On December 23, 2024, President Biden signed into law the $895 billion National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2025. The NDAA is a federal law that authorizes Department of Defense (DoD) funding and establishes the defense budget. The NDAA for FY 2025 includes several noteworthy provisions, as outlined below:

• Section 802 – Limits the number of low-rate production lots for any production quantities procured using fixed-priced options to not more than one.

• Section 814 – Prior commercial contract for a commercial product or service shall serve as a prior commercial product or service determination when subject to minor modifications unless the prior determination was not properly approved, or a senior DoD executive determines in writing that it is no longer appropriate to procure the product or service under commercial acquisition procedures.

• Section 815 – Allows a nontraditional defense contractor (NDC) to submit recent price history in lieu of cost or pricing data if the prices submitted were paid for the same goods and services and the price of the subcontract is not expected to exceed $5 million. Such submission shall be deemed to be the submission of cost or pricing data if the contracting officer determines the prices are fair and reasonable based on supported cost or pricing data within the past two months.

• Section 817 – Clarifies that a follow-on production award may be provided for in an Other Transaction Agreement (OTA) for a prototype project, which can be awarded as one or more separate contracts, OTAs, or a combination thereof.

• Section 820 – Increases the threshold for using an earned value management system on cost or incentive contracts from $20 million to $50 million and increases the threshold for using an approved earned value management system from $50 million to $100 million.

• Section 823 – Limits the number of ships that can be acquired on a fixed-price basis under a major defense acquisition program to two if the scope of work includes the detailed design and construction of items for the major defense acquisition program.

• Section 824 – Extends the temporary authority to modify certain contracts and options to account for the impacts of inflation to December 31, 2025. However, funding has not been appropriated to provide contractors with such relief.

• Section 834 – Establishes criteria in performance evaluations to reward decisions that maximize the acquisition of commercial products and services.

• Section 861 – Establishes a competitive, merit-based program to accelerate procurement of innovative technologies for purposes of reducing acquisition or life-cycle costs, addressing technical risks, improving the timeliness and thoroughness of test and evaluation outcomes, and rapidly implementing such technologies to directly support defense missions. DoD shall submit a report no later than March 1 and September 1 of each year.
• Section 863 – Extends DoD’s Pilot Program for Streamlining Awards for Innovative Technology Projects for small businesses and NDCs established in Section 873 of the NDAA for FY 2016 from October 1, 2024 to October 1, 2029.

• Section 864 – Enables a DoD contracting officer to use an alternative capability-based analysis for determining if prices offered by NDCs for commercial products and services are fair and reasonable. Section 864 provides the five elements that may constitute an “alternative capability-based analysis.”

• Section 884 – Requires DoD to establish and maintain a 10-member panel to advise DoD on the effectiveness of the requirements process and develop options for reform. The panel will focus on innovating and modernizing the requirements process.

• Section 885 – Requires the Government Accountability Office (GAO) and DoD to develop a process whereby an unsuccessful protestor would reimburse the government and the contractor who was awarded the contract. Section 885 increases the GAO jurisdictional threshold for bid protests under DoD task orders from $25 million to $35 million.

Notably, Section 809D within the House of Representatives version of the NDAA for FY 2025, which would have established a review panel addressing fair and reasonable pricing on certain weapons and spare parts contracts, was not included in the joint version. However, citing concerns with the ability of DoD to receive fair and reasonable prices on sole-source contracts, Congress is directing DoD to provide a briefing by March 1, 2025 on the feasibility and advisability of creating a panel to address these concerns.

The NDAA for FY 2025 can be found here.