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ities under this section. Services which may be obtained under this subsection include the identification, investigation, and cleanup of any off-site contamination resulting from the release of a hazardous substance or waste at a facility under the Secretary's jurisdiction.

“(2) LIMITATION ON REIMBURSABLE AGREEMENTS. An agreement with an agency under paragraph (1) may not provide for reimbursement of the agency for regulatory enforcement activities.".

(2)(A) Except as provided in subparagraph (B), the total amount of funds available for reimbursements under agreements entered into under section 2710(d) of title 10, United States Code, as amended by paragraph (1), in fiscal year 1996 may not exceed $10,000,000.

(B) The Secretary of Defense may pay in fiscal year 1996 an amount for reimbursements under agreements referred to in subparagraph (A) in excess of the amount specified in that subparagraph for that fiscal year if

(i) the Secretary certifies to Congress that the payment of the amount under this subparagraph is essential for the management of the Defense Environmental Restoration Program under chapter 160 of title 10, United States Code; and

(ii) a period of 60 days has expired after the date on which the certification is received by Congress.

(b) REPORT ON SERVICES OBTAINED.-The Secretary of Defense shall include in the report submitted to Congress with respect to fiscal year 1998 under section 2706(a) of title 10, United States Code, information on the services, if any, obtained by the Secretary during fiscal year 1996 pursuant to each agreement on a reimbursable basis entered into with a State or local government agency under section 2701(d) of title 10, United States Code, as amended by subsection (a). The information shall include a description of the services obtained under each agreement and the amount of the reimbursement provided for the services.

SEC. 322. ADDITION OF AMOUNTS CREDITABLE TO DEFENSE ENVIRONMENTAL RESTORATION ACCOUNT.

Section 2703(e) of title 10, United States Code, is amended to read as follows:

"(e) AMOUNTS RECOVERED.-The following amounts shall be credited to the transfer account:

"(1) Amounts recovered under CERCLA for response actions of the Secretary.

"(2) Any other amounts recovered by the Secretary or the Secretary of the military department concerned from a contractor, insurer, surety, or other person to reimburse the Department of Defense for any expenditure for environmental response activities.".

SEC. 323. USE OF DEFENSE ENVIRONMENTAL RESTORATION ACCOUNT.

(a) GOAL FOR CERTAIN DERA EXPENDITURES.-It shall be the goal of the Secretary of Defense to limit, by the end of fiscal year 1997, spending for administration, support, studies, and investigations associated with the Defense Environmental Restoration Account to 20 percent of the total funding for that account.

(b) REPORT.-Not later than April 1, 1996, the Secretary shall submit to Congress a report that contains specific, detailed information on

(1) the extent to which the Secretary has attained the goal described in subsection (a) as of the date of the submission of the report; and

(2) if the Secretary has not attained such goal by such date, the actions the Secretary plans to take to attain the goal.

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(a) REGULATIONS.-Paragraph (2) of subsection (d) of section 2705 of title 10, United States Code, is amended to read as follows: "(2)(A) The Secretary shall prescribe regulations regarding the establishment, characteristics, composition, and funding of restoration advisory boards pursuant to this subsection.

"(B) The issuance of regulations under subparagraph (A) shall not be a precondition to the establishment of restoration advisory boards under this subsection.".

Ex

(b) FUNDING FOR ADMINISTRATIVE PENSES.-Paragraph (3) of such subsection is amended to read as follows:

"(3) The Secretary may authorize the commander of an installation (or, if there is no such commander, an appropriate official of the Department of Defense designated by the Secretary) to pay routine administrative expenses of a restoration advisory board established for that installation. Such payments shall be made from funds available under subsection (g).”.

(c) TECHNICAL ASSISTANCE.-Such section is further amended by striking out subsection (e) and inserting in lieu thereof the following new subsection (e):

"(e) TECHNICAL ASSISTANCE.-(1) The Secretary may, upon the request of the technical review committee or restoration advisory board for an installation, authorize the commander of the installation (or, if there is no such commander, an appropriate official of the Department of Defense designated by the Secretary) to obtain for the committee or advisory board, as the case may be, from private sector sources technical assistance for interpreting scientific and engineering issues with regard to the nature of environmental hazards at the installation and the restoration activities conducted, or proposed to be conducted, at the installation. The commander of an installation (or, if there is no such commander, an appropriate official of the Department of Defense designated by the Secretary) shall use funds made available under subsection (g) for obtaining assistance under this paragraph.

"(2) The commander of an installation (or, if there is no such commander, an appropriate official of the Department of Defense designated by the Secretary) may obtain technical assistance under paragraph (1) for a technical review committee or restoration advisory board only if

"(A) the technical review committee or restoration advisory board demonstrates that the Federal, State, and local agencies responsible for overseeing environmental restoration at the installation, and available Department of Defense personnel, do not have the technical expertise necessary for achieving the objective for which the technical assistance is to be obtained; or

"(B) the technical assistance

"(i) is likely to contribute to the efficiency, effectiveness, or timeliness of environmental restoration activities at the installation; and

"(ii) is likely to contribute to community acceptance of environmental restoration activities at the installation.".

(d) FUNDING.-(1) Such section is further amended by adding at the end the following new subsection:

"(g) FUNDING.-The Secretary shall, to the extent provided in appropriations Acts, make funds available for administrative expenses and technical assistance under this section using funds in the following accounts:

"(1) In the case of a military installation not approved for closure pursuant to a base closure law, the Defense Environmental Restoration Account established under section 2703(a) of this title.

