"(2) shall use management and oversight techniques that achieve the objective of the subsection without imposing a significant. management burden on the Government or the contractor involved.".

(5) Subsection (a)(3)(B) of section 2534 of title 10, United States Code, as amended by paragraph (1), shall apply only to contracts entered into after March 31, 1996.

(b) EXTENSION OF LIMITATION RELATING TO BALL BEARINGS AND ROLLER BEARINGS.-Section 2534(c)(3) of such title is amended by striking out "October 1, 1995" and inserting in lieu thereof "October 1, 2000".

(c) TERMINATION OF VESSEL PROPELLER LIMITATION.-Section 2534(c) of such title is amended by adding at the end the following new paragraph:

"(4) VESSEL PROPELLERS.-Subsection (a)(3)(A)(iii) and this paragraph shall cease to be effective on the date occurring two years after the date of the enactment of the National Defense Authorization Act for Fiscal Year 1996.".

(d) INAPPLICABILITY OF SIMPLIFIED ACQUISITION LIMITATION TO CONTRACTS FOR BALL BEARINGS AND ROLLER BEARINGS.-Section 2534(g) of title 10, United States Code, is amended

(1) by inserting "(1)" before "This section"; and

(2) by adding at the end the following new paragraph:

"(2) Paragraph (1) does not apply to contracts for items described in subsection (a)(5) (relating to ball bearings and roller bearings), notwithstanding section 33 of the Office of Federal Procurement Policy Act (41 U.S.C. 429).".

SEC. 807. ENCOURAGEMENT OF USE OF LEASING AUTHORITY.

(a) IN GENERAL.-(1) Section 2401a of title 10, United States Code, is amended

(A) by inserting before "The Secretary of Defense" the following subsection heading: "(b) LIMITATION ON CONTRACTS WITH TERMS OF 18 MONTHS OR MORE.-";

(B) by inserting after the section heading the following:

"(a) LEASING OF COMMERCIAL VEHICLES AND EQUIPMENT.-The Secretary of Defense may use leasing in the acquisition of commercial vehicles and equipment whenever the Secretary determines that leasing of such vehicles is practicable and efficient."; and

(C) by amending the section heading to read as follows:

"§ 2401a. Lease of vehicles, equipment, vessels, and aircraft".

(2) The item relating to section 2401a in the table of sections at the beginning of chapter 141 of such title is amended to read as follows: "2401a. Lease of vehicles, equipment, vessels, and aircraft.".

(b) REPORT.-Not later than 90 days after the date of the enactment of this Act, the Secretary of Defense shall submit to the Committee on Armed Services of the Senate and the Committee on National Security of the House of Representatives a report setting forth changes in legislation that would be required to facilitate the use of leasing in the acquisition of equipment by the Department of Defense.

(c) PILOT PROGRAM.—(1) The Secretary of the Army may conduct a pilot program for leasing commercial utility cargo vehicles in accordance with this subsection.

(2) Under the pilot program—

(A) the Secretary may trade existing commercial utility cargo vehicles of the Army for credit against the costs of leasing new replacement commercial utility cargo vehicles for the Army;

(B) the quantities and trade-in value of commercial utility cargo vehicles to be trad

ed in shall be subject to negotiation between the Secretary and the lessors of the new replacement commercial utility cargo vehicles;

(C) the lease agreement for a new commercial utility cargo vehicle may be executed with or without an option to purchase at the end of the lease period;

(D) the lease period for a new commercial utility cargo vehicle may not exceed the warranty period for the vehicle; and

(E) up to 40 percent of the validated requirement for commercial utility cargo vehicles may be satisfied by leasing such vehicles, except that one or more options for satisfying the remainder of the validated requirement may be provided for and exercised (subject to the requirements of paragraph (6)).

(3) In awarding contracts under the pilot program, the Secretary shall comply with section 2304 of title 10, United States Code. (4) The pilot program may not be commenced until—

(A) the Secretary submits to the Committee on Armed Services of the Senate and the Committee on National Security of the House of Representatives a report that contains the plans of the Secretary for implementing the program and that sets forth in detail the savings in operating and support costs expected to be derived from retiring older commercial utility cargo vehicles, as compared to the expected costs of leasing newer commercial utility cargo vehicles; and (B) a period of 30 calendar days has elapsed after submission of such report.

(5) Not later than one year after the date on which the first lease under the pilot program is entered into, the Secretary of the Army shall submit to the Committee on Armed Services of the Senate and the Committee on National Security of the House of Representatives a report on the status of the pilot program. Such report shall be based on at least six months of experience in operating the pilot program.

(6) The Secretary may exercise an option provided for under paragraph (2) only after a period of 60 days has elapsed after the submission of the report.

(7) No lease of commercial utility cargo vehicles may be entered into under the pilot program after September 30, 2000. SEC. 808. COST REIMBURSEMENT RULES FOR INDIRECT COSTS ATTRIBUTABLE TO PRIVATE SECTOR WORK OF DEFENSE CONTRACTORS.

(a) DEFENSE CAPABILITY PRESERVATION AGREEMENT.-The Secretary of Defense may enter into an agreement, to be known as a "defense capability preservation agreement", with a defense contractor under which the cost reimbursement rules described in subsection (b) shall be applied. Such an agreement may be entered into in any case in which the Secretary determines that the application of such cost reimbursement rules would facilitate the achievement of the policy objectives set forth in section 2501(b) of title 10, United States Code.

