GSA Administrator

February 14, 2007

MEMORANDUM FOR DEPARTMENT OF DEFENSE UNDER SECRETARIES AND CUSTOMERS

FROM: LURITA DOAN ADMINISTRATOR

U.S. GENERAL SERVICES ADMINISTRATION SUBJECT: GSA Support to DOD

I am writing to update you on recent improvements that we have made at the U.S. General Services Administration (GSA), many of them in concert with leadership at the Department of Defense (DOD). I am firmly convinced that these changes have resulted in a GSA that you can count upon to be a force multiplier through fast, compliant and responsible acquisitions. DOD has always been one of GSA's most valued and important customers. We are very much committed to creating and improving our longstanding partnership to betterserve the warfighter and the American taxpayer.

To promote our partnership,GSA and DOD signed a Memorandum of Agreement (MOA) in December 2006. We mutually agreed upon 24 action items intended to improve interactions between the agencies. The MOA demonstrates our commitment to work together to improve our shared objective of achieving acquisition excellence. We believe the MOA to be both practical and symbolic of a new era of DOD-GSA cooperation and coordination relating to GSA's ability to continue to provide vital goodsand services to DOD.

On November 21, 2006, I issued an internal memorandum to GSA leadership to put our support and resources behind implementation of the DOD Policy regarding Non-Economy Act Orders, dated October 16, 2006. The DOD memorandum implements new financial management policy and clarifies how DOD funds are to be handled by both DOD and its interagency partners. GSA is fully committed to abide by the new policy guidance and will assist DOD with its proper implementation.

I have established a DOD Working Group, chaired by our Deputy Administrator. The team meets weekly to address ongoing DOD issues and concerns. All issues and concerns have either been resolved or assigned to action officers and working groups for resolution. Further, top executives of GSA's Federal Acquisition Service and Office of the Chief Acquisition Officer are meeting regularly with top officials from the DOD acquisition community.

GSA obtained a clean audit opinion in November from Price waterhouse Coopers. The regaining of a clean audit opinion after only one year of operation under a disclaimer was attributable in large part to our "cleaning up" the accounting for past years' DODfunding that we were inappropriately holding.

In addition, our GSA IG gave our InformationTechnology Client Support Centers (CSC), a program area in which we had major problems several years ago, a clean bill of health. In turn your IG approved DOD to continue conducting business with our CSCs.

Also, we have made solid progress in ruling out or correcting a number of potential Anti-deficiency Act infractions, as identified in DoD IG reports. We have reduced the number of potential GSA infractions from 50 to 5, and we are committed to working with DOD to resolve the balance.

I have attached a slide presentation that highlights many of the improvements that I have described above. I encourage you to share this current DOD-GSA partnership information throughout your organization, including major commands, Service Heads and Staff Offices, as you deem appropriate. It is my hope that the package, in addition to updating you on GSA's initiatives,will dispel any perception that it is not the policy or desire of either DOD or GSA to discourage use of GSA by DOD when such use serves your business and operational interests.

In conclusion, I want you to know that you can count on us and trust us to meet your needs. Our house is in good order. GSA is committed to providing outstanding acquisition services and solutions to DOD, and we will not rest in continuing our efforts to improve service and meet DOD expectations in a professional, cost effective manner. My executives and I would be happy to meet, at your convenience, to discuss our partnership.

Atttachment

U.S. General Services Administration

DoD/GSA Partnership

1

GSA 2007: A Fast, Compliant, and Responsible Force Multiplier

DoD and GSA share a single commitment: to provide best value, in a timely manner, in support of the warfighter

DoD can buy from GSA with trust:• Acquisition Expertise• Fiscal/regulatory responsibility and

compliance• On-Schedule service delivery, flexible, ease

of use solutions, in a competitive environment

GSA provides DoD with GWACs and Schedules to assist in meeting its socioeconomic goals

GSA has closed virtually all old transactions and returned funds or is returning funds that the agency should not have been holding

2

DoD/GSA Commitment to Partnership

GSA provides acquisition services to customers worldwide on a cost-reimbursable basis and offers a variety of fee structures (3.5%-5% surcharge, hourly rates or fixed fee) designed to meet each DoD customer’s need and preference

DoD Senior Leadership encourages the use of GSA services when it is in the best interest of DoD

GSA Officials meet monthly with DoD at the Executive Level

GSA received FY 2006 Financial Clean Opinion by GSA IG and PriceWaterhouseCoopers

GSA IG, in report dated 9/29/06, gave “Clean Bill of Health” to all Client Support Centers (CSC)*

