CONTRACT TERMS AND CONDITIONS RELATING TO CONTRACTOR COSTS FOR PRODUCTION SPECIAL TOOLING AND PRODUCTION SPECIAL TEST EQUIPMENT

SEC. 810. CONTRACT TERMS AND CONDITIONS RELATING TO CONTRACTOR COSTS FOR PRODUCTION SPECIAL TOOLING AND PRODUCTION SPECIAL TEST EQUIPMENT (a) In General.—(1) Chapter 137 of title 10, United States Code, is amended by adding at the end the following new section: “§ 2329. Production special tooling and production special test equipment: contract terms and conditions “(a) Regulations.—The Secretary of Defense (acting through the Under Secretary of Defense for Acquisition) shall prescribe regula-101 STAT. 1131tions providing for payment to contractors for production special tooling and production special test equipment acquired or fabricated in the performance of contracts described in subsection (b). Such regulations shall establish a uniform policy for the Department of Defense.” “(b) Contracts to Which Regulations Apply.—“(1) Except as provided in paragraph (2), regulations under this section shall apply in the case of any contract for production of an item that is awarded by the Secretary of a military department and under which the contractor, in order to perform the contract, is required to acquire or fabricate items of production special tooling or items of production special test equipment.” “(2) Such regulation shall not apply to a contract in which the cost to the contractor of the special production tooling and special production test equipment used in the performance of the contract is less than $1,000,000.” “(c) Requirements.—Regulations under subsection (a) shall include the following:” “(1) A requirement that the terms and conditions for the acquisition or fabrication of production special test equipment and production special tooling by a contractor under a contract described in subsection (b) (including specification of the maximum amount for which the contractor may be paid for such tooling and equipment)— “(A) shall be specified in the contract, and “(B) shall be determined by the Secretary concerned and the contractor through negotiations.” “(2) A requirement that if the Secretary concerned, at the time a contract described in subsection (b) is entered into, reasonably anticipates that the United States will later contract with the same contractor for the same or similar items for which the contractor would be able to use the special production tooling or special production test equipment that the contractor was required to acquire or fabricate for performance of the contract, and if that tooling and equipment will not be used by the contractor solely for final production acceptance testing under the contract, the contractor— “(A) shall be paid for such tooling and equipment in accordance with the terms and conditions of the contract, but in a total amount not less than a percentage (determined under paragraph (3)) of the maximum amount for such payment agreed to under paragraph (1); and “(B) shall be paid for the balance of such amount subject to the availability of appropriations and in accordance with an amortization schedule determined by the Secretary concerned and the contractor through negotiations.” “(3) The percentage to be used under paragraph (2)(A) shall be specified in the contract based upon negotiations between the Secretary concerned and the contractor and may not be less than 50 percent, except that a lower percentage may be specified in the case of any contract if the Secretary concerned, before the contract is entered into, approves the use of that lower percentage with respect to that contract. Any such approval by the Secretary concerned shall be made under criteria established by the Secretary of Defense, acting through the Under Secretary of Defense for Acquisition.” 101 STAT. 1132 “(4) A requirement that a contract described in subsection (b) include provisions, determined on the basis of negotiations between the Secretary concerned and the contractor, which ensure that if the contract, or the program with respect to which such contract is awarded, is terminated before the maximum amount specified under paragraph (1) has been paid to the contractor, and the termination is not for a reason that reflects a failure of the contractor to perform the contract, the Secretary concerned, subject to the availability of appropriations, shall pay the contractor the balance of such maximum amount in accordance with the terms and conditions of the contract.” “(5) A requirement that, except as provided in paragraph (2), a contractor under a contract described in subsection (b) shall be paid for the special production tooling or special production test equipment that the contractor was required to acquire or fabricate for performance under the contract in the maximum amount provided in the contract and in accordance with the terms and conditions of the contract.” “(d) Costs incurred by a contractor under a contract described in subsection (b) for the acquisition and fabrication of production special tooling and production special test equipment for which reimbursement is made under this section shall be considered to be direct costs incurred by the contractor.” (2) The table of sections at the beginning of such chapter is amended by adding at the end the following new item: “2329.Production special tooling and production special test equipment: contract terms and conditions.”. (b) Effective Date.—Section 2329 of title 10, United States Code, as added by subsection (a), shall apply with respect to contracts entered into pursuant to solicitations issued after the end of the 120-day period beginning on the date of the enactment of this Act.