"(2) In the case of an installation approved for closure pursuant to such a law, the Department of Defense Base Closure Account 1990 established under section 2906(a) of the Defense Base Closure and Realignment Act of 1990 (part A of title XXIX of Public Law 101-510; 10 U.S.C. 2687 note).".

(2)(A) Subject to subparagraph (B), the total amount of funds made available under section 2705(g) of title 10, United States Code, as added by paragraph (1), for fiscal year 1996 may not exceed $6,000,000.

(B) Amounts may not be made available under subsection (g) of such section 2705 after September 15, 1996, unless the Secretary of Defense publishes proposed final or interim final regulations required under subsection (d) of such section, as amended by subsection (a).

(e) DEFINITION.-Such section is further amended by adding after subsection (g) (as added by subsection (d)) the following new subsection:

"(h) DEFINITION.-In this section, the term 'base closure law' means the following:

"(1) Title II of the Defense Authorization Amendments and Base Closure and Realignment Act (Public Law 100-526; 10 U.S.C. 2687 note).

"(2) The Defense Base Closure and Realignment Act of 1990 (part A of title XXIX of Public Law 101-510; 10 U.S.C. 2687 note). "(3) Section 2687 of this title.".

(f) REPORTS ON ACTIVITIES OF TECHNICAL REVIEW COMMITTEES AND RESTORATION ADVISORY BOARDS.-Section 2706(a)(2) of title 10, United States Code, is amended by adding at the end the following:

"(J) A statement of the activities, if any, including expenditures for administrative expenses and technical assistance under section 2705 of this title, of the technical review committee or restoration advisory board established for the installation under such section during the preceding fiscal year.". SEC. 325. DISCHARGES FROM VESSELS OF THE ARMED FORCES.

(a) PURPOSES.-The purposes of this section are to

(1) enhance the operational flexibility of vessels of the Armed Forces domestically and internationally;

(2) stimulate the development of innovative vessel pollution control technology; and (3) advance the development by the United States Navy of environmentally sound ships. (b) UNIFORM NATIONAL DISCHARGE STANDARDS DEVELOPMENT.-Section 312 of the Federal Water Pollution Control Act (33 U.S.C. 1322) is amended by adding at the end the following:

"(n) UNIFORM NATIONAL DISCHARGE STANDARDS FOR VESSELS OF THE ARMED FORCES.

"(1) APPLICABILITY.-This subsection shall apply to vessels of the Armed Forces and discharges, other than sewage, incidental to the normal operation of a vessel of the Armed Forces, unless the Secretary of Defense finds that compliance with this subsection would not be in the national security interests of the United States.

"(2) DETERMINATION OF DISCHARGES REQUIRED TO BE CONTROLLED BY MARINE POLLUTION CONTROL DEVICES.

"(A) IN GENERAL. The Administrator and the Secretary of Defense, after consultation with the Secretary of the department in which the Coast Guard is operating, the Secretary of Commerce, and interested States, shall jointly determine the discharges incidental to the normal operation of a vessel of the Armed Forces for which it is reasonable and practicable to require use of a marine pollution control device to mitigate adverse impacts on the marine environment. Notwithstanding subsection (a)(1) of section 553 of title 5, United States Code, the Administrator and the Secretary of Defense shall

promulgate the determinations in accordance with such section. The Secretary of Defense shall require the use of a marine pollution control device on board a vessel of the Armed Forces in any case in which it is determined that the use of such a device is reasonable and practicable.

"(B) CONSIDERATIONS.-In making a determination under subparagraph (A), the Administrator and the Secretary of Defense shall take into consideration

"(i) the nature of the discharge;

"(ii) the environmental effects of the discharge;

"(iii) the practicability of using the marine pollution control device;

"(iv) the effect that installation or use of the marine pollution control device would have on the operation or operational capability of the vessel;

"(v) applicable United States law; "(vi) applicable international standards; and

"(vii) the economic costs of the installation and use of the marine pollution control device.

"(3) PERFORMANCE STANDARDS FOR MARINE POLLUTION CONTROL DEVICES.

"(A) IN GENERAL.-For each discharge for which a marine pollution control device is determined to be required under paragraph (2), the Administrator and the Secretary of Defense, in consultation with the Secretary of the department in which the Coast Guard is operating, the Secretary of State, the Secretary of Commerce, other interested Federal agencies, and interested States, shall jointly promulgate Federal standards of performance for each marine pollution control device required with respect to the discharge. Notwithstanding subsection (a)(1) of section 553 of title 5, United States Code, the Administrator and the Secretary of Defense shall promulgate the standards in accordance with such section.

promulgating

"(B) CONSIDERATIONS.-In standards under this paragraph, the Administrator and the Secretary of Defense shall take into consideration the matters set forth in paragraph (2)(B).

"(C) CLASSES, TYPES, AND SIZES OF VESSELS. The standards promulgated under this paragraph may

"(i) distinguish among classes, types, and sizes of vessels;

"(ii) distinguish between new and existing vessels; and

"(iii) provide for a waiver of the applicability of the standards as necessary or appropriate to a particular class, type, age, or size of vessel.

"(4) REGULATIONS FOR USE OF MARINE POLLUTION CONTROL DEVICES.-The Secretary of Defense, after consultation with the Administrator and the Secretary of the department in which the Coast Guard is operating, shall promulgate such regulations governing the design, construction, installation, and use of marine pollution control devices on board vessels of the Armed Forces as are necessary to achieve the standards promulgated under paragraph (3).