(b) COST REIMBURSEMENT RULES.-(1) The cost reimbursement rules applicable under an agreement entered into under subsection (a) are as follows:

(A) The Department of Defense shall, in determining the reimbursement due a contractor for its indirect costs of performing a defense contract, allow the contractor to allocate indirect costs to its private sector work only to the extent of the contractor's allocable indirect private sector costs, subject to subparagraph (C).

(B) For purposes of subparagraph (A), the allocable indirect private sector costs of a contractor are those costs of the contractor that are equal to the sum of—

(i) the incremental indirect costs attributable to such work; and

(ii) the amount by which the revenue attributable to such private sector work exceeds the sum of

(I) the direct costs attributable to such private sector work; and

(II) the incremental indirect costs attributable to such private sector work.

(C) The total amount of allocable indirect private sector costs for a contract in any year of the agreement may not exceed the amount of indirect costs that a contractor would have allocated to its private sector work during that year in accordance with the contractor's established accounting practices.

(2) The cost reimbursement rules set forth in paragraph (1) may be modified by the Secretary of Defense if the Secretary of Defense determines that modifications are appropriate to the particular situation to facilitate achievement of the policy set forth in section 2501(b) of title 10, United States Code.

(c) IMPLEMENTATION.-Not later than 90 days after the date of the enactment of this Act, the Secretary of Defense shall establish application procedures and procedures for expeditious consideration of defense capability preservation agreements as authorized by this section.

(d) CONTRACTS COVERED.-An agreement entered into with a contractor under subsection (a) shall apply to each Department of Defense contract with the contractor in effect on the date on which the agreement is entered into and each Department of Defense contract that is awarded to the contractor during the term of the agreement.

(e) REPORTS.-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 setting forth

(1) the number of applications received and the number of applications approved for defense capability preservation agreements; and

(2) any changes to the authority in this section that the Secretary recommends to further facilitate the policy set forth in section 2501(b) of title 10, United States Code. SEC. 809. SUBCONTRACTS FOR OCEAN TRANSPORTATION SERVICES.

Notwithstanding any other provision of law, neither section 901(b) of the Merchant Marine Act, 1936 (46 U.S.C. 1241(b)) nor section 2631 of title 10, United States Code, shall be included before May 1, 1996, on any list promulgated under section 34(b) of the Office of Federal Procurement Policy Act (41 U.S.C. 430(b)).

SEC. 810. PROMPT RESOLUTION OF AUDIT REC

OMMENDATIONS.

Section 6009 of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355; 108 Stat. 3367) is amended to read as follows: "SEC. 6009. PROMPT MANAGEMENT DECISIONS AND IMPLEMENTATION OF AUDIT

RECOMMENDATIONS.

"(a) MANAGEMENT DECISIONS.-(1) The head of a Federal agency shall make management decisions on all findings and recommendations set forth in an audit report of the inspector general of the agency within a maximum of six months after the issuance of the report.

"(2) The head of a Federal agency shall make management decisions on all findings and recommendations set forth in an audit report of any auditor from outside the Federal Government within a maximum of six months after the date on which the head of the agency receives the report.

"(b) COMPLETION OF FINAL ACTION.-The head of a Federal agency shall complete final action on each management decision required with regard to a recommendation in an inspector general's report under sub

section (a)(1) within 12 months after the date of the inspector general's report. If the head of the agency fails to complete final action with regard to a management decision within the 12-month period, the inspector general concerned shall identify the matter in each of the inspector general's semiannual reports pursuant to section 5(a)(3) of the Inspector General Act of 1978 (5 U.S.C. App.) until final action on the management decision is completed.".

SEC. 811. TEST PROGRAM FOR NEGOTIATION OF COMPREHENSIVE SUBCONTRACTING

PLANS.

(a) REVISION OF AUTHORITY.-Subsection (a) of section 834 of National Defense Authorization Act for Fiscal Years 1990 and 1991 (15 U.S.C. 637 note) is amended by striking out paragraph (1) and inserting in lieu thereof the following:

"(1) The Secretary of Defense shall establish a test program under which contracting activities in the military departments and the Defense Agencies are authorized to undertake one or more demonstration projects to determine whether the negotiation and administration of comprehensive subcontracting plans will reduce administrative burdens on contractors while enhancing opportunities provided under Department of Defense contracts for small business concerns and small business concerns owned and controlled by socially and economically disadvantaged individuals. In selecting the contracting activities to undertake demonstration projects, the Secretary shall take such action as is necessary to ensure that a broad range of the supplies and services acquired by the Department of Defense are included in the test program.".

(b) COVERED CONTRACTORS.-Subsection (b) of such section is amended by striking out paragraph (3) and inserting in lieu thereof the following:

"(3) A Department of Defense contractor referred to in paragraph (1) is, with respect to a comprehensive subcontracting plan negotiated in any fiscal year, a business concern that, during the immediately preceding fiscal year, furnished the Department of Defense with supplies or services (including professional services, research and development services, and construction services) pursuant to at least three Department of Defense contracts having an aggregate value of at least $5,000,000.".

(c) TECHNICAL AMENDMENTS.-Such section is amended

(1) by striking out subsection (g); and (2) by redesignating subsection (h) as subsection (g).

SEC. 812. PROCUREMENT OF ITEMS FOR EXPERIMENTAL OR TEST PURPOSES. Section 2373(b) of title 10, United States Code, is amended by inserting "only" after "applies" in the second sentence.

SEC. 813. USE OF FUNDS FOR ACQUISITION OF DESIGNS, PROCESSES, TECHNICAL DATA, AND COMPUTER SOFTWARE. Section 2386(3) of title 10, United States Code, is amended to read as follows:

"(3) Design and process data, technical data, and computer software.". SEC. 814. INDEPENDENT COST ESTIMATES FOR MAJOR DEFENSE ACQUISITION PROGRAMS.

