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119th Congress

Title 10 — Armed Forces

Part V · Chapter 273 — Allowable Costs

§ 3761. Restructuring costs

Statutory text

(a)

Limitation on Payment of Restructuring Costs.—

The Secretary of Defense may not pay, under subchapter I, a defense contractor for restructuring costs associated with a business combination of the contractor that occurs after , unless the Secretary determines in writing either—

(1)

that the amount of projected savings for the Department of Defense associated with the restructuring will be at least twice the amount of the costs allowed; or

(2)

that the amount of projected savings for the Department of Defense associated with the restructuring will exceed the amount of the costs allowed and that the business combination will result in the preservation of a critical capability that otherwise might be lost to the Department.

(b)

Limitation on Delegation.—

The Secretary may not delegate the authority to make a determination under subsection (a), with respect to a business combination, to an official of the Department of Defense—

(1)

below the level of an Assistant Secretary of Defense for cases in which the amount of restructuring costs is expected to exceed $25,000,000 over a 5-year period; or

(2)

below the level of the Director of the Defense Contract Management Agency for all other cases.

(c)

Definition.—

In this section, the term “business combination” includes a merger or acquisition.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

  1. National Defense Authorization Act for Fiscal Year 1998

    Pub. L. 105–85 div. A title VIII § 804(a)(1) · 111 Stat. 1629

    Enacted · 10 U.S.C. § 3761

    Added Pub. L. 105–85, div. A, title VIII, § 804(a)(1), Nov. 18, 1997, 111 Stat. 1832, § 2325

    Source evidence

    Code source credit
    Added Pub. L. 105–85, div. A, title VIII, § 804(a)(1), Nov. 18, 1997, 111 Stat. 1832, § 2325

    Enacted provision · exact public law section
    (1) Chapter 137 of title 10, United States Code, is amended by inserting after section 2324 the following new section: “§ 2325. Restructuring costs “(a) Limitation on Payment of Restructuring Costs.— (1) The Secretary of Defense may not pay, under section 2324 of this title, a defense contractor for restructuring costs associated with a business combination of the contractor unless the Secretary determines in writing either— “(A) that the amount of projected savings for the Department of Defense associated with the restructuring will be at least twice the amount of the costs allowed; or “(B) that the amount of projected savings for the Department of Defense associated with the restructuring will exceed the amount of the costs allowed and that the business combination will result in the preservation of a critical capability that otherwise might be lost to the Department. “(2) The Secretary may not delegate the authority to make a determination under paragraph (1) to an official of the Department of Defense below the level of an Assistant Secretary of Defense. “(b) Report.— Not later than March 1 in each of 1998, 1999, 2000, 2001, and 2002, the Secretary of Defense shall submit to Congress a report that contains, with respect to business combinations occurring on or after August 15, 1994, the following: “(1) For each defense contractor to which the Secretary has paid, under section 2324 of this title, restructuring costs associated with a business combination, a summary of the following: “(A) An estimate of the amount of savings for the Department of Defense associated with the restructuring that has been realized as of the end of the preceding calendar year. “(B) An estimate of the amount of savings for the Department of Defense associated with the restructuring that is expected to be achieved on defense contracts. “(2) An identification of any business combination for which the Secretary has paid restructuring costs under section 2324 of this title during the preceding calendar year and, for each such business combination— “(A) the supporting rationale for allowing such costs; “(B) factual information associated with the determination made under subsection (a) with respect to such costs; and “(C) a discussion of whether the business combination would have proceeded without the payment of restructuring costs by the Secretary. “(3) For business combinations of major defense contractors that took place during the year preceding the year of the report— “(A) an assessment of any potentially adverse effects that the business combinations could have on competition for Department of Defense contracts (including potential horizontal effects, vertical effects, and organizational conflicts of interest), the national technology and industrial base, or innovation in the defense industry; and “(B) the actions taken to mitigate the potentially adverse effects. “(c) Definition.— In this section, the term ‘business combination’ includes a merger or acquisition.”.

  2. Pub. L. 106–65 div. A title X § 1066(a)(19) · 113 Stat. 512

    Inserted · 10 U.S.C. § 3761(a)(1)

    Pub. L. 106–65 inserted “that occurs after November 18, 1997,” after “of the contractor” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (a)(1). Pub. L. 106–65 inserted “that occurs after November 18, 1997,” after “of the contractor” in introductory provisions.

    Enacted provision · exact public law section
    (19) Section 2325(a)(1) is amended by inserting “that occurs after November 18, 1997,” after “of the contractor” in the matter that precedes subparagraph (A).