DoD IG, in report dated 10/30/06, recommended that GSA and DoD continue working together and did not recommend that DoD discontinue use of the CSCs*

* Both reports are available on the respective IGs’ websites

3

FACT:

Memorandum of Agreement (MOA) between Department of Defense (DoD) and General Services Administration (GSA)

• December 4, 2006, Shay Assad (DoD) signed MOA and Action Plan demonstrating an increased partnership with GSA

• MOA lists 24 Action Items to improve interactions between the agencies

• MOA ensures contracts issued by GSA or DoD comply with requirements of the Anti-Deficiency Act (ADA)

4

FACT: (con’t)

Administrator Memorandum, subject: Implementation of the DoD Policy – Non-Economy Act Orders, dated October 16, 2006

• October 21, 2006, Administrator Doan published guidance supporting DoD’s Non-Economy Act policy. GSA has agreed to process orders consistent with DoD policy

• Guidance seeks to adopt standard approach for assisted acquisitions over $500,000 for DoD

• FAS and PBS developed internal guidance that establishes single GSA standard for providing assisted acquisition service to our customers

5

FACT: (con’t)

GSA CFO letter to Tina Jonas, Under Secretary of Defense Comptroller

• December 18, 2006, GSA CFO submitted letter to Tina Jonas, DoD Comptroller, apprising her of improvements GSA made in the area of financial management policy and operations

• Letter addresses FY06 Unqualified Audit Opinion; Return of Funds to DoD; OMB Cir A-123 Implementation; Potential Anti-deficiency Act (ADA) Violations, and Intragovernmental Differences

6

FACT: (con’t)

GSA Administrator memorandum to DoD, subject: Use of Small Business GWACs to meet DoD Small Business Goals

• November 20, 2006, Administrator Doan distributed memo to DoD customers offering use of GSA’s GWACs - HUBZone and 8(a) STARS

• Contracts offer a fully compliant, streamlined method for acquiring goods and services necessary for meeting DoD’s requirements

7

Conclusion:

• DoD can buy from GSA with confidence in its acquisition expertise, value add, and fiscal responsibility. As the government’s central procurement agency, GSA is also able to vastly multiply DoD’s ability to acquire real property, goods and services

8

Attachments:

• Under Secretary of Defense memorandum, Non-Economy Act Orders, dated October 16, 2006

• GSA Administrator memorandum (response) to DoD 16 October memorandum dated November 21, 2006

• DoD/GSA MOU and Action Plan dated December 6, 2006

• GSA CFO letter to Tina Jonas, Undersecretary of Defense Comptroller, dated December 18, 2006

• GSA Administrator memorandum on the Use of Small Business GWAC dated November 20, 2006

9

DoD GSA Talking Points

• DoD & GSA partnering to achieve Acquisition Excellence

• GSA DoD Task Force created to focus on Acquisition Efficiency

• MOA between DoD & GSA signed to improve interaction between agencies

• MOA important, symbolic, and practical achievement that demonstrates increased partnership with DoD

• GSA has agreed to abide by DoD’s new fiscal and funding policies

• GSA and DoD acquisition policy representatives working closely to address DoD issues and concerns

• GSA embarking on standardizing fees world wide

• GSA aiding DoD in achieving strategic sourcing and small business goals

• DoD can buy from GSA with confidence in its acquisition expertise, value add, and fiscal responsibility.

MEMORANDUM OF AGREEMENT (MOA)BETWEENDEPARTMENT OF DEFENSEANDGENERAL SERVICES ADMINISTRATIONBACKGROUND: The General Services Administration (GSA) is charged by statute to provide real property, personal property and services to all federal agencies. The services provided by GSA are not subject to the Economy Act, they are provided under the authority of the Federal Property and Administrative Services Act of 1949 (FPASA). Some of the services provided by GSA are mandatory sources of supply, most are not. The Department of Defense (DoD) is the single largest customer of GSA. DoD utilizes all of GSA’s contract vehicles and services. There has never been an agreement between DoD and GSA on the roles and responsibilities of each respective agency in terms of providing services or in using the services provided. This MOA and Action Plan identify roles and responsibilities for both DoD and GSA. Much of what is set forth below reflects work that has already begun, this document memorializes those actions.OBJECTIVE: DoD and GSA share a single objective of providing best value goods and services, in a timely manner, in support of the warfighter. To achieve this objective both DoD and GSA agree that we must achieve Acquisition Excellence.AGREEMENT: In order to achieve Acquisition Excellence, DoD and GSA agree to work together to:1. Ensure that sole source justifications are adequate when used in connection with a contract or order either issued by DoD or by GSA in support of DoD.2. Ensure that Statements of Work (Sow) or Performance Work Statements (PWS) are complete when used in connection with a contract or order either issued by DoD or by GSA in support of DoD.3. Ensure that Interagency Agreements (IAs) between DoD and GSA for work to be performed by GSA on behalf of DoD describes the work to be performed and any other applicable requirements.4. Develop standardized content for IAs. 5. Ensure that price reasonableness determinations are completed on every contract or order either placed by DoD or by GSA on behalf of DoD. 6. Ensure that acquisition practices across GSA are consistent and applied consistently with GSA policy.

