LEAD SYSTEM INTEGRATORS.

SEC. 807. LEAD SYSTEM INTEGRATORS.(a) Limitations on Contractors Acting as Lead System Integrators.—(1) In general.—Chapter 141 of title 10, United States Code, is amended by adding at the end the following new section:“§ 2410p. Contracts: limitations on lead system integrators“(a) In General.—Except as provided in subsection (b), no entity performing lead system integrator functions in the acquisition of a major system by the Department of Defense may have any direct financial interest in the development or construction of any individual system or element of any system of systems.“(b) Exception.—An entity described in subsection (a) may have a direct financial interest in the development or construction of an individual system or element of a system of systems if—“(1) the Secretary of Defense certifies to the Committees on Armed Services of the Senate and the House of Representatives that—“(A) the entity was selected by the Department of Defense as a contractor to develop or construct the system or element concerned through the use of competitive procedures; and“(B) the Department took appropriate steps to prevent any organizational conflict of interest in the selection process; or“(2) the entity was selected by a subcontractor to serve as a lower-tier subcontractor, through a process over which the entity exercised no control.“(c) Construction.—Nothing in this section shall be construed to preclude an entity described in subsection (a) from performing work necessary to integrate two or more individual systems or elements of a system of systems with each other.” .(2) Clerical amendment.—The table of sections at the beginning of chapter 141 of such title is amended by adding at the end the following new item: “2410p. Contracts: limitations on lead system integrators”. 120 STAT. 2316(3) Effective date.—Section 2410p of title 10, United States Code, as added by paragraph (1), shall apply with respect to contracts entered into after December 31, 2006.(b) Update of Regulations on Lead System Integrators.—Not later than December 31, 2006, the Secretary of Defense shall update the acquisition regulations of the Department of Defense in order to specify fully in such regulations the matters with respect to lead system integrators set forth in section 805(b) of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109–163; 119 Stat. 3372) and the amendments made by subsection (a).(c) Additional Report Requirements.—The Secretary of Defense shall include in the report required by section 805 of such Act—(1) a precise and comprehensive definition of the term “lead system integrator”, as that term is used in such section; and(2) a specification of various types of contracts and fee structures that are appropriate for use by lead system integrators in the production, fielding, and sustainment of complex systems.