1996 US Code
Title 10 - ARMED FORCES
Subtitle A - General Military Law
PART IV - SERVICE, SUPPLY, AND PROCUREMENT
CHAPTER 137 - PROCUREMENT GENERALLY
Sec. 2306 - Kinds of contracts

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§2306. Kinds of contracts

(a) The cost-plus-a-percentage-of-cost system of contracting may not be used. Subject to the limitation in the preceding sentence, the other provisions of this section, and other applicable provisions of law, the head of an agency, in awarding contracts under this chapter after using procedures other than sealed-bid procedures, may enter into any kind of contract that he considers will promote the best interests of the United States.

(b) Each contract awarded under this chapter after using procedures other than sealed-bid procedures shall contain a warranty, determined to be suitable by the head of the agency, that the contractor has employed or retained no person or selling agency to solicit or obtain the contract under an understanding or agreement for a commission, percentage, brokerage, or contingent fee, except a bona fide employee or established commercial or selling agency maintained by him to obtain business. If a contractor breaks such a warranty the United States may annul the contract without liability or may deduct the commission, percentage, brokerage, or contingent fee from the contract price or consideration. This subsection does not apply to a contract that is for an amount not greater than the simplified acquisition threshold or to a contract for the acquisition of commercial items.

[(c) Repealed. Pub. L. 103–355, title I, §1021, Oct. 13, 1994, 108 Stat. 3257.]

(d) The fee for performing a cost-plus-a-fixed-fee contract for experimental, developmental, or research work may not be more than 15 percent of the estimated cost of the contract, not including the fee. The fee for performing a cost-plus-a-fixed-fee contract for architectural or engineering services for a public work or utility plus the cost of those services to the contractor may not be more than 6 percent of the estimated cost of that work or project, not including fees. The fee for performing any other cost-plus-a-fixed-fee contract may not be more than 10 percent of the estimated cost of the contract, not including the fee. Determinations under this subsection of the estimated costs of a contract or project shall be made by the head of the agency at the time the contract is made.

(e) Each cost contract and each cost-plus-a- fixed-fee contract shall provide for notice to the agency by the contractor before the making, under the prime contract, of—

(1) a cost-plus-a-fixed-fee subcontract; or

(2) a fixed-price subcontract or purchase order involving more than the greater of (A) the simplified acquisition threshold, or (B) 5 percent of the estimated cost of the prime contract.

(f) So-called “truth-in-negotiations” provisions relating to cost or pricing data to be submitted by certain contractors and subcontractors are provided in section 2306a of this title.

(g)(1) The head of an agency may enter into contracts for periods of not more than five years for the following types of services (and items of supply related to such services) for which funds would otherwise be available for obligation only within the fiscal year for which appropriated—

(A) operation, maintenance, and support of facilities and installations;

(B) maintenance or modification of aircraft, ships, vehicles, and other highly complex military equipment;

(C) specialized training necessitating high quality instructor skills (for example, pilot and aircrew members; foreign language training); and

(D) base services (for example, ground maintenance; in-plane refueling; bus transportation; refuse collection and disposal);

whenever he finds that—

(i) there will be a continuing requirement for the services consonant with current plans for the proposed contract period;

(ii) the furnishing of such services will require a substantial initial investment in plant or equipment, or the incurrence of substantial contingent liabilities for the assembly, training, or transportation of a specialized work force; and

(iii) the use of such a contract will promote the best interests of the United States by encouraging effective competition and promoting economies in operation.

(2) In entering into such contracts, the head of the agency shall be guided by the following principles:

(A) The portion of the cost of any plant or equipment amortized as a cost of contract performance should not exceed the ratio between the period of contract performance and the anticipated useful commercial life of such plant or equipment. Useful commercial life, for this purpose, means the commercial utility of the facilities rather than the physical life thereof, with due consideration given to such factors as location of facilities, specialized nature thereof, and obsolescence.