7. Ensure that contract surveillance and oversight requirements are defined, adequate and implemented when used in connection with a contract or order either issued by DoD or by GSA in support of DoD. 8. Ensure that funding oversight/management is adequate when used in connection with a contract or order either issued by DoD or by GSA in support of DoD. 9. Ensure that contracts or orders either issued by DoD or by GSA in support of DoD fully comply with the requirements of the Anti-Deficiency Act (ADA). 10. Ensure that acquisition planning is done before and after work is assigned to GSA.11. Ensure that a DoD contacting officer reviews work before the work is accepted by GSA. 12. Ensure that DoD customers provide quality Military Interdepartmental Purchase Requests (MIPRs) (or other comparable documents) to GSA for assisted acquisitions.13. Ensure that pricing on GSA contract vehicles and the services it provides represents the best value on a contract/order basis.14. Ensure that GSA’s fee structure keeps its cost recovery consistent with existing guidance and that it is the lowest possible commensurate with the service provided.15. Ensure that adequate price competition is obtained for contracts or orders either issued by DoD or by GSA in support of DoD in accordance with statutory and regulatory requirements.16. Ensure sufficient contractor oversight is performed to detect potential non-performance and/or non-compliance issues and ensuring that contractor past performance is documented properly and in a timely manner for contracts or orders either issued by DoD or by GSA in support of DoD.17. Ensure requirements are stated in “performance based” terms to the maximum extent possible, consistent with statute and regulation in connection with a contract or order either issued by DoD or by GSA in support of DoD.18. Ensure training and education opportunities are made available to GSA Client Support Centers and their DoD customers.19. Ensure timely and accurate data is reported in the Federal Procurement Data System-Next Generation (FPDS-NG) in connection with a contract or order either issued by DoD or by GSA in support of DoD.20. Define information requirements and then ensure DOD customers are provided with timely and accurate reports on GSA assisted acquisition support in connection with a contract or order issued by GSA in support of DOD.

21. Ensure funds provided GSA by DoD in excess of contract requirements are deobligated in a timely manner and such results are reported to DoD customers in connection with a contract or order issued by GSA in support of DoD.22. Ensure and foster open lines of communication between DoD and GSA leadership and promoting “Acquisition Excellence,” within the two organizations. As partners, DoD and GSA recognize the need to collaborate on Interagency Acquisition requirements. As individual organizations, each have specific responsibilities in all parts of this plan to ensure that all acquisitions conducted by DoD utilizing GSA contract vehicles or on behalf of DoD by GSA contracting officers are compliant with statute, regulation and applicable policy. Collectively, the two organizations have the ability and expertise to ensure that all contracting actions are done properly, in compliance with all applicable law, regulation and policy and in the best interests of the taxpayer. GSA values greatly the support that it provides to DOD and the tremendous additional leverage that DOD adds to GSA’s buying power on behalf of all agencies. DoD is committed to sound acquisition planning and to providing GSA with clear directions regarding what it wants acquired on its behalf. GSA is committed to ensuring that contracting actions done for and on behalf of DOD are of the highest quality, best value, and enhance DOD’s abilities to achieve its mission while also providing for more effective and efficient acquisitions for the American people. Attached is an Action Plan that more specifically defines DoD and GSA’s respective roles and responsibilities with regard to the agreements above. This chart may be modified periodically to update those roles and responsibilities without changing the agreements herein. A quarterly meeting will be held with DoD and GSA senior leadership to evaluate and address the effectiveness of this plan and identify emerging Interagency Acquisition issues.<Signature of Emily Murphy><Signature of Shay Assad>Emily MurphyChief Acquisition OfficerGeneral Services AdministrationShay AssadDirector, Defense Procurement & Acquisition Policy, OUSD(AT&L)Department of DefenseDate: 12/6/2006Date: 12/4/2006

Action Date MOA Item

1. GSA will issue Acquisition Letter(s), supplements or Acquisition Alerts, as necessary, related to the final IG findings.