"(5) DEADLINES; EFFECTIVE DATE.— "(A) DETERMINATIONS. The Administrator and the Secretary of Defense shall

"(i) make the initial determinations under paragraph (2) not later than 2 years after the date of the enactment of this subsection; and "(ii) every 5 years

"(I) review the determinations; and "(II) if necessary, revise the determinations based on significant new information. "(B) STANDARDS.-The Administrator and the Secretary of Defense shall—

"(i) promulgate standards of performance for a marine pollution control device under paragraph (3) not later than 2 years after the date of a determination under paragraph (2)

that the marine pollution control device is required; and

"(ii) every 5 years

"(I) review the standards; and

"(II) if necessary, revise the standards, consistent with paragraph (3)(B) and based on significant new information.

"(C) REGULATIONS.-The Secretary of Defense shall promulgate regulations with respect to a marine pollution control device under paragraph (4) as soon as practicable after the Administrator and the Secretary of Defense promulgate standards with respect to the device under paragraph (3), but not later than 1 year after the Administrator and the Secretary of Defense promulgate the standards. The regulations promulgated by the Secretary of Defense under paragraph (4) shall become effective upon promulgation unless another effective date is specified in the regulations.

"(D) PETITION FOR REVIEW.-The Governor of any State may submit a petition requesting that the Secretary of Defense and the Administrator review a determination under paragraph (2) or a standard under paragraph (3), if there is significant new information, not considered previously, that could reasonably result in a change to the particular determination or standard after consideration of the matters set forth in paragraph (2)(B). The petition shall be accompanied by the scientific and technical information which the petition is based. The Administrator and the Secretary of Defense shall grant or deny the petition not later than 2 years after the date of receipt of the petition.

"(6) EFFECT ON OTHER LAWS.—

on

“(A) PROHIBITION ON REGULATION BY STATES OR POLITICAL SUBDIVISIONS OF STATES.-Beginning on the effective date of

"(i) a determination under paragraph (2) that it is not reasonable and practicable to require use of a marine pollution control device regarding a particular discharge incidental to the normal operation of a vessel of the Armed Forces; or

"(ii) regulations promulgated by the Secretary of Defense under paragraph (4); except as provided in paragraph (7), neither a State nor a political subdivision of a State may adopt or enforce any statute or regulation of the State or political subdivision with respect to the discharge or the design, construction, installation, or use of any marine pollution control device required to control discharges from a vessel of the Armed Forces.

“(B) FEDERAL LAWS.-This subsection shall not affect the application of section 311 to discharges incidental to the normal operation of a vessel.

ESTABLISHMENT

OF

STATE NO-DIS

"(7) CHARGE ZONES."(A) STATE PROHIBITION.— "(i) IN GENERAL.-After the effective date of

"(I) a determination under paragraph (2) that it is not reasonable and practicable to require use of a marine pollution control device regarding a particular discharge incidental to the normal operation of a vessel of the Armed Forces; or

"(II) regulations promulgated by the Secretary of Defense under paragraph (4);

if a State determines that the protection and enhancement of the quality of some or all of the waters within the State require greater environmental protection, the State may prohibit 1 or more discharges incidental to the normal operation of a vessel, whether treated or not treated, into the waters. No prohibition shall apply until the Administrator makes the determinations described in subclauses (II) and (III) of subparagraph (B)(i).

"(ii) DOCUMENTATION.-To the extent that a prohibition under this paragraph would apply to vessels of the Armed Forces and not to other types of vessels, the State shall document the technical or environmental basis for the distinction.

"(B) PROHIBITION BY THE ADMINISTRATOR."(i) IN GENERAL.-Upon application of a State, the Administrator shall by regulation prohibit the discharge from a vessel of 1 or more discharges incidental to the normal operation of a vessel, whether treated or not treated, into the waters covered by the application if the Administrator determines that

"(I) the protection and enhancement of the quality of the specified waters within the State require a prohibition of the discharge into the waters;

"(II) adequate facilities for the safe and sanitary removal of the discharge incidental to the normal operation of a vessel are reasonably available for the waters to which the prohibition would apply; and

"(III) the prohibition will not have the effect of discriminating against a vessel of the Armed Forces by reason of the ownership or operation by the Federal Government, or the military function, of the vessel.

"(ii) APPROVAL OR DISAPPROVAL.-The Administrator shall approve or disapprove an application submitted under clause (i) not later than 90 days after the date on which the application is submitted to the Administrator. Notwithstanding clause (i)(II), the Administrator shall not disapprove an application for the sole reason that there are not adequate facilities to remove any discharge incidental to the normal operation of a vessel from vessels of the Armed Forces.

this

"(C) APPLICABILITY TO FOREIGN FLAGGED VESSELS.-A prohibition under paragraph

"(i) shall not impose any design, construction, manning, or equipment standard on a foreign flagged vessel engaged in innocent passage unless the prohibition implements a generally accepted international rule or standard; and

"(ii) that relates to the prevention, reduction, and control of pollution shall not apply to a foreign flagged vessel engaged in transit passage unless the prohibition implements an applicable international regulation regarding the discharge of oil, oily waste, or any other noxious substance into the waters. "(8) PROHIBITION RELATING TO VESSELS OF THE ARMED FORCES.-After the effective date of the regulations promulgated by the Secretary of Defense under paragraph (4), it shall be unlawful for any vessel of the Armed Forces subject to the regulations to

"(A) operate in the navigable waters of the United States or the waters of the contiguous zone, if the vessel is not equipped with any required marine pollution control device. meeting standards established under this subsection; or

"(B) discharge overboard any discharge incidental to the normal operation of a vessel in waters with respect to which a prohibition on the discharge has been established under paragraph (7).

