with the Federal Acquisition Regulation”, (iii) by inserting “or Secretary” after “agency head”, and (iv) by inserting before the period at the end the following: “or military department”. (b) Unallowability of Costs To Influence Local Legislative Bodies.— Subsection (e)(1)(B) of section 2324 of title 10, United States Code, is amended by striking out “or a State legislature” and inserting in lieu thereof “, a State legislature, or a legislative body of a political subdivision of a State”. (c) Clarification of Cost Principles.— Subsection (f)(1) of such section is amended by adding at the end the following: “(Q) Conventions.”. (d) Covered Contract Defined.— Such section is further amended by striking out subsections (l) and (m) and inserting in lieu thereof the following: “(l) Definitions.— In this section: 108 STAT. 3309 “(1) (A) The term ‘covered contract’ means a contract for an amount in excess of $500,000 that is entered into by the head of an agency, except that such term does not include a fixed-price contract without cost incentives or any firm fixed- price contract for the purchase of commercial items. “(B) Effective on October 1 of each year that is divisible by five, the amount set forth in subparagraph (A) shall be adjusted to the equivalent amount in constant fiscal year 1994 dollars. An amount, as so adjusted, that is not evenly divisible by $50,000 shall be rounded to the nearest multiple of $50,000. In the case of an amount that is evenly divisible by $25,000 but is not evenly divisible by $50,000, the amount shall be rounded to the next higher multiple of $50,000. “(2) The term ‘head of the agency’ or ‘agency head’ does not include the Secretary of a military department. “(3) The term ‘agency’ means the Department of Defense, the Coast Guard, and the National Aeronautics and Space Administration.”. (e) Regulations.— The regulations of the Secretary of Defense implementing section 2324 of title 10, United States Code, shall remain in effect until the Federal Acquisition Regulation is revised to implement the amendments made by this section.