  3. Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005

    Pub. L. 108–375 div. A title VIII § 819 · 118 Stat. 1811

    1. Substituted · 10 U.S.C. § 3761(a)(2)

      Pub. L. 108–375 substituted “paragraph (1), with respect to a business combination, to an official of the Department of Defense—” for “paragraph (1) to an official of the Department of Defense below the level of an Assistant Secretary of Defense.”

    2. Added · 10 U.S.C. § 3761(a)(2)

      Pub. L. 108–375 added subpars. (A) and (B)

    Source evidence

    Code amendment note
    Subsec. (a)(2). Pub. L. 108–375 substituted “paragraph (1), with respect to a business combination, to an official of the Department of Defense—” for “paragraph (1) to an official of the Department of Defense below the level of an Assistant Secretary of Defense.” and added subpars. (A) and (B).

    Enacted provision · exact public law section
    SEC. 819. DELEGATIONS OF AUTHORITY TO MAKE DETERMINATIONS RELATING TO PAYMENT OF DEFENSE CONTRACTORS FOR BUSINESS RESTRUCTURING COSTS.   Section 2325(a)(2) of title 10, United States Code, is amended— (1) by striking “paragraph (1) to an official” and all that follows and inserting “paragraph (1), with respect to a business combination, to an official of the Department of Defense—”; and (2) by adding at the end the following: “(A) below the level of an Assistant Secretary of Defense for cases in which the amount of restructuring costs is expected to exceed $25,000,000 over a 5-year period; or “(B) below the level of the Director of the Defense Contract Management Agency for all other cases.” .

  4. National Defense Authorization Act for Fiscal Year 2013

    Pub. L. 112–239 div. A title X § 1076(g)(2) · 126 Stat. 1632

    1. Redesignated · 10 U.S.C. § 3761(b)

      Pub. L. 112–239 redesignated subsec. (c) as (b)

    2. Struck · 10 U.S.C. § 3761(b)

      Pub. L. 112–239 struck out former subsec. (b) which required reports relating to business combinations occurring on or after August 15, 1994

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 112–239 redesignated subsec. (c) as (b) and struck out former subsec. (b) which required reports relating to business combinations occurring on or after August 15, 1994.

    Enacted provision · exact public law section
    (2) Section 2325 is amended by striking subsection (b) and redesignating subsection (c) as subsection (b).

  5. William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021

    Pub. L. 116–283 § 1832(j)(2) · 134 Stat. 3388

    Changed · 10 U.S.C. § 3761

    Pub. L. 116–283, § 1832(j)(2), renumbered section 2325 of this title as this section

    Source evidence

    Code amendment note
    Pub. L. 116–283, § 1832(j)(2), renumbered section 2325 of this title as this section.

    Enacted provision · exact public law section
    (2) Transfer of sections on restructuring costs, allowability of independent research and development costs, and allowability of bid and proposal costs.— Sections 2325, 2372, and 2372a of title 10, United States Code, are transferred to subchapter II of chapter 273 of such title, as added by paragraph (1), inserted (in that order) after the table of sections, and redesignated as sections 3761, 3762, and 3763, respectively.

    Effective date note
    Amendment by Pub. L. 116–283 effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as a note preceding section 3001 of this title.

  6. William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021

    Pub. L. 116–283 § 1832(j)(3)(B) · 134 Stat. 3388

    1. Struck · 10 U.S.C. § 3761(a)

      Pub. L. 116–283, § 1832(j)(3)(B), (E), in introductory provisions, struck out par. (1) designation before “The Secretary”

    2. Substituted · 10 U.S.C. § 3761(a)

      Pub. L. 116–283, § 1832(j)(3)(B), (E), in introductory provisions, substituted “subchapter I” for “section 2324 of this title”

    3. Redesignated · 10 U.S.C. § 3761(a)

      Pub. L. 116–283, § 1832(j)(3)(B), (E), in introductory provisions, redesignated subpars. (A) and (B) as pars. (1) and (2), respectively. Former par. (2) of subsec. (a) redesignated subsec. (b)

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 116–283, § 1832(j)(3)(B), (E), in introductory provisions, struck out par. (1) designation before “The Secretary” and substituted “subchapter I” for “section 2324 of this title” and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively. Former par. (2) of subsec. (a) redesignated subsec. (b).

    Enacted provision · exact public law section
    (B) in subsection (a)— (i) by striking “(1)” before “The Secretary”; and (ii) by striking “section 2324 of this title” and inserting “subchapter I”:

    Effective date note
    Amendment by Pub. L. 116–283 effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as a note preceding section 3001 of this title.