Begin: January 2007 and ongoing

1-11

2. GSA will develop video tape and on-line training for all GSA 1102s. Make available and leverage existing learning and job support assets on the GSA Center for Acquisition Excellence and integrate into DAU learning and job support assets and repositories as appropriate.

Begin: August 2006Posting completed Jan 1, 07

1-11

3. GSA will use its Procurement Management Reviews (PMRs) to review and identify deficiencies and areas of weakness as identified in DoD and GSA IG reports, and the GSA CAO will issue a PMR Items of Interest memo to the FAS Commissioner, copy to the relevant GSA Regional Administrators.

Begin: January 2007 and ongoing

1-10

4. DoD will use the Intradepartmental Task Force on Interagency Acquisitions (AT&L, DIJSD(C)), established in May 2006, to evaluate the IPR, MIPR process. Report findings and recommend corrective actions as necessary.

Complete: March 2007 1-12

5. DoD will revise DoD Instruction 4000.19 "Inter service and intergovernmental support ( August 1995) as necessary.

Complete: September 2007

6. DOD USD A'L'&L will issue a policy memorandum to require a DoD contracting officer review of each acquisition greater than $500,000 is to be placed on contract by a non-DoD contracting officer (effective January 2006).

Complete: December 2006 10-12

7. DoD USD and AT&L will issue a policy memorandum establishing the DoD policy on contract administration roles and responsibilities when, purchasing goods or services through non-DoD agencies.

Complete: February 2007 1-4, 6-9

8. DoD/DAU will evaluate and revise existing course materials as necessary on bona fide need, appropriation law, and proper acquisition planning, and contract administration for assisted acquisitions.

Complete: June 2007 7, 8, 12

9. GSA and DoD will jointly issue a memorandum to emphasize proper acquisition planning when the Department utilizes contract vehicles of GSA or contract support provided by GSA to DoD.

Complete: February 2007 10

10. GSA and DoD will jointly develop standardized content for Interagency Agreements. Special emphasis areas will include:• Identified roles and responsibilities of DoD and GSA• Justification for sole source procurements• Quality assurance surveillance plans• Statements of work requirements• Fair and reasonable price determination• Funding oversight/management, including the timely deobligation of excess fluids.

Begin: January 2007Complete: March 2007

1-4, 6-9, 12, 13, 21

11. GSA and DoD will execute a Memorandum of Agreement (MOA) between DoD and GSA that establishes specific roles and responsibilities for interagency acquisitions.

Complete: December 06

12. GSA and DoD will allow DoD access to GSA's Acquisition Planning Wizard eTool.

Complete: February 2007

Action Date MOA Item

13. GSA will conduct comprehensive training for the Regions. Begin: January 2007 18

14. GSA will commence standardized quarterly data reporting to DoD (First quarter FY 2007 data), inclusive of fees paid (value added proposition) by DoD to GSA.

Begin: April 2007 andOngoing

14, 17, 19 and 20

15. GSA will perform comprehensive review of targeted GSA schedules to ensure competitive market pricing has been established.

Begin: January 2007 Complete September 2007

13

16. GSA will perform follow-on review of compliance with DoD competition requirements, including Section 803 2002 NDAA.

Begin: February 2007 and ongoing

15

17. DoD USD AT&L will issue a policy memorandum establishing the DoD policy on roles and responsibilities related to the proper capture of past performance information in the federal past performance data base (Past Performance Information Retrieval System) (PPIRS).

Complete: January 2007 16

18. DoD will issue a memorandum to:• emphasize the need to use "performance based" requirements to the maximum extent

possible• emphasize holding contractors accountable for non-performance and• emphasize the need to deobligate funds in a timely manner.

Complete: January 2007 16, 17, 21

19. GSA and DoD will conduct collaborative training in all GSA Regions. Begin: June 2007 18

20. GSA and DoD will collaborate on all policy memos, Acquisition Letter, Alerts, training and related guidance as related to Interagency Acquisitions (IA).

Begin: November 2006 and ongoing

22

21. FAI and DAU will identify and make available performance-based acquisition training and education opportunities and related collaborative resources.

Begin: January 2007 and ongoing

17

22. Conduct monthly DoD and GSA meetings to evaluate and address the effectiveness of this plan and identify emerging Interagency Acquisition issues.