Section 2434(b)(1)(A) of title 10, United States Code, is amended to read as follows: "(A) be prepared

"(i) by an office or other entity that is not under the supervision, direction, or control of the military department, Defense Agency, or other component of the Department of Defense that is directly responsible for carrying out the development or acquisition of the program; or

"(ii) if the decision authority for the program has been delegated to an official of a

military department, Defense Agency, or other component of the Department of Defense, by an office or other entity that is not directly responsible for carrying out the development or acquisition of the program; and".

SEC. 815. CONSTRUCTION, REPAIR, ALTERATION, FURNISHING, AND EQUIPPING OF NAVAL VESSELS.

(a) APPLICABILITY OF CERTAIN LAW.-Chapter 633 of title 10, United States Code, is amended by inserting after section 7297 the following:

"§7299. Contracts: applicability of WalshHealey Act

"Each contract for the construction, alteration, furnishing, or equipping of a naval vessel is subject to the Walsh-Healey Act (41 U.S.C. 35 et seq.) unless the President determines that this requirement is not in the interest of national defense.".

(b) CLERICAL AMENDMENT.-The table of sections at the beginning of such chapter is amended by inserting after the item relating to section 7297 the following: "7299. Contracts: applicability of WalshHealey Act.".

Subtitle B-Other Matters

SEC. 821. PROCUREMENT TECHNICAL ASSIST

ANCE PROGRAMS.

(a) FUNDING.-Of the amount authorized to be appropriated under section 301(5), $12,000,000 shall be available for carrying out the provisions of chapter 142 of title 10, United States Code.

(b) SPECIFIC PROGRAMS.-Of the amounts made available pursuant to subsection (a), $600,000 shall be available for fiscal year 1996 for the purpose of carrying out programs sponsored by eligible entities referred to in subparagraph (D) of section 2411(1) of title 10, United States Code, that provide procurement technical assistance in distressed areas referred to in subparagraph (B) of section 2411(2) of such title. If there is an insufficient number of satisfactory proposals for cooperative agreements in such distressed areas to allow effective use of the funds made available in accordance with this subsection in such areas, the funds shall be allocated among the Defense Contract Administration Services regions in accordance with section 2415 of such title.

SEC. 822. DEFENSE FACILITY-WIDE PILOT PROGRAM.

(a) AUTHORITY TO CONDUCT DEFENSE FACILITY-WIDE PILOT PROGRAM.-The Secretary of Defense may conduct a pilot program, to be known as the "defense facility-wide pilot program", for the purpose of determining the potential for increasing the efficiency and effectiveness of the acquisition process in facilities by using commercial practices on a facility-wide basis.

(b) DESIGNATION OF PARTICIPATING FACILITIES. (1) Subject to paragraph (2), the Secretary may designate up to two facilities as participants in the defense facility-wide pilot program.

(2) The Secretary may designate for participation in the pilot program only those facilities that are authorized to be so designated in a law authorizing appropriations for national defense programs that is enacted after the date of the enactment of this Act.

(c) SCOPE OF PROGRAM.-At a facility designated as a participant in the pilot program, the pilot program shall consist of the following:

(1) All contracts and subcontracts for defense supplies and services that are performed at the facility.

(2) All Department of Defense contracts and all subcontracts under Department of Defense contracts performed elsewhere that the Secretary determines are directly and

substantially related to the production of defense supplies and services at the facility and are necessary for the pilot program.

(d) CRITERIA FOR DESIGNATION OF PARTICIPATING FACILITIES.-The Secretary shall establish criteria for selecting a facility for designation as a participant in the pilot program. In developing such criteria, the Secretary shall consider the following:

(1) The number of existing and anticipated contracts and subcontracts performed at the facility

(A) for which contractors are required to provide certified cost or pricing data pursuant to section 2306a of title 10, United States Code; and

(B) which are administered with the application of cost accounting standards under section 26(f) of the Office of Federal Procurement Policy Act (41 U.S.C. 422(f)).

(2) The relationship of the facility to other and organizations facilities performing under contracts with the Department of Defense and subcontracts under such contracts. (3) The impact that the participation of the facility under the pilot program would have competing domestic

on

manufacturers.

(4) Such other factors as the Secretary considers

appropriate.

(e) NOTIFICATION.-(1) The Secretary shall transmit to the Committee on Armed Services of the Senate and the Committee on National Security of the House of Representatives a written notification of each facility proposed to be designated by the Secretary for participation in the pilot program.

(2) The Secretary shall include in the notification regarding a facility designated for participation in the program a management plan addressing the following:

(A) The proposed treatment of research and development contracts or subcontracts to be performed at the facility during the pilot program.

(B) The proposed treatment of the cost impact of the use of commercial practices on the award and administration of contracts and subcontracts performed at the facility.

(C) The proposed method for reimbursing the contractor for existing and new contracts.

(D) The proposed method for measuring the performance of the facility for meeting the management the Secretary.

goals

of

(E) Estimates of the annual amount and the total amount of the contracts and subcontracts covered under the pilot program.

(3)(A) The Secretary shall ensure that the management plan for a facility provides for attainment of the following objectives:

(i) A significant reduction of the cost to the Government for programs carried out at the facility.

(ii) A reduction of the schedule associated with programs carried out at the facility. (iii) An increased use of commercial practices and procedures for programs carried out at the facility.

