Enhancement of defense supply chain resilience and secondary source qualification

Subsection (f) of section 865 of the National Defense Authorization Act for Fiscal Year 2025 (Public Law 118–159; 10 U.S.C. 4811 note), is amended to read as follows: (f) Expedited Qualification Panel (1) In general Not later than June 30, 2027, the Secretary of Defense, in coordination with the secretaries of the military departments and the Director of the Defense Logistics Agency, shall establish a program to expedite the processing of certain Source Approval Requests. The program shall provide that a Source Approval Request Package submitted by an applicant and meeting the requirements under paragraph (2) shall be subject to the expedited source approval process set under paragraph (3) and may be eligible for the incentives described in paragraph (4). (2) Qualifying Source Approval Request Packages Any Source Approval Request, regardless of category, for an item of supply that is not a critical safety item shall be classified as a Qualifying Source Approval Request Package if it meets the following requirements (as determined by the Secretary concerned): (A) Manufacturer of record The applicant is a manufacturer of record for the proposed subject item of supply. (B) Approved Source Approval Request template The Source Approval Request is submitted on a standardized template for expedited Source Approval Requests. The standardized templates shall be published by each military department not later than April 1, 2027, and shall include all information required for the supply chain risk management review referenced in subsection (f)(3)(D) of this section on an expedited basis. (C) Qualified Engineering Designee certification A Qualified Engineering Designee certifies in writing that the engineering data included in the applicable Source Approval Request, including the technical data Package, conforms to the applicable Technical Data Package or reverse engineering standards required of such item of supply. (D) Manufacturing certification The applicant, or the relevant majority-owned manufacturing subsidiary, holds a current AS9100 Rev D certification (or successor standard) issued by an accredited third-party certification body. (E) Small business parity and market competition The Secretary of Defense shall establish mechanisms to ensure fair access for small businesses, such as subsidized engineering reviews or a waiver of designee fees for qualifying small businesses. (3) Expedited Source Approval process Not later than 7 days after receiving a Source Approval Request purporting to be a Qualifying Source Approval Request Package, the Secretary concerned shall determine whether the Source Approval Request qualifies for such treatment. A qualifying Source Approval Request Package shall be subject to the following Expedited Source Approval Process: (A) A qualifying Source Approval Request Package shall be referred to an Expedited Qualification Panel for the military department, which shall be established by the Secretary concerned by not later than June 30, 2027. (B) Absent the Expedited Qualification Panel’s written determination to the applicant that additional engineering evaluation is required solely based on either the criticality or novelty and complexity of the item of supply, the Qualified Engineering Designee’s certification under paragraph (2)(C) shall constitute the full engineering evaluation necessary for such Expedited Qualification Panel’s review of the Qualifying Source Approval Request Package. (C) Not later than 14 days after receipt of a Qualifying Source Approval Request Package, the applicable Expedited Qualification Panel shall issue a determination on whether to grant approval or disapproval of the Source Approval Request. (D) (i) The 14-day timeline for final determination shall be paused for a maximum of 30 days to allow for the completion of a comprehensive supply chain risk management and foreign ownership, control, or influence assessment. (ii) For qualifying items, particularly non-commercial items with an anticipated contract value exceeding $5,000,000, this review timeframe shall align with standard Defense Counterintelligence and Security Agency review schedules to ensure the applicant poses no risk to the Department. (4) Complete Technical Data Package incentives (A) In general If a Qualifying Source Approval Request Package that meets the requirements of paragraph (2) also includes delivery of a Complete Technical Data Package and Government purpose rights to such Complete Technical Data Package, and such Qualifying Source Approval Request Package receives a determination of full approval pursuant to paragraph (3)(C), the Defense Logistics Agency, the Secretary concerned, or relevant head of contracting activity shall award to the manufacturer of record a firm-fixed-price indefinite-delivery indefinite-quantity (IDIQ) contract for the item of supply which is the subject of such qualifying Source Approval Request Package. (B) Contract terms A contract awarded under subparagraph (A) shall include the following terms: (i) Pricing The unit price shall not exceed 90 percent of the weighted average unit price paid by the Defense Logistics Agency for the item of supply during the two-year period preceding the date of receipt of the Qualifying Source Approval Request Package. (ii) Minimum quantity A guaranteed minimum annual order quantity of not less than 60 percent of the average annual quantity of the item of supply ordered by the Defense Logistics Agency during the 3-year period preceding the date of receipt of the Qualifying Source Approval Request Package. (iii) Length A period of performance of three years. (iv) Deviations Clauses (i), (ii), and (iii) may be deviated from at the discretion of the contracting activity as necessary to establish the awardee as a viable source of supply if it is determined by the contracting activity to be in the best interest of the Government and is bilaterally negotiated with the awardee. (C) Competition authority The award of a contract under this subsection is authorized notwithstanding the requirements of section 3201 of title 10, United States Code, and no justification and approval under section 3204(e) of title 10, United States Code, shall be required for such award. (5) Report Not later than January 1, 2028, the Secretary of Defense, in coordination with the Secretaries of the military departments and the Director of the Defense Logistics Agency, shall submit to the Committees on Armed Services of the Senate and the House of Representatives a report containing an evaluation of the program under this subsection, which shall include a quantitative evaluation of— (A) the number of Source Approval Request Packages processed; (B) average time to qualification compared to prior to the inception of the program; (C) processing cost per Source Approval Request review; (D) impact on part unit cost; and (E) mission readiness. (6) Definitions In this subsection: (A) The term Complete Technical Data Package means a Technical Data Package that includes a complete set of engineering data, drawings, specifications, inspection criteria, test procedures, quality assurance provisions, and other technical information sufficient to enable a qualified manufacturer to produce an item of supply that conforms to the original design requirements. (B) The term criticality means any item of supply which should be a critical safety item. (C) The term critical safety item means any item of supply that is either an aviation critical safety item or ship critical safety item, as those terms are defined in section 3243 of title 10, United States Code. (D) The term Government purpose rights has the meaning given that term in section 252.227–7013(a) of title 48, Code of Federal Regulations. (E) The term manufacturer of record means an entity, or its majority-owned subsidiary, which shall directly, or indirectly through a majority-owned subsidiary, perform the fabrication or manufacture of the item of supply for which such Source Approval Request is being sought. (F) The term novelty and complexity means any Source Approval Request Package where the proposed Package introduces a material change in the form, fit, or function relative to the Technical Data Package or reverse engineering standards of such item of supply. (G) The term Qualified Engineering Designee means an individual who— (i) holds a current appointment as a Designated Engineering Representative issued by the Federal Aviation Administration under part 183 of title 14, Code of Federal Regulations, in the technical discipline for which the Source Approval Request is being made; or (ii) holds an equivalent certification or certifications reflecting engineering competence in an applicable technical field and independence obligations substantially equivalent to the process by which the Federal Aviation Administration appoints Designated Engineering Representatives, as determined by the Secretary of Defense pursuant to an application and qualification process established not later than March 31, 2027, that includes, at a minimum— (I) eight years of engineering experience in the technical discipline for which the Source Approval Request is being made; (II) knowledge and experience relating to the processing of engineering data involving the qualification of parts or systems within such technical discipline; and (III) an engineering degree or equivalent relevant to such technical discipline..