"(9) ENFORCEMENT.-This subsection shall be enforceable, as provided in subsections (j) and (k), against any agency of the United States responsible for vessels of the Armed Forces notwithstanding any immunity asserted by the agency.".

(c) CONFORMING AMENDMENTS.—

(1) DEFINITIONS.-Section 312(a) of the Federal Water Pollution Control Act (33 U.S.C. 1322(a)) is amended

(A) in paragraph (8)—

(i) by striking "or"; and

(ii) by inserting "or agency of the United States," after "association,";

(B) in paragraph (11), by striking the period at the end and inserting a semicolon; and

(C) by adding at the end the following: "(12) 'discharge incidental to the normal operation of a vessel'

"(A) means a discharge, including

"(i) graywater, bilge water, cooling water, weather deck runoff, ballast water, oil water separator effluent, and any other pollutant discharge from the operation of a marine propulsion system, shipboard maneuvering system, crew habitability system, or installed major equipment, such as an aircraft carrier elevator or a catapult, or from a protective, preservative, or absorptive application to the hull of the vessel; and

"(ii) a discharge in connection with the testing, maintenance, and repair of a system described in clause (i) whenever the vessel is waterborne; and

"(B) does not include

"(i) a discharge of rubbish, trash, garbage, or other such material discharged overboard; "(ii) an air emission resulting from the operation of a vessel propulsion system, motor driven equipment, or incinerator; or

"(iii) a discharge that is not covered by part 122.3 of title 40, Code of Federal Regulations (as in effect on the date of the enactment of subsection (n));

"(13) marine pollution control device' means any equipment or management practice, for installation or use on board a vessel of the Armed Forces, that is

"(A) designed to receive, retain, treat, control, or discharge a discharge incidental to the normal operation of a vessel; and

"(B) determined by the Administrator and the Secretary of Defense to be the most effective equipment or management practice to reduce the environmental impacts of the discharge consistent with the considerations set forth in subsection (n)(2)(B); and

"(14) 'vessel of the Armed Forces' means— "(A) any vessel owned or operated by the Department of Defense, other than a time or voyage chartered vessel; and

"(B) any vessel owned or operated by the Department of Transportation that is designated by the Secretary of the department in which the Coast Guard is operating as a vessel equivalent to a vessel described in subparagraph (A).".

(2) ENFORCEMENT.-The first sentence of section 312(j) of the Federal Water Pollution Control Act (33 U.S.C. 1322(j)) is amended

(A) by striking "of this section or" and inserting a comma; and

(B) by striking "of this section shall" and inserting ", or subsection (n)(8) shall”.

(3) OTHER DEFINITIONS.-Subparagraph (A) of the second sentence of section 502(6) of the Federal Water Pollution Control Act (33 U.S.C. 1362(6)) is amended by striking "sewage from vessels'" and inserting "sewage from vessels or a discharge incidental to the normal operation of a vessel of the Armed Forces' ".

(d) COOPERATION IN STANDARDS DEVELOPMENT. The Administrator of the Environmental Protection Agency and the Secretary of Defense may, by mutual agreement, with or without reimbursement, provide for the use of information, reports, personnel, or other resources of the Environmental Protection Agency or the Department of Defense to carry out section 312(n) of the Federal Water Pollution Control Act (as added by subsection (b)), including the use of the

resources

(1) to determine

(A) the nature and environmental effect of discharges incidental to the normal operation of a vessel of the Armed Forces;

(B) the practicability of using marine pollution control devices on vessels of the Armed Forces; and

(C) the effect that installation or use of marine pollution control devices on vessels of the Armed Forces would have on the operation or operational capability of the vessels: and

(2) to establish performance standards for marine pollution control devices on vessels of the Armed Forces.

Subtitle D-Commissaries and Nonappropriated Fund Instrumentalities

SEC. 331. OPERATION OF COMMISSARY SYSTEM. (a) COOPERATION WITH OTHER ENTITIES.Section 2482 of title 10, United States Code, is amended

(1) in the section heading, by striking out "private";

(2) by inserting "(a) PRIVATE OPERATION."before "Private persons"; and

(3) by adding at the end the following new subsection:

"(b) CONTRACTS WITH OTHER AGENCIES AND INSTRUMENTALITIES.-(1) The Defense Commissary Agency, and any other agency of the Department of Defense that supports the operation of the commissary system, may enter into a contract or other agreement with another department, agency, or instrumentality of the Department of Defense or another Federal agency to provide services beneficial to the efficient management and operation of the commissary system.

"(2) A commissary store operated by a nonappropriated fund instrumentality of the Department of Defense shall be operated in accordance with section 2484 of this title. Subject to such section, the Secretary of Defense may authorize a transfer of goods, supplies, and facilities of, and funds appropriated for, the Defense Commissary Agency or any other agency of the Department of Defense that supports the operation of the commissary system to a nonappropriated fund instrumentality for the operation of a commissary store.".