(B) Consideration shall be given to the desirability of obtaining an option to renew the contract for a reasonable period not to exceed three years, at prices not to include charges for plant, equipment and other nonrecurring costs, already amortized.

(C) Consideration shall be given to the desirability of reserving in the agency the right, upon payment of the unamortized portion of the cost of the plant or equipment, to take title thereto under appropriate circumstances.

(3) In the event funds are not made available for the continuation of such a contract into a subsequent fiscal year, the contract shall be canceled or terminated, and the costs of cancellation or termination may be paid from—

(A) appropriations originally available for the performance of the contract concerned;

(B) appropriations currently available for procurement of the type of services concerned, and not otherwise obligated; or

(C) funds appropriated for those payments.

(h) Multiyear contracting authority is provided in section 2306b of this title.

(Aug. 10, 1956, ch. 1041, 70A Stat. 130; Sept. 10, 1962, Pub. L. 87–653, §1(d), (e), 76 Stat. 528; July 5, 1968, Pub. L. 90–378, §1, 82 Stat. 289; Sept. 25, 1968, Pub. L. 90–512, 82 Stat. 863; Dec. 12, 1980, Pub. L. 96–513, title V, §511(77), 94 Stat. 2926; Dec. 1, 1981, Pub. L. 97–86, title IX, §§907(b), 909(b), 95 Stat. 1117, 1118; July 18, 1984, Pub. L. 98–369, div. B, title VII, §2724, 98 Stat. 1192; Nov. 8, 1985, Pub. L. 99–145, title XIII, §1303(a)(15), 99 Stat. 739; Oct. 18, 1986, Pub. L. 99–500, §101(c) [title X, §952(b)(1), (c)(1)], 100 Stat. 1783–82, 1783–169, and Oct. 30, 1986, Pub. L. 99–591, §101(c) [title X, §952(b)(1), (c)(1)], 100 Stat. 3341–82, 3341–169; Nov. 14, 1986, Pub. L. 99–661, div. A, title IX, formerly title IV, §952(b)(1), (c)(1), 100 Stat. 3949, renumbered title IX, Apr. 21, 1987, Pub. L. 100–26, §3(5), 101 Stat. 273; Nov. 29, 1989, Pub. L. 101–189, div. A, title VIII, §805(a), 103 Stat. 1488; Nov. 5, 1990, Pub. L. 101–510, div. A, title VIII, §808, 104 Stat. 1593; Apr. 6, 1991, Pub. L. 102–25, title VII, §701(d)(3), 105 Stat. 114; Oct. 13, 1994, Pub. L. 103–355, title I, §§1021, 1022(b), title IV, §§4102(b), 4401(c), title VIII, §8105(a), 108 Stat. 3257, 3260, 3340, 3348, 3392.)

Historical and Revision Notes

Revised section	Source (U.S. Code)	Source (Statutes at Large)
2306(a) 2306(b)	41:153(a) (1st sentence). 41:153(b) (1st 14 words of 1st sentence). 41:153(a) (less 1st sentence).	Feb. 19, 1948, ch. 65, §4 (less words after semicolon of last sentence of (b), and less (c)), 62 Stat. 23.
2306(c)	41:153(b) (2d sentence).
2306(d)	41:153(b) (1st sentence, less 1st 14 words).
2306(e)	41:153(b) (less 1st and 2d sentences; and less words after semicolon of last sentence).

In subsection (a), the words “subject to subsections (b)–(e)” are substituted for the words “Except as provided in subsection (b) of this section”. The words “United States” are substituted for the word “Government”.

In subsection (b), the words “under section 2304 of this title” are substituted for the words “pursuant to section 151(c) of this title”. The words “full amount of such” and “violation” are omitted as surplusage.

In subsection (c), the words “under section 2304 of this title” are inserted for clarity.

Codification

Pub. L. 99–591 is a corrected version of Pub. L. 99–500.

