Sec. 867. Modifications to defense industrial base fund

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Section 4817 of title 10, United States Code, is amended by adding at the end the following new subsections: The Secretary of Defense may use the authorities provided by this section with respect to defense supply chains, including for material, material production, components, subassemblies, and finished products, testing and qualification, infrastructure, facility construction and improvement, and equipment needed directly for the following: Castings and forgings. Kinetic capabilities, including sensors, targeting systems, and delivery platforms.

Microelectronics. Machine tools, including subtractive, additive, convergent, stamping, forging, abrasives, metrology, and other production equipment. Critical minerals, materials, and chemicals. The workforce of the defense industrial base. Advanced manufacturing (as defined in section 4841(f)) capability and capacity of the defense industrial base, including manufacturing at or near the point of need in the area of responsibility of the United States Indo-Pacific Command. Unmanned vehicles, including subsurface, surface, land, air, single use, and attritable unmanned vehicles and associated launch and recovery platforms.

Manned aircraft. Ground systems. Power sources. Ships or submarines, including technologies and capabilities for the assembly or automation of ships or submarines, new or modernized infrastructure for the construction of new ships or submarines or the maintenance and sustainment or repair of battle damage to ships or submarines. Other materiel solutions required to support the operational plans of the United States Indo-Pacific Command. Defense space systems. Batteries. The Secretary may not use the authorities provided by this section for any activity in a covered country.

The Secretary may not use the authorities provided by subsections

(h)through

(j)for a purpose other than a purpose described in paragraph

(1)unless the Secretary— determines that— the use of the authority for such other purpose is essential to the defense interests of the United States; and without the use of the authority for such other purpose, the defense industrial base cannot reasonably be expected to provide a capability needed by the Department of Defense in a timely manner; and not less than 30 days prior to the Secretary using such authorities for such other purpose, submits to the congressional defense committees a report on such determination that includes appropriate explanatory material for such use. For the purposes of creating, maintaining, protecting, expanding, or restoring the capabilities of the domestic industrial base that are essential for the defense interests of the United States, the Secretary may— use contracts, grants, or other transaction authorities, including cooperative agreements; establish incentives for the private sector to develop capabilities in areas of defense interest; during the five-year period beginning on the date of the enactment of this subsection, make awards to third party entities to support investments in small- and medium-sized entities working in areas of defense interest that would benefit missions of the Department of Defense; and provide subsidies to offset market manipulation. For the purposes of creating, maintaining, protecting, expanding, or restoring capabilities of the industrial base that are essential for the defense interests of the United States, the Secretary may make purchase commitments— for the use or resale of an industrial resource or a critical technology item by the Federal Government; to encourage the exploration, development, and mining of strategic and critical materials; to support the development of other materials and components; for the development of production capabilities; and to increase the use of emerging technologies in defense program applications and the rapid transition of emerging technologies— from research and development sponsored by the Federal Government to commercial applications; and from commercial research and development to national defense applications. Except as provided by subparagraph (B), purchase commitments under paragraph

(1)may be made for such quantities, and on such terms and conditions, including advance payments, and for such periods, but not extending beyond a date that is not more than 10 years from the date on which such purchase was initially made, as the Secretary deems necessary. Purchase commitments under paragraph

(1)involving higher than established ceiling prices (or if no such established ceiling prices exist, currently prevailing market prices) or that result in an anticipated loss on resale shall not be made, unless it is determined that supply of the materials to be purchased under such purchase commitments could not be effectively increased or provisioned at lower prices or on terms more favorable to the Federal Government, or that such purchases are necessary to assure the availability to the United States of overseas supplies. The Secretary may take the actions described in subparagraph (B), if the Secretary finds with respect to a specific material that— under generally fair and equitable ceiling prices, for any raw or nonprocessed material or component, there will result a decrease in supplies from high-cost sources of such material and that the continuation of such supplies from such sources is necessary to carry out the objectives of this section; or an increase in cost of transportation of such material is temporary and threatens to impair maximum production or supply in any area at stable prices of such material. Upon a finding under subparagraph

(A)with respect to a material, the Secretary may, for the purposes described in paragraph (1), make provision for subsidy payments for such material from sources other than sources that are or that are in covered countries, in such amounts and in such manner, including purchase commitments of such material or component thereof and the resale of such material or component thereof at a loss, and on such terms and conditions, as the Secretary determines necessary to ensure that— in the case of a finding described in clause

(i)of such subparagraph, supplies from high-cost sources of such material do not decrease; or in the case of a finding described in clause

(ii)of such subparagraph with respect to one or more areas, that maximum production or supply of such material at stable prices in each such area is maintained, as applicable. The Secretary is authorized to take an action described in subparagraph

(B)if the Secretary determines that such action will aid the defense interests of the United States. The actions described in this section are— procuring and installing additional equipment, facilities, processes or improvements to plants, factories, and other industrial facilities owned by the Federal Government; procuring and installing equipment, including equipment owned by the Federal Government, in privately owned plants, factories, and other industrial facilities; providing for the modification, expansion, or construction of new privately owned facilities, including modifications or improvements to production processes, when taking actions under this subsection or subsection (h); selling or otherwise transferring equipment owned by the Federal Government and installed under this subsection to the owners of such plants, factories, or other industrial facilities; constructing facilities for the purposes described in section subsection (g)(1); and applying contracts, grants, or other transactions authorities. Metals, minerals, materials, and components acquired pursuant to this subsection which are excess to the needs of programs under this section, as determined by the Secretary, shall be transferred to the National Defense Stockpile established by the Strategic and Critical Materials Stock Piling Act ( 50 U.S.C. 98 et seq. ), or other national reserves if available, if the Secretary deems such transfer to be in the public interest. Transfers made pursuant to this paragraph shall be made without charge against or reimbursement from funds appropriated for the purposes of the Strategic and Critical Materials Stock Piling Act ( 50 U.S.C. 98 et seq. ), or other national reserves if available, except that costs incident to such transfer, other than acquisition costs, shall be paid or reimbursed from such funds. For the purposes of section 5(a)(3) of the Strategic and Critical Materials Stock Piling Act ( 50 U.S.C. 98d(a)(3) ), with respect to amounts paid under subparagraph