(b) CLERICAL AMENDMENT.-The item relating to such section in the table of sections at the beginning of chapter 147 of such title is amended to read as follows:

"2482. Commissary stores: operation.".
SEC. 332. LIMITED RELEASE OF COMMISSARY
STORES SALES INFORMATION TO
MANUFACTURERS, DISTRIBUTORS,
AND OTHER VENDORS DOING BUSI-
NESS WITH DEFENSE COMMISSARY
AGENCY.

Section 2487(b) of title 10, United States Code, is amended in the second sentence by inserting before the period the following: "unless the agreement is between the Defense Commissary Agency and a manufacturer, distributor, or other vendor doing business with the Agency and is restricted to information directly related to merchandise provided by that manufacturer, distributor, or vendor".

SEC. 333. ECONOMICAL DISTRIBUTION OF DISTILLED NON

SPIRITS

BY

APPROPRIATED FUND INSTRUMEN-
TALITIES.

(a) ECONOMICAL DISTRIBUTION.-Subsection (a)(1) of section 2488 of title 10, United States Code, is amended by inserting after "most competitive source" the following: "and distributed in the most economical manner". (b) DETERMINATION OF MOST ECONOMICAL DISTRIBUTION METHOD.-Such section is further amended

(1) by redesignating subsection (c) as subsection (d); and

(2) by inserting after subsection (b) the following new subsection:

"(c)(1) In the case of covered alcoholic beverage purchases of distilled spirits, to determine whether a nonappropriated fund instrumentality of the Department of Defense provides the most economical method of distribution to package stores, the Secretary of Defense shall consider all components of the

distribution costs incurred by the nonappropriated fund instrumentality, such as overhead costs (including costs associated with management, logistics, administration, depreciation, and utilities), the costs of carrying inventory, and handling and distribution costs.

(2) If the use of a private distributor would subject covered alcoholic beverage purchases of distilled spirits to direct or indirect State taxation, a nonappropriated fund instrumentality shall be considered to be the most economical method of distribution regardless of the results of the determination under paragraph (1).

"(3) The Secretary shall use the agencies performing audit functions on behalf of the armed forces and the Inspector General of the Department of Defense to make determinations under this subsection.". SEC. 334. TRANSPORTATION BY COMMISSARIES AND EXCHANGES TO OVERSEAS LOCATIONS.

(a) IN GENERAL.-Chapter 157 of title 10, United States Code, is amended by adding at the end the following new section: "§ 2643. Commissary and exchange services: transportation overseas

"The Secretary of Defense shall authorize the officials responsible for operation of commissaries and military exchanges to negotiate directly with private carriers for the most cost-effective transportation of commissary and exchange supplies by sea without relying on the Military Sealift Command or the Military Traffic Management Command. Section 2631 of this title, regarding the preference for vessels of the United States or belonging to the United States in the transportation of supplies by sea, shall apply to the negotiation of transportation contracts under the authority of this section.".

(b) CLERICAL AMENDMENT.-The table of sections at the beginning of such chapter is amended by adding at the end the following new item: "2643. Commissary and exchange services: transportation overseas.". SEC. 335. DEMONSTRATION PROJECT FOR UNIFORM FUNDING OF MORALE, WELFARE, AND RECREATION ACTIVITIES AT CERTAIN MILITARY INSTALLATIONS.

(a) DEMONSTRATION PROJECT REQUIRED.—(1) The Secretary of Defense shall conduct a demonstration project to evaluate the feasibility of using only nonappropriated funds to support morale, welfare, and recreation programs at military installations in order to facilitate the procurement of property and services for those programs and the management of employees used to carry out those programs.

(2) Under the demonstration project

(A) procurements of property and services for programs referred to in paragraph (1) may be carried out in accordance with laws and regulations applicable to procurements paid for with nonappropriated funds; and

(B) appropriated funds available for such programs may be expended in accordance with laws applicable to expenditures of nonappropriated funds as if the appropriated funds were nonappropriated funds.

(3) The Secretary shall prescribe regulations to carry out paragraph (2). The regulations shall provide for financial management and accounting of appropriated funds expended in accordance with subparagraph (B) of such paragraph.

(b) COVERED MILITARY INSTALLATIONS.The Secretary shall select not less than three and not more than six military installations to participate in the demonstration project.

(c) PERIOD OF DEMONSTRATION PROJECT.— The demonstration project shall terminate not later than September 30, 1998.

(d) EFFECT ON EMPLOYEES.-For the purpose of testing fiscal accounting procedures, the Secretary may convert, for the duration of the demonstration project, the status of an employee who carries out a program referred to in subsection (a)(1) from the status of an employee paid by appropriated funds to the status of a nonappropriated fund instrumentality employee, except that such conversion may occur only—

(1) if the employee whose status is to be converted

(A) is fully informed of the effects of such conversion on the terms and conditions of the employment of that employee for purposes of title 5, United States Code, and on the benefits provided to that employee under such title; and

(B) consents to such conversion; or

(2) in a manner which does not affect such terms and conditions of employment or such benefits.

(e) REPORTS.—(1) Not later than six months after the date of the enactment of this Act, the Secretary shall submit to Congress an interim report on the implementation of this section.

(2) Not later than December 31, 1998, the Secretary shall submit to Congress a final report on the results of the demonstration project. The report shall include a comparison of

(A) the cost incurred under the demonstration project in using employees paid by appropriated funds together with nonappropriated fund instrumentality employees to carry out the programs referred to in subsection (a)(1); and

(B) an estimate of the cost that would have been incurred if only nonappropriated fund instrumentality employees had been used to carry out such programs.