Prior Provisions

Provisions similar to those in subsec. (h)(11) of this section were contained in Pub. L. 100–456, title I, §104(a), Oct. 24, 1988, 102 Stat. 2624, which was set out below, prior to repeal by Pub. L. 101–189, §805(b).

Amendments

1994—Subsec. (b). Pub. L. 103–355, §§4102(b), 8105(a), inserted at end “This subsection does not apply to a contract that is for an amount not greater than the simplified acquisition threshold or to a contract for the acquisition of commercial items.”

Subsec. (c). Pub. L. 103–355, §1021, struck out subsec. (c) which read as follows: “No cost contract, cost-plus-a-fixed-fee contract, or incentive contract may be made under this chapter unless the head of the agency determines that such a contract is likely to be less costly to the United States than any other kind of contract or that it is impracticable to obtain property or services of the kind or quality required except under such a contract.”

Subsec. (e)(2)(A). Pub. L. 103–355, §4401(c), substituted “simplified acquisition threshold” for “small purchase threshold”.

Subsec. (h). Pub. L. 103–355, §1022(b), amended subsec. (h) generally. Prior to amendment, subsec. (h) related to requirements for multiyear contracts for purchase of property, including weapon systems and items and services associated with weapons systems.

1991—Subsec. (e)(2)(A). Pub. L. 102–25 substituted “the small purchase threshold” for “the small purchase amount under section 2304(g) of this title”.

1990—Subsec. (h)(1). Pub. L. 101–510, §808(a), struck out “(other than contracts described in paragraph (6))” after “multiyear contracts” in introductory provisions and substituted “substantial savings of the total anticipated costs of carrying out the program through annual contracts” for “reduced total costs under the contract” in subpar. (A).

Subsec. (h)(6). Pub. L. 101–510, §808(b), struck out “contracts for the construction, alteration, or major repair of improvements to real property or” after “not apply to”.

Subsec. (h)(9). Pub. L. 101–510, §808(c)(1), inserted “for a defense acquisition program that has been specifically authorized by law to be carried out using multiyear contract authority” after “under this subsection” in introductory provisions.

Subsec. (h)(9)(C). Pub. L. 101–510, §808(c)(2), struck out subpar. (C) which read as follows: “The proposed multiyear contract—

“(i) achieves a 10 percent savings as compared to the cost of current negotiated contracts, adjusted for changes in quantity and for inflation; or

“(ii) achieves a 10 percent savings as compared to annual contracts if no recent contract experience exists.”

1989—Subsec. (h)(9) to (11). Pub. L. 101–189 added pars. (9) to (11).

1986—Pub. L. 99–500 and Pub. L. 99–591, §101(c) [§952(c)(1)], Pub. L. 99–661, §952(c)(1), amended section identically, striking out “: cost or pricing data: truth in negotiation” after “contracts” in section catchline.

Subsec. (f). Pub. L. 99–500 and Pub. L. 99–591, §101(c) [§952(b)(1)], Pub. L. 99–661, §952(b)(1), amended generally subsec. (f) identically, substituting provision that “truth-in-negotiations” provisions relating to cost and pricing data for contractors and subcontractors are provided in section 2306a of this title for provision relating to certification by contractors and subcontractors on cost and pricing data, circumstances under which such certification will be required, circumstances under which such certification, although not required, may be requested, and evaluation of the accuracy of the data submitted.

1985—Subsec. (a). Pub. L. 99–145, §1303(a)(15)(A), inserted a period at end.

Subsec. (b). Pub. L. 99–145, §1303(a)(15)(B), struck out “of this title” before “shall contain”.

1984—Pub. L. 98–369, §2724(f), substituted “Kinds of contracts; cost or pricing data: truth in negotiation” for “Kinds of contracts” in section catchline.