(B)for any metal, mineral, material, or component transferred pursuant to this paragraph— such metal, mineral, material, or component is deemed to have been determined to be strategic and critical under section 3(a) of the Strategic and Critical Materials Stock Piling Act ( 50 U.S.C. 98b(a) ); and the Stockpile Manager of the National Defense Stockpile is deemed to have determines there is a shortfall of such materials in the National Defense Stockpile. The Secretary may make provision for the development and qualification of substitutes for strategic and critical materials, components, critical technology items, and other industrial resources if and to the extent the Secretary determines that such development and qualification is in the interest of national security. The Secretary may provide appropriate incentives to develop, maintain, modernize, restore, and expand the productive capacities of sources for strategic and critical materials, components, critical technology items, and industrial resources essential for the execution of the national security strategy of the United States. The Secretary shall take appropriate actions to ensure that strategic and critical materials, components, critical technology items, and industrial resources are available from reliable sources when and as needed to meet the requirements of the Department of Defense during peacetime, mobilization, and national emergency (as defined in section 12 of the Strategic and Critical Materials Act (50 USC 98h-3)). For purposes of this paragraph, appropriate actions include— restricting contract solicitations to reliable sources; stockpiling or placing into reserve strategic and critical materials, components, and critical technology items; planning for necessary long lead times for acquiring such materials, components, and items; and developing and qualifying substitutes for such materials, components, and items. Not later than October 15, 2026, and annually thereafter, the Secretary shall submit to the congressional defense committee a report evaluating investments made and any other activities carried out using amounts in the Fund during the previous fiscal year. Each report required by paragraph

(1)shall include— measures of the effectiveness of the investments and activities described in such paragraph in meeting the needs of the Department of Defense and the defense industrial base; an evaluation of the return on investment of all ongoing investments from the Fund; and a description of efforts to coordinate activities carried out using amounts in the Fund with activities to support the defense industrial base carried out under other authorities. In preparing a report required by paragraph (1), the Secretary shall take into account the advice of the defense industry and such other individuals as the Secretary considers relevant. Not later than 90 days after the date of the enactment of the National Defense Authorization Act for Fiscal Year 2026, the Secretary shall submit to the congressional defense committees, the Committee on Banking, Housing, and Urban Affairs of the Senate, and the Committee on Financial Services of the House of Representatives a report detailing how activities carried out under this section will be coordinated with— activities carried out using amounts in the Defense Production Act Fund under section 304 of the Defense Production Act of 1950 (50 U.S.C.4534); activities of the Office of Strategic Capital; and any other efforts designed to enhance the defense industrial base. In this section: The term covered country means— the Russian Federation; the Republic of Cuba; the Bolivarian Republic of Venezuela; the Democratic People’s Republic of Korea; the Islamic Republic of Iran; and the People’s Republic of China. The term reliable source means a citizen of, or business entity organized under the laws of— the United States or any territory or possession of the United States; a country of the national technology and industrial base, as defined in section 4801; or a qualifying country, as defined in section 225.003 of the Department of Defense Supplement to the Federal Acquisition Regulation or any successor regulation. The term Secretary means the Secretary of Defense. The term strategic and critical materials has the meaning given that term in section 12(1) of the Strategic and Critical Materials Stock Piling Act ( 50 U.S.C. 98h–3(1) ). . The Secretary of Defense may not use funds made available before the date of the enactment of this Act to carry out activities under the authority of subsection (g), (h), (i), or

(j)of section 4817 of title 10, United States Code, as added by this Act. Section 1092 of the Servicemember Quality of Life Improvement and National Defense Authorization Act for Fiscal Year 2025 ( Public Law 118–159 ; 10 U.S.C. 149 note) is amended— in subsection (a)— in paragraph (1), by striking ; and and inserting a semicolon; in paragraph (2), by striking the period at the end and inserting ; and ; and by adding at the end the following new paragraph: serve as a clearinghouse for vetting potential investments transactions, whether as a loan or as an equity transaction, by executive agencies (as defined in section 133 of title 41, United States Code). ; and by adding at the end the following new subsection: The Secretary of Defense shall include in the forum established under subsection

(a)the following: The Assistant Secretary of Defense for Industrial Base Policy. The individual serving as the Director of the Defense Logistics Agency and the head of the Office of General Counsel of the Department of Defense. . Effective December 31, 2035, the following provisions of law are repealed: Subsections

(g)through

(m)of section 4817 of title 10, United States Code, as added by subsection

(a)of this section. Subsections (a)(3) and

(e)of section 1092 of the Servicemember Quality of Life Improvement and National Defense Authorization Act for Fiscal Year 2025 ( Public Law 118–159 ; 10 U.S.C. 149 note), as added by subsection

(c)of this section.

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