DATE: October 29, 2004

SUBJECT: Enactment of the National Defense Authorization Act for Fiscal Year 2005

AGENCIES: Department of Defense (DOD)

ACTION: Editor's Analysis

SYNOPSIS: On October 28, 2004, President Bush signed Public Law 108-375, Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005, which authorizes $446 billion for defense and national security programs. Public Law 108-375 contains several acquisition-related provisions that apply to the Department of Defense only, and several other provisions that apply to all government agencies.

ANALYSIS: The following are some of the key acquisition-related provisions of the Fiscal Year 2005 Defense Authorization Act:

One noteworthy provision that was proposed but not adopted was the prohibition against DOD from paying more than a 1% service charge for using other agency contracts to purchase goods and services. This was seen as an attack on GSA's Federal Technology Service, which charges fees considerably more than 1% and has been involved, with DOD, in contractual improprieties. However, GSA convinced Congress that DOD is such a large customer of the Federal Technology Service that it would be crippled if DOD were not permitted to use its services. In its place, Congress substituted a requirement that the procurement be conducted in accordance with procedures for reviewing and approving the use of non-Department contracts, and to report all service charges imposed on purchases exceeding the simplified acquisition threshold in Fiscal Years 2005 and 2006 (see Section 854, Defense Procurements Made Through Contracts of Other Agencies).

"The conferees expect the Department's review and approval procedures to ensure that any fees are reasonable in relation to the work actually performed by the contracting agency," the conference report states. "The conferees do not believe that the Department should pay fees in excess of 1% to an outside agency that merely acts as a conduit for Department requirements. The conferees are particularly concerned that in some instances, the Department's orders appear to have been awarded to contractors who charge their own fees for directing the work to preferred subcontractors without providing any value added."

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2004 by Panoptic Enterprises. All Rights Reserved.

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