SEC. 336. OPERATION OF COMBINED EXCHANGE AND COMMISSARY STORES.

(a) IN GENERAL.-(1) Chapter 147 of title 10, United States Code, is amended by adding at the end the following new section:

"§ 2490a. Combined exchange and commissary stores

"(a) AUTHORITY.-The Secretary of Defense may authorize a nonappropriated fund instrumentality to operate a military exchange and a commissary store as a combined exchange and commissary store on a military installation.

"(b) LIMITATIONS.-(1) Not more than ten combined exchange and commissary stores may be operated pursuant to this section.

"(2) The Secretary may select a military installation for the operation of a combined exchange and commissary store under this section only if—

"(A) the installation is to be closed, or has been or is to be realigned, under a base closure law; or

"(B) a military exchange and a commissary store are operated at the installation by separate entities at the time of, or immediately before, such selection and it is not economically feasible to continue that separate operation.

"(c) OPERATION AT CARSWELL FIELD.-Combined exchange and commissary stores operated under this section shall include the combined exchange and commissary store that is operated at the Naval Air Station Fort Worth, Joint Reserve Center, Carswell Field, Texas, under the authority provided in section 375 of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103-337; 108 Stat. 2736).

"(d) ADJUSTMENTS AND SURCHARGES.-Adjustments to, and surcharges on, the sales price of a grocery food item sold in a combined exchange and commissary store under this section shall be provided for in accordance with the same laws that govern such adjustments and surcharges for items sold in

a commissary store of the Defense Commissary Agency.

"(e) USE OF APPROPRIATED FUNDS.-(1) If a nonappropriated fund instrumentality incurs a loss in operating a combined exchange and commissary store at a military installation under this section as a result of the requirement set forth in subsection (d), the Secretary may authorize a transfer of funds available for the Defense Commissary Agency to the nonappropriated fund instrumentality to offset the loss.

"(2) The total amount of appropriated funds transferred during a fiscal year to support the operation of a combined exchange and commissary store at a military installation under this section may not exceed an amount that is equal to 25 percent of the amount of appropriated funds that was provided for the operation of the commissary store of the Defense Commissary Agency on that installation during the last full fiscal year of operation of that commissary store. “(f) DEFINITIONS.-In this section:

"(1) The term 'nonappropriated fund instrumentality' means the Army and Air Force Exchange Service, Navy Exchange Service Command, Marine Corps exchanges, or any other instrumentality of the United States under the jurisdiction of the Armed Forces which is conducted for the comfort, pleasure, contentment, or physical or mental improvement of members of the Armed Forces.

"(2) The term 'base closure law' has the meaning given such term by section 2667(g) of this title.".

(2) The table of sections at the beginning of such chapter is amended by adding at the end the following new item: "2490a. Combined exchange and commissary

stores.".

(b) CONFORMING AMENDMENT.-Section 375 of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103-337; 108 Stat. 2736) is amended by striking out until December 31, 1995,".

SEC. 337. DEFERRED PAYMENT PROGRAMS OF MILITARY EXCHANGES.

(a) USE OF COMMERCIAL BANKING INSTITUTION.—(1) As soon as practicable after the date of the enactment of this Act, the Secretary of Defense shall seek to enter into an agreement with a commercial banking institution under which the institution agrees to finance and operate the deferred payment program of the Army and Air Force Exchange Service and the deferred payment program of the Navy Exchange Service Command. The Secretary shall use competitive procedures to enter into an agreement under this paragraph.

(2) In order to facilitate the transition of the operation of the programs referred to in paragraph (1) to commercial operation under an agreement described in that paragraph, the Secretary may initially limit the scope of any such agreement so as to apply to only one of the programs.

(b) REPORT.-Not later than December 31, 1995, the Secretary shall submit to Congress a report on the implementation of this section. The report shall also include an analysis of the impact of the deferred payment programs referred to in subsection (a)(1), including the impact of the default and collection procedures under such programs, on members of the Armed Forces and their families.

SEC. 338. AVAILABILITY OF FUNDS TO OFFSET EXPENSES INCURRED BY ARMY AND AIR FORCE EXCHANGE SERVICE ON ACCOUNT OF TROOP REDUCTIONS IN EUROPE.

Of funds authorized to be appropriated under section 301(5), not less than $70,000,000 shall be available to the Secretary of Defense for transfer to the Army and Air Force

Exchange Service to offset expenses incurred by the Army and Air Force Exchange Service on account of reductions in the number of members of the United States Armed Forces assigned to permanent duty ashore in Europe.

SEC. 339. STUDY REGARDING IMPROVING EFFICIENCIES IN OPERATION OF MILITARY EXCHANGES AND OTHER MORALE, WELFARE, AND RECREATION ACTIVITIES AND COMMISSARY STORES.

(a) STUDY REQUIRED.-The Secretary of Defense shall conduct a study regarding the manner in which greater efficiencies can be achieved in the operation of

(1) military exchanges;

(2) other instrumentalities of the United States under the jurisdiction of the Armed Forces which are conducted for the comfort, pleasure, contentment, or physical or mental improvement of members of the Armed Forces; and

(3) commissary stores.

