What is a Non-Traditional Contractor?

This week we've been discussing Sec 820 of the fiscal year 2017 NDAA (National Defense Authorization Act) which deals with Cost Accounting Standards, the Defense Cost Accounting Standards Board (DCASB) and privatizing some of DCAA's (Defense Contract Audit Agency) contract audit functions.

Sec 820 makes references to "nontraditional defense contractor" in a couple of places. First, in describing the makeup of the new Defense Cost Accounting Standards Board (DCASB), one of the members of the Board must be a representative of a "nontraditional defense contractor". Second, is a reference to Cost Accounting Standards being a barrier to participation by nontraditional contractors.

There is a definition for  "nontraditional defense contractor" found in 10 U.S.C. 2302 (9) which states:

The term "nontraditional defense contractor", with respect to a procurement or with respect to a transaction authorized under section 2371(a) or 2371(b) of this title, means an entity that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implementing such section.

This definition is about to become more restrictive because the 2017 NDAA includes a provision that will revise the definition to the following:

The term "nontraditional defense contractor", with respect to a procurement or with respect to a transaction authorized under section 2371(a) or 2371(b) of this title, (A) means a specific business unit or function with a unique entity identifier that is not currently performing and has not performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implementing such section and (B) does not mean a business unit that received a transfer of procurement or transaction from another business unit within the same corporate entity that is currently performing or performed, for at least the one-year period preceding the solicitation of sources by the Department of Defense for the procurement or transaction, any contract or subcontract for the Department of Defense that is subject to full coverage under the cost accounting standards prescribed pursuant to section 1502 of title 41 and the regulations implanting such section.

The key difference in these two definitions is that if a contractor is getting work from another division under a Government contract, it cannot be a nontraditional defense contractor simply because it doesn't have its own prime contracts.

The other thing to note in this definition is that if a contractor had Defense contracts at one time but has gone a year without any Government work, it re-qualifies as a nontraditional defense contractor.