Subsec. (a). Pub. L. 98–369, §2724(a), substituted “the limitation in the preceding sentence, the other provisions of this section, and other applicable provisions of law, the head of an agency, in awarding contracts under this chapter after using procedures other than sealed-bid procedures, may enter into” for “this limitation and subject to subsections (b)–(f), the head of any agency may, in negotiating contracts under section 2304 of this title, make”.

Subsec. (b). Pub. L. 98–369, §2724(b), substituted “awarded under this chapter after using procedures other than sealed-bid procedures” for “negotiated under section 2304”.

Subsec. (c). Pub. L. 98–369, §2724(c), substituted “this chapter” for “section 2304 of this title,”.

Subsec. (e)(2). Pub. L. 98–369, §2724(d), substituted “the greater of (A) the small purchase amount under section 2304(g) of this title, or (B)” for “,000 or”.

Subsec. (f)(1). Pub. L. 98–369, §2724(e)(A)(i), (ii), substituted “such contractor's or subcontractor's” for “his” and struck out “he” before “submitted was accurate” in provisions preceding subpar. (A).

Subsec. (f)(1)(A). Pub. L. 98–369, §2724(3)(A)(iii), (vi), (vii), substituted “prime contract under this chapter entered into after using procedures other than sealed-bid procedures, if” for “negotiated prime contract under this title where”, “0,000” for “0,000”, and “before” for “prior to”.

Subsec. (f)(1)(B). Pub. L. 98–369, §2724(e)(A)(iv), (vi), (vii), substituted “if” for “for which”, “0,000” for “0,000”, and “before” for “prior to”.

Subsec. (f)(1)(C). Pub. L. 98–369, §2724(e)(A)(v)–(vii), substituted “when” for “where”, “0,000” for “0,000”, and “before” for “prior to”.

Subsec. (f)(1)(D). Pub. L. 98–369, §2724(e)(A)(iv), (vi), (vii), substituted “if” for “for which”, “0,000” for “0,000”, and “before” for “prior to”.

Subsec. (f)(2). Pub. L. 98–369, §2724(e)(B), (D), (E), struck out “negotiated” before “price as is practicable” and before “is based on adequate price competition”, redesignated as par. (3) the proviso formerly set out in this par., and as part of the redesignation substituted a period for “: Provided, That” after “or noncurrent”.

Subsec. (f)(3). Pub. L. 98–369, §2724(e)(E), designated as par. (3) the proviso formerly set out in par. (2). Former par. (3) redesignated (5).

Subsec. (f)(4). Pub. L. 98–369, §2724(e)(F), added par. (4).

Subsec. (f)(5). Pub. L. 98–369, §2724(e)(C), redesignated former par. (3) as (5) and substituted “proposal for the contract, the discussions conducted on the proposal” for “negotiation”.

1981—Subsec. (f)(1). Pub. L. 97–86, §907(b), substituted “0,000” for “0,000” in subpars. (A) to (D).

Subsec. (g)(1). Pub. L 97–86, §909(b)(1), struck out “to be performed outside the forty-eight contiguous States and the District of Columbia” after “(and items of supply related to such services)” in provisions preceding subpar. (A).

Subsec. (h). Pub. L. 97–86, §909(b)(2), added subsec. (h).

1980—Subsec. (f). Pub. L. 96–513, §511(77)(A), designated existing provisions as pars. (1) to (3) and in par. (1), as so designated, substituted “(A)” to “(D)” for “(1)” to “(4)”, respectively, “prior” for “Prior” wherever appearing, and “clause (C)” for “(3) above”.

Subsec. (g). Pub. L. 96–513, §511(77)(B), in par. (1) substituted “that—” for “that:”, in par. (2) substituted “(A) The” for “(A) the”, “(B) Consideration” for “(B) consideration”, and “(C) Consideration” for “(C) consideration”, and in par. (3) substituted “from—” for “from:”.

1968—Subsec. (f). Pub. L. 90–512 inserted last par.