  7. William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021

    Pub. L. 116–283 § 1832(j)(3)(C) · 134 Stat. 3388

    1. Redesignated · 10 U.S.C. § 3761(b)

      Pub. L. 116–283, § 1832(j)(3)(C)–(E), redesignated par. (2) of subsec. (a) as subsec. (b)

    2. Inserted · 10 U.S.C. § 3761(b)

      Pub. L. 116–283, § 1832(j)(3)(C)–(E), inserted heading

    3. Substituted · 10 U.S.C. § 3761(b)

      Pub. L. 116–283, § 1832(j)(3)(C)–(E), substituted “subsection (a)” for “paragraph (1)” in introductory provisions

    4. Redesignated · 10 U.S.C. § 3761(b)

      Pub. L. 116–283, § 1832(j)(3)(C)–(E), redesignated subpars. (A) and (B) as pars. (1) and (2), respectively. Former subsec. (b) redesignated (c)

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 116–283, § 1832(j)(3)(C)–(E), redesignated par. (2) of subsec. (a) as subsec. (b), inserted heading, substituted “subsection (a)” for “paragraph (1)” in introductory provisions, and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively. Former subsec. (b) redesignated (c).

    Enacted provision · exact public law section
    (C) by redesignating paragraph (2) as subsection (b);

    Effective date note
    Amendment by Pub. L. 116–283 effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as a note preceding section 3001 of this title.

  8. William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021

    Pub. L. 116–283 § 1832(j)(3)(A) · 134 Stat. 3388

    Redesignated · 10 U.S.C. § 3761(c)

    Pub. L. 116–283, § 1832(j)(3)(A), redesignated subsec. (b) as (c)

    Source evidence

    Code amendment note
    Subsec. (c). Pub. L. 116–283, § 1832(j)(3)(A), redesignated subsec. (b) as (c).

    Enacted provision · exact public law section
    (A) by redesignating subsection (b) as subsection (c);

    Effective date note
    Amendment by Pub. L. 116–283 effective Jan. 1, 2022, with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as a note preceding section 3001 of this title.

15 of 15 references resolved to an enrolled provision

Editorial Notes

Amendments1999–2021 · 4 rounds

2021

Pub. L. 116–283, § 1832(j)(2), renumbered section 2325 of this title as this section.

Subsec. (a). Pub. L. 116–283, § 1832(j)(3)(B), (E), in introductory provisions, struck out par. (1) designation before “The Secretary” and substituted “subchapter I” for “section 2324 of this title” and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively. Former par. (2) of subsec. (a) redesignated subsec. (b).

Subsec. (b). Pub. L. 116–283, § 1832(j)(3)(C)–(E), redesignated par. (2) of subsec. (a) as subsec. (b), inserted heading, substituted “subsection (a)” for “paragraph (1)” in introductory provisions, and redesignated subpars. (A) and (B) as pars. (1) and (2), respectively. Former subsec. (b) redesignated (c).

Subsec. (c). Pub. L. 116–283, § 1832(j)(3)(A), redesignated subsec. (b) as (c).

2013

Subsec. (b). Pub. L. 112–239 redesignated subsec. (c) as (b) and struck out former subsec. (b) which required reports relating to business combinations occurring on or after .

2004

Subsec. (a)(2). Pub. L. 108–375 substituted “paragraph (1), with respect to a business combination, to an official of the Department of Defense—” for “paragraph (1) to an official of the Department of Defense below the level of an Assistant Secretary of Defense.” and added subpars. (A) and (B).

1999

Subsec. (a)(1). Pub. L. 106–65 inserted “that occurs after ,” after “of the contractor” in introductory provisions.

Statutory Notes and Related Subsidiaries

Effective Date of 2021 Amendment

Amendment by Pub. L. 116–283 effective , with additional provisions for delayed implementation and applicability of existing law, see section 1801(d) of Pub. L. 116–283, set out as a note preceding section 3001 of this title.

Effective Date

Pub. L. 105–85, div. A, title VIII, § 804(c), , 111 Stat. 1834, provided that: “Section 2325(a) of title 10, United States Code [now 10 U.S.C. 3761(a)], as added by subsection (a), shall apply with respect to business combinations that occur after the date of the enactment of this Act [].”

Pilot Program for Financing for Covered Activities

Pub. L. 119–60, div. A, title VIII, § 803, , 139 Stat. 940, provided that:

“(a)

Pilot Program.—

The Secretary of Defense may establish a pilot program to evaluate the feasibility, risks, and benefits of expanding contract cost principles and procedures of the Department of Defense to allow for financing costs incurred for a covered activity under a covered contract to be considered allowable and allocable as a direct or indirect cost for such covered contract.

