PUBLIC LAW 109–364—OCT. 17, 2006
120 STAT. 2341
(A) shall assess the extent to which the Department of Defense has paid excessive pass-through charges to contractors who provided little or no value to the performance of the contract; (B) shall assess the extent to which the Department has been particularly vulnerable to excessive pass-through charges on any specific category of contracts or by any specific category of contractors (including any category of small business); and (C) shall determine the extent to which any prohibition on excessive pass-through charges would be inconsistent with existing commercial practices for any specific category of contracts or have an unjustified adverse effect on any specific category of contractors (including any category of small business). (b) REGULATIONS REQUIRED.— (1) IN GENERAL.—Not later than May 1, 2007, the Secretary of Defense shall prescribe regulations to ensure that passthrough charges on contracts or subcontracts (or task or delivery orders) that are entered into for or on behalf of the Department of Defense are not excessive in relation to the cost of work performed by the relevant contractor or subcontractor. (2) SCOPE OF REGULATIONS.—The regulations prescribed under this subsection— (A) shall not apply to any firm, fixed-price contract or subcontract (or task or delivery order) that is— (i) awarded on the basis of adequate price competition; or (ii) for the acquisition of a commercial item, as defined in section 4(12) of the Office of Federal Procurement Policy Act (41 U.S.C. 403(12)); and (B) may include such additional exceptions as the Secretary determines to be necessary in the interest of the national defense. (3) DEFINITION.—In this section, the term ‘‘excessive passthrough charge’’, with respect to a contractor or subcontractor that adds no, or negligible, value to a contract or subcontract, means a charge to the Government by the contractor or subcontractor that is for overhead or profit on work performed by a lower-tier contractor or subcontractor (other than charges for the direct costs of managing lower-tier contracts and subcontracts and overhead and profit based on such direct costs). (4) REPORT.—Not later than one year after the date of the enactment of this Act, the Secretary of Defense shall submit to the congressional defense committees a report on the steps taken to implement the requirements of this subsection, including— (A) any standards for determining when no, or negligible, value has been added to a contract by a contractor or subcontractor; (B) any procedures established for preventing excessive pass-through charges; and (C) any exceptions determined by the Secretary to be necessary in the interest of the national defense.
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