Subsec. (g). Pub. L. 90–378 added subsec. (g).

1962—Subsec. (a). Pub. L. 87–653, §1(d), substituted “subsections (b)–(f)” for “subsections (b)–(e)”.

Subsec. (f). Pub. L. 87–653, §1(e), added subsec. (f).

Effective Date of 1994 Amendment

For effective date and applicability of amendment by Pub. L. 103–355, see section 10001 of Pub. L. 103–355, set out as a note under section 251 of Title 41, Public Contracts.

Effective Date of 1986 Amendment

Amendment by section 101(c) [title X, §952(b)(1)] of Pub. L. 99–500 and Pub. L. 99–591, and section 952(b)(1) of Pub. L. 99–661 applicable with respect to contracts or modifications on contracts entered into after end of 120-day period beginning Oct. 18, 1986, see section 101(c) of Pub. L. 99–500 and Pub. L. 99–591, and section 952(d) of Pub. L. 99–661, set out as a note under section 2306a of this title.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable with respect to any solicitation for bids or proposals issued after Mar. 31, 1985, see section 2751 of Pub. L. 98–369, set out as a note under section 251 of Title 41, Public Contracts.

Effective Date of 1980 Amendment

Amendment by Pub. L. 96–513 effective Dec. 12, 1980, see section 701(b)(3) of Pub. L. 96–513, set out as a note under section 101 of this title.

Effective Date of 1962 Amendment

For effective date of amendment by Pub. L. 87–653 see section 1(h) of Pub. L. 87–653, set out as a note under section 2304 of this title.

Transition Provision

Section 805(c) of Pub. L. 101–189 provided that: “Subparagraph (C) of paragraph (9) of section 2306(h) of title 10, United States Code, as added by subsection (a), does not apply to programs that are under a multiyear contract on the date of the enactment of this Act [Nov. 29, 1989].”

Multiyear Procurement Authority; Requests for Relief

Pub. L. 100–526, title I, §104(a), Oct. 24, 1988, 102 Stat. 2624, which provided that if for any fiscal year a multiyear contract was to be entered into under 10 U.S.C. 2306(h) was authorized by law for a particular procurement program and that authorization was subject to certain conditions established by law (including a condition as to cost savings to be achieved under the multiyear contract in comparison to specified other contracts) and if it appeared (after negotiations with contractors) that such savings could not be achieved, but that substantial savings could nevertheless be achieved through the use of a multiyear contract rather than specified other contracts, the President was to submit to Congress a request for relief from the specified cost savings that was to be achieved through multiyear contracting for that program and that any such request by the President was to include details about the request for a multiyear contract, including details about the negotiated contract terms and conditions, was repealed and restated as subsec. (h)(11) of this section by Pub. L. 101–189, §805(b), (c).

Technical Data and Computer Software Packages; Procurement; Contracting Period; Deferred Ordering Clause; Exemptions; Report to Congressional Committees; Definitions

Pub. L. 94–361, title VIII, §805, July 14, 1976, 90 Stat. 932, required that military contracts entered into during Oct. 1, 1976 to Sept. 30, 1978 for development or procurement of a major system include a deferred ordering clause with an option to purchase from the contractor technical data and computer software packages relating to the system, directed that such clause require such packages to be sufficiently detailed so as to enable procurement of such system or subsystem from another contractor, authorized that a particular contract may be exempted from the deferred ordering clause if the procuring authority reports to the House and Senate Committees on Armed Services his intent to so contract with an explanation for the exemption, and set out definitions for “major system”, “deferred ordering”, and “technical data”.

Cross References

Cost-type research and development contracts with educational institutions, see section 254a of Title 41, Public Contracts.

Determinations or decisions based on written findings, see section 2310 of this title.

Research and development, see section 2352 et seq. of this title.

Section Referred to in Other Sections

This section is referred to in sections 2310, 2343 of this title; title 50 section 403c.