REGULATIONS ON USE OF FIXED-PRICE DEVELOPMENT CONTRACTS

SEC. 807. REGULATIONS ON USE OF FIXED-PRICE DEVELOPMENT CONTRACTS (a) In General.—(1) Not later than 120 days after the date of the enactment of this Act, the Secretary of Defense shall revise the Department of Defense regulations that provide for the use of fixed-price type contracts in a development program. The regulations shall provide that a fixed-price contract may be awarded in such a program only if— (A) the level of program risk permits realistic pricing; and (B) the use of a fixed-price contract permits an equitable and sensible allocation of program risk between the United States and the contractor. (2)(A) The regulations also shall provide that if a contract for development of a major system is to be awarded in an amount greater than $10,000,000, the contract may not be a firm fixed-price contract. (B) A waiver of the requirement prescribed in regulations under subparagraph (A) may be granted by the Secretary of Defense, acting through the Under Secretary of Defense for Acquisition, but only if the Secretary determines and states in writing that the award is consistent with the criteria specified in clauses (A) and (B) of paragraph (1) and the regulations prescribed under such paragraph. The Secretary may delegate the authority in the preceding sentence only to a person who holds a position in the Office of the Secretary of Defense at or above the level of Assistant Secretary of Defense. (b) Definitions.—In this section, the term “major system” has the meaning given such term by section 2302(5} of such title. (c) Expiration.—Paragraph (2) of subsection (a) shall cease to be effective two years after the date of the enactment of this Act.