(iv) Protection of a domestic manufacturer competing for contracts at such facility from being placed at a significant competitive disadvantage by the participation of the facility in the pilot program.

(B) The management plan for a facility shall also require that all or substantially all of the contracts to be awarded and performed at the facility after the designation of that facility under subsection (b), and all or substantially all of the subcontracts to be awarded under those contracts and performed at the facility after the designation, be

(i) for the production of supplies or services on a firm-fixed price basis;

(ii) awarded without requiring the contractors or subcontractors to provide certified cost or pricing data pursuant to section 2306a of title 10, United States Code; and

(iii) awarded and administered without the application of cost accounting standards under section 26(f) of the Office of Federal Procurement Policy Act (41 U.S.C. 422(f)).

(f) EXEMPTION FROM CERTAIN REQUIREMENTS.-In the case of a contract or subcontract that is to be performed at a facility designated for participation in the defense facility-wide pilot program and that is subject to section 2306a of title 10, United States Code, or section 26(f) of the Office of Federal Procurement Policy Act (41 U.S.C. 422(f)), the Secretary of Defense may exempt such contract or subcontract from the requirement to obtain certified cost or pricing data under such section 2306a or the requirement to apply mandatory cost accounting standards under such section 26(f) if the Secretary determines that the contract subcontract

or

(1) is within the scope of the pilot program (as described in subsection (c)); and

(2) is fairly and reasonably priced based on information other than certified cost and pricing data.

(g) SPECIAL AUTHORITY.-The authority provided under subsection (a) includes authority for the Secretary of Defense

(1) to apply any amendment or repeal of a provision of law made in this Act to the pilot program before the effective date of such amendment or repeal; and

(2) to apply to a procurement of items other than commercial items under such program

(A) the authority provided in section 34 of the Office of Federal Procurement Policy Act (41 U.S.C. 430) to waive a provision of law in the case of commercial items, and

(B) any exception applicable under this Act. or the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355) (or an amendment made by a provision of either Act) in the case of commercial items,

before the effective date of such provision (or amendment) to the extent that the Secretary determines necessary to test the application of such waiver or exception to procurements of items other than commercial items.

(h) APPLICABILITY.—(1) Subsections (f) and (g) apply to the following contracts, if such contracts are within the scope of the pilot program at a facility designated for the pilot. program under subsection (b):

(A) A contract that is awarded or modified during the period described in paragraph (2).

(B) A contract that is awarded before the beginning of such period, that is to be performed (or may be performed), in whole or in part, during such period, and that may be modified as appropriate at no cost to the Government.

(2) The period referred to in paragraph (1), with respect to a facility designated under subsection (b), is the period that

(A) begins 45 days after the date of the enactment of the Act authorizing the designation of that facility in accordance with paragraph (2) of such subsection; and

(B) ends on September 30, 2000.

(i) COMMERCIAL PRACTICES ENCOURAGED.— With respect to contracts and subcontracts within the scope of the defense facility-wide pilot program, the Secretary of Defense may, to the extent the Secretary determines appropriate and in accordance with applicable law, adopt commercial practices in the administration of contracts and subcontracts. Such commercial practices may include the following:

(1) Substitution of commercial oversight and inspection procedures for Government audit and access to records.

(2) Incorporation of commercial oversight, inspection, and acceptance procedures.

(3) Use of alternative dispute resolution techniques (including arbitration).

(4) Elimination of contract provisions authorizing the Government to make unilateral changes to contracts.

SEC. 823. TREATMENT OF DEPARTMENT OF DEFENSE CABLE TELEVISION FRANCHISE AGREEMENTS.

Not later than 180 days after the date of the enactment of this Act, the chief judge of the United States Court of Federal Claims shall transmit to Congress a report containing an advisory opinion on the following two questions:

(1) Is it within the power of the executive branch to treat cable television franchise agreements for the construction, installation, or capital improvement of cable television systems at military installations of the Department of Defense as contracts under part 49 of the Federal Acquisition Regulation without violating title VI of the Communications Act of 1934 (47 U.S.C. 521 et

seq.)?

(2) If the answer to the question in paragraph (1) is in the affirmative, is the executive branch required by law to so treat such franchise agreements?

SEC. 824. EXTENSION OF PILOT MENTOR-PROTEGE PROGRAM.

Section 831(j)(1) of the National Defense Authorization Act for Fiscal Year 1991 (10 U.S.C. 2301 note) is amended by striking out "1995" and inserting in lieu thereof "1996". TITLE IX-DEPARTMENT OF DEFENSE ORGANIZATION AND MANAGEMENT Subtitle A-General Matters

SEC. 901. ORGANIZATION OF THE OFFICE OF THE SECRETARY OF DEFENSE. (a) FINDINGS.-Congress makes the following findings:

(1) The statutory provisions that as of the date of the enactment of this Act govern the organization of the Office of the Secretary of Defense have evolved from enactment of a number of executive branch legislative proposals and congressional initiatives over a period of years.

(2) The May 1995 report of the congressionally mandated Commission on Roles and Missions of the Armed Forces included a number of recommendations relating to the Office of the Secretary of Defense.

(3) The Secretary of Defense has decided to create a special Department task force and to conduct other reviews to review many of the Commission's recommendations.

(4) The Secretary of Defense has decided to institute a 5 percent per year reduction of civilian personnel assigned to the Office of the Secretary of Defense, including the Washington Headquarters Service and the Defense Support Activities, for the period from fiscal year 1996 through fiscal year 2001.

(5) Over the ten-year period from 1986 through 1995, defense spending in real dollars has been reduced by 34 percent and military end-strengths have been reduced by 28 percent. During the same period, the number of civilian employees of the Office of the Secretary of Defense has increased by 22 percent.