Begin: August 2006 and ongoing

22

23. Jointly develop standardized reporting requirements outside of FPDS-NG. Begin: January 2007Complete: March 2007

19

24. GSA commences standardized quarterly data reporting to DoD (to include OSD Comptroller) inclusive of uncommitted fund balances, amounts obligated, amounts expended, and expired funds.

February: 2007 and ongoing 20-21

GSA Administrator

November 20, 2006

MEMORANDUM FOR DEPARTMENT OF DEFENSE CUSTOMERS AND POTENTIAL CUSTOMERS OF THE GENERAL SERVICES ADMINISTRATION

FROM: LURITA DOAN ADMINISTRATOR GENERAL SERVICES ADMINISTRATION

SUBJECT: Use of Small Business GWACs to Meet DOD Small Business Goals

The Office of Management and Budget has provided executive agency designation pursuant tothe Clinger-Cohen Act to the General Services Administration (GSA) to award and manageGovernment-wide acquisition contracts (GWACs) for information technology (IT) services basedsolutions. Use of these contracts is not subject to the Economy Act. GSA awarded 2 contractsto assist Government agencies with meeting their small business goals. These GWACs are theHistorically Underutilized Business Zone (HUBZ0ne) GWAC and the 8(a) STARS (StreamlinedTechnology Acquisition Resources for Services) GWAC, These contracts are currentlyavailable for use by all DOD components to assist in meeting our Small Business goals. Thesecontracts offer a fully compliant, streamlined method, for acquiring goods and servicesnecessary for meeting DOD's requirements. You should consider using these vehicles andidentifying their use in preparing acquisition plans to satisfy appropriate IT requirements as wellas meeting small business goals

Shortly. GSA will award a new GWAC composed of service disabled veteran owned smallbusinesses (SDVOSB) Once awarded, this GWAC will be available for use within DOD to meetSDVOSB goals.

We recognize your commitment to meeting the small business goals while providing war fighterswith the best value goods and services they need to successfully complete their mission. GSAis committed to assisting DOD in meeting these goals as well. Use of the GWACs noted abovewill provide you with a regulatory compliant, best value solution and will allow you to expeditethe process of meeting the warfighters requirements

If you have any questions about how to use the GSA small business GWACs you areencouraged to contact Ms. Mary Parks, at (816) 823-3960, GSA's small business GWACCenter. You may also get information by going to GSA's small business GWAC website at:http:llwww.gsa.gov/sbqwac

GSA Administrator

November 21, 2006

MEMORANDUM FOR HEADS OF SERVICES REGIONAL ADMINISTRATORS CHIEF ACQUISITION OFFICER FROM: LURITA DOAN ADMINISTRATOR (A)

SUBJECT: Implementation of the DOD Policy - Non-Economy Act Orders, dated October 16, 2006

1. BACKGROUND: On October 16, 2006, the Under Secretary of Defense, Comptroller(USD(C)) issued policy for all components of the Department of Defense (DOD) regardinginteragency transactions conducted under authority other than the Economy Act. GSA hasagreed to process DOD orders consistent with DOD policy.

2. APPLICABILITY:a. The October 16, 2006 USD(C) policy applies to all of GSA's interagency transactionson behalf of DOD under the authority of the Property Act and/or the InformationTechnology Management and Reform Act (ITMRA) that are received on or afterOctober 16, 2006.

b. The policy applies to orders from DOD regardless of the title used, includingInteragency Agreements (IA's or IAA's), Memoranda of Understanding (MOUs),Memoranda of Agreement (MOAs), Interservice Support Agreements (ISSAs) andReimbursable Work Agreements (RWAs) and it applies to contracts, task orders, BPAsand any other contractual actions placed by GSA as result of the order from DOD.

c. The policy does not apply to orders received from other Federal agency customers orto orders from DOD that were received before October 16, 2006. For those orders, GSAcontracting activities will comply with Federal law and regulation, GSA directives, andany specific instructions from the customer.

d. If a DOD customer requests that we comply with the October 16 policy for ordersreceived prior to October 16, GSA offices will explain the consequences of complianceto the DOD customer, note the contract file and then comply with the October 16guidance. In cases where the DOD component provided funding for which the period ofavailability has now passed, the funds will be deobligated, and DOD will have to providecurrent year funding to complete the contract action.

