Sec. 826. Penalties for the use of cost-type contracts
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Except as provided under subsection (d), for each fiscal year beginning with fiscal year 2018, the Secretary of each military department and the head of each of the Defense Agencies shall pay a penalty for the use of cost-type contracts. For the purposes of this section, the amount of the cost-type contract penalty per fiscal year for a military department or Defense Agency is the total amount of penalties assessed in accordance with paragraph
(2)for the use by such military department or Defense Agency during such fiscal year of cost-type contracts awarded on or after October 1, 2017, including cost no fee, cost plus award fee, cost plus fixed fee, and cost plus incentive fee contracts. the cost-type contract penalty for using a cost-type contract is— 2 percent of obligated funds in the case of a contract using procurement funds; and 1 percent of obligated funds in the case of a contract using research, development, test and evaluation funds. Not later than 60 days after the end of each fiscal year beginning with fiscal year 2018, the Secretary of each military department and the head of each Defense Agency shall reduce the applicable research, development, test, and evaluation account and procurement account of the military department or Defense Agency that incurs obligations for cost-type contracts by the percentage determined under paragraph (2), and remit such amount to the Secretary of Defense. The percentage reduction to research, development, test, and evaluation and procurement accounts of a military department or Defense Agency referred to in paragraph
(1)is the percentage reduction to such accounts necessary to equal the cost-type contract penalty for the fiscal year for such department or Defense Agency determined pursuant to subsection (b). Any amount remitted under paragraph
(1)shall be credited to the Department of Defense Rapid Prototyping Fund established pursuant to section 804 of the National Defense Authorization Act for Fiscal Year 2016 ( Public Law 114–92 ; 10 U.S.C. 2302 note). There shall be no penalty assessed under this section for the use of cost-type contracts for first lead ships in a class. There shall be no penalty assessed under this section until fiscal year 2019 for the following types of contracts: Contracts awarded under the Small Business Innovation Research
(SBIR)and Small Business Technology Transfer Program
(STTR)programs (as those terms are defined in section 9(e) of the Small Business Act ( 15 U.S.C. 638(e) ). Contracts awarded using funds under the Basic Research, Applied Research, and Advanced Technology Development budget activity titles. Nothing in this section shall be construed as limiting or otherwise modifying transfer authorities available to the Secretary of Defense. This section shall terminate at the close of September 30, 2021.
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