(6) To achieve greater efficiency and to revalidate the role and mission of the Office of the Secretary of Defense, a comprehensive review of the organizations and functions of that Office and of the personnel needed to carry out those functions is required.

(b) REVIEW.-The Secretary of Defense shall conduct a further review of the organizations and functions of the Office of the Secretary of Defense, including the Washington Headquarters Service and the Defense Support Activities, and the personnel needed to carry out those functions. The review shall include the following:

(1) An assessment of the appropriate functions of the Office and whether the Office of the Secretary of Defense or some of its component parts should be organized along mission lines.

(2) An assessment of the adequacy of the present organizational structure to efficiently and effectively support the Secretary in carrying out his responsibilities in a manner that ensures civilian authority in the Department of Defense.

(3) An assessment of the advantages and disadvantages of the use of political appointees to fill the positions of the various Under Secretaries of Defense, Assistant Secretaries of Defense, and Deputy Under Secretaries of Defense.

(4) An assessment of the extent of unnecessary duplication of functions between the Office of the Secretary of Defense and the Joint Staff.

(5) An assessment of the extent of unnecessary duplication of functions between the Office of the Secretary of Defense and the military departments.

(6) An assessment of the appropriate number of positions referred to in paragraph (3) and of Deputy Assistant Secretaries of Defense.

(7) An assessment of whether some or any of the functions currently performed by the Office of Humanitarian and Refugee Affairs are more properly or effectively performed by another agency of Government or elsewhere within the Department of Defense.

(8) An assessment of the efficacy of the Joint Requirements Oversight Council and whether it is advisable or necessary to establish a statutory charter for this organization.

(9) An assessment of any benefits or efficiencies derived from decentralizing certain functions currently performed by the Office of the Secretary of Defense.

(10) An assessment of the appropriate size, number, and functional responsibilities of the Defense Agencies and other Department of Defense support organizations.

(c) REPORT.-Not later than March 1, 1996, the Secretary of Defense shall submit to the congressional defense committees a report containing

(1) his findings and conclusions resulting from the review under subsection (b); and (2) a plan for implementing resulting recommendations, including proposals for legislation (with supporting rationale) that would be required as a result of the review.

(d) PERSONNEL REDUCTION.-(1) Effective October 1, 1999, the number of OSD personnel may not exceed 75 percent of the number of OSD personnel as of October 1, 1994.

(2) For purposes of this subsection, the term "OSD personnel" means military and civilian personnel of the Department of Defense who are assigned to, or employed in, functions in the Office of the Secretary of Defense (including Direct Support Activities of that Office and the Washington Headquarters Services of the Department of Defense).

(3) In carrying out reductions in the number of personnel assigned to, or employed in, the Office of the Department of Defense in order to comply with paragraph (1), the Secretary may not reassign functions solely in order to evade the requirement contained in that paragraph.

(4) If the Secretary of Defense determines, and certifies to Congress, that the limitation in paragraph (1) would adversely affect United States national security, the limitation under paragraph (1) shall be applied by substituting "80 percent" for "75 percent". SEC. 902. REDUCTION IN NUMBER OF ASSISTANT SECRETARY OF DEFENSE POSITIONS.

(a) REDUCTION.-Section 138(a) of title 10, United States Code, is amended by striking

out "eleven" and inserting in lieu thereof "ten".

(b) CONFORMING AMENDMENT.-Section 5315 of title 5, United States Code, is amended by striking out "(11)" after "Assistant Secretaries of Defense" and inserting in lieu thereof "(10)".

SEC. 903. DEFERRED REPEAL OF VARIOUS STATUTORY POSITIONS AND OFFICES IN OFFICE OF THE SECRETARY OF DEFENSE.

(a) EFFECTIVE DATE.-The amendments made by this section shall take effect on January 31, 1997.

(b) TERMINATION OF SPECIFICATION BY LAW OF ASD POSITIONS.-Subsection (b) of section 138 of title 10, United States Code, is amended to read as follows:

"(b) The Assistant Secretaries shall perform such duties and exercise such powers as the Secretary of Defense may prescribe.".

(c) REPEAL OF CERTAIN OSD PRESIDENTIAL APPOINTMENT POSITIONS.-The following sections of chapter 4 of such title are repealed: (1) Section 133a, relating to the Deputy Under Secretary of Defense for Acquisition and Technology.

(2) Section 134a, relating to the Deputy Under Secretary of Defense for Policy.

(3) Section 134a, relating to the Director of Defense Research and Engineering.

(4) Section 142, relating to the Assistant to the Secretary of Defense for Nuclear and Chemical and Biological Defense Programs.

(d) DIRECTOR OF MILITARY RELOCATION ASSISTANCE PROGRAMS.-Section 1056 of such title is amended by striking out subsection (d).

(e) CONFORMING AMENDMENTS RELATING TO REPEAL OF VARIOUS OSD POSITIONS.-Chapter 4 of such title is further amended(1) in section 131(b)—

(A) by striking out paragraphs (6) and (8); and

(B) by redesignating paragraphs (7), (9), (10), and (11), as paragraphs (6), (7), (8), and (9), respectively;

(2) in section 138(d), by striking out "the Under Secretaries of Defense, and the Director of Defense Research and Engineering" and inserting in lieu thereof "and the Under Secretaries of Defense"; and

(3) in the table of sections at the beginning of the chapter, by striking out the items relating to sections 133a, 134a, 137, 139, and 142.