3. DISCUSSION: The October 16, 2006 USD(C) policy imposes additional restrictions notrequired by law, regulation and/or GSA directives in two areas:

a. Documentation and Contracting Officer Review. The policy requires a number ofactions within DOD before an order may be placed, including a review by a DODcontracting officer prior to the placement of all orders over $500,000. Attached is acompleted list of the actions required that appears on page 7 of the policy letter. Thedocumentation required includes a completed Statement of Work (SOW) and completedset of evaluation criteria prior to the placement of the order with GSA.

b. Fiscal Policy. The policy prohibits GSA from taking contractual action on behalf ofDOD in the fiscal year following the expiration of funds availability for severable servicesand goods. In so doing, it limits the flexibility that GSA could otherwise provide DODactivities in executing orders placed with GSA late in the fiscal year. It also prohibitsincremental funding (funding over a period of fiscal years) for non-severable services.

4. IMPLEMENTATION: GSA will adopt a standard approach for assisted acquisitions of over$500,000 for DOD. The Commissioners of FAS and PBS will develop this approach incoordination with the Office of the Deputy Administrator no later than December 30, 2006.

5. ACTION.a. FAS and PBS will develop internal guidance in coordination with the Office of theDeputy Administrator. The guidance, at a minimum will establish a single GSA standardfor providing assisted acquisition services in developing the requirements documentsrequired by Figure 1 of the policy and to assist the requiring DOD activity in thepreparation of any internal DOD documents necessary to obtain approval for issuingNon-Economy Act Orders to GSA.

b. No activity in GSA may deviate from the standard without the approval of therespective Commissioner of FAS or PBS.

Attachment

UNDER SECRETARY OF DEFENSE1100 DEFENSE PENTAGON WASHINGTON DC 20301•1100Oct 16 2006

MEMORANDUM FOR SECRETARIES OF THE MILITARY DEPARTMENTSCHAIRMAN OF THE JOINT CHIEFS OF STAFFUNDER SECRETARIES OF DEFENSECOMMANDERS OF THE COMBATANT COMMANDSDIRECTOR, DEFENSE RESEARCH AND ENGINEERINGCOMMANDER, U.S. SPECIAL OPERATIONS COMMANDCOMMANDER. U.S. TRANSPORTATION COMMANDASSISTANT SECRETARIES OF DEFENSEDIRECTOR. OPERATIONAL TEST AND EVALUATIONINSPECTOR GENERAL OF THE DEPARMENT OF DEFENSEASSISTANTS TO THE SECRETARY OF DEFENSEDIRECTORS OF DEFENSE AGENCIESDIRECTORS DOD FIELD ACTIVITIES

SUBJECT: Non-Economy Act Orders

Attached is the Department's revised financial management policy for Non-EconomyAct orders. This policy should be implemented immediately throughout your respectiveorganization. It will be included in the next update to the "DoD Financial ManagementRegulation," scheduled for first quarter of fiscal year 2007.

My point of contact is Ms. Kathryn Gillis. She can be contacted by telephone at(703) 697-6875 or e-mail at Kathryn.gillis@osd.mil.

Robert McNamara Acting Deputy Chief Financial OfficerAttachments:As stated

NON-ECONOMY ACT ORDERSA. Purpose Prescribe policy and procedures applicable to Department of DefenseDoD) procurement of goods and services from Non-DoD agencies under statutoryauthorities other than the Economy Act.

B. Overview. Non-Economy Act orders are for intra-governmental support, wherea DoD activity needing goods and services (requesting DoD agency/customer) obtainsthem from a Non-DoD agency (assisting/servicing agency/performer). Specific statutoryauthority is required to place an order with a Non-DoD agency for goods or services, andto pay the associated cost. If specific statutory authority does not exist, the default willhe the Economy Act, 31 U.S.C. 1535 which is discussed in volume h A, Chapter 3 of the"DoD Financial Management Regulations" ("DoDFMR"). The more commonly usedNon-Economy Act authorities include, but are not limited to, the following.

• Acquisition Services Fund The Acquisition Service Fund was establishedby the General Service Administration Modernization Act that merged theGeneral Supply Fund and the Information Technology Fund to carry outfunctions related to the uses of the Acquisition Services Fund including anyfunctions previously carried out by the Federal Supply Service and theFederal Technology Service managed by General Service Administration.• Franchise Funds. Franchise Funds were first established by P.L. 103-356.Title IV, Sec 403 to provide common administrative support services on acompetitive and fee basis. Franchise fund programs originated within theEnvironmental Protection Agency (EPA), Department of Commerce,Department of Veterans Affairs (VA), Department of Health and HumanServices (HHS), Department of Interior, and Department of the Treasury.