(b) REPORT OF STUDY.-Not later than March 1, 1996, the Secretary of Defense shall submit to Congress a report describing the results of the study and containing such recommendations as the Secretary considers appropriate to implement options identified in the study to achieve the greater efficiencies referred to in subsection (a).

SEC. 340. REPEAL OF REQUIREMENT TO CONVERT SHIPS' STORES ΤΟ NONAPPROPRIATED FUND INSTRUMENTALITIES.

(a) REPEAL.-Section 371 of the National Defense Authorization Act for Fiscal Year 1994 (Public Law 103-160; 10 U.S.C. 7604 note) is amended

(1) by striking out subsections (a) and (b); and

(2) by redesignating subsections (c) and (d) as subsections (a) and (b), respectively.

(b) INSPECTOR GENERAL REVIEW.-Not later than April 1, 1996, the Inspector General of the Department of Defense shall submit to Congress a report that reviews the report on the costs and benefits of converting to operation of Navy ships' stores by nonappropriated fund instrumentalities that the Navy Audit Agency prepared in connection with the postponement of the deadline for the conversion provided for in section 374(a) of the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103-337; 108 Stat. 2736).

SEC. 341. DISPOSITION OF EXCESS MORALE, WELFARE, AND RECREATION FUNDS. Section 2219 of title 10, United States Code, is amended

(1) in the first sentence, by striking out "a military department" and inserting in lieu thereof "an armed force";

(2) in the second sentence

(A) by striking out ", department-wide"; and

(B) by striking out "of the military department” and inserting in lieu thereof "for that armed force"; and

(3) by adding at the end the following: "This section does not apply to the Coast Guard.".

SEC. 342. CLARIFICATION OF ENTITLEMENT TO USE OF MORALE, WELFARE, AND RECREATION FACILITIES BY MEMBERS OF RESERVE COMPONENTS AND DEPENDENTS.

(a) IN GENERAL.-Section 1065 of title 10, United States Code, is amended to read as follows:

"§ 1065. Morale, welfare, and recreation retail facilities: use by members of reserve components and dependents

"(a) MEMBERS OF THE SELECTED RESERVE.— A member of the Selected Reserve in good standing (as determined by the Secretary concerned) shall be permitted to use MWR retail facilities on the same basis as members on active duty.

"(b) MEMBERS OF READY RESERVE NOT IN SELECTED RESERVE.-Subject to such regulations as the Secretary of Defense may prescribe, a member of the Ready Reserve (other than members of the Selected Reserve) may be permitted to use MWR retail facilities on the same basis as members serving on active duty.

"(c) RESERVE RETIREES UNDER AGE 60.-A member or former member of a reserve component under 60 years of age who, but for age, would be eligible for retired pay under chapter 1223 of this title shall be permitted to use MWR retail facilities on the same basis as members of the armed forces entitled to retired pay under any other provision of law.

"(d) DEPENDENTS.-(1) Dependents of a member who is permitted under subsection (a) or (b) to use MWR retail facilities shall be permitted to use such facilities on the same basis as dependents of members on active duty.

"(2) Dependents of a member who is permitted under subsection (c) to use MWR retail facilities shall be permitted to use such facilities on the same basis as dependents of members of the armed forces entitled to retired pay under any other provision of law.

"(e) MWR RETAIL FACILITY DEFINED.—In this section, the term 'MWR retail facilities' means exchange stores and other revenuegenerating facilities operated by nonappropriated fund activities of the Department of Defense for the morale, welfare, and recreation of members of the armed forces.". (b) CLERICAL AMENDMENT. The item relating to such section in the table of sections at the beginning of chapter 54 of such title is amended to read as follows:

"1065. Morale, welfare, and recreation retail facilities: use by members of reserve components and dependents.".

Subtitle E-Performance of Functions by Private-Sector Sources

SEC. 351. COMPETITIVE PROCUREMENT OF PRINTING AND DUPLICATION SERVICES.

(a) REQUIREMENT FOR COMPETITIVE PROCUREMENT.-Except as provided in subsection (b), the Secretary of Defense shall, during fiscal year 1996 and consistent with the requirements of title 44, United States Code, competitively procure printing and duplication services from private-sector sources for the performance of at least 70 percent of the total printing and duplication requirements of the Defense Printing Service.

(b) EXCEPTION FOR CLASSIFIED INFORMATION. The requirement of subsection (a) shall not apply to the procurement of services for printing and duplicating classified documents and information.

SEC. 352. DIRECT VENDOR DELIVERY SYSTEM FOR CONSUMABLE INVENTORY ITEMS OF DEPARTMENT OF DEFENSE.

(a) IMPLEMENTATION OF DIRECT VENDOR DELIVERY SYSTEM.-Not later than September 30, 1997, the Secretary of Defense shall, to the maximum extent practicable, implement a system under which consumable inventory items referred to in subsection (b) are delivered to military installations throughout the United States directly by the vendors of those items. The purpose for implementing the system is to reduce the expense and necessity of maintaining extensive warehouses for those items within the Department of Defense.

(b) COVERED ITEMS.-The items referred to in subsection (a) are the following: (1) Food and clothing.

(2) Medical and pharmaceutical supplies. (3) Automotive, electrical, fuel, and construction supplies.

(4) Other consumable inventory items the Secretary considers appropriate.

SEC. 353. PAYROLL, FINANCE, AND ACCOUNTING FUNCTIONS OF THE DEPARTMENT

OF DEFENSE.