(f) CONFORMING AMENDMENTS RELATING TO REPEAL OF SPECIFICATION OF ASD POSITIONS.

(1) Section 176(a)(3) of title 10, United States Code, is amended

(A) by striking out "Assistant Secretary of Defense for Health Affairs" and inserting in lieu thereof "official in the Department of Defense with principal responsibility for health affairs"; and

(B) by striking out "Chief Medical Director of the Department of Veterans Affairs" and inserting in lieu thereof "Under Secretary for Health of the Department of Veterans Affairs".

(2) Section 1216(d) of such title is amended by striking out "Assistant Secretary of Defense for Health Affairs" and inserting in lieu thereof "official in the Department of Defense with principal responsibility for health affairs".

(3) Section 1587(d) of such title is amended by striking out "Assistant Secretary of Defense for Manpower and Logistics" and inserting in lieu thereof "official in the Department of Defense with principal responsibility for personnel and

readiness".

(4) The text of section 10201 of such title is amended to read as follows:

"The official in the Department of Defense with responsibility for overall supervision of reserve component affairs of the Department of Defense is the official designated by the

Secretary of Defense to have that responsibility.".

(5) Section 1211(b)(2) of the National Defense Authorization Act for Fiscal Years 1988 and 1989 (P.L. 100-180; 101 Stat 1155; 10 U.S.C. 167 note) is amended by striking out "the Assistant Secretary of Defense for Special Operations and Low Intensity Conflict" and inserting in lieu thereof "the official designated by the Secretary of Defense to have principal responsibility for matters relating to special operations and low intensity conflict".

(g) REPEAL OF MINIMUM NUMBER OF SENIOR STAFF FOR SPECIFIED ASSISTANT SECRETARY OF DEFENSE.-Section 355 of the National Defense Authorization Act for Fiscal Year 1991 (Public Law 101-510; 104 Stat. 1540) is repealed. SEC. 904.

REDESIGNATION OF THE POSITION OF ASSISTANT TO THE SECRETARY OF DEFENSE FOR ATOMIC ENERGY. (a) IN GENERAL.-(1) Section 142 of title 10, United States Code, is amended

(A) by striking out the section heading and inserting in lieu thereof the following:

"§ 142. Assistant to the Secretary of Defense for Nuclear and Chemical and Biological Defense Programs";

(B) in subsection (a), by striking out "Assistant to the Secretary of Defense for Atomic Energy" and inserting in lieu thereof "Assistant to the Secretary of Defense for Nuclear and Chemical and Biological Defense Programs"; and

(C) by striking out subsection (b) and inserting in lieu thereof the following:

"(b) The Assistant to the Secretary shall— "(1) advise the Secretary of Defense on nuclear energy, nuclear weapons, and chemical and biological defense;

"(2) serve as the Staff Director of the Nuclear Weapons Council established by section 179 of this title; and

"(3) perform such additional duties as the Secretary may prescribe.".

(2) The item relating to such section in the table of sections at the beginning of chapter 4 of such title is amended to read as follows: "142. Assistant to the Secretary of Defense for Nuclear and Chemical and Biological Defense Programs.". (b) CONFORMING AMENDMENTS.-(1) Section 179(c)(2) of title 10, United States Code, is amended by striking out "The Assistant to the Secretary of Defense for Atomic Energy" and inserting in lieu thereof "The Assistant to the Secretary of Defense for Nuclear and Chemical and Biological Defense Programs”. (2) Section 5316 of title 5, United States Code, is amended by striking out "The Assistant to the Secretary of Defense for Atomic Energy, Department of Defense." and inserting in lieu thereof the following:

"Assistant to the Secretary of Defense for Nuclear and Chemical and Biological Defense Programs, Department of Defense.".

SEC. 905. JOINT REQUIREMENTS OVERSIGHT COUNCIL.

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(a) IN GENERAL. (1) Chapter 7 of title 10, United States Code, is amended by adding at the end the following new section:

"§ 181. Joint Requirements Oversight Council "(a) ESTABLISHMENT. The Secretary of Defense shall establish a Joint Requirements Oversight Council in the Department of Defense.

"(b) MISSION.-In addition to other matters assigned to it by the President or Secretary of Defense, the Joint Requirements Oversight Council shall

"(1) assist the Chairman of the Joint Chiefs of Staff in identifying and assessing the priority of joint military requirements (including existing systems and equipment) to meet the national military strategy;

"(2) assist the Chairman in considering alternatives to any acquisition program that

has been identified to meet military requirements by evaluating the cost, schedule, and performance criteria of the program and of the identified alternatives; and

"(3) as part of its mission to assist the Chairman in assigning joint priority among existing and future programs meeting valid requirements, ensure that the assignment of such priorities conforms to and reflects resource levels projected by the Secretary of Defense through defense planning guidance.

"(c) COMPOSITION.-(1) The Joint Requirements Oversight Council is composed of— "(A) the Chairman of the Joint Chiefs of Staff, who is the chairman of the Council; "(B) an Army officer in the grade of general;

"(C) a Navy officer in the grade of admiral; "(D) an Air Force officer in the grade of general; and

"(E) a Marine Corps officer in the grade of general.

"(2) Members of the Council, other than the Chairman of the Joint Chiefs of Staff, shall be selected by the Chairman of the Joint Chiefs of Staff, after consultation with the Secretary of Defense, from officers in the grade of general or admiral, as the case may be, who are recommended for such selection by the Secretary of the military department concerned.

"(3) The functions of the Chairman of the Joint Chiefs of Staff as chairman of the Council may only be delegated to the Vice Chairman of the Joint Chiefs of Staff.".