C. Initiating a Non Economy Act Order. Non-Economy Act orders in excess of thesimplified acquisition threshold shall comply with Federal Acquisition Regulation (FAR)Part 7. "Acquisition Planning," and DoD Components' procedures for the "Proper Use ofNon-DoD Contracts."1. Justification Non-Economy Act orders may be placed with another agency for goods or services if:

• Proper funds are available;• The Non-Economy Act order does not conflict with another agency'sdesignated responsibilities (e.g., real property lease agreements withGSA).Page 1

• The requesting agency or unit determines the order is in the best interest of the Department; and• The performing agency is able and authorized to provide the ordered goods or services.

2. Order. Non-Economy Act orders for work and services outside the DepartmentOf Defense (DoD) should he executed by issuance of a DD Form 448, "MilitaryInterdepartmental Purchase Request (MIPRY' and accepted using DD Form 448-2.'Acceptance of MIPR." If an alternative execution document is used, it must provideinformation consistent with the MIPR to include the purchase request number and theActivity Address Code (DODAAC). A Non-Economy Act order shall comply with thedocumentation standards in Volume I IA. Chapter 1 of the "DoDFMR." and supportedwith the items identified in Figure 1. Non-Economy Act orders must include:

• A firm, clear, specific, and complete description of the goods or services ordered. The use of generic descriptions is not acceptable;• Specific performance or delivery requirements;• A proper fund citation;• Payment terms and conditions (e.g., direct cite or reimbursement, and provisions of advanced payments); and• Specific Non-Economy Act statutory authority such as those referenced in paragraph B above.• DoD Activity Address Code (DODAAC)

3. Best Interest Determination Each requirement must be evaluated inaccordance with DoD Components' procedures to ensure that Non-Economy Act ordersare in the best interest of DoD. Factors to consider include:

• Satisfying the requirements;• Schedule, performance, and delivery requirements;• Cost effectiveness, taking into account the discounts and fees; and• Contract administration, to include oversight.Page 2

4. Specific Definite and Certain For Non-Economy Act orders in excess ofthe simplified acquisition threshold, the requesting official must provide:• Evidence of market research and acquisition planning:• A statement of work that is specific, definite, and certain both as to the work encompassed by the order and the terms of the order itself.• Unique terms, conditions, and requirements to comply with applicable DoD-unique statues, regulations, directives and other requirements.

5. Contracting Officer Review. All Non-Economy Act orders greater than$500,000 shall be reviewed by a DoD warranted contracting officer prior to sending theorder to the funds certifier or issuing the MIPR to the Non-DoD activity. In addition tothe review of the contracting officer, the requesting official shall further review theAcquisition package to ensure compliance with the FAR part 7, and the DoDComponents' procedures.

6. Certification of Funds Non-Economy Act orders are subject to the samefiscal limitations that are contained within the appropriation from which they are funded.Because the performing entity may not he aware of all the appropriation limitations, theDoD certifying official must certify that the funds cited on the order are available, meettime limitations, and are for the purpose designated by the appropriation.

7. Bona Fide Need Non-Economy Act orders citing an annual or multiyearappropriation must serve a bona fide need arising, or existing, in the fiscal year (or years)For which the appropriation is available for new obligations.

D. Fiscal Policy.

1. Obligation The provisions of 31 U.S.C. 1501 govern the recording of theObligation. An amount shall be recorded as an obligation only when supported bydocumentary evidence of an order required by law to be placed with an agency or uponmeeting all the following criteria:

• Binding agreement (funding vehicle) between an agency and another person (including an agency):• Agreement is in writing;• For a purpose authorized by law:Page 3

• Serves a bona fide need arising, or existing, in the fiscal year or yearsfor which the appropriation is available for obligation;• Executed before the end of the period of availability for new obligationof the appropriation or fund used: and• Provides for specific goods to be delivered, real property to be bought orleased, or specific services to be supplied.

