(b) STATUTORY AND REGULATORY BACKGROUND

(1) The United States Code (USC), Section 2306b of Title 10 (Armed Forces) authorizes the head of an agency to enter into multi-year contracts whenever the head of the agency finds (Note:These conditions become the basis for determining whether a proposed acquisition qualifies as a candidate for MYC. FAR 17.105-1(b) cites the above PL 2306b statutory rules.):

(i) that the use of such a single multi-year contract will result in substantial savings of the total anticipated costs of carrying out the program through annual contracts;

(ii) that the minimum need for the property to be purchased is expected to remain substantially unchanged during the contemplated contract period in terms of production rate, procurement rate, and total quantities;

(iii) that there is a reasonable expectation that throughout the contemplated contract period, the head of the agency will request funding for the contract at the level required to avoid contract cancellation;

(iv) that there is a stable design for the property to be acquired and that the technical risks associated with such property are not excessive;

(v) that the estimates of both the cost of the contract and the anticipated cost avoidance through the use of a multi-year contract are realistic; and

(vi) in the case of a purchase by the Department of Defense, that the use of such a contract will promote the national security of the United States.

(2) 10 USC 2306b(k) defines a multi-year contract as a contract for the purchase of property or services for more than one, but not more than five program years. Such a contract may provide that performance under the contract during the second and subsequent years of the contract is contingent upon the appropriation of funds and (if it does so provide) may provide for a cancellation payment to be made to the contractor if such appropriations are not made.

(3) 10 USC 2306b also contains other specific requirements to review prior to evaluating an acquisition as a potential MYC candidate. Note that Section 806 of Public Law (PL) 105-85 (National Defense Authorization Act for Fiscal Year 1998) made several changes to 10 USC Section 2306b including the codification of annual recurring requirements that have been included in annual defense appropriations acts (including PL 105-56, DoD Appropriations Act, 1998, Section 8008(a)).

(4) Also, Section 8008(b) of the aforementioned PL 105-56 added the following requirement:

"(b) None of the funds provided in this Act and hereafter may be used to submit to Congress (or to any committee of Congress) a request for authority to enter into a contract covered by those provisions of subsection (a) that precede the first proviso of that subsection unless--

(1) such request is made as part of the submission of the President's Budget for the United States Government for any fiscal year and is set forth in the Appendix to that budget as part of proposed legislative language for appropriations bills for the next fiscal year; or

(2) such request is formally submitted by the President as a budget amendment; or

(3) the Secretary of Defense makes such request in writing to the congressional defense committees."

(5) Primary regulatory guidance is found at FAR 17.1, "Multi-year Contracting" (and associated supplements). DoD 7000.14-R, DFARS 217.1 and AFFARS 5317.1 provide implementing instructions.