(2) The table of sections at the beginning of such chapter is amended by adding at the end the following new item:

"181. Joint Requirements Oversight Coun

cil.".

(b) EFFECTIVE DATE.-The amendments made by this section shall take effect on January 31, 1997.

SEC. 906. RESTRUCTURING OF DEPARTMENT OF DEFENSE ACQUISITION ORGANIZATION AND WORKFORCE.

(a) RESTRUCTURING REPORT.-Not later than March 1, 1996, the Secretary of Defense shall submit to Congress a report on the acquisition organization and workforce of the Department of Defense. The report shall include_

(1) the plan described in subsection (b); and (2) the assessment of streamlining and restructuring options described in subsection (c).

(b) PLAN FOR RESTRUCTURING.-(1) The Secretary shall include in the report under subsection (a) a plan on how to restructure the current acquisition organization of the Department of Defense in a manner that would enable the Secretary to accomplish the following:

(A) Reduce the number of military and civilian personnel assigned to, or employed in, acquisition organizations of the Department of Defense (as defined by the Secretary) by 25 percent over a period of five years, beginning on October 1, 1995.

(B) Eliminate duplication of functions among existing acquisition organizations of the Department of Defense.

(C) Maximize opportunity for consolidation among acquisition organizations of the Department of Defense to reduce management overhead.

(2) In the report, the Secretary shall also identify any statutory requirement or congressional directive that inhibits any proposed restructuring plan or reduction in the size of the defense acquisition organization.

(3) In designing the plan under paragraph (1), the Secretary shall give full consideration to the process efficiencies expected to be achieved through the implementation of the Federal Acquisition Streamlining Act of 1994 (Public Law 103-355), the Federal Acquisition Reform Act of 1995 (division D of this

Act), and other ongoing initiatives to increase the use of commercial practices and reduce contract overhead in the defense procurement system.

(c) ASSESSMENT OF SPECIFIED RESTRUCTURING OPTIONS.-The Secretary shall include in the report under subsection (a) a detailed assessment of each of the following options for streamlining and restructuring the existing defense acquisition organization, together with a specific recommendation as to whether each such option should be implemented:

(1) Consolidation of certain functions of the Defense Contract Audit Agency and the Defense Contract Management Command.

(2) Contracting for performance of a significant portion of the workload of the Defense Contract Audit Agency and other Defense Agencies that perform acquisition functions.

(3) Consolidation or selected elimination of Department of Defense acquisition organizations.

(4) Any other defense acquisition infrastructure streamlining or restructuring option the Secretary may determine.

(d) REDUCTION OF ACQUISITION WORKFORCE. (1) The Secretary of Defense shall accomplish reductions in defense acquisition personnel positions during fiscal year 1996 so that the total number of such personnel as of October 1, 1996, is less than the total number of such personnel as of October 1, 1995, by at least 15,000.

(2) For purposes of this subsection, the term "defense acquisition personnel" means military and civilian personnel assigned to, or employed in, acquisition organizations of the Department of Defense (as specified in Department of Defense Instruction numbered 5000.58 dated January 14, 1992) with the exception of personnel who possess technical competence in trade-skill maintenance and repair positions involved in performing depot maintenance functions.

SEC. 907. REPORT ON NUCLEAR POSTURE REVIEW AND ON PLANS FOR NUCLEAR WEAPONS MANAGEMENT IN EVENT OF ABOLITION OF DEPARTMENT OF ENERGY.

(a) REPORT REQUIRED.-The Secretary of Defense shall submit to Congress a report concerning the nuclear weapons complex. The report shall set forth

(1) the Secretary's views on the effectiveness of the Department of Energy in managing the nuclear weapons complex, including the fulfillment of the requirements for nuclear weapons established for the Department of Energy in the Nuclear Posture Review; and

(2) the Secretary's recommended plan for the incorporation into the Department of Defense of the national security programs of the Department of Energy if the Department of Energy should be abolished and those programs be transferred to the Department of Defense.

(b) DEFINITION.-For purposes of this section, the term "Nuclear Posture Review" means the Department of Defense Nuclear Posture Review as contained in the report entitled "Report of the Secretary of Defense to the President and the Congress", dated February 19, 1995, or in subsequent such reports.

(c) SUBMISSION OF REPORT.-The report under subsection (a) shall be submitted not later than March 15, 1996. SEC. 908. REDESIGNATION OF ADVANCED RESEARCH PROJECTS AGENCY.

(a) REDESIGNATION.-The agency in the Department of Defense known as the Advanced Research Projects Agency shall after the date of the enactment of this Act be designated as the Defense Advanced Research Projects Agency.

(b) REFERENCES.-Any reference in any law, regulation, document, record, or other

paper of the United States or in any provision of this Act to the Advanced Research Projects Agency shall be considered to be a reference to the Defense Advanced Research Projects Agency.

Subtitle B-Financial Management

SEC. 911. TRANSFER AUTHORITY REGARDING FUNDS AVAILABLE FOR FOREIGN CURRENCY FLUCTUATIONS.

(a) TRANSFERS TO MILITARY PERSONNEL ACCOUNTS AUTHORIZED.-Section 2779 of title 10, United States Code, is amended by adding at the end the following:

"(c) TRANSFERS TO MILITARY PERSONNEL ACCOUNTS. The Secretary of Defense may transfer funds to military personnel appropriations for a fiscal year out of funds available to the Department of Defense for that fiscal year under the appropriation 'Foreign Currency Fluctuations, Defense'.".