(a) PLAN FOR PRIVATE OPERATION OF CERTAIN FUNCTIONS.-(1) Not later than October 1, 1996, the Secretary of Defense shall submit to Congress a plan for the performance by private-sector sources of payroll functions for civilian employees of the Department of Defense other than employees paid from nonappropriated funds.

(2)(A) The Secretary shall implement the plan referred to in paragraph (1) if the Secretary determines that the cost of performance by private-sector sources of the functions referred to in that paragraph does not exceed the cost of performance of those functions by employees of the Federal Government.

(B) In computing the total cost of performance of such functions by employees of the Federal Government, the Secretary shall include the following:

(i) Managerial and administrative costs. (ii) Personnel costs, including the cost of providing retirement benefits for such personnel.

(iii) Costs associated with the provision of facilities and other support by Federal agencies.

(C) The Defense Contract Audit Agency shall verify the costs computed for the Secretary under this paragraph by others.

(3) At the same time the Secretary submits the plan required by paragraph (1), the Secretary shall submit to Congress a report on other accounting and finance functions of the Department that are appropriate for performance by private-sector sources.

(b) PILOT PROGRAM FOR PRIVATE OPERATION OF NAFI FUNCTIONS.—(1) The Secretary shall carry out a pilot program to test the performance by private-sector sources of payroll and other accounting and finance functions of nonappropriated fund instrumentalities and to evaluate the extent to which cost savings and efficiencies would result from the performance of such functions by those sources.

(2) The payroll and other accounting and finance functions designated by the Secretary for performance by private-sector sources under the pilot program shall include at least one major payroll, accounting, or finance function.

(3) To carry out the pilot program, the Secretary shall enter into discussions with private-sector sources for the purpose of developing a request for proposals to be issued for performance by those sources of functions designated by the Secretary under paragraph (2). The discussions shall be conducted on a schedule that accommodates issuance of a request for proposals within 60 days after the date of the enactment of this Act.

(4) A goal of the pilot program is to reduce by at least 25 percent the total costs incurred by the Department annually for the performance of a function referred to in paragraph (2) through the performance of that function by a private-sector source.

(5) Before conducting the pilot program, the Secretary shall develop a plan for the program that addresses the following:

(A) The purposes of the program.

(B) The methodology, duration, and anticipated costs of the program, including the cost of an arrangement pursuant to which a private-sector Source would receive an agreed-upon payment plus an additional negotiated amount not to exceed 50 percent of the dollar savings achieved in excess of the goal specified in paragraph (4).

(C) A specific citation to any provisions of law, rule, or regulation that, if not waived, would prohibit the conduct of the program or any part of the program.

(D) A mechanism to evaluate the program. (E) A provision for all payroll, accounting, and finance functions of nonappropriated

fund instrumentalities of the Department of Defense to be performed by private-sector sources, if determined advisable on the basis of a final assessment of the results of the program.

(6) The Secretary shall act through the Under Secretary of Defense (Comptroller) in the performance of the Secretary's responsibilities under this subsection.

(c) LIMITATION ON OPENING OF NEW OPERATING LOCATIONS FOR DEFENSE FINANCE AND ACCOUNTING SERVICE. (1) Except as provided in paragraph (2), the Secretary may not establish a new operating location for the Defense Finance and Accounting Service during fiscal year 1996.

(2) The Secretary may establish a new operating location for the Defense Finance and Accounting Service if

(A) for a new operating location that the Secretary planned before the date of the enactment of this Act to establish on or after that date, the Secretary reconsiders the need for establishing that new operating location; and

(B) for each new operating location, including a new operating location referred to in subparagraph (A)

(i) the Secretary submits to Congress, as part of the report required by subsection (a)(4), an analysis of the need for establishing the new operating location; and

(ii) a period of 30 days elapses after the Congress receives the report.

(3) In this subsection, the term "new operating location" means an operating location that is not in operation on the date of the enactment of this Act, except that such term does not include an operating location for which, as of such date

(A) the Secretary has established a date for the commencement of operations; and (B) funds have been expended for the purpose of its establishment. SEC. 354. DEMONSTRATION PROGRAM TO IDENTIFY OVERPAYMENTS MADE TO VENDORS.

(a) IN GENERAL.-The Secretary of Defense shall conduct a demonstration program to evaluate the feasibility of using private contractors to audit accounting and procurement records of the Department of Defense in order to identify overpayments made to vendors by the Department. The demonstration program shall be conducted for the Defense Logistics Agency and include the Defense Personnel Support Center.

(b) PROGRAM REQUIREMENTS.-(1) Under the demonstration program, the Secretary shall, by contract, provide for one or more persons to audit the accounting and procurement records of the Defense Logistics Agency that relate to (at least) fiscal years 1993, 1994, and 1995. The Secretary may enter into more than one contract under the program.

(2) A contract under the demonstration program shall require the contractor to use data processing techniques that are generally used in audits of private-sector records similar to the records audited under the contract.

(c) AUDIT REQUIREMENTS.-In conducting an audit under the demonstration program, a contractor shall compare Department of Defense purchase agreements (and related documents) with invoices submitted by vendors under the purchase agreements. A purpose of the comparison is to identify, in the case of each audited purchase agreement, the following:

(1) Any payments to the vendor for costs that are not allowable under the terms of the purchase agreement or by law.

(2) Any amounts not deducted from the total amount paid to the vendor under the purchase agreement that should have been deducted from that amount on account of goods and services provided to the vendor by the Department.

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