2. Deobligation. Funding under Non-Economy Act orders shall bedeobligated as outlined below.

a. Goods Funds provided to a performing agency for ordered goodswhere the funds period of availability thereafter has expired shall be deobligated andreturned by the performing agency unless the request for goods was made during theperiod of availability of the funds and the item(s) could not be delivered within the fundsperiod of availability solely because of delivery, production or manufacturing lead time,or unforeseen delays that are out of the control and not previously contemplated by thecontracting parties at the time of contracting. Thus, where materials cannot be obtainedin the same fiscal year in which they are needed and contracted for, provisions fordelivery in the subsequent fiscal year do not violate the bona fide need rule as long as thetime intervening between contracting and delivery is not excessive and the procurementis not for standard commercial off the shelf (COTS) items readily available from othersources. The delivery of goods may not he specified to occur in the year subsequent toFunds availability.b. Severable Services An agreement for severable services that arecontinuing and recurring in nature and provide the Department a benefit each time the'service is performed (e.g., maintenance and repair services, scientific, engineering, andtechnical services) is based on statutory authority other than the Economy Act. 10 U.S.C.2410a permits the performance of severable services to begin in one fiscal year and endin the next provided the period of performance does not exceed one year. Thus, theperformance of severable services may begin during funds period of availability and maynot exceed one year. Therefore, annual appropriations provided to a performing agencythat have expired shall be deobligated unless the performance of the services requestedbegan during the funds period of availability and the period of performance does notexceed one year. The annual appropriation from the earlier fiscal year may be used tofund the entire cost of the one-year period of performance; however, an annualappropriations may not be used to enter into a severable services agreement where theperiod of performance for services requested is entirely in the following fiscal year. In noinstance may the period of performance extend beyond September 30 of the subsequentyear for services funded with annual appropriations.Page 4

c. Non-Severable Services Non-severable services contracts must be funded entirely with appropriations available for new obligations at the time the contract is awarded, and the period of performance may extend across fiscal years. Funds provided to a performing agency that become excess shall be deobligated as identified.d. Excess or Expired Funds Activities shall reconcile all obligations and remaining funds available for orders. The purpose of this reconciliation is to ensure the proper use of funds and to identify and coordinate the return of expired or excess funds. Excess or expired funds must he returned by the performing agency and deobligated by the requesting agency to the extent that the performing agency or unit filling the order has not (1) provided the goods or services (or incurred actual expenses in providing the goods or services), or (2) entered into a contract with another entity to provide the requested goods or services. Expired funds shall not be available for new obligations.

3. Prohibitions Non-Economy Act orders may not be used to violate provisions of law, nor may they be used to circumvent conditions and limitations imposed on the use of funds to include extending the period of availability of the cited funds.

E. Non-Economy Act Follow Up Procedures

I. Non-Economy Act Order Oversight The requesting official must establish quality surveillance plans for Non-Economy Act orders in excess of the simplified acquisition threshold to facilitate the oversight of the goods provided or services performed by the performing agency. The plan should include:a. Contract administration oversight in accordance with the surveillance plan;b. Process for receipt and review of receiving reports and invoices from the performing agency:c. Reconciliation of receiving reports and invoices; andd. Requirements for documenting acceptance of the goods received or services performed.

2. Monitor Fund Status The requesting official must monitor fund status to:a. Monitor balances with the performing agency:b. Conduct tri-annual reviews of Non-Economy Act orders in accordance with the Financial Management Regulation, Volume 3.Page 5

Chapter 8. Section 0804, "Tri-Annual Review of Commitments and Obligations;"c. Confirm open balances with the performing agency;d. Coordinate the return of funds from the Non DoD performing agency in accordance with paragraph D2 above; ande. Coordinate with the accounting office to ensure timely deobligation of funds.

3. Payment Procedures Payment shall be made promptly upon the written request (or billing) of the performing agency. Under specific conditions, payment may he made in advance or upon delivery of the goods or services ordered and shall be for any part of the estimated or actual cost as determined by the performing agency.a. The requesting official must be cognizant of the performing agency's payment method. Should the performing agency elect to receive advances or conduct advance billing prior to providing goods or services, the requesting official must comply with the requirements related to advances of public money outlined in Volume 4, Chapter 5 of the "DoD Financial Management Regulation" which implements the general prohibition of advance payments in Title 31, U.S.C. Section 3324 and Title 10, U.S.C. Section 2307. When the conditions under which the advance was made are satisfied, the specific appropriation or law authorizing the advance must be cited on the order and any unused amounts of the advance shall be collected from the performing agency immediately and returned to the fund from which originally made.b. Payments made for services rendered or goods furnished may be credited to the appropriation or fund of the agency performing the reimbursable work.

4. Non Economy Act Order Close Out All Non Economy Act orders shall be reviewed by the requesting official to determine if they are complete. Completed orders shall be fiscally closed out. The requesting official shall reconcile funds and coordinate the return of excess or expired funds held by the performing agency. This review will include:a. Identify and determine if there are outstanding invoices;b. Identify and determine existence of excess or expired funds;c. Coordinate the return of funds from the Non DoD performing agency in accordance with paragraph D2 above; andd. Coordinate with the accounting office to ensure the deobligation of funds.Page 6