(b) REVISION AND CODIFICATION OF AUTHORITY FOR TRANSFERS TO FOREIGN CURRENCY FLUCTUATIONS ACCOUNT.-Section 2779 of such title, as amended by subsection (a), is further amended by adding at the end the following:

"(d) TRANSFERS TO FOREIGN CURRENCY FLUCTUATIONS ACCOUNT.-(1) The Secretary of Defense may transfer to the appropriation 'Foreign Currency Fluctuations, Defense' unobligated amounts of funds appropriated for operation and maintenance and unobligated amounts of funds appropriated for military personnel.

"(2) Any transfer from an appropriation under paragraph (1) shall be made not later than the end of the second fiscal year following the fiscal year for which the appropriation is provided.

"(3) Any transfer made pursuant to the authority provided in this subsection shall be limited so that the amount in the appropriation Foreign Currency Fluctuations, Defense' does not exceed $970,000,000 at the time the transfer is made.".

CONDITIONS

(c) CONDITIONS OF AVAILABILITY FOR TRANSFERRED FUNDS.-Section 2779 of such title, as amended by subsection (b), is further amended by adding at the end the following: "(e) OF AVAILABILITY FOR TRANSFERRED FUNDS.-Amounts transferred under subsection (c) or (d) shall be merged with and be available for the same purposes and for the same period as the appropriations to which transferred.".

(d) REPEAL OF SUPERSEDED PROVISIONS.-(1) Section 767A of Public Law 96-527 (94 Stat. 3093) is repealed.

(2) Section 791 of the Department of Defense Appropriation Act, 1983 (enacted in section 101(c) of Public Law 97-377; 96 Stat. 1865) is repealed.

(e) TECHNICAL AMENDMENTS.-Section 2779 of title 10, United States Code, is amended— (1) in subsection (a), by striking out “(a)(1)" and inserting in lieu thereof “(a) TRANSFERS BACK ΤΟ FOREIGN CURRENCY FLUCTUATIONS APPROPRIATION.—(1)”;

(2) in subsection (a)(2), by striking out "2d fiscal year" and inserting in lieu thereof "second fiscal year"; and

(3) in subsection (b), by striking out "(b)(1)" and inserting in lieu thereof "(b) FUNDING FOR LOSSES IN MILITARY CONSTRUCTION AND FAMILY HOUSING.—(1)”.

(f) EFFECTIVE DATE.-Subsections (c) and (d) of section 2779 of title 10, United States Code, as added by subsections (a) and (b), and the repeals made by subsection (d), shall apply only with respect to amounts appropriated for a fiscal year after fiscal year 1995. SEC. 912. DEFENSE MODERNIZATION ACCOUNT.

(a) ESTABLISHMENT AND USE.-(1) Chapter 131 of title 10, United States Code, is amended by inserting after section 2215 the following new section:

"S2216. Defense Modernization Account

"(a) ESTABLISHMENT.-There is established in the Treasury an account to be known as the 'Defense Modernization Account'.

"(b) TRANSFERS TO ACCOUNT.—(1)(A) Upon a determination by the Secretary of a military department or the Secretary of Defense with respect to Defense-wide appropriations accounts of the availability and source of funds described in subparagraph (B), that Secretary may transfer to the Defense Modernization Account during any fiscal year any amount of funds available to the Secretary described in that subparagraph. Such funds may be transferred to that account only after the Secretary concerned notifies the congressional defense committees in writing of the amount and source of the proposed transfer.

"(B) This subsection applies to the following funds available to the Secretary concerned:

"(i) Unexpired funds in appropriations accounts that are available for procurement and that, as a result of economies, efficiencies, and other savings achieved in carrying out a particular procurement, are excess to the requirements of that procurement.

"(ii) Unexpired funds that are available during the final 30 days of a fiscal year for support of installations and facilities and that, as a result of economies, efficiencies, and other savings, are excess to the requirements for support of installations and facilities.

"(C) Any transfer under subparagraph (A) shall be made under regulations prescribed by the Secretary of Defense.

"(2) Funds referred to in paragraph (1) may not be transferred to the Defense Modernization Account if

"(A) the funds are necessary for programs, projects, and activities that, as determined by the Secretary, have a higher priority than the purposes for which the funds would be available if transferred to that account; or

"(B) the balance of funds in the account, after transfer of funds to the account, would exceed $1,000,000,000.

"(3) Amounts credited to the Defense Modernization Account shall remain available for transfer until the end of the third fiscal year that follows the fiscal year in which the amounts are credited to the account.

"(4) The period of availability of funds for expenditure provided for in sections 1551 and 1552 of title 31 may not be extended by transfer into the Defense Modernization Account. "(c) SCOPE OF USE OF FUNDS.-Funds transferred to the Defense Modernization Account from funds appropriated for a military department, Defense Agency, or other element of the Department of Defense shall be available in accordance with subsections (f) and (g) only for transfer to funds available for that military department, Defense Agency, or other element.

"(d) AUTHORIZED USE OF FUNDS.-Funds available from the Defense Modernization Account pursuant to subsection (f) or (g) may be used for the following purposes:

"(1) For increasing, subject to subsection (e), the quantity of items and services procured under a procurement program in order to achieve a more efficient production or delivery rate.

"(2) For research, development, test, and evaluation and for procurement necessary for modernization of an existing system or of a system being procured under an ongoing procurement program.

"(e) LIMITATIONS.-(1) Funds in the Defense Modernization Account may not be used to increase the quantity of an item or services procured under a particular procurement program to the extent that doing so would"(A) result in procurement of a total quantity of items or services in excess of