“(b)

Program Authorities and Requirements.—

Under a pilot program established under subsection (a), the Secretary of Defense—

“(1)

may treat financing costs incurred for a covered activity under a covered contract as allowable and allocable as a direct or an indirect cost for such covered contract, provided—

“(A)

such costs are—

“(i)

reasonable in amount and consistent with prevailing market rates for similar financing; and

“(ii)

incurred to pay a financing entity; and

“(B)

such covered activity is performed in compliance with the applicable requirements of the Department of Defense for audits of material and inventory management; and

“(2)

shall ensure that with respect to a covered contract for which financing costs are allowable and allocable under the pilot program, any obligation of the United States to make a payment under such covered contract is subject to the availability of appropriations for that purpose, and that total liability to the Government for the termination of such covered contract shall be limited to the total amount of funding obligated at the time of termination.

“(c)

Subcontractor Status.—

For the purposes of a pilot program established under (a), a financing entity may not be considered a subcontractor solely because of the participation of such financing entity in a covered activity.

“(d)

Briefing.—

Prior to establishing a pilot program under subsection (a), the Secretary of Defense shall provide to the congressional defense committees [Committees on Armed Services and Appropriations of the Senate and the House of Representatives] a briefing on how the Department of Defense will ensure the compliance of a financing entity who is not treated as a subcontractor with the applicable requirements of the Department of Defense for audits of material and inventory management, including any updates to the policies or regulations of the Department required to ensure such compliance.

“(e)

Report and Recommendations.—

Not later than , the Secretary of Defense shall submit to the congressional defense committees a report on the pilot program established under subsection (a), if any, including an assessment of the feasibility, risks, and benefits of authorizing the financing costs incurred by a contractor for a covered activity under a covered contract to be considered allowable and allocable as a direct or indirect cost for such covered contract, and recommendations on whether the pilot program should be extended or the authority under the pilot program should be made permanent.

“(f)

Sunset.—

The Secretary of Defense may not authorize the treatment of financing costs incurred for a covered activity under a covered contract as allowable and allocable as a direct or an indirect cost for such covered contract under the pilot program established under subsection (a) if such covered contract is entered into on or after .

“(g)

Definitions.—

In this section:

“(1)

The term ‘covered activity’ means an activity taken by a prime contractor or subcontractor—

“(A)

to manage an inventory of completed products or components used in production;

“(B)

to improve inventory management of products or components necessary for sustainment or maintenance; or

“(C)

to materially expand the capacity of production or sustainment and maintenance through capital expenditures.

“(2)

The term ‘covered contract’ means a contract, subcontract, or other agreement entered into by the Secretary of Defense for the performance of a covered activity.

“(3)

The term ‘financing costs’ means interest on borrowings, bond discounts, and costs of financing and refinancing capital.

“(4)

The term ‘financing entity’ means—

“(A)

any corporation, limited liability company, partnership, trust, or other entity that—

“(i)

is organized under Federal or State law; and

“(ii)

as part of its regular business activities, extends credit, loans, or other forms of financing to other persons or entities; and

“(B)

provided that such legal entity is not owned by, controlled by, or under common control with the other persons or entities receiving such financing.”

Credits

1997–2021 · 5 acts
  1. 1997Added Pub. L. 105–85, div. A, title VIII, § 804(a)(1), , 111 Stat. 1832, § 2325
  2. 1999amended Pub. L. 106–65, div. A, title X, § 1066(a)(19), , 113 Stat. 771
  3. 2004Pub. L. 108–375, div. A, title VIII, § 819, , 118 Stat. 2016
  4. 2013Pub. L. 112–239, div. A, title X, § 1076(g)(2), , 126 Stat. 1955
  5. 2021renumbered § 3761 and amended Pub. L. 116–283, div. A, title XVIII, § 1832(j)(2), (3), , 134 Stat. 4225.
Show as published

(Added Pub. L. 105–85, div. A, title VIII, § 804(a)(1), , 111 Stat. 1832, § 2325; amended Pub. L. 106–65, div. A, title X, § 1066(a)(19), , 113 Stat. 771; Pub. L. 108–375, div. A, title VIII, § 819, , 118 Stat. 2016; Pub. L. 112–239, div. A, title X, § 1076(g)(2), , 126 Stat. 1955; renumbered § 3761 and amended Pub. L. 116–283, div. A, title XVIII, § 1832(j)(2), (3), , 134 Stat. 4225.)

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