(b) PREREQUISITES FOR UNDERSTANDING MYC

(1) To understand MYC, you must first understand conventional (i.e., annual-buy) contracting practices and the meaning of "requirement."

(i) Conventional Contracting. The conventional approach to contracting is strongly influenced by the Congressional authorization and appropriation processes. Ordinarily, Congress authorizes the Department to procure a specific number of units of a weapon system in a given year. Congress then appropriates funds for the purpose of buying that number of units. So while Congress may review the Department's plans for procurement of the weapon system six years into the future (in the form of the Future Years Defense Plan), the Congress only makes a firm financial commitment regarding the first of those six years. Consequently, the manager of the acquisition program only gets a firm requirement and funding one year at a time, and has no assurance that the Congress will support the Department's requirements for the out-years. Under this scenario, the contractor normally performs production planning and tooling estimates based on assurance of receiving only a single year's requirement.

(A) A common method of dealing with annual appropriations is to award contracts that include options for the out-year requirements. The options do not commit the Government to purchase out-year quantities, but give it the unilateral right to do so under agreed upon terms and conditions. Thus, if an agency's planned requirements are eventually authorized and funded by Congress, the agency can exercise options rather than negotiate new contracts each year.

(ii) The Meaning of Requirement. An acquisition program that reaches the production phase should plan and budget for producing units (e.g., missiles, aircraft, satellites, radars) at a certain rate. While a contractor may view production rate in terms of a number of units produced per month, the Air Force program manager should always translate this into some quantity to be bought by the Government each year, since the federal Government budgets on an annual basis. The number of units to be bought in a given fiscal year is referred to as the program's "requirement" for that fiscal year.